EXHIBIT 4.3
===============================================================================
PACIFICAMERICA MONEY CENTER, INC.,
as Master Servicer,
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Indenture Trustee,
and
PACIFICAMERICA HOME EQUITY LOAN TRUST SERIES 1997-1,
as Issuer
----------------------
SERVICING AGREEMENT
Dated as of December 1, 1997
----------------------
Fixed and Adjustable-Rate Home Equity Loans
PacificAmerica Home Equity Loan Asset-Backed Notes, Series 1997-1
===============================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions1
Section 1.01. DEFINITIONS................................................1
Section 1.02. OTHER DEFINITIONAL PROVISIONS..............................1
Section 1.03. INTEREST CALCULATIONS......................................2
ARTICLE II
Representations and Warranties
3
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER
SERVICER...................................................3
Section 2.02. EXISTENCE..................................................4
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES..............4
ARTICLE III
Administration and Servicing of Mortgage Loans
6
Section 3.01. SERVICER TO ASSURE SERVICING................................6
Section 3.02. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUBSERVICERS.........................................................7
Section 3.03. SUCCESSOR SUBSERVICERS......................................8
Section 3.04. LIABILITY OF THE MASTER SERVICER............................8
Section 3.05. ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY
INDENTURE TRUSTEE....................................................9
Section 3.06. COLLECTION OF MORTGAGE LOAN PAYMENTS; COLLECTION ACCOUNT....9
Section 3.07. WITHDRAWALS FROM THE COLLECTION ACCOUNT....................12
Section 3.08. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING ACCOUNTS..................................................13
Section 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS........................................14
Section 3.10. RESERVED...................................................14
Section 3.11. MAINTENANCE OF HAZARD INSURANCE AND FIDELITY COVERAGE......14
Section 3.12. DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.................16
Section 3.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS..................17
Section 3.14. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES..19
Section 3.15. SERVICING COMPENSATION.....................................20
Section 3.16. ANNUAL STATEMENTS OF COMPLIANCE............................21
Section 3.17. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT....21
Section 3.18. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS..............22
Section 3.19. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF
MORTGAGED PROPERTY..................................................22
i
PAGE
----
Section 3.20. MASTER SERVICER TO ACT AS AGENT AND BAILEE OF THE
INDENTURE TRUSTEE...................................................22
ARTICLE IV
Remittance Reports23
Section 4.01. REMITTANCE REPORTS.........................................23
Section 4.02. ADVANCES...................................................23
Section 4.03. COMPENSATING INTEREST PAYMENTS.............................23
ARTICLE V
The Master Servicer
24
Section 5.01. LIABILITY OF THE MASTER SERVICER...........................24
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE MASTER SERVICER.................................24
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND OTHERS..24
Section 5.04. MASTER SERVICER NOT TO RESIGN..............................25
Section 5.05. DELEGATION OF DUTIES.......................................26
Section 5.06. MASTER SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER
TRUSTEE'S EXPENSES; INDEMNIFICATION.................................26
Section 5.07. ASSIGNMENT OF SERVICING AGREEMENT..........................27
ARTICLE VI
Default
27
Section 6.01. SERVICING DEFAULT..........................................27
Section 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.........30
Section 6.03. NOTIFICATION TO NOTEHOLDERS................................31
Section 6.04. WAIVER OF DEFAULTS.........................................32
ARTICLE VII
Miscellaneous Provisions
33
Section 7.01. AMENDMENT..................................................33
Section 7.02. GOVERNING LAW..............................................33
Section 7.03. NOTICES....................................................33
Section 7.04. SEVERABILITY OF PROVISIONS.................................35
Section 7.05. THIRD-PARTY BENEFICIARIES..................................35
Section 7.06. COUNTERPARTS...............................................35
Section 7.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS...................35
ii
PAGE
----
Section 7.08. TERMINATION UPON PURCHASE BY THE MASTER SERVICER...........35
Section 7.09. NO PETITION................................................35
Section 7.10. NO RECOURSE................................................35
ARTICLE VIII
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
36
Section 8.01. ADMINISTRATIVE DUTIES......................................36
Section 8.02. RECORDS....................................................37
Section 8.03. ADDITIONAL INFORMATION TO BE FURNISHED.....................37
EXHIBIT A - MORTGAGE LOAN SCHEDULE..........................................A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE.....................................B-1
EXHIBIT C - FORM OF LIQUIDATION REPORT......................................C-1
iii
This Servicing Agreement, dated as of December 1, 1997, among
PacificAmerica Money Center, Inc., as Master Servicer (in such capacity, the
"Master Servicer"), Bankers Trust Company of California, N.A., as Indenture
Trustee, and PacificAmerica Home Equity Loan Trust Series 1997-1, as Issuer (the
"Issuer").
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, pursuant to the terms of the Home Equity Loan
Purchase Agreement, the Seller will sell (i) the Initial Mortgage Loans to the
Company on the Closing Date and (ii) the Subsequent Mortgage Loans to the Issuer
on each Subsequent Transfer Date ;
WHEREAS, the Company will sell the Initial Mortgage Loans and
transfer all of its rights under the Home Equity Loan Purchase Agreement to the
Issuer on the Closing Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue the Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer
will issue and transfer to or at the direction of the Company, the Notes; and
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Master Servicer will service the Mortgage Loans directly or through one or
more Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Servicing
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires, capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Definitions contained in Appendix A
to the Indenture dated as of December 1, 1997 (the "Indenture") between the
Issuer and the Indenture Trustee, which Definitions are incorporated by
reference herein. All other capitalized terms used herein shall have the
meanings specified herein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in
this Servicing Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter
genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03. INTEREST CALCULATIONS. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made in accordance with the terms of the related Mortgage Note and
Mortgage. The calculation of the Servicing Fee shall be made on the basis of a
360-day year consisting of twelve 30-day months. All dollar amounts calculated
hereunder shall be rounded to the nearest xxxxx with one-half of one xxxxx being
rounded up.
-2-
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER
SERVICER. The Master Servicer represents and warrants to the Issuer and for the
benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, the Note
Insurer and the Noteholders, as of the Closing Date, that:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to own its assets and to
transact the business in which it is currently engaged. The Master
Servicer is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer or the validity
or enforceability of the Mortgage Loans; provided that the Master
Servicer is not qualified as a servicer in any jurisdiction as of the
date hereof;
(ii) The Master Servicer has the corporate power and
authority to make, execute, deliver and perform this Servicing
Agreement and all of the transactions contemplated under this Servicing
Agreement, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Servicing Agreement.
When executed and delivered, this Servicing Agreement will constitute
the legal, valid and binding obligation of the Master Servicer
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect, affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies (whether at law or in equity);
(iii) The Master Servicer is not required to obtain the
consent of any other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing
Agreement and the performance of the transactions contemplated hereby
by the Master Servicer will not violate any provision of any existing
law or regulation or any order or decree of any court applicable to the
Master Servicer or any provision of the certificate of incorporation or
bylaws of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound, nor,
to the Master Servicer's knowledge, will any such mortgage,
-3-
indenture, contract or other agreement materially affect in the future
the ability of the Master Servicer to perform its obligations under
this Agreement or its business, properties, assets, or condition
(financial or other); and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Master Servicer threatened, against the
Master Servicer or any of its properties or with respect to this
Servicing Agreement or the Notes or the Certificates which, to the
knowledge of the Master Servicer, has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated
by this Servicing Agreement.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
Section 2.02. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Servicing Agreement.
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. The Master
Servicer, on behalf of and subject to the direction of the Note Insurer or, if a
Note Insurer Default exists, the Indenture Trustee, as pledgee of the Mortgage
Loans, or the Note Insurer, shall enforce the representations and warranties and
related obligations for breaches thereof of the Seller pursuant to the Home
Equity Loan Purchase Agreement upon notice of breach of such representations and
warranties from the Indenture Trustee, the Issuer, the Owner Trustee, the
Seller, the Note Insurer or the Company. Upon the discovery by the Seller, the
Master Servicer, the Indenture Trustee, the Issuer, the Owner Trustee, the Note
Insurer or the Company of a breach of any of the representations and warranties
made in the Home Equity Loan Purchase Agreement, in respect of any Mortgage Loan
which materially and adversely affects the value of the related Mortgage Loan or
the interests of the Noteholders or the Certificateholders or the Note Insurer,
the party discovering such breach shall give prompt written notice to the other
parties. The Note Insurer or the Indenture Trustee may, and the Master Servicer
shall, request that (or if the Seller is the Master Servicer, the Seller shall)
pursuant to the terms of the Home Equity Loan Purchase Agreement, either (i)
cure such breach in all material respects or (ii) purchase such Mortgage Loan,
in each instance in accordance with the Home Equity Loan Purchase Agreement;
PROVIDED that the Seller shall, subject to the conditions set forth in the Home
Equity Loan Purchase Agreement, have the option to substitute an Eligible
Substitute Mortgage Loan or Eligible Substitute Mortgage Loans for such Mortgage
Loan. Monthly Payments due with respect to Eligible Substitute Mortgage Loans in
the month of substitution shall not be part of the Trust Estate and will be
retained by the Master Servicer and remitted by the Master Servicer to the
Seller on the next succeeding Payment Date. For the month of substitution,
distributions to the Payment Account pursuant to the Servicing Agreement will
include the Monthly Payment due on a Deleted Mortgage Loan for such month and
thereafter the Seller shall be entitled to retain all amounts received in
respect of such Deleted Mortgage Loan. The Master Servicer shall amend or cause
to be amended the Mortgage Loan Schedule to reflect the removal of such Mortgage
Loan
-4-
and the substitution of the Eligible Substitute Mortgage Loans and the Master
Servicer shall promptly deliver the amended Mortgage Loan Schedule to the
related Subservicer, if any, the Note Insurer, the Owner Trustee and the
Indenture Trustee.
In connection with the substitution of one or more Eligible Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (such amount, a "Substitution Adjustment Amount"), if any,
by which the aggregate principal balance of all such Eligible Substitute
Mortgage Loans as of the date of substitution is less than the aggregate
principal balance of all such Deleted Mortgage Loans (after application of the
principal portion of the Monthly Payments due in the month of substitution that
are to be distributed to the Payment Account in the month of substitution). The
Seller shall pay the Substitution Adjustment Amount to the Master Servicer and
the Master Servicer shall deposit such Substitution Adjustment Amount into the
Collection Account upon receipt.
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such Mortgage Loan as to which such a
breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and the Indenture Trustee, as
pledgee of the Mortgage Loans, against the Seller. In connection with the
purchase of or substitution for any such Mortgage Loan by the Seller, the Issuer
shall assign to the Seller all of its right, title and interest in respect of
the Home Equity Loan Purchase Agreement applicable to such Mortgage Loan. Upon
receipt of the Repurchase Price, or upon completion of such substitution, the
Master Servicer shall notify the Indenture Trustee by delivering a request for
Release in the form of Exhibit B hereto, and then the Indenture Trustee shall
deliver the Mortgage Files relating to such Mortgage Loan to the Master
Servicer, together with all relevant endorsements and assignments prepared by
the Master Servicer which the Indenture Trustee shall execute.
-5-
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. SERVICER TO ASSURE SERVICING. (a) The Master Servicer
shall supervise, or take such actions as are necessary to ensure, the servicing
and administration of the Mortgage Loans and any REO Property in accordance with
this Servicing Agreement and Accepted Servicing Procedures, which generally
shall conform to the standards of an institution prudently servicing mortgage
loans for its own account and shall have full authority to do anything it
reasonably deems appropriate or desirable in connection with such servicing and
administration. The Master Servicer may perform its responsibilities relating to
servicing through other agents or independent contractors, but shall not thereby
be released from any of its responsibilities as hereinafter set forth. The
authority of the Master Servicer, in its capacity as Master Servicer, and any
Subservicer acting on its behalf, shall include, without limitation, the power
to (i) consult with and advise any Subservicer regarding administration of a
related Mortgage Loan, (ii) direct a Subservicer to foreclose on a related
Mortgage Loan, (iii) supervise the filing and collection of insurance claims and
take or cause to be taken such actions on behalf of the insured Person
thereunder as shall be reasonably necessary to prevent the denial of coverage
thereunder, and (iv) effectuate foreclosure or other conversion of the ownership
of the Mortgaged Property securing a related Mortgage Loan, including the
employment of attorneys, the institution of legal proceedings, the collection of
deficiency judgments, the acceptance of compromise proposals and any other
matter pertaining to a delinquent Mortgage Loan. The authority of the Master
Servicer shall include, in addition, the power on behalf of the Noteholders, the
Indenture Trustee, the Note Insurer or any of them to (i) execute and deliver
customary consents or waivers and other instruments and documents, (ii) consent
to transfer of any related Mortgaged Property and assumptions of the related
Mortgage Notes and Security Instruments (pursuant to the provisions of this
Servicing Agreement) and (iii) collect any Insurance Proceeds and Liquidation
Proceeds. Without limiting the generality of the foregoing, the Master Servicer
and any Subservicer acting on its behalf may, and is hereby authorized, and
empowered by the Indenture Trustee when the Master Servicer believes it is
reasonably necessary in its best judgment in order to comply with its servicing
duties hereunder, to execute and deliver, on behalf of itself, the Noteholders,
the Indenture Trustee, the Note Insurer or any of them, any instruments of
satisfaction, cancellation, partial or full release, discharge and all other
comparable instruments, with respect to the related Mortgage Loans, the
Insurance Policies and the accounts related thereto, and the Mortgaged
Properties. The Master Servicer may exercise this power in its own name or
through the appointment of a Subservicer.
The Master Servicer, in such capacity, may not consent to the placing
of a lien senior to that of the Mortgage on the related Mortgaged Property.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as Master Servicer under this Servicing Agreement) to the Issuer
and the Indenture Trustee under this Servicing Agreement is intended by the
parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
-6-
(b) Notwithstanding the provisions of Subsection 3.01(a), the Master
Servicer shall not take any action inconsistent with the interests of the
Indenture Trustee, the Note Insurer or the Noteholders or with the rights and
interests of the Indenture Trustee, the Note Insurer or the Noteholders under
this Servicing Agreement; provided, however, that in the event the interests of
the parties conflict, the Master Servicer shall act to maximize the value to the
Trust Estate.
(c) The Indenture Trustee shall furnish the Master Servicer with any
powers of attorney and other documents in form as provided to it necessary or
appropriate to enable the Master Servicer to service and administer the related
Mortgage Loans and REO Property and the Indenture Trustee shall not be liable
for the actions of the Master Servicer or any Subservicers
under such powers of attorney.
Section 3.02. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUBSERVICERS. (a) With the consent of the Note Insurer, the Master Servicer may
enter into Subservicing Agreements with Subservicers for the servicing and
administration of the Mortgage Loans and for the performance of any and all
other activities of the Master Servicer hereunder. Each Subservicer shall be
either (i) an institution the accounts of which are insured by the FDIC or (ii)
another entity that engages in the business of originating or servicing mortgage
loans comparable to the Mortgage Loans, and in either case shall be authorized
to transact business in the state or states in which 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 Subservicing Agreement. Any Subservicing Agreement entered into by
the Master Servicer shall include the provision that such Agreement may be
immediately terminated (i) (x) with cause and without any termination fee by the
Note Insurer or the Master Servicer hereunder and/or (y) without cause by the
Master Servicer (with the consent of the Note Insurer, which consent shall not
be unreasonably withheld), in which case the Master Servicer shall be solely
responsible for any termination fee or penalty resulting therefrom (which shall
not be the responsibility of the Indenture Trustee) and (ii) at the option of
the Note Insurer upon the termination or resignation of the Master Servicer
hereunder, in which case the Master Servicer shall be solely responsible for any
termination fee or penalty resulting therefrom. In addition, each Subservicing
Agreement shall provide for servicing of the Mortgage Loans consistent with the
terms of this Servicing Agreement and shall provide, in the event of termination
or resignation of the Master Servicer, that (i) the Subservicer thereunder may
become the successor Master Servicer, with the approval of the Note Insurer, and
(ii) if the Subservicer does not elect to become the Master Servicer or is not
approved as the successor Master Servicer by the Note Insurer, the Note Insurer
may terminate the Subservicer without any termination fee; provided, however,
the Master Servicer shall be responsible for any such termination fee. With the
consent of the Note Insurer, the Master Servicer and the Subservicers may enter
into Subservicing Agreements and make amendments to the Subservicing Agreements
or enter into different forms of Subservicing Agreements providing for, among
other things, the delegation by the Master Servicer to a Subservicer of
additional duties regarding the administration of the Mortgage Loans.
As of the date hereof, the Master Servicer has entered into the
Sub-Servicing Agreement with the Sub-Servicer for the servicing and
administration of the Mortgage Loans and, with the consent of the Note Insurer,
may enter into additional subservicing agreements with subservicers
-7-
acceptable to the Indenture Trustee and the Note Insurer for the servicing and
administration of certain of the Mortgage Loans.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Indenture Trustee, the Note Insurer and the Noteholders,
shall enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing 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, but
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement only to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan or (ii) from a specific
recovery of costs, expenses or attorneys' fees against the party against whom
such enforcement is directed.
Section 3.03. SUCCESSOR SUBSERVICERS. The Master Servicer shall be
entitled to terminate any Subservicing Agreement that may exist in accordance
with the terms and conditions of such Subservicing Agreement and without any
limitation by virtue of this Servicing Agreement, but only with the consent of
the Note Insurer; PROVIDED, HOWEVER, that upon termination, the Master Servicer
shall either act as Master Servicer of the related Mortgage Loans or enter into
an appropriate contract with a successor Subservicer reasonably acceptable to
the Indenture Trustee and the Note Insurer, pursuant to which such successor
Subservicer will be bound by all relevant terms of the related Subservicing
Agreement pertaining to the servicing of such Mortgage Loan, which Subservicing
Agreement shall be acceptable to and acknowledged by the Note Insurer and
acknowledged by the Indenture Trustee.
Section 3.04. LIABILITY OF THE MASTER SERVICER. (a) Notwithstanding any
Subservicing Agreement, any of the provisions of this Servicing Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall under all circumstances remain obligated and primarily
liable to the Indenture Trustee, the Noteholders and the Note Insurer for the
servicing and administering of the Mortgage Loans and any REO Property in
accordance with this Servicing Agreement. The obligations and liability of the
Master Servicer shall not be diminished by virtue of Subservicing Agreements or
by virtue of indemnification of the Master Servicer by any Subservicer, or any
other Person. The obligations and liability of the Master Servicer shall remain
of the same nature and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the related Mortgage Loans. The
Master Servicer shall, however, be entitled to enter into indemnification
agreements with any Subservicer or other Person and nothing in this Servicing
Agreement shall be deemed to limit or modify such indemnification. For the
purposes of this Servicing Agreement, the Master Servicer shall be deemed to
have received any payment on a Mortgage Loan on the date the Subservicer
received such payment; PROVIDED, HOWEVER, that this sentence shall not apply to
the Indenture Trustee acting as the Master Servicer; PROVIDED, FURTHER, however,
that the foregoing provision shall not affect the obligation of the Master
Servicer if it is also the Indenture Trustee to advance amounts which are not
Nonrecoverable Advances.
-8-
(b) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Master Servicer alone, and the Indenture Trustee, the
Note Insurer and the Noteholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Sections 3.05 and 7.05.
Section 3.05. ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY
INDENTURE TRUSTEE. (a) If the Indenture Trustee or its designee shall assume the
servicing obligations of the Master Servicer in accordance with Section 6.02
below, the Indenture Trustee, to the extent necessary to permit the Indenture
Trustee to carry out the provisions of Section 6.02 with respect to the Mortgage
Loans, shall succeed to all of the rights and obligations of the Master Servicer
under each of the Subservicing Agreements and each Subservicing Agreement shall
provide for such successor. In such event, the Indenture Trustee or its designee
as the successor Master Servicer shall be deemed to have assumed all of the
Master Servicer's rights and obligations therein and to have replaced the Master
Servicer as a party to such Subservicing Agreements to the same extent as if
such Subservicing Agreements had been assigned to the Indenture Trustee or its
designee as a successor Master Servicer, except that the Indenture Trustee or
its designee as a successor Master Servicer shall not be deemed to have assumed
any obligations or liabilities of the Master Servicer arising prior to such
assumption and the Master Servicer shall not thereby be relieved of any
liability or obligations under such Subservicing Agreements arising prior to
such assumption; provided, however, that if the Master Servicer resigns or is
terminated due to an Event of Default not caused by the Subservicer, the
Subservicer shall have the option if it so chooses, with the consent of the Note
Insurer, to become the successor Master Servicer in which event the Indenture
Trustee shall name the Subservicer as the successor Master Servicer. Nothing in
the foregoing shall be deemed to entitle the Indenture Trustee or its designee
as a successor Master Servicer at any time to receive any portion of the
servicing compensation provided under Section 3.17 except for such portion as
the Master Servicer would be entitled to receive.
(b) In the event that the Indenture Trustee or its designee as
successor Master Servicer for the Indenture Trustee assumes the servicing
obligations of the Master Servicer under Section 6.02, upon the request of the
Indenture Trustee or such designee as successor Master Servicer, the Master
Servicer shall at its own expense deliver to the Indenture Trustee, or at its
written request to such designee, originals or, if originals are not available,
photocopies of all documents, files and records, electronic or otherwise,
relating to the Subservicing Agreements and the related Mortgage Loans or REO
Property then being serviced and an accounting of amounts collected and held by
it, if any, and will otherwise cooperate and use its reasonable efforts to
effect the orderly and efficient transfer of the Subservicing Agreements, or
responsibilities hereunder to the Indenture Trustee, or at its written request
to such designee as successor Master Servicer.
Section 3.06. COLLECTION OF MORTGAGE LOAN PAYMENTS; COLLECTION ACCOUNT.
(a) The Master Servicer will coordinate and monitor remittances by Subservicers
with respect to the Mortgage Loans in accordance with this Servicing Agreement.
-9-
(b) The Master Servicer shall make its best reasonable efforts to
collect or cause to be collected all payments required under the terms and
provisions of the Mortgage Loans and shall follow, and use its best reasonable
efforts to cause Subservicers to follow, collection procedures comparable to the
collection procedures of prudent mortgage lenders servicing mortgage loans for
their own account to the extent such procedures shall be consistent with this
Servicing Agreement. Consistent with the foregoing, the Master Servicer or the
related Subservicer may in its discretion (i) waive or permit to be waived any
late payment charge or assumption fee, and (ii) suspend or reduce or permit to
be suspended or reduced regular monthly payments for a period of up to six
months, or arrange or permit an arrangement with a Mortgagor for a scheduled
liquidation of delinquencies; provided, however, that the Master Servicer or the
related Subservicer may permit the foregoing only if it believes, in its good
faith business judgment, that recoveries of Monthly Payments will be maximized
as a result of such actions; provided further, however, that the Master Servicer
shall not permit any waiver, modification or variance which would (a) change the
loan rate, (b) forgive any payment of principal or interest, (c) lessen the lien
priority or (d) extend the final maturity date of a Mortgage Loan past 12 months
after to the final maturity date on the Notes; provided, however, that the
Master Servicer may approve (a) through (d) if it believes it is in the best
interests of the Noteholders and the Note Insurer. In the event the Master
Servicer or related Subservicer shall consent to the deferment of the due dates
for payments due on a Mortgage Note, the Master Servicer shall nonetheless make
an Advance or shall cause the related Subservicer to make an advance to the same
extent as if such installment were due, owing and delinquent and had not been
deferred through liquidation of the Mortgaged Property; PROVIDED, HOWEVER, that
the obligation of the Master Servicer or the related Subservicer to make an
Advance shall apply only to the extent that the Master Servicer believes, in its
good faith business judgment, that such advances are not Nonrecoverable
Advances.
(c) Promptly after the Master Servicer has determined that all amounts
which it expects to recover from or on account of a Mortgage Loan have been
recovered and that no further Liquidation Proceeds will be received in
connection therewith, the Master Servicer shall provide to (i) the Indenture
Trustee a certificate of a Servicing Officer that such Mortgage Loan became a
Liquidated Mortgage Loan as of the date of such determination and (ii) the Note
Insurer and the Indenture Trustee a Liquidation Report in the form attached
hereto as Exhibit C.
(d) The Master Servicer shall establish a segregated account in the
name of the Indenture Trustee (the "COLLECTION ACCOUNT"), which shall be an
Eligible Account, in which the Master Servicer shall deposit or cause to be
deposited any amounts representing payments on and any collections in respect of
the Initial Mortgage Loans received by it after the Cut-Off Date or, with
respect to the Subsequent Mortgage Loans, the Subsequent Cut-off Date (other
than in respect of the payments referred to below under "provided however" in
this subsection (d)) within two Business Days following receipt thereof,
including the following payments and collections received or made by it (without
duplication):
(i) all payments of principal of or interest on the
Mortgage Loans received by the Master Servicer after the Cut-off Date
or the Subsequent Cut-off Date directly from Mortgagors or from the
respective Subservicer;
-10-
(ii) the aggregate Repurchase Price of the Mortgage
Loans purchased by the Master Servicer pursuant to Section 3.18;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by
the Seller pursuant to the Home Equity Loan Purchase Agreement, and all
Substitution Adjustment Amounts required to be deposited in connection
with the substitution of an Eligible Substitute Mortgage Loan pursuant
to the Home Equity Loan Purchase Agreement;
(v) Insurance Proceeds, other than Net Liquidation
Proceeds, resulting from any insurance policy maintained on a Mortgaged
Property;
(vi) any Advance and any Compensating Interest payments;
and
(vii) any other amounts received by the Master Servicer,
including all assumption fees and any other fees that are required to
be deposited in the Collection Account pursuant to this Servicing
Agreement.
PROVIDED, HOWEVER, that with respect to each Due Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee, for such Due Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account late payment charges
payable by Mortgagors, as further described in Section 3.15, or amounts received
by the Subservicer for the accounts of Mortgagors for application towards the
payment of taxes, insurance premiums, assessments and similar items. In the
event any amount not required to be deposited in the Collection Account is so
deposited, the Master Servicer may at any time (prior to being terminated under
this Agreement) withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding. The Master Servicer shall keep records
that accurately reflect the funds on deposit in the Collection Account that have
been identified by it as being attributable to the Mortgage Loans and shall hold
all collections in the Collection Account for the benefit of the Owner Trustee,
the Indenture Trustee, the Noteholders and the Note Insurer, as their interests
may appear.
(e) Funds in the Collection Account may be invested in Eligible
Investments, but shall not be commingled with the Master Servicer's own funds or
general assets or with funds respecting payments on mortgage loans or with any
other funds not related to the Notes. Income earned on such Eligible Investments
shall be for the account of the Master Servicer.
(f) Payments in the nature of prepayment penalties received on the
Mortgage Loans or Foreclosing Profits shall not be deposited in the Collection
Account, but rather shall be received and held by the Master Servicer (or the
Subservicer) solely for the benefit of and at the direction of the Seller. Such
amounts shall not be applied or made available by the Master
Servicer (or the Subservicer) for any other purpose.
-11-
(g) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Master Servicer, in one or more accounts in the name of the Indenture
Trustee meeting the requirements of an Eligible Account. The Subservicer shall
segregate and hold all funds collected and received pursuant to each Mortgage
Loan separate and apart from any of its own funds and general assets and any
other funds. Each Subservicer shall make remittances to the Master Servicer no
later than one Business Day following receipt thereof and the Master Servicer
shall deposit any such remittances received from any Subservicer within two
Business Days following receipt by the Master Servicer.
Section 3.07. WITHDRAWALS FROM THE COLLECTION ACCOUNT. (a) The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.06 that
are attributable to the Mortgage Loans for the following purposes (without
duplication):
(i) to deposit in the Payment Account, by the fifth
Business Day prior to each Payment Date, all collections on the
Mortgage Loans required to be distributed
from the Payment Account on a Payment Date;
(ii) to the extent deposited to the Collection Account,
to reimburse itself or the related Subservicer for previously
unreimbursed Servicing Advances, expenses incurred in maintaining
individual insurance policies pursuant to Section 3.11, or Liquidation
Expenses, paid pursuant to Section 3.13, such withdrawal right being
limited to amounts received on particular Mortgage Loans (other than
any Repurchase Price in respect thereof) which represent late
recoveries of the payments for which such advances were made, or from
related Liquidation Proceeds;
(iii) to pay to itself out of each payment received on
account of interest on a Mortgage Loan as contemplated by Section 3.15,
an amount equal to the related Servicing Fee (to the extent not
retained pursuant to Section 3.06), net of any amount retained by the
Subservicer in respect of the Subservicing Fee pursuant to Section
3.07(b);
(iv) to pay to itself or the Seller, with respect to any
Mortgage Loan or property acquired in respect thereof that has been
purchased by the Seller, the Master Servicer or other entity, all
amounts received thereon and not required to be distributed to
Noteholders as of the date on which the related Repurchase Price is
determined;
(v) to reimburse the Master Servicer or any Subservicer
for any unreimbursed Advance of its own funds or any unreimbursed
advance of such Subservicer's own funds, the right of the Master
Servicer or a Subservicer to reimbursement pursuant to this subclause
(v) being limited to amounts received on a particular Mortgage Loan
(including, for this purpose, the Repurchase Price therefor, Insurance
Proceeds and Liquidation Proceeds) which represent late payments or
recoveries of the principal of or interest on such Mortgage Loan
respecting which such Advance or advance was made;
-12-
(vi) to reimburse the Master Servicer or any Subservicer
from Insurance Proceeds or Liquidation Proceeds relating to a
particular Mortgage Loan for amounts expended by the Master Servicer or
such Subservicer pursuant to Section 3.13 in good faith in connection
with the restoration of the related Mortgage Property which was damaged
by the uninsured cause or in connection with the liquidation of such
Mortgage Loan;
(vii) to reimburse the Master Servicer or any Subservicer
for any unreimbursed Nonrecoverable Advance previously made, and
otherwise not reimbursed pursuant to this Subsection 3.07(a);
(viii) to withdraw any other amount deposited in the
Collection Account that was not required to be deposited therein
pursuant to Section 3.06;
(ix) to reimburse the Master Servicer for costs
associated with any environmental report specified in Section 3.13(c);
(x) to clear and terminate the Collection Account upon
a termination pursuant to Section 7.08; and
(xi) to pay to the Master Servicer or any Subservicer
income earned on Eligible Investments in the Collection Account.
In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v) and
(vi), the Master Servicer's entitlement thereto is limited to collections or
other recoveries on the related Mortgage Loan, and the Master Servicer shall
keep or cause the Subservicer to keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to such clauses.
(b) Notwithstanding the provisions of this Section 3.07, the Master
Servicer may, but is not required to, allow the Subservicers to deduct from
amounts received by them or from the related account maintained by a
Subservicer, prior to deposit in the Collection Account, any portion to which
such Subservicers are entitled as reimbursement of any reimbursable Advances,
Servicing Advances and Nonrecoverable Advances made by such Subservicers or the
Sub-Servicing Fee; PROVIDED THAT any amount so retained in respect of the
Subservicing Fee shall be deemed to have been received by the Master Servicer in
respect of the Servicing Fee.
Section 3.08. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING ACCOUNTS.
(a) The Master Servicer shall establish and maintain or cause the
related Subservicer to establish and maintain, one or more Servicing Accounts.
The Master Servicer or a Subservicer will deposit and retain therein all
collections from the Mortgagors for the payment of taxes, assessments, insurance
premiums, or comparable items as agent of the Mortgagors.
-13-
(b) The deposits in the Servicing Accounts shall be held in trust by
the Master Servicer or a Subservicer (and its successors and assigns) in the
name of the Indenture Trustee. Such Servicing Accounts shall be Eligible
Accounts and, if permitted by applicable law, invested in Eligible Investments
held in trust by the Master Servicer or a Subservicer as described above and
maturing, or be subject to redemption or withdrawal, no later than the date on
which such funds are required to be withdrawn; withdrawals of amounts from the
Servicing Accounts may be made only to effect timely payment of taxes,
assessments, insurance premiums, or comparable items, to reimburse the Master
Servicer or a Subservicer for any advances made with respect to such items, to
refund to any Mortgagors any sums as may be determined to be overages, to pay
interest, if required, to Mortgagors on balances in the Servicing Accounts or to
clear and terminate the Servicing Accounts at or any time after the termination
of this Servicing Agreement. Amounts received from Mortgagors for deposit into
the Servicing Accounts shall be deposited in the Servicing Accounts by the
Master Servicer within two days of receipt. The Master Servicer shall advance
from its own funds amounts needed to pay items payable from the Servicing
Accounts if the Master Servicer reasonably believes that such amounts are
recoverable from the related Mortgagor. The Master Servicer shall comply with
all laws relating to the Servicing Accounts, including laws relating to payment
of interest on the Servicing Accounts. The Master Servicer agrees to abide by
applicable law with respect to the payment of interest on escrow accounts to
Mortgagors. The Servicing Accounts shall not be the property of the Issuer, the
Note Insurer or the Noteholders.
Section 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS. The Master Servicer or the Seller shall provide, and shall
cause any Subservicer to provide, to the Indenture Trustee and the Note Insurer
access to the documentation regarding the related Mortgage Loans and REO
Property and to the Noteholders, the FDIC, and the supervisory agents and
examiners of the FDIC (to which the Indenture Trustee shall also provide) access
to the documentation regarding the related Mortgage Loans required by applicable
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Master Servicer
or the Subservicers that are designated by these entities; PROVIDED, HOWEVER,
that, unless otherwise required by law, the Master Servicer, the Seller or the
Subservicer shall not be required to provide access to such documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor;
PROVIDED, FURTHER, HOWEVER, that the Indenture Trustee and the Note Insurer
shall coordinate their requests for such access so as not to impose an
unreasonable burden on, or cause an unreasonable interruption of, the business
of the Master Servicer, the Seller or any Subservicer. The Master Servicer, the
Seller and the Subservicers shall allow representatives of the above entities to
photocopy any of the documentation and shall provide equipment for that purpose
at a charge that covers their own actual out-of-pocket costs.
Section 3.10. RESERVED.
Section 3.11. MAINTENANCE OF HAZARD INSURANCE AND FIDELITY COVERAGE.
(a) The Master Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each Mortgage Loan and each REO Property, in
full force and effect hazard insurance (fire insurance with extended coverage)
equal to at least the lesser of the Principal Balance of the
-14-
Mortgage Loan or the current replacement cost of the Mortgaged Property, and
containing a standard mortgagee clause, PROVIDED, HOWEVER, that the amount of
hazard insurance may not be less than the amount necessary to prevent loss due
to the application of any co-insurance provision of the related policy. If the
Master Servicer shall obtain and maintain a blanket policy consistent with its
general mortgage servicing activities from an insurer insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in this Section 3.11(a), 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 a policy complying with this
Section 3.11(a) and there shall have been a loss which would have been covered
by such policy, deposit in the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause without any
right of reimbursement. Any such deposit by the Master Servicer shall be made on
the last Business Day of the Due Period in the month in which payments under any
such policy would have been deposited in the Collection Account. In connection
with its activities as Master Servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Issuer, the Note Insurer
and the Indenture Trustee, claims under any such blanket policy.
(b) Any amounts collected by the Master Servicer or a Subservicer under
any such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with the Master Servicer's or a Subservicer's normal
servicing procedures, the Mortgage Note, the Security Instrument or applicable
law) shall be deposited in the Collection Account.
(c) Any cost incurred by a Master Servicer or a Subservicer in
maintaining any such individual hazard insurance policies shall not be added to
the amount owing under the Mortgage Loan for the purpose of calculating monthly
distributions to Noteholders, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs of maintaining individual hazard insurance policies
shall be recoverable by the Master Servicer or a Subservicer out of related late
payments by the Mortgagor or out of Insurance Proceeds or Liquidation Proceeds
or by the Master Servicer from the Repurchase Price, to the extent permitted by
Section 3.07.
(d) No earthquake or other additional insurance is to be required of
any Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Master Servicer shall use its best reasonable efforts to cause with
respect to the Mortgage Loans and each REO Property flood insurance (to the
extent available and in accordance with mortgage servicing industry practice) to
be maintained. Such flood insurance shall cover the Mortgaged Property,
including all items taken into account in arriving at the Appraised Value on
which the Mortgage Loan was based, and shall be in an amount equal to the lesser
of (i) the Principal Balance of the related Mortgage Loan and (ii) the minimum
amount required under the terms of coverage to compensate for any damage or loss
on a replacement cost basis, but not more than the maximum amount of such
insurance available for the related Mortgaged Property under either the regular
-15-
or emergency programs of the National Flood Insurance Program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).
(e) If insurance has not been maintained complying with Subsections
3.11 (a) and (d) and there shall have been a loss which would have been covered
by such insurance had it been maintained, the Master Servicer shall pay, or
cause the related Subservicer to pay, for any necessary repairs without any
right of reimbursement.
(f) The Master Servicer shall present, or cause the related Subservicer
to present, claims under any related hazard insurance or flood insurance policy.
(g) The Master Servicer shall obtain and maintain at its own expense,
and shall cause each Subservicer to obtain and maintain at its own expense, and
for the duration of this Servicing Agreement, a blanket fidelity bond and an
errors and omissions insurance policy covering the Master Servicer's and such
Subservicer's officers, employees and other persons acting on its behalf in
connection with its activities under this Servicing Agreement. The amount of
coverage shall be consistent with industry standards. The Master Servicer shall
promptly notify the Indenture Trustee and the Note Insurer of any material
change in the terms of such bond or policy. To the extent requested, the Master
Servicer shall provide to the Indenture Trustee and the Note Insurer a
certificate of insurance that such bond and policy are in effect. If any such
bond or policy ceases to be in effect, the Master Servicer shall, to the extent
possible, give the Indenture Trustee and the Note Insurer ten days' notice prior
to any such cessation and shall use its reasonable best efforts to obtain a
comparable replacement bond or policy, as the case may be. Any amounts relating
to the Mortgage Loans collected under such bond or policy shall be deposited in
the Collection Account.
Section 3.12. DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS. (a) In any
case in which the Master Servicer is notified by any Mortgagor or Subservicer
that a Mortgaged Property relating to a Mortgage Loan has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall enforce, or shall instruct
such Subservicer to enforce, any due-on-sale clause contained in the related
Security Instrument to the extent permitted under the terms of the related
Mortgage Note and by applicable law. The Master Servicer or the related
Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the
Master Servicer requires acceleration of the Mortgage Loan, but only if the
Master Servicer is satisfied, as evidenced by an Officer's Certificate delivered
to the Indenture Trustee and the Note Insurer, that such Mortgage Loan is in
default or default is reasonably foreseeable. If the Master Servicer reasonably
believes that such due-on-sale clause cannot be enforced under applicable law,
that enforcement thereof is not in the best interests of the Noteholders and the
Note Insurer or, if a Note Insurer Default exists, of the Noteholders or if the
Mortgage Loan does not contain a due-on-sale clause, the Master Servicer is
authorized, and may authorize any Subservicer, to consent to a conveyance
subject to the lien of the Mortgage, and to take or enter into an assumption
agreement from or with the Person to whom such property has been or is about to
be conveyed, pursuant to which such Person becomes liable under the related
Mortgage Note and unless prohibited by applicable state law, such Mortgagor
remains liable thereon, on condition, however, that the related Mortgage Loan
shall continue to be covered by a hazard policy. In connection with any such
assumption, no material
-16-
term of the related Mortgage Note may be changed. The Master Servicer shall
notify the Indenture Trustee and the Note Insurer, whenever possible, before the
completion of such assumption agreement, and shall forward to the Indenture
Trustee the original copy of such assumption agreement, which copy shall be
added by the Indenture Trustee to the related Mortgage File and which 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. Upon the
instruction of the Master Servicer, the Indenture Trustee shall execute all
agreements relating to the foregoing.
(b) Notwithstanding the foregoing paragraph or any other provision of
this Servicing 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 any conveyance by the
Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan
which the Master Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever or if the exercise of such right would
impair or threaten to impair any recovery under any applicable insurance policy.
Section 3.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The Master
Servicer shall, or shall direct the related Subservicer to, foreclose upon or
otherwise comparably convert the ownership of properties securing any Mortgage
Loans that come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.06, except that the Master Servicer shall not, and shall not direct
the related Subservicer to, foreclose upon or otherwise comparably convert a
Mortgaged Property if there is evidence of toxic waste or other environmental
hazards thereon unless the Master Servicer follows the procedures in Subsection
(c) below. In connection with such foreclosure or other conversion, the Master
Servicer in conjunction with the related Subservicer, if any, shall use its best
reasonable efforts to preserve REO Property and to realize upon defaulted
Mortgage Loans in such manner as to maximize the receipt of principal and
interest by the Noteholders, taking into account, among other things, the timing
of foreclosure and the considerations set forth in Subsection 3.13(b). The
foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the restoration of any property unless it determines in good faith (i) that such
restoration or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Noteholders after reimbursement to itself for such expenses and
(ii) that such expenses will be recoverable to it either through Liquidation
Proceeds (respecting which it shall have priority for purposes of reimbursements
from the Collection Account pursuant to Section 3.07) or through Insurance
Proceeds (respecting which it shall have similar priority). The Master Servicer
shall be responsible for all costs and expenses constituting Liquidation
Expenses incurred by it in any such proceedings; PROVIDED, HOWEVER, that it
shall be entitled to reimbursement thereof (as well as its normal servicing
compensation) as set forth in Section 3.07. Any income from or other funds (net
of any income taxes) generated by REO Property shall be deemed for purposes of
this Servicing Agreement to be Liquidation Proceeds.
Any subsequent collections with respect to any Liquidated Mortgage Loan
shall be deposited to the Collection Account. For purposes of determining the
amount of any Liquidation Proceeds or Insurance Proceeds, or other unscheduled
collections, the Master Servicer may take
-17-
into account any estimated additional Liquidation Expenses expected to be
incurred in connection with the related defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, who shall hold the same on behalf of
the Issuer in accordance with the Indenture. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage Loan, such
Mortgaged Property shall (except as otherwise expressly provided herein) be
considered to be an outstanding Mortgage Loan held as an asset of the Issuer
until such time as such property shall be sold.
(b) The Master Servicer shall not acquire any real property (or any
personal property incident to such real property) on behalf of the Issuer except
in connection with a default or reasonably foreseeable default of a Mortgage
Loan. In the event that the Master Servicer acquires any real property (or
personal property incident to such real property) on behalf of the Trust Estate
in connection with a default or imminent default of a Mortgage Loan, such
property shall be disposed of by the Master Servicer on behalf of the Issuer
within two years after its acquisition on behalf of the Trust Estate.
(c) With respect to any Mortgage Loan as to which the Master Servicer
or a Subservicer has received notice of, or has actual knowledge of, the
presence of any toxic or hazardous substance on the Mortgaged Property, the
Master Servicer shall promptly notify the Indenture Trustee, the Owner Trustee
and the Note Insurer and shall act in accordance with any such directions and
instructions provided by the Note Insurer, or if a Note Insurer Default exists,
by the Issuer. Notwithstanding the preceding sentence of this Section 3.13(c),
with respect to any Mortgage Loan described by such sentence, the Master
Servicer shall, if requested by the Note Insurer, obtain and deliver to the
Issuer, the Indenture Trustee and the Note Insurer an environmental audit report
prepared by a Person who regularly conducts environmental audits using customary
industry standards. The Master Servicer shall be entitled to reimbursement for
such report pursuant to Section 3.07. If the Note Insurer has not provided
directions and instructions to the Master Servicer in connection with any such
Mortgage Loan within 30 days of a request by the Master Servicer for such
directions and instructions, then the Master Servicer shall take such action as
it deems to be in the best economic interest of the Trust Estate (other than
proceeding against the Mortgaged Property) and is hereby authorized at such time
as it deems appropriate to release such Mortgaged Property from the lien of the
related Mortgage. The parties hereto acknowledge that the Master Servicer shall
not obtain on behalf of the Issuer a deed as a result or in lieu of foreclosure,
and shall not otherwise acquire possession of or title to, or commence any
proceedings to acquire possession of or title to, or take any other action with
respect to, any Mortgaged Property, if the Owner Trustee or the Indenture
Trustee could reasonably be considered to be a responsible party for any
liability arising from the presence of any toxic or hazardous substance on the
Mortgaged Property, unless the Owner Trustee or the Indenture Trustee has been
indemnified by the Trust Fund to its reasonable satisfaction against such
liability.
Section 3.14. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE
FILES. (a) Upon payment in full of any Mortgage Loan or the realization of all
amounts expected to be collected
-18-
thereon (including the repurchase or liquidation through foreclosure or
otherwise), the Master Servicer will immediately deliver to the Indenture
Trustee a Request for Release in the form of Exhibit B hereto signed by a
Servicing Officer (which certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited in the Collection Account have been so deposited) and shall request
delivery to the Master Servicer or Subservicer, as the case may be, of the
Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee shall promptly release the related Mortgage File to the Master Servicer
or Subservicer and execute and deliver to the Master Servicer, without recourse,
the request for reconveyance, deed of reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Security Instrument
(furnished by the Master Servicer), together with the Mortgage Note with written
evidence of cancellation thereon.
(b) Each Request for Release may be delivered to the Indenture Trustee
(i) via mail or courier, (ii) via facsimile or (iii) by such other means,
including, without limitation, electronic or computer readable medium, as the
Master Servicer and the Indenture Trustee shall mutually agree. The Indenture
Trustee shall promptly release the related Mortgage File(s) within seven (7)
Business Days of receipt of a properly completed Request for Release pursuant to
clause (i), (ii) or (iii) above, which shall be authorization to the Indenture
Trustee to release such Mortgage Files, provided the Indenture Trustee has
determined that such Request for Release has been executed, with respect to
clause (i) or (ii) above, or approved, with respect to clause (iii) above, by an
authorized Servicing Officer of the Master Servicer, and so long as the
Indenture Trustee complies with its duties and obligations under this Agreement.
If the Indenture Trustee is unable to release the Mortgage Files within the time
frames previously specified, the Indenture Trustee shall immediately notify the
Master Servicer indicating the reason for such delay, but in no event shall such
notification be later than seven Business Days after receipt of a Request for
Release. If the Master Servicer is required to pay penalties or damages due the
Indenture Trustee's negligent failure to release the related Mortgage File or
the Indenture Trustee's negligent failure to execute and release documents in a
timely manner, the Indenture Trustee shall be liable for such penalties or
damages.
On each day that the Master Servicer remits to the Indenture Trustee
Requests for Releases pursuant to clauses (ii) or (iii) above, the Master
Servicer shall also submit to the Indenture Trustee a summary of the total
amount of such Requests for Releases requested on such day by the same method as
described in such clauses (ii) and (iii) above.
(c) From time to time as is appropriate, for the servicing or
foreclosure of any Mortgage Loan or collection under an insurance policy, the
Master Servicer may deliver to the Indenture Trustee a Request for Release
signed by a Servicing Officer on behalf of the Master Servicer in substantially
the form attached as Exhibit B hereto. Upon receipt of the Request for Release,
the Indenture Trustee shall deliver the Mortgage File or any document therein to
the Master Servicer or Subservicer, as the case may be, as bailee for the
Indenture Trustee.
(d) The Master Servicer shall cause each Mortgage File or any document
therein released pursuant to Subsection 3.14(b) to be returned to the Indenture
Trustee when the need therefor no longer exists, unless the Mortgage Loan has
become a Liquidated Mortgage Loan and
-19-
the Liquidation Proceeds relating to the Mortgage Loan have been deposited in
the Collection Account or such Mortgage File is being used to pursue foreclosure
or other legal proceedings. Prior to return of a Mortgage File or any document
to the Indenture Trustee, the Master Servicer, the related insurer or
Subservicer to whom such file or document was delivered shall retain such file
or document in its respective control as bailee for the Indenture Trustee unless
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, to initiate or
pursue 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 Indenture 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. If
a Mortgage Loan becomes a Liquidated Mortgage Loan, the Indenture Trustee shall
deliver a copy of the Request for Release with respect thereto to the Master
Servicer upon deposit of the related Liquidation Proceeds in the Collection
Account.
(e) The Indenture Trustee shall execute and deliver to the Master
Servicer any court pleadings, requests for trustee's sale or other documents
necessary to (i) the foreclosure or trustee's sale with respect to a Mortgaged
Property; (ii) any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment
against the Mortgagor; or (iv) enforce any other rights or remedies provided by
the Mortgage Note or Security Instrument or otherwise available at law or
equity. Together with such documents or pleadings the Master Servicer shall
deliver to the Indenture Trustee a certificate of a Servicing Officer in which
it requests the Indenture Trustee to execute the pleadings or documents. The
certificate shall certify and explain the reasons for which the pleadings or
documents are required. It shall further certify that the Indenture Trustee's
execution and delivery of the pleadings or documents will not invalidate any
insurance coverage under the insurance policies or invalidate or otherwise
affect the lien of the Security Instrument, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
Section 3.15. SERVICING COMPENSATION. (a) As compensation for its
activities hereunder, the Master Servicer shall be entitled to receive the
Servicing Fee from payments of accrued interest on each Mortgage Loan. The
Master Servicer shall be solely responsible for paying any and all fees with
respect to a Subservicer and the Trust Estate shall not bear any fees, expenses
or other costs directly associated with any Subservicer.
(b) The Master Servicer may retain additional servicing compensation in
the form of late payment charges, release fees, bad check charges, assumption
fees and any other servicing-related fees, to the extent such charges are
collected from the related Mortgagors and investment earnings on the Collection
Account. The Master Servicer shall be required to pay all expenses it incurs in
connection with servicing activities under this Servicing Agreement and shall
not be entitled in connection with servicing activities under this Servicing
Agreement to reimbursement except as provided in this Servicing Agreement.
Expenses to be paid by the Master Servicer without reimbursement under this
Subsection 3.15(b) shall include payment of the expenses of the accountants
retained pursuant to Section 3.17.
-20-
Section 3.16. ANNUAL STATEMENTS OF COMPLIANCE. Within 120 days after
December 31 of each year, beginning with December 31, 1998, the Master Servicer
at its own expense shall deliver to the Indenture Trustee, with a copy to the
Note Insurer and the Rating Agencies, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of performance under this Servicing
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled its obligations under this Servicing Agreement in all material
respects for such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof including the steps being taken by the Master Servicer
to remedy such default; (iii) a review of the activities of each Subservicer
during the Subservicer's most recently ended calendar year and its performance
under its Subservicing Agreement has been made under such officer's supervision;
and (iv) to the best of the Servicing Officer's knowledge, based on his review
and the certification of an officer of the Subservicer (unless the Servicing
Officer has reason to believe that reliance on such certification is not
justified), either each Subservicer has performed and fulfilled its duties,
responsibilities and obligations under this Servicing Agreement and its
Subservicing Agreement in all material respects throughout the year, or, if
there has been a default in performance or fulfillment of any such duties,
responsibilities or obligations, specifying the nature and status of each such
default known to the Servicing Officer. Copies of such statements shall be
provided by the Master Servicer to the Noteholders upon request or by the
Indenture Trustee at the expense of the Master Servicer should the Master
Servicer fail to provide such copies.
Section 3.17. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
(a) Within 120 days after December 31 of each year, beginning with December 31,
1998, the Master Servicer, at its expense, shall cause a firm of Independent
nationally-recognized certified public accountants who are members of the
American Institute of Certified Public Accountants and who are acceptable to the
Note Insurer to furnish a statement to the Master Servicer, which will be
provided to the Indenture Trustee, the Note Insurer and the Rating Agencies, to
the effect that, in connection with the firm's examination of the Master
Servicer's financial statements as of the end of such calendar year, nothing
came to their attention that indicated that the Master Servicer was not in
compliance with Sections 3.06, 3.07 and 3.08 except for (i) such exceptions as
such firm believes to be immaterial and (ii) such other exceptions as are set
forth in such statement; provided, however, that for purposes of complying with
this Section such a statement furnished to a Subservicer otherwise satisfying
the requirements of this Section shall be deemed to satisfy the obligations of
the Master Servicer.
(b) Within 120 days after December 31 of each year, beginning
with December 31, 1998, the Master Servicer, at its expense, shall, and shall
cause each Subservicer to cause, a nationally recognized firm of independent
certified public accountants to furnish to the Master Servicer or such
Subservicer, as the case may be, a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer or such Subservicer, as the case may be, which includes an
assertion that the Master Servicer or such Subservicer, as the case may be, has
complied with certain minimum mortgage loan servicing standards identified in
the Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America with respect to the servicing of first
lien single
-21-
family mortgage loans during the most recently completed calendar year and (ii)
on the basis of an examination conducted by such firm in accordance with
standards established by the American Institute of Certified Public Accountants,
such representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate. Immediately upon
receipt of such report, the Master Servicer shall or shall cause each
Subservicer to furnish a copy of such report to the Indenture Trustee, the
Rating Agencies and the Note Insurer.
Section 3.18. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS. With the
consent of the Note Insurer, the Master Servicer may repurchase any Mortgage
Loan delinquent in payment for a period of 90 days or longer for a price equal
to the Repurchase Price; PROVIDED, HOWEVER, that the Master Servicer purchases
any such Mortgage Loan on the basis of delinquency, purchasing the most
delinquent Mortgage Loans first (unless otherwise agreed to by the Note
Insurer). The procedure for such repurchase shall be the same as for repurchase
by the Seller under the Home Equity Loan Purchase Agreement. Notwithstanding the
foregoing, the Indenture Trustee, whether acting as Indenture Trustee or in the
capacity of successor Master Servicer, shall have no obligation to repurchase
any Mortgage Loan.
Section 3.19. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer or Subservicer shall make reports of
foreclosures and abandonments of any mortgaged property for each year beginning
in 1997, the Master Servicer or Subservicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) acquires an interest in any 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 any Mortgaged Property has been
abandoned. The reports from the Master Servicer or Subservicer shall be in form
and substance sufficient to meet the reporting requirements imposed by Section
6050J, Section 6050H (reports relating to mortgage interest received) and
Section 6050P of the Code (reports relating to cancellation of indebtedness).
Section 3.20. MASTER SERVICER TO ACT AS AGENT AND BAILEE OF THE
INDENTURE TRUSTEE. The Master Servicer hereby agrees to act as agent and bailee
of the Indenture Trustee for the purposes set forth in Section 3.14 of the
Indenture.
-22-
ARTICLE IV
Remittance Reports
Section 4.01. REMITTANCE REPORTS. On the second Business Day following
each Determination Date, the Master Servicer shall deliver or cause the
Subservicer to deliver to the Indenture Trustee a report, prepared as of the
close of business on such Determination Date (the "Determination Date Report"),
and shall forward to the Indenture Trustee in the form of computer readable
electromagnetic tape or disk of such report. The Determination Date Report and
any written information supplemental thereto shall include such information with
respect to the Mortgage Loans that is reasonably available to the Master
Servicer and that is required by the Indenture Trustee for purposes of making
the calculations and providing the reports referred to in the Indenture, as set
forth in written specifications or guidelines issued by the Indenture Trustee
from time to time and agreed to by the Master Servicer. Such information shall
include the aggregate amounts required to be withdrawn from the Collection
Account and deposited into the Payment Account pursuant to Section 3.07. The
Master Servicer agrees to cooperate with the Indenture Trustee in providing all
information as is reasonably requested by the Indenture Trustee to prepare the
reports required under the Indenture. The Master Servicer shall deliver the
Determination Date Report to the Note Insurer.
The determination by the Master Servicer of such amounts shall, in the
absence of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee and Indenture Trustee shall be protected in
relying upon the same without any independent check or verification.
Section 4.02. ADVANCES. If any portion of a Monthly Payment relating to
interest payments (together with any advances from the Subservicers) on a
Mortgage Loan that was due on the immediately preceding Due Date and delinquent
on the Determination Date is delinquent other than as a result of application of
the Relief Act, the Master Servicer will deposit or cause the Subservicer to
deposit in the Collection Account not later than the fourth Business Day
immediately preceding the related Payment Date an amount equal to such
deficiency net of the related Servicing Fee for such Mortgage Loan, except to
the extent the Master Servicer determines any such advance to be a
Nonrecoverable Advance. Subject to the foregoing and in the absence of such a
determination, the Master Servicer shall continue to make such advances through
the date that the related Mortgaged Property has, in the judgment of the Master
Servicer, been completely liquidated. If applicable, on the fourth Business Day
preceding each Payment Date, the Master Servicer shall present an Officer's
Certificate to the Indenture Trustee and the Note Insurer (i) stating that the
Master Servicer elects not to make an Advance in a stated amount and (ii)
detailing the reason it deems the advance to be a Nonrecoverable Advance.
Section 4.03. COMPENSATING INTEREST PAYMENTS. The Master Servicer shall
deposit or cause the Subservicer to deposit in the Collection Account not later
than the fourth Business Day preceding the Payment Date an amount equal to the
Compensating Interest related to the related Determination Date. The Master
Servicer shall not be entitled to any reimbursement of any Compensating Interest
payment.
-23-
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 upon and undertaken by the Master Servicer herein.
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE MASTER SERVICER. Any corporation into which the Master
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to the business
of the Master Servicer, shall be, with the consent of the Note Insurer, 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.
The Master Servicer may fully assign all of its rights and delegate its
duties and obligations under this Servicing Agreement; PROVIDED, that the Person
accepting such assignment or delegation shall be a Person which is reasonably
satisfactory to the Indenture Trustee (as pledgee of the Mortgage Loans) and the
Company and satisfactory to the Note Insurer (in its sole discretion), is
willing to service the Mortgage Loans and executes and delivers to the Indenture
Trustee and the Issuer an agreement, in form and substance reasonably
satisfactory to the Note Insurer, the Indenture Trustee and the Issuer, 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 Servicing Agreement; PROVIDED, FURTHER, that each
Rating Agency's rating of the Notes that would be in effect immediately prior to
such assignment and delegation, without taking into account the Note Insurance
Policy, would not be qualified, reduced, or withdrawn as a result of such
assignment and delegation (as evidenced by a letter to such effect from each
Rating Agency).
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS. Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Issuer, the Owner Trustee, the Indenture Trustee, the Note Insurer or the
Noteholders for any action taken or for refraining from the taking of any action
in good faith pursuant to this Servicing Agreement, PROVIDED, HOWEVER, that this
provision shall not protect the Master Servicer or any such Person against any
liability which would otherwise be imposed by reason of its willful misfeasance,
bad faith or negligence in the performance of its duties hereunder or by reason
of its reckless disregard of its obligations and duties hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
may rely in good faith on any document of any kind PRIMA FACIE properly executed
and submitted by any Person respecting any matters arising hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Issuer and held harmless against any loss, liability
or expense incurred in connection with any legal action relating to this
Servicing Agreement or the Notes, including any amount paid to the Owner Trustee
or the Indenture Trustee pursuant to Section 5.06(b), other than any loss,
liability or expense related to
-24-
any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability
or expense shall be otherwise reimbursable pursuant to this Servicing Agreement)
and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or negligence in the performance of its duties hereunder
or by reason of its reckless disregard of its obligations and duties hereunder.
The Master Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Servicing Agreement, and which in its
opinion may involve it in any expense or liability; PROVIDED, HOWEVER, that the
Master Servicer may in its sole discretion undertake any such action which it
may deem necessary or desirable in respect of this Servicing Agreement, and the
rights and duties of the parties hereto and the interests of the Noteholders
hereunder. In such event, the reasonable legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Issuer, and the Master Servicer shall be entitled to be reimbursed
therefor. The Master Servicer's right to indemnity or reimbursement pursuant to
this Section 5.03 shall survive any resignation or termination of the Master
Servicer pursuant to Section 5.04 or 6.01 with respect to any losses, expenses,
costs or liabilities arising prior to such resignation or termination (or
arising from events that occurred prior to such resignation or termination). Any
reimbursements or indemnification to the Master Servicer from the Issuer
pursuant to this Section 5.03 shall be payable in the priority set forth in
Section 3.05(a)(ix) of the Indenture.
Section 5.04. MASTER SERVICER NOT TO RESIGN. Subject to the provisions
of Section 5.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or (ii) upon satisfaction of the following conditions: (a) the
Master Servicer has proposed a successor Master Servicer to the Issuer, the Note
Insurer and the Indenture Trustee in writing and such proposed successor Master
Servicer is reasonably acceptable to the Issuer and the Indenture Trustee; (b)
each Rating Agency shall have delivered a letter to the Issuer, the Note Insurer
and the Indenture Trustee prior to the appointment of the successor Master
Servicer stating that the proposed appointment of such successor Master Servicer
as Master Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Notes or the rating of the Notes that would be in
effect without taking into account the Note Insurance Policy; and (c) such
proposed successor Master Servicer is acceptable to the Note Insurer, as
evidenced by a letter to the Issuer, the Master Servicer and the Indenture
Trustee; PROVIDED, HOWEVER, that no such resignation by the Master Servicer
shall become effective until such successor Master Servicer or, in the case of
(i) above, the Indenture Trustee, as pledgee of the Mortgage Loans, shall have
assumed the Master Servicer's responsibilities and obligations hereunder or the
Indenture Trustee, as pledgee of the Mortgage Loans, shall have designated a
successor Master Servicer in accordance with Section 6.02; provided, however, if
the Master Servicer resigns, Advanta Mortgage Corp. USA ("Advanta"), if it so
chooses and it is acceptable to the Note Insurer, shall be the successor Master
Servicer. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02 as
obligations that survive the resignation or termination of the Master Servicer.
The Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Noteholder or the Note Insurer for any amounts paid by
the Master Servicer pursuant to any provision of this Servicing Agreement. Any
such determination permitting the resignation of the
-25-
Master Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Note Insurer.
Section 5.05. DELEGATION OF DUTIES. In the ordinary course of business,
the Master Servicer at any time may, with the consent of the Note Insurer,
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with the same
standards with which the Master Servicer complies pursuant to Section 3.01. Such
delegation shall not relieve the Master Servicer of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 5.04.
Section 5.06. MASTER SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER
TRUSTEE'S EXPENSES; INDEMNIFICATION. (a) The Master Servicer covenants and
agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee of
the Indenture Trustee all indemnification payments (which shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust) in connection with the exercise and performance of any of the powers and
duties pursuant to Section 7.02 of the Trust Agreement or Section 6.07 of the
Indenture, as the case may be.
(b) The Master Servicer agrees to indemnify the Indenture
Trustee and the Owner Trustee for, and to hold the Indenture Trustee and the
Owner Trustee, as the case may be, harmless against, any claim, tax, penalty,
loss, liability or expense of any kind whatsoever, incurred without negligence
(or gross negligence on the part of the Owner Trustee) or willful misconduct on
its part, arising out of, or in connection with, the failure by the Master
Servicer to perform its duties in compliance with this Servicing Agreement,
including the reasonable costs and expenses (including reasonable legal fees and
expenses) of defending itself against any claim in connection with the exercise
or performance of any of its powers or duties under any Basic Document, provided
that:
(i) with respect to any such claim, the Indenture
Trustee or Owner Trustee, as the case may be, shall have given the
Master Servicer written notice thereof promptly after the Indenture
Trustee or Owner Trustee, as the case may be, shall have actual
knowledge thereof;
(ii) while maintaining control over its own defense, the
Indenture Trustee or Owner Trustee, as the case may be, shall cooperate
and consult fully with the Master Servicer in preparing such defense;
and
(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Master Servicer shall not be liable for
settlement of any claim by the Indenture Trustee or the Owner Trustee,
as the case may be, entered into without the prior consent of the
Master Servicer, which consent shall not be unreasonably withheld.
No termination of this Servicing Agreement shall affect the obligations created
by this Section 5.06 of the Master Servicer to indemnify the Indenture Trustee
and the Owner Trustee under the condi-
-26-
tions and to the extent set forth herein. This section shall survive the
termination or assignment of this Servicing Agreement and the resignation or
removal of the Indenture Trustee. Any amounts to be paid by the Master Servicer
pursuant to this Subsection may not be paid from the Trust Estate.
Notwithstanding the foregoing, the indemnification provided by the
Master Servicer in this Section 5.06 shall not pertain to any loss, liability or
expense of the Indenture Trustee or the Owner Trustee, including the costs and
expenses of defending itself against any claim, incurred in connection with any
actions taken by the Indenture Trustee or the Owner Trustee at the direction of
the Securityholders, as the case may be, pursuant to the terms of this Servicing
Agreement.
Section 5.07. ASSIGNMENT OF SERVICING AGREEMENT. This Agreement shall
bind and inure to the benefit of and be enforceable by the Master Servicer, the
Issuer and the Indenture Trustee and their respective successors and assigns.
The obligations of the Master Servicer may be assigned or delegated only to
affiliates of the Master Servicer.
ARTICLE VI
Default
Section 6.01. SERVICING DEFAULT. If any one of the following events (a
"Servicing Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in
the Collection Account or Payment Account any deposit required to be
made under the terms of this Servicing Agreement, including any
Advances (other than Servicing Advances) and Compensating Interest,
which continues unremedied for a period of two Business Days after the
date upon which such payment was required; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in this Servicing
Agreement, which failure, in each case, materially and adversely
affects the interests of Noteholders or the Note Insurer or the breach
of any representation or warranty of the Master Servicer in this
Servicing Agreement or in the Insurance Agreement which materially and
adversely affects the interests of the Noteholders or the Note Insurer,
and which in either case continues unremedied for a period of [60] days
after the date on which written notice of such failure, requiring the
same to be remedied, and stating that such notice is a "Notice of
Default" hereunder, shall have been given to the Master Servicer by the
Company, the Issuer or the Indenture Trustee, with a copy to the Note
Insurer, or to the Master Servicer, the Company, the Issuer and the
Indenture Trustee by the Note Insurer; or
-27-
(iii) The entry against the Master Servicer of a decree
or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(iv) The Master Servicer shall voluntarily go into
liquidation, consent to the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged, unbonded or unstayed for a period of 60 days; or the
Master Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations; or
(v) Any "Event of Default" under Section 5.01 of
the Insurance Agreement;
(vi) So long as the Seller is the Master Servicer or is
an affiliate, the parent of or under the common control with, the
Master Servicer, any failure of the Seller to repurchase any Mortgage
Loan required to be repurchased, or to pay any amount due,
pursuant to the Home Equity Loan Purchase Agreement; or
(vii) The occurrence of a Performance Test Violation;
then, (a) and in every such case, other than that set forth in (v) or (vi)
hereof, so long as a Servicing Default shall not have been remedied by the
Master Servicer, either the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans, with the consent of the Note Insurer,
or the Note Insurer, or if a Note Insurer Default exists, the holders of at
least 51% of the aggregate Note Principal Balance of the Notes, by notice then
given in writing to the Master Servicer (and to the Indenture Trustee and the
Issuer if given by the Note Insurer or the Noteholders in the case of a Note
Insurer Default) or (b) in the case of the events set forth in (v) or (vi)
hereof, the Note Insurer or, if a Note Insurer Default exists, the holders of at
least 51% of the aggregate Note Principal Balance of the Notes, may, by notice
to the Master Servicer, terminate all of the rights and obligations of the
Master Servicer as Master Servicer under this Servicing Agreement other than its
right to receive servicing compensation and expenses for servicing the Mortgage
Loans hereunder during any period prior to the date of such termination and the
Issuer, subject to the direction of the Indenture Trustee as pledgee of the
Mortgage Loans, with the consent of the Note Insurer, or the Note Insurer may
exercise any and all other remedies
-28-
available at law or equity. Any such notice to the Master Servicer shall also be
given to each Rating Agency, the Note Insurer, the Indenture Trustee and the
Issuer. On or after the receipt by the Master Servicer of such written notice,
all authority and power of the Master Servicer under this Servicing Agreement,
whether with respect to the Notes or the Mortgage Loans or otherwise, shall pass
to and be vested in the Indenture Trustee, pursuant to and under this Section
6.01; and, without limitation, the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Indenture Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer hereunder,
including, without limitation, the transfer within one Business Day to the
Indenture Trustee for the administration by it of all cash amounts relating to
the Mortgage Loans that shall at the time be held by the Master Servicer and to
be deposited by it in the Collection Account, or that have been deposited by the
Master Servicer in the Collection Account or thereafter received by the Master
Servicer with respect to the Mortgage Loans. In addition, the Master Servicer
agrees promptly to provide the Indenture Trustee with all documents and records
requested by it to enable it to assume the Master Servicer's functions under
this Agreement. All reasonable costs and expenses (including, but not limited
to, attorneys' fees) incurred in connection with amending this Servicing
Agreement to reflect such succession as Master Servicer pursuant to this Section
6.01 shall be paid by the predecessor Master Servicer (or if the predecessor
Master Servicer is the Indenture Trustee, the Master Servicer succeeded by the
Indenture Trustee) upon presentation of reasonable documentation of such costs
and expenses. For purposes of this Section 6.01, the Indenture Trustee shall not
be deemed to have knowledge of a Master Servicer Default unless a Responsible
Officer of the Indenture Trustee assigned to and working in the Indenture
Trustee's Corporate Trust Office has actual knowledge thereof or unless written
notice of any event which is in fact such a Servicing Default is received by the
Indenture Trustee and such notice references the Notes or this Agreement.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a payment on a Mortgage Loan which was due prior to the
notice terminating the Master Servicer's rights and obligations hereunder and
received after such notice, that portion to which the Master Servicer would have
been entitled pursuant to Sections 3.07 and 3.15 as well as its Servicing Fee in
respect thereof, and any other amounts payable to the Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder.
Upon the occurrence of a Servicing Default, if not terminated pursuant
to this Section 6.01, the Master Servicer shall continue to act as Master
Servicer under this Agreement, subject to the continuing right of removal
pursuant to this Section 6.01, for an initial term, commencing on the date which
such Servicing Default occurred and ending on the last day of the calendar
quarter in which such Servicing Default occurred, which period may be extended
by the Note Insurer, in its sole discretion, for successive terms of three
calendar months thereafter, until the satisfaction and discharge of the
Indenture under Section 4.10 thereof. Each such notice of extension (a "Master
Servicer Extension Notice") shall be delivered by the Note Insurer to the
Indenture Trustee and
-29-
the Master Servicer. The Master Servicer hereby agrees that, upon its receipt of
any such Master Servicer Extension Notice, the Master Servicer shall become
bound for the duration of the term covered by such Master Servicer Extension
Notice to continue as the Master Servicer subject to and in accordance with the
other provisions of this Agreement; PROVIDED, that nothing herein shall prohibit
the Note Insurer or the Indenture Trustee from thereafter removing the Master
Servicer pursuant to this Section 6.01 or any other provision of this Agreement.
The Indenture Trustee agrees that if as of the fifteenth (15) day prior to the
last day of any term of the Master Servicer the Indenture Trustee shall not have
received any Master Servicer Extension Notice from the Note Insurer, the
Indenture Trustee will within five (5) days thereafter, give written notice of
such non-receipt to the Note Insurer and the Master Servicer. The failure of the
Note Insurer to deliver a Master Servicer Extension Notice by the end of a
calendar term shall result in the termination of the Master Servicer. The
foregoing provisions of this paragraph shall not apply to the Indenture Trustee
in the event the Indenture Trustee succeeds to the rights and obligations of the
Master Servicer and the Indenture Trustee shall continue in such capacity until
the earlier of the termination of this Agreement pursuant to Section 7.08 or the
appointment of a successor master servicer.
The Master Servicer shall immediately notify the Indenture Trustee, the
Note Insurer and the Owner Trustee in writing of any Servicing Default.
Section 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a)
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 6.01, sends a notice pursuant to Section 5.04, or its term
expires and is not renewed pursuant to the penultimate paragraph of Section
6.01, the Indenture Trustee on behalf of the Noteholders and the Note Insurer
shall be the successor in all respects to the Master Servicer in its capacity as
Master Servicer under this Servicing Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof, including but not limited to the provisions of Article VIII.
Nothing in this Servicing Agreement shall be construed to permit or require the
Indenture Trustee to (i) be responsible or accountable for any act or omission
of the Master Servicer prior to the issuance of a notice of termination
hereunder, (ii) require or obligate the Indenture Trustee, in its capacity as
successor Master Servicer, to purchase, repurchase or substitute any Mortgage
Loan, (iii) fund any losses on any Eligible Investment directed by any other
Master Servicer, or (iv) be responsible for the representations and warranties
of the Master Servicer; PROVIDED, HOWEVER, that the Indenture Trustee, as
successor Master Servicer, shall be required to make any required Advances to
the extent that the Master Servicer failed to make such Advances. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Master Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Master Servicer, or (ii) if
the Indenture Trustee is legally unable so to act, the Indenture Trustee shall
so notify the Note Insurer, and the Note Insurer may appoint a successor Master
Servicer if no Note Insurer Default exists and, if it does not do so within 30
days after receipt of such notice, the Indenture Trustee may (in the situation
described in clause (i)) or shall (in the situation described in clause (ii))
appoint or petition a court of competent jurisdiction to appoint any established
housing and home finance institution, bank or other mortgage loan Master
Servicer having a net worth of not less
-30-
than $10,000,000 as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder; PROVIDED, that any such successor Master Servicer
shall be acceptable to the Note Insurer, as evidenced by the Note Insurer's
prior written consent (which consent shall not be unreasonably withheld) and
provided further that the appointment of any such successor Master Servicer will
not result in the qualification, reduction or withdrawal of the ratings assigned
to the Notes by the Rating Agencies or the ratings assigned to the Notes without
taking into account the Note Insurance Policy; provided, however, Advanta shall
become the successor Master Servicer if the Master Servicer was terminated for
reasons other than due to any action or inaction on the part of Advanta. Pending
appointment of a successor to the Master Servicer hereunder, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Master Servicer would otherwise have received pursuant
to Section 3.15 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The appointment of a successor Master Servicer shall not
affect any liability of the predecessor Master Servicer which may have arisen
under this Servicing Agreement prior to its termination as Master Servicer
(including, without limitation, the obligation to purchase Mortgage Loans
pursuant to Section 3.01, to pay any deductible under an insurance policy
pursuant to Section 3.11 or to indemnify the Indenture Trustee pursuant to
Section 5.06), nor shall any successor Master Servicer be liable for any acts
or omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Indenture Trustee and such successor shall
take such action, consistent with this Servicing Agreement, as shall be
necessary to effectuate any such succession.
(b) Any successor, including the Indenture Trustee on behalf of the
Noteholders, to the Master Servicer as Master Servicer shall during the term of
its service as Master Servicer (i) continue to service and administer the
Mortgage Loans for the benefit of the Noteholders and the Note Insurer, (ii)
maintain in force a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Master Servicer hereunder and
a fidelity bond in respect of its officers, employees and agents to the same
extent as the Master Servicer is so required pursuant to Section 3.11.
(c) Any successor Master Servicer, including the Indenture Trustee on
behalf of the Noteholders and the Note Insurer, shall not be deemed to be in
default or to have breached its duties hereunder if the predecessor Master
Servicer shall fail to deliver any required deposit to the Collection Account or
otherwise cooperate with any required servicing transfer or succession here-
under.
Section 6.03. NOTIFICATION TO NOTEHOLDERS. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VI or
Section 5.04, the Indenture Trustee shall give prompt written notice thereof to
the Noteholders, the Note Insurer, the Owner Trustee, the Company, the Issuer
and each Rating Agency.
-31-
Section 6.04. WAIVER OF DEFAULTS. The Indenture Trustee shall transmit
by mail to all Noteholders and the Note Insurer, within 5 days after the
occurrence of any Servicing Default known to the Indenture Trustee, unless such
Servicing Default shall have been cured, notice of each such Servicing Default
hereunder known to the Indenture Trustee. The Note Insurer or, if a Note Insurer
Default exists, the holders of at least 51% of the aggregate Note Principal
Balance of the Notes may waive any default by the Master Servicer in the
performance of its obligations hereunder and the consequences thereof, except a
default in the making of or the causing to be made any required distribution on
the Notes or, in the case of Noteholders, payment of the Note Insurance Premium.
No such waiver shall extend to any subsequent or other default or impair any
right consequent thereon except to the extent expressly so waived. The Master
Servicer shall give notice of any such waiver to the Rating Agencies.
-32-
ARTICLE VII
Miscellaneous Provisions
Section 7.01. AMENDMENT. This Servicing Agreement may be amended from
time to time by the parties hereto with the prior written consent of the Note
Insurer, and of the Subservicer (which consent of the Subservicer shall not be
unreasonably withheld), provided that any amendment be accompanied by a letter
from the Rating Agencies to the effect that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Notes or the rating
that would then be assigned to the Notes without taking into account the Note
Insurance Policy.
Section 7.02. GOVERNING LAW. THIS SERVICING 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 7.03. 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 mail, return receipt requested,
to:
(a) in the case of the Master Servicer: PacificAmerica Money Center, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxx, XX 00000-0000
Attention: Chief Financial Officer
(b) in the case of the Note Insurer: Financial Security Assurance
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Re: (PacificAmerica Home Equity
Loan
Asset-Backed Notes, Series 1997-1)
Telecopy: (000) 000-0000
(000) 000-0000
In each case in which a notice or other communication to the Note Insurer
refers to a Master Servicer Event of Default or a claim on the Note Insurance
Policy or with respect to which failure on the part of the Note Insurer to
respond be deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention of the
General Counsel and the Head Financial Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED."
(c) in the case of Rating Agencies: Xxxxx'x Investors Service, Inc.
4th Floor
00 Xxxxxx Xxxxxx
-00-
Xxx Xxxx, XX 00000
Attention: Residential Mortgage
Monitoring Department
Standard & Poor's Rating Services
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Asset Backed Surveillance
Group
(d) in the case of the Owner Trustee,
the Corporate Trust Office: Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust
Administration
(e) in the case of the Issuer,
to the Owner Trustee: Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust
Administration
(f) in the case of the Indenture
Trustee: Bankers Trust Company of California,
N.A.
0 Xxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Fax No.: (000) 000-0000
Attention: Corporate Trust Department
PacificAmerica Home Equity Loan
Trust
Series 1997-1
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to be
mailed to a Noteholder shall be given by first class mail, postage prepaid, at
the address of such Noteholder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Noteholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy
-34-
and accommodation and the Indenture Trustee shall have no liability for failure
to deliver such notice or document to any Rating Agency.
Section 7.04. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Servicing 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 Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Notes or the rights of the Noteholders thereof.
Section 7.05. THIRD-PARTY BENEFICIARIES. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Noteholders,
the Note Insurer, the Owner Trustee, the Indenture Trustee and their respective
successors and permitted assigns. Except as otherwise provided in this Servicing
Agreement, no other Person will have any right or obligation hereunder. The
Indenture Trustee shall have the right to exercise all rights of the Issuer
under this Agreement.
Section 7.06. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 7.08. TERMINATION UPON PURCHASE BY THE MASTER SERVICER. Except
with respect to obligations of the Master Servicer relating to any
representations and warranties or indemnities made by it in this Agreement, the
respective obligations and responsibilities of the Master Servicer and the
Issuer created hereby shall terminate upon the satisfaction and discharge of the
Indenture pursuant to Section 4.10 thereof.
Section 7.09. NO PETITION. The Master Servicer, by entering into this
Servicing Agreement, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join in any institution against the Issuer, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations of the Issuer. This section shall
survive the termination of this Servicing Agreement by one year.
Section 7.10. NO RECOURSE. The Master Servicer acknowledges that no
recourse may be had against the Issuer, except as may be expressly set forth in
this Servicing Agreement.
-35-
ARTICLE VIII
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
--------------------------------------------
Section 8.01. ADMINISTRATIVE DUTIES. (a) DUTIES WITH RESPECT TO THE
INDENTURE. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall consult
with the Owner Trustee as the Master Servicer deems appropriate regarding the
duties of the Issuer under the Indenture. The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Master
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Master Servicer shall take all necessary action that is the
duty of the Issuer to take pursuant to the Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Master Servicer set forth
in this Servicing Agreement or any of the Basic Documents, the Master Servicer
shall perform such calculations and shall prepare for execution by the Issuer or
the Owner Trustee or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to this Servicing Agreement or any of the Basic Documents or
under state and federal tax and securities laws, and at the request of the Owner
Trustee or the Note Insurer shall take all appropriate action that it is the
duty of the Issuer to take pursuant to this Servicing Agreement or any of the
Basic Documents. In accordance with the directions of the Issuer, the Note
Insurer or the Owner Trustee, the Master Servicer shall administer, perform or
supervise the performance of such other activities in connection with the Notes
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Issuer, the Note Insurer or the
Owner Trustee and are reasonably within the capability of the Master Servicer.
(ii) Notwithstanding anything in this Servicing Agreement or
any of the Basic Documents to the contrary, the Master Servicer shall be
responsible for, upon learning of such event, promptly notifying the Owner
Trustee, the Indenture Trustee and the Note Insurer in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of income)
to an Owner (as defined in the Trust Agreement) as contemplated in Section
5.01(b) of the Trust Agreement. Any such notice shall be in writing and specify
the amount of any withholding tax required to be withheld by the Owner Trustee
pursuant to such provision.
(iii) In carrying out the foregoing duties or any of its other
obligations under this Servicing Agreement, the Master Servicer may enter into
transactions with or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in the
-36-
Master Servicer's opinion, no less favorable to the Issuer in any material
respect than with terms made available to unrelated third-parties.
(c) TAX MATTERS. The Master Servicer shall provide such services as are
reasonably necessary to assist the Issuer, the Indenture Trustee or the Owner
Trustee, as applicable, in the preparation of tax returns and information
reports as provided in Section 5.03 of the Trust Agreement.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in the
reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article VIII unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee, the Note Insurer and the Indenture Trustee of the
proposed action and the Owner Trustee, the Note Insurer and, with respect to
items (A), (B), (C) and (D) below, the Indenture Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
provided that the Issuer cannot agree to any amendment or supplement to
the Indenture without the approval of the Master Servicer, which
consent shall not be unreasonably withheld;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Mortgage Loans);
(C) the amendment, change or modification of this Agreement or
any of the Basic Documents;
(D) the appointment of successor Certificate Paying Agents and
successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Master Servicers or the consent to the
assignment by the Certificate Registrar, Paying Agent or Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
Section 8.02. RECORDS. The Master Servicer shall maintain appropriate
books of account and records relating to services performed under this Servicing
Agreement, which books of account and records shall be accessible for inspection
by the Issuer, the Indenture Trustee and the Note Insurer upon reasonable
request and at any time during normal business hours.
Section 8.03. ADDITIONAL INFORMATION TO BE FURNISHED. The Master
Servicer shall furnish to the Issuer, the Indenture Trustee and the Note Insurer
from time to time such additional information regarding the Notes as the Issuer
or the Note Insurer shall reasonably request.
-37-
IN WITNESS WHEREOF, the Master Servicer, the Indenture Trustee and the
Issuer have caused this Servicing Agreement to be duly executed by their
respective officers or representatives all as of the day and year first above
written.
PACIFICAMERICA MONEY CENTER, INC.,
as Master Servicer
By_______________________________________
Name:
Title:
PACIFICAMERICA HOME EQUITY LOAN
TRUST SERIES 1997-1, as Issuer
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By_______________________________________
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A.
not in its individual capacity but solely as
Indenture Trustee
By_______________________________________
Name:
Title:
EXHIBIT A
MORTGAGE LOAN SCHEDULE
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
_____________________________________ [Send Files To:
[Name of Master Servicer] ________________________
Authorized Signature ________________________
________________________
Attention: ________________________
******************************************************************
TO CUSTODIAN/Indenture Trustee: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other: ___________________________
____________________
Name
____________________
Title
____________________
Date
B-1
EXHIBIT C
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition
2. Liquidation Proceeds
Principal Prepayment $____________
Property Sale Proceeds ____________
Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances ____________
Delinquency Advances ____________
Monthly Advances ____________
Servicing Fees ____________
Other Servicing Compensation ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
____________________
Name
____________________
Title
____________________
Date
- C-1
