EXHIBIT 10.2
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SALE AND SERVICING AGREEMENT
among
CHEVY CHASE HOME
LOAN TRUST 20___-_
Issuer,
CHEVY CHASE BANK, F.S.B.
Servicer
and
[NAME OF SELLER]
as Seller
Dated as of __________________ ___, 20___
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Table of Contents
Page
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ARTICLE I Definitions.................................................................................1
Section 1.1. Definitions.................................................................................1
Section 1.2. Other Definitional Provisions..............................................................18
Section 1.3. Interest Calculations......................................................................18
ARTICLE II Conveyance of Mortgage Loans...............................................................19
Section 2.1. Conveyance of Mortgage Loans...............................................................19
Section 2.2. Acceptance by Trustee......................................................................21
Section 2.3. [Intentionally Omitted]....................................................................21
Section 2.4. Representation and Warranties of the Seller Regarding the Mortgage Loans...................21
Section 2.5. Substitution of Mortgage Loans.............................................................27
ARTICLE III Administration and Servicing of Mortgage Loans.............................................28
Section 3.1. Duties of Servicer.........................................................................28
Section 3.2. Collection and Allocation of Mortgage Loan Payments........................................28
Section 3.3. Withdrawals from each Collection Account...................................................30
Section 3.4. Maintenance of Hazard Insurance; Property Protection Expenses..............................31
Section 3.5. Maintenance of Mortgage Impairment Insurance Policy Error! Bookmark not defined.
Section 3.6. Fidelity Bond..............................................................................31
Section 3.7. Management and Realization Upon Defaulted Mortgage Loans...................................32
Section 3.8. Trustee to Cooperate.......................................................................32
Section 3.9. Servicing Fee..............................................................................33
Section 3.10. Servicer's Certificate.....................................................................33
Section 3.11. Annual Statement as to Compliance; Notice of Default.......................................33
Section 3.12. Annual Independent Certified Public Accountants' Report....................................34
Section 3.13. Access to Certain Documentation and Information Regarding Mortgage Loans...................34
Section 3.14. Servicer Expenses..........................................................................34
Section 3.15. Advances by the Servicer...................................................................35
Section 3.16. Optional Purchase of Defaulted Mortgage Loans..............................................35
Section 3.17. Superior Liens.............................................................................35
Section 3.18. Payment of Taxes, Insurance and Other Charges..............................................36
Section 3.19. Appointment of Subservicer.................................................................36
ARTICLE IV Distributions; Reserve Account; Statements to Certificateholders and Noteholders...........37
Section 4.1. Establishment of Trust Accounts............................................................37
Section 4.2. [Intentionally omitted]....................................................................39
Section 4.3. Application of Collections.................................................................39
Section 4.4. Additional Deposits........................................................................39
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Section 4.5. Distributions..............................................................................39
Section 4.6. Reserve Account............................................................................41
Section 4.7. [Intentionally Omitted]....................................................................41
Section 4.8. Statements to Certificateholder and Noteholders............................................41
Section 4.9. Net Deposits...............................................................................42
ARTICLE V The Seller.................................................................................42
Section 5.1. Representations of Seller..................................................................42
Section 5.2. Corporate Existence........................................................................44
Section 5.3. Liability of Seller; Indemnities...........................................................44
Section 5.4. Merger or Consolidation of, or Assumption of the Obligations of Seller.....................45
Section 5.5. Limitation on Liability of Seller and Others...............................................46
Section 5.6. Seller May Own Certificates or Notes.......................................................46
ARTICLE VI The Servicer...............................................................................46
Section 6.1. Representations of Servicer................................................................46
Section 6.2. Indemnities of Servicer....................................................................48
Section 6.3. Merger or Consolidation of, or Assumption of the Obligations of, Servicer..................48
Section 6.4. Limitation on Liability of Servicer and Others.............................................49
Section 6.5. Chevy Chase Bank, F.S.B. Not To Resign as Servicer.........................................49
ARTICLE VII Default....................................................................................50
Section 7.1. Servicer Default...........................................................................50
Section 7.2. Appointment of Successor...................................................................51
Section 7.3. Payment of Servicing Fee...................................................................52
Section 7.4. Notification to Noteholders and Certificateholders.........................................52
Section 7.5. Waiver of Past Defaults....................................................................52
ARTICLE VIII Termination................................................................................52
Section 8.1. Optional Purchase of All Mortgage Loans....................................................52
ARTICLE IX Administrative Duties of the Servicer......................................................53
Section 9.1. Administrative Duties......................................................................53
Section 9.2. Records....................................................................................55
Section 9.3. Additional Information To Be Furnished to the Issuer.......................................55
ARTICLE X Miscellaneous Provisions...................................................................55
Section 10.1. Amendment..................................................................................55
Section 10.2. Protection of Title to Trust...............................................................56
Section 10.3. Notices....................................................................................58
Section 10.4. Assignment.................................................................................59
Section 10.5. Limitations on Rights of Others............................................................59
Section 10.6. Severability...............................................................................59
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Section 10.7. Separate Counterparts......................................................................59
Section 10.8. Headings...................................................................................59
Section 10.9. Governing Law..............................................................................59
Section 10.10. Assignment to Trustee......................................................................59
Section 10.11. Nonpetition Covenant.......................................................................59
Section 10.12. Limitation of Liability of Owner Trustee and Trustee.......................................60
Section 10.13. Independence of the Servicer...............................................................60
Section 10.14. No Joint Venture...........................................................................60
EXHIBITS
Exhibit A Mortgage Loan Schedule
Exhibit B Form of Monthly Certificateholder Statement
Exhibit C Form of Monthly Noteholder Statement
Exhibit D Form of Servicer's Certificate
Exhibit E Form of Request for Release
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SALE AND SERVICING AGREEMENT dated as of _______, __ _______,
among CHEVY CHASE HOME LOAN TRUST 20____-_, a Delaware statutory trust (the
"Issuer"), [NAME OF SELLER], a limited liability corporation organized under the
laws of [State of Organization] (the "Seller") and CHEVY CHASE BANK, F.S.B., as
servicer (the "Servicer").
WHEREAS, the Issuer desires to purchase a portfolio of
mortgage loans from the Seller;
WHEREAS, the Seller has purchased such mortgage loans from
Chevy Chase Bank, F.S.B. and is willing to sell such mortgage loans to the
Issuer; and
WHEREAS, the Servicer is willing to service such mortgage
loans.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accrual Period" means as to any Simple Interest Loan and
Monthly Payment, the period commencing from and after the date through which
interest was last paid up to but excluding the date of receipt of such Monthly
Payment. As to any Actuarial Loan and Monthly Payment, the period from and
including a Due Date for such Actuarial Loan to but excluding the succeeding Due
Date.
"Actuarial Loan" means a Mortgage Loan for which the relative
application of each Monthly Payment to interest and principal is based on the
period between Due Dates and not on the timing of receipt of such Monthly
Payment.
"Aggregate Net Losses" means with respect to a Due Period, the
aggregate principal balance of all Mortgage Loans newly designated during such
Due Period as Liquidated Mortgage Loans minus Liquidation Proceeds collected
during such Due Period with respect to all Liquidated Mortgage Loans.
"Agreement" means this Sale and Servicing Agreement, as the
same may be amended and supplemented from time to time.
"ARM" means a Mortgage Loan which is serviced as an Actuarial
Loan and the Mortgage Rate of which is subject to adjustment on each Change Date
by reference to the Index, subject to rounding and the Periodic Cap, the
applicable Lifetime Cap and the applicable Lifetime Floor.
"Assignment of Mortgage" means, with respect to any Mortgage,
an assignment, notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction in which the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Issuer, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
"Available Principal" means with respect to any Distribution
Date, the sum of the following amounts without duplication: (a) that portion of
all collections on the Mortgage Loans allocable to principal in respect of the
preceding Due Period; (b) Liquidation Proceeds attributable to the principal
amount of Mortgage Loans which became Liquidated Mortgage Loans during the
preceding Due Period in accordance with the Servicer's customary servicing
procedures; and (c) to the extent attributable to principal, the Purchase Price
of each Mortgage Loan repurchased by the Seller or purchased by the Servicer
during the preceding Due Period; provided, however, that in calculating the
Available Principal, all payments and proceeds (including Liquidation Proceeds)
of any Mortgage Loans repurchased by the Seller or purchased by the Servicer the
Purchase Price of which has been included in the Available Principal in a prior
Due Period shall be excluded.
"Basic Documents" means the Certificate of Trust, the Trust
Agreement, the Indenture, the Depository Agreements and other documents and
certificates delivered in connection therewith.
"Business Day" means any day other than (i) a Saturday or a
Sunday or (ii) a day on which banking institutions in the States of New York or
_____________ are required or authorized by law to be closed.
"Certificate" means a Trust Certificate (as defined in the
Trust Agreement).
"Certificate Balance" equals, initially, $___________ and,
thereafter, equals the initial Certificate Balance, reduced by all amounts
allocable to principal previously distributed to Certificateholders.
"Certificate Distribution Account" has the meaning assigned to
such term in the Trust Agreement.
"Certificate Rate" means ______% per annum.
"Certificateholder" has the meaning assigned to such term in
the Trust Agreement.
"Certificateholders' Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Interest
Distributable Amount and the Certificateholders' Principal Distributable Amount.
"Certificateholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Certificateholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Certificateholders' Interest Carryover
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Shortfall on such preceding Distribution Date, over the amount in respect of
interest at the Certificate Rate that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date, plus interest on such
excess, to the extent permitted by law, at the Certificate Rate from and
including such preceding Distribution Date to but excluding the current
Distribution Date.
"Certificateholders' Interest Distributable Amount" means,
with respect to any Distribution Date, the sum of the Certificateholders'
Monthly Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount"
means, with respect to any Distribution Date, 30 days of interest (or, in the
case of the first Distribution Date, interest accrued from and including the
Closing Date to but excluding such Distribution Date) at the Certificate Rate on
the Certificate Balance on the immediately preceding Distribution Date, after
giving effect to all payments of principal to the Certificateholders on or prior
to such Distribution Date (or, in the case of the first Distribution Date, the
Certificate Balance on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount"
means, with respect to any Distribution Date, the Certificateholders' Percentage
of the Principal Distribution Amount or, with respect to any Distribution Date
on or after the Distribution Date on which the outstanding principal balance of
the Class A-___ Notes is reduced to zero, 100% of the Principal Distribution
Amount (less any amount required on the first such Distribution Date to reduce
the outstanding principal balance of the Class A-___ Notes to zero, which shall
be deposited into the Note Distribution Account).
"Certificateholders' Percentage" means 100% minus the
Noteholders' Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as
of the close of any Distribution Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means,
with respect to any Distribution Date, the sum of the Certificateholders'
Monthly Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance. In
addition, on the Certificate Final Scheduled Distribution Date, the principal
required to be distributed to Certificateholders will include the lesser of (a)
any payments of principal due and remaining unpaid on each Mortgage Loan in the
Trust as of _________ __, ____ or (b) the portion of the amount that is
necessary (after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero, in either case after
giving effect to any required distribution of the Noteholders' Principal
Distributable Amount to the Note Distribution Account. In addition, on any
Distribution Date on which, after giving effect to all distributions to the
Servicer, the Noteholders and the
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Certificateholders on such Distribution Date, (i) the outstanding principal
balance of the Notes is zero and (ii) the amount on deposit in the Reserve
Account is equal to or greater than the Certificate Balance, Certificateholders'
Principal Distributable Amount shall include an amount equal to such Certificate
Balance.
"Change Date" means the date on which the Mortgage Rate of
each ARM is subject to adjustment, which date is the Due Date set forth in the
related Mortgage Note and every twelfth Due Date thereafter.
"Charge-off Rate" means, with respect to a Due Period, the
Aggregate Net Losses with respect to the Mortgage Loans expressed, on an
annualized basis, as a percentage of the average of (x) the Pool Balance on the
last day of the immediately preceding Due Period and (y) the Pool Balance on the
last day in such Due Period.
"Civil Relief Act" means the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
"Closing Date," means ___________ __, _____.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 3.2(c).
"Cutoff Date" means _____________ __, 20____.
"Cutoff Date Principal Balance" means with respect to any
Mortgage Loan, the unpaid principal balance thereof as of the Cut-Off Date (or
as of the applicable date of substitution with respect to an Eligible substitute
mortgage Loan pursuant to Section 2.2 or 2.4).
"Debt Service Reduction" means with respect to any Mortgage
Loan, a reduction by a court of competent jurisdiction of the Monthly Payment
due on such Mortgage Loan.
"Defective Mortgage Loan" means any Mortgage Loan subject to
repurchase or substitution pursuant to Section 2.2 or 2.4.
"Delinquency Percentage" means, with respect to a Due Period,
the ratio of (a) the outstanding principal balance of all outstanding Mortgage
Loans 60 days or more delinquent (which amount shall include mortgage Loans in
respect of Mortgaged Properties that have been repossessed but not yet sold or
otherwise liquidated) as of the last day of such Due Period, determined in
accordance with the Servicer's normal practices, divided by (b) the outstanding
principal balance of all Mortgage Loans on the last day of such Due Period.
"Delivery" when used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9.105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Trustee or its nominee or custodian by physical delivery to the
Trustee or its nominee or custodian endorsed to, or registered in the
name of, the Trustee or its nominee
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or custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC) transfer thereof (i)
by delivery of such certificated security endorsed to, or registered in
the name of, the Trustee or its nominee or custodian or endorsed in
blank to a financial intermediary (as defined in Section 8-313 of the
UCC) and the making by such financial intermediary of entries on its
books and records identifying such certificated securities as belonging
to the Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such
certificated security by the Trustee or its nominee or custodian, or
(ii) by delivery thereof to a "clearing corporation" (as defined in
Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the
appropriate securities account of the Seller and increasing the
appropriate securities account of a financial intermediary by the
amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of
such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the
nominee of either subject to the clearing corporation's exclusive
control, the sending of a confirmation by the financial intermediary of
the purchase by the Trustee or its nominee or custodian of such
securities and the making by such financial intermediary of entries on
its books and records identifying such certificated securities as
belonging to the Trustee or its nominee or custodian (all of the
foregoing, "Physical Property"), and, in any event, any such Physical
Property in registered form shall be in the name of the Trustee or its
nominee or custodian; and such additional or alternative procedures as
may hereafter become appropriate to effect the complete transfer of
ownership of any such Trust Account Property to the Trustee or its
nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, FHLMC or by FNMA that is a book-entry security held through
the Federal Reserve System pursuant to Federal book-entry regulations,
the following procedures, all in accordance with applicable law,
including applicable Federal regulations and Articles 8 and 9 of the
UCC: book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank
by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Trustee or its nominee or custodian of
the purchase by the Trustee or its nominee or custodian of such
book-entry securities; the making by such financial intermediary of
entries in its books and records identifying such book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trustee or its nominee or custodian and
indicating that such custodian holds such Trust Account Property solely
as agent for the Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation
thereof; and
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(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Trustee or its nominee or custodian of such uncertificated
security, the making by such financial intermediary of entries on its
books and records identifying such uncertificated certificates as
belonging to the Trustee or its nominee or custodian.
"Depository Agreements" mean the Certificate Depository
Agreement and the Note Depository Agreement.
"Determination Date" means, with respect to any Distribution
Date, the lath day of the month of such Distribution Date or, if such ___ day is
not a Business Day, the preceding Business Day.
"Distribution Date" means, with respect to each Due Period,
the 25th day of the following month, or if such day is not a Business Day, the
immediately following Business Day, commencing on ________ __, 20___.
"Due period" means a calendar month, except with respect to
the first Due Period, which shall be the period from the Cutoff Date to
__________ __, 20___. Any amount stated "as of the close of business on the last
day of a Due Period" shall give effect to the following calculations as
determined as of the end of the day on such last day: (1) all applications of
collections and (2) all distributions to be made on the immediately following
Distribution Date.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution (other than the Seller or
any affiliate of the Seller) organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), having corporate trust powers and acting as
trustee for funds deposited in such account, so long as any of the securities of
such depository institution have a credit rating from each Rating Agency in one
of its generic rating categories which signifies investment grade.
"Eligible Institution" means a depository institution
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), which (1) has (A) either a long-term senior unsecured debt rating of
[AAA] or a short-term senior unsecured debt or certificate of deposit rating of
[A-1+] or better by [Standard & Poor's] and (B) (1) a long-term senior unsecured
debt rating of [Al] or better and (2) a short-term senior unsecured debt rating
of [P1] or better by [Moody's], or any other long-term, short-term or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the Federal Deposit Insurance Corporation. If so
qualified, the Owner Trustee or the Trustee may be considered an Eligible
Institution.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
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(a) direct obligations of, and obligations fully guaranteed as
to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the
laws of the United States of America or any state thereof or the
District of Columbia (or any domestic branch of a foreign bank) and
subject to supervision and examination by Federal or state banking or
depository institution authorities (including depository receipts
issued by any such institution or trust company as custodian with
respect to any obligation referred to in clause (a) above or portion of
such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or
contractual commitment to invest therein (which shall be deemed to be
made again each time funds are reinvested following each Distribution
Date), the commercial paper or other short-term senior unsecured debt
obligations (other than such obligations the rating of which is based
on the credit of a Person other than such depository institution or
trust company) of such depository institution or trust company shall
have a credit rating from [Standard & Poor's of A-1+ and from Moody's
of P1];
(c) commercial paper (including commercial paper of the Seller
or any Affiliate of the Seller) having, at the time of the investment
or contractual commitment to invest therein, a rating from [Standard &
Poor's of A-1+ and from Moody's of P1];
(d) investments in money market funds (including funds for
which the Seller, the Trustee or the Owner Trustee or any of their
respective Affiliates is investment manager or advisor) having a rating
from [Standard & Poor's of AAA-m or AAAm-G and from Moody's of Aaa];
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) referred to in clause (b) above;
and
(g) any other investment which would not cause either Rating
Agency to downgrade or withdraw its then current rating of any class of
Notes or the Certificates.
"Eligible Substitute Mortgage Loan" means a Mortgage Loan
substituted by the Seller for a Defective Mortgage Loan which must, on the date
of such substitution, (i) have an outstanding Principal Balance not in excess of
and not more than 5% less. than the Principal Balance of the Defective Mortgage
Loan; (ii) have a current Mortgage Rate not less than the Mortgage Rate of the
Defective Mortgage Loan and not more than 1% in excess of the Mortgage Rate of
such Defective Mortgage Loan; (iii) have a mortgage of the same or higher level
of lien priority as the Mortgage relating to the Defective Mortgage Loan at the
time such Mortgage was transferred to the Trust; (iv) have a remaining term to
maturity not more than six months earlier
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and not later than the remaining term to maturity of the Defective Mortgage
Loan; (v) comply with each representation and warranty set forth in Section 2.4
(deemed to be made as of the date of substitution); and (vi) have an original
Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; (vii)
be an ARM if the Defective Mortgage Loan was an ARM; and (viii) if an ARM, use
the same index, have the same Periodic Cap, have a Lifetime Cap and a Gross
Margin no less than, those of the Defective Mortgage Loan.
"FHLMC" means Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Scheduled Distribution Date" means with respect to
[List Class(es) of Notes and their Respective Final Scheduled Distribution
Dates].
"Final scheduled Maturity Date" means ________________ __,
____.
"First Lien" means, with respect to any Mortgage Loan which is
a second priority lien, the mortgage loan relating to the corresponding
Mortgaged Property having a first priority lien.
"Fitch" means Fitch Ratings or its successors.
"FNMA" means Federal National Mortgage Association or any
successor thereto.
"Foreclosure Profits" means, with respect-to a Liquidated
Mortgage Loan, the amount, if any, by which (i) the aggregate of the related Net
Liquidation Proceeds exceeds (ii) the related Principal Balance (plus accrued
and unpaid interest thereon at the applicable Mortgage Rate from the date
interest was last paid through the date of receipt of the final Liquidation
Proceeds) of such Liquidated Mortgage Loan immediately prior to the final
recovery of its Liquidation Proceeds.
"Gross Margin" means, with respect to each ARM, the number of
basis points set forth in the related Mortgage Note which is added to the Index
to determine the Mortgage Rate on the related Change Date, subject to rounding
and the Periodic Cap and the applicable Lifetime Cap and the applicable Lifetime
Floor.
"GP Interest" means the __% interest in the Trust held by
__________________, a ____________, pursuant to the Trust Agreement.
"Indenture" means the Indenture dated as of _____________ ___,
20___, between the Issuer and the Trustee, as the name may be amended and
supplemented from time to time.
"Index" means [the weekly average yield on United States
Treasury securities adjusted to a constant maturity of one year, as made
available by the Federal Reserve Board and most recently available as of the
date 45 days before each Change Date].
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Federal or state
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bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver (including any receiver appointed under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended),
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insurance Proceeds" means proceeds paid by any insurer
pursuant to any insurance policy covering a Mortgage Loan, or amounts required
to be paid by the Servicer pursuant to Section 3.5, net of any component thereof
(i) covering any expenses incurred by or on behalf of the Servicer in connection
with obtaining such proceeds, (ii) that is applied to the restoration or repair
of the related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Servicer's normal servicing procedures or (iv) required to be paid to
any holder of a mortgage senior to such Mortgage Loan.
"Interest Distribution Amount" means, with respect to any
Distribution Date, the sum of the following amounts without duplication: (a)
that portion of all collections on the Mortgage Loans allocable to interest in
respect of the preceding Due Period; (b) Liquidation Proceeds attributable to
interest on the Mortgage Loans which became Liquidated Mortgage Loans during the
preceding Due Period in accordance with the Servicer's customary servicing
procedures; (c) the Purchase Price of each Mortgage Loan that became a Purchased
Mortgage Loan during the preceding Due Period to the extent attributable to
accrued interest on such Mortgage Loan; (d) Recoveries for such Due Period and
(e) Investment Earnings for such Distribution Date; provided, however, that in
calculating the Interest Distribution Amount, all payments and proceeds
(including Liquidation Proceeds) of any Purchased Mortgage Loans the Purchase
Price of which has been included in the Interest Distribution Amount in a prior
Due Period shall be excluded.
"Investment Earnings" means, with respect to any Distribution
Date, the investment earnings (net of Losses and investment expenses) on amounts
on deposit in the Trust Accounts and the Certificate Distribution Account to be
deposited into the Collection Account on such Distribution Date pursuant to
Section 4.1(b).
"Issuer" means Chevy Chase Home Loan Trusts 20____-_.
"Lien" means a security interest, lien, charge, pledge or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
which attach to the respective Mortgage Loan by operation of law as a result of
any act or omission by the related Mortgagor.
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"Lifetime Cap" means the provision in the Mortgage Note for
each ARM which limits the maximum Mortgage Rate over the life of such ARM to ___
basis points greater than the Mortgage Rate on the date of origination of such
ARM.
"Lifetime Floor" means the provision in the Mortgage Note for
each ARM which limits the minimum mortgage Rate over the life of such ARM to the
Mortgage Rate on the date of origination of such ARM.
"Liquidated Mortgage Load" means, an to any Distribution Date,
any Mortgage Loan with respect to which the Servicer has determined, in
accordance with the servicing procedures specified herein, as of the end of the
related Due Period that all Liquidation Proceeds which it expects to recover
with respect to the liquidation of the Mortgage Loan or disposition of the
related REO Property have been recovered.
"Liquidation Proceeds" means proceeds (including Insurance
Proceeds) received in connection with the liquidation of any Mortgage Loan or
related REO Property, whether through trustee's sale, foreclosure sale or
otherwise.
"Loan-to-Value Ratio" means the fraction, expressed as a
percentage, the numerator of which is the original principal balance of the
related Mortgage Loan and the denominator of which is the original Value of the
related Mortgaged Property.
"Monthly Advance" means an advance made by the Servicer
pursuant to Section 3.15 hereof.
"Monthly Payment" means the scheduled monthly payment of
principal and/or interest required to be made by a Mortgagor on the related
Mortgage Loan.
"Moody's" means Xxxxx'x Investors Service, Inc., or its
successor.
"Mortgage" means the mortgage, deed of trust or other
instrument creating a first or second lien on an estate in fee simple interest
in real property securing a Mortgage Loan.
"Mortgage File" means the mortgage documents listed in Section
2.1(b) pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan" means a mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.1 or Section 2.4 and held as a part of the
Trust, an identified in the Mortgage Loan Schedule.
"Mortgage Loan Schedule" means with respect to any date, the
schedule of Mortgage Loans included in the Trust on such date. The initial
schedule of Mortgage Loans as of the Cutoff Date is the schedule set forth
herein as Exhibit A, which schedule sets forth as to each Mortgage Loan (i) the
Cut-Off Date Principal Balance, (ii) the account number, (iii) the original
principal amount, (iv) the Loan-to-Value Ratio as of the date of the origination
of the related Mortgage Loan, (v) the Due Date, (vi) the current Mortgage Rate,
(vii) the first date on which a Monthly Payment is due under the mortgage Note,
(viii) the original stated maturity date
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of the Mortgage Note, (ix) the remaining number of months to maturity as of the
Cutoff Date, (x) the State in which the related Mortgaged Property is situated,
(xi) the type of property, (xii) the lien status, (xiii) a code indicating
whether the Mortgage Loan is an ARM, and (xiv) for each ARM, the Gross Margin
and the Mortgage Rate at origination.]
"Mortgage Note" means the originally executed note or other
evidence of indebtedness evidencing the indebtedness of a Mortgagor under the
related Mortgage Loan.
"Mortgaged Property" means the land and improvements securing
the indebtedness of a Mortgagor under the related Mortgage Loan.
"Mortgagor" means the obligor or obligors on a Mortgage Note.
"Net Liquid on Proceeds" means, with respect to any Liquidated
Mortgage Loan, Liquidation Proceeds net of unreimbursed servicing Fees,
unreimbursed Servicing Advances and Monthly Advances with respect thereto.
"Net Rate" means, with respect to any Mortgage Loan as to any
day, the Mortgage Rate less the related Servicing Fee Rate.
"Nonrecoverable Advances" means, with respect to any Mortgage
Loan, (i) any Monthly Advance previously made and not reimbursed pursuant to
Section 3.2(c) or 3.3(ii), or (ii) a servicing Advance or Monthly Advance
proposed to be made in respect of a Mortgage Loan or REO Property which, in the
good faith business judgment of the Servicer, will not or, in the case of a
proposed advance, would not be ultimately recoverable pursuant to Sections
3.2(c) or 3.3(ii).
"Note Distribution Account" means the account designated as
such, established and maintained pursuant to Section 4.1.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date,
plus interest on the amount of interest due but not paid to Noteholders on the
preceding Distribution Date, to the extent permitted by law, at the respective
Interest Rate borne by each class of Notes from such preceding Distribution Date
through the current Distribution Date.
"Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
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"Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, the product of (i)(A) in the case of the
Class A-1 Notes, the product of the Interest Rate for such class and a fraction,
the numerator of which is the number of days elapsed from and including the
prior Distribution Date (or, in the case of the first Distribution Date, from
and including the Closing Date) to but excluding such Distribution Date and the
denominator of which is 360 and (B) in the case of each other class of Notes,
one-twelfth of the Interest Rate for such class (or, in the case of the first
Distribution Date, the Interest Rate for such class multiplied by a fraction,
the numerator of which is the number of days elapsed from and including the
Closing Date to but excluding such Distribution Date and the denominator of
which is 360) and (ii) the outstanding principal balance of the Notes of such
class on the immediately preceding Distribution Date, after giving effect to all
distributions of principal to Noteholders of such class on such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
"Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the Noteholders' Percentage of the
Principal Distribution Amount.
"Noteholders' Percentage" means 100% until the point in time
at which [List Class(es) of Notes] have been paid in full and zero thereafter.
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Noteholder's Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Distributable Amount shall
not exceed the outstanding principal balance of the Notes. In addition, on the
Final Scheduled Distribution Date of each class of Notes, the principal required
to be deposited in the Note Distribution Account will include the amount
necessary (after giving effect to the other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Outstanding Amount of such class of Notes to zero.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, any
executive vice president, any senior vice president or any vice president and
(b) a cashier, assistant cashier, secretary or assistant secretary of the Seller
or the Servicer, as appropriate, provided that no one person may sign in a
capacity fulfilling both clause (a) and clause (b).
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to the Seller or the Servicer,
which counsel shall be acceptable to the Trustee, the Owner Trustee or the
Rating Agencies, as applicable.
"Original Pool Balance" means the Pool Balance as of the
Cutoff Date which is $ ______.
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"Original Value" means the value of the Mortgaged Property at
the time of origination of the related Mortgage Loan, such value being the lower
of the value of such property set forth in an appraisal acceptable to the
originator of the Mortgage Loan or the sales price of such property at the time
of origination or, in the case of a refinancing, the value of such property set
forth in an appraisal acceptable to the originator.
"Owner Trust Estate" has the meaning assigned to such term in
the Trust Agreement.
"Owner Trustee" means ____________________, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Payahead" on a Actuarial Mortgage Loan means the amount, as
of the close of business on the last day of a Due Period, computed in accordance
with Section 4.3 with respect to such Mortgage Loan.
"Payahead Account" means the account designated as such,
established and maintained pursuant to Section 4.1(d)(ii).
"Payahead Balance" on a Actuarial Mortgage Loan means the sum,
as of the close of business on the last day of a Due Period, of all Payaheads
made by or on behalf of the Mortgagor with respect to such Actuarial Mortgage
Loan, as reduced by applications of previous Payaheads with respect to such
Actuarial Mortgage Loan, pursuant to Sections 4.3 and 4.4.
"Periodic Cap" means the provision in the Mortgage Note for
each ARM which limits increases or decreases in the Mortgage Rate on each Change
Date to ___ basis points.
"Person" means any individual, corporation, limited liability
company, estate, partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Poverty" has the meaning assigned to such term in
the definition of "Delivery" above.
"Pool Balance" as of the close of business on the last day of
a Due Period means the aggregate Principal Balance of the Mortgage Loans
(excluding Purchased Mortgage Loans and Liquidated Mortgage Loans).
"Primary Mortgage Insurance Policy" means the certificate of
primary mortgage insurance relating to a particular Mortgage Loan, or any
replacement policy therefor.
"Principal Balance" means as to any Mortgage Loan other than a
Liquidated Mortgage Loan and any day, the related Cut-Off Date Principal Balance
(or unpaid principal balance as of the date of substitution), minus all
collections credited against the Principal Balance of any such Mortgage Loan.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the related
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Mortgage Loan immediately prior to the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter.
"Principal Distribution Amount" means, with respect to any
Distribution Date, the sum of the following amounts, without duplication, in
respect of the preceding Due Period: (a) that portion of all collections on
mortgage Loans (including, with respect to Actuarial Loans, amounts withdrawn
from the Payahead Account but excluding amounts deposited into the Payahead
Account) allocable to principal, (b) Liquidation Proceeds attributable to the
principal amount of mortgage Loans which became Liquidated Mortgage Loans during
such Due Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Mortgage Loans, (c) to the extent attributable to principal, the Purchase Price
of each Mortgage Loan that became a Purchased Mortgage Loan during ouch Due
Period and (d) on the Final Scheduled Distribution Date for the Certificates,
any amounts advanced by the Servicer on such Final Scheduled Distribution Date
with respect to principal on the Mortgage Loans; provided, however, that in
calculating the Principal Distribution Amount the following will be excluded:
(i) amounts received on Actuarial Mortgage Loans to the extent that the Servicer
has previously made an unreimbursed Precomputed Advance of principal, (ii)
Liquidation Proceeds with respect to a particular Actuarial Mortgage Loan to the
extent of any unreimbursed Precomputed Advances of principal, (iii) all payments
and proceeds (including Liquidation Proceeds) of any Purchased Mortgage Loans
the Purchase Price of which has been included in the Principal Distribution
Amount in a prior Due Period and (iv) Recoveries.
"Purchase Price" means as to any Defective Mortgage Loan
repurchased on any date pursuant to Sections 2.2 or 2.4, an amount equal to the
sum of (i) the unpaid Principal Balance thereof, (ii) the greater of (a) all
unpaid accrued interest thereon and (b) 30 days' interest thereon, computed at
the applicable mortgage Rate and (iii) any unreimbursed Servicing Advances with
respect to such Mortgage Loan; provided, however, that if at the time of
repurchase the Seller or an Affiliate is the Servicer, the amount described in
clause (ii) shall be computed at the Net Rate.
"Purchased Mortgage Loan" means a Mortgage Loan purchased as
of the close of business on the last day of a Due Period by the Servicer
pursuant to Section 3.16 or repurchased by the Seller pursuant to Section 2.2.
"Rating Agency" means Moody's, Standard & Poor's, Fitch and/or
any other rating agency requested by the Seller or an affiliate thereof to rate
the Notes and/or the Certificates. If no such organization or successor is any
longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable Person designated by the
Seller, notice of which designation shall be given to the Trustee, the Owner
Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action,
that each Rating Agency shall have been given 10 days' prior notice thereof (or
such shorter period as shall be acceptable to the Rating Agencies) and that
neither of the Rating Agencies shall have notified the Seller, the Servicer, the
Owner Trustee or the Trustee in writing that such action will, in and of
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itself, result in a reduction or withdrawal of the then current rating of any
class of Notes, or the Certificates.
"Realized Losses" means the excess of the Principal Balance of
any Liquidated Mortgage Loan over Liquidation Proceeds to the extent allocable
to principal.
"Recoveries" means, with respect to any Liquidated Mortgage
Loan, monies collected in respect thereof, from whatever source, during any Due
Period following the Due Period in which such Mortgage Loan became a Liquidated
Mortgage Loan, net of the sum of any amounts expended by the Servicer for the
account of the Mortgagor and any amounts required by law to be remitted to the
Mortgagor.
"REO Property" means a Mortgaged Property that is acquired by
the Servicer on behalf of the Trustee in foreclosure or by deed-in-lieu of
foreclosure.
"Released Mortgaged Property Proceeds" means, as to any
Mortgage Loan, proceeds received by the Servicer in connection with (a) a taking
of an entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise,
which are not released to the Mortgagor in accordance with applicable law,
mortgage servicing standards the Servicer would use in servicing mortgage loans
for its own account and this Agreement.
"Reserve Account" means the account designated as such,
established and maintained pursuant to Section 4.1.
"Reserve Account Initial Deposit" means, with respect to the
Closing Date, $________.
"Reserve Account Transfer Amount" means an amount equal to the
lesser of (i) the amount of cash or other immediately available funds on deposit
in the Reserve Account on such Distribution Date (before giving effect to any
withdrawals therefrom relating to such Distribution Date) or (ii) the amount, if
any, by which (x) the sum of the Total Servicing Fee, the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable Amount, the
Noteholders' Principal Distributable Amount and the Certificateholders'
Principal Distributable Amount for such Distribution Date exceeds (y) the sum of
the Interest Distribution Amount and the Available Principal for such
Distribution Date.
"Seller" means [Name of Seller], a limited liability company,
as the seller of the Mortgage Loans, and each successor to [Name of Seller] (in
the same capacity) to the extent permitted hereunder.
"Servicer" means Chevy Chase Bank, F.S.B., the servicer of the
Mortgage Loans, and each successor to Chevy Chase Bank, F.S.B., (in the same
capacity) pursuant to Section 6.3 or 7.2.
"Servicer Default" means an event specified in Section 7.1.
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"Servicer's Certificate" means an officers' Certificate of the
Servicer delivered pursuant to Section 3.10, substantially in the form of
Exhibit D.
"Servicing Advances" means all reasonable and customary "out
of pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property, including reasonable fees paid
to any independent contractor in connection therewith, (iv) compliance with the
obligations under sections 3.4, 3.7 or 3.19 and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 3.17.
"Servicing Compensation" means the servicing Fee, the
Supplemental Servicing Fee and any other amounts to which the servicer is
entitled pursuant to Section 3.9.
"Servicing Fee" has the meaning specified in Section 3.9.
"Servicing Fee Rate" means _____% per annum.
"Simple Interest Loan" means any Mortgage Loan as to which,
pursuant to the Mortgage Note related thereto, interest is calculated on the
basis of the outstanding principal balance of the Mortgage Loan multiplied by
the applicable Mortgage Rate and further multiplied by a fraction, of which the
numerator is the number of days in the period elapsed since the date to which
interest was paid and the denominator is the number of days in the annual period
for which interest accrues on such Mortgage Loan, and the Monthly Payment
received is applied first to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance.
"Specified Reserve Account Balance" means, with respect to (i)
any Distribution Date prior to the Distribution Date on which the Outstanding
Amount of the Class A-1 Notes has been paid in full, $________________ and (ii)
any Distribution Date on or after the Distribution Date on which the outstanding
Amount of the Class A- Notes has been paid in full the greater of (a) ______% of
the sum of the aggregate outstanding principal amount of each class of Notes
plus the outstanding Certificate Balance on such Distribution Date (after giving
effect to all payments on the Notes and distributions with respect to the
Certificates to be made on such Distribution Date); or (b) ____% of the sum of
the aggregate initial principal of the Notes plus the initial Certificate
Balance except that, if on any Distribution Date (x) the average of the
Charge-off Rates for the three preceding Due Periods exceeds _____% or (y) the
average of the Delinquency Percentages for the three preceding Due Periods
exceeds ______%, then the Specified Reserve Account Balance shall be an amount
equal to ____% of the sum of the aggregate outstanding principal amount of each
class of Notes and the aggregate outstanding Certificate Balance on such
Distribution Date (after giving effect to all payments on the Notes and
distributions with respect to the Certificates to be made on such Distribution
Date).
"Standard & Poor's" means Standard & Poor's Ratings Group, or
its successor.
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"Supplemental Servicing Fee" means the fee payable to the
Servicer for certain services rendered during the respective Due Period,
determined pursuant to and defined in Section 3.9.
"____________________" means __________________________ in its
individual capacity and not as Servicer.
"Total Servicing Fee" means with respect to each Distribution
Date the Servicing Fee for the related Due Period and all accrued and unpaid
Servicing Fees for prior Due Periods.
"Total Distribution Amount" means, for each Distribution Date,
the sum of (i) the Interest Distribution Amount (ii) the Available Principal and
(iii) the Reserve Account Transfer Amount, in each case in respect of such
Distribution Date; provided, however, that if on the Class A-1 Final Scheduled
Distribution Date, the Total Distribution Amount (as defined above) would be
insufficient to pay the Total Servicing Fee, Noteholders' Interest Distributable
Amount, Certificateholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount for such Distribution Date, then the Total
Distribution Amount for such Distribution Date will include, in addition to the
Total Distribution Amount (as defined above), an amount, up to the amount
necessary to pay any such items, of the Interest Distribution Amount and the
Available Principal on deposit (or, if the conditions specified in Section
3.2(c) have been satisfied, that would have been required to have been deposited
but for the satisfaction of such conditions) in the Collection Account on the
Determination Date relating to such Class A-1 Final Scheduled Distribution Date
which would have constituted the Interest Distribution Amount or Available
Principal, as the case may be, for the Due Period relating to the succeeding
Distribution Date and the Interest Distribution Amount and Available Principal,
as the case may be, for such succeeding Distribution Date will be reduced
accordingly.
"Transfer Date" means, with respect to any Distribution Date,
the Business Day preceding such Distribution Date.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in
Section 4.1.
"Trust Agreement" means the Trust Agreement dated as of
______________ __, _____, between the Seller and the Owner Trustee, as the same
may be amended and supplemented from time to time.
"Trust Officer" means, (i) in the case of the Trustee, any
Officer within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
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because of such officer's knowledge of and familiarity with the particular
subject and (ii) in the case of the Owner Trustee, any officer in the corporate
trust office of the Owner Trustee with direct responsibility for the
administration of this Agreement or any of the Basic Documents on behalf of the
owner Trustee.
"Trustee" means the Person acting as Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
Section 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
Section 1.3. Interest Calculations. All calculations of
interest hereunder that are made in respect of the Principal Balance of a Simple
Interest Loan shall be made on the basis of the actual number of days in an
Accrual Period and a year assumed to consist of 365 days. All calculations of
interest in respect of the Principal Balance of an Actuarial Loan or in respect
of the Notes or the Certificates shall be made on the basis of a 360-day year
consisting of twelve 30-day months. The calculation of the Servicing Fee shall
be made on the basis of the actual number of days in an Accrual Period and a
year assumed to consist of 365 days.
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ARTICLE II
Conveyance of Mortgage Loans
Section 2.1. Conveyance of Mortgage Loans. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the certificates
and the other amounts to be distributed from time to time to the Seller in
accordance with the terms of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
(subject to the obligations herein):
(A) all right, title and interest of the Seller in and to the
Mortgage Loans, and all moneys received thereon, on or after the Cutoff
Date;
(B) all right, title and interest of the Seller in the
security interests in the Mortgaged Properties granted by Mortgagors
pursuant to the Mortgage Loans and any other interest of the Seller in
the Mortgaged Properties;
(C) the interest of the Seller in any proceeds with respect to
the Mortgage Loans from claims on any physical damage, theft, credit
life or disability insurance policies covering Mortgaged Properties or
Mortgagors;
(D) all right, title and interest in all funds on deposit from
time to time in the Certificate Distribution Account, in the Trust
Accounts, including the Reserve Account Initial Deposit, and in all
investments and proceeds thereof (including all income thereon); and
(E) the proceeds of any and all of the foregoing.
In connection with such transfer, assignment and conveyance by
the Seller, the Seller shall deliver to, and deposit with the Trustee, on or
before the Closing Date, the following documents or instruments with respect to
each Mortgage Loan (the "Related Documents"):
(i) The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the
originator of the Mortgage Loan to the Person so endorsing the Mortgage
Loan to the Trustee, endorsed by such Person "Pay to the order of
_______________________, as Trustee for Chevy Chase Home Loan Trust
20____-_ without recourse" and signed, by facsimile or manual
signature, in the name of the Seller by a Responsible Officer;
(ii) Any of: (1) the original Mortgage, and related power of
attorney, if any, with evidence of recording thereon, (2) a copy of the
Mortgage and related power of attorney, if any, certified as a true
copy of the original Mortgage or power of attorney by a Responsible
Officer of the Seller or by the closing attorney by facsimile or manual
signature, or by an officer of the title insurer or agent of the title
insurer that issued the related title insurance policy if the original
has been transmitted for recording until such time as the original is
returned by the public recording office or (3) a copy of the Mortgage
and related power of attorney, if any, certified by the public
recording office;
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(iii) The original Assignment of mortgage in recordable form,
to "__________________, as Trustee for Chevy Chase Home Loan Trust
20____-_". Any such Assignments of Mortgage may be made by blanket
assignments for Mortgage Loans secured by the Mortgaged Properties in
the same county, if permitted by applicable law;
(iv) The original lender's policy of title insurance or a true
copy thereof, or if such original lender's title insurance policy has
been lost, a copy thereof certified by the appropriate title insurer to
be true and complete, or if such lender's title insurance policy has
not been issued as of the Closing Date, a marked up commitment (binder)
to issue such policy;
(v) All intervening assignments, if any, showing a complete
chain of assignments from the originator to the Seller, including any
recorded warehousing assignments, with evidence of recording thereon,
certified by a Responsible Officer of the Seller by facsimile or manual
signature as a true copy of the original of such intervening
assignments; and
(vi) originals of all assumption, written assurance,
substitution and modification agreements, if any.
In instances where the original recorded Mortgage cannot be
delivered by the Seller to the Trustee prior to or concurrently with the
execution and delivery of this Agreement due to a delay in connection with
recording, the Seller may in lieu of delivering such original recorded mortgage,
deliver to the Trustee a copy thereof, provided that the Seller certifies that
the original Mortgage has been delivered to a title insurance company for
recordation after receipt of its policy of title insurance or binder therefor.
In all such instances, the Seller will deliver or cause to be delivered the
original recorded Mortgage to the Trustee promptly upon receipt of the original
recorded mortgage but in no event later than one year after the Closing Date.
(b) The Trustee agrees, for the benefit of the Noteholders and
the Certificateholders, within 90 days after execution and delivery of this
Agreement, to review the Mortgage Files to ascertain that all required documents
set forth in paragraphs (A) - (E) of Section 2.1(a) have been executed and
received, and that the Mortgage Notes have been endorsed as set forth in section
2.1(a), and that such documents relate to the Mortgage Loans identified on the
Mortgage Loan Schedule and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 90-day period
the Trustee finds any document constituting a part of a Mortgage File not to
have been executed or received or to be unrelated to the Mortgage Loans
identified in said Mortgage Loan Schedule or, if in the course of its review,
the Trustee determines that such Mortgage File is otherwise defective in any
material respect, the Trustee shall promptly upon the conclusion of its review
notify the Seller, and the Seller shall have a period of 90 days after such
notice within which to correct or cure any such defect.
(c) The Trustee shall have no responsibility for reviewing any
Mortgage File except as expressly provided in Section 2.1(b). Without limiting
the effect of the preceding sentence, in reviewing any Mortgage File pursuant to
such subsection, the Trustee shall have no
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responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form (except, if applicable, to determine if the Trustee is the assignee or
endorsee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment is
permitted in any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded, but
shall not be required to determine whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine.
Section 2.2. Acceptance by Trustee. The Trustee hereby
acknowledges, subject to the review and period for delivery provided for in
Section 2.1, its receipt of the Mortgage Files, and declares that the Trustee
holds and will hold such documents and all amounts received by it thereunder and
hereunder in trust, upon the terms herein set forth, for the use and benefit of
all present and future Noteholders and Certificateholders. If the Seller is
given notice under Section 2.1(c) above and if the Seller does not correct or
cure such omission or defect within the 90-day period specified in Section
2.1(c) above, the Seller shall substitute one or more Eligible Substitute
Mortgage Loans therefor as provided in Section 2.5 hereof or purchase such
Mortgage Loan from the Trustee on the Determination Date in the month following
the month in which such 90-day period expired at the Purchase Price of such
mortgage Loan. The Purchase Price for the purchased Mortgage Loan shall be
deposited in the Collection Account no later than the applicable Determination
Date or the Business Day preceding the expiration of such 90-day period, as the
case may be, and, upon receipt by the Trustee of written notification of such
deposit signed by an officer of the Seller, the Trustee shall release to the
Seller the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Seller or its designee any Mortgage Loan released
pursuant hereto. It is understood and agreed that the obligation of the Seller
to cure, substitute for or purchase any Mortgage Loan as to which a material
defect in or omission of a constituent document exists shall constitute the sole
remedy against the Seller respecting such defect or omission available to the
Issuer, the Owner Trustee, the Trustee, the Noteholders or the
Certificateholders.
The Servicer, promptly following the transfer of (i) a
Defective Mortgage Loan from or (ii) an Eligible Substitute Mortgage Loan to the
Trust pursuant to this Section and Section 2.5, as the case may be, shall amend
the Mortgage Loan Schedule and make appropriate entries in its general account
records to reflect such transfer and the addition of any Eligible Substitute
Mortgage Loan, if applicable.
Section 2.3. [Intentionally Omitted].
Section 2.4. Representation and Warranties of the Seller
Regarding the Mortgage Loans. (a) The Seller represents and warrants to the
Issuer as follows as of the Closing Date:
(i) the information set forth in the Mortgage Loan
Schedule in Exhibit A hereto with respect to the Mortgage Loans was and
will be true and correct in all material respects at the date or dates
respecting which such information is furnished;
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(ii) the terms of the Mortgage Note and the Mortgage have
not been impaired, waived, altered or modified in any respect, except
by written instruments, if required by law in the jurisdiction where
the Mortgaged Property is located, the substance of which waiver,
alteration or modification is reflected on the Mortgage Loan Schedule
and the Mortgage File for such Mortgage Loan contains a true, accurate
and complete copy of each such waiver, alteration and modification;
(iii) except as otherwise set forth in the Mortgage Loan
Schedule, the Mortgage File for each Mortgage Loan contains a true,
accurate and complete copy of each of the documents contained in such
Mortgage File, including all amendments, modifications and, if
applicable, waivers and assumptions that have been executed in
connection with such Mortgage Loan, and except as reflected in the
Mortgage File, the Mortgage Loan Schedule for such Mortgage Loan, such
Mortgage Loan has not been further modified or amended;
(iv) immediately prior to the transfer to the Issuer, the
Seller is the sole owner of beneficial title and holder of each
mortgage and mortgage Note relating to the Mortgage Loans free and
clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any
nature and the Seller has full right and authority, subject to no
interest or participation of, or agreement with, any other party, to
sell or assign the same pursuant to this Agreement;
(v) each Mortgage is a valid and enforceable first lien
or junior lien (as to which all prior liens are being assigned) on the
property securing the related Mortgage Note and each Mortgaged Property
is owned by the Mortgagor in fee simple (except with respect to common
areas in the case of condominiums, PUDs and de minimus PUDs) or by
leasehold for a term longer than the term of the related Mortgage,
subject only to (i) the lien of current real property taxes and
assessments, not yet due and payable, covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal obtained in
connection with the origination of the related Mortgage Loan and (iii)
such other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended
to be provided by such Mortgage;
(vi) as of the Cutoff Date, no payment of principal of or
interest on or in respect of any Mortgage Loan is more than ___ days
past due;
(vii) there is no mechanic's lien or claim for work, labor
or materials affecting the premises subject to any Mortgage which is or
may be a lien prior to, or equal with, the lien of such Mortgage except
those which are insured against by the title insurance policy referred
to in clause (x) below;
(viii) as of the Cutoff Date, no Mortgage Loan has been
delinquent for ______ days or more during the preceding 12 months, and
there is no delinquent tax or assessment lien against the property
subject to any Mortgage;
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(ix) there is no valid offset, defense or counterclaim to
any Mortgage Note or Mortgage, including the obligation of the
Mortgagor to pay the unpaid principal and interest on such Mortgage
Note;
(x) the physical property subject to any Mortgage is free
of material damage and is in good repair and there is no proceeding
pending or, to the best of the Seller's knowledge, threatened for the
total or partial condemnation of any Mortgaged Property;
(xi) a lender's title insurance policy (on an ALTA or CLTA
form) or binder, or other assurance of title customary in the relevant
jurisdiction therefor in a form acceptable to FNMA or FHLMC, was issued
on the date of the origination of each related Mortgage Loan by a title
insurance company acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the related Mortgaged Property is
located, insuring the Seller and its successors and assigns that the
Mortgage is a first priority lien on the related Mortgaged Property in
the original principal amount of the Mortgage Loan. The Seller is the
sole insured under such lender's title insurance policy, and such
policy, binder or assurance is valid and remains in full force and
effect, and each such policy, binder or assurance shall contain all
applicable endorsements including a negative amortization endorsement,
if applicable;
(xii) in the event the mortgage constitutes a deed of
trust, either a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves and is
named in the Mortgage or if no duly qualified trustee has been properly
designated and so serves, the Mortgage contains satisfactory provisions
for the appointment of such trustee by the holder of the Mortgage at no
cost or expense to such holder, and no fees or expenses are or will
become payable by Issuer to the trustee under the deed of trust, except
in connection with a trustee's sale after default by the mortgagor;
(xiii) as of the Cutoff Date, the Mortgage Loans had the
characteristics described in the Mortgage Loan Schedule for such
Mortgage Loans;
(xiv) the original principal amount of each Mortgage Loan
is not more than ____% of the Original Value; except as otherwise set
forth in the Mortgage Loan Schedule, each mortgage Loan for which the
original principal balance of the related Mortgage Note exceeded 80% of
the original Value is covered by a Primary Mortgage Insurance Policy
issued by a private mortgage insurer insuring against default under the
Mortgage Note in an amount at least equal to the excess of such
outstanding principal amount over 75% of such original Value until the
principal balance of such Mortgage Loan is reduced below 80% of the
original Value or, based upon a new appraisal, the principal balance of
such Mortgage Loan represents less than 80% of the new appraised value.
Each FHA insurance policy or VA guaranty relating to each FHA/VA
insured/guaranteed Mortgage Loan is current, in full force and effect
and may be assigned by the Seller to the Issuer at no cost to the
Issuer;
(xv) there has been no fraud, misrepresentation or
dishonesty with respect to the origination or servicing of any Mortgage
Loan or which has resulted or may result in
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the exclusion from, denial of or defense to coverage under any Primary
Mortgage Insurance Policy;
(xvi) upon origination of each Mortgage Loan, the
originator received an appraisal with respect to each Mortgaged
Property which conformed to all FNMA requirements, and a true, accurate
and complete copy of such appraisal is contained in the Mortgage File;
(xvii) on the basis of a representation by the Mortgagor at
the time of origination of the Mortgage Loans, at least ____% of the
Mortgage Loans (by aggregate principal balance) are secured by
Mortgages on properties which were owner-occupied primary residences at
the time of the origination of such Mortgage Loan;
(xviii) neither the Seller nor any servicer of the related
Mortgage Loans has advanced funds or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for
the payment of any amount required by the mortgage, except for (i)
interest accruing from the date of the origination of the related
mortgage Note or date of disbursement of the Mortgage Loan proceeds,
whichever is later, to the first Due Date under the related Mortgage
Note and (ii) customary advances for insurance and taxes;
(xix) each Mortgage Note, the related Mortgage and other
agreements executed in connection therewith are genuine, and each is
the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law); and all parties to
each Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has
been duly and properly executed by the Mortgagor;
(xx) if the Mortgage Loan provides that the interest rate
on the principal balance of the related Mortgage Loan may be adjusted,
all of the terms of the related Mortgage pertaining to interest rate
adjustments, payment adjustments and adjustments of the outstanding
principal balance are enforceable and such adjustments will not affect
the priority of the Mortgage lien;
(xxi) to the extent required under applicable law, each
originator and subsequent mortgagee or servicer of the Mortgage Loans
was authorized to transact and do business in the jurisdiction in which
the related Mortgaged Property is located at all times when it held or
serviced the Mortgage Loan; any requirements of any laws or
regulations, including usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, fair credit reporting, unfair
collection practice, equal credit opportunity and disclosure laws and
regulations, applicable to the origination and servicing of such
Mortgage Loan have been complied with in all material respects; and any
obligations of the holder of the related Mortgage Note, Mortgage and
other loan documents have been complied with in all material respects;
servicing of each Mortgage Loan has been in
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accordance with prudent mortgage servicing standards, any applicable
laws, rules and regulations and in accordance with the terms of the
Mortgage Notes, the Mortgage and other loan documents, whether such
origination and servicing was done by the Seller, its affiliates, or
any third party which originated the Mortgage Loan on behalf of, or
sold the Mortgage Loan to, any of them, or any servicing agent of any
of the foregoing;
(xxii) the related Mortgage Note and Mortgage contain
customary and enforceable provisions such as to render the rights and
remedies of the bolder adequate for the realization against the
Mortgaged Property of the benefits of the security, including
realization by judicial, or, if applicable, non-judicial foreclosure,
and there is no homestead or other exemption available to the Mortgagor
which would interfere with such right to foreclosure;
(xxiii) the proceeds of the related Mortgage Loans have been
fully disbursed, there is no requirement for future advances thereunder
and any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds
therefor have been complied with; and all costs, fees and expenses
incurred in making, closing or recording the related Mortgage Loan have
been paid, except recording fees with respect to Mortgages not recorded
as of the Closing Date;
(xxiv) as of the Closing Date the Mortgaged Property
securing the Mortgage Loan is insured (by an insurer which is
acceptable to the Seller) against loss by fire and such hazards as are
covered under a standard extended coverage endorsement, in an amount
which is not less than the lesser of the maximum insurable value of the
improvements securing such Mortgage Loan and the outstanding principal
balance of the Mortgage Loan, but in no event in an amount less than an
amount that is required to prevent the Mortgagor from being deemed to
be a co-insurer thereunder; if the Mortgaged Property is a condominium
unit, it is included under the coverage afforded by a blanket policy
for the condominium project; if upon origination of the related
Mortgage Loan, the improvements on the Mortgaged Property were in an
area identified as a federally designated flood area, a flood insurance
policy is in effect in an amount representing coverage not less than
the lesser of (i) the outstanding principal balance of the Mortgage
Loan, (ii) the restorable cost of improvements located on such
Mortgaged Property and (iii) the maximum coverage available; and each
Mortgage obligates the Mortgagor thereunder to maintain the insurance
referred to in the Mortgage at the Mortgagor's cost and expense;
(xxv) except for ___% of the Mortgage Loans (by aggregate
principal balance as of the Cutoff Date) which are no more than ___
days delinquent as of the Cutoff Date, there is no material monetary
default existing under any Mortgage or the related Mortgage Note and
there is no material event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute
a default, breach or event of acceleration; and neither the Seller nor
any servicer of any related Mortgage Loan has taken any action to waive
any default, breach or event of acceleration; except for ___% of the
Mortgage Loans (by aggregate principal balance as of the Cutoff Date)
which are no more than ___ days delinquent as of the Cutoff Date, no
foreclosure action is threatened or has been commenced with respect to
the Mortgage Loans;
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(xxvi) no Mortgagor, at the time of origination of the
applicable Mortgage, was a debtor in any state or federal bankruptcy or
insolvency proceeding;
(xxvii) each Mortgage Loan was originated by an entity
described in Section 3(a)(41) of the Securities Exchange Act of 1934,
as amended;
(xxviii) all inspections, licenses and certificates required
to be made or issued with respect to the Mortgaged Property and, with
respect to the use and occupancy of the same, including, but not
limited to, certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities;
(xxix) the Mortgaged Property and all improvements thereon
comply with all requirements of any applicable zoning and subdivision
laws and ordinances;
(xxx) there do not exist any circumstances or conditions
with respect to the Mortgage, the Mortgaged Property, the Mortgagor or
the Mortgagor's credit standing that can be reasonably expected to
cause private institutional investors to regard the mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become delinquent
or adversely affect the value or marketability of the Mortgage Loan;
(xxxi) no instrument of release or waiver has been executed
in connection with the Mortgage Loans, and no Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement which has been approved by the primary mortgage guaranty
insurer, if any, and which has been delivered to the Issuer or its
designee; and
(xxxii) except as otherwise provided in the Mortgage Loan
Schedule, no Mortgage Loan provides for a balloon payment and each
Mortgage Note contains provisions providing for its full amortization
by the end of its original term and is payable on the first day of each
month in monthly installments of principal and interest, with interest
payable in arrears, over an original term of not more than ___ years.
(b) It is understood and agreed that the representations and
warranties set forth in Section 2.4(a) shall survive the sale, transfer and
assignment of the Mortgage Loans to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture. Upon discovery by the Seller, the Servicer or
the Owner Trustee of a breach of any of the foregoing representations and
warranties, without regard to any limitation set forth therein concerning the
knowledge of the Seller as to the facts stated therein, which materially and
adversely affects the interests of the Noteholders or the Certificateholders in
the related Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties and the Trustee. Within 60 days of its
discovery or its receipt of notice of breach, the Seller shall use all
reasonable efforts to cure such breach in all material respects or shall
purchase from the Trust or substitute an Eligible Substitute Mortgage Loan as
provided in Section 2.5 for such Mortgage Loan. Any such purchase by the Seller
shall be at the Purchase Price, and in each case shall be accomplished in the
manner set forth in Section 2.2. It is understood and agreed that the obligation
of the Seller to cure, substitute for or purchase any Mortgage Loan as to which
such a breach has occurred and is continuing shall constitute the sole remedies
against the Seller respecting such breach
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available to the Issuer, the Owner Trustee, the Trustee, the Noteholders or
Certificateholders. Neither the Owner Trustee nor the Trustee shall have a duty
to conduct any affirmative investigation as to the occurrence of any conditions
requiring the repurchase of any Mortgage Loan pursuant to this Section.
Section 2.5. Substitution of Mortgage Loans. (a) On a
Determination Date within two years following the Closing Date and which is on
or before the date on which the Seller would otherwise be required to repurchase
a Mortgage Loan under Section 2.2 or 2.4, the Seller may deliver to the Trustee
one or more Eligible Substitute Mortgage Loans in substitution for any one or
more of the Defective Mortgage Loans which the Seller would otherwise be
required to repurchase pursuant to Sections 2.2 or 2.4.
(b) The Seller shall notify the Issuer, the Owner Trustee, the
Servicer and the Trustee in writing not less than five Business Days before the
related Determination Date which is on or before the date on which the Seller
would otherwise be required to repurchase such Mortgage Loan pursuant to Section
2.2 or 2.4 of its intention to effect a substitution under this Section. On such
Determination Date (the "Substitution Date"), the Seller shall deliver to the
Issuer (1) the Eligible Substitute Mortgage Loans to be substituted for the
Original Mortgage Loans, (2) a list of the Original Mortgage Loans to be
substituted for by such Eligible Substitute Mortgage Loans, (3) an Officers'
Certificate (A) stating that no failure by the Servicer described in Section 7.1
shall have occurred and be continuing, (B) stating that all conditions precedent
to such substitution specified in subsection (a) have been satisfied and
attaching as an exhibit a supplemental Mortgage Loan schedule (the "Supplemental
Mortgage Loan Schedule") setting forth the same type of information as appears
on the Mortgage Loan Schedule and representing as to the accuracy thereof and
(C) confirming that the representations and warranties contained in Section 2.4
are true and correct in all material respects with respect to the Substitute
Mortgage Loans on and as of such Determination Date, provided that remedies for
the inaccuracy of such representations are limited as set forth in Sections 2.2,
2.4 and this Section 2.5 and (4) a certificate stating that cash in the amount
of the related Substitution Adjustment, if any, has been deposited to the
Collection Account. Upon receipt of the foregoing, the Issuer shall release such
Original Mortgage Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set
forth in Section 2.5(a) and (b) above and the grant of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.5(a) above, Exhibit A to
this Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.
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ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.1. Duties of Servicer. (a) The Servicer, as agent
for the Issuer (to the extent provided herein) 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 Agreement and the
customary and usual standards of an institution prudently servicing mortgage
loans for its own account and shall have full authority to do anything it
reasonably deems appropriate in connection with such servicing and
administration. The Servicer shall maintain servicing standards equivalent to
those required for approval by FNMA or FHLMC. The 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 Servicer, in its capacity as
servicer, shall include the power to (i) 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 (ii) 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, the
filing of claims under any Primary Insurance Policy and any other matter
pertaining to a delinquent mortgage Loan. The authority of the Servicer shall
include, in addition, the power to (i) execute and deliver customary consents or
waivers and other instruments and documents, (ii) consent to transfers of any
related Mortgaged Property and assumptions of the related Mortgage Notes and
Security Instruments (but only in the manner provided in this Agreement) and
(iii) collect any Insurance Proceeds and Liquidation Proceeds. Without limiting
the generality of the foregoing, the Servicer is authorized and empowered to
execute and deliver, on behalf of itself, the Issuer, the Owner Trustee, the
Trustee, the Certificateholders and the Noteholders or any of them, any and all
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such Mortgage
Loans or to the Mortgaged Properties securing such Mortgage Loans.
(b) Notwithstanding the provisions of Subsection 3.1(a), the
Servicer shall not take any action inconsistent with the interest of the
Noteholders or the Certificateholders in the Mortgage Loans or with the rights
and interests of the Owner Trustee, the Trustee, the Noteholders or the
Certificateholders under this Agreement.
(c) The Owner Trustee shall furnish the Servicer with any
powers of attorney and other documents in form as provided to it necessary or
appropriate (as certified to the Owner Trustee by the Servicer) to enable the
Servicer to service and administer the related Mortgage Loans and REO Property.
Section 3.2. Collection and Allocation of Mortgage Loan
Payments. (a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all mortgage loans in its servicing portfolio comparable to the
Mortgage Loans that it services for itself or others.
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(b) Consistent with the terms of this Agreement, the
Servicer may waive, modify or vary any term of any Mortgage Loan or consent to
the postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's determination ouch waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Noteholders and the Certificateholders; provided, however, that
the Servicer may not permit any modification with respect to any Mortgage Loan
that would change the Mortgage Rate, defer or forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Mortgage Loan) or extend the Final Scheduled Maturity Date on the Mortgage Loan.
No costs incurred by the Servicer in respect of Servicing Advances shall for the
purposes of distributions to Noteholders or Certificateholders be added to the
amount owing under the related Mortgage Loan.
(c) The Servicer, for the benefit of the Noteholders and
the Certificateholders, shall establish and maintain in the name of the Trustee
an Eligible Deposit Account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders. The Collection Account shall
initially be established with the Trustee. The Servicer shall on the Closing
date deposit into the Collection Account any amounts representing payments on
and any collections in respect of the Mortgage Loans in received on or after the
Cutoff Date and prior to the Closing Date, and thereafter shall use its best
efforts to deposit within one Business Day, and shall in any event deposit
within two Business Days following receipt thereof the following payments and
collections received or made by it (without duplication) with respect to the
Mortgage Loans:
(i) all payments received on and after the Cutoff Date on
account of principal on the Mortgage Loans and all full or partial
prepayments collected after the Cutoff Date;
(ii) all payments received on and after the Cutoff Date on
account of interest on the Mortgage Loans;
(iii) all Net Liquidation Proceeds net of Foreclosure
Profits;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase
of any Mortgage Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.2, 2.4, 2.6 and 3.16; and
(vii) any amount required to be deposited in the Collection
Account pursuant to Sections 3.5, 3.7, 3.15, 3.16 or 8.1;
provided, however, that (x) with respect to each Due Period, the Servicer shall
be permitted to retain from payments in respect of interest on the Mortgage
Loans, the Servicing Fee for such Due Period and (y) the Servicer shall be
permitted to retain late collections, including Liquidation Proceeds, Released
Mortgaged Property Proceeds and Insurance Proceeds, to the extent of any unpaid
Servicing Fees, unreimbursed Monthly Advance and/or Servicing Advance with
respect to the related Mortgage Loan. The foregoing requirements respecting
deposits to
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the Collection Account are exclusive, it being understood that, without limiting
the generality of the foregoing, the Servicer need not deposit in the Collection
Account amounts representing Foreclosure Profits, fees (including annual fees),
late charges or penalties payable by Mortgagors, or amounts received by the
servicer for the accounts of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
Section 3.3. Withdrawals from each Collection Account.
The Trustee shall withdraw or cause to be withdrawn funds from the Collection
Account for the following purposes with respect to the Mortgage Loans:
(i) the deposits and distributions required by Section
4.5(d);
(ii) to the extent not retained by the Servicer as provided
in Section 3.2(c), to reimburse the Servicer for any accrued unpaid
Servicing Fees and for unreimbursed Monthly Advances and Servicing
Advances. The Servicer's right to reimbursement for unpaid Servicing
Fees and unreimbursed Servicing Advances shall be limited to late
collections on the related Mortgage Loan, including Liquidation
Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds and
such other amounts as may be collected by the Servicer from the related
Mortgagor or otherwise relating to the Mortgage Loan in respect of
which such reimbursed amounts are owed. If a Monthly Advance was made
net of the Servicing Fee as permitted by Section 3.15 hereof, no
additional Servicing Fee for the related Mortgage loan and Due Period
shall be payable. The Servicer's right to reimbursement from such
Collection Account for unreimbursed Monthly Advances shall be limited
to late collections of interest on any mortgage Loan and to Liquidation
Proceeds and Insurance Proceeds on related Mortgage Loans,
(iii) to withdraw any amount received from a Mortgagor that
is recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy code in
accordance with a final, nonappealable order of a court having
competent jurisdiction;
(iv) (a) to make investments in Eligible Investments and (b)
to pay to the Servicer, interest earned is respect of Eligible
Investments or on funds deposited in the Collection Account;
(v) to withdraw any funds deposited in such Collection
Account that were not required to be deposited therein (such as
Servicing compensation) or were deposited therein in error and to pay
such funds to the appropriate Person;
(vi) to pay the Servicer Servicing Compensation pursuant to
Section 3.9 hereof to the extent not retained or paid pursuant to
Section 3.2(c);
(vii) to withdraw funds necessary for the conservation and
disposition of REO Property pursuant to Section 3.7; and
(viii) to clear and terminate such Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein
in accordance with Section 8.1(b).
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Section 3.4. Maintenance of Hazard Insurance; Property
Protection Expenses. The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance naming the Servicer as loss payee thereunder
providing extended coverage in an amount which is at least equal to the lesser
of (i) the maximum insurable value of the improvements securing such Mortgage
Loan from time to time, (ii) the combined principal balance owing on such
Mortgage Loan and any related First Lien and (iii) the minimum amount required
to compensate for damage or loss on a replacement cost basis. The Servicer shall
also maintain on property acquired upon foreclosure, or by deed-in-lieu of
foreclosure, hazard insurance with extended coverage in an amount which is at
least equal to the lesser of (i) the maximum insurable value from time to time
of the improvements which are a part of such property, (ii) the combined
principal balance owing on such mortgage Loan and any related First Lien and
(iii) the minimum amount required to compensate for damage or loss on a
replacement cost basis at the time of such foreclosure, fire and or deed in lieu
of foreclosure plus accrued interest and the good-faith estimate of the Servicer
of related Servicing Advances to be incurred in connection therewith. Amounts
collected by the Servicer under any such policies shall be deposited in the
Collection Account to the extent called for by Section 3.2. In cases in which
any mortgaged Property is located in a federally designated flood area, the
hazard insurance to be maintained for the related Mortgage Loan shall include
flood insurance to the extent such flood insurance is available and the Servicer
has determined such insurance to be necessary in accordance with accepted
mortgage loan servicing standards for mortgage loans comparable to the Mortgage
Loans. All such flood insurance shall be in amounts equal to the least of the
amount in clause (i) above, clause (ii) above and the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as amended.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any ouch additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
Section 3.5. [Reserved]
Section 3.6. Fidelity Bond. The Servicer shall maintain
with a responsible company, and at its own expense, a blanket fidelity bond and
an errors and omissions insurance policy, in a minimum amount acceptable to FNMA
or FHLMC or otherwise in an amount as is commercially available at a cost that
is not generally regarded as excessive by industry standards, with broad
coverage on all officers, employees or other persons acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the Mortgage Loans ("Servicer Employees"). Any such fidelity bond and errors and
omissions insurance shall protect and insure the Servicer against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such Servicer Employees. Such fidelity bond
shall also protect and insure the Servicer against losses in connection with the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 3.6
requiring such fidelity bond and errors and omissions insurance shall diminish
or relieve the Servicer from its duties and obligations as set forth in this
Agreement. Upon the request of the Owner Trustee or the Trustee, the Servicer
shall cause to be delivered to the Owner Trustee or the Trustee a certified true
copy of, such fidelity bond and insurance policy.
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Section 3.7. Management and Realization Upon Defaulted
Mortgage Loans. On behalf of the issuer, the Servicer shall manage, conserve,
protect and operate each REO Property for the Noteholders and the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
servicer, manage, conserve, protect and operate the REO Property in the same
manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the REO Property is managed. The Servicer shall attempt to
sell the same (and may temporarily rent the same) on such terms and conditions
as the Servicer deems to be in the beat interests of the Noteholders and the
Certificateholders.
The Servicer shall cause to be deposited, no later than five
Business Days after the receipt thereof, in the Collection Account, all revenues
received with respect to the related REO Property and shall retain, or cause the
Trustee to withdraw therefrom funds necessary for the proper operation,
management and maintenance of the REO Property and the fees of any managing
agent acting on behalf of the Servicer.
The disposition of REO Property shall be carried out by the
Servicer for cash at such price, and upon such terms and conditions, as the
Servicer deems to be in the beat interests of the Noteholders and the
Certificateholders and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The cash proceeds of sale of the REO Property shall be
promptly deposited in the Collection Account, net of Foreclosure Profits and of
any related unreimbursed Servicing Advances, accrued and unpaid Servicing Fees
and unreimbursed Monthly Advances payable to the Servicer in accordance with
Section 3.3, for distribution to the Noteholders and the Certificateholders in
accordance with Section 4.5 hereof.
The Servicer shall foreclose upon or otherwise comparably
convert to ownership Mortgaged Properties securing such of the Mortgage Loans as
come into and continue in default when no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.2 subject to the
provisions contained in the last paragraph of this Section 3.7.
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 owner Trustee, or to its nominee on behalf of the
Noteholders and the Certificateholders.
Section 3.8. Trustee to Cooperate. Upon payment in full of
any Mortgage Loan, the Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.1, if the related Assignment of Mortgage
has been recorded as required hereunder, an instrument of satisfaction regarding
the related Mortgage, which instrument of satisfaction shall be recorded by the
Servicer if required by applicable law and be delivered to the Person entitled
thereto. It is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a Request for Release, in the form
annexed hereto as Exhibit E, signed by a Servicing officer, release the related
Mortgage File to the Servicer, and the Trustee shall execute such documents, in
the forms provided by the Servicer, as
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shall be necessary to the prosecution of any such proceedings or the taking of
other servicing actions. Such Request for Release shall obligate the Servicer to
return the Mortgage File to the Trustee when the need therefor by the Servicer
no longer exists unless the Mortgage Loan shall be liquidated, in which case,
upon receipt of a certificate of a Servicing officer similar to that hereinabove
specified, the Request for Release shall be released by the Trustee to the
Servicer.
In order to facilitate the foreclosure of the Mortgage
securing any Mortgage Loan that is in default following recordation of the
related Assignment of Mortgage in accordance with the provisions hereof, the
Trustee shall, if so requested in writing by the Servicer, execute an
appropriate assignment in the form provided to the Trustee by the Servicer to
assign such Mortgage Loan for the purpose of collection to the Servicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, such assignee for
collection will thereupon bring all required actions in its own name and
otherwise enforce the terms of the Mortgage Loan and deposit or credit the Net
Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect
thereto in the Collection Account. In the event that all delinquent payments due
under any such Mortgage Loan are paid by the Mortgagor and any other defaults
are cured then the assignee for collection shall promptly reassign such Mortgage
Loan to the Trustee and return it to the place where the related Mortgage File
was being maintained.
Section 3.9. Servicing Fee. The servicing fee for a
Distribution Date shall equal the product of (a) one-twelfth, (b) the Servicing
Fee Rate and (c) the Pool Balance as of the first day of the preceding Due
Period (the "Servicing Fee"). The Servicer shall also be entitled to all late
payment charges and other administrative fees or similar charges, including
without limitation, Foreclosure Profits, allowed by applicable law with respect
to Mortgage Loans, collected (from whatever source) on the Mortgage Loans (the
"Supplemental Servicing Fee"). The Servicer also shall be entitled to and may
retain from Collections the Servicing Fee, as provided herein. The Servicer, in
its discretion at its election, may defer receipt of all or any portion of the
Servicing Fee or supplemental Servicing Fee for any Due Period to and until a
later Due Period for any reason, including in order to avoid a shortfall in any
payments due on any Notes or Certificates. Any such deferred amount shall be
payable to (or may be retained from subsequent collections by) the Servicer on
demand.
Section 3.10. Servicer's Certificate. On each Determination
Date, the Servicer shall deliver to the Owner Trustee, the Trustee and the
Seller, with a copy to the Rating Agencies, a Servicer's Certificate containing
all information necessary to make the distributions pursuant to Sections 4.5 and
4.6 for the Due Period preceding the date of such Servicer's Certificate.
Mortgage Loans to be purchased by the Servicer or to be repurchased by the
Seller shall be identified by the Servicer by account number with respect to
such Mortgage Loan (as specified in Exhibit A).
Section 3.11. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Owner Trustee and the Trustee, on
or before ____________ of each year beginning ________ 20___, an Officers'
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding twelve-month
period (or, in the case of the first such report, during the period from the
Closing Date to December 31, 20___) and of its performance under this Agreement
has been made under
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such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Trustee shall send a copy of
such certificate and the report referred to in Section 3.10 to the Rating
Agencies. A copy of such certificate and the report referred to in Section 3.10
may be obtained by any Certificateholder by a request in writing to the Owner
Trustee addressed to the Corporate Trust office (as defined in the Trust
Agreement) or by any Noteholder by a request in writing to the Trustee addressed
to the Corporate Trust Office. Upon the telephone request of the Owner Trustee,
the Trustee will promptly furnish the Owner Trustee a list of Noteholders as of
the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the
Trustee and the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice in an Officers' Certificate of any event which with the giving of notice
or lapse of time, or both, would become a Servicer Default under Section 7.2 (a)
or (b).
Section 3.12. Annual Independent Certified Public
Accountants' Report. The Servicer shall cause a firm of independent certified
public accountants, which may also render other services to the Servicer or the
Seller, to deliver to the Seller, the Owner Trustee and the Trustee an or before
of each year beginning ________, 20___, a letter addressed to the Servicer, the
Seller, the Owner Trustee and the Trustee and each Rating Agency, to the effect
that such firm has with respect to the Servicer's overall servicing operations
examined such operations in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers during the preceding calendar year
(or, in the case of the first such report, during the period from the Closing
Date to December 31, 20___), and stating such firm's conclusions relating
thereto.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
Section 3.13. Access to Certain Documentation and Information
Regarding Mortgage Loans. The Servicer shall provide to the Certificateholders
and Noteholders access to the Mortgage Files in such cases where the
Certificateholders or Noteholders shall be required by applicable statutes or
regulations to review such documentation as demonstrated by evidence
satisfactory to the Servicer in its reasonable judgment. Access shall be
afforded without charge, but only upon reasonable request and during the normal
business hours at the respective offices of the Servicer. Nothing in this
Section 3.13 shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Servicer to provide access to information as provided in
this Section 3.13 as a result of such obligation shall not constitute a breach
of this Section 3.13.
Section 3.14. Servicer Expenses. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Servicer and expenses incurred in connection with distributions
and reports to Certificateholders and Noteholders.
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Section 3.15. Advances by the Servicer. (a) Not later than
the close of business on the second Business Day preceding each Distribution
Date, the Servicer shall remit to the Trustee for deposit in the Collection
Account an amount, to be distributed on the related Distribution Date pursuant
to Section 4.5(d), equal to the sum of (a) the interest accrued on each Mortgage
Loan at the Mortgage Rate (or at such lower rate as may be in effect for such
mortgage Loan pursuant to application of the Civil Relief Act and/or any Debt
Service Reduction) through the related Due Date, but not received as of the
close of business on the Determination Date for such Distribution Date (net of
the Servicing Fee) and (b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which a final disposition
did not occur during the related Due Period, an amount equal to the excess, if
any, of interest on the Principal Balance of such REO Property at the Net Rate
for the most recently ended Due Period prior to the related Determination Date
for the related Mortgage Loan over the net income from the REO Property
transferred to the Collection Account for such Distribution Date pursuant to
Section 3.4; such sum being defined herein as the "Monthly Advance." The
Servicer may fund all or a portion of the monthly Advance with respect to the
Mortgage Loans by instructing the Trustee on such Determination Date to use
funds deposited in the Collection Account which are not part of the Total
Distribution Amount for the related Distribution Date; provided that if such
funds are so used the Servicer shall replace such funds on or before any
subsequent Determination Date on which such funds are required to be part of the
Total Distribution Amount.
(b) Notwithstanding anything herein to the contrary, no
Servicing Advance or Monthly Advance shall be required to be made hereunder if
the Servicer determines that such Servicing Advance or Monthly Advance would, if
made, constitute a Nonrecoverable Advance.
Section 3.16. Optional Purchase of Defaulted Mortgage
Loans. The Servicer, in its sole discretion, shall have the right to elect (by
written notice sent to the Seller, the Owner Trustee and the Trustee) to
purchase for its own account from the Issuer any Mortgage Loan which is 90 days
or more delinquent in the manner and at the price specified in Section 2.2. The
Purchase Price for any Mortgage Loan purchased hereunder shall be deposited in
the Collection Account and the Trustee, upon receipt of such deposit, shall
release or cause to be released to the Servicer or its designee the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by the purchaser of such Mortgage Loan, in each case without
recourse, as shall be necessary to vest in the purchaser of such Mortgage Loan
any Mortgage Loan released pursuant hereto and the purchaser of such Mortgage
Loan shall succeed to all the Issuer's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The purchaser of such
Mortgage Loan shall thereupon own such Mortgage Loan, and all security and
documents, free of any further obligation to the Owner Trustee, the Trustee, the
Noteholders or the Certificateholders with respect thereto.
Section 3.17. Superior Liens. The Servicer shall file (or
cause to be filed) of record a request for notice of any action by a superior
lienholder under a First Lien for the protection of the Issuer's interest, where
permitted by local law and whenever applicable state law does not require that a
junior lienholder be named as a party defendant in foreclosure proceedings in
order to foreclose such junior lienholder's equity of redemption.
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If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the First Lien,
or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust, whatever actions are necessary to protect the interests of
the Noteholders and the Certificateholders, and/or to preserve the security of
the related Mortgage Loan. The Servicer shall advance the necessary funds to
cure the default or reinstate the superior lien, if the Servicer reasonably
believes such advance is in the best interests of the Noteholders and the
Certificateholders. The Servicer shall not make such an advance except to the
extent that it determines in its reasonable good faith judgment that the advance
would be recoverable from Liquidation Proceeds on the related Mortgage Loan.
Section 3.18. Payment of Taxes, Insurance and Other
Charges. With respect to each Mortgage Loan, the Servicer shall maintain
accurate records reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Servicer
maintains escrow accounts, the Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Servicer in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does not
provide for escrow payments, the Servicer shall, if it has received notice of a
default or deficiency, monitor such payments to determine if they are made by
the Mortgagor.
Section 3.19. Appointment of Subservicer. The Servicer may
at any time appoint a subservicer to perform all or any portion of its
obligations as Servicer hereunder; provided, however, that the Rating Agency
Condition shall have been satisfied in connection therewith; provided further
that the Servicer shall remain obligated and be liable to the Issuer, the Owner
Trustee, the Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Mortgage Loans in accordance with the
provisions hereof without diminution of such obligation and liability by virtue
of the appointment of such subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time and none of the
Issuer, the Owner Trustee, the Trustee, the Certificateholders or the
Noteholders shall have any responsibility therefor.
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ARTICLE IV
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
Section 4.1. Establishment of Trust Accounts. (a) (i) The
Servicer, for the benefit of the Noteholders' shall establish and maintain in
the name of the Trustee an Eligible Deposit Account (the "Note Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Noteholders. The Note Distribution
Account shall initially be established with the Trustee.
(ii) The Servicer, for the benefit of the Noteholders and
the Certificateholders, shall establish and maintain in the name of the Trustee
an Eligible Deposit Account (the "Reserve Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholder. The Reserve Account shall be
maintained with the Trustee as long as the Trustee is an Eligible Institution.
(b) Funds on deposit in the Collection Account, the Note
Distribution Account and the Reserve Account (collectively, the "Trust
Accounts") and the Certificate Distribution Account shall be invested by the
Trustee with respect to Trust Accounts and by the Owner Trustee with respect to
the Certificate Distribution Account (or any custodian with respect to funds on
deposit in any such account) in Eligible Investments selected in writing by the
Servicer (pursuant to standing instructions or otherwise); provided, however, it
is understood and agreed that neither the Trustee nor the Owner Trustee shall be
liable for any loss arising from such investment in Eligible Investments. All
such Eligible Investments shall be held by or on behalf of the Trustee or the
Owner Trustee, as applicable, for the benefit of the Noteholders and the
Certificateholders, the Noteholders or the Certificateholders, as applicable;
provided that on each Distribution Date all interest and other investment income
(net of losses and investment expenses) on funds on deposit therein shall be
deposited into the Collection Account and shall be deemed to constitute a
portion of the Interest Distribution Amount. Other than as permitted by the
Rating Agencies, funds on deposit in the collection Account, the Note
Distribution Account, the Certificate Distribution Account and the Reserve
Account shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Transfer Date preceding
the following Distribution Date. Funds deposited in a Trust Account or the
Certificate Distribution Account on a Transfer Date which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not required
to be invested overnight.
(c)(i) The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Owner Trust Estate. Except
as otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of the Trustee for the benefit of the Noteholders and the
Certificateholders, or the Noteholders' as the case may be. If, at any time, any
of the Trust Accounts or the Certificate Distribution Account ceases to be an
Eligible Deposit Account, the Trustee (or the Servicer on its behalf) or the
Owner Trustee, as applicable, shall within 10 Business Days (or such longer
period as to which each Rating Agency may consent) establish a new Trust Account
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or a new Certificate Distribution Account, as applicable, as an Eligible Deposit
Account and shall transfer any cash and/or any investments to such new Trust
Account or a new Certificate Distribution Account, as applicable. In connection
with the foregoing, the Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Trustee, the Servicer shall notify the
Trustee in writing promptly upon any of such Trust Accounts ceasing to be an
Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the
Trustee, and with respect to the Certificate Distribution Account, the Owner
Trustee, agrees, by its respective acceptance hereof, that:
(A) any Trust Account Property or any property in the
Certificate Distribution Account that is held in deposit accounts shall be held
solely in the Eligible Deposit Accounts subject to the penultimate sentence of
Section 4.1(c)(i); and, except as otherwise provided herein, each such Eligible
Deposit Account shall be subject to the exclusive custody and control of the
Trustee with respect to the Trust Accounts and the owner Trustee with respect to
the Certificate Distribution Account, and the Trustee or the Owner Trustee, as
applicable, shall have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Trustee in accordance with paragraph (a) of
the definition of "Delivery" and shall be held, pending maturity or disposition,
solely by the Trustee or a financial intermediary (as such term is defined in
Section 8-313(4) of the UCC) acting solely for the Trustee;
(C) any Trust Account Property that is a bookentry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued book-entry registration of such Trust
Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause (C)
above shall be delivered to the Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued registration of the Trustee's (or its
nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the
Trustee or by the Owner Trustee with the consent of the Trustee, to instruct the
Trustee to make withdrawals and payments from the Trust Accounts for the purpose
of permitting the Servicer or the Owner Trustee to carry out its respective
duties hereunder or permitting the Trustee to carry out its duties under the
Indenture.
(d)(i) The Servicer shall establish and maintain with the
Trustee an Eligible Deposit Account (the "Payahead Account"). The Payahead
Account shall not be property of the Issuer.
(ii) The Servicer shall on or prior to each Distribution
Date (and prior to deposits to the Note Distribution Account or the Certificate
Distribution Account) transfer from
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the Collection Account to the Payahead Account all Payaheads as described in
Section 4.3 received by the Servicer during the Due Period. Notwithstanding the
foregoing, for so long as the Servicer is permitted to make monthly remittances
to the Collection Account pursuant to Section 3.2(c), Payaheads need not be
remitted to and deposited in the Payahead Account but instead may be remitted to
and held by the Servicer. So long as such condition is met, the Servicer shall
not be required to segregate or otherwise hold separate any Payaheads remitted
to the Servicer as aforesaid but shall be required to remit Payaheads to the
Collection Account in accordance with the first sentence of the third paragraph
of Section 4.5(a).
Section 4.2. [Intentionally omitted].
Section 4.3. Application of Collections.
(a) All collections for the Due Period shall be applied by the
Servicer as follows:
With respect to each Mortgage Loan (other than a Purchased
Mortgage Loan), payments by or on behalf of the Mortgagor shall be applied, in
the case of Actuarial Mortgage Loans, to the Scheduled Payment and, in the case
of Simple Interest Mortgage Loans, to interest and principal in accordance with
the Simple Interest Method. With respect to Actuarial Mortgage Loans, any
remaining excess shall be added to the Payahead Balance, and shall be applied to
prepay the Actuarial Mortgage Loan, but only if the sum of such excess and the
previous Payahead Balance shall be sufficient to prepay the Mortgage Loan in
full. Otherwise, any such remaining excess payments shall constitute a Payahead
and shall increase the Payahead Balance.
(b) All Liquidation Proceeds shall be applied to the related
Mortgage Loan in accordance with the Servicer's customary servicing procedures.
Section 4.4. Additional Deposits. The Servicer and the
Seller shall deposit or cause to be deposited in the Collection Account the
aggregate Purchase Price with respect to Purchased Mortgage Loans and the Seller
shall deposit therein all amounts to be paid under Section 8.1. The Servicer
will deposit the aggregate Purchase Price with respect to Purchased Mortgage
Loans within two Business Days after such obligations become due, unless the
Servicer shall not be required to make deposits within two Business Days of
receipt pursuant to section 3.2(c) (in which case such deposit will be made by
the related Transfer Date). All such other deposits shall be made on the
Transfer Date following the end of the related Due Period.
Section 4.5. Distributions. (a) On each Distribution
Date, the Trustee shall cause to be transferred from the Payahead Account, or
from the Servicer in the event the provisions of Section 4.1(d)(ii) are
applicable, to the Collection Account, in immediately available funds, the
aggregate previous Payaheads to be applied to Scheduled Payments on Actuarial
Mortgage Loans for the related Due Period or prepayments for the related Due
Period, pursuant to Sections 4.3 and 4.4, in the amounts set forth in the
Servicer's Certificate for such Distribution Date. A single, net transfer may be
made.
(b) On each Determination Date, the Servicer shall calculate
all amounts required to determine the amounts to be deposited from the Reserve
Account into the Collection
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Account and from the Collection Account into the Note Distribution Account and
the Certificate Distribution Account.
(c) On or before each Distribution Date, the Servicer shall
instruct the Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section
3.10) to withdraw from the Reserve Account and deposit in the Collection Account
and the Trustee shall so withdraw and deposit the Reserve Account Transfer
Amount for such Distribution Date.
(d) Subject to the last paragraph of this Section 4.5(c), on
each Distribution Date, the Servicer shall instruct the Trustee (based on the
information contained in the Servicer's Certificate delivered on the related
Determination Date pursuant to Section 3.10) to make, and the Trustee shall
make, the following deposits and distributions from the Collection Account for
deposit in the applicable Account by [TIME], to the extent of the Total
Distribution Amount, in the following order of priority:
(i) to the Servicer, from the Total Distribution Amount, the
Total Servicing Fee;
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Noteholders' Interest Distributable Amount;
(iii) to the Owner Trustee for deposit in the Certificate
Distribution Account, from the Total Distribution Amount remaining after the
application of clause (i) and clause (ii), the Certificateholders' Interest
Distributable Amount;
(iv) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iii), the Noteholders' Principal Distributable Amount; and
(v) to the Owner Trustee for deposit in the Certificate
Distribution Account, from the Total Distribution Amount remaining after the
application of clauses (i) through (iv), the Certificateholders' Principal
Distributable Amount;
provided, however, that following the occurrence of an Event of Default pursuant
to Section 5.1(i), 5.1(11), 5.1(iv) or 5.1(v) of the Indenture, an acceleration
of the Notes pursuant to Section 5.2 of the Indenture or an Insolvency Event
with respect to the holder of the GP Interest, amounts on deposit in the
Collection Account will be deposited in the Note Distribution Account to the
extent necessary to pay accrued and unpaid interest on the Notes and then, to
the extent funds are available therefore, principal on the Notes until the
principal balance of each class of Notes has been reduced to zero, before any
amounts are deposited in the Certificate Distribution Account. Following the
payment in full of the Notes, amounts on deposit in the Collection Account will
be deposited in the Certificate Distribution Account to the extent necessary to
pay accrued and unpaid interest on the Certificates and then, to the extent
funds are available therefore, principal on the Certificates until the principal
balance thereof has been reduced to zero.
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In the event that the Collection Account is maintained with an
institution other than the Trustee, the Servicer shall instruct and cause such
institution to make all deposits and distributions pursuant to this Section
4.5(c) on the related Transfer Date.
Section 4.6. Reserve Account. (a) On the Closing Date,
the Seller shall deposit the Reserve Account Initial Deposit into the Reserve
Account.
(b) If the amount on deposit in the Reserve Account on any
Distribution Date (after giving effect to any withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance for
such Distribution Date, the Servicer shall instruct the Trustee to distribute,
and the Trustee shall distribute, the amount of the excess to the Seller.
Amounts properly distributed to the Seller pursuant to Section
4.6(b) shall be deemed released from the Trust and the security interest therein
granted to the Trustee and the Seller shall in no event thereafter be required
to refund any such distributed amounts.
Section 4.7. [Intentionally Omitted].
Section 4.8. Statements to Certificateholder and
Noteholders. On each Determination Date, the Servicer shall provide to the
Trustee (with a copy to the Rating Agencies) for the Trustee to forward to each
Noteholder of record, to each Paying Agent, if any, and to the Owner Trustee for
the Owner Trustee to forward to each Certificateholder of record, a statement
substantially in the form of Exhibit B and Exhibit C, respectively, setting
forth at least the following information as to the Notes and the Certificates to
the extent applicable:
(i) the amount of such distribution allocable to principal
of each class of Notes and to the Certificate Balance of the Certificates;
(ii) the amount of such distribution allocable to interest
on or with respect to each class of Notes and to the Certificates;
(iii) the aggregate outstanding principal balance of each
class of the Notes and the Certificate Balance after giving effect to payments
allocated to principal reported under (i) above;
(iv) the amount of the Total Servicing Fee paid to the
Servicer with respect to the related Due Period;
(v) The amount of the Monthly Advances payment to be made
on the Determination Date;
(vi) the amount of the aggregate Realized Losses, if any,
for such Due Period;
(vii) the Reserve Account Transfer Amount, if any, for such
Distribution Date, the average of the Charge-off Rates and the Delinquency
Percentages for the three preceding Due Periods, the Specified Reserve Account
Balance for such Distribution Date, the amount distributed to the Seller from
the Reserve Account on such Distribution Date, and the balance of
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the Reserve Account (if any) on such Distribution Date, after giving effect to
changes therein on such Distribution Date;
(viii) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall, the Noteholders' Principal
Carryover Shortfall, and the Certificateholders' Principal Carryover Shortfall;
(ix) the amounts which are reimbursable to the Servicer for
Reimbursable Amounts and Nonrecoverable Advances;
(x) the amount of Servicing Advances for the preceding Due
Period; and
(xi) the aggregate Purchase Price paid by the Seller or the
Servicer with respect to the related Due Period.
Each amount set forth pursuant to paragraph (i), (ii), (vi) or (xi) above shall
be expressed as a dollar amount per $1,000 of the initial principal balance of
the Notes (or class thereof) or the initial Certificate Balance, as applicable.
Section 4.9. Net Deposits. As an administrative convenience,
unless the Servicer is required to remit collections within two Business Days of
receipt thereof, the Servicer will be permitted to make the deposit of
collections on the Mortgage Loans and Purchase Prices for or with respect to the
Due Period net of distributions to be made to the Servicer with respect to the
Due Period. The Servicer, however, will account to the owner Trustee, the
Trustee, the Noteholders and the Certificateholders as if all deposits,
distributions and transfers were made individually.
ARTICLE V
The Seller
Section 5.1. Representations of Seller. The Seller makes
the following representations on which the Issuer is deemed to have relied in
acquiring the Mortgage Loans. The representations speak as of the execution and
delivery of this Agreement and shall survive the sale of the Mortgage Loans to
the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller is duly
organized and validly existing as a corporation in good standing under the laws
of the [State of Organization] with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to acquire and own the Mortgage Loans.
(b) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
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(c) Power and Authority of the Seller. The Seller has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under each of the Basic Documents to which the Seller is
a party; the Seller has full corporate power and authority to sell and assign
the property to be sold and assigned to and deposited with the Issuer and the
Seller has duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of each
of the Basic Documents to which the Seller is a party has been duly authorized
by the Seller by all necessary corporate action.
(d) Binding Obligation. This Agreement and each of the Basic
Documents to which the Seller is a party constitute legal, valid and binding
obligations of the Seller, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in effect relating to
creditors' rights generally and subject to general principles of equity (whether
applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time or both) a default under, the articles of
association or by-laws of the Seller, or any material indenture, agreement or
other instrument to which the Seller is a party or by which it shall be bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or, to the
best of its knowledge, any order, rule or regulation applicable to the Seller of
any court or of any Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or its
properties.
(f) No Proceedings. There are no proceedings or investigations
pending against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Seller of its obligations under, or the
validity or enforceability of the Basic Documents, the Notes or the Certificates
or (iv) seeking to affect adversely the Federal or state income tax or ERISA
attributes of the Issuer, the Notes or the Certificates.
(g) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution and
delivery by the Seller of this Agreement or any of the Basic Documents to which
it is a party and the performance by the Seller of the transactions contemplated
by this Agreement or any of the Basic Documents to which it is a party, have
been duly obtained, effected or given and are in full force and effect, except
where failure to obtain the same would not have a material adverse effect upon
the rights of the Issuer, the Noteholders or the Certificateholders.
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Section 5.2. Corporate Existence. (a) During the term of
this Agreement, the Seller will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall
observe the applicable legal requirements for the recognition of the Seller as a
legal entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain corporate records and books
of account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Seller shall not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall hold such appropriate meetings of its
Board of Directors as are necessary to authorize all the Seller's corporate
actions required by law to be authorized by the Board of Directors, shall keep
minutes of such meetings and of meetings of its stockholder(s) and observe all
other customary corporate formalities (and any successor Seller not a
corporation shall observe similar procedures in accordance with its governing
documents and applicable law);
(iv) the Seller shall at all times hold itself out to the
public under the Seller's own name as a legal entity separate and distinct from
its Affiliates; and
(v) all transactions and dealings between the Seller and
its Affiliates will be conducted on an arm's-length basis.
Section 5.3. Liability of Seller; Indemnities. The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee and the Trustee and their respective officers,
directors, employees and agents from and against any taxes that may at any time
be asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the Basic Documents (except any income
taxes arising out of fees paid to the owner Trustee or the Trustee and except
any taxes to which the Owner Trustee or the Trustee may otherwise be subject
to), including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, and as of the date of, the sale of
the Mortgage Loans to the Owner Trustee on behalf of the Issuer or the issuance
and original sale of the Certificates and the Notes, or asserted with respect to
ownership of the Mortgage Loans or Federal or other income taxes arising out of
distributions on the Certificates and the Notes) and costs and expenses in
defending against the same or in connection with any application relating to the
Notes or Certificates under any state securities laws.
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(b) The Seller shall indemnify, defend and hold harmless
the Issuer, the owner Trustee, the Trustee, the Certificateholders and the
Noteholders and the officers, directors, employees and agents of the Issuer, the
Owner Trustee and the Trustee from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent arising out of, or imposed
upon such Person through (i) the Seller's willful misfeasance, bad faith or
negligence in the performance of its duties under this Agreement, or by reason
of reckless disregard of its obligations and duties under this Agreement and
(ii) the Seller's or the Issuer's violation of Federal or state securities laws
in connection with the offering and sale of the Notes and the Certificates or in
connection with any application relating to the Notes or Certificates under any
state securities laws.
(c) The Seller shall be liable as primary obligor for, and
shall indemnify, defend and hold harmless the Owner Trustee and its officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or incurred in
connection with, this Agreement or any of the Basic Documents, the owner Trust
Estate, the acceptance or performance of the trusts and duties set forth herein
and in the Trust Agreement or the action or the inaction of the Owner Trustee
hereunder and under the Trust Agreement, except to the extent that such cost,
expense, loss, claim, damage or liability: (i) shall be due to the willful
misfeasance, bad faith or negligence of the Owner Trustee; (ii) shall arise from
any breach by the Owner Trustee of its covenants under this Agreement or any of
the Basic Documents; or (iii) shall arise from the breach by the owner Trustee
of any of its representations or warranties set forth in Section 7.3 of the
Trust Agreement. Such liability shall survive the termination of the Trust. In
the event of any claim, action or proceeding for which indemnity will be sought
pursuant to this paragraph, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Seller, which approval shall not be unreasonably
withheld.
(d) The Seller shall pay any and all taxes levied or
assessed upon all or any part of the Trust Estate (other than those taxes
expressly excluded from the Seller's responsibilities pursuant to the
parentheticals in paragraph (a) above).
Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee or the Trustee and the termination
of this Agreement or the indenture or the Trust Agreement, as applicable, and
shall include reasonable fees and expenses of counsel and other expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
Section 5.4. Merger or Consolidation of, or Assumption of
the Obligations of Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, shall be the successor to the Seller
without the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that the Seller hereby covenants
that it will not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving Seller if other than [Name of
Seller], executes an agreement of assumption to perform every obligation of the
Seller under this Agreement, (ii) immediately after giving effect to such
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transaction, no representation or warranty made pursuant to Section 2.4 or 5.1
shall have been breached, (iii) the Seller shall have delivered to the Owner
Trustee and the Trustee an Officers' Certificate and an opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, and that the Rating Agency Condition shall have been satisfied with
respect to such transaction, (iv) the surviving Seller shall have a consolidated
net worth at least equal to that of the predecessor Seller, (v) such transaction
will not result in a material adverse federal or state tax consequence to the
issuer, the Noteholders or the Certificateholders and (vi) unless [Name of
Seller], is the surviving entity, the Seller shall have delivered to the Owner
Trustee and the Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and Trustee,
respectively, in the Mortgage Loans and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests.
Section 5.5. Limitation on Liability of Seller and Others.
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document (provided that such reliance shall not limit in
any way the Seller's obligations under Section 2.4(b)). The Seller shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.
Section 5.6. Seller May Own Certificates or Notes. The
Seller and any Affiliate thereof may in its individual or any other capacity
become the owner or pledgee of Certificates or Notes with the same rights as it
would have if it were not the Seller or an Affiliate thereof, except as
expressly provided herein or in any Basic Document.
ARTICLE VI
The Servicer
Section 6.1. Representations of Servicer. The Servicer
makes the following representations on which the Issuer is deemed to have relied
in acquiring the Mortgage Loans. The representations speak as of the execution
and delivery of the Agreement and shall survive the sale of the Mortgage Loans
to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly
organized and validly existing as a corporation in good standing under the laws
of the State of Delaware with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to service the Mortgage Loans.
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(b) Due Qualification. The Servicer is duly qualified to do
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of its
business (including the servicing of the Mortgage Loans as required by this
Agreement) shall require such qualifications.
(c) Power and Authority of the Servicer. The Servicer has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and performance
of this Agreement have been duly authorized by the Servicer by all necessary
corporate action. All authorizations, consents, orders or approvals of or
registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by the Servicer in connection with the execution and delivery by the
Servicer of this Agreement or any of the Basic Documents to which it is a party
and the performance by the Servicer of the transactions contemplated by this
Agreement or any of the Basic Documents to which it is a party, have been duly
obtained, effected or given and are in full force and effect, except where
failure to obtain the same would not have a material adverse effect upon the
rights of the Issuer, the Noteholders or the Certificateholders.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally, and subject to general principles of equity
(whether applied in a proceeding of law or in equity).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time or both) a default under the articles of
association or by-laws of the Servicer, or any material indenture, agreement or
other instrument to which the Servicer is a party or by which it shall be bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or, to the
best of its knowledge, any order, rule or regulation applicable to the Servicer
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Servicer or
its properties.
(f) No Proceedings. There are no proceedings or investigations
pending against the Servicer, or, to its best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Servicer of its obligations under, or
the validity or enforceability of this Agreement or any of the Basic Documents,
the Notes or the Certificates or (iv) seeking to affect adversely the Federal or
state income tax or ERISA attributes of the Issuer, the Notes or the
Certificates.
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(g) No Amendment or Waiver. No provision of any Mortgage Loan
has been waived, altered or modified in any respect, except pursuant to a
document, instrument or writing included in the relevant Mortgage File, and no
such amendment, waiver, alteration or modification causes such mortgage Loan not
to conform to the other warranties contained in this Section or those of the
Seller contained in Section 2.4.
Section 6.2. Indemnities of Servicer. (a) The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Seller, the Certificateholders and
the Noteholders and any of the officers, directors, employees and agents of the
issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of, or imposed upon any
such Person through, the negligence, willful misfeasance or bad faith of the
Servicer in the performance of its obligations and duties under this Agreement
or in the performance of the obligations and duties of any subservicer under any
subservicing agreement or by reason of the reckless disregard of its obligations
and duties under this Agreement or by reason of the reckless disregard of the
obligations of any subservicer under any subservicing agreement, where the final
determination that any such cost, expense, loss, claim, damage or liability
arose out of, or was imposed upon any such Person through, any such negligence,
willful misfeasance, bad faith or recklessness on the part of the Servicer or
any subservicer, is established by a court of law, by an arbitrator or by way of
settlement agreed to by the Servicer. Notwithstanding the foregoing, if the
Servicer is rendered unable, in whole or in part, by virtue of an act of God,
act of war, fires, earthquake or other natural disasters, to satisfy its
obligations under this Agreement, the Servicer shall not be deemed to have
breached any such obligation upon the sending of written notice of such event to
the other parties hereto, for so long as the Servicer remains unable to perform
such obligation as a result of such event. This provision shall not be construed
to limit the Servicer's or any other party's rights, obligations, liabilities,
claims or defenses which arise as a matter of law or pursuant to any other
provision of this Agreement.
The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Seller, the Certificateholders and
the Noteholders or any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of or imposed upon any
such Person as a result of any compensation payable to any subservicer
(including any fees payable in connection with the termination of the servicing
activities of such subservicer with respect to any mortgage Loan) whether
pursuant to the terms of any subservicing agreement or otherwise.
Section 6.3. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer. Any Person (a) into which the servicer may be
merged or consolidated, (b) which may result from any merger or consolidation to
which the Servicer shall be a party or (c) which may succeed to the properties
and assets of the servicer, substantially as a whole, shall be the successor to
the Servicer without the execution or filing of any document or any further act
by any of the parties to this Agreement; provided, however, that the Servicer
hereby covenants that
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it will not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving Servicer if other than Chevy
Chase Bank, F.S.B., executes an agreement of assumption to perform every
obligation of the Servicer under this Agreement, (ii) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 6.1 shall have been breached and no Servicer Default, and no event that,
after notice or lapse of time, or both, would become a Servicer Default shall
have occurred and be continuing, (iii) the Servicer shall have delivered to the
Owner Trustee and the Trustee an Officers' Certificate and an opinion of counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, and that the Rating Agency condition shall have been satisfied with
respect to such transaction, (iv) the surviving Servicer shall have a
consolidated net worth at least equal to that of the predecessor Servicer, and
(v) such transaction will not result in a material adverse Federal or state tax
consequence to the Issuer, the Noteholders or the Certificateholders.
Section 6.4. Limitation on Liability of Servicer and
Others. Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action by the Servicer or any
subservicer pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such person
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties under this Agreement. The
Servicer or any subservicer and any of their respective directors, officers,
employees or agents may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement.
Except as provided in this Agreement the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall be incidental to its duties to service the Mortgage Loans in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer, may (but shall not be required
to) undertake any reasonable action that it may deem necessary or desirable in
respect of the Basic Documents to protect the interests of the
Certificateholders under this Agreement and the Noteholders under the Indenture.
Section 6.5. Chevy Chase Bank, F.S.B. Not To Resign as
Servicer. Subject to the provisions of section 6.3, Chevy Chase Bank, F.S.B.,
hereby agrees not to resign from the obligations and duties hereby imposed on it
as Servicer under this Agreement except upon determination that the performance
of its duties hereunder shall no longer be permissible under applicable law or
if such resignation is required by regulatory authorities. Notice of any such
determination permitting the resignation of Chevy Chase Bank, F.S.B., as
Servicer shall be communicated to the Owner Trustee and the Trustee at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Owner Trustee and the Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until the earlier
of the Trustee or a Successor Servicer having
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assumed the responsibilities and obligations of the resigning Servicer in
accordance with Section 7.2 or the date upon which any regulatory authority
requires such resignation.
ARTICLE VII
Default
Section 7.1. Servicer Default. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver to the Trustee for
deposit in any of the Trust Accounts or the Certificate Distribution Account any
required payment or to direct the Trustee to make any required distributions
therefrom (other than a Monthly Advance required to be made from its own funds)
that shall continue unremedied for a period of five Business Days after written
notice of such failure is received by the Servicer from the Owner Trustee or the
Trustee or after discovery of such failure by an Authorized Officer of the
Servicer; or
(b) failure by the Servicer to make any required servicing
Advance which failure continues unremedied for a period of 30 days, or failure
on the part of the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement or any other Basic Document, which failure shall (i) materially and
adversely affect the rights of either the Certificateholders or Noteholders and
(ii) continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer by the Owner Trustee or the Trustee or (B) to the Servicer
and to the Owner Trustee and the Trustee by the Holders of Notes evidencing not
less than 25% of the outstanding Amount of the Notes or Holders of Certificates
evidencing not less than 25% of the outstanding Certificate Balance, as
applicable (or for such longer period, not in excess of 120 days, as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 120 days and the Servicer delivers an officers'
Certificate to the Owner Trustee and the Trustee to such effect and to the
effect that the Servicer has commenced or will promptly commence, and will
diligently pursue, all reasonable efforts to remedy such default); or
(c) any failure of the Servicer to pay any Monthly Advance
required to be made from its own funds pursuant to Section 3.15 that continues
unremedied for a period of one Business Day; or
(d) an Insolvency Event occurs with respect to the Servicer or
any successor;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Trustee, or the Holders of Notes evidencing not less
than 25% of the outstanding Amount of the Notes, by notice then given in writing
to the Servicer and the Owner Trustee (and to the Trustee if given by the
Noteholders) may terminate all the rights and obligations (other than the
obligations set forth in Section 6.2) of the Servicer under this Agreement. On
or after the receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Notes,
the Certificates or the Mortgage Loans or otherwise, shall, without further
action, pass to and be vested in the Trustee or such successor
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Servicer as may be appointed under Section 7.2; and, without limitation, the
Trustee and the Owner Trustee are hereby authorized and empowered to execute and
deliver, on behalf of the predecessor 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 the
Mortgage Loans and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Trustee and the Owner Trustee
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to a Mortgage Loan. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Mortgage Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid by
the predecessor Servicer upon presentation of reasonable documentation of such
costs and expenses. Upon receipt of notice of the occurrence of a Servicer
Default, the Owner Trustee shall give notice thereof to the Rating Agencies.
Section 7.2. Appointment of Successor. (a) Upon the
Servicer's receipt of notice of termination, pursuant to Section 7.1 or the
Servicer's resignation in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, in the case of termination, only until the date specified in
such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation, until
the earlier of (x) the date 45 days from the delivery to the Owner Trustee and
the Trustee of written notice of such resignation (or written confirmation of
such notice) in accordance with the terms of this Agreement and (y) the date
upon which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying opinion of Counsel. In
the event of the Servicer's termination hereunder, the Trustee shall appoint a
successor Servicer, and the successor Servicer shall accept its appointment by a
written assumption in form acceptable to the Owner Trustee and the Trustee. In
the event that a successor Servicer has not been appointed at the time when the
predecessor Servicer has ceased to act as Servicer in accordance with this
Section, the Trustee without further action shall automatically be appointed the
successor Servicer and the Trustee shall be entitled to the Servicing Fee.
Notwithstanding the above, the Trustee shall, if it shall be unwilling or unable
so to act, appoint or petition a court of competent jurisdiction to appoint, any
established institution, having a net worth of not less than $50,000,000 and
whose regular business shall include the servicing of Mortgage Loans and REO
Property, as the successor to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the
Trustee acting as successor servicer) shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer acid shall be entitled to the servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement. No successor Servicer shall be liable for any acts or omissions of
any predecessor Servicer.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law or by requirement of any regulatory authority.
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Section 7.3. Payment of Servicing Fee. If the Servicer
shall change, the predecessor servicer shall be entitled to receive any accrued
and unpaid Servicing Fees through the date of the successor Servicer's
acceptance hereunder in accordance with Section 3.9.
Section 7.4. Notification to Noteholders and
Certificateholders. Upon any termination of, or appointment of a successor to,
the Servicer pursuant to this Article VII, the Owner Trustee shall give prompt
written notice thereof to Certificateholders and the Trustee shall give prompt
written notice thereof to Noteholders subject to the Rating Agency Condition.
Section 7.5. Waiver of Past Defaults. The Holders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
(or the Holders (as defined in the Trust Agreement) of Certificates evidencing
not less than a majority of the outstanding Certificate Balance, as applicable,
in the case of any default which does not adversely affect the Trustee or the
Noteholders) may, on behalf of all Noteholders and Certificateholders, waive in
writing any default by the Servicer in the performance of its obligations
hereunder and its consequences, except a default in making any required deposits
to or payments from any of the Trust Accounts in accordance with this Agreement.
upon any such waiver of a past default, such default shall cease to exist, and
any Servicer Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto.
ARTICLE VIII
Termination
Section 8.1. Optional Purchase of All Mortgage Loans.
(a) On the last day of any Due Period immediately preceding
a Determination Date as of which the then outstanding Pool Balance is __% or
less of the Original Pool Balance, the Seller shall have the option to purchase
the Owner Trust Estate, other than the Trust Accounts and the Certificate
Distribution Account. To exercise such option, the Seller shall deposit pursuant
to Section 4.4 in the Collection Account an amount which, when added to the
amounts on deposit in the Collection Account for such Distribution Date, equals
the Sum of (a) the unpaid principal amount of the then outstanding Class A-__
Notes, plus accrued and unpaid interest thereon, plus (b) the Certificate
Balance plus accrued and unpaid interest thereon. The Class A-__ Notes and the
Certificates will be redeemed concurrently therewith.
(b) Upon any sale of the assets of the Trust pursuant to
Section 9.2 of the Trust Agreement, the Servicer shall instruct the Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency Proceeds")
in the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are not
so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Servicer shall instruct the Trustee to make, and
the Trustee shall make, the following deposits and distributions (after the
application on such Distribution Date of the Total Distribution Amount pursuant
to Section 4.5) from the Insolvency Proceeds and any funds remaining on deposit
in the Reserve Account (including the proceeds of any sale of investments
therein):
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(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding
principal balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits made in
the Note Distribution Account on such Distribution Date);
(iii) to the Owner Trustee for deposit in the Certificate
Distribution Account, any portion of the Certificateholders' Interest
Distributable Amount not otherwise deposited into the Certificate Distribution
Account on such Distribution Date; and
(iv) to the Owner Trustee for deposit in the Certificate
Distribution Account, the Certificate Balance and any Certificateholders'
Principal Carryover Shortfall Amount (after giving effect to the reduction in
the Certificate Balance to result from the deposits made in the Certificate
Distribution Account on such Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid to the GP Holder.
(c) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee, the Trustee and the Rating Agencies as soon
as practicable after the Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the
indenture and the payment in full of the principal of and interest on the Notes,
the Certificateholders will succeed to the rights of the Noteholders hereunder
and the Owner Trustee will succeed to the rights of, and assume the obligations
of, the Trustee pursuant to this Agreement.
ARTICLE IX
Administrative Duties of the Servicer
Section 9.1. Administrative Duties.
(a) Duties with Respect to the Indenture and Depository
Agreements. The Servicer shall perform all its duties and the duties of the
Issuer under the Depository Agreements. In addition, the Servicer shall consult
with the Owner Trustee as the Servicer deems appropriate regarding the duties of
the Issuer under the Indenture and the Depository Agreements. The 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 and
the Depository Agreements. The 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
and the Depository Agreements. In furtherance of the foregoing, the Servicer
shall take all appropriate action that is the duty of the Issuer to take
pursuant to the Indenture.
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(b) Duties with Respect to the Issuer. (i) In addition to
the duties of the Servicer set forth in this Agreement or any of the Basic
Documents, the 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 Agreement or any of the
Basic Documents, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take pursuant to this
Agreement or any of the Basic Documents. Subject to Section 9.4, and in
accordance with the directions of the owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities in
connection with the Collateral (including the Basic Documents) as are not
covered by any of the foregoing provisions and as are expressly requested by the
Owner Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of
the Basic Documents to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee 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 5.2(c) of the Trust
Agreement. Any such notice shall specify the amount of any withholding tax
required to be withheld by the owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for performance of
the duties of the Owner Trustee and the holder of the GP Interest set forth in
Section 5.6(a), (b), (c) and (d) of the Trust Agreement with respect to, among
other things, accounting and reports to Owners (as defined in the Trust
Agreement); provided, however, that the Owner Trustee shall retain
responsibility for the distribution of the Schedule K-Is necessary to enable
each Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Servicer under this Agreement
or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the 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 Servicer's opinion, no
less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on
behalf of the holder of the GP Interest, all tax returns, tax elections,
financial statements and such annual or other reports of the Issuer as are
necessary for preparation of tax reports as provided in Article V of the Trust
Agreement, including without limitation forms 1099 and 1066. All tax returns
will be signed by the holder of the GP Interest.
(d) Non-Ministerial Matters. With respect to matters that
in the reasonable judgment of the Servicer are non-ministerial, the Servicer
shall not take any action pursuant to
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this Article X unless within a reasonable time before the taking of such action,
the Servicer shall have notified the Owner Trustee and the Trustee of the
proposed action and the Owner Trustee and, with respect to items (A), (B), (C)
and (D) below, the 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;
(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 Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of Successor Servicer or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture; and
(E) the removal of the Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Basic
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders or Certificateholders
under the Basic Documents, (2) sell the Indenture Trust Estate pursuant to
Section 5.4 of the Indenture, (3) take any other action that the Issuer directs
the Servicer not to take on its behalf or (4) in connection with its duties
hereunder assume any indemnification obligation of any other Person.
Section 9.2. Records. The Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for inspection
by the Issuer at any time during normal business hours.
Section 9.3. Additional Information To Be Furnished to the
Issuer. The Servicer shall furnish to the Issuer from time to time such
additional information regarding the Collateral as the Issuer shall reasonably
request.
ARTICLE X
Miscellaneous Provisions
Section 10.1. Amendment. This Agreement may be amended by the
Seller, the Servicer and the Owner Trustee, with the consent of the Trustee
(which consent may not be unreasonably withheld), but without the consent of any
of the Noteholders or the Certificateholders, to cure any ambiguity or defect,
to correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of
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the Noteholders or the Certificateholders; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee
and the Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the
Seller, the Servicer and the Owner Trustee, with the consent of the Trustee, the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and the consent of the Holders (as defined in
the Trust Agreement) of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Mortgage Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance, the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes and the Holders
(as defined in the Trust Agreement) of all the outstanding Certificates of each
class affected thereby.
Prior to the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to the Rating Agencies. Promptly after the execution of any
such amendment or consent, the Owner Trustee shall furnish written notification
of the substance of such amendment or consent to each Certificateholder and the
Trustee.
It shall not be necessary for the consent of
Certificateholders or Noteholders pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Owner Trustee and the Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and that all conditions precedent to the execution
and delivery of such amendment have been satisfied and the Opinion of Counsel
referred to in Section 10.2(i)(1) has been delivered. The owner Trustee and the
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's or the Trustee's, as applicable, own rights, duties
or immunities under this Agreement or otherwise.
Section 10.2. Protection of Title to Trust. (a) The Seller
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as may
be required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Trustee in the Mortgage Loans and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Owner Trustee and the Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
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(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given the owner Trustee and the Trustee at
least five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Seller and the Servicer shall have an
obligation to give the owner Trustee and the Trustee at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment. The Servicer shall at all times maintain each office from which it
shall service Mortgage Loans, and its principal executive office, within the
United States of America.
(d) The Servicer shall maintain accounts and records as to
each mortgage Loan accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Mortgage Loan, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Mortgage Loan and the amounts from time to time deposited in the Collection
Account in respect of such Mortgage Loan.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Mortgage Loans, the
Servicer's master computer records (including any backup archives) that refer to
a Mortgage Loan shall indicate clearly the interest of the Issuer and the
Trustee in such Mortgage Loan and that such Mortgage Loan is owned by the Issuer
and has been pledged to the Trustee. Indication of the Issuer's and the
Trustee's interest in a Mortgage Loan shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Mortgage Loan shall
have been paid in full or repurchased by the Seller or purchased by the
Servicer.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in
mortgage loans to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Mortgage
Loan, shall indicate clearly that such mortgage Loan has been sold and is owned
by the Issuer and has been pledged to the Trustee.
(g) The Servicer shall permit the Trustee and its agents at
any time during normal business hours to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Mortgage Loan.
(h) Upon request at any time the Owner Trustee or the Trustee
shall have reasonable grounds to believe that such request is necessary in
connection with the performance of its duties under this Agreement or any of the
Basic Documents, the Servicer shall furnish to the Owner Trustee or to the
Trustee, within five Business Days, a list of all Mortgage Loans (by
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contract number and name of mortgagor) then held as part of the Trust, together
with a reconciliation of such list to the Mortgage Loan Schedule and to each of
the Servicer's Certificates furnished before such request indicating removal of
Mortgage Loans from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the
Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment thereto, an opinion of Counsel either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Trustee in the
Mortgage Loans, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cutoff Date, an Opinion of Counsel, dated as of a date during such 120-day
period, either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Trustee in the Mortgage Loans, and reciting the details of such filings or
referring to prior opinions of Counsel in which such details are given, or (B)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable
law, cause the Certificates and the Notes to be registered with the Commission
pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time
periods specified in such sections.
Section 10.3. Notices. All demands, notices and
communications upon or to the Seller, the Servicer, the Owner Trustee, the
Trustee or the Rating Agencies under this Agreement shall be in writing,
personally delivered, sent by overnight courier or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Servicer to Chevy Chase Bank, F.S.B., 0000
Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention __________________, (b) in
the case of the Seller to [Name of Seller], [Address of Seller], Attention
__________________, telecopy ____________, (c) in the case of the Issuer or the
Owner Trustee, at the Corporate Trust Office (as defined in the Trust
Agreement), (d) in the case of the Trustee, at the Corporate Trust Office, (e)
in the case of Moody's, to Xxxxx'x Investors Service, Inc., to 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Securities Group, (f) in the
case of Standard & Poor's, to Standard & Poor's Ratings Group, 00 Xxxxxxxx (00xx
Xxxxx), Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Surveillance
Department and (g) in the case of Fitch, to Fitch Investors Service, L.P., Xxx
Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention of _________.]
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Section 10.4. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.4 and 6.3 and as
provided in the provisions of this Agreement concerning the resignation of the
Servicer, this Agreement may not be assigned by the Seller or the Servicer.
Section 10.5. Limitations on Rights of Others. The
provisions of this Agreement are solely for the benefit of the Seller, the
Servicer, the Issuer, the Owner Trustee and for the benefit of the
Certificateholders (including the holder of the GP Interest), the Trustee and
the Noteholders' as third party beneficiaries, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Owner Trust Estate or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 10.6. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 10.7. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 10.8. Headings. The headings of the various
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
Section 10.9. Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [NEW YORK], WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 10.10. Assignment to Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Trustee pursuant to the Indenture for the
benefit of the Noteholders of all right, title and interest of the Issuer in, to
and under the Mortgage Loans and/or the assignment of any or all of the Issuer's
rights and obligations hereunder to the Trustee.
Section 10.11. Nonpetition Covenant. Notwithstanding any
prior termination of this Agreement, the Servicer and the Seller shall not,
prior to the date which is one year and one day after the termination of this
Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
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Section 10.12. Limitation of Liability of Owner Trustee and
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by [Name of Owner Trustee] not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall [Name of Owner Trustee] in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by _________________ not in its individual
capacity but solely as Trustee and in no event shall ___________________ have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
Section 10.13. Independence of the Servicer. For all
purposes of this Agreement, the Servicer shall be an independent contractor and
shall not be subject to the supervision of the Issuer or the Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the Servicer
shall have no authority to act for or represent the Issuer or the Owner Trustee
in any way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
Section 10.14. No Joint Venture. Nothing contained in this
Agreement (i) shall constitute the Servicer and either of the Issuer or the
Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
CHEVY CHASE HOME LOAN TRUST 20____ - __
By:
-----------------------------------------
not in its individual capacity but solely
as Owner Trustee on behalf of the Trust,
By:
-----------------------------------------
Name:
Title:
CHEVY CHASE BANK, F.S.B., Servicer
By:
-----------------------------------------
Name:
Title:
[Name of Seller], Seller
By:
-----------------------------------------
Name:
Title:
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