EXECUTION COPY
RESIDENTIAL FUNDING CORPORATION,
as Master Servicer
HOME EQUITY LOAN TRUST 2002-HS3,
as Issuer
and
JPMORGAN CHASE BANK
as Indenture Trustee
SERVICING AGREEMENT
Dated as of September 27, 2002
Home Equity Loans
TABLE OF CONTENTS
PAGE
ARTICLE I Definitions...............................................................1
Section 1.01 Definitions.........................................................1
Section 1.02 Other Definitional Provisions.......................................1
Section 1.03 Interest Calculations; Servicing Fee................................2
ARTICLE II Representations and Warranties............................................2
Section 2.01 Representations and Warranties Regarding the Master Servicer........2
Section 2.02 Representations and Warranties of the Issuer........................3
Section 2.03 Enforcement of Representations and Warranties.......................4
ARTICLE III Administration and Servicing of Home Equity Loans.........................5
Section 3.01 The Master Servicer.................................................5
Section 3.02 Collection of Certain Home Equity Loan Payments....................10
Section 3.03 Permitted Withdrawals from the Custodial Account...................13
Section 3.04 Maintenance of Hazard Insurance; Property Protection Expenses......14
Section 3.05 Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements; Release or Substitution of Lien....................15
Section 3.06 Trust Estate; Related Documents....................................18
Section 3.07 Realization Upon Defaulted Home Equity Loans; Loss Mitigation......18
Section 3.08 Issuer and Indenture Trustee to Cooperate..........................22
Section 3.09 Servicing Compensation; Payment of Certain Expenses by
Master.......23
Section 3.10 Annual Statement as to Compliance..................................23
Section 3.11 Annual Servicing Report............................................23
Section 3.12 Access to Certain Documentation and Information Regarding the
Home Equity Loans...........................................................24
Section 3.13 Maintenance of Certain Servicing Insurance Policies................24
Section 3.14 Information Required by the Internal Revenue Service and
Reports of Foreclosures and Abandonments of Mortgaged Property..............24
Section 3.15 Optional Repurchase or Transfer of Home Equity Loans...............25
ARTICLE IV Servicing Certificate....................................................26
Section 4.01 Statements to Securityholders......................................26
Section 4.02 Tax Reporting......................................................29
ARTICLE V Payment Account..........................................................29
Section 5.01 Payment Account....................................................29
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ARTICLE VI The Master Servicer......................................................30
Section 6.01 Liability of the Master Servicer...................................30
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Master Servicer.....................................................30
Section 6.03 Limitation on Liability of the Master Servicer and Others..........30
Section 6.04 Master Servicer Not to Resign......................................31
Section 6.05 Delegation of Duties...............................................31
Section 6.06 Master Servicer to Pay Indenture Trustee's and Owner Trustee's
Fees and Expenses; Indemnification..........................................32
ARTICLE VII Default..................................................................33
Section 7.01 Servicing Default..................................................33
Section 7.02 Indenture Trustee to Act; Appointment of Successor.................35
Section 7.03 Notification to Securityholders....................................36
ARTICLE VIII Miscellaneous Provisions.................................................37
Section 8.01 Amendment..........................................................37
Section 8.02 GOVERNING LAW......................................................37
Section 8.03 Notices............................................................37
Section 8.04 Severability of Provisions.........................................38
Section 8.05 Third-Party Beneficiaries..........................................38
Section 8.06 Counterparts.......................................................38
Section 8.07 Effect of Headings and Table of Contents...........................38
Section 8.08 Termination Upon Purchase by the Master Servicer or
Liquidation of Home Equity Loans............................................38
Section 8.09 Certain Matters Affecting the Indenture Trustee....................39
Section 8.10 Owner Trustee Not Liable for Related Documents.....................39
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EXHIBITS
Exhibit A Home Equity Loan Schedule..............................................A-1
Exhibit B Limited Power of Attorney..............................................B-1
Exhibit C Form of Request for Release............................................C-1
Exhibit D Form of Lender Certification for Assignment
of Home Equity Loan....................................................D-1
Exhibit E Form 10-K Certification................................................E-1
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This Servicing Agreement, dated as of September 27, 2002, among
Residential Funding Corporation (the "Master Servicer"), the Home Equity Loan
Trust 2002-HS3 (the "Issuer"), and JPMorgan Chase Bank (the "Indenture
Trustee").
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, pursuant to the terms of the Purchase Agreement.
Residential Funding Corporation (in its capacity as Seller) will sell to the
Depositor the Group I Loans and Group II Loans together with the Related
Documents on the Closing Date and thereafter all Additional Balances on the
Group II Loans created on or after the Cut-off Date (except as set forth
herein);
WHEREAS, the Depositor will sell the Group I Loans and Group II
Loans and all of its rights under the Purchase Agreement to the Issuer, together
with the Related Documents on the Closing Date, and thereafter all Additional
Balances on the Group II Loans created on or after the Cut-off Date (except as
set forth herein);
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will issue and transfer to or at the direction of the Depositor, the
Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue and
transfer to or at the direction of the Depositor, the Notes; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Master Servicer will service the Home Equity Loans directly or through one or
more Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. For all purposes of this Servicing Agreement, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions contained in Appendix A to the Indenture dated
the date hereof (the "Indenture"), between the Issuer and JPMorgan Chase Bank,
as indenture trustee, which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1.02 OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in this
Servicing Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used in this Servicing Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Servicing Agreement or in any such certificate or other document, and
accounting terms partly defined in this Servicing Agreement or in any such
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certificate or other document, to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import when
used in this Servicing Agreement shall refer to this Servicing Agreement as a
whole and not to any particular provision of this Servicing Agreement; Section
and Exhibit references contained in this Servicing Agreement are references to
Sections and Exhibits in or to this Servicing Agreement unless otherwise
specified; the term "including" shall mean "including without limitation"; and
the term "proceeds" shall have the meaning ascribed thereto in the UCC.
(d) The definitions contained in this Servicing Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time amended, modified or supplemented and
includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
Section 1.03 INTEREST CALCULATIONS; SERVICING FEE. All calculations of interest
hereunder that are made in respect of the Loan Balance of a Home Equity Loan
shall be made in accordance with the method of calculation set forth in the
related Mortgage Note. All calculations of interest on the Class I Notes (other
than the Class A-I-1 Notes) shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest on the Class
A-I-1 and the Class II Notes shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest xxxxx with one-half of one xxxxx being rounded
up.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER SERVICER. The
Master Servicer represents and warrants to the Issuer and for the benefit of the
Indenture Trustee, as pledgee of the Home Equity Loans, as of the Closing Date:
(a) The Master Servicer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power to own its assets and to transact the business in which it is currently
engaged. The Master Servicer is duly qualified to do business as a foreign
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corporation and is in good standing in each jurisdiction in which the character
of the business transacted by it or properties owned or leased by it requires
such qualification and in which the failure to so qualify would have a material
adverse effect on the business, properties, assets, or condition (financial or
other) of the Master Servicer;
(b) The Master Servicer has the power and authority to make, execute, deliver
and perform this Servicing Agreement and all of the transactions contemplated
under this Servicing Agreement, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Servicing Agreement.
When executed and delivered, this Servicing Agreement will constitute the legal,
valid and binding obligation of the Master Servicer enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(c) The Master Servicer is not required to obtain the consent of any other
Person or any consent, license, approval or authorization from, or registration
or declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been obtained or
filed, as the case may be;
(d) The execution and delivery of this Servicing Agreement and the performance
of the transactions contemplated hereby by the Master Servicer will not violate
any provision of any existing law or regulation or any order or decree of any
court applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound;
(e) No litigation or administrative proceeding of or before any court, tribunal
or governmental body is currently pending, or to the knowledge of the Master
Servicer threatened, against the Master Servicer or any of its properties or
with respect to this Servicing Agreement or the Securities which in the opinion
of the Master Servicer has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Servicing Agreement; and
(f) the Master Servicer is a member of MERS in good standing, and will comply in
all material respects with the rules and procedures of MERS in connection with
the servicing of the Home Equity Loans that are registered with MERS.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
Section 2.02 REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby
represents and warrants to the Master Servicer and for the benefit of the
Indenture Trustee, as pledgee of the Home Equity Loans, as of the Closing Date:
(a) The Issuer is a statutory trust duly formed and in good standing under the
laws of the State of Delaware and has full power, authority and legal right to
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execute and deliver this Servicing Agreement and to perform its obligations
under this Servicing Agreement, and has taken all necessary action to authorize
the execution, delivery and performance by it of this Servicing Agreement; and
(b) The execution and delivery by the Issuer of this Servicing Agreement and the
performance by the Issuer of its obligations under this Servicing Agreement will
not violate any provision of any law or regulation governing the Issuer or any
order, writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Issuer or any of its assets. Such
execution, delivery and performance will not require the consent or approval of,
the giving of notice to, the filing or registration with, or the taking of any
action, other than such actions that have already been taken, with respect to,
any governmental authority or agency regulating the activities of limited
liability companies. Such execution, delivery, authentication and performance
will not conflict with, or result in a breach or violation of, any mortgage,
deed of trust, lease or other agreement or instrument to which the Issuer is
bound.
Section 2.03 ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. The Master Servicer,
on behalf of and subject to the direction of the Indenture Trustee, as pledgee
of the Home Equity Loans, or the Issuer, shall enforce the representations and
warranties of the Seller pursuant to the Purchase Agreement. Upon the discovery
by the Seller, the Depositor, the Master Servicer, the Indenture Trustee, the
Credit Enhancer, the Issuer, or any Custodian of a breach of any of the
representations and warranties made in the Purchase Agreement, in respect of any
Home Equity Loan, which materially and adversely affects the interests of the
Securityholders or the Credit Enhancer in that Home Equity Loan, the party
discovering such breach shall give prompt written notice to the other parties
(any Custodian being so obligated under a Custodial Agreement); provided that in
the event of a breach of representation set forth in Section 3.1(b)(xxv) of the
Purchase Agreement, notice shall be given within five days of discovery. The
Master Servicer shall promptly notify the Seller of such breach and request
that, pursuant to the terms of the Purchase Agreement, the Seller either (i)
cure such breach in all material respects within 45 days (with respect to a
breach of the representations and warranties contained in Section 3.1(a) of the
Purchase Agreement) or 90 days (with respect to a breach of the representations
and warranties contained in Section 3.1(b) and 3.1(c) of the Purchase Agreement)
from the date the Seller was notified of such breach or, in the case of a breach
of the representation set forth in Section 3.1(b)(xxv) of the Purchase
Agreement, within 90 days after the discovery thereof by the Seller, the
Depositor, the Master Servicer, the Indenture Trustee, the Credit Enhancer, the
Issuer or the Purchaser or (ii) purchase such Home Equity Loan from the Issuer
at the price, during the time, and in the manner set forth in Section 3.1(d) of
the Purchase Agreement; provided that the Seller shall, subject to compliance
with all the conditions set forth in the Purchase Agreement, have the option to
substitute an Eligible Substitute Loan or Loans for such Home Equity Loan,
provided that in the case of the substitution of a Group I Loan, such
substitution occurs within two years following the Closing Date. In the event
that the Seller elects to substitute one or more Eligible Substitute Loans
pursuant to Section 3.1(b) or 3.1(c) of the Purchase Agreement, the Seller shall
deliver to the Issuer with respect to such Eligible Substitute Loans, the
original Loan Agreement, the Mortgage, and such other documents and agreements
as are required by the Purchase Agreement. Payments due with respect to Eligible
Substitute Loans in the month of substitution shall not be transferred to the
Issuer and will be retained by the Master Servicer and remitted by the Master
Servicer to the Seller on the next succeeding Payment Date provided a payment at
least equal to the applicable Minimum Monthly Payment has been received by the
Issuer for such month in respect of the Home Equity Loan to be removed. The
Master Servicer shall amend or cause to be amended the Home Equity Loan Schedule
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to reflect the removal of such Home Equity Loan and the substitution of the
Eligible Substitute Loans and the Master Servicer shall promptly deliver the
amended Home Equity Loan Schedule to the Owner Trustee and the Indenture
Trustee.
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such Home Equity Loan as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and the Indenture Trustee, as
pledgee of the Home Equity Loans, against the Seller. In connection with the
purchase of or substitution for any such Home Equity Loan by the Seller, the
Issuer shall assign to the Seller all of its right, title and interest in
respect of the Purchase Agreement applicable to such Home Equity Loan. Upon
receipt of the Repurchase Price, or upon completion of such substitution, the
Master Servicer shall notify the Custodian and then the Custodian shall deliver
the Mortgage Files to the Master Servicer, together with all relevant
endorsements and assignments prepared by the Master Servicer which the Indenture
Trustee shall execute.
ARTICLE III
ADMINISTRATION AND SERVICING OF HOME EQUITY LOANS
Section 3.01 THE MASTER SERVICER.
(a) The Master Servicer shall service and administer the Home Equity Loans in a
manner generally consistent with the terms of the Program Guide and in a manner
consistent with the terms of this Servicing Agreement, following such procedures
as it would employ in its good faith business judgment and which are normal and
usual in its general mortgage servicing activities, and shall have full power
and authority, acting alone or through a Subservicer, to do any and all things
which it may deem necessary or desirable in connection with such servicing and
administration, it being understood, however, that the Master Servicer shall at
all times remain responsible to the Issuer and the Indenture Trustee, as pledgee
of the Home Equity Loans, for the performance of its duties and obligations
hereunder in accordance with the terms hereof and the Program Guide. In
addition, the Master Servicer shall perform the obligations of the Master
Servicer and REMIC Administrator (for so long as the Master Servicer is the
REMIC Administrator) set forth in the Indenture and the Trust Agreement.
Without limiting the generality of the foregoing, the Master Servicer
shall continue, and is hereby authorized and empowered by the Issuer and the
Indenture Trustee, as pledgee of the Home Equity Loans, to execute and deliver,
on behalf of itself, the Issuer, the Indenture Trustee or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release,
or discharge, or of consent to assumption or modification in connection with a
proposed conveyance, or of assignment of any Mortgage and Mortgage Note in
connection with the repurchase of a Home Equity Loan and all other comparable
instruments, or with respect to the modification or re-recording of a Mortgage
for the purpose of correcting the Mortgage, the subordination of the lien, as
permitted pursuant to this Agreement, of the Mortgage in favor of a public
utility company or government agency or unit with powers of eminent domain, the
taking of a deed in lieu of foreclosure, the commencement, prosecution or
completion of judicial or non-judicial foreclosure, the conveyance of a
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Mortgaged Property to the related insurer, the acquisition of any property
acquired by foreclosure or deed in lieu of foreclosure, or the management,
marketing and conveyance of any property acquired by foreclosure or deed in lieu
of foreclosure with respect to the Home Equity Loans and with respect to the
Mortgaged Properties.
The Issuer, the Indenture Trustee and the Custodian, as applicable,
shall furnish the Master Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties hereunder. On the Closing Date, the
Indenture Trustee shall deliver to the Master Servicer a limited power of
attorney substantially in the form of Exhibit B hereto. In connection with
servicing and administering the Home Equity Loans, the Master Servicer and any
Affiliate of the Master Servicer may perform services such as appraisals and
brokerage services that are not customarily provided by servicers of mortgage
loans, and shall be entitled to reasonable compensation therefor in accordance
with Section 3.03. In addition, the Master Servicer may, at its own discretion
and on behalf of the Indenture Trustee, obtain credit information in the form of
a Credit Score from a credit repository. The Master Servicer is further
authorized and empowered by the Issuer and the Indenture Trustee, on behalf of
the Noteholders and the Indenture Trustee, in its own name or in the name of the
Subservicer, when the Master Servicer or the Subservicer, as the case may be,
believes it appropriate in its best judgment to register any Home Equity Loan on
the MERS(R) System, or cause the removal from the registration of any Home
Equity Loan on the MERS(R) System, to execute and deliver, on behalf of the
Indenture Trustee and the Noteholders or any of them, any and all instruments of
assignment and other comparable instruments with respect to such assignment or
re-recording of a Mortgage in the name of MERS, solely as nominee for the
Indenture Trustee and its successors and assigns. Any expenses incurred in
connection with the actions described in the preceding sentence shall be borne
by the Master Servicer, with no right of reimbursement.
Notwithstanding the foregoing, subject to Section 3.02(a), the Master
Servicer shall not permit any modification with respect to any Group I Loan that
would both constitute a sale or exchange of such Group I Loan within the meaning
of Section 1001 of the Code and any proposed, temporary or final regulations
promulgated thereunder and cause any of REMIC I, REMIC II or REMIC III to fail
to qualify as a REMIC under the Code or, except as provided in Section 11.01(f)
of the Indenture, cause the imposition of a tax upon any of the REMICs
(including but not limited to the tax on prohibited transactions as defined in
Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth
in Section 860G(d) of the Code).
(b) If the Mortgage relating to a Home Equity Loan did not have a lien senior to
the Home Equity Loan on the related Mortgaged Property as of the Cut-off Date,
then the Master Servicer, in such capacity, may not consent to the placing of a
lien senior to that of the Mortgage on the related Mortgaged Property. If the
Mortgage relating to a Group II Loan had a lien senior to the Group II Loan on
the related Mortgaged Property as of the Cut-off Date, then the Master Servicer,
in such capacity, may consent to the refinancing of the prior senior lien,
provided that the following requirements are met:
(i) (A) the Mortgagor's debt-to-income ratio resulting from such refinancing is
less than the original debt-to-income ratio as set forth on the Home Equity Loan
Schedule; provided, however, that in no instance shall the resulting Combined
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Loan-to-Value Ratio of such Home Equity Loan be higher than that permitted by
the Program Guide; or (B) the resulting Combined Loan-to-Value Ratio of such
Group II Loan is no higher than the Combined Loan-to-Value Ratio prior to such
refinancing; provided, however, if such refinanced mortgage loan is a "rate and
term" mortgage loan (meaning, the Mortgagor does not receive any cash from the
refinancing), the Combined Loan-to-Value Ratio may increase to the extent of
either (a) the reasonable closing costs of such refinancing or (b) any decrease
in the value of the related Mortgaged Property, if the Mortgagor is in good
standing as defined by the Program Guide;
(ii) the interest rate, or, in the case of an adjustable rate existing senior
lien, the maximum interest rate, for the loan evidencing the refinanced senior
lien is no more than 2.0% higher than the interest rate or the maximum interest
rate, as the case may be, on the loan evidencing the existing senior lien
immediately prior to the date of such refinancing; provided, however, (a) if the
loan evidencing the existing senior lien prior to the date of refinancing has an
adjustable rate and the loan evidencing the refinanced senior lien has a fixed
rate, then the current interest rate on the loan evidencing the refinanced
senior lien may be up to 2.0% higher than the then-current loan rate of the loan
evidencing the existing senior lien and (b) if the loan evidencing the existing
senior lien prior to the date of refinancing has a fixed rate and the loan
evidencing the refinanced senior lien has an adjustable rate, then the maximum
interest rate on the loan evidencing the refinanced senior lien shall be less
than or equal to (x) the interest rate on the loan evidencing the existing
senior lien prior to the date of refinancing plus (y) 2.0%; and
(iii) the loan evidencing the refinanced senior lien is not subject to negative
amortization.
The Master Servicer may also, without prior approval of the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on the Group II
Loans (a "Credit Limit Increase"), provided that (i) a new appraisal is
obtained, (ii) the new Combined Loan-to-Value Ratio of any such Group II Loan
after giving effect to such increase is less than or equal to the Combined
Loan-to-Value Ratio of the Group II Loan as of the Cut-off Date, (iii) the
Master Servicer receives verbal verification of employment of the related
Mortgagor and (iv) the payment history of the related Mortgagor is within the
underwriting parameters of the Program Guide. In addition, the Master Servicer
may increase the Credit Limits on Group II Loans without obtaining new
appraisals provided that clauses (iii) and (iv) of the preceding sentence are
satisfied, the Combined Loan-to-Value Ratio of the Group II Loan following the
Credit Limit Increase will be limited to 100% and at no time shall the aggregate
Loan Balance of such Group II Loans exceed 5% of the current Pool Balance for
the Group II Loans; provided, further, however, that for Group II Loans with
original Combined Loan-to-Value Ratios in excess of 80%, the Combined
Loan-to-Value Ratio resulting from such Credit Limit Increase must be less than
or equal to the original Combined Loan-to-Value Ratio and at no time shall the
aggregate Loan Balance of such Group II Loans exceed 5% of the current Pool
Balance for the Group II Loans.
In connection with servicing the Group II Loans, the Master Servicer may
take reasonable actions to encourage or effect the termination of Loan
Agreements that have become dormant.
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The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Servicing Agreement) to the Issuer under
this Servicing Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
All costs incurred by the Master Servicer or by Subservicers in
effecting the timely payment of taxes and assessments on the properties subject
to the Home Equity Loans shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
related Home Equity Loans, notwithstanding that the terms of such Home Equity
Loan so permit, and such costs shall be recoverable to the extent permitted by
Section 3.03.
(c) The Master Servicer may enter into Subservicing Agreements with Subservicers
for the servicing and administration of certain of the Home Equity Loans. Any
Subservicing Agreement that may be entered into and any other transactions or
services relating to the Home Equity Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Master Servicer alone and the Indenture Trustee and
Securityholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer in
its capacity as such except as set forth in Section 7.02. Each Subservicer of a
Home Equity Loan shall be entitled to receive and retain, as provided in the
related Subservicing Agreement and in Section 3.02, the related Subservicing Fee
from payments of interest received on such Home Equity Loan after payment of all
amounts required to be remitted to the Master Servicer in respect of such Home
Equity Loan. For any Home Equity Loan that is a nonsubserviced Home Equity Loan,
the Master Servicer shall be entitled to receive and retain an amount equal to
the Subservicing Fee from payments of interest. References in this Servicing
Agreement to actions taken or to be taken by the Master Servicer in servicing
the Home Equity Loans include actions taken or to be taken by a Subservicer on
behalf of the Master Servicer and any amount actually received by such
Subservicer in respect of a Home Equity Loan shall be deemed to have been
received by the Master Servicer whether or not actually received by the Master
Servicer. Each Subservicing Agreement will be upon such terms and conditions as
are not inconsistent with this Servicing Agreement and as the Master Servicer
and the Subservicer have agreed. With the approval of the Master Servicer, a
Subservicer may delegate its servicing obligations to third-party servicers, but
such Subservicers will remain obligated under the related Subservicing
Agreements. The Master Servicer and the Subservicer may enter into amendments to
the related Subservicing Agreements; provided, however, that any such amendments
shall not cause the Home Equity Loans to be serviced in a manner that would be
materially inconsistent with the standards set forth in this Servicing
Agreement. The Master Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions thereof and without any
limitation by virtue of this Servicing Agreement; provided, however, that in the
event of termination of any Subservicing Agreement by the Master Servicer or the
Subservicer, the Master Servicer shall either act as servicer of the related
Home Equity Loan or enter into a Subservicing Agreement with a successor
Subservicer which will be bound by the terms of the related Subservicing
Agreement. If the Master Servicer or any Affiliate of Residential Funding acts
as servicer, it will not assume liability for the representations and warranties
of the Subservicer which it replaces. If the Master Servicer enters into a
Subservicing Agreement with a successor Subservicer, the Master Servicer shall
use reasonable efforts to have the successor Subservicer assume liability for
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the representations and warranties made by the terminated Subservicer in respect
of the related Home Equity Loans and, in the event of any such assumption by the
successor Subservicer, the Master Servicer may, in the exercise of its business
judgment, release the terminated Subservicer from liability for such
representations and warranties.
As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the Securityholders and the Credit Enhancer, shall use reasonable
efforts to enforce the obligations of each Subservicer under the related
Subservicing Agreement, to the extent that the non-performance of any such
obligation would have a material adverse effect on a Home Equity Loan. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Home Equity Loans. The Master Servicer shall
pay the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to the
extent, if any, that such recovery exceeds all amounts due in respect of the
related Home Equity Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Master Servicer shall remain obligated and liable to the
Indenture Trustee, the Credit Enhancer, the Noteholders and the
Certificateholders for the servicing and administering of the Home Equity Loans
in accordance with the provisions of this Section 3.01 without diminution of
such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Home Equity Loans. The Master
Servicer shall be entitled to enter into any agreement with a Subservicer or
Program Seller for indemnification of the Master Servicer and nothing contained
in this Agreement shall be deemed to limit or modify such indemnification.
In the event the Master Servicer shall for any reason no longer be the
master servicer (including by reason of a Servicing Default), the Indenture
Trustee, its designee or the successor servicer for the Indenture Trustee shall
be deemed to have assumed all of the Master Servicer's interest therein and to
have replaced the Master Servicer as a party to the Subservicing Agreement to
the same extent as if the Subservicing Agreement had been assigned to the
assuming party, except that the Master Servicer shall not thereby be relieved of
any liability or obligations under the Subservicing Agreement, nor shall the
Indenture Trustee be responsible for any obligations or liabilities prior to
such replacement. The Indenture Trustee shall not be responsible for any
representations and warranties made by the Master Servicer pursuant to such
Subservicing Agreement.
The Master Servicer shall, upon request of the Indenture Trustee but at
the expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each Subservicing Agreement and the Home Equity Loans
then being serviced and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
each Subservicing Agreement to the assuming party.
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Section 3.02 COLLECTION OF CERTAIN HOME EQUITY LOAN PAYMENTS. (a) The Master
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Home Equity Loans, and shall, to the extent such
procedures shall be consistent with this Servicing Agreement and generally
consistent with the Program Guide, follow such collection procedures as it would
employ in its good faith business judgment and which are normal and usual in its
general mortgage servicing activities. Consistent with the foregoing, and
without limiting the generality of the foregoing, the Master Servicer may in its
discretion waive any late payment charge, penalty interest or other fees which
may be collected in the ordinary course of servicing such Home Equity Loan. The
Master Servicer may also extend the Due Date for payment due on a Home Equity
Loan in accordance with the Program Guide, provided, however, that the Master
Servicer shall first determine that any such waiver or extension will not impair
the coverage of any related insurance policy or materially adversely affect the
lien of the related Mortgage (except as described below) or the interests of the
Securityholders and the Credit Enhancer. Consistent with the terms of this
Servicing Agreement, the Master Servicer may also:
(i) waive, modify or vary any term of any Home Equity Loan (including reduce the
Credit Limit or extend the period during which a Draw may be made by the
Mortgagor pursuant to the Loan Agreement with respect to any Group II Loan);
(ii) consent to the postponement of strict compliance with any such term or in
any manner grant indulgence to any Mortgagor;
(iii) arrange with a Mortgagor a schedule for the payment of principal and
interest due and unpaid;
(iv) forgive any portion of the amounts contractually owed under the Home Equity
Loan;
(v) capitalize any past due amounts owed under the Home Equity Loan by adding
amounts in arrearage to the existing Loan Balance of the Home Equity Loan (a
"Capitalization Workout"), provided, however, that the Master Servicer shall not
enter into a Capitalization Workout unless the Combined Loan-to-Value Ratio of
the Home Equity Loan prior to the Capitalization Workout equals or exceeds 80%;
and
(vi) reset the due date for the Home Equity Loan, or any combination of the
foregoing,
if in the Master Servicer's determination such waiver, modification,
postponement or indulgence, arrangement or other action referred to above is not
materially adverse to the interests of the Securityholders or the Credit
Enhancer and is generally consistent with the Master Servicer's policies with
respect to home equity loans similar to Home Equity Loans; provided, however,
that the Master Servicer may not, except in the case of an extension of the
period during which a Draw may be made by the Mortgagor with respect to a Group
II Loan, pursuant to this Section 3.02, modify or permit any Subservicer to
modify any Home Equity Loan, (including without limitation any modification that
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would change the Loan Rate, forgive the payment of any principal or interest
(unless in connection with the liquidation of the related Home Equity Loan),
capitalize any arrearage for the related Home Equity Loan or extend the due date
any payment) unless such Home Equity Loan is in default or, in the judgment of
the Master Servicer, such default is reasonably foreseeable. Notwithstanding the
foregoing, the final maturity date of any Home Equity Loan will not be extended
beyond the Final Scheduled Payment Date. The general terms of any waiver,
modification, postponement or indulgence with respect to any of the Home Equity
Loans will be included in the Servicing Certificate, and such Home Equity Loans
will not be considered "delinquent" for the purposes of the Basic Documents so
long as the Mortgagor complies with the terms of such waiver, modification,
postponement or indulgence. In addition, if a Group II Loan is in default or, in
the judgment of the Master Servicer, such default is reasonably foreseeable, the
Master Servicer may, through modification, convert such Group II Loan to a fully
amortizing closed-end loan. Notwithstanding the foregoing, with respect to the
Group II Loans, the Master Servicer in its sole discretion (i) may permit the
Mortgagor (or may enter into a modification agreement which will allow the
Mortgagor) to make monthly payments, with respect to any Billing Cycle during
the related Draw Period, in a minimum amount that will be equal to the related
finance charge for such Billing Cycle and (ii) may reduce the amount of the
Credit Limit (to an amount no less than the then current Loan Balance of such
Group II Loan) in connection with any refinancing of a senior lien pursuant to
Section 3.01(b) of this Agreement. In connection with any Curtailment of a Home
Equity Loan, the Master Servicer, to the extent not inconsistent with the terms
of the Mortgage Note and local law and practice, may permit the Home Equity Loan
to be reamortized such that the Minimum Monthly Payment is recalculated as an
amount that will fully amortize the remaining Loan Balance thereof by the Final
Scheduled Payment Date based on the original Loan Rate; provided, that such
re-amortization any Group I Loan shall not be permitted if it would constitute a
reissuance of such Group I Loan for federal income tax purposes.
(b) The Master Servicer shall establish a Custodial Account, which shall be an
Eligible Account in which the Master Servicer shall deposit or cause to be
deposited any amounts representing payments and collections in respect of the
Home Equity Loans received by it on or after the Cut-off Date, within one
Business Day following receipt thereof, except as otherwise specifically
provided herein, including the following payments and collections received or
made by it (without duplication):
(i) all payments on account of principal, (including Principal Prepayments made
by Mortgagors on the Home Equity Loans or from any REO Proceeds received in
connection with an REO Property for which an REO Disposition has occurred);
(ii) All payments on account of interest at the Adjusted Mortgage Rate on the
Home Equity Loans, or from any REO Proceeds received in connection with an REO
Property for which an REO Disposition has occurred;
(iii) the aggregate Repurchase Price of the Home Equity Loans purchased by the
Master Servicer pursuant to Section 3.15;
(iv) Net Liquidation Proceeds net of any related Foreclosure Profit;
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(v) all proceeds of any Home Equity Loans repurchased by the Seller pursuant to
the Purchase Agreement, and all Substitution Adjustment Amounts required to be
deposited in connection with the substitution of an Eligible Substitute Loan
pursuant to the Purchase Agreement;
(vi) Insurance Proceeds, other than Net Liquidation Proceeds, resulting from any
insurance policy maintained on a Mortgaged Property; and
(vii) amounts required to be paid by the Master Servicer pursuant to Sections
3.04 and 8.08 and any payments or collections received in the nature of
prepayment charges;
provided, however, that with respect to each Collection Period, the Master
Servicer shall be permitted to retain from payments in respect of interest on
the Home Equity Loans, the Master Servicing Fee for such Collection Period. The
foregoing requirements respecting deposits to the Custodial Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Master Servicer need not deposit in the Custodial Account amounts
representing Foreclosure Profits, fees (including annual fees), assumption
charges or late charge penalties payable by Mortgagors (such amounts to be
retained as additional servicing compensation in accordance with Section 3.09
hereof), or amounts received by the Master Servicer for the accounts of
Mortgagors for application towards the payment of taxes, insurance premiums,
assessments and similar items. In the event any amount not required to be
deposited in the Custodial Account is so deposited, the Master Servicer may at
any time withdraw such amount from the Custodial Account, any provision herein
to the contrary notwithstanding. The Custodial Account may contain funds that
belong to one or more trusts created for the notes or certificates of other
series and may contain other funds respecting payments on home equity loans or
other mortgage loans belonging to the Master Servicer or serviced or master
serviced by it on behalf of others. Notwithstanding such commingling of funds,
the Master Servicer shall keep records that accurately reflect the funds on
deposit in the Custodial Account that have been identified by it as being
attributable to the Home Equity Loans and shall hold all collections in the
Custodial Account to the extent they represent collections on the Home Equity
Loans for the benefit of the Trust, the Securityholders and the Indenture
Trustee, as their interests may appear. The Master Servicer shall retain all
Foreclosure Profits as additional servicing compensation.
With respect to Insurance Proceeds, Net Liquidation Proceeds, REO
Proceeds and the proceeds of the purchase of any Home Equity Loan received in
any calendar month, the Master Servicer may elect to treat such amounts to be
deposited in the Custodial Account for distribution in accordance with Section
3.05 of the Indenture for distribution on the Payment Date in the month of
receipt, but is not obligated to do so. If the Master Servicer so elects, such
amounts will be deemed to have been received (and any related Liquidated Loss
Amount shall be deemed to have occurred) on the last day of the month prior to
the receipt thereof.
The Master Servicer may cause the institution maintaining the Custodial
Account to invest any funds in the Custodial Account in Permitted Investments
(including obligations of the Master Servicer or any of its Affiliates, if such
obligations otherwise qualify as Permitted Investments), which shall mature not
later than the Business Day preceding the next Payment Date and shall not be
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sold or disposed of prior to its maturity. Except as provided above, all income
and gain realized from any such investment shall inure to the benefit of the
Master Servicer and shall be subject to its withdrawal or order from time to
time. The amount of any losses incurred in respect of the principal amount of
any such investments shall be deposited in the Custodial Account by the Master
Servicer out of its own funds immediately as realized.
(c) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Home Equity Loans, pending remittance thereof to
the Master Servicer, in one or more accounts meeting the requirements of an
Eligible Account, and invested in Permitted Investments.
(d) [Reserved].
Section 3.03 PERMITTED WITHDRAWALS FROM THE CUSTODIAL ACCOUNT. The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Custodial Account of amounts on deposit therein pursuant to Section 3.02 that
are attributable to the Home Equity Loans for the following purposes:
(a) to deposit in the Payment Account, on the Business Day prior to each Payment
Date, an amount equal to the Interest Collections and Principal Collections
required to be distributed on such Payment Date and any payments or collections
in the nature of prepayment charges received during the related Collection
Period;
(b) prior to either an Amortization Event or the Collection Period during which
the Revolving Period ends, to pay to the Seller, the amount of any Additional
Balances as and when created during the related Collection Period, provided,
that the aggregate amount so paid to the Seller in respect of Additional
Balances at any time during any Collection Period shall not exceed the amount of
Principal Collections theretofore received for such Collection Period;
(c) to the extent deposited to the Custodial Account, to reimburse itself or the
related Subservicer for previously unreimbursed expenses incurred in maintaining
individual insurance policies pursuant to Section 3.04, or Liquidation Expenses
paid pursuant to Section 3.07 or otherwise reimbursable pursuant to the terms of
this Servicing Agreement (to the extent not payable pursuant to Section 3.09),
such withdrawal right being limited to amounts received on particular Home
Equity Loans (other than any Repurchase Price in respect thereof) which
represent late recoveries of the payments for which such advances were made, or
from related Liquidation Proceeds or the proceeds of the purchase of such Home
Equity Loan;
(d) to pay to itself out of each payment received on account of interest on a
Home Equity Loan as contemplated by Section 3.09, an amount equal to the related
Master Servicing Fee (to the extent not retained pursuant to Section 3.02), and
to pay to any Subservicer any Subservicing Fees not previously withheld by the
Subservicer;
(e) to the extent deposited in the Custodial Account to pay to itself as
additional servicing compensation any interest or investment income earned on
funds deposited in the Custodial Account and Payment Account that it is entitled
to withdraw pursuant to Sections 3.02(b) and 5.01;
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(f) to the extent deposited in the Custodial Account, to pay to itself as
additional servicing compensation any Foreclosure Profits (to the extent
permitted by law);
(g) to pay to itself, a Subservicer or the Seller, or any other appropriate
person, as the case may be, with respect to any Home Equity Loan or property
acquired in respect thereof that has been purchased or otherwise transferred to
the Seller, the Master Servicer or other entity, all amounts received thereon
and not required to be distributed to Securityholders as of the date on which
the related Purchase Price or Repurchase Price is determined;
(h) to withdraw any other amount deposited in the Custodial Account that was not
required to be deposited therein pursuant to Section 3.02;
(i) after the occurrence of an Amortization Event, to pay to the Seller, the
Excluded Amount for each Group II Loan;
(j) to reimburse itself for amounts expended by it (a) pursuant to Section 3.06
in good faith in connection with the restoration of property damaged by an
Uninsured Cause, and (b) in connection with the liquidation of a Home Equity
Loan or disposition of an REO Property to the extent not otherwise reimbursed
pursuant to clause (c) above; and
(k) to reimburse itself or the REMIC Administrator for expenses incurred by and
reimbursable to it or the REMIC Administrator pursuant to Sections 3.07, 6.03 or
otherwise, or Section 11.01 of the Indenture.
Since, in connection with withdrawals pursuant to clauses (c), (d), (f) and (g),
the Master Servicer's entitlement thereto is limited to collections or other
recoveries on the related Home Equity Loan, the Master Servicer shall keep and
maintain separate accounting, on a Home Equity Loan by Home Equity Loan basis,
for the purpose of justifying any withdrawal from the Custodial Account pursuant
to such clauses. Notwithstanding any other provision of this Servicing
Agreement, the Master Servicer shall be entitled to reimburse itself for any
previously unreimbursed expenses incurred pursuant to Section 3.07 or otherwise
reimbursable pursuant to the terms of this Servicing Agreement that the Master
Servicer determines to be otherwise nonrecoverable (except with respect to any
Home Equity Loan as to which the Repurchase Price has been paid), by withdrawal
from the Custodial Account of amounts on deposit therein attributable to the
Home Equity Loans on any Business Day prior to the Payment Date succeeding the
date of such determination.
Section 3.04 MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION EXPENSES. (a)
The Master Servicer shall cause to be maintained for each Home Equity Loan
hazard insurance naming the Master Servicer or related Subservicer 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
Home Equity Loan from time to time or (ii) the combined Loan Balance owing on
such Home Equity Loan and any mortgage loan senior to such Home Equity Loan from
time to time; provided, however, that such coverage may not be less than the
minimum amount required to fully compensate for any loss or damage on a
replacement cost basis. The Master Servicer shall also cause to be maintained on
property acquired upon foreclosure, or deed in lieu of foreclosure, of any Home
Equity Loan, fire insurance with extended coverage in an amount which is at
least equal to the amount necessary to avoid the application of any co-insurance
clause contained in the related hazard insurance policy. Amounts collected by
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the Master Servicer under any such policies (other than amounts to be applied to
the restoration or repair of the related Mortgaged Property or property thus
acquired or amounts released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures) shall be deposited in the Custodial
Account to the extent called for by Section 3.02. In cases in which any
Mortgaged Property is located at any time during the life of a Home Equity Loan
in a federally designated flood area, the hazard insurance to be maintained for
the related Home Equity Loan shall include flood insurance (to the extent
available). All such flood insurance shall be in amounts equal to the lesser of
(i) the amount required to compensate for any loss or damage to the Mortgaged
Property on a replacement cost basis and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program). The Master 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 such
additional insurance on property acquired in respect of a Home Equity 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.
If the Master Servicer shall obtain and maintain a blanket policy
consistent with its general mortgage servicing activities insuring against
hazard losses on all of the Home Equity Loans, it shall conclusively be deemed
to have satisfied its obligations as set forth in the first sentence of this
Section 3.04, it being understood and agreed that such policy may contain a
deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 3.04 and there shall have been
a loss which would have been covered by such policy, deposit in the Custodial
Account the amount not otherwise payable under the blanket policy because of
such deductible clause. Any such deposit by the Master Servicer shall be made on
the last Business Day of the Collection Period in the month in which payments
under any such policy would have been deposited in the Custodial Account. In
connection with its activities as servicer of the Home Equity Loans, the Master
Servicer agrees to present, on behalf of itself, the Issuer and the Indenture
Trustee, claims under any such blanket policy.
Section 3.05 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AND MODIFICATION
AGREEMENTS; RELEASE OR SUBSTITUTION OF LIEN. (a) When any Mortgaged Property is
conveyed by the Mortgagor, the Master Servicer or Subservicer, to the extent it
has knowledge of such conveyance, shall enforce any due-on-sale clause contained
in any Mortgage Note or Mortgage, to the extent permitted under applicable law
and governmental regulations, but only to the extent that such enforcement will
not adversely affect or jeopardize coverage under any Required Insurance Policy
or otherwise adversely affect the interests of the Certificateholders or the
Credit Enhancer. Notwithstanding the foregoing:
(i) the Master Servicer shall not be deemed to be in default
under this Section 3.05(a) by reason of any transfer or assumption which
the Master Servicer is restricted by law from preventing; and
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(ii) if the Master Servicer determines that it is reasonably
likely that any Mortgagor will bring, or if any Mortgagor does bring,
legal action to declare invalid or otherwise avoid enforcement of a
due-on-sale clause contained in any Mortgage Note or Mortgage, the
Master Servicer shall not be required to enforce the due-on-sale clause
or to contest such action.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.05(a), the Master Servicer or the
related Subservicer, as the case may be, shall be entitled to (A) execute
assumption agreements, substitution agreements, and instruments of satisfaction
or cancellation or of partial or full release or discharge, or any other
document contemplated by this Servicing Agreement and other comparable
instruments with respect to the Home Equity Loans and with respect to the
Mortgaged Properties subject to the Mortgages (and the Issuer and the Indenture
Trustee each shall promptly execute any such documents on request of the Master
Servicer) and (B) approve the granting of an easement thereon in favor of
another Person, any alteration or demolition of the related Mortgaged Property
or other similar matters, if it has determined, exercising its good faith
business judgment in the same manner as it would if it were the owner of the
related Home Equity Loan, that the security for, and the timely and full
collectability of, such Home Equity Loan would not be adversely affected
thereby, and that each of REMIC I, REMIC II and REMIC III would continue to
qualify as a REMIC under the Code as a result thereof and that no tax on
"prohibited transactions" or "contributions" after the startup day would be
imposed on any of REMIC I, REMIC II or REMIC III as a result thereof. A partial
release pursuant to this Section 3.05 shall be permitted only if the Combined
Loan-to-Value Ratio for such Home Equity Loan after such partial release does
not exceed the Combined Loan-to-Value Ratio for such Home Equity Loan as of the
Cut-off Date, and provided further that, in the case of a Group I Loan, the
Master Servicer, the Indenture Trustee and the Credit Enhancer have received an
Opinion of Counsel to the effect that such partial release will not result in an
Adverse REMIC Event. Any fee collected by the Master Servicer or the related
Subservicer for processing such request will be retained by the Master Servicer
or such Subservicer as additional servicing compensation.
(c) The Master Servicer may enter into an agreement with a Mortgagor to
release the lien on the Mortgaged Property relating to a Group II Loan (the
"Existing Lien"), if at the time of such agreement the Group II Loan is current
in payment of principal and interest, under any of the following circumstances:
(i) in any case in which, simultaneously with the release of the Existing Lien,
the Mortgagor executes and delivers to the Master Servicer a Mortgage on a
substitute Mortgaged Property, provided that the Combined Loan-to-Value Ratio of
the Group II Loan (calculated based on the Appraised Value of the substitute
Mortgaged Property) is not greater than the Combined Loan-to-Value Ratio prior
to releasing the Existing Lien;
(ii) in any case in which, simultaneously with the release of the Existing Lien,
the Mortgagor executes and delivers to the Master Servicer a Mortgage on a
substitute Mortgaged Property, provided that: (A) the Combined Loan-to-Value
Ratio of the Group II Loan (calculated based on the Appraised Value of the
substitute Mortgaged Property) is not greater than the lesser of (1) 100% and
(2) 105% of the Combined Loan-to-Value Ratio prior to releasing the Existing
Lien; and (B) the Master Servicer determines that at least two appropriate
compensating factors are present (compensating factors may include, without
limitation, an increase in the Mortgagor's monthly cash flow after debt service,
the Mortgagor's debt-to-income ratio has not increased since origination, or an
increase in the Mortgagor's credit score); or
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(iii) in any case in which, at the time of release of the Existing Lien, the
Mortgagor does not provide the Master Servicer with a Mortgage on a substitute
Mortgaged Property (any Group II Loan that becomes and remains unsecured in
accordance with this subsection, an "Unsecured Loan"), provided that: (A) the
current Combined Loan-to-Value Ratio is greater than or equal to 85%; (B) the
Master Servicer shall not permit the release of an Existing Lien under this
clause (iii) as to more than 100 Group II Loans in any calendar year; (C) at no
time shall the aggregate Loan Balance of Unsecured Loans exceed 2.5% of the then
Pool Balance; (D) the Mortgagor agrees to an automatic debit payment plan; and
(E) the Master Servicer shall provide notice to each Rating Agency that has
requested notice of such releases.
In connection with any Unsecured Loan, the Master Servicer may require
the Mortgagor to enter into an agreement under which: (i) the Loan Rate may be
increased effective until a substitute Mortgage meeting the criteria under (i)
or (ii) above is provided; or (ii) any other provision may be made which the
Master Servicer considers to be appropriate. Thereafter, the Master Servicer
shall determine in its discretion whether to accept any proposed Mortgage on any
substitute Mortgaged Property as security for the Group II Loan, and the Master
Servicer may require the Mortgagor to agree to any further conditions which the
Master Servicer considers appropriate in connection with such substitution,
which may include a reduction of the Loan Rate (but not below the Loan Rate in
effect at the Closing Date). Any Group II Loan as to which a Mortgage on a
substitute Mortgaged Property is provided in accordance with the preceding
sentence shall no longer be deemed to be an Unsecured Loan.
(d) Subject to any other applicable terms and conditions of this
Agreement, the Master Servicer shall be entitled to approve an assignment in
lieu of satisfaction with respect to any Home Equity Loan, provided the obligee
with respect to such Home Equity Loan following such proposed assignment
provides the Master Servicer with a "Lender Certification for Assignment of Home
Equity Loan" in the form attached hereto as Exhibit D, in form and substance
satisfactory to the Indenture Trustee and Master Servicer, providing the
following: (i) that the Home Equity Loan is secured by Mortgaged Property
located in a jurisdiction in which an assignment in lieu of satisfaction is
required to preserve lien priority, minimize or avoid mortgage recording taxes
or otherwise comply with, or facilitate a refinancing under, the laws of such
jurisdiction; (ii) that the substance of the assignment is, and is intended to
be, a refinancing of such Home Equity Loan and that the form of the transaction
is solely to comply with, or facilitate the transaction under, such local laws;
(iii) that the Home Equity Loan following the proposed assignment will have a
rate of interest at least 0.25 percent below or above the rate of interest on
such Home Equity Loan prior to such proposed assignment; and (iv) that such
assignment is at the request of the borrower under the related Home Equity Loan.
Upon approval of an assignment in lieu of satisfaction with respect to any Home
Equity Loan, the Master Servicer shall receive cash in an amount equal to the
unpaid Loan Balance of and accrued interest on such Home Equity Loan and the
Master Servicer shall treat such amount as a Principal Prepayment in Full with
respect to such Home Equity Loan for all purposes hereof.
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Section 3.06 TRUST ESTATE; RELATED DOCUMENTS (a) When required by the provisions
of this Servicing Agreement, the Issuer or the Indenture Trustee shall execute
instruments to release property from the terms of the Trust Agreement, Indenture
or Custodial Agreement, as applicable, or convey the Issuer's or the Indenture
Trustee's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Servicing Agreement. No party
relying upon an instrument executed by the Issuer or the Indenture Trustee as
provided in this Section 3.06 shall be bound to ascertain the Issuer's or the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) If from time to time the Master Servicer shall deliver to the Custodian
copies of any written assurance, assumption agreement or substitution agreement
or other similar agreement pursuant to Section 3.05, the Custodian shall check
that each of such documents purports to be an original executed copy (or a copy
of the original executed document if the original executed copy has been
submitted for recording and has not yet been returned) and, if so, shall file
such documents, and upon receipt of the original executed copy from the
applicable recording office or receipt of a copy thereof certified by the
applicable recording office shall file such originals or certified copies with
the Related Documents. If any such documents submitted by the Master Servicer do
not meet the above qualifications, such documents shall promptly be returned by
the Custodian to the Master Servicer, with a direction to the Master Servicer to
forward the correct documentation.
(c) Upon receipt of a Request for Release from the Master Servicer,
substantially in the form of Exhibit C to the effect that a Home Equity Loan has
been the subject of a final payment or a prepayment in full and the related Home
Equity Loan has been terminated or that substantially all Liquidation Proceeds
which have been determined by the Master Servicer in its reasonable judgment to
be finally recoverable have been recovered, and upon deposit to the Custodial
Account of such final monthly payment, prepayment in full together with accrued
and unpaid interest to the date of such payment with respect to such Home Equity
Loan or, if applicable, Liquidation Proceeds, the Custodian shall promptly
release the Related Documents to the Master Servicer, which the Indenture
Trustee shall execute, along with such documents as the Master Servicer or the
Mortgagor may request to evidence satisfaction and discharge of such Home Equity
Loan, upon request of the Master Servicer. If from time to time and as
appropriate for the servicing or foreclosure of any Home Equity Loan, the Master
Servicer requests the Custodian to release the Related Documents and delivers to
the Custodian a trust receipt reasonably satisfactory to the Custodian and
signed by a Responsible Officer of the Master Servicer, the Custodian shall
release the Related Documents to the Master Servicer. If such Home Equity Loans
shall be liquidated and the Custodian receives a certificate from the Master
Servicer as provided above, then, upon request of the Master Servicer, the
Custodian shall release the trust receipt to the Master Servicer.
Section 3.07 REALIZATION UPON DEFAULTED HOME EQUITY LOANS; LOSS MITIGATION. With
respect to such of the Home Equity Loans as come into and continue in default,
the Master Servicer will decide whether to (i) foreclose upon the Mortgaged
Properties securing such Home Equity Loans, (ii) write off the unpaid Loan
Balance of the Home Equity Loans as bad debt, (iii) take a deed in lieu of
foreclosure, (iv) accept a short sale (a payoff of the Home Equity Loan for an
amount less than the total amount contractually owed in order to facilitate a
sale of the Mortgaged Property by the Mortgagor) or permit a short refinancing
(a payoff of the Home Equity Loan for an amount less than the total amount
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contractually owed in order to facilitate refinancing transactions by the
Mortgagor not involving a sale of the Mortgaged Property), (v) arrange for a
repayment plan, (vi) agree to a modification in accordance with this Servicing
Agreement, or (vii) in the case of a Group II Loan, take an unsecured note, in
connection with a negotiated release of the lien of the Mortgage in order to
facilitate a settlement with the Mortgagor; in each case subject to the rights
of any related first lien holder; provided that in connection with the foregoing
if the Master Servicer has actual knowledge that any Mortgaged Property is
affected by hazardous or toxic wastes or substances and that the acquisition of
such Mortgaged Property would not be commercially reasonable, then the Master
Servicer will not cause the Issuer or the Indenture Trustee to acquire title to
such Mortgaged Property in a foreclosure or similar proceeding. In connection
with such decision, the Master Servicer shall follow such practices (including,
in the case of any default on a related senior mortgage loan, the advancing of
funds to correct such default if deemed to be appropriate by the Master
Servicer) and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general mortgage servicing activities and as shall be
required or permitted by the Program Guide; provided that the Master Servicer
shall not be liable in any respect hereunder if the Master Servicer is acting in
connection with any such foreclosure or attempted foreclosure which is not
completed or other conversion in a manner that is consistent with the provisions
of this Servicing Agreement. The foregoing is subject to the proviso that the
Master Servicer shall not be required to expend its own funds in connection with
any foreclosure or attempted foreclosure which is not completed or towards the
correction of any default on a related senior mortgage loan or restoration of
any property unless it shall determine that such expenditure will increase Net
Liquidation Proceeds. In the event of a determination by the Master Servicer
that any such expenditure previously made pursuant to this Section 3.07 will not
be reimbursable from Net Liquidation Proceeds, the Master Servicer shall be
entitled to reimbursement of its funds so expended pursuant to Section 3.03.
In addition, the Master Servicer may pursue any remedies that may
be available in connection with a breach of a representation and warranty with
respect to any such Home Equity Loan in accordance with Section 2.03. However,
the Master Servicer is not required to continue to pursue both foreclosure (or
similar remedies) with respect to the Home Equity Loans and remedies in
connection with a breach of a representation and warranty if the Master Servicer
determines in its reasonable discretion that one such remedy is more likely to
result in a greater recovery as to the Home Equity Loan. Upon the occurrence of
a Cash Liquidation or REO Disposition, following the deposit in the Custodial
Account of all Insurance Proceeds, Liquidation Proceeds and other payments and
recoveries referred to in the definition of "Cash Liquidation" or "REO
Disposition," as applicable, upon receipt by the Indenture Trustee of written
notification of such deposit signed by a Servicing Officer, the Indenture
Trustee or any Custodian, as the case may be, shall release to the Master
Servicer the related Mortgage File and the Indenture Trustee shall execute and
deliver such instruments of transfer or assignment prepared by the Master
Servicer, in each case without recourse, representation or warranty as shall be
necessary to vest in the Master Servicer or its designee, as the case may be,
the related Home Equity Loan, and thereafter such Home Equity Loan shall not be
part of the Trust. Notwithstanding the foregoing or any other provision of this
Agreement, in the Master Servicer's sole discretion with respect to any
defaulted Home Equity Loan or REO Property as to either of the following
provisions, (i) a Cash Liquidation or REO Disposition may be deemed to have
19
occurred if substantially all amounts expected by the Master Servicer to be
received in connection with the related defaulted Home Equity Loan or REO
Property have been received; provided, however, a Cash Liquidation or REO
Disposition shall be deemed to have occurred with respect to any Group I Loan
that is 180 days or more delinquent as of the end of the related Collection
Period; provided further, however, any subsequent collections with respect to
any such Group I Loan shall be deposited to the Custodial Account, and (ii) for
purposes of determining the amount of any Liquidation Proceeds, Insurance
Proceeds, REO Proceeds or any other unscheduled collections or the amount of any
Liquidation Loss Amount, the Master Servicer may take into account minimal
amounts of additional receipts expected to be received or any estimated
additional liquidation expenses expected to be incurred in connection with the
related defaulted Group I Loan or REO Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued in the name of the Indenture Trustee or a nominee thereof, who
shall hold the same on behalf of the Issuer in accordance with Section 3.13 of
the Indenture. Notwithstanding any such acquisition of title and cancellation of
the related Home Equity Loan, such Mortgaged Property shall (except as otherwise
expressly provided herein) be considered to be an outstanding Home Equity Loan
held as an asset of the Issuer until such time as such property shall be sold.
Consistent with the foregoing for purposes of all calculations hereunder, so
long as such Mortgaged Property shall be considered to be an outstanding Home
Equity Loan it shall be assumed that, notwithstanding that the indebtedness
evidenced by the related Loan Agreement shall have been discharged, such Loan
Agreement in effect at the time of any such acquisition of title before any
adjustment thereto by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period will remain in effect.
In the event that the Trust acquires any REO Property as aforesaid or
otherwise in connection with a default or imminent default on a Group I Loan,
the Master Servicer on behalf the Trust shall dispose of such REO Property as
soon as practicable, giving due consideration to the interests of the
Noteholders and the Certificateholders, but in all cases within three full years
after the taxable year of its acquisition by the Trust for purposes of Section
860G(a)(8) of the Code (or such shorter period as may be necessary under
applicable state (including any state in which such property is located) law to
maintain the status of any of REMIC I, REMIC II or REMIC III as a REMIC under
applicable state law and avoid taxes resulting from such property failing to be
foreclosure property under applicable state law) or, at the expense of the
Trust, request, more than 60 days before the day on which such grace period
would otherwise expire, an extension of such grace period unless the Master
Servicer obtains for the Indenture Trustee an Opinion of Counsel, addressed to
the Indenture Trustee and the Master Servicer, to the effect that the holding by
the Trust of such REO Property subsequent to such period will not result in the
imposition of taxes on "prohibited transactions" as defined in Section 860F of
the Code or cause the Trust to fail to qualify as a REMIC (for federal (or any
applicable State or local) income tax purposes) at any time that any
Certificates are outstanding, in which case the Trust may continue to hold such
REO Property (subject to any conditions contained in such Opinion of Counsel).
The Master Servicer shall be entitled to be reimbursed from the Custodial
Account for any costs incurred in obtaining such Opinion of Counsel, as provided
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in Section 3.03. Notwithstanding any other provision of this Agreement, no REO
Property acquired by the Trust shall be rented (or allowed to continue to be
rented) or otherwise used by or on behalf of the Trust in such a manner or
pursuant to any terms that would (i) cause such REO Property to fail to qualify
as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code
or (ii) subject REMIC I, REMIC II or REMIC III to the imposition of any federal
income taxes on the income earned from such REO Property, including any taxes
imposed by reason of Section 860G(c) of the Code, unless the Master Servicer has
agreed to indemnify and hold harmless the Trust with respect to the imposition
of any such taxes.
Any proceeds from the purchase or repurchase of any Home Equity Loan
pursuant to the terms of this Servicing Agreement (including without limitation
Sections 2.03 and 3.15) will be applied in the following order of priority:
first, to the Master Servicer or the related Subservicer, all Servicing Fees
payable therefrom to the Payment Date on which such amounts are to be deposited
in the Payment Account; second, as Interest Collections, accrued and unpaid
interest on the related Home Equity Loan, at the Net Loan Rate to the Payment
Date on which such amounts are to be deposited in the Payment Account; and
third, as Principal Collections, as a recovery of principal on the Home Equity
Loan.
Liquidation Proceeds with respect to a Liquidated Home Equity Loan will
be applied in the following order of priority: first, to reimburse the Master
Servicer or the related Subservicer in accordance with this Section 3.07 for any
Liquidation Expenses; second, to the Master Servicer or the related Subservicer,
all unpaid Servicing Fees through the date of receipt of the final Liquidation
Proceeds; third, as Principal Collections, as a recovery of principal on the
Home Equity Loan, up to an amount equal to the Loan Balance of the related Home
Equity Loan immediately prior to the date it became a Liquidated Home Equity
Loan; fourth, as Interest Collections, accrued and unpaid interest on the
related Home Equity Loan at the Net Loan Rate through the date of receipt of the
final Liquidation Proceeds; and fifth, to Foreclosure Profits.
Proceeds and other recoveries from a Home Equity Loan after it becomes a
Liquidated Home Equity Loan will be applied in the following order of priority:
first, to reimburse the Master Servicer or the related Subservicer in accordance
with this Section 3.07 for any expenses previously unreimbursed from Liquidation
Proceeds or otherwise; second, to the Master Servicer or the related
Subservicer, all unpaid Servicing Fees payable thereto through the date of
receipt of the proceeds previously unreimbursed from Liquidation Proceeds or
otherwise; third, as Interest Collections, up to an amount equal to the sum of
(a) the Loan Balance of the related Home Equity Loan immediately prior to the
date it became a Liquidated Home Equity Loan, less any Net Liquidation Proceeds
previously received with respect to such Home Equity Loan and applied as a
recovery of principal, and (b) accrued and unpaid interest on the related Home
Equity Loan at the Net Loan Rate through the date of receipt of the proceeds;
and fourth, to Foreclosure Profits.
In the event of a default on a Home Equity Loan one or more of whose
obligors is a Non-United States Person, in connection with any foreclosure or
acquisition of a deed in lieu of foreclosure (together, "foreclosure") in
respect of such Home Equity Loan, the Master Servicer will cause compliance with
the provisions of Treasury Regulation Section 1.1445-2(d)(3) (or any successor
thereto) necessary to assure that no withholding tax obligation arises with
respect to the proceeds of such foreclosure except to the extent, if any, that
proceeds of such foreclosure are required to be remitted to the obligors on such
Home Equity Loan.
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Section 3.08 ISSUER AND INDENTURE TRUSTEE TO COOPERATE. On or before each
Payment Date, the Master Servicer will notify the Indenture Trustee or the
Custodian, with a copy to the Issuer, of the termination of or the payment in
full and the termination of any Home Equity Loan during the preceding Collection
Period. Upon receipt of payment in full, the Master Servicer is authorized to
execute, pursuant to the authorization contained in Section 3.01, if the
assignments of Mortgage have been recorded to the extent required under the
Purchase Agreement, an instrument of satisfaction regarding the related
Mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the Person entitled
thereto and cause the removal from the registration of the MERS(R) System of
such Mortgage. It is understood and agreed that any expenses incurred in
connection with such instrument of satisfaction or transfer shall be reimbursed
from amounts deposited in the Custodial Account. From time to time and as
appropriate for the servicing or foreclosure of any Home Equity Loan, the
Indenture Trustee or the Custodian shall, upon request of the Master Servicer
and delivery to the Indenture Trustee or Custodian, with a copy to the Issuer,
of a Request for Release, in the form annexed hereto as Exhibit C, signed by a
Servicing Officer, release or cause to be released the related Mortgage File to
the Master Servicer and the Issuer or Indenture Trustee shall promptly execute
such documents, in the forms provided by the Master Servicer, as shall be
necessary for the prosecution of any such proceedings or the taking of other
servicing actions. Such trust receipt shall obligate the Master Servicer to
return the Mortgage File to the Indenture Trustee or the Custodian (as specified
in such receipt) when the need therefor by the Master Servicer no longer exists
unless the Home Equity Loan shall be liquidated, in which case, upon receipt of
a certificate of a Servicing Officer similar to that hereinabove specified, the
trust receipt shall be released to the Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any Home
Equity Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions of the Purchase Agreement, the
Indenture Trustee or the Issuer shall, if so requested in writing by the Master
Servicer, promptly execute an appropriate assignment in the form provided by the
Master Servicer to assign such Home Equity Loan for the purpose of collection to
the Master 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 Home Equity Loan and deposit or
credit the Net Liquidation Proceeds, exclusive of Foreclosure Profits, received
with respect thereto in the Custodial Account. In the event that all delinquent
payments due under any such Home Equity Loan are paid by the Mortgagor and any
other defaults are cured, then the assignee for collection shall promptly
reassign such Home Equity Loan to the Indenture Trustee and return all Related
Documents to the place where the related Mortgage File was being maintained.
In connection with the Issuer's obligation to cooperate as provided in
this Section 3.08 and all other provisions of this Servicing Agreement requiring
the Issuer to authorize or permit any actions to be taken with respect to the
Home Equity Loans, the Indenture Trustee, as pledgee of the Home Equity Loans
and as assignee of record of the Home Equity Loans on behalf of the Issuer
pursuant to Section 3.13 of the Indenture, expressly agrees, on behalf of the
Issuer, to take all such actions on behalf of the Issuer and to promptly execute
and return all instruments reasonably required by the Master Servicer in
22
connection therewith; provided, that if the Master Servicer shall request a
signature of the Indenture Trustee, on behalf of the Issuer, the Master Servicer
will deliver to the Indenture Trustee an Officer's Certificate stating that such
signature is necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties under this Servicing Agreement.
Section 3.09 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY MASTER
SERVICER. The Master Servicer shall be entitled to receive the Master Servicing
Fee in accordance with Sections 3.02 and 3.03 as compensation for its services
in connection with servicing the Home Equity Loans. Subject to Section 3.07, in
the event that Liquidation Proceeds, Insurance Proceeds and REO Proceeds in
respect of a Cash Liquidation or REO Disposition exceed the unpaid Loan Balance
of such Home Equity Loan plus unpaid interest accrued thereon (including REO
Imputed Interest) at the related Net Loan Rate, the Master Servicer shall be
entitled to retain therefrom and to pay to itself and/or the related
Subservicer, any Foreclosure Profits. Additional servicing compensation in the
form of assumption fees, investment income on amounts in the Custodial Account
or the Certificate Distribution Account or otherwise shall be retained by the
Master Servicer or the Subservicer to the extent provided herein. Moreover,
additional servicing compensation in the form of late payment charges,
investment income on amounts in the Payment Account and other receipts not
required to be deposited in the Custodial Account as specified in Section
3.02(b) shall be retained by the Master Servicer. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including payment of all other fees and expenses not expressly stated
hereunder to be for the account of the Securityholders, including, without
limitation, the fees and expenses of the Owner Trustee, Indenture Trustee and
any Custodian) and shall not be entitled to reimbursement therefor.
Section 3.10 ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Master Servicer will
deliver to the Issuer, each Underwriter and the Indenture Trustee, with a copy
to the Credit Enhancer, on or before March 31 of each year, beginning March 31,
2003, an Officer's Certificate stating that (i) a review of the activities of
the Master Servicer during the preceding calendar year and of its performance
under servicing agreements, including this Servicing Agreement has been made
under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Master Servicer has complied in all
material respects with the minimum servicing standards set forth in the Uniform
Single Attestation Program for Mortgage Bankers and has fulfilled all of its
material obligations in all material respects throughout such year, or, if there
has been material noncompliance with such servicing standards or a default in
the fulfillment in all material respects of any such obligation relating to this
Servicing Agreement, such statement shall include a description of such
noncompliance or specify each such default, as the case may be, known to such
officer and the nature and status thereof.
(b) The Master Servicer shall deliver to the Issuer and the Indenture Trustee,
with a copy to the Credit Enhancer, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice by means of an Officer's Certificate of any event which with the giving
of notice or the lapse of time or both, would become a Servicing Default.
Section 3.11 ANNUAL SERVICING REPORT. On or before March 31 of each year,
beginning March 31, 2003, the Master Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
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other services to the Master Servicer) to furnish a report to the Issuer, the
Indenture Trustee, the Depositor, each Underwriter, the Credit Enhancer and each
Rating Agency stating its opinion that, on the basis of an examination conducted
by such firm substantially in accordance with standards established by the
American Institute of Certified Public Accountants, the assertions made pursuant
to Section 3.10 regarding compliance with the minimum servicing standards set
forth in the Uniform Single Attestation Program for Mortgage Bankers during the
preceding calendar year are fairly stated in all material respects, subject to
such exceptions and other qualifications that, in the opinion of such firm, such
accounting standards require it to report. In rendering such statement, such
firm may rely, as to matters relating to the direct servicing of Home Equity
Loans by Subservicers, upon comparable statements for examinations conducted by
independent public accountants substantially in accordance with standards
established by the American Institute of Certified Public Accountants (rendered
within one year of such statement) with respect to such Subservicers.
Section 3.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE HOME
EQUITY Loans. Whenever required by statute or regulation, the Master Servicer
shall provide to the Credit Enhancer, any Securityholder upon reasonable request
(or a regulator for a Securityholder) or the Indenture Trustee, reasonable
access to the documentation regarding the Home Equity Loans such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Master Servicer. Nothing in this Section
3.12 shall derogate from the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Master Servicer to provide access as provided in this
Section 3.12 as a result of such obligation shall not constitute a breach of
this Section 3.12.
Section 3.13 MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The Master
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall be at least equal to the coverage that would be required
by Xxxxxx Xxx or Xxxxxxx Mac, whichever is greater, for Persons performing
servicing for Home Equity Loans purchased by such entity. Coverage of the Master
Servicer under a policy or bond obtained by an Affiliate of the Master Servicer
and providing the coverage required by this Section 3.13 shall satisfy the
requirements of this Section 3.13.
Section 3.14 INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE AND REPORTS OF
FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY. The Master Servicer shall
prepare and deliver all federal and state information reports with respect to
the Home Equity Loans when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under Section
6050J of the Code to the effect that the Master Servicer or Subservicer shall
make reports of foreclosures and abandonments of any mortgaged property for each
year beginning in 2002, the Master Servicer or Subservicer shall file reports
relating to each instance occurring during the previous calendar year in which
the Master Servicer (i) on behalf of the Issuer, acquires an interest in any
Mortgaged Property through foreclosure or other comparable conversion in full or
partial satisfaction of a Home Equity Loan, or (ii) knows or has reason to know
that any Mortgaged Property has been abandoned. The reports from the Master
Servicer or Subservicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Section 6050J and Section 6050H (reports
relating to mortgage interest received) of the Code.
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Section 3.15 OPTIONAL REPURCHASE OR TRANSFER OF HOME EQUITY LOANS.
(a) Notwithstanding any provision in Section 3.07 to the contrary, the Master
Servicer, at its option and in its sole discretion, may repurchase any Home
Equity Loan that is delinquent in payment for a period of 60 days or longer for
a price equal to the Repurchase Price; provided, that any such Home Equity Loan
that becomes 60 days or more delinquent during any given Calendar Quarter shall
only be eligible for purchase pursuant to this Section 3.15(a) during the period
beginning on the first Business Day of the following Calendar Quarter, and
ending at the close of business on the second-to-last Business Day of such
following Calendar Quarter; and provided further, that such Home Equity Loan is
60 days or more delinquent at the time of repurchase. Such option if not
exercised shall not thereafter be reinstated as to any Home Equity Loan, unless
the delinquency is cured and the Home Equity Loan thereafter again becomes
delinquent in payment by 60 days or more in a subsequent Calendar Quarter. If at
any time the Master Servicer makes a payment to the Payment Account covering the
amount of the Repurchase Price for such a Home Equity Loan, and the Master
Servicer provides to the Indenture Trustee a certification signed by a Servicing
Officer stating that the amount of such payment has been deposited in the
Payment Account, then the Indenture Trustee shall execute the assignment of such
Home Equity Loan at the request of the Master Servicer without recourse,
representation or warranty to the Master Servicer which shall succeed to all the
Indenture Trustee's right, title and interest in and to such Loan, and all
security and documents relative thereto. Such assignment shall be an assignment
outright and not for security. The Master Servicer will thereupon own such Home
Equity Loan, and all such security and documents, free of any further obligation
to the Indenture Trustee or the Securityholders with respect thereto.
(b) Subject to the conditions set forth below, the Master Servicer, upon receipt
of written notice and direction from the Issuer, shall cause the retransfer of
Group II Loans from the Indenture Trustee to the Issuer as of the close of
business on a Payment Date (the "Transfer Date"). On the fifth Business Day (the
"Transfer Notice Date") prior to the Transfer Date designated in such notice,
the Master Servicer shall give the Indenture Trustee, the Rating Agencies and
the Credit Enhancer a notice of the proposed retransfer that contains a list of
the Home Equity Loans to be retransferred. Such retransfers of Group II Loans
shall be permitted upon satisfaction of the following conditions:
(i) No Amortization Event has occurred or will result from such retransfer;
(ii) On the Transfer Date, the Group II Overcollateralization Amount (after
giving effect to the removal from the Trust of the Group II Loans proposed to be
transferred) will equal or exceed Group II Required Overcollateralization
Amount;
(iii) On or before the Transfer Date, the Master Servicer shall have delivered
to the Indenture Trustee a revised Home Equity Loan Schedule showing that the
Home Equity Loans are no longer owned by the Trust;
25
(iv) The Master Servicer shall represent and warrant that the Group II Loans to
be removed from the Trust were selected at random and the Master Servicer shall
have received the consent of the Credit Enhancer as to the selection of the
particular Group II Loans to be removed; and
(v) The Master Servicer shall have delivered to the Indenture Trustee and the
Credit Enhancer an officer's certificate certifying that the items set forth in
subparagraphs (i) through (iv), inclusive, have been performed or are true and
correct, as the case may be. The Indenture Trustee may conclusively rely on such
officer's certificate, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying.
The Master Servicer shall not be permitted to effect the retransfer of
any Group II Loan except under the conditions specified above. Upon receiving
the requisite notice and direction from the Issuer, the Master Servicer shall
perform in a timely manner those acts required of it, as specified above. Upon
satisfaction of the above conditions, on the Transfer Date the Indenture Trustee
shall deliver, or cause to be delivered, to the Issuer a written itemization of
each Group II Loan being transferred, together with the Mortgage File for each
such Home Equity Loan, and the Indenture Trustee shall execute and deliver to
the Issuer or its designee such other documents prepared by the Master Servicer
as shall be reasonably necessary to transfer such Group II Loans to the Group II
Certificateholders. Any such transfer of the Trust's right, title and interest
in and to the Group II Loans shall be without recourse, representation or
warranty by or of the Indenture Trustee or the Trust to the Issuer or its
designee.
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01 STATEMENTS TO SECURITYHOLDERS. (a) With respect to each Payment
Date, on the Business Day following the related Determination Date, the Master
Servicer shall forward to the Indenture Trustee and the Indenture Trustee
pursuant to Section 3.26 of the Indenture shall forward or cause to be forwarded
by mail to each Certificateholder, Noteholder, the Credit Enhancer, the
Depositor, the Owner Trustee, the Certificate Paying Agent and each Rating
Agency, a statement setting forth the following information (the "Servicing
Certificate") as to the Notes and Certificates, to the extent applicable:
(a) for each Loan Group, the aggregate amount of (a) Interest Collections, (b)
Principal Collections and (c) Substitution Adjustment Amounts for such
Collection Period;
(b) the amount paid as principal to the Noteholders of each Class of Notes;
(c) for each Loan Group, the amount paid as interest to the Noteholders of each
Class of Notes, separately stating the portion thereof in respect of Prepayment
Interest Shortfalls, Relief Act Shortfalls or Basis Risk Shortfalls, if any;
(d) for each Loan Group, the aggregate Interest Distribution Amount remaining
unpaid, if any, for each Class of Class I Notes and Class II Notes, after giving
effect to the payments made on such Payment Date;
26
(e) with respect to Loan Group I, the amount of any Group I Credit Enhancement
Draw Amount or Dissolution Draw, if any, for such Payment Date, the amount paid
to the Credit Enhancer in reimbursement for prior draws and the aggregate amount
of prior draws under the Group I Policy not yet reimbursed;
(f) with respect to Loan Group II, the amount of any Group II Credit Enhancement
Draw Amount or Dissolution Draw, if any, for such Payment Date, the amount paid
to the Credit Enhancer in reimbursement for prior draws and the aggregate amount
of prior draws under the Group II Policy not yet reimbursed;
(g) for each Loan Group, the amount of such distribution as principal and
interest to the Certificateholders of the Certificates, separately stating the
portion thereof which resulted in a reduction of the Certificate Loan Balance
thereof;
(h) the aggregate Loan Balance of the Home Equity Loans in each Loan Group as of
the end of the preceding Collection Period;
(i) the aggregate amount of Additional Balances on the Group II Loans created
during the previous Collection Period conveyed to the Issuer;
(j) for each Loan Group, the number and aggregate Loan Balances of Home Equity
Loans (a) as to which the Minimum Monthly Payment is Delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, (b) that are foreclosed and (c)
that have become REO, in each case as of the end of the related Collection
Period; provided, however, that such information will not be provided on the
statements relating to the first Payment Date;
(k) the Note Rate for each Class of Class I Notes and Class II Notes, the Group
I Net WAC Rate and the Group II Net WAC Rate for the related Collection Period;
(l) for each Loan Group, the aggregate Liquidation Loss Amounts with respect to
the related Collection Period, the amount of any Liquidation Loss Distribution
Amounts with respect to the Notes, and the aggregate of the Liquidation Loss
Amounts from all Collection Periods to date expressed as dollars and as a
percentage of the aggregate Cut-off Date Loan Balance for such Loan Group;
(m) the aggregate Excess Loss Amounts with respect to the Group II Loans with
respect to the related Collection Period and the aggregate of the Excess Loss
Amounts with respect to the Group II Loans from all Collection Periods to date;
(n) for each Loan Group, the aggregate Special Hazard Losses, Fraud Losses,
Bankruptcy Losses and losses caused by or resulting from an Extraordinary Event
with respect to the related Collection Period and the aggregate of each of such
losses from all Collection Periods to date;
(o) for each Loan Group, the Security Balance of each related Class of Notes and
the Certificate Principal Balance of the related Certificates after giving
effect to the distribution of principal on such Payment Date;
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(p) the aggregate Servicing Fees for the related Collection Period and the
aggregate amount of Draws for the related Collection Period;
(q) the number and amount of any increases in the Credit Limits of the Home
Equity Loans during the related Collection Period;
(r) the Group I Overcollateralization Amount, the Group II Overcollateralization
Amount, the Undercollateralization Amount, the Special Hazard Amount for each
Loan Group, the Fraud Loss Amount for each Loan Group, the Bankruptcy Loss
Amount for each Loan Group, the Group I Required Overcollateralization Amount
immediately following such Payment Date and the Group II Required
Overcollateralization Amount immediately following such Payment Date; and
(s) (1) the number and principal amount of release agreements pursuant to
Section 3.05(c) entered into during the calendar year and since the Closing
Date, stated separately, for the Group II Loans and, the aggregate outstanding
principal amount of such release agreements expressed as a percentage of the
Pool Balance for Loan Group II with information provided separately with respect
to all Unsecured Loans and (2) the number and principal amount of Capitalization
Workouts pursuant to Section 3.02(a)(v) entered into during the calendar year
and since the Closing Date, stated separately for each Loan Group and the
aggregate outstanding amount of the Capitalization Workouts expressed as a
percentage of the respective Pool Balance.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as an aggregate dollar amount per Variable
Funding Note, Term Note or Certificate, as applicable, with a $1,000
denomination.
In addition, the Master Servicer shall forward to the Indenture Trustee
any other information reasonably requested by the Indenture Trustee necessary to
make distributions pursuant to Section 3.05 of the Indenture. Prior to the close
of business on the Business Day next succeeding each Determination Date, the
Master Servicer shall furnish a written statement to the Certificate Paying
Agent and the Indenture Trustee setting forth the aggregate amounts required to
be withdrawn from the Custodial Account and deposited into the Payment Account
on the Business Day preceding the related Payment Date pursuant to Section 3.03.
The determination by the Master Servicer of such amounts shall, in the absence
of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee and Indenture Trustee shall be protected in
relying upon the same without any independent check or verification. In
addition, upon the Issuer's written request, the Master Servicer shall promptly
furnish information reasonably requested by the Issuer that is reasonably
available to the Master Servicer to enable the Issuer to perform its federal and
state income tax reporting obligations.
(b) The Master Servicer shall, on behalf of the Depositor and in respect
of the Trust, sign and cause to be filed with the Commission any periodic
reports required to be filed under the provisions of the Exchange Act, and the
rules and regulations of the Commission thereunder. In connection with the
preparation and filing of such periodic reports, the Indenture Trustee shall
timely provide to the Master Servicer (I) a list of Holders as of the end of
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each calendar year, (II) all material information with respect to any legal
proceedings involving the Indenture Trustee or the Trust that is in the
possession of the Indenture Trustee and is not, to the best of the Indenture
Trustee's knowledge, in the possession of the Master Servicer, (III) all
material information with respect to the submission of matters to a vote of the
Holders that is in the possession of the Indenture Trustee and is not, to the
best of the Indenture Trustee's knowledge, in the possession of the Master
Servicer, and (IV) all material information with respect to any failure of the
Indenture Trustee to make any distribution to the Holders as required pursuant
to this Agreement. Neither the Master Servicer nor the Indenture Trustee shall
have any liability with respect to the Master Servicer's failure to properly
prepare or file such periodic reports resulting from or relating to the Master
Servicer's inability or failure to obtain any information not resulting from the
Master Servicer's own negligence or willful misconduct. Any Form 10-K filed with
the Commission in connection with this clause (b) shall include a certification,
signed by the senior officer in charge of the servicing functions of the Master
Servicer, in the form attached as Exhibit E hereto or such other form as may be
required or permitted by the Commission (the "Form 10-K Certification"), in
compliance with Rule 13a-14 and 15d-14 under the Exchange Act and any additional
directives of the Commission. This Section 4.01(b) may be amended in accordance
with this Agreement without the consent of the Holders.
Section 4.02 TAX REPORTING. So long as Residential Funding Corporation or any
Affiliate thereof owns 100% of the Certificates, then no separate federal and
state income tax returns and information returns or reports will be filed with
respect to the Issuer, and the Issuer will be treated as an entity wholly owned
by Residential Funding Corporation or an affiliate thereof.
ARTICLE V
PAYMENT ACCOUNT
Section 5.01 PAYMENT ACCOUNT. The Indenture Trustee shall establish and maintain
a Payment Account titled "JPMorgan Chase Bank, as Indenture Trustee, for the
benefit of the Securityholders, the Certificate Paying Agent and the Credit
Enhancer pursuant to the Indenture, dated as of September 27, 2002, between Home
Equity Loan Trust 2002-HS3 and JPMorgan Chase Bank". The Payment Account shall
be an Eligible Account. On each Payment Date, amounts on deposit in the Payment
Account will be distributed by the Indenture Trustee in accordance with Section
3.05 of the Indenture. The Indenture Trustee shall, upon written request from
the Master Servicer, invest or cause the institution maintaining the Payment
Account to invest the funds in the Payment Account in Permitted Investments
designated in the name of the Indenture Trustee, which shall mature not later
than the Business Day next preceding the Payment Date next following the date of
such investment (except that (i) any investment in the institution with which
the Payment Account is maintained may mature on such Payment Date and (ii) any
other investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Payment Account in the amount payable
on such investment on such Payment Date, pending receipt thereof to the extent
necessary to make distributions on the Securities) and shall not be sold or
disposed of prior to maturity. All income and gain realized from any such
investment shall be for the benefit of the Master Servicer and shall be subject
to its withdrawal or order from time to time. The amount of any losses incurred
in respect of any such investments shall be deposited in the Payment Account by
the Master Servicer out of its own funds immediately as realized.
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ARTICLE VI
THE MASTER SERVICER
Section 6.01 LIABILITY OF THE MASTER SERVICER. The Master Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Master Servicer herein.
Section 6.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE MASTER SERVICER. Any corporation into which the Master Servicer may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to the business of the
Master Servicer, shall be the successor of the Master Servicer, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; provided, that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
Home Equity Loans, is reasonably satisfactory to the Indenture Trustee (as
pledgee of the Home Equity Loans), the Issuer and the Credit Enhancer, is
willing to service the Home Equity Loans and executes and delivers to the
Indenture Trustee and the Issuer an agreement, in form and substance reasonably
satisfactory to the Credit Enhancer, the Indenture Trustee and the Issuer, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Master Servicer under this Servicing Agreement; provided, further, that each
Rating Agency's rating of the Securities in effect immediately prior to such
assignment and delegation will not be qualified, reduced, or withdrawn as a
result of such assignment and delegation (as evidenced by a letter to such
effect from each Rating Agency), if determined without regard to the related
Policy; and provided, further, that the Owner Trustee receives an Opinion of
Counsel to the effect that such assignment or delegation shall not cause the
Trust to be treated as a corporation for federal or state income tax purposes.
Section 6.03 LIMITATION ON LIABILITY OF THE MASTER SERVICER AND OTHERS. Neither
the Master Servicer nor any of the directors or officers or employees or agents
of the Master Servicer shall be under any liability to the Issuer, the Owner
Trustee, the Indenture Trustee or the Securityholders for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Servicing Agreement, provided, however, that this provision shall not protect
the Master Servicer or any such Person against any liability which would
otherwise be imposed by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. The Master Servicer
and any director or officer or employee or agent of the Master Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Issuer and held harmless against any loss, liability
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or expense incurred in connection with any legal action relating to this
Servicing Agreement or the Securities, including any amount paid to the Owner
Trustee or the Indenture Trustee pursuant to Section 6.06(b), other than any
loss, liability or expense incurred by reason of its willful misfeasance, bad
faith or gross negligence in the performance of its duties hereunder or by
reason of its reckless disregard of its obligations and duties hereunder. The
Master Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its duties to service the
Home Equity Loans in accordance with this Servicing Agreement, and which in its
opinion may involve it in any expense or liability; provided, however, that the
Master Servicer may in its sole discretion undertake any such action which it
may deem necessary or desirable in respect of this Servicing Agreement, and the
rights and duties of the parties hereto and the interests of the
Securityholders. In such event, the reasonable legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Issuer, and the Master Servicer shall be entitled to be
reimbursed therefor. The Master Servicer's right to indemnity or reimbursement
pursuant to this Section 6.03 shall survive any resignation or termination of
the Master Servicer pursuant to Section 6.04 or 7.01 with respect to any losses,
expenses, costs or liabilities arising prior to such resignation or termination
(or arising from events that occurred prior to such resignation or termination).
Section 6.04 MASTER SERVICER NOT TO RESIGN. Subject to the provisions of Section
6.02, the Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Servicing Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Issuer and the Indenture Trustee in writing and such proposed successor servicer
is reasonably acceptable to the Issuer, the Indenture Trustee and the Credit
Enhancer; (b) each Rating Agency shall have delivered a letter to the Issuer,
the Credit Enhancer and the Indenture Trustee prior to the appointment of the
successor servicer stating that the proposed appointment of such successor
servicer as Master Servicer hereunder will not result in the reduction or
withdrawal of the then current rating of the Securities, if determined without
regard to the related Policy; and (c) such proposed successor servicer is
reasonably acceptable to the Credit Enhancer, as evidenced by a letter to the
Issuer and the Indenture Trustee; provided, however, that no such resignation by
the Master Servicer shall become effective until such successor servicer or, in
the case of (i) above, the Indenture Trustee, as pledgee of the Home Equity
Loans, shall have assumed the Master Servicer's responsibilities and obligations
hereunder or the Indenture Trustee, as pledgee of the Home Equity Loans, shall
have designated a successor servicer in accordance with Section 7.02. Any such
resignation shall not relieve the Master Servicer of responsibility for any of
the obligations specified in Sections 7.01 and 7.02 as obligations that survive
the resignation or termination of the Master Servicer. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Indenture Trustee and the
Credit Enhancer.
Section 6.05 DELEGATION OF DUTIES. In the ordinary course of business, the
Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
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accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 6.04.
Section 6.06 MASTER SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER TRUSTEE'S FEES
AND EXPENSES; INDEMNIFICATION. (a) The Master Servicer covenants and agrees to
pay to the Owner Trustee, the Indenture Trustee and any co-trustee of the
Indenture Trustee or the Owner Trustee from time to time, and the Owner Trustee,
the Indenture Trustee and any such co-trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
each of them in the execution of the trusts created under the Trust Agreement
and the Indenture and in the exercise and performance of any of the powers and
duties under the Trust Agreement or the Indenture, as the case may be, of the
Owner Trustee, the Indenture Trustee and any co-trustee, and the Master Servicer
will pay or reimburse the Indenture Trustee and any co-trustee upon request for
all reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or any co-trustee in accordance with any of the provisions of
this Servicing Agreement except any such expense, disbursement or advance as may
arise from its negligence, willful misfeasance or bad faith.
(b) The Master Servicer agrees to indemnify the Indenture Trustee and the Owner
Trustee for, and to hold the Indenture Trustee and the Owner Trustee, as the
case may be, harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on the part of the Indenture Trustee
or the Owner Trustee, as the case may be, arising out of, or in connection with,
the acceptance and administration of the Issuer and the assets thereof,
including the costs and expenses (including reasonable legal fees and expenses)
of defending the Indenture Trustee or the Owner Trustee, as the case may be,
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Indenture Trustee or Owner Trustee, as
the case may be, shall have given the Master Servicer written notice thereof
promptly after the Indenture Trustee or Owner Trustee, as the case may be, shall
have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Issuer, the Indenture
Trustee or Owner Trustee, as the case may be, shall cooperate and consult fully
with the Master Servicer in preparing such defense; and
(iii) notwithstanding anything in this Servicing Agreement to the contrary, the
Master Servicer shall not be liable for settlement of any claim by the Indenture
Trustee or the Owner Trustee, as the case may be, entered into without the prior
consent of the Master Servicer.
No termination of this Servicing Agreement shall affect the obligations
created by this Section 6.06 of the Master Servicer to indemnify the Indenture
Trustee and the Owner Trustee under the conditions and to the extent set forth
herein.
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Notwithstanding the foregoing, the indemnification provided by the
Master Servicer in this Section 6.06(b) shall not pertain to any loss, liability
or expense of the Indenture Trustee or the Owner Trustee, including the costs
and expenses of defending itself against any claim, incurred in connection with
any actions taken by the Indenture Trustee or the Owner Trustee at the direction
of the Noteholders or Certificateholders, as the case may be, pursuant to the
terms of this Servicing Agreement.
ARTICLE VII
DEFAULT
Section 7.01 SERVICING DEFAULT. If any one of the following events ("Servicing
Default") shall occur and be continuing:
(a) Any failure by the Master Servicer to deposit in the Custodial Account or
Payment Account any deposit required to be made under the terms of this
Servicing Agreement which continues unremedied for a period of five Business
Days after the date upon which written notice of such failure shall have been
given to the Master Servicer by the Issuer or the Indenture Trustee, or to the
Master Servicer, the Issuer and the Indenture Trustee by the Credit Enhancer; or
(b) Failure on the part of the Master Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Master Servicer set
forth in the Securities or in this Servicing Agreement, which failure, in each
case, materially and adversely affects the interests of Securityholders or the
Credit Enhancer and which continues unremedied for a period of 45 days after the
date on which written notice of such failure, requiring the same to be remedied,
and stating that such notice is a "Notice of Default" hereunder, shall have been
given to the Master Servicer by the Issuer or the Indenture Trustee, or to the
Master Servicer, the Issuer and the Indenture Trustee by the Credit Enhancer; or
(c) The entry against the Master Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(d) The Master Servicer shall voluntarily go into liquidation, consent to the
appointment of a conservator, receiver, liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Master Servicer or of or relating to
all or substantially all of its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer and such decree or order shall
have remained in force undischarged, unbonded or unstayed for a period of 60
days; or the Master Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations,
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then, and in every such case, so long as a Servicing Default shall not have been
remedied by the Master Servicer, either the Issuer or the Indenture Trustee,
with the consent of the Credit Enhancer, or the Credit Enhancer, by notice then
given in writing to the Master Servicer (and to the Issuer and the Indenture
Trustee if given by the Credit Enhancer) may terminate all of the rights and
obligations of the Master Servicer as servicer under this Servicing Agreement
other than its right to receive servicing compensation and expenses for
servicing the Home Equity Loans hereunder during any period prior to the date of
such termination and the Issuer or the Indenture Trustee, with the consent of
the Credit Enhancer, or the Credit Enhancer may exercise any and all other
remedies available at law or equity. Any such notice to the Master Servicer
shall also be given to each Rating Agency, the Credit Enhancer and the Issuer.
On or after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer under this Servicing Agreement,
whether with respect to the Securities or the Home Equity Loans or otherwise,
shall pass to and be vested in the Indenture Trustee as pledgee of the Home
Equity Loans, pursuant to and under this Section 7.01; and, without limitation,
the Indenture Trustee is hereby authorized and empowered to execute and deliver,
on behalf of the Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Home
Equity Loan and related documents, or otherwise. The Master Servicer agrees to
cooperate with the Indenture Trustee in effecting the termination of the
responsibilities and rights of the Master Servicer hereunder, including, without
limitation, the transfer to the Indenture Trustee for the administration by it
of all cash amounts relating to the Home Equity Loans that shall at the time be
held by the Master Servicer and to be deposited by it in the Custodial Account,
or that have been deposited by the Master Servicer in the Custodial Account or
thereafter received by the Master Servicer with respect to the Home Equity
Loans. All reasonable costs and expenses (including, but not limited to,
attorneys' fees) incurred in connection with amending this Servicing Agreement
to reflect such succession as Master Servicer pursuant to this Section 7.01
shall be paid by the predecessor Master Servicer (or if the predecessor Master
Servicer is the Indenture Trustee, the initial Master Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a payment on a Home Equity Loan which was due prior to the notice
terminating the Master Servicer's rights and obligations hereunder and received
after such notice, that portion to which the Master Servicer would have been
entitled pursuant to Sections 3.03 and 3.09 as well as its Master Servicing Fee
in respect thereof, and any other amounts payable to the Master Servicer
hereunder the entitlement to which arose prior to the termination of its
activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 7.01(a) or under Section 7.01(b) after the applicable grace
periods specified in such Sections, shall not constitute a Servicing Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
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of God or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Master Servicer from using reasonable efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Servicing
Agreement and the Master Servicer shall provide the Indenture Trustee, the
Credit Enhancer and the Securityholders with notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Master Servicer shall immediately notify the Indenture Trustee, the Credit
Enhancer and the Owner Trustee in writing of any Servicing Default.
Section 7.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.01 or sends a notice pursuant to Section 6.04, the
Indenture Trustee as pledgee of the Home Equity Loans shall be the successor in
all respects to the Master Servicer in its capacity as servicer under this
Servicing Agreement and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Master Servicer by the terms and provisions hereof.
Nothing in this Servicing Agreement or in the Trust Agreement shall be construed
to permit or require the Indenture Trustee to (i) succeed to the
responsibilities, duties and liabilities of the initial Master Servicer in its
capacity as Seller under the Purchase Agreement, (ii) be responsible or
accountable for any act or omission of the Master Servicer prior to the issuance
of a notice of termination hereunder, (iii) require or obligate the Indenture
Trustee, in its capacity as successor Master Servicer, to purchase, repurchase
or substitute any Home Equity Loan, (iv) fund any Additional Balances with
respect to any Home Equity Loan, (v) fund any losses on any Permitted Investment
directed by any other Master Servicer, or (vi) be responsible for the
representations and warranties of the Master Servicer. As compensation therefor,
the Indenture Trustee shall be entitled to such compensation as the Master
Servicer would have been entitled to hereunder if no such notice of termination
had been given. Notwithstanding the above, (i) if the Indenture Trustee is
unwilling to act as successor Master Servicer, or (ii) if the Indenture Trustee
is legally unable so to act, the Indenture Trustee as pledgee of the Home Equity
Loans may (in the situation described in clause (i)) or shall (in the situation
described in clause (ii)) appoint or petition a court of competent jurisdiction
to appoint any established housing and home finance institution, bank or other
mortgage loan or home equity loan servicer having a net worth of not less than
$10,000,000 as the successor to the Master Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder; provided, that any such successor Master Servicer shall be
acceptable to the Credit Enhancer, as evidenced by the Credit Enhancer's prior
written consent which consent shall not be unreasonably withheld and provided
further that the appointment of any such successor Master Servicer will not
result in the qualification, reduction or withdrawal of the ratings assigned to
the Securities by the Rating Agencies, if determined without regard to the
related Policy. Pending appointment of a successor to the Master Servicer here
under, unless the Indenture Trustee is prohibited by law from so acting, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the successor shall be entitled
to receive compensation out of payments on Home Equity Loans in an amount equal
to the compensation which the Master Servicer would otherwise have received
pursuant to Section 3.09 (or such lesser compensation as the Indenture Trustee
and such successor shall agree). The appointment of a successor Master Servicer
shall not affect any liability of the predecessor Master Servicer which may have
arisen under this Servicing Agreement prior to its termination as Master
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Servicer (including, without limitation, the obligation to purchase Home Equity
Loans pursuant to Section 3.01, to pay any deductible under an insurance policy
pursuant to Section 3.04 or to indemnify the Indenture Trustee pursuant to
Section 6.06), nor shall any successor Master Servicer be liable for any acts or
omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Indenture Trustee and such successor shall
take such action, consistent with this Servicing Agreement, as shall be
necessary to effectuate any such succession.
(b) Any successor, including the Indenture Trustee, to the Master Servicer as
servicer shall during the term of its service as servicer (i) continue to
service and administer the Home Equity Loans for the benefit of the
Securityholders, (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13 and (iii) be bound by the terms of the Insurance Agreement.
(c) Any successor Master Servicer, including the Indenture Trustee, shall not be
deemed in default or to have breached its duties hereunder if the predecessor
Master Servicer shall fail to deliver any required deposit to the Custodial
Account or otherwise cooperate with any required servicing transfer or
succession hereunder.
(d) In connection with the termination or resignation of the Master Servicer
hereunder, either (i) the successor Master Servicer, including the Indenture
Trustee if the Indenture Trustee is acting as successor Master Servicer, shall
represent and warrant that it is a member of MERS in good standing and shall
agree to comply in all material respects with the rules and procedures of MERS
in connection with the servicing of the Home Equity Loans that are registered
with MERS, in which case the predecessor Master Servicer shall cooperate with
the successor Master Servicer in causing MERS to revise its records to reflect
the transfer of servicing to the successor Master Servicer as necessary under
MERS' rules and regulations, or (ii) the predecessor Master Servicer shall
cooperate with the successor Master Servicer in causing MERS to execute and
deliver an assignment of Mortgage in recordable form to transfer the Mortgage
from MERS to the Indenture Trustee and to execute and deliver such other
notices, documents and other instruments as may be necessary or desirable to
effect a transfer of such Home Equity Loan or servicing of such Home Equity Loan
on the MERS(R) System to the successor Master Servicer. The predecessor Master
Servicer shall file or cause to be filed any such assignment in the appropriate
recording office. The predecessor Master Servicer shall bear any and all fees of
MERS, costs of preparing any assignments of Mortgage, and fees and costs of
filing any assignments of Mortgage that may be required under this subsection
(d). The successor Master Servicer shall cause such assignment to be delivered
to the Indenture Trustee or the Custodian promptly upon receipt of the original
with evidence of recording thereon or a copy certified by the public recording
office in which such assignment was recorded.
Section 7.03 NOTIFICATION TO SECURITYHOLDERS. Upon any termination of or
appointment of a successor to the Master Servicer pursuant to this Article VII
or Section 6.04, the Indenture Trustee shall give prompt written notice thereof
to the Securityholders, the Credit Enhancer, the Issuer and each Rating Agency.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 AMENDMENT. This Servicing Agreement may be amended from time to
time by the parties hereto, provided that any amendment be accompanied by a
letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Securities, if
determined without regard to the related Policy, and a tax opinion to the effect
that neither such amendment nor any action permitted by such amendment and not
otherwise permitted by this Agreement will cause any of REMIC I, REMIC II or
REMIC III to fail to qualify as a REMIC or, except as permitted pursuant to the
provisions of Section 11.01(f) of the Indenture, give rise to the imposition of
a tax on "prohibited transactions" of a REMIC, or prohibited contributions to a
REMIC, on any REMIC I, REMIC II or REMIC III and provided further, that the
Credit Enhancer and the Indenture Trustee shall consent thereto.
Section 8.02 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 8.03 NOTICES. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
at or mailed by certified mail, return receipt requested, to (a) in the case of
the Master Servicer, 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000-0000,
Attention: Director - Bond Administration, (b) in the case of the Depositor,
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000,
Attention: President, (c) in the case of the Credit Enhancer, Financial Guaranty
Insurance Company, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Research and Risk Management (Home Equity Loan Trust 2002-HS3), (d) in the case
of Standard & Poor's, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Residential Mortgage Surveillance Group, (e) in the case of Moody's, 00 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: ABS Monitoring Department, (f) in
the case of the Owner Trustee, Wilmington Trust Company, Xxxxxx Square North,
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate
Trust Administration, (g) in the case of the Issuer, to Home Equity Loan Trust
2002-HS3, c/o Owner Trustee, Wilmington Trust Company, Xxxxxx Square North, 0000
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate Trust
Administration, (h) in the case of the Indenture Trustee, JPMorgan Chase Bank,
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention:
Institutional Trust Services/Structured Finance Services--2002-HS3 and (i) in
the case of the Underwriters, to Xxxxxxx Xxxxx Xxxxxx Inc., 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: General Counsel, and to Residential
Funding Securities Corporation, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxx 00000-0000, Attention: Director of Compliance; or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party. Any notice required or permitted to be mailed to a
Securityholder shall be given by first class mail, postage prepaid, at the
address of such Securityholder as shown in the Register. Any notice so mailed
within the time prescribed in this Servicing Agreement shall be conclusively
presumed to have been duly given, whether or not the Securityholder receives
such notice. Any notice or other document required to be delivered or mailed by
the Indenture Trustee to any Rating Agency shall be given on a reasonable
efforts basis and only as a matter of courtesy and accommodation and the
Indenture Trustee shall have no liability for failure to delivery such notice or
document to any Rating Agency.
37
Section 8.04 SEVERABILITY OF PROVISIONS. If any one or more of the covenants,
agreements, provisions or terms of this Servicing Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Servicing Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Servicing Agreement
or of the Securities or the rights of the Securityholders thereof.
Section 8.05 THIRD-PARTY BENEFICIARIES. This Servicing Agreement will inure to
the benefit of and be binding upon the parties hereto, the Securityholders, the
Credit Enhancer, the Owner Trustee and their respective successors and permitted
assigns. Except as otherwise provided in this Servicing Agreement, no other
Person will have any right or obligation hereunder.
Section 8.06 COUNTERPARTS. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
Section 8.07 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 8.08 TERMINATION UPON PURCHASE BY THE MASTER SERVICER OR LIQUIDATION OF
HOME EQUITY LOANS. (a) The respective obligations and responsibilities of the
Master Servicer, the Issuer and the Indenture Trustee created hereby shall
terminate upon the last action required to be taken by the Issuer pursuant to
the Trust Agreement and by the Indenture Trustee pursuant to the Indenture
following the earlier of:
(i) the date on or before which the Indenture or Trust Agreement is terminated;
or
(ii) the purchase by the Master Servicer of all Home Equity Loans and all
property acquired in respect of any Home Equity Loan remaining in the Trust
(other than the Group I Policy and the Group II Policy).
(b) The right of the Master Servicer to purchase the Group I Loans is
conditioned upon the Pool Balance for Loan Group I as of such date (after
application of payments received during the related Collection Period) being
less than ten percent of the aggregate of the Cut-off Date Loan Balances of the
Group I Loans; provided, however, that no such purchase will be permitted if it
would result in a draw under the related Policy, unless the Credit Enhancer
consents in writing to the purchase. The right of the Master Servicer to
purchase the Group II Loans is conditioned upon the Pool Balance for Loan Group
II as of such date (after application of payments received during the related
Collection Period) being less than ten percent of the aggregate of the Cut-off
38
Date Loan Balances of the Group II Loans; provided, however, that no such
purchase will be permitted if it would result in a draw under the related
Policy, unless the Credit Enhancer consents in writing to the purchase. The
purchase by the Master Servicer of either the Group I Loans or the Group II
Loans and all property acquired (including REO Property) in respect of such Home
Equity Loans shall be at a price equal to 100% of the unpaid Loan Balance of
each Home Equity Loan in the related Loan Group, plus accrued and unpaid
interest on each such Home Equity Loan, at the applicable Net Loan Rate, plus
the related Policy premium rate, up to the first day of the month in which such
amounts are to be distributed to Securityholders, or in the case of REO
Property, the fair market value of the REO Property, plus any amounts due and
owing to the Credit Enhancer under the Insurance Agreement (any unpaid Master
Servicing Fee shall be deemed paid at such time). If such right is exercised by
the Master Servicer, the Master Servicer shall deposit the amount calculated
pursuant to this Section 8.08(b) with the Indenture Trustee for deposit in the
Payment Account and, upon the receipt of such deposit, the Indenture Trustee or
Custodian shall release to the Master Servicer, the files pertaining to the Home
Equity Loans being purchased.
(c) In addition to the foregoing, on any Payment Date on which the Pool Balance
of a Loan Group (after application of payment received during the related
Collection Period) is less than ten percent of the aggregate of the Cut-off Date
Loan Balances of the Home Equity Loans in such Loan Group, the Master Servicer
shall have the right, at its option, to purchase the related Notes in whole, but
not in part, at a price equal to the outstanding Security Balance of the related
Notes (other than the Class A-I-IO Notes) plus the sum of Interest Distribution
Amount thereon for the related Interest Period and any previously unpaid
Interest Distribution Amount, plus any amounts due to the Credit Enhancer under
the Insurance Agreement. Any such purchase of the Class A-I-IO Notes as
discussed above will be made at a price equal to the sum of the interest accrued
thereon during the related Interest Period; provided, however, that no such
purchase will be permitted if it would result in a draw under the related
Policy, unless the Credit Enhancer consents in writing to the purchase. If the
Master Servicer exercises this right to purchase the outstanding Class I Notes
or Class II Notes, the Master Servicer will promptly purchase the related Home
Equity Loans pursuant to this Section 8.08.
(d) The Master Servicer, at its expense, shall prepare and deliver to the
Indenture Trustee for execution, at the time the Home Equity Loans are to be
released to the Master Servicer, appropriate documents assigning each such Home
Equity Loan from the Indenture Trustee or the Issuer to the Master Servicer or
the appropriate party.
Section 8.09 CERTAIN MATTERS AFFECTING THE INDENTURE TRUSTEE. For all purposes
of this Servicing Agreement, in the performance of any of its duties or in the
exercise of any of its powers hereunder, the Indenture Trustee shall be subject
to and entitled to the benefits of Article VI of the Indenture.
Section 8.10 OWNER TRUSTEE NOT LIABLE FOR RELATED DOCUMENTS. The recitals
contained herein shall be taken as the statements of the Depositor, and the
Owner Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Servicing Agreement, of any Basic Document or of the Certificates (other than
the signatures of the Owner Trustee on the Certificates) or the Notes, or of any
Related Documents. The Owner Trustee shall at no time have any responsibility or
39
liability with respect to the sufficiency of the Owner Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under
the Trust Agreement or the Noteholders under the Indenture, including, the
compliance by the Depositor or the Seller with any warranty or representation
made under any Basic Document or in any related document or the accuracy of any
such warranty or representation, or any action of the Certificate Paying Agent,
the Certificate Registrar or the Indenture Trustee taken in the name of the
Owner Trustee.
40
IN WITNESS WHEREOF, the Master Servicer, the Indenture Trustee and the
Issuer have caused this Servicing Agreement to be duly executed by their
respective officers or representatives all as of the day and year first above
written.
RESIDENTIAL FUNDING CORPORATION,
as Master Servicer
By: /s/ Xxxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Director
HOME EQUITY LOAN TRUST 2002-HS3
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
JPMORGAN CHASE BANK,
as Indenture Trustee
By: /s/ Sora Jun
--------------------------------------
Name: Sora Jun
Title: Trust Officer
41
EXHIBIT A
HOME EQUITY LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
EXHIBIT B
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PREMISES:
That JPMorgan Chase Bank, as Indenture Trustee (the "Indenture
Trustee"), under the Indenture (the "Indenture") between Home Equity Loan Trust
2002-HS3 and the Indenture Trustee, a national banking association organized and
existing under the laws of the State of New York, and having its principal
office located at 000 Xxxx 00xx Xxxxxx, in the City of New York in the State of
New York, hath made, constituted and appointed, and does by these presents make,
constitute and appoint Residential Funding Corporation, a corporation organized
and existing under the laws of the State of Delaware, its true and lawful
Attorney-in-Fact, with full power and authority to sign, execute, acknowledge,
deliver, file for record, and record any instrument on its behalf and to perform
such other act or acts as may be customarily and reasonably necessary and
appropriate to effectuate the following enumerated transactions in respect of
any of the mortgages or deeds of trust (the "Mortgages" and the "Deeds of
Trust", respectively) creating a trust or second lien or an estate in fee simple
interest in real property securing a Home Equity Loan and promissory notes
secured thereby (the "Mortgage Notes") for which the undersigned is acting as
Indenture Trustee for various Securityholders (whether the undersigned is named
therein as mortgagee or beneficiary or has become mortgagee by virtue of
Endorsement of the Mortgage Note secured by any such Mortgage or Deed of Trust)
and for which Residential Funding Corporation is acting as master servicer
pursuant to a Servicing Agreement, dated as of September 27, 2002 (the
"Servicing Agreement").
This appointment shall apply only to transactions which the Indenture
Trustee is authorized to enter into under the Indenture, but in no event shall
apply to any transactions other than the following enumerated transactions only:
1. The modification or re-recording of a Mortgage or Deed of Trust, where said
modification or re-recording is for the purpose of correcting the Mortgage or
Deed of Trust to conform same to the original intent of the parties thereto or
to correct title errors discovered after such title insurance was issued and
said modification or re-recording, in either instance, does not adversely affect
the lien of the Mortgage or Deed of Trust as insured.
2. The subordination of the lien of a Mortgage or Deed of Trust to an easement
in favor of a public utility company or a government agency or unit with powers
of eminent domain; this section shall include, without limitation, the execution
of partial satisfactions/releases, partial reconveyances or the execution of
requests to trustees to accomplish same.
3. With respect to a Mortgage or Deed of Trust, the foreclosure, the taking of a
deed in lieu of foreclosure, or the completion of judicial or non-judicial
foreclosure or termination, cancellation or rescission of any such foreclosure,
including, without limitation, any and all of the following acts:
a. The substitution of trustee(s) serving under a Deed of Trust, in
accordance with state law and the Deed of Trust;
1
b. Statements of breach or non-performance;
c. Notices of default;
d. Cancellations/rescissions of notices of default and/or notices of
sale;
e. The taking of a deed in lieu of foreclosure; and
f. Such other documents and actions as may be necessary under the
terms of the Mortgage, Deed of Trust or state law to expeditiously
complete said transactions.
4. The conveyance of the properties to the mortgage insurer, or the closing of
the title to the property to be acquired as real estate owned, or conveyance of
title to real estate owned.
5. The completion of loan assumption agreements.
6. The full satisfaction/release of a Mortgage or Deed of Trust or full
reconveyance upon payment and discharge of all sums secured thereby, including,
without limitation, cancellation of the related Mortgage Note.
7. The assignment of any Mortgage or Deed of Trust and the related Mortgage
Note, in connection with the repurchase of the Home Equity Loan secured and
evidenced thereby pursuant to the requirements of a Residential Funding
Corporation Seller Contract, including, with limitation, by reason of conversion
of an adjustable rate mortgage loan from a variable rate to a fixed rate.
8. The full assignment of a Mortgage or Deed of Trust upon payment and discharge
of all sums secured thereby in conjunction with the refinancing thereof,
including, without limitation, the endorsement of the related Mortgage Note.
9. The modification or re-recording of a Mortgage or Deed of Trust, where said
modification or re-recording is for the purpose of any modification pursuant to
Section 3.01 of the Servicing Agreement.
10. The subordination of the lien of a Mortgage or Deed of Trust, where said
subordination is in connection with any modification pursuant to Section 3.01 of
the Servicing Agreement, and the execution of partial satisfactions/releases in
connection with such same Section 3.01.
The undersigned gives said Attorney-in-Fact full power and authority to execute
such instruments and to do and perform all and every act and thing necessary and
proper to carry into effect the power or powers granted by or under this Limited
Power of Attorney as fully as the undersigned might or could do, and hereby does
ratify and confirm to all that said Attorney-in-Fact shall lawfully do or cause
to be done by authority hereof.
2
Third parties without actual notice may rely upon the exercise of the power
granted under this Limited Power of Attorney; and may be satisfied that this
Limited Power of Attorney shall continue in full force and effect has not been
revoked unless an instrument of revocation has been made in writing by the
undersigned.
JPMORGAN CHASE BANK, not in its individual
capacity, but solely as Indenture Trustee under
the Indenture
By:
--------------------------------------
Name:
Title:
STATE OF )
SS.
COUNTY OF )
On this th day of , 2002, before me the undersigned, Notary Public of
said State, personally appeared personally known to me to be duly authorized
officers of JPMorgan Chase Bank that executed the within instrument and
personally known to me to be the persons who executed the within instrument on
behalf of JPMorgan Chase Bank therein named, and acknowledged to me such
JPMorgan Chase Bank executed the within instrument pursuant to its by-laws.
WITNESS my hand and official seal.
Notary Public in and for the
State of _____________
After recording, please mail to:
Attn:____________________
3
EXHIBIT C
FORM OF REQUEST FOR RELEASE
DATE:
TO:
Re: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Home Equity Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Home Equity Loan Prepaid in Full
Home Equity Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
Residential Funding Corporation
Authorized Signature
.................................................................................
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other:
Name
Title
Date
1
EXHIBIT D
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF
HOME EQUITY LOAN
________, 20 ____
Residential Funding Mortgage Securities II, Inc.
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
JPMorgan Chase Bank
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Residential Funding Corporation Series 2002-HS3
Re: Home Equity Loan Pass-Through Certificates,
Series 2002-HS3, Assignment of Home Equity Loan
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment by
__________ (the "Indenture Trustee") to ______________ (the "Lender") of (the
"Home Equity Loan") pursuant to Section 3.05 of the Servicing Agreement (the
"Servicing Agreement"), dated as of September 1, 2002 among Home Equity Loan
Trust 2002-HS3, as issuer, Residential Funding Corporation, as master servicer,
and the Indenture Trustee. All terms used herein and not otherwise defined shall
have the meanings set forth in the Servicing Agreement. The Lender hereby
certifies, represents and warrants to, and covenants with, the Master Servicer
and the Indenture Trustee that:
(i) the Home Equity Loan is secured by Mortgaged Property located
in a jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a
refinancing of such Home Equity Loan and the form of the transaction is solely
to comply with, or facilitate the transaction under, such local laws;
(iii) the Home Equity Loan following the proposed assignment will
be modified to have a rate of interest at least 0.25 percent below or above the
rate of interest on such Home Equity Loan prior to such proposed assignment; and
(iv) such assignment is at the request of the borrower under the
related Home Equity Loan.
Very truly yours,
(Lender)
By:
-------------------------------
Name:
Title:
EXHIBIT E
FORM OF FORM 10-K CERTIFICATION
I, [identify the certifying individual], certify that:
1. I have reviewed the annual report on Form 10-K for the fiscal year
[____], and all reports on Form 8-K containing distribution or servicing reports
filed in respect of periods included in the year covered by that annual report,
of the trust (the "Trust") created pursuant to the Trust Agreement, dated as of
September 23, 2002 between the Depositor and Wilmington Trust Company, as owner
trustee (the "Owner Trustee"), as amended and restated by the Amended and
Restated Trust Agreement, dated as of September 27, 2002 between the Depositor
and the Owner Trustee (the "Trust Agreement"). [The Home Equity Loans were
serviced by the Master Servicer pursuant to a Servicing Agreement (the
"Servicing Agreement"), dated as of September 27, 2002, among the Master
Servicer, the Issuer and the Indenture Trustee. ]
2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
last day of the period covered by that annual report;
3. Based on my knowledge, the servicing information required to be provided
to the Indenture Trustee by the Master Servicer under the Servicing Agreement is
included in these reports;
4. I am responsible for reviewing the activities performed by the Master
Servicer under the Servicing Agreement and based upon the review required under
the Servicing Agreement, and, except as disclosed in the report, the Master
Servicer has fulfilled its obligations under the Servicing Agreement; and
5. I have disclosed to the Depositor's certified public accountants all
significant deficiencies relating to the Master Servicer's compliance with the
minimum servicing standards in accordance with a review conducted in compliance
with the Uniform Single Attestation Program for Mortgage Bankers as set forth in
the Servicing Agreement.
Date:_______________________
____________________________*
Name:
Title:
* to be signed by the senior officer in charge of the servicing functions of
the Master Servicer
