EXHIBIT 4.2
SALE AND SERVICING AGREEMENT
Dated as of [ ]
among
Household Mortgage Funding Corporation III
(Depositor)
[ ]MORTGAGE LOAN TRUST 200_-_
(Trust)
[ ]
(Master Servicer)
and
[ ]
(Indenture Trustee)
[ ] MORTGAGE LOAN TRUST 200_-_
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS
Section 1.01 Definitions..............................................................................2
Section 1.02 Other Definitional Provisions...........................................................19
Section 1.03 Interest Calculations...................................................................19
ARTICLE II. CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01 Acknowledgment; Conveyance of Mortgage Loans;
Custody of Mortgage Files...............................................................20
Section 2.02 Acceptance by Indenture Trustee; Repurchase of Mortgage Loans;
Conveyance of Eligible Substitute Mortgage Loans........................................23
Section 2.03 Representations, Warranties and Covenants of the Master Servicer........................25
Section 2.04 Representations and Warranties of the Depositor Regarding this
Agreement and the Mortgage Loans; Repurchases
and Substitutions.......................................................................26
Section 2.05 Tax Treatment...........................................................................31
ARTICLE III. ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 The Master Servicer.....................................................................32
Section 3.02 Collection of Certain Mortgage Loan Payments............................................34
Section 3.03 Withdrawals from the Collection Account.................................................36
Section 3.04 Maintenance of Hazard Insurance; Property Protection Expenses...........................37
Section 3.05 Assumption and Modification Agreements..................................................38
Section 3.06 Realization Upon Defaulted Mortgage Loans...............................................39
Section 3.07 [Reserved]..............................................................................39
Section 3.08 Indenture Trustee to Cooperate..........................................................39
Section 3.09 Servicing Compensation; Payment of Certain Expenses by
Master Servicer.........................................................................40
Section 3.10 Annual Statement as to Compliance.......................................................40
Section 3.11 Annual Servicing Report.................................................................41
Section 3.12 Access to Certain Documentation and Information Regarding the Mortgage Loans............41
Section 3.13 Maintenance of Certain Servicing Insurance Policies.....................................42
Section 3.14 Reports to the Securities and Exchange Commission.......................................42
Section 3.15 [Reserved]..............................................................................42
Section 3.16 Information Required by the Internal Revenue Service Generally and
Reports of Foreclosures and Abandonments of Mortgaged Property..........................42
Section 3.17 Additional Covenants of HFC.............................................................42
Section 3.18 Servicing Certificate...................................................................43
i
ARTICLE IV. INSURER
Section 4.01 [Claims upon the Insurance Policy]......................................................46
Section 4.02 [Effect of Payments by the Insurer; Subrogation]........................................47
Section 4.03 [Reserved]..............................................................................47
Section 4.04 [Reserved]..............................................................................47
Section 4.05 [Replacement Insurance Policy]..........................................................47
ARTICLE V. PRIORITY OF DISTRIBUTIONS; STATEMENTS
TO NOTEHOLDERS; RIGHTS OF NOTEHOLDERS
Section 5.01 Distributions...........................................................................48
Section 5.02 Calculation of the Class A Note Rate....................................................49
Section 5.03 Statements to Noteholders...............................................................49
ARTICLE VI. THE MASTER SERVICER AND THE DEPOSITOR
Section 6.01 Liability of the Master Servicer and the Depositor......................................53
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Master
Servicer or the Depositor...............................................................53
Section 6.03 Limitation on Liability of the Master Servicer, the Depositor and Others................53
Section 6.04 Master Servicer Not to Resign...........................................................54
Section 6.05 Delegation of Duties....................................................................54
ARTICLE VII. MASTER SERVICER TERMINATION
Section 7.01 Master Servicer Termination Events......................................................56
Section 7.02 Indenture Trustee to Act; Appointment of Successor......................................57
Section 7.03 Waiver of Defaults......................................................................58
Section 7.04 Notification to Class A Noteholders.....................................................59
ARTICLE VIII. TERMINATION
Section 8.01 Termination.............................................................................60
ARTICLE IX. MISCELLANEOUS PROVISIONS
Section 9.01 Amendment...............................................................................62
Section 9.02 Recordation of Agreement................................................................63
Section 9.03 Duration of Agreement...................................................................63
Section 9.04 Governing Law...........................................................................63
Section 9.05 Notices.................................................................................63
Section 9.06 Severability of Provisions..............................................................64
Section 9.07 No Partnership..........................................................................64
Section 9.08 Counterparts............................................................................64
Section 9.09 Successors and Assigns..................................................................64
Section 9.10 Headings................................................................................64
ii
Section 9.11 Indenture Trustee.......................................................................64
Section 9.12 Reports to Rating Agencies..............................................................64
Section 9.13 Inconsistencies Among Transaction Documents.............................................65
Section 9.14 [Rights of the Insurer to Exercise Rights of Noteholders]...............................65
Section 9.15 Limitation on Voting of Preferred Stock.................................................65
Section 9.16 Perfection Representations..............................................................65
EXHIBITS
SCHEDULE 1 Perfection Representations, Warranties and Covenants
EXHIBIT A Mortgage Loan Schedule
EXHIBIT B Form of Monthly Statement to Noteholders
EXHIBIT C Form of Servicing Certificate
EXHIBIT D Form of Liquidation Report
EXHIBIT E Form of Class A Notes
EXHIBIT F [Specimen of the Insurance Policy]
EXHIBIT G Custodial Fee Letter
iii
This
Sale and Servicing Agreement (the "Agreement") is entered into
effective as of [ ], among [ ] MORTGAGE LOAN TRUST 200_-_, a Delaware
business trust (the "Trust"), Household Mortgage Funding Corporation III, a
Delaware Corporation, as depositor (the "Depositor"), [ ], a [ ]
corporation, as master servicer (the "Master Servicer"), and [Indenture
Trustee], a [ ] banking corporation, as Indenture Trustee on behalf of the Class
A Noteholders (in such capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Trust desires to purchase from the Depositor a pool of
Mortgage Loans which were acquired by the Depositor from various sellers;
WHEREAS, the Depositor, concurrently with the execution of this Agreement,
purchased the Mortgage Loans from the sellers pursuant to various Mortgage Loan
Purchase Agreements (the "Mortgage Loan Purchase Agreements");
WHEREAS, the Master Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
ACCRUAL PERIOD: [ ].
AFFILIATE: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
AGREEMENT: This
Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
APPRAISED VALUE: As to any Mortgage Loan, the appraised value of the
related Mortgaged Property based upon the appraisal used by the applicable
Seller at the time of origination of such Mortgage Loan (or any mortgage loan
made by the Seller on the Mortgaged Property that the Mortgage Loan replaced);
provided that if the Mortgage Loan was originated simultaneously with or not
more than 12 months after another mortgage was placed on the related Mortgaged
Property, the lesser of the Appraised Value at origination of the other mortgage
and the sales price, if any, of the related Mortgaged Property.
ASSIGNMENT EVENT: [ ].
ASSIGNMENT OF MORTGAGE: With respect to any Mortgage, an assignment, notice
of transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction in which the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Indenture Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
AVAILABLE DISTRIBUTION AMOUNT: As to any Payment Date, the sum of (A) the
sum, without duplication, of all amounts described in clauses (i) through (iv),
inclusive, of Section 3.02(b) received by the Master Servicer with respect to
the related Collection Period and deposited in the Collection Account, and (B)
Insured Payments, if any.
[AVOIDED PAYMENT: As defined in Section 4.01 hereto.]
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
2
BOOK-ENTRY NOTE: Any Class A Note registered in the name of the Depository
or its nominee, ownership of which is reflected on the books of the Depository
or on the books of a Person maintaining an account with such Depository
(directly or as an indirect participant in accordance with the rules of such
Depository).
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of
New York or Illinois are required
or authorized by law to be closed.
CHARGE OFF AMOUNT: As to any Charged Off Mortgage Loan and Collection
Period, an amount equal to the amount of the Principal Balance that the Master
Servicer has charged off on its servicing records during such Collection Period.
CHARGED OFF MORTGAGE LOAN: A defaulted Mortgage Loan that is not a
Liquidated Mortgage Loan and as to which (i) collection procedures are ongoing
and (ii) the Master Servicer has charged off all or a portion of the related
Principal Balance.
CLASS A NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: [ ].
CLASS A NOTE: Any Class A Note executed by the Trust and authenticated by
the Indenture Trustee substantially in the form set forth in Exhibit E hereto.
CLASS A NOTE OWNER: The Person who is the beneficial owner of a Book-Entry
Note.
CLASS A NOTE PRINCIPAL AMOUNT: With respect to any date of determination,
(a) the Original Class A Note Principal Amount less (b) the aggregate of amounts
distributed as principal to the Class A Noteholders on previous Payment Dates.
CLASS A NOTE RATE: [ ].
CLASS A NOTEHOLDER OR HOLDER: The Person in whose name a Class A Note is
registered in the Note Register, except that, solely for the purpose of giving
any consent, direction, waiver or request pursuant to this Agreement, (x) any
Class A Note registered in the name of the Depositor or any Person actually
known to a Responsible Officer to be an Affiliate of the Depositor (y) any Class
A Note for which the Depositor or any Person actually known to a Responsible
Officer to be an Affiliate of the Depositor is the Class A Note Owner shall be
deemed not to be outstanding (unless to the actual knowledge of a Responsible
Officer (i) the Seller or the Depositor, or such Affiliate, is acting as trustee
or nominee for a Person who is not an Affiliate of the Depositor and who makes
the voting decision with respect to such Class A Note or (ii) the Depositor, or
such Affiliate, is the Class A Note Owner of all the Class A Notes) and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
effect any such consent, direction, waiver or request has been obtained and (z)
the Insurer shall be deemed to be the owner of 100% of the Class A Notes so long
as no Insurer Default is then continuing.
CLASS A NOTE PRINCIPAL DISTRIBUTION: [ ]
CLOSING DATE: [ ].
3
CODE: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
COLLECTION ACCOUNT: The custodial account or accounts created and
maintained for the benefit of the Class A Noteholders, the Ownership Interest
and the Insurer pursuant to Section 3.02(b). The Collection Account shall be an
Eligible Account.
COLLECTION PERIOD: As to any Payment Date and Mortgage Loan, the calendar
month immediately preceding the month in which such Payment Date occurs, except
that with respect to the initial Payment Date, the Collection Period is the
period from [ ] to [ ].
COMBINED LOAN-TO-VALUE RATIO OR CLTV: As to each Mortgage Loan, a ratio,
expressed as a percentage, the numerator of which is the sum of (a) the original
Principal Balance of the Mortgage Loan and (b) the aggregate unpaid principal
balance, at the time of origination of the Mortgage Loan, of all other mortgage
loans, if any, secured by liens senior to that Mortgage Loan on the related
Mortgaged Property, and the denominator of which is the Appraised Value of the
Mortgaged Property.
CORPORATE TRUST OFFICE: The principal office of the Indenture Trustee at
which at any particular time its corporate business shall be administered, which
office on the Closing Date is located at [ ], Attention: [ ].
CURRENT INTEREST: As to the Class A Notes and any Payment Date, the
interest accrued at the Class A Note Rate during the Accrual Period on the
aggregate Class A Note Principal Amount.
CUSTODIAL FEE: The fees and expenses as set forth in the fee letter between
[ ] and [ ], as of [ ], attached as Exhibit G hereto.
CUT-OFF DATE: As to a Mortgage Loan, the close of business on [ ].
CUT-OFF DATE POOL BALANCE: The aggregate of the Cut-Off Date Principal
Balances of the Mortgage Loans.
CUT-OFF DATE PRINCIPAL BALANCE: As to any Mortgage Loan, the unpaid
principal balance thereof as of the Cut-Off Date or, as to any Eligible
Substitute Mortgage Loan, as of the date of substitution of such Eligible
Substitute Mortgage Loan.
DEFECTIVE MORTGAGE LOAN: Any Mortgage Loan subject to repurchase or
substitution pursuant to Section 2.02 or 2.04.
DEFINITIVE NOTES: As defined in the Indenture.
DEPOSIT DATE: As to any Payment Date, the Business Day immediately
preceding such Payment Date.
4
DEPOSIT EVENT: The lowering of the Master Servicer's short-term debt rating
below "P-1" by Xxxxx'x, "A-1" by Standard & Poor's or "F1" by Fitch or any time
in which HFC shall cease to be the Master Servicer.
DEPOSITOR: Household Mortgage Funding Corporation III, a Delaware
corporation.
DEPOSITORY: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of Class A Notes
evidencing $[ ] in initial aggregate principal amount of the Class A Notes.
The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(a)(5) of the UCC of the State of
New York.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: As to any Payment Date, the second Business Day prior
to such Payment Date.
DISTRIBUTABLE EXCESS CASHFLOW: As to any Payment Date, the lesser of (i)
the Excess Cashflow for such Payment Date and (ii) the Interim
Overcollateralization Deficiency, if any, for such Payment Date.
ELECTRONIC LEDGER: The electronic master record of mortgage loans
(including the Mortgage Loans) maintained by the Master Servicer.
ELIGIBLE ACCOUNT: An account that is either (i) maintained with a
depository institution whose short-term debt obligations at the time of any
deposit therein are rated in the highest short-term debt rating category by the
Rating Agencies, (ii) an account or accounts maintained with a depository
institution with a long-term unsecured debt rating by each Rating Agency that is
at least investment grade, provided that the deposits in such account or
accounts are fully insured by either the BIF or the SAIF, (iii) a segregated
trust account maintained on the corporate trust side with the Indenture Trustee
in its fiduciary capacity, or (iv) an account otherwise acceptable to each
Rating Agency, as evidenced by a letter to such effect from each such Rating
Agency to the Indenture Trustee, without reduction or withdrawal of the
then-current ratings of the Class A Notes.
ELIGIBLE SUBSTITUTE MORTGAGE LOAN: A Mortgage Loan substituted (a) by the
Depositor or the Master Servicer for a Defective Mortgage Loan pursuant to
Section 2.02(a) or 2.04 or (b) by the Master Servicer pursuant to Section
2.02(b), which on the date of such substitution must
(i) have a Principal Balance not substantially greater or less
than the Principal Balance of such Defective Mortgage Loan or such elected
substituted Mortgage Loan;
(ii) have a current Loan Rate of not less than the Loan Rate of the
Defective Mortgage Loan or elected substituted Mortgage Loan and not more
than 500 basis points in excess thereof;
5
(iii) have a remaining term to maturity not more than six months
earlier or later than the remaining term to maturity of the Defective
Mortgage Loan or elected substituted Mortgage Loan;
(iv) comply with the representations and warranties set forth in
Section 2.04(b), to the extent such representations and warranties do not
pertain exclusively to the Mortgage Loans transferred on the Closing Date;
(v) have a Combined Loan-to-Value Ratio that is not greater than
the Combined Loan-to-Value Ratio of the Defective Mortgage Loan or elected
substituted Mortgage Loan as of the date of origination of such Defective
Mortgage Loan or elected substituted Mortgage Loan;
(vi) have a lien position at least equal to the lien position of
the Mortgage relating to the Defective Mortgage Loan or elected substituted
Mortgage Loan; and
(vii) be the obligation of a Mortgagor whose credit profile is
substantially similar to that of the Mortgagor under the Defective Mortgage
Loan or elected substituted Mortgage Loan,
PROVIDED, HOWEVER, that with respect to (i) through (vii) above, a mortgage loan
may qualify as an Eligible Substitute Mortgage Loan if each of the Rating
Agencies consents to such substitution.
ENHANCEMENT PERCENTAGE: As to any Payment Date, the percentage obtained by
dividing (x) the Interim Overcollateralization Amount by (y) the Pool Balance as
of the last day of the related Collection Period.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
EXCESS CASHFLOW: With respect to any Payment Date, the positive excess, if
any, of (a) the Available Distribution Amount for such Payment Date over (b) the
aggregate of amounts required to be distributed pursuant to subclauses (i)
through (iv) of Section 5.01(a) herein on such Payment Date.
EXTRA PRINCIPAL DISTRIBUTION AMOUNT: As to any Payment Date, the lesser of
(x) the Monthly Excess Cashflow and (y) the Interim Overcollateralization
Deficiency.
XXXXXX XXX: Xxxxxx Xxx, formerly known as The Federal National Mortgage
Association, or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FIDELITY BOND: As defined in Section 3.06.
FINAL ORDER: As defined in Section 4.01.
FINAL PAYMENT DATE: The Payment Date in [ ].
6
[FISCAL AGENT: As defined in the Insurance Policy.]
FITCH: Fitch Ratings, or its successor in interest.
FORECLOSURE PROFIT: As to any Liquidated Mortgage Loan, the amount, if any,
by which (i) the aggregate of its Liquidation Proceeds less Liquidation Expenses
exceeds (ii) the Principal Balance thereof immediately prior to the final
recovery of its Liquidation Proceeds, together with the sum of (x) accrued and
unpaid interest thereon at the applicable Loan Rate from the date interest was
last paid through the date of receipt of the final Liquidation Proceeds and (y)
the related Charge Off Amounts.
XXXXXXX MAC: Xxxxxxx Mac, formerly known as The Federal Home Loan Mortgage
Corporation, or any successor thereto.
GRANT: As defined in the Indenture.
GUARANTEED PRINCIPAL DISTRIBUTION AMOUNT: (i) With respect to any Payment
Date other than the Final Payment Date, the amount, if any, by which the Class A
Note Principal Amount exceeds the Pool Balance as of the end of the related
Collection Period (after giving effect to all payments of principal on the Class
A Notes on such Payment Date pursuant to Section 5.01 hereof). With respect to
the Final Payment Date, the outstanding Class A Note Principal Amount (after
giving effect to all payments of principal on the Class A Notes on such Final
Payment Date pursuant to Section 5.01(a) hereof).
HFC: Household Finance Corporation, a Delaware corporation, and its
successors.
INDENTURE: The Indenture, dated as of [ ], between the Issuer and the
Indenture Trustee.
INDENTURE TRUSTEE: [ ], a [ ] banking corporation, as Indenture
Trustee under the Indenture or any successor indenture trustee under the
Indenture appointed in accordance with such agreement.
INDENTURE TRUSTEE FEE: With respect to any Payment Date, the greater of (i)
1/12th of the sum of (a) the product of (1) the Indenture Trustee Fee Rate and
(2) the Pool Balance of the Mortgage Loans as of the end of the second preceding
Collection Period (or in the case of the first Payment Date, as of the Cut Off
Date) and (b) any Custodial Fees to the extent not paid by the Master Servicer,
or (ii) $[ ].
INDENTURE TRUSTEE FEE RATE: The per annum rate at which the Indenture
Trustee Fee is calculated, which is an amount equal to [ ]% per annum.
INDENTURE TRUSTEE'S STATEMENT TO NOTEHOLDERS: As defined in Section 5.03.
INITIAL MORTGAGE LOAN: Each Mortgage Loan transferred and assigned to the
Trust on the Closing Date.
7
[INSURANCE AGREEMENT: The Insurance Agreement dated as of [ ] among
the Indenture Trustee, the Master Servicer, [ ] and the Insurer, including
any amendments and supplements thereto in accordance with the terms thereof.]
[INSURANCE POLICY: The Financial Guaranty Insurance Policy (No. [ ])
with respect to the Class A Notes and all endorsements thereto, if any, dated
the Closing Date, issued by the Insurer for the benefit of the Holders of the
Class A Notes, a copy of which is attached hereto as Exhibit F.]
INSURANCE PROCEEDS: Proceeds paid by any insurer [(other than the Insurer)]
pursuant to any insurance policy covering a Mortgage Loan, or by the Master
Servicer pursuant to the last sentence of Section 3.04, net of any component
thereof covering any expenses incurred by or on behalf of the Master Servicer in
connection with obtaining such Insurance Proceeds and exclusive of any portion
thereof that is applied to the restoration or repair of the related Mortgaged
Property, released to the Mortgagor in accordance with the Master Servicer's
normal servicing procedures or required to be paid to any holder of a mortgage
senior to such Mortgage Loan.
[INSURED PAYMENT: With respect to any Payment Date, an amount equal to the
sum of the (i) the Guaranteed Principal Distribution Amount and (ii) the amount,
if any, by which the aggregate of the Interest Distribution with respect to the
Class A Notes for such Payment Date exceeds the amount on deposit in the
Collection Account available to be distributed therefor on such Payment Date.]
[INSURER: [ ], a stock insurance company organized and created under
the laws of the State of [ ], or any successor thereto.]
[INSURER DEFAULT: [ ].]
INTEREST CARRY FORWARD AMOUNT: As to the Class A Notes and any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of the Current
Interest and all prior unpaid Interest Carry Forward Amounts for such Class A
Notes as of the immediately preceding Payment Date exceeded (ii) the amount of
the actual distribution with respect to interest made to such Class A Notes on
such Payment Date plus (y) interest on such amount calculated for the related
Accrual Period at the Class A Note Rate.
INTEREST COLLECTIONS: As to any Payment Date, the sum, without duplication
of:
(i) the portion allocable to interest of all scheduled monthly
payments on the Mortgage Loans received during the related Collection
Period, minus the Servicing Fee for the related Collection Period;
(ii) all Net Liquidation Proceeds actually collected by the Master
Servicer during the related Collection Period (to the extent such Net
Liquidation Proceeds relate to interest);
8
(iii) the interest portion of the Purchase Price for any Mortgage
Loan repurchased from the Trust pursuant to the terms of this Agreement
during the related Collection Period;
(iv) the interest portion of all Substitution Adjustment Amounts
with respect to the related Collection Period; and
(v) to the extent advanced by the Master Servicer pursuant to
Section 3.01(f) and not previously distributed, the amount of any
Skip-A-Pay Advance deposited by the Master Servicer into the Collection
Account with respect to such Payment Date.
INTEREST DISTRIBUTION: With respect to any Payment Date, the Class A Notes,
the sum of (a) the Current Interest for such Class A Notes for such Payment
Date, and (b) any Interest Carry Forward Amount for such Class A Notes for such
Payment Date.
INTERIM OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, the excess,
if any, of (x) the Pool Balance as of the last day of the preceding Collection
Period over (y) (i) the Class A Note Principal Amount (before taking into
account any distributions of principal on such Payment Date) less (ii) the
Principal Collections for such Payment Date.
INTERIM OVERCOLLATERALIZATION DEFICIENCY: As to any Payment Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount over (y) the
Interim Overcollateralization Amount.
ISSUER: [ ] Mortgage Loan Trust 200_-_.
LIBOR: The per annum rate established by the Indenture Trustee in
accordance with Section 5.02.
LIBOR BUSINESS DAY: Any day on which dealings in United States dollars are
transacted in the London interbank market.
LIBOR DETERMINATION DATE: As to any Payment Date, the second LIBOR Business
Day before the first day of the related Accrual Period.
LIEN: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing or the filing of any financing statement under the UCC (other than any
such financing statement filed for informational purposes only) or comparable
law of any jurisdiction to evidence any of the foregoing.
LIQUIDATED MORTGAGE LOAN: As to any Payment Date, any Mortgage Loan in
respect of which the Master Servicer has determined as of the end of the related
Collection Period that all Liquidation Proceeds which it expects to recover on
such Mortgage Loan have been recovered (exclusive of any possibility of a
deficiency judgment).
9
LIQUIDATION EXPENSES: Out-of-pocket expenses (exclusive of overhead) that
are incurred by the Master Servicer in connection with the liquidation of any
Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses, any
unreimbursed amount expended pursuant to Section 3.06 (including, without
limitation, amounts advanced to correct defaults on any mortgage loan that is
senior to such Mortgage Loan and amounts advanced to keep current or pay off a
mortgage loan that is senior to such Mortgage Loan) with respect to the related
Mortgage Loan and any related and unreimbursed expenditures for real estate
property taxes, mechanics liens, title perfection, property management or for
property restoration, preservation or insurance against casualty loss or damage.
LIQUIDATION PROCEEDS: Proceeds (including Insurance Proceeds) received in
connection with the liquidation of any Mortgage Loan, whether through trustee's
sale, foreclosure sale or otherwise.
LOAN RATE: As to any Mortgage Loan and day, the per annum rate of interest
applicable under the related Mortgage Note to the calculation of interest for
such day on the Principal Balance.
MASTER SERVICER: Household Finance Corporation, a Delaware corporation, or
its successor in interest, or any successor master servicer appointed as herein
provided.
MASTER SERVICER TERMINATION EVENTS: As defined in Section 7.01.
MAJORITY CLASS A NOTEHOLDER: The Holder or Holders of Class A Notes
representing at least 51% of the aggregate Class A Note Principal Amount.
MASTER SERVICER: Household Finance Corporation or any successor hereunder
appointed in accordance with the terms hereof.
MONTHLY EXCESS CASHFLOW: As to any Payment Date, the excess, if any, of (i)
the excess, if any, of (x) Interest Collections (for clarity purposes only, net
of any Servicing Fee) over (y) the Interest Distribution for such Payment Date
over (ii) the Additional Principal Reduction Amount.
MOODY'S: Xxxxx'x Investors Service, Inc., or any successor thereto.
MORTGAGE: The mortgage, deed of trust or other instrument creating a first,
second or third lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
MORTGAGE FILE: The mortgage documents (including without limitation the
related Mortgage Note) listed in Section 2.01 pertaining to a particular
Mortgage Loan and any additional documents required to be added to the Mortgage
File pursuant to this Agreement, which documents may be physical documents or,
pursuant to the terms of Section 2.01, may be optical images or other
representations thereof.
MORTGAGE LOAN: Such of the mortgage loans (together with the related
Mortgage Notes and Mortgages) transferred and assigned to the Trust pursuant to
Section 2.01 and pursuant to the
10
Transfer Agreement, together with the Related Documents, as from time to time
are held as a part of the Trust, the mortgage loans originally so held being
identified in the Mortgage Loan Schedule delivered on the Closing Date. As
applicable, the term Mortgage Loan shall be deemed to refer to the Mortgaged
Property that has been converted to ownership by the Master Servicer prior to
the final recovery of related Liquidation Proceeds.
MORTGAGE LOAN PURCHASE AGREEMENT: The mortgage loan purchase agreement
dated as of [ ], between the Depositor and the Sellers pursuant to which
the Sellers convey to the Depositor all of their right, title and interest in
and to the unpaid Principal Balance of the Mortgage Loans, including all
interest and principal payments in respect thereof received on or after the
Cut-Off Date, and certain other rights with respect to the collateral supporting
the Mortgage Loans.
MORTGAGE LOAN SCHEDULE: As to any date, the schedule of Mortgage Loans,
including any Eligible Substitute Mortgage Loans, included in the Trust on such
date. The initial Mortgage Loan Schedule is the schedule delivered by the
Depositor to the Indenture Trustee on the Closing Date and delivered as Exhibit
A hereto, which schedule may be in the form of a computer file or an electronic
or magnetic tape and sets forth as to each Mortgage Loan (i) the account number,
(ii) the Cut-Off Date Principal Balance, (iii) the Loan Rate, (iv) the lien
position of the related Mortgage and (v) the CLTV. The Mortgage Loan Schedule
will be amended from time to time to reflect the removal of Mortgage Loans and
the addition of any Eligible Substitute Mortgage Loans to the Trust, and when so
amended shall include the information set forth above with respect to each
Eligible Substitute Mortgage Loan as of its related date of substitution.
MORTGAGE NOTE: As to a Mortgage Loan, the mortgage note or other evidence
of indebtedness under which the related Mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage.
MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.
MORTGAGOR: The obligor or obligors under a Mortgage.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan, Liquidation
Proceeds less Liquidation Expenses.
NET LOAN RATE: As to any Mortgage Loan, the Loan Rate less the Servicing
Fee Rate.
NOTE REGISTER AND NOTE REGISTRAR: As defined in the Indenture.
NOTICE FOR PAYMENT: As defined in Section 4.01.
OFFICER'S CERTIFICATE: A certificate signed by the President, an Executive
Vice President, a Senior Vice President, a Vice President, an Assistant Vice
President, the Treasurer, Assistant Treasurer, Controller or Assistant
Controller of the Master Servicer or the Depositor, as the case may be, and
delivered to the Indenture Trustee and the Insurer.
OPINION OF COUNSEL: A written opinion of counsel reasonably acceptable to
the Indenture Trustee, who may be in-house counsel for the Master Servicer (or
its affiliate) or the Depositor
11
(or its affiliate) (except that any opinion pursuant to Section 2.01 or 6.04 or
relating to taxation or otherwise as required by the Insurer must be an opinion
of independent outside counsel) and who, in the case of opinions delivered to
the Insurer and the Rating Agency, is reasonably acceptable to each of them.
ORIGINAL CLASS A NOTE PRINCIPAL AMOUNT: $[ ].
OPTIONAL TERMINATION DATE: Any Payment Date on or after the Pool Balance
has been reduced to an amount less than or equal to [ ]% of the Cut-Off Date
Pool Balance.
OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, the excess, if any,
of (x) the Pool Balance as of the last day of the preceding Collection Period
over (y) the Class A Note Principal Amount, calculated after taking into account
all distributions in respect of principal on such Payment Date.
OVERCOLLATERALIZATION RELEASE AMOUNT: As to any Payment Date, the amount
(but not in excess of the Principal Collections for such Payment Date) equal to
the excess, if any, of (i) the Interim Overcollateralization Amount over (ii)
the Targeted Overcollateralization Amount.
OWNER TRUSTEE: [ ], as owner trustee under the Trust Agreement,
and any successor owner trustee under the Trust Agreement appointed in
accordance with the terms thereof.
OWNER TRUSTEE FEE: A monthly fee equal to 1/12th of $[ ].
OWNERSHIP INTEREST: The Transferor Interest.
PAYING AGENT: Any paying agent appointed pursuant to the Indenture.
PAYMENT DATE: The [ ] day of each month or, if such day is not a Business
Day, then the next Business Day, beginning in [ ].
PERCENTAGE INTEREST: As to the Class A Notes and any date of determination,
the percentage obtained by dividing the principal denomination of such Class A
Note by the aggregate of the principal denominations of all Class A Notes.
PERFECTION REPRESENTATIONS: The representations, warranties and covenants
set forth in Schedule 1 attached hereto.
PERMITTED INVESTMENTS: One or more of the following (excluding any callable
investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof,
provided that the short-term
12
unsecured debt obligations of the party agreeing to repurchase such
obligations are at the date of acquisition rated by each Rating Agency in
its highest short-term rating category (which is "F1" for Fitch, "A-1+" for
Standard & Poor's and "P-1" for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Xxxxx'x is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365
days) of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities,
provided that the unsecured short-term debt obligations of such depository
institution or trust company at the date of acquisition thereof have been
rated by each of Moody's, Standard & Poor's and Fitch in its highest
unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been rated
by Fitch, Standard & Poor's and Moody's in their highest short-term rating
categories;
(v) short term investment funds sponsored by any trust company or
national banking association incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been rated
by Fitch, Standard & Poor's and Moody's in their respective highest rating
category for long-term unsecured debt, or any other short-term investment
fund the funds in which are invested in securities rated in the highest
rating category by Fitch, Standard & Poor's and Moody's and which mature on
demand or prior to the next Payment Date;
(vi) interests in any money market fund which at the date of
acquisition has a rating of "Aaa" by Moody's and "AAA" by Fitch and
Standard & Poor's or such lower rating as will not result in the
qualification, downgrading or withdrawal of the then current rating
assigned to the Class A Notes by each Rating Agency; and
(vii) other obligations or securities that are indebtedness in
registered form for U.S. federal income tax purposes and that are
acceptable to each Rating Agency [and the Insurer] as a Permitted
Investment hereunder and will not result in a reduction in the then-current
rating of the Class A Notes, as evidenced by a confirmation or letter to
such effect from such Rating Agency [and the Insurer];
PROVIDED THAT no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument if such interest and principal payments provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to its stated
maturity.
13
PERSON: Any individual, corporation, partnership, joint venture, limited
partnership, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
POOL BALANCE: With respect to any date of determination, the aggregate of
the Principal Balances of all Mortgage Loans as of such date.
POOL FACTOR: As to any Payment Date, the percentage, carried to seven
places, obtained by dividing the aggregate Class A Note Principal Amount for
such Payment Date by the aggregate Original Class A Note Principal Amount.
[PREFERENCE EVENT: As defined in Section 4.01(c).]
[PREMIUM AMOUNT: The premium payable to the Insurer pursuant to the
Insurance Agreement.]
PRINCIPAL BALANCE: As to any Mortgage Loan (other than a Liquidated
Mortgage Loan) and date, the related Cut-Off Date Principal Balance, minus the
sum of (x) all collections credited against the principal balance of such
Mortgage Loan in accordance with the terms of the related Mortgage Note and (y)
any related Charge Off Amounts credited against the principal balance of such
Mortgage Loan prior to such date. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance equal to the Principal
Balance of the related Mortgage Loan immediately prior to the final recovery of
related Liquidation Proceeds and a Principal Balance of zero thereafter.
PRINCIPAL CARRY FORWARD AMOUNT: As to the Class A Notes and any Payment
Date, the amount, if any, by which (i) the amounts payable to such Class
pursuant to Section 5.01(a)(iii), as of the preceding Payment Date exceeded (ii)
the amount of the actual distributions made on such prior Payment Date pursuant
to Section 5.01(a)(iii).
PRINCIPAL COLLECTIONS: As to any Payment Date, the sum, without
duplication, of:
(i) the principal portion of all scheduled monthly payments on the
Mortgage Loans received by the Master Servicer during the related
Collection Period;
(ii) the principal portion of the Purchase Price for any Mortgage
Loan repurchased from the Trust pursuant to the terms of this Agreement
during the related Collection Period;
(iii) the principal portion of all Substitution Adjustment Amounts
with respect to the related Collection Period;
(iv) all Net Liquidation Proceeds (excluding Foreclosure Profits
and Recovered Charge Off Amounts) actually received by the Master Servicer
during the related Collection Period (to the extent such Net Liquidation
Proceeds relate to principal); and
14
(v) the principal portion of all other unscheduled collections on
the Mortgage Loans received by the Master Servicer during the related
Collection Period (including, without limitation, full and partial
prepayments of principal made by the Mortgagors), to the extent not
previously distributed.
PRINCIPAL DISTRIBUTION AMOUNT: As to any Payment Date, (i) the Principal
Collections minus (ii) for Payment Dates occurring on and after the Stepdown
Date and for which a Trigger Event is not in effect, the Overcollateralization
Release Amount, if any.
PURCHASE PRICE: As to any Mortgage Loan purchased from the Trust on any
date pursuant to Section 2.02, 2.04 or 3.01 an amount equal to the sum of (i)
the Principal Balance thereof plus any related Charge Off Amount as of the end
of the related Collection Period preceding the date of repurchase, and (ii)
accrued and unpaid interest to the end of such Collection Period computed on a
daily basis at the Net Loan Rate on the Principal Balance outstanding from time
to time.
RATING AGENCIES: Moody's, Standard & Poor's and Fitch. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical credit rating agency, or other comparable Person,
designated by the Depositor [and acceptable to the Insurer], notice of which
designation shall be given to the Indenture Trustee. References herein to the
highest short term unsecured rating category of a Rating Agency shall mean "P-1"
or better in the case of Moody's, "A-1+" or better in the case of Standard &
Poor's and "F1" in the case of Fitch and in the case of any other Rating Agency
shall mean such equivalent ratings. References herein to the highest long-term
rating category of a Rating Agency shall mean "AAA" in the case of Fitch and
Standard & Poor's and "Aaa" in the case of Moody's and in the case of any other
Rating Agency, such equivalent rating.
RATINGS: The ratings initially assigned to the Class A Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
RECORD DATE: As to any Payment Date, the Business Day immediately preceding
such Payment Date; provided, however, that if any Class A Notes become
Definitive Notes, the record date for such Class A Notes will be the last
Business Day of the month immediately preceding the month in which the related
Payment Date occurs.
RECOVERED CHARGE OFF AMOUNT: As to any Mortgage Loan that became a
Liquidated Mortgage Loan in a Collection Period, the amount, if any, by which
(i) its Net Liquidation Proceeds that are allocable to principal in accordance
with the related Mortgage Note exceeds (ii) its Principal Balance immediately
prior to foreclosure up to an amount of all related Charge Off Amounts, but in
no event less than zero.
RELATED DOCUMENTS: As defined in Section 2.01.
REO: A Mortgaged Property that is acquired by the Trust in a foreclosure or
by grant of deed in lieu of foreclosure.
[REPLACEMENT EVENT: As defined in Section 4.05.]
15
REQUIRED EXCESS CASHFLOW: As to any Payment Date, means 2.5%, DIVIDED by
12, MULTIPLIED by the Pool Balance as of the first day of the related Collection
Period.
RESPONSIBLE OFFICER: With respect to the Indenture Trustee, any officer
assigned to the corporate trust group (or any successor thereto), including any
vice president, assistant vice president, trust officer, assistant secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Agreement. When used with
respect to the Master Servicer, the President or any Vice President, Assistant
Vice President, Treasurer, Assistant Treasurer or any Secretary or Assistant
Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
SELLERS: [ ].
SERVICER: As to each Mortgage Loan, the related Seller that sold such
Mortgage Loan to the Depositor pursuant to the Mortgage Loan Purchase Agreement.
SERVICING NOTE: A Note completed by and executed on behalf of the Master
Servicer in accordance with Section 3.18.
SERVICING FEE: The fee payable to the Master Servicer pursuant to Section
3.09, equal to 1/12th of the Servicing Fee Rate for each Mortgage Loan in the
Mortgage Loan Schedule MULTIPLIED BY the outstanding Principal Balance of such
Mortgage Loan as of the first day of the related Collection Period.
SERVICING FEE RATE: A rate equal to 0.50% per annum.
SERVICING OFFICER: Any officer of the Master Servicer or other individual
designated by an officer of the Master Servicer involved in, or responsible for,
the administration and servicing of the Mortgage Loans, whose name and specimen
signature appear on a list of servicing officers furnished to the Indenture
Trustee [(with a copy to the Insurer)] on the Closing Date by the Master
Servicer, as such list may be amended from time to time.
SIXTY DAY DELINQUENCY PERCENTAGE: As to any Collection Period, (a) the
aggregate of the Principal Balances of all Mortgage Loans that are 60 or more
days contractually delinquent, in bankruptcy, in foreclosure and REO, over (b)
the Pool Balance as of the end of such Collection Period.
SIXTY DAY-PLUS ROLLING AVERAGE: As to any Payment Date, the average of the
Sixty Day Delinquency Percentage for each of the three (3) immediately preceding
Collection Periods.
SKIP-A-PAY ADVANCE: For any Collection Period, means the positive result,
if any, of the Required Excess Cashflow on the related Payment Date, MINUS the
Excess Cashflow on the
16
related Payment Date. For the avoidance of doubt, if the result of the foregoing
calculation is not a positive number, the Skip-A-Pay Advance for the related
Collection Period shall be zero.
SKIP-A-PAY REIMBURSEMENT AMOUNT: As of any Payment Date means, the positive
result, if any, of the Excess Cashflow on such Payment Date, MINUS the Required
Excess Cashflow on such Payment Date.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
STATISTICAL CUT-OFF DATE: The close of business on [ ].
STEPDOWN DATE: The later to occur of (A) the first Payment Date on which
the Pool Balance is less than the product of [ ]% and the Cut-Off Date Pool
Balance and (B) the [ ] Payment Date.
STEPPED UP ENHANCEMENT LEVEL: As to any Payment Date, two (2) times the
amount of the Sixty Day-Plus Rolling Average.
SUBSEQUENT CUT-OFF DATE: As to each Eligible Substitute Mortgage Loan, the
close of business on the day designated as the "Subsequent Cut-Off Date" with
respect to the Eligible Substitute Mortgage Loan.
SUBSTITUTION ADJUSTMENT AMOUNT: As to any Defective Mortgage Loan or any
Mortgage Loan for which the Master Servicer elects to substitute pursuant to
Section 2.02(b) and the date on which a substitution thereof occurs pursuant to
Sections 2.02 or 2.04, the sum of:
(i) the excess, if any, of (a) the Principal Balance of such
Defective Mortgage Loan or such elected Mortgage Loan PLUS any related
Charge Off Amount as of the end of the related Collection Period preceding
the date of substitution (after the application of any principal payments
received on such Defective Mortgage Loan or such elected Mortgage Loan on
or before the date of the substitution of the applicable Eligible
Substitute Mortgage Loan or Loans) over (b) the aggregate Principal Balance
of the applicable Eligible Substitute Mortgage Loan or Loans, PLUS
(ii) accrued and unpaid interest to the end of such Collection
Period computed on a daily basis at the Net Loan Rate on the Principal
Balance of such Defective Mortgage Loan or such elected Mortgage Loan
outstanding from time to time.
TARGETED OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, (x) prior to
the Stepdown Date, [ ]% of the Cut-Off Date Pool Balance, and (y) on and after
the Stepdown Date and assuming a Trigger Event is not in effect, the lesser of
(i) [ ]% of the Cut-Off Date Pool Balance and (ii) the greater of (A) [ ]%
of the Pool Balance as of the last day of the related Collection Period and (B)
$[ ]. If a Trigger Event is in effect on and after the Stepdown Date,
the Targeted Overcollateralization Amount shall be equal to the Targeted
Overcollateralization Amount for the immediately preceding Payment Date.
TERMINATION PRICE: As defined in Section 8.01(b).
17
TRANSACTION DOCUMENTS: This Agreement, the Mortgage Loan Purchase
Agreement, the Transfer Agreement, [the Insurance Agreement,] the Administration
Agreement, the Trust Agreement and the Indenture.
TRANSFER AGREEMENT: The transfer agreement dated as of [ ],
between the Indenture Trustee and each Seller pursuant to which the Sellers will
assign to the Trust all of their right, title and interest in and on the
Transferred Assets not otherwise transferred pursuant to the Mortgage Loan
Purchase Agreement.
TRANSFER DATE: As to any Mortgage Loan transferred to or retransferred from
the Trust hereunder, the date on which such transfer or retransfer is made under
the terms hereof, which date shall be (i) in the case of the Mortgage Loans
originally listed on the Mortgage Loan Schedule, the Closing Date, and (ii) in
the case of any Eligible Substitute Mortgage Loan, the date on which such
Eligible Substitute Mortgage Loan is conveyed to the Trust under the terms
hereof.
TRANSFEROR: [ ], or any such permitted holder of the Ownership
Interest.
TRANSFEROR INTEREST: As defined in the Trust Agreement.
TRANSFERRED ASSETS: All aspects, rights, title or interests of, in, to or
under the Mortgage Loans that are not otherwise conveyed hereunder pursuant to
Section 2.01, including, without limitation, all agreements, instruments and
other documents evidencing or governing the Mortgagor's obligations under the
Mortgage Loans or otherwise related thereto or establishing or setting forth the
terms and conditions thereof, and any amendments or modifications thereto, and
all property and collateral securing the borrowers obligations thereunder.
TRIGGER EVENT: Any Payment Date on which the 60 Day+ Rolling Average equals
or exceeds [ ]% of the Enhancement Percentage; provided a Trigger Event shall
not be in effect if the Enhancement Percentage exceeds the Stepped Up
Enhancement Level.
TRUST: The trust created by the Trust Agreement, the corpus of which
consists of the Mortgage Loans, such assets as shall from time to time be
identified as deposited in the Collection Account (exclusive of net earnings
thereon), the Mortgage Notes and other Mortgage File documents for the Mortgage
Loans, any property that secured a Mortgage Loan and that has become REO, the
interest of the Depositor in certain hazard insurance policies maintained by the
Mortgagors or the Master Servicer in respect of the Mortgage Loans, the
Collection Account, [the Insurance Policy,] the proceeds of each of the
foregoing and one share of Preferred Stock of the Depositor.
TRUST AGREEMENT: The Trust Agreement dated as of [ ], among
[Household Finance Corporation], the Depositor and the Owner Trustee.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
UNDERWRITERS: [ ], [ ], and [ ], as underwriters
of the [ ] Mortgage Loan Asset-Backed Notes, Series 200_-_.
18
Section 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement, as
applicable.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this 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 Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03 INTEREST CALCULATIONS.
All calculations of interest hereunder that are made in respect of the
Principal Balance of a Mortgage Loan shall be made based on the number of days
elapsed between the date that interest was last paid on such Mortgage Loan and
the date of receipt of the related Mortgagor's most current payment. All
calculations of interest on the Class A Notes [and of the Premium Amount] shall
be made on the basis of a 360-day year and the actual number of days in the
related Accrual Period. The calculation of the Servicing Fee, the Indenture
Trustee Fee and the Owner Trustee 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
down.
19
ARTICLE II.
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01 ACKNOWLEDGMENT; CONVEYANCE OF MORTGAGE LOANS; CUSTODY OF
MORTGAGE FILES.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby irrevocably transfer, assign, sell, set over and
otherwise convey to the Trust without recourse (subject to Sections 2.02 and
2.04) (i) all of its right, title and interest in and to the unpaid principal
balance of each Mortgage Loan and each Eligible Substitute Mortgage Loan,
including all Interest Collections and Principal Collections in respect of any
such Mortgage Loan received after the Cut-Off Date with respect to each Initial
Mortgage Loan and after the Subsequent Cut-Off Date with respect to each
Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan Purchase
Agreement; (ii) property which secured such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in
any insurance policies in respect of the Mortgage Loans (including any Insurance
Proceeds); (iv) all other assets included or to be included in the Trust for the
benefit of the Class A Noteholders[, the Insurer] and the Transferor; (v) all
proceeds of any of the foregoing; and (vi) one share of the Depositor's
Preferred Stock. [In addition, on or prior to the Closing Date, the Depositor
shall cause the Insurer to deliver the Insurance Policy to the Indenture
Trustee.]
(b) The Depositor agrees to take, or to cause to be taken, such actions
and to execute such documents (including without limitation the filing of all
necessary continuation statements for the UCC-1 financing statement filed in the
State of Illinois and the State of Delaware, as applicable (which shall have
been filed as promptly as practicable, but in no event later than 10 days
following the effective date of this Agreement), describing the Mortgage Loans
and naming the Depositor as seller and the Trust as buyer, and any amendments or
other filings to the UCC-1 financing statement required to reflect a change in
the applicable UCC, or a change of the name or corporate structure of the
Depositor, or the filing of any additional UCC-1 financing statement due to any
change in the principal office of the Depositor) as are necessary to perfect and
protect the Class A Noteholders' [and the Insurer's] interests in the Trust
created hereunder, including each Mortgage Loan and the proceeds thereof (other
than delivering to the Indenture Trustee possession of the Mortgage Files, which
possession will, subject to the terms hereof, be maintained by the Servicers on
behalf of the Master Servicer as custodian and bailee for the Indenture
Trustee). The parties hereto intend that the transactions set forth herein
constitute a sale and not a pledge by the Depositor to the Trust of all the
Depositor's right, title and interest in and to the Mortgage Loans and other
Trust property as and to the extent described above. In the event the
transactions set forth herein are characterized as a pledge and not a sale, the
Depositor hereby grants to the Trust a security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Loans and
such other Trust property, to secure all of the Depositor's obligations
hereunder, and this Agreement shall constitute a security agreement under
applicable law. With respect to the Mortgage Loans sold by each Seller to the
Depositor, the Master Servicer shall cause such Seller to file as promptly as
practicable, but in no event later than ten days following the effective date of
this Agreement, in the appropriate public filing office or offices UCC-1
financing statements and continuation statements describing such Mortgage Loans
and naming such Seller as seller and the Depositor as buyer, to file appropriate
20
continuation statements thereto, to file amendments thereto in the case of a
change in the applicable UCC, name change or change in corporate structure and
to file appropriate additional UCC-1 financing statements, if any, if such
Seller changes its jurisdiction of incorporation.
(c) In connection with such transfer and assignment by the Depositor and
the Master Servicer, acting through the Servicers, the Indenture Trustee and the
Master Servicer hereby acknowledge that the Servicers are holding, with respect
to the Mortgage Loans transferred on the Closing Date, and will hold, with
respect to each Eligible Substitute Mortgage Loan, on and from the applicable
Transfer Date, as custodian and bailee for the Indenture Trustee, the following
documents or instruments with respect to each such Mortgage Loan (the "Related
Documents"):
(i) the original Mortgage Note with all intervening endorsements
showing a complete chain of title from the originator of such Mortgage Loan
to the Seller or a copy of such original Mortgage Note with an accompanying
lost note affidavit;
(ii) the original Mortgage, with evidence of recording thereon,
provided that if the original Mortgage has been delivered for recording to
the appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located but has not yet been returned to the Seller
by such recording office, the Seller may hold a copy of such original
Mortgage; and
(iii) originals of any amendments to the Mortgage Note or Mortgage,
any modification or assumption agreements and any previous assignments of
such Mortgage Loan;
PROVIDED, HOWEVER, that as to any Mortgage Loan, if, as evidenced by an Opinion
of Counsel delivered to and in form and substance satisfactory to the Owner
Trustee and the Indenture Trustee, (x) an optical image or other electronic
representation of the related documents specified in clauses (i) through (iii)
above are enforceable in the relevant jurisdictions to the same extent as the
original of such document and (y) such optical image or other representation
does not impair the ability of an owner of such Mortgage Loan to transfer its
interest in such Mortgage Loan, such optical image or other representation may
be held by the Master Servicer, acting through the Servicers, as custodian and
bailee for the Indenture Trustee, in lieu of the physical documents specified
above.
(d) Except as hereinafter provided, the Master Servicer, acting through
the Servicers, shall be entitled to maintain possession of all of the foregoing
documents and instruments, shall not be required to deliver any of them to the
Indenture Trustee or the Owner Trustee and shall not be required to record an
assignment of Mortgage in favor of the Indenture Trustee or the Owner Trustee
with respect to any Mortgage Loan. In the event, however, that possession of any
of such documents or instruments is required by any Person (including the
Indenture Trustee) acting as successor master servicer pursuant to Section 7.04
or 8.02 in order to carry out the duties of Master Servicer hereunder, then such
successor shall be entitled to request delivery, at the expense of the Master
Servicer, of such documents or instruments by the Master Servicer and to retain
such documents or instruments for servicing purposes; provided that the
Indenture
21
Trustee or such servicers shall maintain such documents at such offices as may
be required by any regulatory body having jurisdiction over such Mortgage Loans.
(e) The Master Servicer's right to maintain possession, directly or
through the Servicers, of the documents enumerated above shall continue so long
as (i) at least two of Xxxxx'x, Standard & Poor's and Fitch assign a long-term
senior unsecured debt rating to HFC of at least "Baa3", in the case of Xxxxx'x,
"BBB", in the case of Fitch, and "BBB-", in the case of Standard & Poor's, or
such lower ratings as shall be acceptable to the Rating Agencies in order to
maintain their current ratings of the Class A Notes, and (ii) each of the
Servicers remains an Affiliate of HFC. At such time as either of the conditions
specified in the preceding sentence is not satisfied, as promptly as
practicable, but in no event more than 90 days thereafter in the case of clause
(i) below and 60 days in the case of clause (ii) below, the Master Servicer
shall cause each Servicer, at such Servicer's expense or, at the Master
Servicer's discretion, the Master Servicer's expense, to (i) either (x) record
an assignment of Mortgage in favor of the Trust (which may be a blanket
assignment if permitted by applicable law) with respect to each of the Mortgage
Loans being serviced by such Servicer in the appropriate real property or other
records or (y) deliver to the Indenture Trustee the assignment of such Mortgage
in favor of the Trust in form for recordation, together with an Opinion of
Counsel addressed to the Indenture Trustee to the effect that recording is not
required to protect the Trust's right, title and interest in and to the related
Mortgage Loan or to perfect a first priority security interest in favor of the
Trust in the related Mortgage Loan, which Opinion of Counsel also shall be
reasonably acceptable to each of the Rating Agencies [and the Insurer] (as
evidenced in writing), and (ii) unless an Opinion of Counsel, reasonably
acceptable to the Owner Trustee, the Indenture Trustee and the Rating Agencies
[and the Insurer] (as evidenced in writing), is delivered to the Indenture
Trustee to the effect that delivery of the Mortgage Files is not necessary to
protect the Trust's right, title and interest in and to the related Mortgage
Loans or to perfect a first priority security interest in favor of the Trust in
the related Mortgage Loans, deliver the related Mortgage Files to the Indenture
Trustee to be held by the Indenture Trustee in trust, upon the terms herein set
forth, for the use and benefit of all present and future Class A Noteholders
[and the Insurer], and the Indenture Trustee shall retain possession thereof
except to the extent the Master Servicer or Servicers require any Mortgage Files
for normal servicing as contemplated by Section 3.08. The Master Servicer shall
cause the Servicers to appoint the Indenture Trustee their attorney-in-fact to
prepare, execute and record any assignments of Mortgages required under this
Section 2.01 in the event that the Servicers or the Master Servicer should fail
to do so on a timely basis.
(f) Within 90 days following delivery, if any, of the Mortgage Files to
the Indenture Trustee pursuant to the preceding subsection, the Indenture
Trustee shall review each such Mortgage File to ascertain that all required
documents set forth in this Section 2.01 have been executed and received and
that such documents relate to the Mortgage Loans identified on the Mortgage Loan
Schedule, and in so doing the Indenture Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 90-day period
the Indenture Trustee finds any document constituting a part of a Mortgage File
not to have been executed or received or to be unrelated to the Mortgage Loans
identified in said Mortgage Loan Schedule or, if in the course of its review,
the Indenture Trustee determines that such Mortgage File is otherwise defective
in any material respect, the Indenture Trustee shall promptly upon the
conclusion of its review notify the Owner Trustee, the Depositor[, the Insurer]
and the Master Servicer, and the Depositor and the Master Servicer shall have a
period of 90 days after such
22
notice within which to correct or cure any such defect; provided, however, that
if such defect shall not have been corrected or cured within such 90-day period
due to the failure of the related office of real property or other records to
return any document constituting a part of a Mortgage File, the Depositor or the
Master Servicer shall so notify the Owner Trustee and the Indenture Trustee and
the period during which such defect may be corrected or cured shall be extended
for one additional 90-day period.
(g) The Indenture Trustee shall have no responsibility for reviewing any
Mortgage File except as expressly provided in this Section 2.01. In reviewing
any Mortgage File pursuant to this Section 2.01, the Indenture Trustee shall
have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine if the Trust is the
assignee or endorsee), whether any document has been recorded in accordance with
the requirements of any applicable jurisdiction, or whether a blanket assignment
is permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be and, where applicable, that it purports
to be recorded.
(h) The Master Servicer hereby confirms to the Indenture Trustee and the
Owner Trustee that on or prior to the Closing Date and on or prior to the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
the portions of the Electronic Ledger relating to such Mortgage Loans have been
or will have been clearly and unambiguously marked, and the appropriate entries
have been or will have been made in its general accounting records, to indicate
that such Mortgage Loans have been transferred to the Trust and constitute part
of the Trust in accordance with the terms hereof
Section 2.02 ACCEPTANCE BY INDENTURE TRUSTEE; REPURCHASE OF MORTGAGE LOANS;
CONVEYANCE OF ELIGIBLE SUBSTITUTE MORTGAGE LOANS.
(a) The Indenture Trustee hereby acknowledges receipt of all the right,
title and interest of the Depositor in and to the assets described Section
2.01(a)(i) through (vi), and all of the right, title and interest of the Sellers
in and to the Transferred Assets pursuant to the Transfer Agreement, including
but not limited to the transfer and assignment of the Mortgage Notes and the
Mortgages, and declares that it holds and will hold such documents and interests
and all amounts received by it in trust, upon the terms herein set forth, for
the use and benefit of all present and future Class A Noteholders [and the
Insurer]. If the time to cure any defect of which the Indenture Trustee has
notified the Depositor and the Master Servicer following the Indenture Trustee's
review of the Mortgage Loan Files pursuant to Section 2.01 has expired or if any
loss is suffered by the Indenture Trustee, on behalf of the Class A Noteholders
[and the Insurer], in respect of any Mortgage Loan as a result of (i) a defect
in any document constituting a part of a Mortgage File or (ii) the related
Seller's retention of such Mortgage File or an assignment of Mortgage not having
been recorded, the Depositor shall, in the case of a defect in such document, or
the Master Servicer shall, in the case of a loss resulting from such Seller's
retention of a Mortgage File or assignment of Mortgage not having been recorded,
on the Business Day next preceding the Payment Date in the month following the
end of the Collection Period in which the time to cure such defect expired or
such loss occurred, either (i) repurchase the related
23
Mortgage Loan (a "Defective Mortgage Loan") (including any property acquired in
respect thereof and any insurance policy or insurance proceeds with respect
thereto) from the Trust at a price equal to the Purchase Price which shall be
accomplished by deposit by the Depositor or the Master Servicer, as applicable,
in the Collection Account pursuant to Section 3.02 on such next preceding
Business Day, or (ii) remove such Defective Mortgage Loan from the Trust and
substitute in its place an Eligible Substitute Mortgage Loan or Loans.
(b) The Master Servicer, in its sole discretion, shall have the right, but
not the obligation, to elect (by written notice sent to the Indenture Trustee
and the Owner Trustee) to substitute in the place of any Mortgage Loan an
Eligible Substitute Mortgage Loan or Loans; provided that the aggregate of all
substitutions pursuant to this Section shall not exceed 30% of the Cut-Off Date
Pool Balance.
(c) As to any Eligible Substitute Mortgage Loan or Loans, the Master
Servicer shall cause the related Seller to deliver to the Indenture Trustee with
respect to such Eligible Substitute Mortgage Loan or Loans an acknowledgment
that the related Seller is holding as custodian for the Indenture Trustee such
documents and agreements, if any, as are permitted to be held by the related
Seller in accordance with Section 2.01. An assignment of the Mortgage in favor
of the Trust with respect to such Eligible Substitute Mortgage Loan or Loans
shall be required to be recorded in the appropriate real property or other
records or delivered to the Indenture Trustee with the Opinion of Counsel
referred to in Section 2.01 under the same circumstances that all other
assignments of Mortgage are required to be recorded hereunder. For any
Collection Period during which the Depositor or the Master Servicer substitutes
one or more Eligible Substitute Mortgage Loans, the Master Servicer shall
determine the Substitution Adjustment Amount. The Depositor or the Master
Servicer, as applicable, shall deposit the Substitution Adjustment Amount in the
Collection Account no later than the Business Day next preceding the Payment
Date in the month following the end of the Collection Period in which such
substitution occurs. The Master Servicer shall amend the Mortgage Loan Schedule
to reflect the removal of the Defective Mortgage Loan or Mortgage Loan for which
the Master Servicer has made a substitution election pursuant to Section 2.02(b)
from the terms of this Agreement and the substitution of the Eligible Substitute
Mortgage Loan or Loans. Upon such substitution, the Eligible Substitute Mortgage
Loan or Loans shall be subject to the terms of this Agreement in all respects,
and the Depositor shall be deemed to have made with respect to such Eligible
Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 2.04(b). The
Indenture Trustee shall upon satisfaction of the conditions in this subsection
immediately take any action requested by the Depositor, if any, to effect the
reconveyance of such Defective Mortgage Loan or such Mortgage Loan for which the
Master Servicer has made a substitution election so removed from the Trust to
the Depositor or the Master Servicer, as applicable. The procedures applied by
the Depositor or the Master Servicer in selecting each Eligible Substitute
Mortgage Loan shall not be adverse to the interests of the Class A Noteholders
and shall be comparable to the selection procedures applicable to the Mortgage
Loans originally conveyed hereunder.
(d) Upon receipt by the Indenture Trustee of (i) in the case of a
repurchase, a Servicing Certificate to the effect that the Purchase Price for
any such Defective Mortgage Loan or such Mortgage Loan for which the Master
Servicer has made a substitution election has been so deposited in the
Collection Account or (ii) in the case of a substitution, (A) a Servicing
24
Certificate to the effect that the Substitution Adjustment Amount, if any, has
been so deposited in the Collection Account and (B) an Officer's Certificate
reciting the transfer and assignment of the Eligible Substitute Mortgage Loan(s)
to the Indenture Trustee and, if required at such time, that the related
Mortgage File(s) for such Eligible Substitute Mortgage Loan(s) have been
delivered to the Indenture Trustee and the assignment(s) of Mortgage have been
recorded, the Indenture Trustee shall execute and deliver such instrument of
transfer or assignment presented to it by the Master Servicer, in each case
without recourse, as shall be necessary to vest in the Depositor or the Master
Servicer, as applicable, legal and beneficial ownership of such Defective
Mortgage Loan or such Mortgage Loan for which the Master Servicer has made a
substitution election (including any property acquired in respect thereof or
proceeds of any insurance policy with respect thereto). It is understood and
agreed that the obligation of the Depositor or the Master Servicer to repurchase
or substitute for (to the extent permitted herein) any Defective Mortgage Loan
shall constitute the sole remedy respecting such defect available to Class A
Noteholders[, the Insurer] or the Indenture Trustee against the Depositor or the
Master Servicer, and such obligation on the part of the Master Servicer shall
survive any resignation or termination of the Master Servicer hereunder.
Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER. The Master Servicer represents, warrants and covenants that 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 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
require 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 its obligations under this Agreement and to perform its
obligations with respect to all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under this Agreement.
When executed and delivered, this 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 (whether in a proceeding
at law or in equity);
(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
Agreement, except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as the case
may be;
(d) The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby by the Master Servicer will not violate any
provision of any
25
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; and
(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 Agreement or the Class A Notes 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 Agreement.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the Class A Noteholders [or the Insurer], the
Person discovering such breach shall give prompt written notice to the other
parties [and the Insurer]. Within 60 days (or such longer period as permitted by
prior written consent of a Responsible Officer of the Indenture Trustee) of its
discovery or its receipt of notice of such breach, the Master Servicer shall
cure such breach in all material respects.
Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR REGARDING THIS
AGREEMENT AND THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS.
(a) The Depositor represents and warrants that as of the Closing Date:
(i) The Depositor 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 Depositor is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it require 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
Depositor;
(ii) The Depositor has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and to perform its
obligations with respect to all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Depositor 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 (whether in a proceeding at law or in equity);
(iii) The Depositor 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 Agreement, except for such consents,
26
licenses, approvals or authorizations, or registrations or declarations, as
shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by the Depositor will
not violate any provision of any existing law or regulation or any order or
decree of any court applicable to the Depositor or any provision of the
Certificate of Incorporation or Bylaws of the Depositor, or constitute a
material breach of any mortgage, indenture, contract or other agreement to
which the Depositor is a party or by which the Depositor may be bound; and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Depositor threatened, against the Depositor or any of its
properties or with respect to this Agreement which in the opinion of the
Depositor has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement.
(b) The Depositor represents and warrants with respect to each Mortgage
Loan that as of the Closing Date with respect to the Initial Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute Mortgage
Loans (or to the extent expressly stated herein as of such other time):
(i) This Agreement and the Transfer Agreement constitute a valid
transfer and assignment to the Trust of all right, title and interest of
the Depositor and the Sellers, respectively, in and to the Mortgage Loans,
all monies due or to become due with respect thereto, all proceeds thereof,
such funds as are from time to time deposited in the Collection Account
(excluding any investment earnings thereon) and all other property
specified in the definition of "Trust" as being part of the corpus of the
Trust conveyed to the Trust by the Depositor;
(ii) Information set forth in the Mortgage Loan Schedule with
respect to such Mortgage Loan is true and correct in all material respects;
(iii) Immediately prior to the transfer and assignment by the
related Seller to the Depositor and the Trust pursuant to the Mortgage Loan
Purchase Agreement and the Transfer Agreement, the Mortgage Loan has not
been assigned or pledged, and the related Seller has good and marketable
title thereto, and the related Seller is the sole owner and holder of such
Mortgage Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests
of any nature, and has full right and authority, under all governmental and
regulatory bodies having jurisdiction over the ownership of such Mortgage
Loan, to transfer and assign the same pursuant to the Mortgage Loan
Purchase Agreement and the Transfer Agreement;
(iv) Immediately prior to the transfer and assignment by the
Depositor to the Trust pursuant to this Agreement, the Mortgage Loan has
not been assigned or pledged, and the Depositor has good and marketable
title thereto, and the Depositor is the sole owner and holder of such
Mortgage Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests
of
27
any nature, and has full right and authority, under all governmental and
regulatory bodies having jurisdiction over the ownership of such Mortgage
Loan, to transfer and assign the same pursuant to this Agreement;
(v) The related Mortgage is a valid and subsisting first or second
lien, as set forth on the Mortgage Loan Schedule with respect to such
Mortgage Loan, on the property therein described, and the related Mortgaged
Property is free and clear of all encumbrances and liens having priority
over the first or second lien, as applicable, of such Mortgage except for
liens for (a) real estate taxes and special assessments not yet delinquent;
(b) any first and, if applicable, second mortgage loan secured by such
Mortgaged Property and specified on the Mortgage Loan Schedule; (c)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording that are acceptable to
mortgage lending institutions generally; and (d) other matters to which
like properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by such Mortgage;
(vi) To the best knowledge of the Depositor, there is no valid
offset, defense or counterclaim of any obligor under the Mortgage;
(vii) To the best knowledge of the Depositor, there is no delinquent
recording or other tax or fee or assessment lien against the related
Mortgaged Property;
(viii) To the best knowledge of the Depositor, there is no proceeding
pending or threatened for the total or partial condemnation of the related
Mortgaged Property, and such property is free of material damage and is in
good repair;
(ix) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material affecting the related Mortgaged
Property which are, or may be, liens prior or equal to the lien of the
related Mortgage, except (a) liens which are fully insured against by the
title insurance policy referred to in clause (xiii) or (b) liens which do
not materially interfere with the collection of the Mortgage Loan upon
foreclosure or otherwise;
(x) As of the Cut-Off Date for the Initial Mortgage Loans (or as
of the applicable Transfer Date for any Eligible Substitute Mortgage Loan),
no scheduled monthly payment is more than 29 days delinquent (measured on a
contractual basis);
(xi) The related Mortgage File contains each of the documents and
instruments specified to be included therein (including, if applicable, an
appraisal (which may be an appraisal prepared using a statistical data
base));
(xii) The related Mortgage Note and the related Mortgage at the time
they were made complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan;
28
(xiii) A lender's title insurance policy or binder was issued on the
date of origination of each Mortgage Loan for mortgage loans in excess of
$50,000 (in excess of $75,000 in Oklahoma), and each such policy is valid
and remains in full force and effect, and a title search or other assurance
of title customary in the relevant jurisdiction was obtained with respect
to each Mortgage Loan as to which no title insurance policy or binder was
issued;
(xiv) The related Mortgaged Property is not a mobile home or a
manufactured housing unit that is not permanently attached to its
foundation;
(xv) As of the Statistical Cut-Off Date for the Initial Mortgage
Loans, no more than [ ]% of such Mortgage Loans (by Pool Balance as of the
Statistical Cut-Off Date) are secured by Mortgaged Properties located in
one United States postal zip code;
(xvi) As of the Statistical Cut-Off Date, the Combined Loan-to-Value
Ratio for each Initial Mortgage Loan was not in excess of [ ]%;
(xvii) No selection procedure reasonably believed by the Depositor to
be adverse to the interests of the Class A Noteholders [or the Insurer] was
utilized in selecting the Mortgage Loan;
(xviii) The Depositor has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(xix) Each Mortgage Note and each Mortgage is in substantially the
form previously provided to the Indenture Trustee by the Depositor and each
Mortgage Loan is an enforceable obligation of the related Mortgagor;
(xx) The Depositor has not received a notice of default of any
senior mortgage loan with respect to the related Mortgaged Property that
has not been cured by a party other than the related Servicer;
(xxi) The Initial Mortgage Loan does not have an original term to
maturity in excess of [ ] months; and as of the Statistical Cut-Off Date
for the Initial Mortgage Loans, the weighted average remaining term to
maturity of the Initial Mortgage Loans on a contractual basis is
approximately [ ] months.
(xxii) The related Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
thereon, or an individual condominium unit, planned unit development unit
or townhouse;
(xxiii) As of the Cut-Off Date, the average Principal Balance of the
Initial Mortgage Loans was $[ ]; and
(xxiv) As of the Statistical Cut-Off Date, approximately [ ]%
(by Pool Balance as of the Statistical Cut-Off Date) and [ ]% (by Pool
Balance as of the Statistical Cut-Off Date) of the Initial Mortgage Loans
are first and second liens, respectively.
29
(c) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive the transfer and assignment of the
Mortgage Loans to the Trust. Upon discovery by the Depositor, the Master
Servicer [, the Insurer], the Owner Trustee or the Indenture Trustee of a breach
of any of the representations and warranties set forth in this Section 2.04,
without regard to any limitation set forth in such representation or warranty
concerning the knowledge of the Depositor as to the facts stated therein, which
materially and adversely affects the interests of the Class A Noteholders[, the
Insurer] or the Transferor in respect of the Ownership Interest in the related
Mortgage Loan, the person discovering such breach shall give prompt written
notice to the other parties[, the Insurer] and each Rating Agency. Within 60
days of its discovery or its receipt of notice of such breach, or, with the
prior written consent of a Responsible Officer of the Indenture Trustee, such
longer period not to exceed 90 days specified in such consent, the Depositor or,
as necessary, the Master Servicer shall cure such breach in all material
respects. With regard to any such breach of the representations and warranties
set forth in Section 2.04(b), unless, at the expiration of such 60 day or longer
period, such breach has been cured in all material respects or otherwise does
not exist or continue to exist, the Depositor or the Master Servicer shall, not
later than the Business Day next preceding the Payment Date in the month
following the end of the Collection Period in which any such cure period
expired, either (i) repurchase such Defective Mortgage Loan (including any
property acquired in respect thereof and any insurance policy or insurance
proceeds with respect thereto) or (ii) remove such Mortgage Loan from the Trust
and substitute in its place an Eligible Substitute Mortgage Loan or Loans, in
the same manner and subject to the same conditions as set forth in Section 2.02.
Upon making any such repurchase or substitution the Depositor or the Master
Servicer, as applicable, shall be entitled to receive an instrument of
assignment or transfer from the Indenture Trustee to the same extent as set
forth in Section 2.02 with respect to the repurchase or replacement of Mortgage
Loans under that Section. Subject to Section 2.04(d), it is understood and
agreed that the obligation of the Depositor or the Master Servicer to purchase
or substitute for any such Defective Mortgage Loan (or property acquired in
respect thereof) shall constitute the sole remedy against the Depositor or the
Master Servicer respecting such breach of the foregoing representations or
warranties available to Class A Noteholders, the Transferor in respect of the
Ownership Interest[, the Insurer], the Owner Trustee or the Indenture Trustee
against the Depositor or the Master Servicer, and such obligation on the part of
the Master Servicer shall survive any resignation or termination of the Master
Servicer hereunder.
(d) The Depositor and the Master Servicer, jointly and not severally,
agree to indemnify and hold harmless the Trust against any and all out-of-pocket
financial losses, claims, expenses, damages or liabilities to which the Trust
may become subject, insofar as such out-of-pocket financial losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any representation or warranty made by the Depositor in this
Section 2.04 on which the Trust has relied, being, or alleged to be, untrue or
incorrect in any material respect. This indemnity will be in addition to any
liability which the Depositor or the Master Servicer may otherwise have.
(e) Promptly after receipt by the Trust of notice of the commencement of
any action or proceeding in any way relating to or arising from this Agreement,
the Owner Trustee will notify the Indenture Trustee, the Depositor [, the
Insurer] and the Master Servicer of the commencement thereof, but the omission
so to notify the party from whom indemnification is
30
sought (the "Indemnifying Party") will not relieve the Indemnifying Party from
any liability which it may have to the party seeking indemnification (the
"Indemnified Party") except to the extent that the Indemnifying Party is
adversely affected by the lack of notice. In case any such action is brought
against the Indemnified Party, and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate in
the defense (with the consent of the Indemnified Party which shall not be
unreasonably withheld) of such action at the Indemnifying Party's expense.
Section 2.05 TAX TREATMENT. It is the intention of the Depositor and the
Class A Noteholders that the Class A Notes will be indebtedness for federal,
state and local income and franchise tax purposes and for purposes of any other
tax imposed on or measured by income. The terms of this Agreement shall be
interpreted to further the intent of the parties hereto. The Depositor, the
Indenture Trustee and each Class A Noteholder (or Class A Note Owner) by
acceptance of its Class A Note (or, in the case of a Class A Note Owner, by
virtue of such Class A Note Owner's acquisition of a beneficial interest
therein) agrees to treat the Class A Note (or beneficial interest therein), for
purposes of federal, state and local income or franchise taxes and any other tax
imposed on or measured by income, as indebtedness secured by the Trust Estate
and to report the transactions contemplated by this Agreement on all applicable
tax returns in a manner consistent with such treatment. Each Class A Noteholder
agrees that it will cause any Class A Note Owner acquiring an interest in a
Class A Note through it to comply with this Agreement as to treatment of the
Class A Notes as indebtedness for federal, state and local income and franchise
tax purposes and for purposes of any other tax imposed on or measured by income.
The Indenture Trustee will prepare and file all tax reports required hereunder
on behalf of the Trust.
31
ARTICLE III.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 THE MASTER SERVICER.
(a) The Master Servicer shall, or shall cause the Servicers to, service
and administer the Mortgage Loans in a manner consistent with the terms of this
Agreement and with general industry practice and shall have full power and
authority, acting alone or through the Servicers, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Master Servicer shall at all
times remain responsible to the Indenture Trustee and the Class A Noteholders
for the performance of its duties and obligations hereunder in accordance with
the terms hereof. Any amounts received by the related Servicer in respect of a
Mortgage Loan shall be deemed to have been received by the Master Servicer
whether or not actually received by it. Without limiting the generality of the
foregoing, the Master Servicer shall continue, and is hereby authorized and
empowered by the Indenture Trustee, to execute and deliver, on behalf of itself,
the Class A Noteholders and the Indenture Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the Mortgaged Properties. Upon the written request of
the Master Servicer, the Depositor and the Indenture Trustee 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. The Master Servicer in such capacity may also
consent to the placing of a proposed lien senior to that of the Mortgage on the
related Mortgaged Property, provided that such proposed lien is not secured by a
note providing for negative amortization and:
(x) (i) the Mortgage relating to the Mortgage Loan was in a first
lien position as of the Cut-Off Date and was in a first lien position
immediately prior to the placement of the proposed senior lien, and (ii)
the ratio of (a) the sum of the Principal Balance of the Mortgage Loan and
the principal balance of the mortgage loan to be secured by the proposed
senior lien to (b) the Appraised Value of the Mortgaged Property at the
time the Mortgage Loan was originated is not greater than (1) with respect
to Mortgage Loans with an original CLTV of 85% or less, 85%, (2) with
respect to Mortgage Loans with an original CLTV in excess of 85% and not
greater than 95%, 95% and (3) with respect to Mortgage Loans with an
original CLTV in excess of 95% and not greater than 115%, 115%;
(y) (i) the Mortgage relating to the Mortgage Loan was in a first or
second lien position at the time the related Mortgage Loan was conveyed to
the Trust and, immediately following the placement of such proposed senior
lien, such Mortgage will be in a second or, if such Mortgage was in a
second lien position at the time the related Mortgage Loan was conveyed to
the Trust, a third lien position and (ii) the principal balance of the
mortgage loan to be secured by the proposed senior lien and the rate at
which interest accrues thereon are no greater than those of the related
Mortgage Loan as of the date it was first conveyed to the Trust; or
32
(z) the Mortgage relating to the Mortgage Loan was in a second lien
position as of the Cut-Off Date and the proposed senior lien secures a
mortgage loan that refinances an existing first mortgage loan and the
outstanding principal amount of such mortgage loan immediately following
such refinancing and the rate at which interest accrues thereon are not
greater than that of such existing first mortgage loan at the date the
mortgage loan was originated.
(b) If (i) foreclosure proceedings are commenced with respect to any
Mortgage Loan with respect to which the Master Servicer has consented to the
placing of a subsequent senior lien pursuant to clause (x) in Section 3.01(a),
or (ii) any loss is suffered by the Indenture Trustee on behalf of the Class A
Noteholders[, the Insurer] and the Transferor in respect of the Ownership
Interest in respect of any Mortgage Loan as a result of (x) a failure to file on
or within ten days following the effective date of this Agreement the UCC-l
financing statements referred to in Section 2.01 or (y) a failure to publish on
or prior to the Closing Date such notices reflecting the sale of the Mortgage
Loans as are described in Section 3440.1(h) of the California Civil Code, then
the Master Servicer shall repurchase or substitute for any adversely affected
Mortgage Loan on the Business Day preceding the next Payment Date following the
end of the Collection Period during which such foreclosure proceedings were
commenced or such losses were suffered. Such repurchase or substitution shall be
accomplished in the same manner and subject to the same conditions as set forth
in Section 2.02. Upon making any such repurchase or substitution the Master
Servicer shall be entitled to receive an instrument of assignment or transfer
from the Indenture Trustee to the same extent as set forth in Section 2.02.
(c) Upon the request of a Mortgagor or at the Master Servicer's own
initiative, the Master Servicer (or the related Servicer on behalf of the Master
Servicer) may waive, modify or vary any term of any Mortgage Loan or consent to
the postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if:
(i) in the Master Servicer's (or such Servicer's) good faith
determination such waiver, modification, postponement or indulgence will
enhance recovery with respect to such Mortgage Loan; and
(ii) the Mortgagor is in default with respect to the Mortgage Loan,
or such default is, in the judgment of the Master Servicer (or such
Servicer) imminent.
(d) Subject to subparagraph (e) below, in addition to the circumstances
described under Section 3.01(c), the Master Servicer (or the related Servicer on
behalf of the Master Servicer) may waive, modify or vary any term of any
Mortgage Loan, if the purpose of such action is to reduce the likelihood of
prepayment or of default of such Mortgage Loan, to increase the likelihood of
repayment or repayment upon default of such Mortgage Loan, to increase the
likelihood of repayment in full of or recoveries under such Mortgage Loan, or to
otherwise benefit the Class A Noteholders[, the Insurer] or the Transferor in
respect of the Ownership Interest, all in the reasonable judgment of the Master
Servicer.
(e) Notwithstanding any provision in this Agreement to the contrary, the
Master Servicer may not defer the scheduled monthly interest and principal
payment on any Mortgage Loan that is not in default or (in the judgment of the
Master Servicer (or the related Servicer on
33
behalf of the Master Servicer)) for which default is not imminent unless (i) the
Master Servicer elects to make a Skip-A-Pay Advance pursuant to subparagraph (f)
below or (ii) each Rating Agency advises in writing that as a result of such
deferment the then current rating of the Class A Notes will not be withdrawn,
suspended or reduced; provided, however, that the Master Servicer may not defer
the scheduled monthly payment on any Mortgage Loan in reliance on clause (i)
above unless the Master Servicer determines, in its good faith judgment, that
such Skip-A-Pay Advance will be recoverable from future payments on the Mortgage
Loans.
(f) If during any Collection Period the Master Servicer deferred the
scheduled monthly payment on any Mortgage Loan that was not in default or for
which default was not imminent in reliance on clause (i) of subparagraph (e)
above, no later than 12:00 noon Chicago time on each Deposit Date, the Master
Servicer shall deposit into the Collection Account an amount equal to the
Skip-A-Pay Advance for such Collection Period. On each Payment Date, the Master
Servicer shall be entitled to reimburse itself for all previously unreimbursed
Skip-A-Pay Advances from funds on deposit in the Collection Account, before
making any distributions to Class A Noteholders pursuant to Section 5.01, up to
an amount equal to the Skip-A-Pay Reimbursement Amount on such Payment Date;
PROVIDED, HOWEVER, that the Skip-A-Pay Reimbursement Amount that the Master
Servicer is entitled to receive on such Payment Date shall be reduced by the
portion of such amount, if any, that was applied to reduce the amount of funds
that the Master Servicer was required to deposit or to cause to be deposited
into the Collection Account on the preceding Deposit Date pursuant to Section
3.02(b).
(g) The relationship of the Master Servicer (and of any successor to the
Master Servicer as master servicer under this Agreement) to the Indenture
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
(h) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any Servicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
Section 3.02 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it follows with respect to mortgage loans
in its servicing portfolio comparable to the Mortgage Loans. Consistent with,
and without limiting the generality of, the foregoing, the Master Servicer may
in its discretion (i) waive any late payment charge or any assumption fees or
other fees that may be collected in the ordinary course of servicing the
Mortgage Loans, (ii) arrange with a Mortgagor a schedule for the payment of
delinquent amounts, so long as such arrangement is consistent with the Master
Servicer's policies with respect to the mortgage loans it owns or services,
(iii) sell the Mortgage Loan at its fair market value to a third party for
collection activity or (iv) treat a Mortgage Loan as current if the Mortgagor
has made one scheduled payment (which, for the purposes of this Section
3.02(a)(iii) only, is in accordance
34
with the Master Servicer's customary servicing practices and may be less than
100% of the scheduled payment) to cure the delinquency status of such Mortgage
Loan.
(b) The Master Servicer shall establish and maintain with the Trustee a
separate trust account (the "Collection Account") titled "[ ], as
Indenture Trustee, in trust for the registered holders of [ ] Mortgage
Loan Asset Backed Notes, Series 200[ ]-[ ]". In the event that a successor
Indenture Trustee is as provided in Section [ ] of the Indenture, a new
Collection Account be promptly established at and maintained by such successor
Indenture Trustee, and the title of the new Collection Account shall be
"[Successor Indenture Trustee], as Indenture Trustee, in trust for the
registered holders of [ ] Mortgage Loan Asset Backed Notes, Series
200[ ]-[ ]", and any amounts in the old Collection Account shall be transferred
to the new Collection Account. The Account shall be an Eligible Account. No
later than 12:00 noon Chicago time on each Deposit Date (or, if a Deposit Event
has occurred and the Master Servicer has not provided credit enhancement
acceptable to each of the Rating Agencies, within two (2) Business Days
following receipt thereof), the Master Servicer shall deposit or cause to be
deposited into the Collection Account the following payments and collections
received or made by it with respect to the Mortgage Loans (without duplication):
(i) Interest Collections (net of any Servicing Fee) on the
Mortgage Loans;
(ii) Principal Collections on the Mortgage Loans;
(iii) Insurance Proceeds (including, for this purpose, any amount
required to be paid by the Master Servicer pursuant to Section 3.04 and
excluding any portion thereof constituting Principal Collections); and
(iv) amounts required to be paid by the Master Servicer in
connection with the termination of the Trust pursuant to Section 8.01;
PROVIDED, HOWEVER, that so long as a Deposit Event has not occurred (unless the
Master Servicer has provided credit enhancement acceptable to each of the Rating
Agencies [and the Insurer]), the amount of funds that the Master Servicer is
required to deposit or to cause to be deposited into the Collection Account on
or before such Deposit Date shall be reduced by the Skip-A-Pay Reimbursement
Amount the Master Servicer is entitled to receive on the next Payment Date.
The foregoing requirements respecting deposits to the Collection Account
are exclusive, it being understood that, without limiting the generality of the
foregoing, fees (including annual fees) or late charge penalties payable by
Mortgagors, prepayment penalties, or amounts received by the Master Servicer or
a Servicer for the accounts of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items for the account of the
related Servicer, if any, need not be deposited in the Collection Account.
(c) The Indenture Trustee shall hold amounts deposited in the Collection
Account as trustee for the Class A Noteholders[, the Insurer] and the Transferor
in respect of the Ownership Interest. In addition, the Master Servicer shall
notify the Indenture Trustee in writing on each Determination Date of the amount
of payments and collections to be deposited in the Collection Account with
respect to the related Payment Date.
35
(d) The Master Servicer may cause the institution maintaining the
Collection Account to invest any funds in the Collection Account in Permitted
Investments (including obligations of the Master Servicer or of any of its
affiliates, if such obligations otherwise qualify as Permitted Investments),
which shall mature or otherwise be available not later than the Business Day
next preceding the Payment Date or on the Payment Date next following the date
of such investment as long as such action does not result in a withdrawal or
downgrading of the then current ratings on the Class A Notes by the Rating
Agencies (except that any investment in an obligation of the institution with
which the Collection Account is maintained may mature on or before 12:00 noon,
Chicago time, on such Payment Date) and shall not be sold or disposed of prior
to its maturity. In the event the Indenture Trustee is at any time maintaining
the Collection Account, any request by the Master Servicer to invest funds on
deposit in the Collection Account shall be in writing, shall be delivered to the
Indenture Trustee at or before 10:30 A.M., Chicago time, if such investment is
to be made on such day, and shall certify that the requested investment is a
Permitted Investment that matures at or prior to the time required hereby. Any
such investment shall be registered in the name of or controlled by the
Indenture Trustee as trustee hereunder or in the name of its nominee and to the
extent such investments are certificated they shall be maintained in the
possession or control of the Indenture Trustee in the state of its Corporate
Trust Office. Except as provided above, 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 the principal amount of any such investments shall be
deposited in the Collection Account by the Master Servicer out of its own funds
immediately as realized.
(e) The Indenture Trustee is hereby authorized to execute purchases and
sales of Permitted Investments as directed by the Master Servicer through the
facilities of its own trading or capital markets operations. The Indenture
Trustee shall send to the Master Servicer statements reflecting the monthly
activity for each such purchase and sale made for the preceding month. Although
the Master Servicer recognizes that it may obtain a broker confirmation or
written monthly statement containing comparable information at no additional
cost, the Master Servicer hereby agrees that confirmations of investments are
not required to be issued by the Indenture Trustee for each month in which a
monthly statement is rendered. No statement need be rendered pursuant to the
provision of this subsection if no activity occurred in the account for such
month.
Section 3.03 WITHDRAWALS FROM THE COLLECTION ACCOUNT.
(a) The Indenture Trustee shall withdraw or cause to be withdrawn funds
from the Collection Account for the following purposes:
(i) On each Payment Date, to make distributions and payments to
[the Insurer,] Class A Noteholders and the Transferor in respect of the
Ownership Interest pursuant to Section 5.01;
(ii) From time to time, to make investments in Permitted
Investments and to pay to the Master Servicer all income and gain earned in
respect of Permitted Investments or on funds deposited in the Collection
Account;
36
(iii) To reimburse the Depositor or the Master Servicer to the
extent permitted by Section 6.03;
(iv) To withdraw any funds deposited in the Collection Account that
were not required to be deposited therein or were deposited therein in
error and to pay such funds to the appropriate Person;
(v) To pay to the party legally entitled by a final order of a
court of competent jurisdiction in an insolvency proceeding an amount equal
to any preference claim made with respect to amounts paid with respect to
the Mortgage Loans; provided that, if any such amount is later determined
not to be a preference by such court of competent jurisdiction and is
returned to the Master Servicer or any Servicer, such amount shall be
redeposited into the Collection Account by the Master Servicer;
(vi) To clear and terminate the Collection Account upon the
termination of his Agreement and to pay any amounts remaining therein to
the Transferor in respect of the Ownership Interest; and
(vii) To reimburse the Master Servicer for Skip-A-Pay Advances to
the extent permitted by Section 3.01(f).
(b) If the Master Servicer deposits in the Collection Account any amount
not required to be deposited therein or credited thereto or any amount in
respect of payments by Mortgagors made by checks subsequently returned for
insufficient funds or other reason for non-payment, it may at any time withdraw
such amount from the Collection Account pursuant to Section 3.03(a)(iv), and any
such amounts shall not be included in Interest Collections and Principal
Collections, any provision herein to the contrary notwithstanding. Any
withdrawal or debit permitted by Section 3.03(a) may be accomplished by
delivering an Officer's Certificate to the Indenture Trustee which describes the
purpose of such withdrawal (including, without limitation, that any such amount
was deposited in the Collection Account in error or, in the case of returned
checks, that such amounts were properly debited, respectively). Upon receipt of
any such Officer's Certificate, the Indenture Trustee shall withdraw such amount
for the account of the Master Servicer. All funds deposited by the Master
Servicer in the Collection Account shall be held by the Indenture Trustee in
trust for the Class A Noteholders[, the Insurer] and the Transferor in respect
of the Ownership Interest, until disbursed in accordance with Section 5.01 or
withdrawn or debited in accordance with this Section.
Section 3.04 MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION EXPENSES.
Each Mortgage Loan requires that the borrower thereunder maintain hazard
insurance naming the Master Servicer or the related Servicer as loss payee
providing extended coverage in an amount which is at least equal to the lesser
of (i) the maximum insurable value of the Mortgaged Property or (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan from time to time. The Master Servicer represents
and warrants that it or the applicable Seller verified the existence of such
hazard insurance at the origination of the Mortgage Loan. The Master Servicer
shall also maintain on property acquired upon foreclosure, or by grant of deed
in lieu of foreclosure, hazard insurance with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value of
37
the Mortgaged Property or (ii) the combined unpaid principal balance owing on
such Mortgage Loan and any mortgage loans senior to such Mortgage Loans at the
time of such foreclosure or grant of deed in lieu of foreclosure PLUS accrued
interest thereon. Amounts collected by the Master Servicer under any such
policies shall be deposited in the Collection Account to the extent called for
by Section 3.02. In cases in which any Mortgaged Property is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Mortgage Loan shall include flood insurance. All such flood insurance
shall be in such amounts as are required under applicable guidelines of Xxxxxx
Xxx. 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 Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. As to Mortgaged Properties acquired by the Master Servicer
as provided herein, the Master Servicer may satisfy its obligation set forth in
the first sentence of this Section 3.04 by self insuring Mortgaged Properties
for which the aggregate unpaid principal balance of the related Mortgage Loans
PLUS the outstanding balance of any mortgage loans senior to such Mortgage Loans
at the time title was acquired, PLUS accrued interest (the "Combined Exposure"),
was less than $500,000 (or such other amount as the Master Servicer may in good
faith determine from time to time) and by causing hazard policies to be
maintained with respect to Mortgaged Properties for which the Combined Exposure
equals or exceeds the self insurance threshold established from time to time by
the Master Servicer by maintaining a blanket policy consistent with prudent
industry standards insuring against hazard losses on the Mortgaged Properties.
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 Collection Account the amount not otherwise payable under
the blanket policy because of such deductible clause.
Section 3.05 ASSUMPTION AND MODIFICATION AGREEMENTS. In any case in which a
Mortgaged Property has been or is about to be conveyed by the Mortgagor, the
Master Servicer shall exercise or refrain from exercising its right to
accelerate the maturity of such Mortgage Loan consistent with the then-current
practice of the Master Servicer and without regard to the inclusion of such
Mortgage Loan in the Trust and not in the Master Servicer's portfolio. If it
elects not to enforce its right to accelerate or if it is prevented from doing
so by applicable law, the Master Servicer (so long as such action conforms with
the Master Servicer's underwriting standards at the time for new originations)
is authorized to take or enter into an assumption and modification agreement
from or with the Person to whom such Mortgaged Property has been or is about to
be conveyed, pursuant to which such Person becomes liable under the Mortgage
Note and, to the extent permitted by applicable law, the Mortgagor remains
liable thereon. The Master Servicer shall notify the Indenture Trustee that any
assumption and modification agreement has been completed by delivering to the
Indenture Trustee [(with a copy to the Insurer)] an Officer's Certificate
certifying that such agreement is in compliance with this Section and by
forwarding to the applicable Servicer on behalf of the Depositor or the
Indenture Trustee, as applicable, the original copy of such assumption and
modification agreement. Any such assumption and modification agreement shall,
for all purposes, be considered a part of the related Mortgage File to the same
extent as all other documents and instruments constituting a part thereof. No
change in the terms of the related Mortgage Note may be made by the Master
Servicer in connection
38
with any such assumption to the extent that such change would not be permitted
to be made in respect of the original Mortgage Note pursuant to Section 3.01
unless the conditions specified in Section 3.01 are satisfied. Any fee collected
by the Master Servicer for entering into any such agreement will be retained by
the Master Servicer as additional servicing compensation.
Section 3.06 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
(a) The Master Servicer (or the Master Servicer together with the related
Seller as called for by the Mortgage Loan Purchase Agreement) shall foreclose
upon or otherwise comparably convert to ownership Mortgaged Properties securing
such of the Mortgage Loans as come into and continue in default when, in the
opinion of the Master Servicer based upon the practices and procedures referred
to in the following sentence, no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.02; PROVIDED that if the
Master Servicer has actual knowledge or reasonably believes 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 Trust to acquire title to such
Mortgaged Property in a foreclosure or similar proceeding. In connection with
such foreclosure or other conversion, 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) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
mortgage servicing activities. The foregoing is subject to the proviso that the
Master Servicer shall not be required to expend its own funds in connection with
any foreclosure or towards the 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. The Master Servicer will be
reimbursed out of Liquidation Proceeds for advances of its own funds to pay
Liquidation Expenses before any Net Liquidation Proceeds are deposited in the
Collection Account.
(b) 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 (i) so long as at least two of Xxxxx'x, Standard & Poor's and Fitch assign
a long-term unsecured debt rating to the Master Servicer of at least "Baa3", in
the case of Xxxxx'x, "BBB", in the case of Fitch, and "BBB-" in the case of
Standard & Poor's, be issued in the name of the related Servicer or (ii) if the
rating requirements in clause (i) are not satisfied, be issued to the Indenture
Trustee, or to its nominee on behalf of Class A Noteholders.
Section 3.07 [RESERVED].
Section 3.08 INDENTURE TRUSTEE TO COOPERATE.
(a) Upon any payment in full of the Principal Balance of any Mortgage
Loan, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01, if the assignments of Mortgage have
been recorded as required hereunder, 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. It is understood and agreed that no expenses incurred in
connection with such instrument of satisfaction or transfer shall be reimbursed
from amounts deposited in the Collection Account. If the
39
Indenture Trustee is holding the Mortgage Files, from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Indenture
Trustee shall, upon request of the Master Servicer and delivery to the Indenture
Trustee of a trust receipt signed by a Servicing Officer, release the related
Mortgage File to the Master Servicer, and the Indenture Trustee shall execute
such documents as shall be necessary to 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 when the
need therefor by the Master Servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of an Officer's Certificate of
the Master Servicer, the trust receipt shall be released by the Indenture
Trustee to the Master Servicer.
(b) In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Indenture Trustee shall,
if the Master Servicer so requests in writing and supplies the Indenture Trustee
with appropriate forms therefor, assign such Mortgage Loan for the purpose of
collection to the Master Servicer or to the related Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Mortgage Loan and deposit or credit the Net Liquidation
Proceeds received with respect thereto in the Collection Account. In the event
that all delinquent payments due under any such Mortgage Loan are paid by the
Mortgagor and any other defaults are cured then the assignee for collection
shall promptly reassign such Mortgage Loan to the Indenture Trustee and return
it to the place where the related Mortgage File was being maintained.
Section 3.09 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY MASTER
SERVICER. The Master Servicer shall be entitled to receive the Servicing Fee as
compensation for its services in connection with servicing the Mortgage Loans.
The Servicing Fee for each Collection Period shall be paid to the Master
Servicer out of Interest Collections prior to their deposit in the Collection
Account and shall not be the responsibility or liability of the Trust, the Owner
Trustee, the Indenture Trustee[, the Insurer], the Class A Noteholders or the
Transferor in respect of the Ownership Interest. Additional servicing
compensation in the form of late payment charges or other receipts not required
to be deposited in the Collection Account 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 Trustee
fees and all other fees and expenses not expressly stated hereunder to be for
the account of the Class A Noteholders[, the Insurer] and the Transferor in
respect of the Ownership Interest) and shall not be entitled to reimbursement
therefor except as specifically provided herein.
Section 3.10 ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Master Servicer will deliver to the Indenture Trustee and a copy
to each of the Rating Agencies [and the Insurer], on or before March 31 of each
year, beginning March 31, 200[ ], an Officer's Certificate stating that (i)
a review of the activities of the Master Servicer during the preceding calendar
year (or in the case of the Officer's Certificate delivered in 200[ ], from the
Closing Date) and of its performance under this Agreement has been made under
such officer's supervision and (ii) to the best of such officer's knowledge,
based on such review,
40
the Master Servicer has fulfilled all its material obligations under this
Agreement throughout such year (or in the case of the Officer's Certificate
delivered in 200[ ], from the Closing Date), or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof. Copies of such Officer's
Certificate shall be provided by the Master Servicer to any Class A Noteholder
upon written request at the Master Servicer's expense.
(b) The Master Servicer shall deliver to the Indenture Trustee and a copy
to each of the Rating Agencies [and the Insurer], 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 Master Servicer
Termination Event.
Section 3.11 ANNUAL SERVICING REPORT. On or before March 31 of each year,
beginning March 31, 200[ ], the Master Servicer at its expense shall cause a
firm of nationally recognized independent public accountants (who may also
render other services to the Master Servicer) to furnish a report to the
Indenture Trustee and a copy to each of the Rating Agencies [and the Insurer] to
the effect that such firm has examined certain documents and records relating to
the servicing of mortgage loans by the Master Servicer during the most recent
calendar year (or in the case of the report delivered in 200[ ], from the
Closing Date) then ended under pooling and servicing agreements (including this
Agreement) substantially similar to this Agreement and that such examination,
which has been conducted substantially in compliance with the audit guide for
audits of non-supervised mortgagees approved by the Department of Housing and
Urban Development for use by independent public accountants (to the extent that
the procedures in such audit guide are applicable to the servicing obligations
set forth in such agreements), has disclosed no items of noncompliance with the
provisions of this Agreement which, in the opinion of such firm, are material,
except for such items of noncompliance as shall be set forth in such report.
Section 3.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS.
(a) The Master Servicer and the Servicers shall provide to the Trustee,
[the Insurer,] Class A Noteholders or the Transferor in respect of the Ownership
Interest that are federally insured savings and loan associations, the Office of
Thrift Supervision, the successor to the Federal Home Loan Bank Board, the FDIC
and the supervisory agents and examiners of the Office of Thrift Supervision
access to the documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision and the FDIC (acting as operator
of the SAIF or the BIF), such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer or the Servicers. Nothing in this Section 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 as a result of
such obligation shall not constitute a breach of this Section.
(b) No later than the Determination Date preceding the related Payment
Date, the Master Servicer shall supply information in such form as the Indenture
Trustee shall reasonably
41
request to the Indenture Trustee and the Paying Agent as is required in the
Indenture Trustee's reasonable judgment to enable the Paying Agent or the
Trustee, as the case may be, to make the required distributions and to furnish
the required reports to Class A Noteholders on such Payment Date.
Section 3.13 MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Master Servicer shall during the term of its service as master 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, together, comply with the requirements from time to
time of Xxxxxx Xxx for Persons performing servicing for mortgage loans purchased
by such association.
Section 3.14 REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. The Master
Servicer shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 3.15 [RESERVED].
Section 3.16 INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE GENERALLY
AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY. The Master
Servicer shall prepare and deliver, or cause to be prepared, mailed and filed
all federal and state information reports for the Mortgage Loans when and as
required by all applicable state and federal income tax laws including, to the
extent applicable, returns reporting a cancellation of indebtedness as
prescribed by Section 6050P of the Code. In particular, with respect to the
requirement under Section 6050J of the Code, to the effect that a lender shall
be required to report foreclosures and abandonments of any mortgaged property
for each year beginning in 200[ ], the Master Servicer shall prepare, mail and
file in a timely fashion each year as required by law information statements in
accordance with the reporting requirements imposed by Section 6050J with respect
to each instance occurring during the previous calendar year in which the Master
Servicer or any Servicer (i) on behalf of the Indenture Trustee acquired an
interest in any Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan or (ii) knew or
had reason to know that any Mortgaged Property has been abandoned. The
information statements from the Master Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Section 6050J of the
Code.
Section 3.17 ADDITIONAL COVENANTS OF HFC. HFC hereby agrees that:
(a) It will maintain its books and records to clearly note the separate
corporate existence of the Depositor, each Servicer and the Master Servicer;
(b) The Depositor, the Servicers and HFC will share certain overhead
expenses, although the amount the Depositor will be charged for such use will be
based on actual use to the extent practicable and, to the extent such allocation
is not practicable, on a basis reasonably related to use;
42
(c) Separate financial records will be maintained to reflect the assets
and liabilities of the Depositor, HFC and each Servicer, which financial records
are and will be subject to audit by independent public accountants at the
reasonable request of the Board of Directors of the Depositor, HFC or such
Servicer, as the case may be;
(d) Except as permitted hereunder, there will be no commingling of the
assets of the Depositor with the assets of HFC or any Servicer. All demand
deposit accounts and other bank accounts of the Depositor will be maintained
separately from those of HFC and the Servicers. Monetary transactions between
the Depositor and HFC or any Servicer are and will continue to be properly
reflected in their respective financial records;
(e) HFC at all times will recognize, and will take all steps within its
power to maintain, the corporate existence of the Depositor and Servicers as
being separate and apart from its own corporate existence and will not refer to
the Depositor or any Servicer as a department or division of HFC; and
(f) Except as otherwise expressly provided herein, the Depositor and HFC
will not guaranty or advance the proceeds for payment of any obligations of the
Trust.
Section 3.18 SERVICING CERTIFICATE. Not later than each Determination Date,
the Master Servicer shall deliver to the Indenture Trustee, the Paying Agent [,
the Insurer] and each Rating Agency a Servicing Certificate (in written form or
the form of computer readable media or such other form as may be agreed to by
the Indenture Trustee and the Master Servicer), together with an Officer's
Certificate to the effect that such Servicing Certificate is true and correct in
all material respects, stating the related Collection Period, Payment Date, the
series number of the Class A Notes, the date of this Agreement, and:
(i) The Available Distribution Amount for such Payment Date,
separately stating the amount of Interest Collections and Principal
Collections;
(ii) The Class A Note Rate for such Payment Date;
(iii) The Class A Note Principal Amount, the Pool Balance as
reported in the prior Indenture Trustee's Statement to Noteholders or, in
the case of the first Determination Date, the Original Class A Note
Principal Amount and the Cut-Off Date Pool Balance;
(iv) The number and aggregate Principal Balance of any Mortgage
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 2.02;
(v) The number and aggregate Principal Balance of any Mortgage
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 2.04;
(vi) The number and aggregate Principal Balance of any Mortgage
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 3.01;
43
(vii) The number and aggregate Principal Balance of any Mortgage
Loan that the Master Servicer has consented to the placement of a senior
lien during the related Collection Period pursuant to Section 3.01(a);
(viii) The amount of any Substitution Adjustment Amounts for such
Payment Date;
(ix) The Class A Principal Distribution to be distributed on the
Class A Notes, and the Interest Distribution for the related Payment Date
to be distributed on the Class A Notes;
(x) The amount, if any, of unpaid Interest Carry Forward Amount
after giving effect to the distributions on the related Payment Date;
(xi) The amount of the Insured Payments, if any, to be made on the
related Payment Date;
(xii) The amount to be distributed to the Transferor in respect of
the Transferor Interest for the related Payment Date pursuant to Section
5.01(a)(vii);
(xiii) The Class A Note Principal Amount after giving effect to the
distribution to be made on the related Payment Date;
(xiv) The weighted average remaining term to maturity of the
Mortgage Loans and the weighted average Loan Rate;
(xv) The Servicing Fee for the related Collection Period and any
accrued amounts thereof that remain unpaid for previous Collection Periods;
(xvi) The amounts to be paid to the Insurer, separately stated,
pursuant to Sections 5.01(a)(iv) and 5.01(a)(vi);
(xvii) The Premium Amount to be paid to the Insurer pursuant to
Section 5.01;
(xviii) The amount of all payments or reimbursements to the Master
Servicer pursuant to Sections 3.03;
(xix) The Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim Overcollateralization Deficiency,
the Overcollateralization Release Amount, the Targeted
Overcollateralization Amount, the Excess Cashflow and the Distributable
Excess Cashflow for such Payment Date;
(xx) The amount of Distributable Excess Cashflow to be distributed
to the Class A Noteholders on such Payment Date pursuant to Section
5.01(a)(v) on such Payment Date;
(xxi) The number of Mortgage Loans outstanding at the beginning and
at the end of the related Collection Period;
44
(xxii) The Pool Balance as of the end of the related Collection
Period;
(xxiii) The number and aggregate Principal Balances of Mortgage Loans
(x) as to which the scheduled monthly payment is contractually delinquent
for 30-59 days, 60-89 days and 90 or more days, respectively, and (y) that
have become REO, in each case as of the end of such Collection Period;
(xxiv) The unpaid principal amount of all Mortgage Loans that became
Liquidated Mortgage Loans during such Collection Period;
(xxv) The Net Liquidation Proceeds received during such Collection
Period;
(xxvi) The cumulative losses on the Mortgage Loans;
(xxvii) The book value (within the meaning of 12 C.F.R. Section
571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xxviii) The Sixty Day Delinquency Percentage for the related
Collection Period;
(xxix) The Sixty Day-Plus Rolling Average for such Payment Date;
(xxx) LIBOR for such Payment Date;
(xxxi) Whether a Master Servicer Termination Event has occurred
since the prior Determination Date, specifying each such Master Servicer
Termination Event if one has occurred;
(xxxii) Whether an Event of Default has occurred and is continuing;
(xxxiii) The amount of any Skip-A-Pay Advances for the related
Collection Period; and
(xxxiv) The Skip-A-Pay Reimbursement Amount for such Payment Date.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modified by the mutual agreement of the Master Servicer and the Trustee or as
may be required by the rules and regulations of the Securities and Exchange
Commission. The Master Servicer shall give notice of any such change to the
Rating Agencies [and the Insurer].
45
ARTICLE IV.
INSURER
Section 4.01 [CLAIMS UPON THE INSURANCE POLICY. (a) As soon as possible,
and in no event later than 10:00 a.m.
New York City time on the second Business
Day immediately preceding the Payment Date, the Indenture Trustee shall furnish
the Insurer, the Fiscal Agent and the Master Servicer with a completed notice in
the form set forth as Exhibit A to the Insurance Policy (the "Notice for
Payment") in the event that the Insured Payment for such Payment Date is equal
to an amount greater than zero. The Notice for Payment shall specify the amount
of Insured Payment and shall constitute a claim for an Insured Payment pursuant
to the Insurance Policy. Upon receipt of an Insured Payment on behalf of the
Holders of the Class A Notes under the Insurance Policy, the Indenture Trustee
shall deposit such Insured Payment in the Collection Account and shall
distribute such Insured Payments pursuant to Section 5.01.
(b) The Indenture Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of the Class A Notes from
moneys received under the Insurance Policy. The Insurer shall have the right to
inspect such records at reasonable times during normal business hours upon four
Business Day's prior written notice to the Indenture Trustee.
(c) If a payment to the Class A Noteholders which is guaranteed pursuant
to the Insurance Policy is voided (a "Preference Event") under any applicable
bankruptcy, insolvency, receivership or similar law in an Insolvency Proceeding
(as defined in the Insurance Policy), and, as a result of such a Preference
Event, the Indenture Trustee is required to return such voided payment, or any
portion of such voided payment, made in respect of the Class A Notes (an
"Avoided Payment"), the Indenture Trustee shall furnish to the Insurer (w) a
certified copy of a final order of a court exercising jurisdiction in such
Insolvency Proceeding to the effect that the Indenture Trustee is required to
return any such payment or portion thereof during the term of the Insurance
Policy because such payment was voided under applicable law, with respect to
which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (x) an Opinion of Counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (y) an assignment, in form
reasonably satisfactory to the Insurer, irrevocably assigning to the Insurer all
rights and claims of the Indenture Trustee relating to or arising under such
Avoided Payment and (z) a Notice for Payment appropriately completed and
executed by the Indenture Trustee. Such payment shall be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Final Order and not to the Indenture Trustee directly (unless a Class A
Noteholder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order in which
case such payment shall be disbursed to the Beneficiary for distribution to such
Class A Noteholder upon proof of such payment reasonably satisfactory to
Insurer). The Indenture Trustee is not permitted to make a claim on the Trust or
on any Class A Noteholder for payments made to any Class A Noteholder which are
characterized as preference payments by any bankruptcy court having jurisdiction
over any bankrupt Mortgagor unless ordered to do so by such bankruptcy court.
46
(d) Any amounts received by the Indenture Trustee pursuant to the
Insurance Policy in respect of the Class A Notes shall be deposited to the
Collection Account.]
Section 4.02 [EFFECT OF PAYMENTS BY THE INSURER; SUBROGATION. Anything
herein to the contrary notwithstanding, any payment with respect to principal of
or interest on any of the Class A Notes which are made with moneys received
pursuant to the terms of the Insurance Policy shall not be considered payment of
such Class A Notes, as applicable, from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Class A Notes, as applicable, within the meaning of Section 5.01 herein.
The Master Servicer and the Indenture Trustee acknowledge, and each Holder by
its acceptance of a Class A Note agrees, that without the need for any further
action on the part of the Insurer, the Depositor, the Master Servicer, the
Indenture Trustee or the Note Registrar (a) to the extent the Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Notes to the Holders of such Class A Notes, the Insurer will be fully
subrogated to the rights of such Holders to receive such principal and interest,
as applicable, from the Trust and (b) the Insurer shall be paid such principal
and interest but only from the sources and in the manner provided herein and in
the Insurance Agreement for the payment of such principal and interest.
The Indenture Trustee and the Master Servicer shall cooperate in all
respects with any reasonable request by the Insurer for action to preserve or
enforce the Insurer's rights or interests under this Agreement without limiting
the rights or affecting the interests of the Holders of the Class A Notes as
otherwise set forth herein.]
Section 4.03 [RESERVED]
Section 4.04 [RESERVED]
Section 4.05 [REPLACEMENT INSURANCE POLICY. In the event of a default by
the Insurer under the Insurance Policy or if the claims paying ability rating of
the Insurer is downgraded and such downgrade results in a downgrading of the
then current rating of the Class A Notes (in each case, a "Replacement Event"),
the Depositor may, in accordance with and upon satisfaction of the conditions
set forth in the Insurance Policy and the Insurance Agreement and payment in
full of all amounts owed to the Insurer, but shall not be required to,
substitute a new insurance policy or insurance policies for the existing
Insurance Policy, or may arrange for any other form of credit enhancement;
PROVIDED, HOWEVER, that in each case the Class A Notes shall be rated no lower
than the rating assigned by each Rating Agency to the Class A Notes immediately
prior to such Replacement Event. It shall be a condition to substitution of any
new credit enhancement that there be delivered to the Indenture Trustee (i) a
legal opinion, acceptable in form and substance to the Indenture Trustee, from
counsel to the provider of such new credit enhancement with respect to the
enforceability thereof and such other matters as the Indenture Trustee may
require and (ii) an Opinion of Counsel to the effect that such substitution
would not have a materially adverse tax effect on the Trust. Upon receipt of the
items referred to above and the taking of physical possession of the new credit
enhancement, the Indenture Trustee shall, within five Business Days following
receipt of such items and such taking of physical possession, deliver the
replaced Insurance Policy to the Insurer.]
47
ARTICLE V.
PRIORITY OF DISTRIBUTIONS; STATEMENTS TO
NOTEHOLDERS; RIGHTS OF NOTEHOLDERS
Section 5.01 DISTRIBUTIONS.
(a) DISTRIBUTIONS OF INTEREST AND PRINCIPAL PROCEEDS. Pursuant to Section
5.4(b) of the Indenture, on each Payment Date, the Indenture Trustee, with
respect to the Class A Notes, and the Paying Agent, with respect to the
Ownership Interest, shall distribute out of the Collection Account, to the
extent of the Available Distribution Amount (except that amounts paid under the
Insurance Policy shall only be available for distribution to Class A
Noteholders), the following amounts and in the following order of priority to
the following Persons (based on the information set forth in the Servicing
Certificate):
(i) to the Indenture Trustee, the Indenture Trustee Fee for such
Payment Date, to the Owner Trustee, the Owner Trustee Fee for such Payment
Date[, and to the Insurer, the Premium Amount];
(ii) to the holders of the Class A Notes, an amount equal to the
Interest Distribution for the Class A Notes for such Payment Date;
(iii) to the holders of the Class A Notes, the Class A Principal
Distribution for such Payment Date (other than the portion constituting
Distributable Excess Cashflow);
(iv) [to the Insurer, the amount owing to the Insurer under the
Insurance Agreement for reimbursement for prior draws made on the Insurance
Policy;]
(v) to the holders of the Class A Notes, to the extent of the
Available Distribution Amount remaining, the Distributable Excess Cashflow
for such Payment Date;
(vi) [to the Insurer, any other amounts owing to the Insurer under
the Insurance Agreement; and]
(vii) to the Transferor in respect of the Ownership Interest, the
balance.
(b) METHOD OF DISTRIBUTION. The Indenture Trustee shall make distributions
in respect of a Payment Date to each Class A Noteholder of record on the related
Record Date (other than as provided in Section 8.01 respecting the final
distribution) by check or money order mailed to such Class A Noteholder at the
address appearing in the Note Register, or upon written request by a Class A
Noteholder delivered to the Indenture Trustee at least five Business Days prior
to such Record Date, by wire transfer (but only if such Class A Noteholder is
the Depository or such Class A Noteholder owns of record one or more Class A
Notes having principal denominations aggregating at least $[1,000,000]), or by
such other means of payment as such Class A Noteholder and the Indenture Trustee
shall agree. Distributions among Class A Noteholders shall be made in proportion
to the Percentage Interests evidenced by the Class A
48
Notes held by such Class A Noteholders. The Indenture Trustee, acting in its
capacity as Paying Agent, shall make distributions in respect of a Payment Date
to the Transferor of record on the related Record Date, in respect of the
Ownership Interest by wire transfer or by such other means of payment as the
Transferor and the Paying Agent shall agree.
(c) DISTRIBUTIONS ON BOOK-ENTRY NOTES. Each distribution with respect to a
Book-Entry Note shall be paid to the Depository, which shall credit the amount
of such distribution to the accounts of its Depository Participants in
accordance with its normal procedures. Each Depository Participant shall be
responsible for disbursing such distribution to the Class A Note Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm shall be responsible for disbursing funds to the Class A Note Owners that
it represents. All such credits and disbursements with respect to a Book-Entry
Note are to be made by the Depository and the Depository Participants in
accordance with the provisions of the Class A Notes. None of the Indenture
Trustee, the Paying Agent, the Note Registrar, [the Insurer, ]the Trust or the
Master Servicer shall have any responsibility therefor except as otherwise
provided by applicable law.
Section 5.02 CALCULATION OF THE CLASS A NOTE RATE. With respect to the
Class A Notes, on the second LIBOR Business Day immediately preceding each
Payment Date (or as of the fourth LIBOR Business Day prior to the Closing Date,
in the case of the first Payment Date), the Indenture Trustee shall determine
LIBOR for the Accrual Period commencing on such Payment Date and inform the
Master Servicer (at the facsimile number given to the Indenture Trustee in
writing) of such rates. On or prior to each Determination Date, the Indenture
Trustee shall determine the applicable Class A Note Rate for the related Payment
Date.
Section 5.03 STATEMENTS TO NOTEHOLDERS. (a) Not later than 12:00 noon,
New
York time, on each Determination Date, the Master Servicer shall deliver to the
Indenture Trustee, the Depositor and the Underwriters a computer tape (or such
other report in a form and format mutually agreeable to the Master Servicer and
the Indenture Trustee) (the "Servicing Certificate") containing the information
set forth in Exhibit C hereto with respect to the Mortgage Loans on an aggregate
basis as of the end of the preceding Collection Period and such other
information as the Indenture Trustee shall reasonably require. Not later than
12:00 noon,
New York time, on the Business Day preceding the Payment Date, the
Indenture Trustee shall deliver to the Depositor, the Master Servicer, the
Transferor and to the Insurer, by telecopy, with a hard copy thereof to be
delivered on such Payment Date, a statement (the "Indenture Trustee's Statement
to Noteholders") (based solely on the information contained on the computer tape
provided by the Master Servicer) containing the information set forth below with
respect to such Payment Date:
(i) The Available Distribution Amount for such Payment Date,
separately stating the amount of Interest Collections and Principal
Collections;
(ii) The Class A Note Rate for such Payment Date;
(iii) The Class A Note Principal Amount, the Pool Balance as
reported in the prior Indenture Trustee's Statement to Noteholders or, in
the case of the first
49
Determination Date, the Original Class A Note Principal Amount and the
Cut-Off Date Pool Balance;
(iv) The number and aggregate Principal Balance of any Mortgage
Loans purchased by the Depositor or the Master Servicer with respect to the
related Collection Period pursuant to Sections 2.02, 2.04 and 3.01;
(v) The amount of any Substitution Adjustment Amounts for such
Payment Date;
(vi) The Class A Principal Distribution to be distributed on the
Class A Notes, and the Interest Distribution for the related Payment Date
to be distributed on the Class A Notes;
(vii) The amount, if any, of unpaid Interest Carry Forward Amount
after giving effect to the distributions on the related Payment Date;
(viii) The amount of the Insured Payments, if any, to be made on the
related Payment Date;
(ix) The amount to be distributed to the Transferor in respect of
the Transferor Interest for the related Payment Date pursuant to Section
5.01(a)(vii);
(x) The Class A Note Principal Amount after giving effect to the
distribution to be made on the related Payment Date;
(xi) The weighted average remaining term to maturity of the
Mortgage Loans and the weighted average Loan Rate;
(xii) The Servicing Fee for the related Collection Period and any
accrued amounts thereof that remain unpaid for previous Collection Periods;
(xiii) The amounts to be paid to the Insurer, separately stated,
pursuant to Sections 5.01(a)(iv) and 5.01(a)(vi);
(xiv) The Premium Amount to be paid to the Insurer pursuant to
Section 5.01;
(xv) The amount of all payments or reimbursements to the Master
Servicer pursuant to Sections 3.03;
(xvi) The Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim Overcollateralization Deficiency,
the Overcollateralization Release Amount, the Targeted
Overcollateralization Amount, the Excess Cashflow and the Distributable
Excess Cashflow for such Payment Date;
(xvii) The amount of Distributable Excess Cashflow to be distributed
to the Class A Noteholders on such Payment Date pursuant to Section
5.01(a)(v) on such Payment Date;
50
(xviii) The number of Mortgage Loans outstanding at the beginning and
at the end of the related Collection Period;
(xix) The Pool Balance as of the end of the related Collection
Period;
(xx) The number and aggregate Principal Balances of Mortgage Loans
(x) as to which the scheduled monthly payment is contractually delinquent
for 30-59 days, 60-89 days and 90 or more days, respectively, and (y) that
have become REO, in each case as of the end of such Collection Period;
(xxi) The unpaid principal amount of all Mortgage Loans that became
Liquidated Mortgage Loans during such Collection Period;
(xxii) The Net Liquidation Proceeds received during such Collection
Period;
(xxiii) The cumulative losses on the Mortgage Loans;
(xxiv) The book value (within the meaning of 12 C.F.R. Section
571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xxv) The Sixty Day Delinquency Percentage for the related
Collection Period;
(xxvi) The Sixty Day-Plus Rolling Average for such Payment Date;
(xxvii) LIBOR for such Payment Date;
(xxviii) Whether a Master Servicer Termination Event has occurred
since the prior Determination Date, specifying each such Master Servicer
Termination Event if one has occurred;
(xxix) Whether an Event of Default has occurred and is continuing;
(xxx) The amount of any Skip-A-Pay Advances for the related
Collection Period; and
(xxxi) The Skip-A-Pay Reimbursement Amount for such Payment Date.
In the case of information furnished pursuant to clauses (ii), (x) and
(xiv) above, the amounts shall be expressed, in a separate section of the
report, as a dollar amount for each Class A Note for each $1,000 original dollar
amount as of the Cut-Off Date.
In addition, the Indenture Trustee shall forward the Indenture Trustee's
Statement to Noteholders to each Class A Noteholder, the Rating Agencies,
Bloomberg (at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: [ ])
and Intex Solutions (at 00 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000,
Attention: [ ]) on the related Payment Date. The Indenture Trustee may
fully and conclusively rely upon and shall have no liability with respect to
information provided by the Master Servicer.
51
To the extent that there are inconsistencies between the telecopy of the
Indenture Trustee's Statement to Noteholders and the hard copy thereof, the
Master Servicer may rely upon the latter.
(b) The Indenture Trustee shall prepare or cause to be prepared (in a
manner consistent with the treatment of the Class A Notes as indebtedness of the
Trust, or as may be otherwise required by Section 3.16 herein) Internal Revenue
Service Form 1099 (or any successor form) and any other tax forms required to be
filed or furnished to Class A Noteholders in respect of distributions by the
Indenture Trustee (or the Paying Agent) on the Class A Notes and shall file and
distribute such forms as required by law.
(c) The Master Servicer and the Indenture Trustee shall furnish to each
Class A Noteholder and to the Insurer (if requested in writing), during the term
of this Agreement, such periodic, special or other reports or information,
whether or not provided for herein, as shall be necessary, reasonable or
appropriate with respect to the Class A Noteholder or the Insurer, as the case
may be, or otherwise with respect to the purposes of this Agreement, all such
reports or information to be provided by and in accordance with such applicable
instructions and directions (if requested in writing) as the Class A Noteholder
or the Insurer, as the case may be, may reasonably require; provided that the
Master Servicer and the Indenture Trustee shall be entitled to be reimbursed by
such Class A Noteholder or the Insurer, as the case may be, for their respective
fees and actual expenses associated with providing such reports, if such reports
are not generally produced in the ordinary course of their respective businesses
or readily obtainable.
(d) Reports and computer tapes furnished by the Master Servicer pursuant
to this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed except to the extent provided in this
Agreement and to the extent required by law or to the Rating Agencies, the
Depositor, the Insurer's reinsurers, parent, regulators, liquidity providers and
auditors and to the extent the Seller instructs the Indenture Trustee in writing
to furnish information regarding the Trust or the Mortgage Loans to third-party
information providers. No Person entitled to receive copies of such reports or
tapes or lists of Class A Noteholders shall use the information therein for the
purpose of soliciting the customers of the Seller or for any other purpose
except as set forth in this Agreement.
52
ARTICLE VI.
THE MASTER SERVICER AND THE DEPOSITOR
Section 6.01 LIABILITY OF THE MASTER SERVICER AND THE DEPOSITOR. 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. The Depositor shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Depositor
herein.
Section 6.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE MASTER SERVICER OR THE DEPOSITOR. Any corporation into which the Master
Servicer or Depositor may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer or the Depositor shall be a party, or any corporation succeeding to the
business of the Master Servicer or the Depositor, shall be the successor of the
Master Servicer or the Depositor, as the case may be, hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 6.03 LIMITATION ON LIABILITY OF THE MASTER SERVICER, THE DEPOSITOR
AND OTHERS. None of the Master Servicer, the Depositor, or any director,
officer, employee or agent of the Master Servicer or the Depositor shall be
under any liability to the Trust or the Noteholders for any action taken or for
refraining from the taking of any action by the Master Servicer or the
Depositor, as applicable, in good faith pursuant to this Agreement, or for
errors in judgment; PROVIDED, HOWEVER, that this provision shall not protect the
Master Servicer, the Depositor or any such person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder, and that this provision shall not be construed
to entitle the Master Servicer to indemnity in the event that amounts advanced
by the Master Servicer to retire any senior Lien exceed Net Liquidation Proceeds
realized with respect to the related Mortgage Loan. The Master Servicer, the
Depositor and any director, officer, employee or agent of the Master Servicer or
the Depositor 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, the Depositor and any director, officer,
employee or agent of the Master Servicer or the Depositor shall be indemnified
by the Trust and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the Class A
Notes, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Neither the Master Servicer nor
the Depositor shall be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its respective duties under this
Agreement, and which in its opinion may involve it in any expense or liability;
PROVIDED, HOWEVER, that the Master Servicer or the Depositor may, in its sole
discretion, undertake any such action which it may deem necessary or desirable
in respect of this Agreement and the rights and duties of the parties
53
hereto and the interests of the Class A Noteholders hereunder. In such event,
the reasonable legal expenses and costs of such action and any liability
resulting therefrom and any claims by the Master Servicer or the Depositor
hereunder for indemnification shall be expenses, costs and liabilities of the
Trust, and the Master Servicer or the Depositor, as the case may be, shall be
entitled to be reimbursed therefor and indemnified pursuant to the terms hereof
from amounts deposited in the Collection Account as provided by Section 3.03.
The Master Servicer's and the Depositor's right to indemnity or reimbursement
pursuant to this Section 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).
The Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Noteholder for any amounts paid by the Master Servicer
pursuant to any provision of this Agreement.
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 Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Indenture Trustee in writing and such proposed successor servicer is reasonably
acceptable to the Indenture Trustee [and the Insurer]; (b) each Rating Agency
shall have confirmed to the Indenture Trustee that the appointment of such
proposed successor servicer as Master Servicer hereunder will not result in the
reduction or withdrawal of the then-current rating of the Class A Notes; and (c)
such proposed successor servicer has agreed in writing to assume the obligations
of Master Servicer hereunder and the Master Servicer has delivered to the
Indenture Trustee an Opinion of Counsel to the effect that all conditions
precedent to the resignation of the Master Servicer and the appointment of and
acceptance by the proposed successor servicer have been satisfied; PROVIDED,
HOWEVER, that in the case of clause (i) above no such resignation by the Master
Servicer shall become effective until the Indenture Trustee shall have assumed
the Master Servicer's responsibilities and obligations hereunder or the
Indenture Trustee shall have designated a successor servicer in accordance with
Section 8.02. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 8.01 and 8.02 as
obligations that survive the resignation or termination of the Master Servicer.
Any such determination permitting the resignation of the Master Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Indenture Trustee [and the Insurer].
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
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 7.04. The
Master Servicer shall provide each Rating Agency [, the Insurer] and the
Indenture Trustee with written notice prior to
54
the delegation of any of its duties to any Person other than any of the Master
Servicer's Affiliates or their respective successors and assigns.
55
ARTICLE VII.
MASTER SERVICER TERMINATION
Section 7.01 MASTER SERVICER TERMINATION EVENTS.
If any one of the following events ("Master Servicer Termination Events")
shall occur and be continuing:
(a) Any failure by the Master Servicer to deposit in the Collection
Account any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of five (5) Business Days after the date upon
which written notice of such failure shall have been given to the Master
Servicer by the Indenture Trustee or the Depositor, or to the Master Servicer,
the Depositor and the Indenture Trustee by [the Insurer or] Holders of Class A
Notes evidencing not less than 51% of the aggregate Percentage Interests of the
Class A Notes; or
(b) Any 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 Class A Notes or in this Agreement, which failure (A)
materially and adversely affects the interests of Class A Noteholders and (B)
continues unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Indenture Trustee or the Depositor, or
to the Master Servicer, the Depositor and the Indenture Trustee by [the Insurer
or] Holders of Class A Notes evidencing not less than 51% of the aggregate
Percentage Interests of the Class A Notes; 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 consent by the Master Servicer to 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 of or relating to the Master Servicer or of or relating to
substantially all of its property; 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;
then, and in each and every case, so long as a Master Servicer Termination Event
shall not have been remedied by the Master Servicer, either the Indenture
Trustee[, the Insurer] or the Depositor may, and at the direction of Holders of
Class A Notes evidencing not less than 51% of the aggregate Percentage Interests
of the Class A Notes [(with the consent of the Insurer so long as no Insurer
Default exists)], the Indenture Trustee shall, by notice then given in writing
to the
56
Master Servicer, the Depositor[, the Insurer] and the Indenture Trustee, as
applicable, terminate all of the rights and obligations of the Master Servicer
as master servicer under this Agreement; PROVIDED, HOWEVER, that the
responsibilities and duties of the initial Master Servicer with respect to the
purchase of Mortgage Loans pursuant to Sections 2.04(c) and 3.01 shall not
terminate. Any such notice to the Master Servicer shall also be given to each
Rating Agency. On or after the receipt by the Master Servicer of such written
notice, all authority and power of, and all benefits accruing to, the Master
Servicer under this Agreement, whether with respect to the Class A Notes or the
Mortgage Loans or otherwise, shall pass to and be vested in the Indenture
Trustee or, if a successor Master Servicer has been appointed under Section
7.02, such successor Master Servicer 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 Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Indenture Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer hereunder,
including, without limitation, the transfer to the Indenture Trustee for the
administration by it of all cash amounts that shall at the time be held by the
terminated Master Servicer and to be deposited by it in the Collection Account,
or that have been deposited by the terminated Master Servicer in the Collection
Account or thereafter received by the terminated Master Servicer with respect to
the Mortgage Loans.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 7.01(a) for a period of five (5) Business Days or under Section 7.01(b)
for a period of sixty (60) days, shall not constitute a Master Servicer
Termination Event 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 of God, acts of declared or undeclared war, public
disorder, terrorism, rebellion or sabotage, epidemics, landslides, lightning,
fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence
shall not relieve the Master Servicer from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of this Agreement,
and the Master Servicer shall provide the Indenture Trustee, the Depositor [,
the Insurer] and the Class A Noteholders with an Officer's Certificate giving
prompt 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 Insurer] and each Rating Agency in writing
of any Master Servicer Termination Events.
Section 7.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Master Servicer receives a notice of
resignation or termination pursuant to Section 6.04 or 7.01, the Indenture
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof; PROVIDED, HOWEVER, that the responsibilities and duties of
HFC as Master Servicer with respect to the purchase of the Mortgage Loans
pursuant to Sections 2.04(c) and 3.01 shall not terminate. 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
57
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 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 housing and home
finance institution or other mortgage loan or mortgage loan servicer having all
licenses and permits required in order to perform its obligations hereunder and
a net worth of not less than $50,000,000 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 Servicer shall be acceptable to the Insurer, as evidenced by the
Insurer's prior written consent which consent shall not be unreasonably
withheld; and PROVIDED FURTHER that] that the appointment of any such successor
Master Servicer will not result in the qualification, reduction or withdrawal of
the then-current rating assigned to the Class A Notes by the Rating Agencies, as
evidenced by a writing to such effect delivered to the Indenture Trustee [and
the Insurer]. Pending appointment of a successor to the Master Servicer
hereunder, unless the Indenture Trustee is prohibited by law from so acting, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the successor shall be entitled
to receive compensation out of payments on Mortgage Loans in an amount equal to
the compensation which the Master Servicer would otherwise have received
pursuant to Section 3.09 (or such lesser compensation as the Indenture Trustee
and such successor shall agree). The Indenture Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) Any successor, including the Indenture Trustee, to the Master Servicer
as master servicer shall during the term of its service as master servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Noteholders and (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. The appointment of a successor Master Servicer shall not affect
any liability of the predecessor Master Servicer which may have arisen under
this Agreement prior to its termination as Master Servicer (including, without
limitation, any deductible under an insurance policy pursuant to Section 3.04),
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 or the
Depositor of any of their representations or warranties contained herein or in
any related document or agreement.
Section 7.03 WAIVER OF DEFAULTS. The Insurer or the Majority Noteholders
with the consent of the Insurer (which consent shall not be unreasonably
withheld) may, on behalf of all Class A Noteholders, waive any events permitting
removal of the Master Servicer as master servicer pursuant to this Article VII,
PROVIDED, HOWEVER, that the Insurer and the Majority Noteholders may not waive a
default in making a required distribution on a Class A Note without the consent
of the Holder of such Class A Note. Upon any waiver of a past default, such
default shall cease to exist and any Master Servicer Termination Event arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Notice of any such waiver shall be given by the Indenture Trustee to the Rating
Agencies.
58
Section 7.04 NOTIFICATION TO CLASS A NOTEHOLDERS. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VII
or Section 6.04 above, the Indenture Trustee shall give prompt written notice
thereof to the Class A Noteholders at their respective addresses appearing in
the Class A Note Register, the Insurer and each Rating Agency.
59
ARTICLE VIII.
TERMINATION
Section 8.01 TERMINATION.
(a) The respective obligations and responsibilities of the Depositor, the
Seller, the Master Servicer, the Trust and the Indenture Trustee created hereby
(other than the obligation of the Indenture Trustee to make certain payments to
Class A Noteholders after the Final Payment Date and the obligation of the
Master Servicer to send certain notices as hereinafter set forth) shall
terminate upon notice to the Indenture Trustee of the later of (A) payment in
full of all amounts owing to the Insurer unless the Insurer shall otherwise
consent and (B) the earliest of (i) the final payment or other liquidation of
the last Mortgage Loan remaining in the Trust; (ii) the optional purchase by the
Master Servicer of the Mortgage Loans as described below and (iii) the Payment
Date in [ ]. Notwithstanding the forgoing, in no event shall the trust
created hereby continue beyond the expiration of 21 years from the date of the
last survivor of the descendants of Xxxxxx X. Xxxxxxx, the late ambassador of
the United States to the Court of St. James's, living on the date hereof.
(b) The Master Servicer may, at its option, terminate this Agreement on
any Payment Date on or after the Payment Date on which the aggregate Pool
Balance is less than or equal to [ ] of the Cut-Off Date Pool Balance by
purchasing, on the next succeeding Payment Date, all of the outstanding Mortgage
Loans and REO Properties at a price (the "Termination Price") equal the greatest
of (A) the sum of (x) 100% of the Principal Balance of each Mortgage Loan (other
than any Mortgage Loan as to which title to the underlying Mortgaged Property
has been acquired and whose fair market value is included pursuant to clause (y)
below) as of the first day of the Collection Period preceding the Distribution
Date upon which the proceeds of any repurchase are to be distributed and (y) the
fair market value of such acquired property (as determined by the Master
Servicer as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to Noteholders
pursuant to Section 8.01(e)) PLUS, in each case, one month's interest at the
applicable Net Loan Rate on the Principal Balance of each Mortgage Loan
(including any Mortgage Loan as to which title to the underlying Mortgaged
Property has been acquired),(B) the aggregate fair market value (as determined
by the Master Servicer as of the close of business on such third preceding
Business Day) of all of the assets of the Trust, and (C) the Class A Note
Principal Amount, together with any unpaid Interest Carry Forward Amounts, PLUS
one month's interest on such Class A Note Principal Amount and any unpaid
Interest Carry Forward Amounts at the Class A Note Rate, [PLUS all amounts due
and owing to the Insurer].
Any such purchase shall be accomplished by deposit into the Collection
Account on the Determination Date before such Payment Date of the Termination
Price.
(c) Notice of any termination, specifying the Payment Date (which shall be
a date that would otherwise be a Payment Date) upon which the Class A
Noteholders may surrender their Class A Notes to the Indenture Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Indenture Trustee (upon receipt of written directions
60
from the Master Servicer, if the Master Servicer is exercising its right to
transfer of the Mortgage Loans, given not later than the first day of the month
preceding the month of such final distribution) to the Insurer and to the Master
Servicer by letter to the Class A Noteholders mailed not earlier than the 15th
day and not later than the 25th day of the month next preceding the month of
such final distribution specifying (i) the Payment Date upon which final
distribution of the Class A Notes will be made upon presentation and surrender
of Class A Notes at the office or agency of the Indenture Trustee therein
designated, (ii) the amount of any such final distribution and (iii) that the
Record Date otherwise applicable to such Payment Date is not applicable,
distributions being made only upon presentation and surrender of the Class A
Notes at the office or agency of the Indenture Trustee therein specified.
(d) Upon presentation and surrender of the Class A Notes, the Indenture
Trustee shall cause to be distributed to the Holders of the Class A Notes on the
Payment Date for such final distribution, in proportion to the Percentage
Interests of their respective Class A Notes and to the extent that funds are
available for such purpose, an amount equal to the amount required to be
distributed to Class A Noteholders pursuant to Section 5.01 for such Payment
Date. On the final Payment Date prior to having made the distributions called
for above, the Indenture Trustee shall, based upon the information set forth in
the Servicing Certificate for such Payment Date, withdraw from the Collection
Account and remit to the Insurer the lesser of (x) the amount available for
distribution on such final Payment Date, net of any portion thereof necessary to
pay the Class A Noteholders pursuant to Section 5.01(a) and any amounts owing to
the Indenture Trustee in respect of the Indenture Trustee Fee and due and unpaid
Skip-A-Pay Advances and Servicing Fees, and (y) the unpaid amounts due and owing
to the Insurer pursuant to the Insurance Agreement.
(e) In the event that all of the Class A Noteholders shall not surrender
their Class A Notes for final payment and cancellation on or before such final
Payment Date, the Indenture Trustee shall promptly following such date cause all
funds in the Distribution Account not distributed in final distribution to Class
A Noteholders, to be withdrawn therefrom and credited to the remaining Class A
Noteholders by depositing such funds in a separate escrow account for the
benefit of such Class A Noteholders, and the Master Servicer (if the Master
Servicer has exercised its right to purchase the Mortgage Loans) or the
Indenture Trustee (in any other case) shall give a second written notice to the
remaining Class A Noteholders to surrender their Class A Notes for cancellation
and receive the final distribution with respect thereto. If within nine months
after the second notice all the Class A Notes shall not have been surrendered
for cancellation, the Transferor Interest will be entitled to all unclaimed
funds and other assets which remain subject hereto and the Indenture Trustee
upon transfer of such funds shall be discharged of any responsibility for such
funds and the Noteholders shall look to the holder of the Transferor Interest
for payment.
(f) Upon payment of all amounts owed under the Insurance Policy and
cancellation of the Class A Notes, the Indenture Trustee shall provide the
Insurer notice of cancellation of the Class A Notes and surrender the Insurance
Policy to the Insurer.
61
ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.01 AMENDMENT.
(a) This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Trust and the Indenture Trustee by written agreement,
without the consent of any of the Class A Noteholders[, but only with the
consent of the Insurer (which consent shall not be unreasonably withheld)] (i)
to cure any ambiguity, (ii) to correct any defective provisions or to correct or
supplement any provisions herein that may be inconsistent with any other
provisions herein, (iii) to add to the duties of the Depositor, the Indenture
Trustee or the Master Servicer, (iv) to add any other provisions with respect to
matters or questions arising under this Agreement [or the Insurance Policy, as
the case may be], which shall not be inconsistent with the provisions of this
Agreement, (v) to add or amend any provisions of this Agreement as required by
any Rating Agency or any other nationally recognized statistical rating agency
in order to maintain or improve any rating of the Class A Notes (it being
understood that, after obtaining the ratings in effect on the Closing Date,
neither the Indenture Trustee, the Depositor nor the Master Servicer is
obligated to obtain, maintain or improve any such rating), or (vi) to amend the
definition of Targeted Overcollateralization Amount; PROVIDED, HOWEVER, that as
evidenced by an Opinion of Counsel (at the expense of the party requesting such
amendment) in each case such action shall not, (1) have any material adverse tax
consequence with respect to such Class A Noteholder[, the Insurer] or the Trust
or (2) adversely affect in any material respect the interest of any Class A
Noteholder [or the Insurer], PROVIDED, FURTHER, that the amendment shall not be
deemed to adversely affect in any material respect the interests of the Class A
Noteholder [or the Insurer], and no Opinion of Counsel to that effect shall be
required by this clause (2) if the Person requesting the amendment obtains a
letter from the Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the Class A
Notes[ without regard to the Insurance Policy].
(b) This Agreement also may be amended from time to time by the Master
Servicer, the Depositor, the Trust and the Indenture Trustee, with the consent
of the Holders of Class A Notes representing not less than 51% of the Class A
Note Principal Amount, [and with the consent of the Insurer (which consent shall
not be unreasonably withheld),] for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Class A Noteholders or the
Transferor in respect of the Ownership Interest; PROVIDED, HOWEVER, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
payments on the Class A Notes [or distributions or payments under the Insurance
Policy which are required to be made on the Class A Notes] without the consent
of the Holder of such Class A Notes or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the Holders of
all Class A Notes then outstanding.
Prior to the execution of any such amendments, the Indenture Trustee shall
furnish written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Class A
62
Noteholders, the Indenture Trustee shall furnish written notification of the
substance of such amendment to each Class A Noteholder and fully executed
original counterparts of the instruments effecting such amendment to the
Insurer.
(c) It shall not be necessary for the consent of Class A Noteholders under
this Section 9.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Class A Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, each of the
Indenture Trustee and the Owner Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and all conditions
precedent to the execution of such amendment have been met. The Indenture
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Indenture Trustee's own rights, duties, indemnities or immunities
under this Agreement.
Section 9.02 RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the Class A Noteholders' expense on direction
of the Indenture Trustee or the Majority Class A Noteholders, but only when
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Class A Noteholders or
is necessary for the administration or servicing of the Mortgage Loans.
Section 9.03 DURATION OF AGREEMENT. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 9.04 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF
NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 9.05 NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by overnight mail, certified mail or registered mail,
postage prepaid, to (a) in the case of the Master Servicer, 0000 Xxxxxxx
Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, Attention: Treasurer, (b) in the case
of the Depositor, 0000 Xxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention:
[ ], (c) in the case of the Indenture Trustee, at the Corporate Trust
Office, [ ], Attention: [ ], (d) in the case of the Owner Trustee,
[ ], Attention: [ ], (e) in the case of Moody's, ABS Monitoring
Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (f) in the case of
Standard & Poor's, 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Structured Finance Surveillance and (g) in the case of Fitch, Xxx
Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: RMBS
Surveillance Department [and
63
(h) in the case of the Note Insurer, [ ]], 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 Class A
Noteholder shall be given by first class mail, postage prepaid, at the address
of such Holder as shown in the Note Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Class A Noteholder receives such notice.
Section 9.06 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 9.07 NO PARTNERSHIP. Nothing herein contained shall be deemed or
construed to create any partnership or joint venture between the parties hereto
and the services of the Master Servicer shall be rendered as an independent
contractor.
Section 9.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same Agreement.
Section 9.09 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Master Servicer, the Seller, the Trust, the
Indenture Trustee and the Class A Noteholders and their respective successors
and permitted assigns. The Insurer is an express third party beneficiary of this
Agreement.
Section 9.10 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 9.11 INDENTURE TRUSTEE. All privileges, rights and immunities given
to the Indenture Trustee in the Indenture are hereby extended to and applicable
to the Indenture Trustee's obligations hereunder.
Section 9.12 REPORTS TO RATING AGENCIES. The Indenture Trustee shall
provide to each Rating Agency copies of statements, reports and notices, to the
extent received or prepared by the Master Servicer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Mortgage
Loans;
(iii) notice of any termination, replacement, succession, merger or
consolidation of either the Master Servicer or the Trust;
(iv) notice of final payment on the Class A Notes;
64
(v) notice of any Master Servicer Termination Event;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 3.11 herein, and copies of any compliance reports
delivered by the Master Servicer hereunder including Section 3.10 herein;
and
(vii) copies of any Servicing Certificate pursuant to Section 3.18
herein.
Section 9.13 INCONSISTENCIES AMONG TRANSACTION DOCUMENTS. In the event
certain provisions of a Transaction Document conflict with the provisions of
this
Sale and Servicing Agreement, the parties hereto agree that the provisions
of this
Sale and Servicing Agreement shall be controlling.
Section 9.14 [RIGHTS OF THE INSURER TO EXERCISE RIGHTS OF NOTEHOLDERS. By
accepting its Class A Note, each Class A Noteholder agrees that unless an
Insurer Default exists, the Insurer shall have the right to exercise all rights
of the Class A Noteholders as specified under this Agreement without any further
consent of the Class A Noteholders. Any right conferred to the Insurer hereunder
shall be suspended and shall run to the benefit of the Class A Noteholders
during any period in which there exists an Insurer Default.]
Section 9.15 LIMITATION ON VOTING OF PREFERRED STOCK. The Indenture Trustee
shall hold all of the preferred stock ("Preferred Stock") of the Depositor in
trust, for the benefit of the Class A Noteholders [and the Insurer], and, during
the continuance of a Master Servicer Termination Event, shall vote such stock
only pursuant to the written instructions of [the Insurer and] Holders of Class
A Notes evidencing not less than 51% of the Class A Note Principal Amount. The
Indenture Trustee shall not permit a transfer of any of the Preferred Stock to
HFC or any of its Affiliates. Concurrently with any retransfer of the Mortgage
Loans to the Master Servicer pursuant to Section 8.01, the Indenture Trustee
shall transfer to the Depositor for cancellation all shares of Preferred Stock
held by the Indenture Trustee.
Section 9.16 PERFECTION REPRESENTATIONS. The Perfection Representations
shall be a part of this Agreement for all purposes.
65
IN WITNESS WHEREOF, the following have caused their names to be signed by
their respective officers thereunto duly authorized, as of the day and year
first above written, to this
Sale and Servicing Agreement.
[ ]MORTGAGE LOAN TRUST 200_-_,
By: [ ], not in its individual
capacity but solely as Owner Trustee
By:
-----------------------------------
Name:
Title
HOUSEHOLD FINANCE CORPORATION
as Master Servicer
By:
-----------------------------------
Name:
Title
HOUSEHOLD MORTGAGE FUNDING CORPORATION III,
as Depositor
By:
-----------------------------------
Name:
Title
[ ],
as Indenture Trustee
By:
-----------------------------------
Name:
Title
THE STATE OF ________ )
)
COUNTY OF __________ )
BEFORE ME, on [ ], the undersigned authority, a Notary
Public, on this day personally appeared [ ], known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [ ] not
in its individual capacity but in its capacity as Owner Trustee of [ ]
MORTGAGE LOAN TRUST 200_-_, as the Trust, and that he executed the same as the
act of such corporation for the purpose and consideration therein expressed, and
in the capacity therein stated.
--------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF __________ )
BEFORE ME, on [ ], the undersigned authority, a Notary
Public, on this day personally appeared , known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [ ], as
the Master Servicer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
--------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF __________ )
BEFORE ME, on [ ], the undersigned authority, a Notary
Public, on this day personally appeared , known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [ ], as
the Depositor, and that he executed the same as the act of such corporation for
the purpose and consideration therein expressed, and in the capacity therein
stated.
--------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF __________ )
BEFORE ME, on [ ], the undersigned authority, a Notary
Public, on this day personally appeared , known to me to be the person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [ ], as
Indenture Trustee, and that he executed the same as the act of such corporation
for the purposes and consideration therein expressed, and in the capacity
therein stated.
--------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF __________ )
BEFORE ME, on [ ] the undersigned authority, a Notary
Public, on this day personally appeared [ ], known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [ ], and that
he executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
--------------------------------
Notary Public, State of ________
Schedule 1
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
The Depositor hereby represents, warrants, and covenants to the Trustee as to
itself and the Sellers as follows on the Closing Date and on each Distribution
Date thereafter:
GENERAL
1. This Agreement creates a valid and continuing security interest (as defined
in the applicable UCC) in the Mortgage Loans in favor of the Indenture Trustee,
and the Indenture creates a valid and continuing security interest (as defined
in the applicable UCC), each of which security interest is prior to all other
Liens, and is enforceable as such as against creditors of and purchasers from
the Depositor.
2. The Mortgage Loans constitute "general intangibles" or "instruments" within
the meaning of the applicable UCC.
3. The Collection Account and all subaccounts thereof constitute either a
deposit account or a securities account.
4. To the extent that payments and collections received or made with respect
to the Mortgage Loans constitute securities entitlements, such payments and
collections have been and will have been credited to the Collection Account. The
securities intermediary for the Collection Account has agreed to treat all
assets credited to the Collection Account as "financial assets" within the
meaning of the applicable UCC.
CREATION
5. The Depositor owns and has good and marketable title to the Mortgage Loans
free and clear of any Lien, claim or encumbrance of any Person, excepting only
liens for taxes, assessments or similar governmental charges or levies incurred
in the ordinary course of business that are not yet due and payable or as to
which any applicable grace period shall not have expired, or that are being
contested in good faith by proper proceedings and for which adequate reserves
have been established, but only so long as foreclosure with respect to such a
lien is not imminent and the use and value of the property to which the Lien
attaches is not impaired during the pendency of such proceeding.
6. The Depositor has received all consents and approvals to the sale of the
Mortgage Loans hereunder to the Trust required by the terms of the Mortgage
Loans that constitute instruments.
7. To the extent the Collection Account or subaccounts thereof constitute
securities entitlements, certificated securities or uncertificated securities,
the Depositor has received all consents and approvals required to transfer to
the Trustee its interest and rights in the Collection Account hereunder.
1-1
PERFECTION
8. The Depositor has caused or will have caused, within ten days after the
effective date of this Agreement, the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the sale of the Mortgage Loans from the
Depositor to the Trust, the security interest in the Mortgage Loans granted to
the Trust hereunder, the pledge of the Mortgage Loans from the Trust to the
Indenture Trustee, and the security interest in the Mortgage Loans granted to
the Indenture Trustee under the Indenture.
9. With respect to the Collection Account and all subaccounts that constitute
deposit accounts, either:
(i) the Depositor has delivered to the Indenture Trustee a fully-executed
agreement pursuant to which the bank maintaining the deposit accounts has
agreed to comply with all instructions originated by the Indenture Trustee
directing disposition of the funds in the Collection Account without
further consent by the Depositor; or
(ii) the Depositor has taken all steps necessary to cause the Indenture
Trustee to become the account holder of the Collection Account.
10. With respect to the Collection Account or subaccounts thereof that
constitute securities accounts or securities entitlements, either:
(i) the Depositor has caused or will have caused, within ten days after
the effective date of this Agreement, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest in the Collection Account granted by the Depositor to the Trust
and by the Trust to the Indenture Trustee; or
(ii) the Depositor has delivered to the Indenture Trustee a fully-executed
agreement pursuant to which the securities intermediary has agreed to
comply with all instructions originated by the Indenture Trustee relating
to the Collection Account without further consent by the Depositor; or
(iii) the Depositor has taken all steps necessary to cause the securities
intermediary to identify in its records the Indenture Trustee as the person
having a security entitlement against the securities intermediary in the
Collection Account.
PRIORITY
11. Other than the transfer of the Mortgage Loans to the Trust under the
Transfer Agreement, and the security interest granted to the Trust pursuant to
this Agreement, neither the Depositor nor the Sellers have pledged, assigned,
sold, granted a security interest in, or otherwise conveyed any of the Mortgage
Loans. Neither the Depositor nor the Sellers have authorized the filing of, or
are aware of any financing statements against the Depositor or any of the
Sellers that include a description of collateral covering the Mortgage Loans
other than any financing statement relating to the security interest granted to
the Trustee hereunder or that has been terminated.
1-2
12. The Depositor is not aware of any judgment, ERISA or tax lien filings
against either the Depositor or any of the Sellers.
13. To the Depositor's knowledge, none of the instruments that constitute or
evidence the Mortgage Loans has any marks or notations indicating that they have
been pledged, assigned or otherwise conveyed to any Person other than the Trust.
14. Neither the Collection Account nor any subaccount thereof is in the name of
any person other than the Depositor or the Indenture Trustee as trustee under
the Indenture or in the name of its nominee. The Depositor has not consented for
the securities intermediary of the Collection Account to comply with entitlement
orders of any person other than the Indenture Trustee.
15. SURVIVAL OF PERFECTION REPRESENTATIONS. Notwithstanding any other provision
of this Agreement or any other transaction document, the Perfection
Representations contained in this Schedule shall be continuing, and remain in
full force and effect (notwithstanding any replacement of the Master Servicer or
termination of the Master Servicer's rights to act as such) until such time as
all obligations under this Agreement have been finally and fully paid and
performed.
16. NO WAIVER. The parties to this Agreement (i) shall not, without obtaining a
confirmation of the then-current rating of the Class A Notes, waive any of the
Perfection Representations, and (ii) shall provide the Rating Agencies with
prompt written notice of any breach of the Perfection Representations, and shall
not, without obtaining a confirmation of the then-current rating of the Class A
Notes (as determined after any adjustment or withdrawal of the ratings following
notice of such breach) waive a breach of any of the Perfection Representations.
17. MASTER SERVICER TO MAINTAIN PERFECTION AND PRIORITY. The Master Servicer
covenants that, in order to evidence the interests of the Depositor, the Trust
and the Indenture Trustee under this Agreement, the Master Servicer shall take
such action, or execute and deliver such instruments (other than effecting a
Filing (as defined below), unless such Filing is effected in accordance with
this paragraph) as may be necessary or advisable (including, without limitation,
such actions as are requested by the Indenture Trustee) to maintain and perfect,
as a first priority interest, the Indenture Trustee's security interest in the
Mortgage Loans. The Master Servicer shall, from time to time and within the time
limits established by law, prepare and present to the Indenture Trustee for the
Indenture Trustee to authorize (based in reliance on the Opinion of Counsel
hereinafter provided for) the Master Servicer to file, all financing statements,
amendments, continuations, initial financing statements in lieu of a
continuation statement, terminations, partial terminations, releases or partial
releases, or any other filings necessary or advisable to continue, maintain and
perfect the Indenture Trustee's security interest in the Mortgage Loans as a
first-priority interest (each a "Filing"). The Master Servicer shall present
each such Filing to the Indenture Trustee together with (x) an Opinion of
Counsel to the effect that such Filing is (i) consistent with grant of the
security interest to the Trust pursuant to Section 2.01 of this Agreement and
the grant of the security interest to the Indenture Trustee pursuant to the
Indenture, (ii) satisfies all requirements and conditions to such Filing in this
Agreement and (iii) satisfies the requirements for a Filing of such type under
the Uniform Commercial Code in the applicable jurisdiction (or if the Uniform
Commercial Code does not apply, the applicable statute governing the perfection
of security interests), and (y) a form of authorization for the
1-3
Indenture Trustee's signature. Upon receipt of such Opinion of Counsel and form
of authorization, the Indenture Trustee shall promptly authorize in writing the
Master Servicer to, and the Master Servicer shall, effect such Filing under the
Uniform Commercial Code without the signature of the Depositor or the Trust or
the Indenture Trustee where allowed by applicable law. Notwithstanding anything
else in the transaction documents to the contrary, the Master Servicer shall not
have any authority to effect a Filing without obtaining written authorization
from the Indenture Trustee.
1-4
EXHIBIT A
MORTGAGE LOAN SCHEDULE
A-1
EXHIBIT B
FORM OF MONTHLY STATEMENT TO NOTEHOLDERS
B-1
EXHIBIT C
FORM OF SERVICING CERTIFICATE
C-1
EXHIBIT D
FORM OF LIQUIDATION REPORT
D-1
EXHIBIT E
FORM OF CLASS A NOTES
E-1
EXHIBIT F
[SPECIMEN OF THE INSURANCE POLICY]
F-1
EXHIBIT G
CUSTODIAL FEE LETTER
G-1
