EXHIBIT 99.1
================================================================================
IMPAC FUNDING CORPORATION,
as Master Servicer,
IMPAC CMB TRUST SERIES 2003-11,
as Issuer
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee,
------------------------------------
SERVICING AGREEMENT
Dated as of November 6, 2003
------------------------------------
Mortgage Loans
Impac CMB Trust Series 2003-11
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions..............................................................................................2
Section 1.01 Definitions.......................................................................2
Section 1.02 Other Definitional Provisions.....................................................2
Section 1.03 Interest Calculations.............................................................2
ARTICLE II
Representations and Warranties...........................................................................4
Section 2.01 Representations and Warranties Regarding the Master Servicer......................4
Section 2.02 Existence.........................................................................5
Section 2.03 Enforcement of Representations and Warranties.....................................5
ARTICLE III
Administration and Servicing of Mortgage Loans...........................................................7
Section 3.01 Master Servicer to Assure Servicing...............................................7
Section 3.02 Subservicing Agreements Between Master Servicer
and Subservicers..............................................................9
Section 3.03 Successor Subservicers...........................................................10
Section 3.04 Liability of the Master Servicer.................................................10
Section 3.05 Assumption or Termination of Subservicing Agreements
by Indenture Trustee.........................................................10
Section 3.06 Collection of Mortgage Loan Payments.............................................11
Section 3.07 Withdrawals from the Collection Account..........................................13
Section 3.08 Collection of Taxes Assessments and Similar Items;
Servicing Accounts...........................................................16
Section 3.09 Access to Certain Documentation and Information
Regarding the Mortgage Loans.................................................16
Section 3.10 Maintenance of Primary Insurance Policies and
the Radian Policy; Collection Thereunder.....................................16
Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage............................17
Section 3.12 Due-on-Sale Clauses; Assumption Agreements.......................................19
Section 3.13 Realization Upon Defaulted Mortgage Loans........................................20
Section 3.14 Indenture Trustee to Cooperate; Release of Mortgage Files........................21
Section 3.15 Master Servicing Compensation....................................................22
Section 3.16 Annual Statements of Compliance..................................................23
i
Section 3.17 Annual Independent Public Accountants' Servicing Report..........................24
Section 3.18 Optional Purchase of Defaulted Mortgage Loans....................................24
Section 3.19 Information Required by the Internal Revenue Service Generally and
Reports of Foreclosures and Abandonments of Mortgaged Property...............25
Section 3.20 Realization Upon Multifamily Loans...............................................25
Section 3.21 Title and Management of REO Properties Related
to Multifamily Loans.........................................................27
Section 3.22 Sale of Specially Serviced Mortgage Loans and
Related REO Properties.......................................................28
Section 3.23 Transfer of Servicing Between Master Servicer and Special Servicer;
Record Keeping...............................................................30
Section 3.24 Inspections......................................................................31
Section 3.25 Available Information and Notices................................................32
ARTICLE IV
Servicing Certificate...................................................................................33
Section 4.01 Remittance Reports...............................................................33
Section 4.02 Reserved.........................................................................33
Section 4.03 Reserved.........................................................................33
Section 4.04 Advances.........................................................................33
Section 4.05 Compensating Interest Payments...................................................34
Section 4.06 Exchange Act Reporting...........................................................34
ARTICLE V
The Master Servicer.....................................................................................37
Section 5.01 Liability of the Master Servicer.................................................37
Section 5.02 Merger or Consolidation of or Assumption of the Obligations
of the Master Servicer.......................................................37
Section 5.03 Limitation on Liability of the Master Servicer and Others........................37
Section 5.04 Master Servicer Not to Resign....................................................38
Section 5.05 Delegation of Duties.............................................................38
Section 5.06 Master Servicer to Pay Indenture Trustee's and Owner Trustee's Fees
and Expenses; Indemnification................................................39
ARTICLE VI
Default.................................................................................................41
Section 6.01 Servicing Default................................................................41
Section 6.02 Indenture Trustee to Act; Appointment of Successor...............................43
Section 6.03 Notification to Bondholders......................................................45
Section 6.04 Waiver of Defaults...............................................................45
ii
ARTICLE VII
Miscellaneous Provisions................................................................................46
Section 7.01 Amendment........................................................................46
Section 7.02 GOVERNING LAW....................................................................46
Section 7.03 Notices..........................................................................46
Section 7.04 Severability of Provisions.......................................................47
Section 7.05 Third-Party Beneficiaries........................................................47
Section 7.06 Counterparts.....................................................................47
Section 7.07 Effect of Headings and Table of Contents.........................................47
Section 7.08 Termination......................................................................47
Section 7.09 No Petition......................................................................48
Section 7.10 No Recourse......................................................................48
ARTICLE VIII
Duties of the Master Servicer...........................................................................49
Section 8.01 Administrative Duties............................................................49
Section 8.02 Records.........................................................................50
Section 8.03 Additional Information to be Furnished...........................................50
EXHIBIT A - MORTGAGE LOAN SCHEDULE..............................................................................A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE.........................................................................B-1
EXHIBIT C-1 - FORM OF CERTIFICATION TO BE PROVIDED BY
THE MASTER SERVICER WITH FORM 10-K..........................................................C-1
EXHIBIT C-2 - FORM OF FORM CERTIFICATION TO BE PROVIDED BY
THE INDENTURE TRUSTEE WITH FORM 10-K........................................................C-2
EXHIBIT C-3 - FORM OF CERTIFICATION TO BE PROVIDED TO
MASTER SERVICER BY THE INDENTURE TRUSTEE......................................................C-3
iii
This Servicing Agreement, dated as of November 6, 2003, among
Impac Funding Corporation, as Master Servicer (the "Master Servicer" ), Impac
CMB Trust Series 2003-11, as Issuer (the "Issuer") and Deutsche Bank National
Trust Company, as Indenture Trustee (the "Indenture Trustee").
W I T N E S S E T H T H A T :
WHEREAS, pursuant to the terms of the Mortgage Loan Sale and
Contribution Agreement, IMH Assets Corp. (the "Company" or the "Depositor") will
acquire the Mortgage Loans;
WHEREAS, the Company will create Impac CMB Trust Series
2003-11, a Delaware statutory trust, and will transfer the Mortgage Loans and
all of its rights under the Mortgage Loan Sale and Contribution Agreement to the
Issuer;
WHEREAS, pursuant to the terms of an Amended and Restated
Trust Agreement dated as of November 6, 2003 (the "Trust Agreement") among the
Company, as depositor, Wilmington Trust Company, as owner trustee (the "Owner
Trustee") and Deutsche Bank National Trust Company, as certificate registrar and
certificate paying agent, the Company will convey the Mortgage Loans to the
Issuer in exchange for the Certificates (as defined below);
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Depositor, the
Trust Certificates, Series 2003-11 (the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of
November 6, 2003 (the "Indenture") between the Issuer and Deutsche Bank National
Trust Company (the "Indenture Trustee"), the Issuer will pledge the Mortgage
Loans and issue and transfer to or at the direction of the Purchaser the
Collateralized Asset-Backed Bonds, Series 2003-11, Class 1-A-1, Class 1-A-2,
Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 2-A-1, Class 2-M-1, Class 2-M-2 and
Class 2-B-1 Bonds (collectively, the "Bonds"); and
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Master Servicer will service the Mortgage Loans set forth on the Mortgage
Loan Schedule attached hereto as Exhibit A directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
4
ARTICLE I
Definitions
Section 1.01 Definitions. For all purposes of this Servicing Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Definitions contained in Appendix A to the
Indenture which is incorporated by reference herein. All other capitalized terms
used herein shall have the meanings specified herein.
Section 1.02 Other Definitional Provisions.
(a) All terms defined in this Servicing Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03 Interest Calculations. All calculations of interest
hereunder that are made in respect of the Stated Principal Balance of a Mortgage
Loan shall be made on the basis of a 360-day
5
year consisting of twelve 30-day months, notwithstanding the terms of the
related Mortgage Note and Mortgage.
6
ARTICLE II
Representations and Warranties
Section 2.01 Representations and Warranties Regarding the Master
Servicer. The Master Servicer represents and warrants to the Issuer and for the
benefit of the Indenture Trustee, as pledgee of the Mortgage Loans and the
Bondholders, as of the Cut-off Date and the Closing Date, that:
(i) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California and has the corporate power to own its assets and to
transact the business in which it is currently engaged. The Master
Servicer is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer or the validity
or enforceability of the Mortgage Loans;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered,
this Servicing Agreement will constitute the legal, valid and binding
obligation of the Master Servicer enforceable in accordance with its
terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies;
(iii) The Master Servicer is not required to obtain the
consent of any other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement
and the performance of the transactions contemplated hereby by the
Master Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the Master
Servicer or any provision of the certificate of incorporation or bylaws
of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound;
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending (other
than litigation with respect to which pleadings or documents have been
filed with a court, but not served on the Master Servicer), or to the
knowledge of the Master Servicer threatened, against the Master
Servicer or any of its properties or with respect to this Servicing
Agreement or the Bonds or the Certificates which,
7
to the knowledge of the Master Servicer, has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated
by this Servicing Agreement; and
(vi) The Master Servicer is a member of MERS in good standing,
and will comply in all material respects with the rules and procedures
of MERS in connection with the servicing of the Mortgage Loans that are
registered with MERS.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
Section 2.02 Existence. The Issuer will keep in full effect its
existence, rights and franchises as a statutory trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States of
America, in which case the Issuer will keep in full effect its existence, rights
and franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Servicing Agreement.
Section 2.03 Enforcement of Representations and Warranties. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Loans, shall enforce the representations and warranties
and related obligations for breaches thereof of the Seller pursuant to the
Mortgage Loan Sale and Contribution Agreement. Upon the discovery by the Seller,
the Master Servicer, the Indenture Trustee or the Company of a breach of any of
the representations and warranties made in the Mortgage Loan Sale and
Contribution Agreement in respect of any Mortgage Loan, or upon the occurrence
of a Repurchase Event, which materially and adversely affects the interests of
the Bondholders or the Certificateholders, the party discovering the same shall
give prompt written notice to the other parties. The Master Servicer shall
promptly notify the Seller and request that, pursuant to the terms of the
Mortgage Loan Sale and Contribution Agreement, the Seller either (i) cure such
breach or Repurchase Event in all material respects or (ii) purchase such
Mortgage Loan, in each instance in accordance with the Mortgage Loan Sale and
Contribution Agreement; provided that the Seller shall, subject to the
conditions set forth in the Mortgage Loan Sale and Contribution Agreement, have
the option to substitute an Eligible Substitute Mortgage Loan or Eligible
Substitute Mortgage Loans for such Mortgage Loan. Monthly Payments due with
respect to Eligible Substitute Mortgage Loans in the month of substitution shall
not be part of the Trust Estate and will be retained by the Master Servicer and
remitted by the Master Servicer to the Seller on the next succeeding Payment
Date. For the month of substitution, distributions to the Payment Account
pursuant to this Agreement will include the Monthly Payment due on a Deleted
Mortgage Loan for such month and thereafter the Seller shall be entitled to
retain all amounts received in respect of such Deleted Mortgage Loan. The Master
Servicer shall amend or cause to be amended the Mortgage Loan Schedule to
reflect the removal of such Mortgage Loan and the substitution of the Eligible
Substitute Mortgage Loans and the Master Servicer shall promptly deliver the
amended Mortgage Loan Schedule to the related Subservicer, Owner Trustee and
Indenture Trustee.
In connection with the substitution of one or more Eligible Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (such amount,
8
a "Substitution Adjustment Amount"), if any, by which the aggregate principal
balance of all such Eligible Substitute Mortgage Loans as of the date of
substitution is less than the aggregate principal balance of all such Deleted
Mortgage Loans (after application of the principal portion of the Monthly
Payments due in the month of substitution that are to be distributed to the
Payment Account in the month of substitution). The Seller shall pay the
Substitution Adjustment Amount to the Master Servicer and the Master Servicer
shall deposit such Substitution Adjustment Amount into the Collection Account
upon receipt.
9
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01 Master Servicer to Assure Servicing. (a) The Master
Servicer shall supervise, or take such actions as are necessary to ensure, the
servicing and administration of the Mortgage Loans and any REO Property in
accordance with this Servicing Agreement and its normal servicing practices,
which generally shall conform to the standards of an institution prudently
servicing mortgage loans for its own account and shall have full authority to do
anything it reasonably deems appropriate or desirable in connection with such
servicing and administration. The Master Servicer may perform its
responsibilities relating to servicing through other agents or independent
contractors, but shall not thereby be released from any of its responsibilities
as hereinafter set forth. The authority of the Master Servicer, in its capacity
as master servicer, and any Subservicer acting on its behalf, shall include,
without limitation, the power to (i) consult with and advise any Subservicer
regarding administration of a related Mortgage Loan, (ii) approve any
recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii)
supervise the filing and collection of insurance claims and take or cause to be
taken such actions on behalf of the insured Person thereunder as shall be
reasonably necessary to prevent the denial of coverage thereunder, and (iv)
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing a related Mortgage Loan, including the employment of
attorneys, the institution of legal proceedings, the collection of deficiency
judgments, the acceptance of compromise proposals, the filing of claims under
any Primary Insurance Policy and the Radian Lender-Paid PMI Policy, and any
other matter pertaining to a delinquent Mortgage Loan. The authority of the
Master Servicer shall include, in addition, the power on behalf of the
Bondholders, the Indenture Trustee or any of them to (i) execute and deliver
customary consents or waivers and other instruments and documents, (ii) consent
to transfer of any related Mortgaged Property and assumptions of the related
Mortgage Notes and Security Instruments (in the manner provided in this
Servicing Agreement) and (iii) collect any Insurance Proceeds and Liquidation
Proceeds. Without limiting the generality of the foregoing, the Master Servicer
and any Subservicer acting on its behalf may, and is hereby authorized, and
empowered by the Indenture Trustee to, execute and deliver, on behalf of itself,
the Bondholders, the Indenture Trustee or any of them, any instruments of
satisfaction, cancellation, partial or full release, discharge and all other
comparable instruments, with respect to the related Mortgage Loans, the
Insurance Policies and the accounts related thereto, and the Mortgaged
Properties. The Master Servicer may exercise this power in its own name or in
the name of a Subservicer.
In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.08, and further as
provided in Section 3.07; provided that the Master Servicer shall not be
obligated to make such advance if, in its good faith judgment, the Master
Servicer determines that such advance to be a Nonrecoverable Advance.
The relationship of the Master Servicer (and of any successor to the
Master Servicer under this Agreement) to the Indenture Trustee under this
Agreement is intended by the parties to be that
10
of an independent contractor and not that of a joint venturer, partner or agent;
provided, however, that the Master Servicer is authorized and empowered by the
Indenture Trustee, on behalf of the Bondholders and the Indenture Trustee, in
its own name or in the name of any Subservicer, when the Master Servicer or such
Subservicer, as the case may be, believes it is appropriate in its best judgment
to register any Mortgage Loan on the MERS(R) System, or cause the removal from
the registration of any Mortgage Loan on the MERS(R) System, to execute and
deliver, on behalf of the Indenture Trustee and the Bondholders or any of them,
any and all instruments of assignment and other comparable instruments with
respect to such assignment or re-recording of a Mortgage in the name of MERS,
solely as nominee for the Indenture Trustee and its successors and assigns. Any
expenses incurred in connection with the actions described in the preceding
sentence shall be borne by the Master Servicer in accordance with Section 3.15,
with no right of reimbursement; provided, that if, as a result of MERS
discontinuing or becoming unable to continue operations in connection with the
MERS System, it becomes necessary to remove any Mortgage Loan from registration
on the MERS System and to arrange for the assignment of the related Mortgages to
the Indenture Trustee, then any related expenses shall be reimbursable to the
Master Servicer from the Trust Fund.
(b) If the Mortgage relating to a Mortgage Loan did not have a lien
senior to the Mortgage Loan on the related Mortgaged Property as of the related
Cut-off Date, then the Master Servicer, in such capacity, may not consent to the
placing of a lien senior to that of the Mortgage on the related Mortgaged
Property.
(c) The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to (A) execute assumption agreements, substitution agreements,
and instruments of satisfaction or cancellation or of full release or discharge,
or any other document contemplated by this Servicing Agreement and other
comparable instruments with respect to the Mortgage Loans and with respect to
the Mortgaged Properties subject to the Mortgages (and the Issuer and the
Indenture Trustee each shall promptly execute any such documents on request of
the Master Servicer and prepared by it) and (B) approve the granting of an
easement thereon in favor of another Person, any alteration or demolition of the
related Mortgaged Property or other similar matters, if it has determined,
exercising its good faith business judgment in the same manner as it would if it
were the owner of the related Mortgage Loan, that the security for, and the
timely and full collectability of, such Mortgage Loan would not be adversely
affected thereby. An assumption pursuant to this Section 3.01 is permitted
solely if the creditworthiness of the prospective purchaser of a Mortgaged
Property meets the same or better underwriting guidelines as those which were
applied to the original borrower and the security for such Mortgage Loan is not
impaired by the assumption. Any fee collected by the Master Servicer or the
related Subservicer for processing such request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.
(d) Notwithstanding the provisions of Subsection 3.01(a), the Master
Servicer shall not take any action inconsistent with the interests of the
Indenture Trustee or the Bondholders or with the rights and interests of the
Indenture Trustee or the Bondholders under this Servicing Agreement.
(e) The Indenture Trustee shall execute and return to the Master
Servicer any limited powers of attorney and other documents in form as provided
to it necessary or appropriate to enable the Master Servicer to service and
administer the related Mortgage Loans and REO Property.
11
Section 3.02 Subservicing Agreements Between Master Servicer and
Subservicers. (a) The Master Servicer may enter into Subservicing Agreements
with Subservicers for the servicing and administration of the Mortgage Loans and
for the performance of any and all other activities of the Master Servicer
hereunder. Each Subservicer shall be either (i) an institution the accounts of
which are insured by the FDIC or (ii) another entity that engages in the
business of originating or servicing mortgage loans comparable to the Mortgage
Loans, and in either case shall be authorized to transact business in the state
or states in which the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Subservicer to perform its obligations hereunder and under the Subservicing
Agreement, and in either case shall be a Xxxxxxx Mac or Xxxxxx Mae approved
mortgage servicer. Any Subservicing Agreement entered into by the Master
Servicer shall include the provision that such Agreement may be immediately
terminated (x) with cause and without any termination fee by any Master Servicer
hereunder or (y) without cause in which case the Master Servicer shall be
responsible for any termination fee or penalty resulting therefrom. In addition,
each Subservicing Agreement shall provide for servicing of the Mortgage Loans
consistent with the terms of this Servicing Agreement. With the consent of the
Indenture Trustee, the Master Servicer and the Subservicers may enter into
Subservicing Agreements and make amendments to the Subservicing Agreements or
enter into different forms of Subservicing Agreements providing for, among other
things, the delegation by the Master Servicer to a Subservicer of additional
duties regarding the administration of the Mortgage Loans; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Servicing Agreement, and that no such amendment
or different form shall be made or entered into which could be reasonably
expected to be materially adverse to the interests of the Bondholders, without
the consent of the Holders of Bonds representing not less than a majority of the
aggregate Bond Principal Balance of the Bonds.
The Master Servicer has entered into Subservicing Agreements with the
Initial Subservicers for the servicing and administration of the Mortgage Loans
and may enter into additional Subservicing Agreements with Subservicers
acceptable to the Indenture Trustee for the servicing and administration of
certain of the Mortgage Loans.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Indenture Trustee and the Bondholders, shall enforce the
obligations of each Subservicer under the related Subservicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Master Servicer shall pay
the costs of such enforcement at its own expense, but shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement only
to the extent, if any, that such recovery exceeds all amounts due in respect of
the related Mortgage Loan or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
(c) The Master Servicer represents that it has entered into a contract
regarding the sale of sub-servicing rights with respect to the Group 1 Loans
with Countrywide Home Loans Servicing LP ("Countrywide") and shall transfer the
subservicing of the Mortgage Loans from Wendover to Countrywide or an affiliate
thereof on or about January 1, 2004. The Indenture Trustee hereby
12
consents to such transfer with respect to the Group 1 Loans. The Master Servicer
represents that it has entered into a subservicing agreement with respect to the
Group 2 Loans with Midland Loan Services, Inc.
Section 3.03 Successor Subservicers. The Master Servicer shall be
entitled to terminate any Subservicing Agreement that may exist in accordance
with the terms and conditions of such Subservicing Agreement and without any
limitation by virtue of this Servicing Agreement; provided, however, that upon
termination, the Master Servicer shall either act as servicer of the related
Mortgage Loan or enter into an appropriate contract with a successor Subservicer
acceptable to the Indenture Trustee pursuant to which such successor Subservicer
will be bound by all relevant terms of the related Subservicing Agreement
pertaining to the servicing of such Mortgage Loan.
Section 3.04 Liability of the Master Servicer. (a) Notwithstanding any
Subservicing Agreement, any of the provisions of this Servicing Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall under all circumstances remain obligated and primarily
liable to the Indenture Trustee and the Bondholders for the servicing and
administering of the Mortgage Loans and any REO Property in accordance with this
Servicing Agreement. The obligations and liability of the Master Servicer shall
not be diminished by virtue of Subservicing Agreements or by virtue of
indemnification of the Master Servicer by any Subservicer, or any other Person.
The obligations and liability of the Master Servicer shall remain of the same
nature and under the same terms and conditions as if the Master Servicer alone
were servicing and administering the related Mortgage Loans. The Master Servicer
shall, however, be entitled to enter into indemnification agreements with any
Subservicer or other Person and nothing in this Servicing Agreement shall be
deemed to limit or modify such indemnification. For the purposes of this
Servicing Agreement, the Master Servicer shall be deemed to have received any
payment on a Mortgage Loan on the date the Subservicer received such payment;
provided, however, that this sentence shall not apply to the Indenture Trustee
as the successor Master Servicer; provided, further, however, that the foregoing
provision shall not affect the obligation of the Master Servicer if it is also
the Indenture Trustee to advance amounts which are not Nonrecoverable Advances.
Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Master Servicer alone, and the Indenture Trustee and the
Bondholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 3.05.
Section 3.05 Assumption or Termination of Subservicing Agreements by
Indenture Trustee. (a) If the Indenture Trustee or a successor Master Servicer
shall assume the servicing obligations of the Master Servicer in accordance with
Section 6.02 below, the Indenture Trustee, to the extent necessary to permit the
Indenture Trustee to carry out the provisions of Section 6.02 with respect to
the Mortgage Loans, shall succeed to all of the rights and obligations of the
Master Servicer under each of the Subservicing Agreements. In such event, the
Indenture Trustee or its designee as the successor master servicer shall be
deemed to have assumed all of the Master Servicer's rights and obligations
therein and to have replaced the Master Servicer as a party to such Subservicing
13
Agreements to the same extent as if such Subservicing Agreements had been
assigned to the Indenture Trustee or its designee as a successor master
servicer, except that the Indenture Trustee or its designee as a successor
master servicer shall not be deemed to have assumed any obligations or
liabilities of the Master Servicer arising prior to such assumption (other than
the obligation to make any Advances) and the Master Servicer shall not thereby
be relieved of any liability or obligations under such Subservicing Agreements
arising prior to such assumption. Nothing in the foregoing shall be deemed to
entitle the Indenture Trustee or its designee as a successor master servicer at
any time to receive any portion of the servicing compensation provided under
Section 3.15 except for such portion as the Master Servicer would be entitled to
receive.
(b) In the event that the Indenture Trustee or a successor Master
Servicer assumes the servicing obligations of the Master Servicer under Section
6.02, upon the reasonable request of the Indenture Trustee or such successor
Master Servicer, the Master Servicer shall at its own expense deliver to the
Indenture Trustee, or to such successor Master Servicer, photocopies of all
documents, files and records, electronic or otherwise, relating to the
Subservicing Agreements and the related Mortgage Loans or REO Property then
being serviced and an accounting of amounts collected and held by it, if any,
and will otherwise cooperate and use its reasonable efforts to effect the
orderly and efficient transfer of the Subservicing Agreements, or
responsibilities hereunder to the Indenture Trustee, or to such successor Master
Servicer.
Section 3.06 Collection of Mortgage Loan Payments. (a) The Master
Servicer will coordinate and monitor remittances by Subservicers to it with
respect to the Mortgage Loans in accordance with this Servicing Agreement.
(b) The Master Servicer shall make its best reasonable efforts to
collect or cause to be collected all payments required under the terms and
provisions of the Mortgage Loans and shall follow, and use its best reasonable
efforts to cause Subservicers to follow, collection procedures comparable to the
collection procedures of prudent mortgage lenders servicing mortgage loans for
their own account to the extent such procedures shall be consistent with this
Servicing Agreement. Consistent with the foregoing, the Master Servicer or the
related Subservicer may in its discretion (i) waive or permit to be waived any
late payment charge, prepayment charge, assumption fee, or any penalty interest
in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce
or permit to be suspended or reduced regular monthly payments for a period of up
to six months, or arrange or permit an arrangement with a Mortgagor for a
scheduled liquidation of delinquencies; provided, however, that the Master
Servicer or the related Subservicer may permit the foregoing only if it
believes, in good faith, that recoveries of Monthly Payments will be maximized;
provided further, however, that Monthly Payments may not be suspended during the
twelve months prior to the final maturity of the Bonds. In the event the Master
Servicer or related Subservicer shall consent to the deferment of the due dates
for payments due on a Mortgage Note, the Master Servicer shall nonetheless make
an Advance or shall cause the related Subservicer to make an advance to the same
extent as if such installment were due, owing and delinquent and had not been
deferred through liquidation of the Mortgaged Property; provided, however, that
the obligation of the Master Servicer or the related Subservicer to make an
Advance shall apply only to the extent that the Master Servicer believes, in
good faith, that such advances are not Nonrecoverable Advances.
14
(c) Within five Business Days after the Master Servicer has determined
that all amounts which it expects to recover from or on account of a Mortgage
Loan have been recovered and that no further Liquidation Proceeds will be
received in connection therewith, the Master Servicer shall cause the related
Subservicer to provide to the Master Servicer a certificate of a Servicing
Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date
of such determination. The Master Servicer shall provide to the Indenture
Trustee a monthly summary of each Mortgage Loan that became a Liquidated
Mortgage Loan.
(d) The Master Servicer shall establish a segregated account in the
name of the Indenture Trustee (the "Collection Account"), which shall be an
Eligible Account, in which the Master Servicer shall deposit or cause to be
deposited any amounts representing payments on and any collections in respect of
the Mortgage Loans due subsequent to the Cut-off Date (other than in respect of
the payments referred to in the following paragraph) within two Business Days
following receipt thereof (or otherwise on or prior to the Closing Date),
including the following payments and collections received or made by it (without
duplication):
(i) all payments of principal, including Principal
Prepayments, of or interest on the Mortgage Loans (including advances
by a Subservicer) received by the Master Servicer directly from
Mortgagors or from the respective Subservicer, net of any portion of
the interest thereof retained by the Subservicer as subservicing fees;
(ii) the aggregate Repurchase Price of the Mortgage Loans
purchased by the Master Servicer pursuant to Section 3.18;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by the
Seller pursuant to the Mortgage Loan Sale and Contribution Agreement,
and all Substitution Adjustment Amounts required to be deposited in
connection with the substitution of an Eligible Substitute Mortgage
Loan pursuant to the Mortgage Loan Sale and Contribution Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds,
resulting from any insurance policy maintained on a Mortgaged Property;
(vi) any Advance and any Compensating Interest payments; and
(vii) any other amounts received by the Master Servicer,
including any fees or penalties not retained by a Subservicer, required
to be deposited in the Collection Account pursuant to this Servicing
Agreement.
provided, however, that with respect to each Due Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Due Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account fees (including
annual fees or assumption fees) or late charge and prepayment penalties, payable
by Mortgagors, each as further described in Section 3.15, or amounts
15
received by the Subservicer for the accounts of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar items.
In the event any amount not required to be deposited in the Collection Account
is so deposited, the Master Servicer may at any time (prior to being terminated
under this Agreement) withdraw such amount from the Collection Account, any
provision herein to the contrary notwithstanding. The Master Servicer shall keep
records that accurately reflect the funds on deposit in the Collection Account
that have been identified by it as being attributable to the Mortgage Loans and
shall hold all collections in the Collection Account for the benefit of the
Owner Trustee, the Indenture Trustee and the Bondholders, as their interests may
appear. The Master Servicer shall remit all Foreclosure Profits to the
Collection Account, to the extent not payable to the related Subservicer.
Funds in the Collection Account may not be invested with, and shall not
be commingled with, the Master Servicer's own funds or general assets or with
funds respecting payments on mortgage loans or with any other funds not related
to the Bonds. Funds in the Collection Account shall be invested solely in
Eligible Investments, designated in the name of the Indenture Trustee, which
shall mature not later than the Business Day next preceding the third Business
Day prior to each Payment Date next following the date of such investment and
shall not be sold or disposed of prior to maturity. All income and gain realized
from any such investment shall be for the benefit of the Master Servicer or the
related Subservicer. The amount of any losses incurred with respect to any such
investments shall be deposited in the Collection Account by the Master Servicer.
In the event the Indenture Trustee assumes the responsibilities of the
Master Servicer under this Servicing Agreement upon a Servicing Default under
Section 6.01, the Indenture Trustee shall be entitled to reimburse itself for
Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement
of the terminated Master Servicer or any successor Master Servicer.
(e) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Master Servicer, in one or more accounts meeting the requirements of an
Eligible Account, and invested in Eligible Investments, and in the name of the
Indenture Trustee. The Subservicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets and any other funds. Each Subservicer shall make
remittances to the Master Servicer no later than the eighteenth (18th) day of
each month, commencing on the eighteenth (18th) day of the month next following
the Closing Date, or if such eighteenth (18th) day is not a Business Day, the
first Business Day immediately preceding such eighteenth (18th) day.
Section 3.07 Withdrawals from the Collection Account. (a) The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.06 that
are attributable to the Mortgage Loans for the following purposes (without
duplication):
(i) to deposit in the Payment Account, by the third Business
Day prior to each Payment Date, the Available Funds required to be
distributed as provided in the Indenture on a Payment Date;
16
(ii) to the extent deposited to the Collection Account, to
reimburse itself or the related Subservicer for previously unreimbursed
expenses incurred in maintaining individual insurance policies pursuant
to Sections 3.10 or 3.11, or Liquidation Expenses, paid pursuant to
Section 3.13 or otherwise reimbursable pursuant to the terms of this
Servicing Agreement, such withdrawal right being limited to amounts
received on the related Mortgage Loans (other than any Repurchase Price
in respect thereto) which represent late recoveries of the payments for
which such advances were made, or from related Liquidation Proceeds;
(iii) to pay to itself out of each payment received on account
of interest on a Mortgage Loan as contemplated by Section 3.15, an
amount equal to the related Master Servicing Fee (to the extent not
retained pursuant to Section 3.06);
(iv) to pay to itself or the Seller, with respect to any
Mortgage Loan or property acquired in respect thereof that has been
purchased or otherwise transferred to the Seller, the Master Servicer
or other entity, all amounts received thereon and not required to be
distributed to Bondholders as of the date on which the related Purchase
Price or Repurchase Price is determined;
(v) to reimburse the Master Servicer or any Subservicer for
any Advance of its own funds or any advance of such Subservicer's own
funds, the right of the Master Servicer or a Subservicer to
reimbursement pursuant to this subclause (v) being limited to amounts
received (including, for this purpose, the Repurchase Price therefor,
Insurance Proceeds and Liquidation Proceeds) which represent late
payments or recoveries of the principal of or interest on such Mortgage
Loan respecting which such Advance or advance was made;
(vi) to reimburse the Master Servicer or any Subservicer from
Insurance Proceeds or Liquidation Proceeds relating to a particular
Mortgage Loan for amounts expended by the Master Servicer or such
Subservicer pursuant to Section 3.13 in good faith in connection with
the restoration of the related Mortgaged Property which was damaged by
the Uninsured Cause or in connection with the liquidation of such
Mortgage Loan;
(vii) to pay the Master Servicer or any Subservicer (payment
to any Subservicer to be subject to prior payment to the Master
Servicer of an amount equal to the Subservicing Fee), as appropriate,
from Liquidation Proceeds or Insurance Proceeds received in connection
with the liquidation of any Mortgage Loan, the amount which it or such
Subservicer would have been entitled to receive under subclause (iii)
of this Subsection 3.07(a) as servicing compensation on account of each
defaulted Monthly Payment on such Mortgage Loan if paid in a timely
manner by the related Mortgagor, but only to the extent that the
aggregate of Liquidation Proceeds and Insurance Proceeds with respect
to such Mortgage Loan, after any reimbursement to the Master Servicer
or any Subservicer, pursuant to other subclauses of this Subsection
3.07(a), exceeds the outstanding Stated Principal Balance of such
Mortgage Loan plus accrued and unpaid interest thereon at the related
Mortgage Rate less the Servicing Fee Rate to but not including the date
of payment (in any event, the amount of servicing compensation received
by a Subservicer and the Master Servicer with respect to any defaulted
Monthly Payment shall not exceed the applicable Servicing Fee);
17
(viii) to reimburse the Master Servicer or any Subservicer for
advances of funds pursuant to Article III, the right to reimbursement
pursuant to this subclause being limited to amounts received on the
related Mortgage Loan (including, for this purpose, the Repurchase
Price therefor, Insurance Proceeds and Liquidation Proceeds) which
represent late recoveries of the payments for which such advances were
made;
(ix) to reimburse the Master Servicer or any Subservicer for
any Nonrecoverable Advance previously made, and not reimbursed pursuant
to this Subsection 3.07(a);
(x) to deposit in the Payment Account, by the third Business
Day prior to each Payment Date, the Indenture Trustee Fee and the
Derivative Contract Payment Amount;
(xi) to withdraw any other amount deposited in the Collection
Account that was not required to be deposited therein pursuant to
Section 3.06;
(xii) to pay Radian the premium with respect to the Radian
Lender-Paid PMI Policy;
(xiii) to pay the Owner Trustee the Owner Trustee Fee;
(xiv) to reimburse the Master Servicer for costs associated
with the environmental report specified in Section 3.13(e); and
(xv) clear and terminate the Collection Account following a
termination of the Trust pursuant to Section 8.01 of the Trust
Agreement.
In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v), (vi),
(vii) and (viii), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, and the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Collection Account pursuant to such clauses. Notwithstanding any other provision
of this Servicing Agreement, the Master Servicer shall be entitled to reimburse
itself for any previously unreimbursed expenses incurred pursuant to Section
3.13 or otherwise reimbursable expenses incurred pursuant to the terms of this
Servicing Agreement, but only to the extent of collections or other recoveries
on the related Mortgage Loan.
(b) Notwithstanding the provisions of this Section 3.07, the Master
Servicer may, but is not required to, allow the Subservicers to deduct from
amounts received by them or from the related account maintained by a
Subservicer, prior to deposit in the Collection Account, any portion to which
such Subservicers are entitled as servicing compensation (including income on
Eligible Investments) or reimbursement of any reimbursable Advances or Servicing
Advances made by such Subservicers.
18
Section 3.08 Collection of Taxes Assessments and Similar Items;
Servicing Accounts.
(a) The Master Servicer shall establish and maintain or cause the
related Subservicer to establish and maintain, one or more Servicing Accounts.
The Master Servicer or a Subservicer will deposit and retain therein all
collections from the Mortgagors for the payment of taxes, assessments, insurance
premiums, or comparable items as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by
the Master Servicer or a Subservicer (and its successors and assigns) in the
name of the Indenture Trustee. Such Servicing Accounts shall be Eligible
Accounts and if permitted by applicable law, invested in Eligible Investments
held in trust by the Master Servicer or a Subservicer as described above and
maturing, or be subject to redemption or withdrawal, no later than the date on
which such funds are required to be withdrawn, and in no event later than 45
days after the date of investment; withdrawals of amounts from the Servicing
Accounts may be made only to effect timely payment of taxes, assessments,
insurance premiums, or comparable items, to reimburse the Master Servicer or a
Subservicer for any advances made with respect to such items, to refund to any
Mortgagors any sums as may be determined to be overages, to pay interest, if
required, to Mortgagors on balances in the Servicing Accounts or to clear and
terminate the Servicing Accounts at or any time after the termination of this
Servicing Agreement.
Section 3.09 Access to Certain Documentation and Information Regarding
the Mortgage Loans. The Master Servicer shall provide, and shall cause any
Subservicer to provide, to the Indenture Trustee and the Owner Trustee access to
the documentation regarding the related Mortgage Loans and REO Property and to
the Bondholders, the FDIC, and the supervisory agents and examiners of the FDIC
access to the documentation regarding the related Mortgage Loans required by
applicable regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer or the Subservicers that are designated by these entities; provided,
however, that, unless otherwise required by law, the Master Servicer or the
Subservicer shall not be required to provide access to such documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor;
provided, further, however, that the Indenture Trustee and the Owner Trustee
shall coordinate their requests for such access so as not to impose an
unreasonable burden on, or cause an unreasonable interruption of, the business
of the Master Servicer or any Subservicer. The Master Servicer and the
Subservicers shall allow representatives of the above entities to photocopy any
of the documentation and shall provide equipment for that purpose at a charge
that covers their own actual out-of-pocket costs.
Section 3.10 Maintenance of Primary Insurance Policies and the Radian
Policy; Collection Thereunder.
(a) The Master Servicer shall, or shall cause the related Subservicer
to, exercise its best reasonable efforts to maintain and keep in full force and
effect each Primary Insurance Policy by a Qualified Insurer, or other insurer
satisfactory to the Rating Agencies, with respect to each Mortgage Loan as to
which as of the Cut-off Date a Primary Insurance Policy was in effect and the
original principal amount of the related Mortgage Note exceeded 80% of the
Original Value in an amount at least equal to the excess of such original
principal amount over 75% of such Original Value until the principal amount of
any such first lien Mortgage Loan is reduced below 80% of the Original
19
Value or, based upon a new appraisal, the principal amount of such first lien
Mortgage Loan represents less than 80% of the new appraised value. The Master
Servicer shall, or shall cause the related Subservicer to, effect the timely
payment of the premium on each Primary Insurance Policy. The Master Servicer and
the related Subservicer shall have the power to substitute for any Primary
Insurance Policy another substantially equivalent policy issued by another
Qualified Insurer, provided, that, such substitution shall be subject to the
condition that it will not cause the ratings on the Bonds to be downgraded or
withdrawn as evidenced by a writing from each Rating Agency.
(b) The Master Servicer shall take all such actions on behalf of the
Trust as are necessary to service, maintain and administer the Radian
Lender-Paid PMI Policy and to enforce the Trust's rights under the Radian
Lender-Paid PMI Policy. The Master Servicer shall effect the timely payment of
the Radian PMI Policy Fee. To the extent the Mortgagor with respect to a Radian
PMI Insured Loan is delinquent, the Master Servicer shall advance the related
Radian PMI Policy Fee as a Servicing Advance. Except as expressly set forth
herein, the Master Servicer shall have full authority on behalf of the Trust to
do anything it reasonably deems appropriate or desirable in connection with the
servicing, maintenance and administration of the Radian Lender-Paid PMI Policy.
The Master Servicer shall make its best reasonable efforts to file all insured
claims under the Radian Lender-Paid PMI Policy and collect from Radian all
Insurance Proceeds due to the Trust under the Radian Lender-Paid PMI Policy. The
Master Servicer shall not take, or permit any Subservicer to take, any action
which would result in non-coverage under the Radian Lender-Paid PMI Policy of
any loss which, but for the actions of the Master Servicer or any Subservicer,
would have been covered thereunder. To the extent coverage is available, the
Master Servicer shall keep or cause to be kept in full force and effect the
Radian Lender-Paid PMI Policy for the life of the Mortgage Loan. Neither the
Master Servicer nor the Indenture Trustee shall terminate the Radian Lender-Paid
PMI Policy with respect to any Mortgage Loan, except in accordance with the
terms thereof. The Master Servicer shall cooperate with Radian and shall use its
best efforts to furnish all reasonable aid, evidence and information in the
possession of the Master Servicer or to which the Master Servicer has access
with respect to any Radian PMI Insured Loan.
(c) If Radian remains in default pursuant to the Radian Lender-Paid PMI
Policy and may be terminated thereunder without payment of any further premium
for such policy, the Master Servicer shall use its best efforts to replace such
policy with a substitute policy at the same premium rate that is charged under
the Radian Lender-Paid PMI Policy and with coverage for losses in amounts
substantially similar to those under the Radian Lender-Paid PMI Policy.
(d) With respect to the Radian PMI Insured Loans covered by a Radian
Lender-Paid PMI Policy, the Master Servicer will confirm with Radian, and Radian
will certify to the Indenture Trustee, on or before December 19, 2003, that the
Mortgage Loans indicated on the Mortgage Loan Schedule as being covered by
Radian Lender-Paid PMI Policy are so covered.
Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage. (a)
The Master Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each Mortgage Loan and REO Property, in full
force and effect hazard insurance (fire insurance with extended coverage) equal
to at least the lesser of the Stated Principal Balance of the Mortgage Loan or
the current replacement cost of the Mortgaged Property, and containing a
standard mortgagee clause, provided, however, that the amount of hazard
insurance may not be less than the amount
20
necessary to prevent loss due to the application of any co-insurance provision
of the related policy. Unless applicable state law requires a higher deductible,
the deductible on such hazard insurance policy may be no more than $1,000 or 1%
of the applicable amount of coverage, whichever is less. In the case of a
condominium unit or a unit in a planned unit development, the required hazard
insurance shall take the form of a multi-peril policy covering the entire
condominium project or planned unit development, in an amount equal to at least
100% of the insurable value based on replacement cost.
(b) Any amounts collected by the Master Servicer or a Subservicer under
any such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with the Master Servicer's or a Subservicer's normal
servicing procedures, the Mortgage Note, the Security Instrument or applicable
law) shall be deposited initially in a Collection Account, for transmittal to
the Payment Account, subject to withdrawal pursuant to Section 3.07.
(c) Any cost incurred by a Master Servicer or a Subservicer in
maintaining any such hazard insurance policy shall not be added to the amount
owing under the Mortgage Loan for the purpose of calculating monthly
distributions to Bondholders, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs shall be recoverable by the Master Servicer or a
Subservicer out of related late payments by the Mortgagor or out of Insurance
Proceeds or Liquidation Proceeds or by the Master Servicer from the Repurchase
Price, to the extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of
any Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Master Servicer shall use its best reasonable efforts to cause with
respect to the Mortgage Loans and each REO Property flood insurance (to the
extent available and in accordance with mortgage servicing industry practice) to
be maintained. Such flood insurance shall cover the Mortgaged Property,
including all items taken into account in arriving at the Appraised Value on
which the Mortgage Loan was based, and shall be in an amount equal to the lesser
of (i) the Stated Principal Balance of the related Mortgage Loan and (ii) the
minimum amount required under the terms of coverage to compensate for any damage
or loss on a replacement cost basis, but not more than the maximum amount of
such insurance available for the related Mortgaged Property under either the
regular or emergency programs of the National Flood Insurance Program (assuming
that the area in which such Mortgaged Property is located is participating in
such program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,000 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections
3.11 (a) and (d) and there shall have been a loss which would have been covered
by such insurance had it been maintained, the Master Servicer shall pay, or
cause the related Subservicer to pay, for any necessary repairs.
21
(f) The Master Servicer shall present, or cause the related Subservicer
to present, claims under any applicable Primary Insurance Policy or the related
hazard insurance or flood insurance policy.
(g) The Master Servicer shall obtain and maintain at its own expense
and for the duration of this Servicing Agreement and shall cause each
Subservicer to obtain and maintain a blanket fidelity bond and an errors and
omissions insurance policy covering such Person's officers, employees and other
persons acting on its behalf in connection with its activities under this
Servicing Agreement or the related Subservicing Agreement. The amount of
coverage shall be at least equal to the coverage maintained by the Master
Servicer acceptable to Xxxxxx Xxx or Xxxxxxx Mac to service loans for it or
otherwise in an amount as is commercially available at a cost that is generally
not regarded as excessive by industry standards. The Master Servicer shall
promptly notify the Indenture Trustee of any material change in the terms of
such bond or policy. The Master Servicer shall provide annually to the Indenture
Trustee a certificate of insurance that each such bond and policy are in effect.
If any such bond or policy ceases to be in effect, the Master Servicer shall, to
the extent possible, give the Indenture Trustee ten days' notice prior to any
such cessation and shall use its reasonable best efforts to obtain a comparable
replacement bond or policy, as the case may be. Any amounts relating to the
Mortgage Loans collected under each such bond or policy shall be deposited
initially in a Collection Account for transmittal to the Payment Account,
subject to withdrawal pursuant to Section 3.07.
Section 3.12 Due-on-Sale Clauses; Assumption Agreements. (a) In any
case in which the Master Servicer is notified by any Mortgagor or Subservicer
that a Mortgaged Property relating to a Mortgage Loan has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall enforce, or shall instruct
such Subservicer to enforce, any due-on-sale clause contained in the related
Security Instrument to the extent permitted under the terms of the related
Mortgage Note and by applicable law. The Master Servicer or the related
Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the
Master Servicer requires acceleration of the Mortgage Loan, but only if the
Master Servicer is satisfied, as evidenced by an Officer's Certificate delivered
to the Indenture Trustee, that either (i) such Mortgage Loan is in default or
default is reasonably foreseeable or (ii) if such Mortgage Loan is not in
default or default is not reasonably foreseeable, such repurchase will have no
adverse tax consequences for the Trust Estate or any Securityholder. If the
Master Servicer reasonably believes that such due-on-sale clause cannot be
enforced under applicable law or if the Mortgage Loan does not contain a
due-on-sale clause, the Master Servicer is authorized, and may authorize any
Subservicer, to consent to a conveyance subject to the lien of the Mortgage, and
to take or enter into an assumption agreement from or with the Person to whom
such property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the related Mortgage Note and unless prohibited by
applicable state law, such Mortgagor remains liable thereon, on condition,
however, that the related Mortgage Loan shall continue to be covered by a hazard
policy and (if so covered before the Master Servicer or the related Subservicer
enters into such agreement) by any Primary Insurance Policy. In connection with
any such assumption, no material term of the related Mortgage Note may be
changed. The Master Servicer shall forward to the Indenture Trustee the original
copy of such assumption agreement, which copy shall be added by the Indenture
Trustee to the related Mortgage File and which shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. A portion, equal to up to
2% of the Stated Principal Balance of the related Mortgage Loan, of any fee or
22
additional interest collected by the Master Servicer or the related Subservicer
for consenting in any such conveyance or entering into any such assumption
agreement may be retained by the related Subservicer as additional servicing
compensation.
(b) Notwithstanding the foregoing paragraph or any other provision of
this Servicing Agreement, the Master Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan by operation of law or any conveyance by the
Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan
which the Master Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever or if the exercise of such right would
impair or threaten to impair any recovery under any applicable insurance policy.
Section 3.13 Realization Upon Defaulted Mortgage Loans. (a) The Master
Servicer shall, or shall direct the related Subservicer to, foreclose upon or
otherwise comparably convert the ownership of properties securing any Mortgage
Loans that come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.06, except that the Master Servicer shall not, and shall not direct
the related Subservicer to, foreclose upon or otherwise comparably convert a
Mortgaged Property if there is evidence of toxic waste or other environmental
hazards thereon unless the Master Servicer follows the procedures in Subsection
(e) below.
(b) [Reserved]
(c) In connection with such foreclosure or other conversion, the Master
Servicer in conjunction with the related Subservicer, if any, shall use its best
reasonable efforts to preserve REO Property and to realize upon defaulted
Mortgage Loans in such manner (including short sales) as to maximize the receipt
of principal and interest by the Bondholders, taking into account, among other
things, the timing of foreclosure and the considerations set forth in Subsection
3.13(d). The foregoing is subject to the proviso that the Master Servicer shall
not be required to expend its own funds in connection with any foreclosure or
towards the restoration of any property unless it determines in good faith (i)
that such restoration or foreclosure will increase the proceeds of liquidation
of the Mortgage Loan to Bondholders after reimbursement to itself for such
expenses and (ii) that such expenses will be recoverable to it either through
Liquidation Proceeds (respecting which it shall have priority for purposes of
reimbursements from the Collection Account pursuant to Section 3.07) or through
Insurance Proceeds (respecting which it shall have similar priority). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof (as well as its normal servicing compensation), and in
respect of any Subservicer only, to receive Foreclosure Profits as additional
servicing compensation to the extent that transfers or withdrawals from the
Collection Account with respect thereto are permitted under Section 3.07. Any
income from or other funds (net of any income taxes) generated by REO Property
shall be deemed for purposes of this Servicing Agreement to be Insurance
Proceeds.
(d) The Trust Estate shall not acquire any real property (or any
personal property incident to such real property) except in connection with a
default or reasonably foreseeable default of a Mortgage Loan. In the event that
the Trust Estate acquires any real property (or personal property
23
incident to such real property) in connection with a default or imminent default
of a Mortgage Loan, such property shall be disposed of by the Master Servicer
(or its agent) on behalf of the Trust Estate within two years after its
acquisition by the Trust Estate.
(e) With respect to any Mortgage Loan as to which the Master Servicer
or a Subservicer has received notice of, or has actual knowledge of, the
presence of any toxic or hazardous substance on the Mortgaged Property, the
Master Servicer shall promptly notify the Indenture Trustee and the Owner
Trustee and shall act in accordance with any such directions and instructions
provided by the Indenture Trustee, as pledgee of the Issuer. Notwithstanding the
preceding sentence of this Section 3.13(e), with respect to any Mortgage Loan
described in such sentence, the Master Servicer shall obtain and deliver to the
Issuer and the Indenture Trustee an environmental audit report prepared by a
Person who regularly conducts environmental audits using customary industry
standards, a copy of which shall be delivered to the Issuer and the Indenture
Trustee. The Master Servicer shall be entitled to reimbursement for such report
pursuant to Section 3.07. If the Indenture Trustee, as applicable, has not
provided directions and instructions to the Master Servicer in connection with
any such Mortgage Loan within 30 days of a request by the Master Servicer for
such directions and instructions, then the Master Servicer shall take such
action as it deems to be in the best economic interest of the Trust Estate
(other than proceeding against the Mortgaged Property) and is hereby authorized
at such time as it deems appropriate to release such Mortgaged Property from the
lien of the related Mortgage. The parties hereto acknowledge that the Master
Servicer shall not obtain on behalf of the Issuer a deed as a result or in lieu
of foreclosure, and shall not otherwise acquire possession of or title to, or
commence any proceedings to acquire possession of or title to, or take any other
action with respect to, any Mortgaged Property, if the Owner Trustee or the
Indenture Trustee could reasonably be considered to be a responsible party for
any liability arising from the presence of any toxic or hazardous substance on
the Mortgaged Property, unless the Owner Trustee or the Indenture Trustee has
been indemnified to its reasonable satisfaction against such liability.
Section 3.14 Indenture Trustee to Cooperate; Release of Mortgage Files.
(a) Upon payment in full of any Mortgage Loan or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Indenture Trustee by a certification signed by a Servicing Officer in the form
of the request for release (the "Request for Release") attached hereto as
Exhibit B (which certification shall include a statement to the effect that all
amounts received or to be received in connection with such payment which are
required to be deposited in the Payment Account have been or will be so
deposited) and shall request delivery to the Master Servicer or Subservicer, as
the case may be, of the Mortgage File. Upon receipt of such certification and
request, the Custodian shall release the related Mortgage File to the Master
Servicer or Subservicer and execute and deliver to the Master Servicer, without
recourse, the request for reconveyance, deed of reconveyance or release or
satisfaction of mortgage or such instrument releasing the lien of the Security
Instrument (furnished by the Master Servicer), together with the Mortgage Note
with written evidence of cancellation thereon. In connection with the
satisfaction of any MOM Loan, the Master Servicer is authorized to cause the
removal from the registration on the MERS(R) System of such Mortgage.
(b) From time to time as is appropriate, for the servicing or
foreclosure of any Mortgage Loan or collection under an insurance policy, the
Master Servicer may deliver to the Custodian a Request for Release signed by a
Servicing Officer on behalf of the Master Servicer in substantially
24
the form attached as Exhibit B hereto. Upon receipt of the Request for Release,
the Indenture Trustee shall deliver the Mortgage File or any document therein to
the Master Servicer or Subservicer, as the case may be, as bailee for the
Indenture Trustee.
(c) The Master Servicer shall cause each Mortgage File or any document
therein released pursuant to Subsection 3.14(b) to be returned to the Indenture
Trustee, when the need therefor no longer exists, and in any event within 21
days of the Master Servicer's receipt thereof, unless the Mortgage Loan has
become a Liquidated Mortgage Loan and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Collection Account or such Mortgage
File is being used to pursue foreclosure or other legal proceedings. Prior to
return of a Mortgage File or any document to the Indenture Trustee, the Master
Servicer, the related insurer or Subservicer to whom such file or document was
delivered shall retain such file or document in its respective control as bailee
for the Indenture Trustee unless the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, to initiate or pursue legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non- judicially, and
the Master Servicer has delivered to the Indenture Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or purposes of
such delivery. If a Mortgage Loan becomes a Liquidated Mortgage Loan, the
Indenture Trustee shall deliver the Request for Release with respect thereto to
the Master Servicer and upon deposit of the related Liquidation Proceeds in the
Collection Account.
(d) The Indenture Trustee shall execute and deliver to the Master
Servicer any court pleadings, requests for trustee's sale or other documents
necessary to (i) the foreclosure or trustee's sale with respect to a Mortgaged
Property; (ii) any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment
against the Mortgagor; or (iv) enforce any other rights or remedies provided by
the Mortgage Note or Security Instrument or otherwise available at law or
equity. Together with such documents or pleadings the Master Servicer shall
deliver to the Indenture Trustee a certificate of a Servicing Officer in which
it requests the Indenture Trustee to execute the pleadings or documents. The
certificate shall certify and explain the reasons for which the pleadings or
documents are required. It shall further certify that the Indenture Trustee's
execution and delivery of the pleadings or documents will not invalidate any
insurance coverage under the insurance policies or invalidate or otherwise
affect the lien of the Security Instrument, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
Section 3.15 Master Servicing Compensation. (a) As compensation for its
activities hereunder, the Master Servicer shall be entitled to receive the
Servicing Fee from full payments of accrued interest on each Mortgage Loan. The
Master Servicer shall be solely responsible for paying any and all fees with
respect to a Subservicer and the Trust Estate shall not bear any fees, expenses
or other costs directly associated with any Subservicer.
(b) The Master Servicer or the related Subservicer may retain
additional servicing compensation in the form of prepayment charges, if any, a
portion of the assumption fees up to 2% of the Stated Principal Balance of the
related Mortgage Loan, tax service fees, fees for statement of account or
payoff, late payment charges, or otherwise, to the extent such fees are
collected from the
25
related Mortgagors or, with respect to a Liquidated Mortgage Loan, to the extent
such fees have accrued. The Master Servicer shall be required to pay all
expenses it incurs in connection with servicing activities under this Servicing
Agreement and shall not be entitled in connection with servicing activities
under this Servicing Agreement to reimbursement except as provided in this
Servicing Agreement. Expenses to be paid by the Master Servicer under this
Subsection 3.15(b) shall include payment of the expenses of the accountants
retained pursuant to Section 3.17.
(c) The Master Servicer, or any Special Servicer acting on its behalf,
shall be entitled to receive, as additional servicing compensation, to the
extent permitted by applicable law and the related Mortgage Notes and Mortgages,
any late payment charges or late fees, demand fees, assumption fees, loan
modification fees, extension fees, consent fees, beneficiary statement charges,
or similar items, in each case to the extent received with respect to any
Specially Serviced Mortgage Loan.
Furthermore, the Master Servicer, or any Special Servicer acting on its
behalf, shall be entitled to receive, as additional servicing compensation, a
Workout Fee; provided, however, that the Master Servicer, or any Special
Servicer acting on its behalf, shall not enter into any workout arrangement with
respect to any Multifamily Loan which will result in a Workout Fee. If any
Corrected Mortgage Loan again becomes a Specially Serviced Mortgage Loan, any
right to the Workout Fee with respect to such Mortgage Loan earned in connection
with the initial modification, restructuring or workout thereof shall terminate,
and the Master Servicer, or any Special Servicer acting on its behalf, shall be
entitled to a new Workout Fee for such Mortgage Loan upon resolution or workout
of the subsequent event of default under such Mortgage Loan. If the Master
Servicer, or any Special Servicer acting on its behalf, is terminated for any
reason hereunder it shall retain the right to receive any Workout Fees payable
in respect of any Mortgage Loans which became Corrected Mortgage Loans during
the period that it acted as Master Servicer or Special Servicer, as applicable
(and the successor Master Servicer or Special Servicer, as applicable, shall not
be entitled to any portion of such Workout Fees), in each case until the Workout
Fees for any such Mortgage Loan ceases to be payable in accordance with this
paragraph.
(d) In addition to other servicing compensation provided for in this
Agreement, and not in lieu thereof, the Master Servicer, or any Special Servicer
acting on its behalf, shall be entitled to (i) the Disposition Fee payable out
of certain Liquidation Proceeds prior to the deposit of the Liquidation Proceeds
in the Collection Account and (ii) a fee of 0.25% of the unpaid balance of any
Mortgage Loan or Mortgage Loan relating to any REO Property repurchased from the
Trust Fund pursuant to Section 2.03.
Section 3.16 Annual Statements of Compliance. No later than March 1 of
each year, commencing in March 2004, the Master Servicer at its own expense
shall deliver to the Indenture Trustee, with a copy to the Rating Agencies, an
Officer's Certificate stating, as to the signer thereof, that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
performance under this Servicing Agreement has been made under such officer's
supervision, (ii) to the best of such officer's knowledge, based on such review,
the Master Servicer has fulfilled all its obligations under this Servicing
Agreement for such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof including the steps being taken by the Master Servicer
to remedy such default; (iii)
26
a review of the activities of each Subservicer during the Subservicer's most
recently ended calendar year on or prior to December 31 of the preceding year
and its performance under its Subservicing Agreement has been made under such
officer's supervision; and (iv) to the best of the Servicing Officer's
knowledge, based on his review and the certification of an officer of the
Subservicer (unless the Servicing Officer has reason to believe that reliance on
such certification is not justified), either each Subservicer has performed and
fulfilled its duties, responsibilities and obligations under this Servicing
Agreement and its Subservicing Agreement in all material respects throughout the
year, or, if there has been a default in performance or fulfillment of any such
duties, responsibilities or obligations, specifying the nature and status of
each such default known to the Servicing Officer. Copies of such statements
shall be provided by the Master Servicer to the Bondholders upon request or by
the Indenture Trustee at the expense of the Master Servicer should the Master
Servicer fail to provide such copies.
Section 3.17 Annual Independent Public Accountants' Servicing Report.
(a) No later than March 1 of each year, commencing in March 2004, the Master
Servicer, at its expense, shall cause a firm of independent public accountants
who are members of the American Institute of Certified Public Accountants and
who are KPMG LLP (or a successor thereof) to furnish a statement to the Master
Servicer, which will be provided to the Indenture Trustee and the Rating
Agencies, to the effect that, in connection with the firm's examination of the
Master Servicer's financial statements as of the end of the preceding calendar
year, nothing came to their attention that indicated that the Master Servicer
was not in compliance with Sections 3.06, 3.07 and 3.08 except for (i) such
exceptions as such firm believes to be immaterial and (ii) such other exceptions
as are set forth in such statement.
(b) No later than March 1 of each year, commencing in March 2004, the
Master Servicer, at its expense, shall or shall cause each Subservicer to cause
a nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer or such Subservicer a report stating that (i) it
has obtained a letter of representation regarding certain matters from the
management of the Master Servicer or such Subservicer which includes an
assertion that the Master Servicer or such Subservicer has complied with certain
minimum mortgage loan servicing standards (to the extent applicable to
residential mortgage loans) identified in the Uniform Single Attestation Program
for Mortgage Bankers established by the Mortgage Bankers Association of America
with respect to the servicing of first and second lien conventional single
family mortgage loans during the most recently completed calendar year and (ii)
on the basis of an examination conducted by such firm in accordance with
standards established by the American Institute of Certified Public Accountants,
such representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate. Immediately upon
receipt of such report, the Master Servicer shall or shall cause each
Subservicer to furnish a copy of such report to the Indenture Trustee and the
Rating Agencies.
Section 3.18 Optional Purchase of Defaulted Mortgage Loans. The Master
Servicer may, on behalf of the Issuer, but is not obligated to, repurchase from
the Issuer any Mortgage Loan delinquent in payment for a period of 90 days or
longer for a price equal to the Repurchase Price therefor. In addition, the
Master Servicer must repurchase any Mortgage Loan which does not satisfy the
requirements of 3.01(d) at a price equal to the Repurchase Price. Any such
purchase shall be accomplished as provided in Subsection 2.03 hereof.
Notwithstanding the foregoing, the Indenture
27
Trustee, whether acting as Indenture Trustee or in the capacity of successor
Master Servicer, shall have no obligation hereunder or under any other Basic
Document to repurchase any Mortgage Loan.
Section 3.19 Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer or Subservicer shall make reports of
foreclosures and abandonments of any mortgaged property for each year beginning
in 2003, the Master Servicer or Subservicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) acquires an interest in any Mortgaged Property through foreclosure
or other comparable conversion in full or partial satisfaction of a Mortgage
Loan, or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Master Servicer or Subservicer shall be in form
and substance sufficient to meet the reporting requirements imposed by Section
6050J, Section 6050H (reports relating to mortgage interest received) and
Section 6050P of the Code (reports relating to cancellation of indebtedness).
Section 3.20 Realization Upon Multifamily Loans. (a) With respect to
any Specially Serviced Mortgage Loan, the Master Servicer, or any Special
Servicer on its behalf, shall determine, in accordance with the servicing
standards herein, whether to grant a modification, waiver or amendment of the
terms of such Specially Serviced Mortgage Loan (subject to the limitations
contained in Section 3.12), commence foreclosure proceedings or attempt to sell
such Specially Serviced Mortgage Loan with reference to which course of action
is reasonably likely to produce a greater recovery on a net present value basis
with respect to such Specially Serviced Mortgage Loan.
(b) In connection with any foreclosure or other acquisition, the Master
Servicer shall pay the costs and expenses in any such proceedings as a Servicing
Advance. If the Master Servicer, or any Special Servicer on its behalf, elects
to proceed with a non-judicial foreclosure in accordance with the laws of the
state where the related Mortgaged Property is located, the Master Servicer, or
any Special Servicer on its behalf, shall not be required to pursue a deficiency
judgment against the related Mortgagor or any other liable party if the laws of
such state do not permit such a deficiency judgment after a non-judicial
foreclosure or if the Master Servicer, or any Special Servicer on its behalf,
determines, in its reasonable judgment, that, if a deficiency judgment is
obtained, the likely recovery will not be sufficient to warrant the cost, time,
expense and/or exposure of pursuing such a deficiency judgment.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, or to its nominee (which shall not
include the Master Servicer or any Special Servicer) or a separate trustee or
co-trustee on behalf of the Indenture Trustee, as Indenture Trustee for the
Bondholders. Notwithstanding any such acquisition of title and cancellation of
the related Multifamily Loan, such Multifamily Loan shall (except for purposes
of Section 8.01 of the Trust Agreement) be considered to be a Mortgage Loan held
in the Trust Fund until such time as the related REO Property shall be sold by
the Trust Fund and the Stated Principal Balance of each Multifamily Loan
relating to an REO Property shall be reduced by any REO Proceeds allocated to
principal. Consistent with the foregoing,
28
for purposes of all calculations hereunder, so long as such Multifamily Loan
shall be considered to be an Outstanding Mortgage Loan:
(i) it shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Mortgage Note shall have been
discharged, such Mortgage Note and, for purposes of determining the
Stated Principal Balance thereof, the related amortization schedule in
effect at the time of any such acquisition of title, remain in effect;
and
(ii) REO Proceeds received in any month shall be deemed to be
treated first, as a recovery of any related and unreimbursed Servicing
Advances and, if applicable, unpaid Liquidation Expenses; second, as a
recovery of accrued and unpaid interest on the related Multifamily Loan
related to the REO Property to, but not including, the Due Date in the
Due Period of receipt; third, as a recovery of principal of the related
Multifamily Loan related to the REO Property to the extent of its
entire unpaid principal balance; and fourth, as a recovery of any other
amounts deemed to be due and owing in respect of the related
Multifamily Loan related to the REO Property.
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the Master Servicer, or any Special Servicer acting on its behalf,
shall not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as
a result of or in lieu of foreclosure or otherwise obtain title to any direct or
indirect partnership interest or other equity interest in any Mortgagor pledged
pursuant to a pledge agreement and thereby be the beneficial owner of a
Mortgaged Property, and shall not otherwise acquire possession of, or take any
other action with respect to, any Mortgaged Property if, as a result of any such
action, the Indenture Trustee, for the Trust Fund or the Bondholders, would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Master Servicer, or
any Special Servicer acting on its behalf, has previously determined in
accordance with the servicing standards herein, based on an updated Phase I
Environmental Assessment report prepared (not more than 12 months prior to the
taking of such action) by a Qualified Environmental Consultant, that:
(A) the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions
as are necessary to bring the Mortgaged Property into compliance
therewith is reasonably likely to produce a greater recovery on a
present value basis than not taking such actions, and
(B) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any Hazardous
Materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any applicable federal,
state or local law or regulation, or that, if any such Hazardous
Materials are present for which such action could be required, after
consultation with a Qualified Environmental Consultant, taking such
actions with respect to the Mortgaged Property is reasonably likely to
produce a greater recovery on a present value basis than not taking
such actions.
29
In the event that the Phase I Environmental Assessment first obtained
or updated by the Master Servicer, or any Special Servicer acting on its behalf,
with respect to a Mortgaged Property indicates that such Mortgaged Property may
not be in compliance with applicable environmental laws or that Hazardous
Materials may be present but does not definitively establish such fact, the
Master Servicer, or any Special Servicer acting on its behalf, shall cause such
further environmental tests as the Master Servicer, or any Special Servicer
acting on its behalf, shall deem prudent to protect the interests of Bondholders
to be conducted by a Qualified Environmental Consultant. Any such tests shall be
deemed part of the Phase I Environmental Assessment obtained by the Master
Servicer, or any Special Servicer acting on its behalf, for purposes of this
Section 3.20. The Master Servicer shall pay for the cost of preparation of such
Phase I Environmental Assessments as well as the cost of any remedial,
corrective or other further action contemplated by clauses (A) and/or (B) of
this Section 3.20(c) as a Servicing Advance, unless such Advance would be a
Nonrecoverable Advance.
(d) The Master Servicer, or any Special Servicer on its behalf, shall
report to the IRS and to the related Mortgagor, in the manner required by
applicable law, the information required to be reported regarding any Mortgaged
Property which is abandoned or foreclosed. The Master Servicer, or any Special
Servicer acting on its behalf, shall deliver a copy of any such report to the
Indenture Trustee.
Section 3.21 Title and Management of REO Properties Related to
Multifamily Loans. (a) In the event that title to any Mortgaged Property related
to a Multifamily Loan is acquired for the benefit of Bondholders in foreclosure
or by deed in lieu of foreclosure, the deed or certificate of sale shall be
taken in the name of the Indenture Trustee, or its nominee (which shall not
include the Master Servicer or any Special Servicer), or a separate trustee or
co-trustee, on behalf of the Trust Fund and the Bondholders. The Master
Servicer, or any Special Servicer on its behalf, shall maintain accurate records
with respect to each related REO Property reflecting the status of taxes,
assessments and other similar items that are or may become a lien on such REO
Property and the status of insurance premiums payable with respect thereto.
(b) The Master Servicer, or any Special Servicer on its behalf, shall
have full power and authority, subject only to the specific requirements and
prohibitions of this Agreement, to do any and all things in connection with any
REO Property as are consistent with the servicing standards herein, all on such
terms and for such period as the Master Servicer, or any Special Servicer on its
behalf, deems to be in the best interests of Bondholders, and, in connection
therewith, the Master Servicer, or any Special Servicer on its behalf, shall
agree to the payment of management fees that are consistent with general market
standards. The Master Servicer, or any Special Servicer on its behalf, shall
segregate and hold all revenues received by it with respect to any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain with respect to any REO Property a segregated custodial account (each,
an "REO Account"), each of which shall be an Eligible Account and shall be
entitled "Deutsche Bank National Trust Company, as indenture trustee, in trust
for the registered holders of IMH Assets Corp., Collateralized Asset-Backed
Bonds, Series 2003-11, REO Account." The Master Servicer, or any Special
Servicer on its behalf, shall be entitled to any interest or investment income
earned on funds deposited in an REO Account to the extent provided in Section
3.06(d). The Master Servicer, or any Special Servicer on its behalf, shall
deposit or cause to be deposited in the related REO Account within two Business
Days after receipt all REO
30
Proceeds received by it with respect to any REO Property, and shall withdraw
therefrom funds necessary for the proper operation, management and maintenance
of such REO Property, including:
(i) all insurance premiums and ground rents, if any, due and payable in
respect of such REO Property;
(ii) all real estate taxes and assessments in respect of such REO
Property and such other Mortgaged Properties that may result in the
imposition of a lien thereon; and
(iii) all costs and expenses necessary to protect, maintain, manage,
operate, repair and restore such REO Property.
To the extent that such REO Proceeds are insufficient for the purposes
set forth in clauses (i) through (iii) above, the Master Servicer shall make an
Advance equal to the amount of such shortfall unless the Master Servicer
determines, in its good faith judgment, that such Advance would be a
Nonrecoverable Advance. The Master Servicer shall be entitled to reimbursement
of such Advances (with interest) made pursuant to the preceding sentence, to the
extent permitted pursuant to Section 3.07. The Master Servicer, or any Special
Servicer on its behalf shall remit to the Master Servicer, from each REO Account
for deposit in the Collection Account on a monthly basis prior to the third
Business Day prior to the related Payment Date the REO Proceeds received or
collected from the related REO Property, except that in determining the amount
of such REO Proceeds, the Master Servicer, or any Special Servicer on its
behalf, may retain in such REO Account reasonable reserves for repairs,
replacements and necessary capital improvements and other related expenses.
Section 3.22 Sale of Specially Serviced Mortgage Loans and Related REO
Properties. (a) The Master Servicer shall appoint itself as Special Servicer or
shall enter into (or have in place) a Subservicing Agreement with a Special
Servicer (other than the Master Servicer) to service each Specially Serviced
Mortgage Loan. With respect to any Specially Serviced Mortgage Loan or related
REO Property which the Master Servicer, or any Special Servicer on its behalf,
has determined to sell in accordance with Section 3.20 or otherwise, the Master
Servicer, or any Special Servicer on its behalf, shall deliver to the Indenture
Trustee an Officers' Certificate to the effect that the Master Servicer, or any
Special Servicer on its behalf, has determined to sell such Specially Serviced
Mortgage Loan or REO Property in accordance with this Section 3.22. The Master
Servicer, or any Special Servicer on its behalf, will give the Indenture Trustee
not less than 10 Business Days' prior written notice of its intention to sell
any Specially Serviced Mortgage Loan or REO Property. The Repurchase Price for
any Specially Serviced Mortgage Loan or REO Property purchased under this
Section 3.22(a) shall be deposited into the Collection Account, and the
Indenture Trustee, upon receipt of an Officers' Certificate from the Master
Servicer to the effect that such deposit has been made, shall release or cause
to be released the related Mortgage File, and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty as shall be provided to it and are reasonably
necessary to vest in the ownership of such Multifamily Loan or REO Property. In
connection with any such purchase, the Master Servicer, or any Special Servicer
acting on its behalf, shall deliver the related servicing file to the Person
effecting such purchase.
31
(b) If any Specially Serviced Mortgage Loan or REO Property is not
purchased as described in the first sentence of Section 3.21(a) within 10
Business Days of the Indenture Trustee having received notice in respect thereof
pursuant to Section 3.22(a) above, then either the Special Servicer or the
Master Servicer, in that order, may, at its option, within 10 Business Days
after the expiration of such 10 Business Day period, purchase (or designate an
Affiliate thereof to purchase) such Mortgage Loan or REO Property out of the
Trust Fund at a cash price equal to the Repurchase Price. The Repurchase Price
for any such Mortgage Loan or REO Property purchased under this Section 3.22(b)
shall be deposited into the Collection Account, and the Indenture Trustee, upon
receipt of an Officers' Certificate from the Master Servicer to the effect that
such deposit has been made, shall release or cause to be released to the Master
Servicer or the Special Servicer (or the designated Affiliate thereof), as
applicable, the related Mortgage File, and shall execute and deliver such
instruments of transfer or assignments, in each case without recourse,
representation or warranty as shall be provided to it and are reasonably
necessary to vest in the Master Servicer or the Special Servicer (or the
designated Affiliate thereof),as applicable, the ownership of such Mortgage Loan
or REO Property. In connection with any such purchase by the Master Servicer,
the Special Servicer, if any, shall deliver the related servicing file to the
Master Servicer.
(c) The Master Servicer, or any Special Servicer acting on its behalf,
may offer to sell to any Person (including the Depositor, the Master Servicer
and any Special Servicer) any Specially Serviced Mortgage Loan or REO Property
not otherwise purchased pursuant to Section 3.22(a) or 3.22(b) if and when the
Master Servicer, or any Special Servicer acting on its behalf, determines,
consistent with the servicing standards herein, that such a sale would be in the
best economic interests of the Bondholders (as a collective whole). The Master
Servicer, or any Special Servicer acting on its behalf, shall give the Indenture
Trustee not less than 10 Business Days prior written notice of its intention to
sell such Specially Serviced Mortgage Loan or REO Property, in which case the
Master Servicer, or any Special Servicer acting on its behalf, shall accept any
offer received from any Person that is determined by the Master Servicer, or any
Special Servicer acting on its behalf, to be a fair cash price, as determined in
accordance with Section 3.22(b), for such Specially Serviced Mortgage Loan or
REO Property if the offeror is a Person other than the Master Servicer, or any
Special Servicer acting on its behalf, or an Affiliate thereof, or is determined
to be such a price by an independent appraiser if the offeror is the Master
Servicer, or any Special Servicer acting on its behalf, or an Affiliate thereof;
provided, however, that any offer by an Interested Person in the amount of the
Repurchase Price shall be deemed to be a fair cash price. Notwithstanding
anything to the contrary herein, neither the Indenture Trustee in its individual
capacity nor any of its Affiliates, may make an offer to purchase or purchase
any Specially Serviced Mortgage Loan or any REO Property pursuant hereto. In
addition, in the event that the Master Servicer, or any Special Servicer acting
on its behalf, receives more than one fair offer with respect to any Specially
Serviced Mortgage Loan or REO Property, the Master Servicer, or any Special
Servicer acting on its behalf, may accept an offer that is not the highest fair
cash offer if it determines, in accordance with the servicing standards herein,
that acceptance of such offer would be in the best interests of the Bondholders
(for example, if the prospective buyer making the lower cash offer is more
likely to perform its obligations, or the terms offered by the prospective buyer
making the lower cash offer are more favorable). The Master Servicer, or any
Special Servicer acting on its behalf, shall use its best efforts in accordance
with the servicing standards herein, to sell any REO Property no later than the
day prior to the Determination Date immediately prior to the Final Scheduled
Payment Date.
32
(d) In determining whether any offer received represents a fair price
for any Specially Serviced Mortgage Loan or any REO Property, the Master
Servicer, or any Special Servicer acting on its behalf, shall be entitled to
engage and may conclusively rely on the opinion of an Independent appraiser or
other expert in real estate matters retained by the Master Servicer, or any
Special Servicer acting on its behalf, the cost of which shall be advanced as a
Servicing Advance, unless such Servicing Advance would be a Nonrecoverable
Advance. In determining whether any offer constitutes a fair price for any
Specially Serviced Mortgage Loan or any REO Property, the Master Servicer, or
any Special Servicer acting on its behalf (or, if applicable, such
appraiser)shall take into account, and any appraiser or other expert in real
estate matters shall be instructed to take into account, any appraisal obtained
and, as applicable, among other factors, the period and amount of any
delinquency on such Specially Serviced Mortgage Loan, the physical (including
environmental) condition of the related Mortgaged Property or such REO Property,
the state of the local economy and the Trust Fund's obligation to dispose of any
REO Property within the time period specified in Section 3.21(a).
(e) Subject to the provisions of Section 3.21, the Master Servicer, or
any Special Servicer acting on its behalf, shall act on behalf of the Trust Fund
in negotiating and taking any other action necessary or appropriate in
connection with the sale of any Specially Serviced Mortgage Loan or REO
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Specially Serviced Mortgage Loan or any REO Property
shall be without recourse to, or representation or warranty by, the Indenture
Trustee, the Depositor, the Master Servicer, any Special Servicer or the Trust
Fund (except that any contract of sale and assignment and conveyance documents
may contain customary warranties of title and condition, so long as the only
recourse for breach thereof is to the Trust Fund), and, if such sale is
consummated in accordance with the duties of the Master Servicer, any Special
Servicer, the Depositor and the Indenture Trustee pursuant to the terms of this
Servicing Agreement, no such Person who so performed shall have any liability to
the Trust Fund or any Bondholder with respect to the purchase price therefor
accepted by the Master Servicer, or any Special Servicer acting on its behalf.
(f) Liquidation Proceeds related to any such sale shall be promptly,
and in any event within one Business Day following receipt thereof, deposited in
the Collection Account in accordance with Section 3.06(d).
Section 3.23 Transfer of Servicing Between Master Servicer and Special
Servicer; Record Keeping. (a) Upon determining that any Multifamily Loan has
become a Specially Serviced Mortgage Loan, the Master Servicer shall immediately
give notice thereof, together with a copy of the related Mortgage File, to a
Special Servicer and shall use its best efforts to provide such Special Servicer
with all information, documents but excluding the original documents
constituting such Mortgage File) and records (including records stored
electronically on computer tapes, magnetic discs and the like) relating to such
Multifamily Loan and reasonably requested by the Special Servicer to enable it
to assume its duties hereunder with respect thereto without acting through a
Subservicer. The Master Servicer shall use its best efforts to comply with the
preceding sentence within five Business Days of the date such Multifamily Loan
became a Specially Serviced Mortgage Loan and in any event shall continue to act
as Master Servicer and administrator of such Multifamily Loan (i) if the Master
Servicer does not exercise such discretion or (ii) until the Special Servicer
has commenced the servicing of such Multifamily Loan, which shall occur upon the
receipt by the
33
Special Servicer of the information, documents and records referred to in the
preceding sentence. No later than 10 Business Days before the Master Servicer is
required to deliver a copy of the Mortgage File to the Special Servicer, it
shall review the Mortgage File and request from the Indenture Trustee any
material documents that it is aware are missing from the Mortgage File to the
extent that the Indenture Trustee has such documents. With respect to each
Multifamily Loan that becomes a Specially Serviced Mortgage Loan, the Master
Servicer shall instruct the related Mortgagor to continue to remit all payments
in respect of such Mortgage Loan to the Master Servicer. Upon determining that a
Multifamily Loan is no longer a Specially Serviced Mortgage Loan, the Special
Servicer shall immediately give notice thereof to the Master Servicer and upon
giving such notice, the Special Servicer's obligation to service such
Multifamily Loan shall terminate and the obligations of the Master Servicer to
service and administer such Multifamily Loan as a Mortgage Loan that is not a
Specially Serviced Mortgage Loan shall resume.
(b) In servicing any Specially Serviced Mortgage Loan, the Special
Servicer shall provide to the Indenture Trustee originals of documents included
within the definition of "Mortgage File" for inclusion in the related Mortgage
File (to the extent such documents are in the possession of the Special
Servicer) and copies of any additional related Mortgage Loan information,
including correspondence with the related Mortgagor, and the Special Servicer
shall provide copies of the foregoing to the Master Servicer, including, without
limitation, electronic data and/or files in CMSA IRP format.
(c) The Master Servicer shall maintain ongoing payment records with
respect to each of the Specially Serviced Mortgage Loans and shall provide any
Special Servicer with any information reasonably required by the Special
Servicer to perform its duties under this Agreement. Any Special Servicer shall
provide the Master Servicer with any information the Master Servicer reasonably
requires to perform its duties under this Agreement.
(d) In the event that the Special Servicer is required under the terms
of this Agreement to service, or perform any of its duties hereunder with
respect to, a Mortgage Loan that is not a Specially Serviced Mortgage Loan, the
Master Servicer shall provide the Special Servicer with a copy of any document
contained in the Mortgage File that is necessary for the Special Servicer to
perform any of its duties hereunder. Upon request, the Master Servicer shall
provide the Special Servicer, at the Special Servicer's expense, with a copy of
any document contained in the Mortgage File that is not currently necessary for
the Special Servicer to perform its duties hereunder.
Section 3.24 Inspections. Commencing in 2003, the Master Servicer (or,
with respect to Specially Serviced Mortgage Loans and the related REO
Properties, any Special Servicer) shall, with respect to each Multifamily Loan,
inspect or cause to be inspected the related Mortgaged Property (i) when the
Master Servicer determines that it is prudent to conduct such an inspection,
(ii) with respect to any Multifamily Loan with a Stated Principal Balance of
greater than $1,000,000, at least once every year and (ii) with respect to any
Multifamily Loan with a Stated Principal Balance of less than or equal to
$1,000,000, at least once every two years. Promptly after a Multifamily Loan
becomes a Specially Serviced Mortgage Loan (and in any event within 60 days
thereafter), the Master Servicer, or any Special Servicer on its behalf, shall
inspect the Mortgaged Property. The annual inspections will be done at the
expense of the servicer performing the inspection. The inspection done at the
time a Mortgage Loan becomes a Specially Serviced Mortgage Loan will be
34
an expense of the Trust Fund. The Master Servicer and any Special Servicer shall
each prepare or cause to be prepared as soon as reasonably possible a written
report of each such inspection and shall deliver a copy of such report (which
may be in electronic format) to each Rating Agency within 15 days after the
preparation thereof.
Section 3.25 Available Information and Notices. Upon request, the
Master Servicer, or any Special Servicer on its behalf, shall promptly furnish
to each Rating Agency and the Indenture Trustee (in written or electronic
format) annual reports of each Mortgagor with respect to the net operating
income and occupancy rates required to be delivered by the related Mortgagor and
actually received by the Master Servicer, or any Special Servicer on its behalf,
with respect to Specially Serviced Mortgage Loans, to the extent that delivery
of such items is consistent with applicable law and the related Mortgage Loan
documents. Upon request, the Master Servicer, or any Special Servicer on its
behalf, shall promptly furnish to each Rating Agency and the Indenture Trustee
(in written or electronic format) all rent rolls and sales reports with respect
to Specially Serviced Mortgage Loans, to the extent they are delivered by the
related Mortgagor to the Master Servicer, or any Special Servicer on its behalf,
and to the extent that delivery of such items is consistent with applicable law
and the related Mortgage Loan documents. The Master Servicer, or any Special
Servicer on its behalf, shall promptly notify each Rating Agency and the
Indenture Trustee if it obtains knowledge of any material uninsured damage to a
Mortgaged Property that relates to a Specially Serviced Mortgage Loan. In
addition to the other reports and information made available and distributed
pursuant to other provisions of this Agreement, the Master Servicer and any
Special Servicer shall, in accordance with such reasonable rules and procedures
as it may adopt, also make available any information relating to the Multifamily
Loans and the related Mortgaged Properties or the related Mortgagors for review
by the Depositor, the Rating Agencies and the Indenture Trustee. The Master
Servicer and any Special Servicer acting on its behalf, as the case may be, will
also make such information available to any Person that is a Bondholder or
potential Bondholder.
35
ARTICLE IV
Servicing Certificate
Section 4.01 Remittance Reports. On the Business Day following each
Determination Date, the Master Servicer shall deliver to the Indenture Trustee a
report, prepared as of the close of business on the Determination Date (the
"Remittance Report"), in the form of a magnetic tape or disk or such other
method as to which the Master Servicer and Indenture Trustee shall agree. The
Remittance Report and any written information supplemental thereto shall include
such information with respect to the Mortgage Loans that is reasonably available
to the Master Servicer and that is required by the Indenture Trustee for
purposes of making the calculations and providing the reports referred to in the
Indenture, as set forth in written specifications or guidelines issued by the
Indenture Trustee from time to time.
In addition, prior to each Payment Date, the Master Servicer shall
determine the total amount of Realized Losses, if any, that resulted from any
Cash Liquidation, Debt Service Reduction, Deficient Valuation or REO Disposition
that occurred during the related Collection Period. The amount of each Realized
Loss shall be evidenced by an Officer's Certificate delivered to the Indenture
Trustee with the related Remittance Report.
The determination by the Master Servicer of such amounts shall, in the
absence of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee and Indenture Trustee shall be protected in
relying upon the same without any independent check or verification. The
Indenture Trustee shall have no obligation to recompute, recalculate or verify
any information provided to it by the Master Servicer.
Section 4.02 Reserved.
Section 4.03 Reserved.
Section 4.04 Advances. If any Monthly Payment on a Mortgage Loan that
was due on the immediately preceding Due Date or due during the related
Collection Period and delinquent on the Determination Date is delinquent other
than as a result of application of the Relief Act, the Master Servicer will
deposit in the Collection Account not later than the third Business Day
immediately preceding the related Payment Date an amount equal to such Monthly
Payment net of the related Servicing Fee for such Mortgage Loan, except to the
extent the Master Servicer or the related Subservicer determines any such
advance to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or
future payments on any Mortgage Loan. Subject to the foregoing and in the
absence of such a determination, the Master Servicer shall continue to make such
advances through the date that the related Mortgaged Property has, in the
judgment of the Master Servicer, been completely liquidated. No later than the
fourth Business Day preceding each Payment Date, the Master Servicer shall
present an Officer's Certificate to the Indenture Trustee with respect to the
Mortgage Loans, (i) stating that the Master Servicer elects not to make an
Advance in a stated amount and (ii) detailing the reason it deems the advance to
be a Nonrecoverable Advance. The Master Servicer will
36
include in the Remittance Report a list of each Mortgage Loan for which it does
not make an Advance in accordance with this Section.
Such Advances may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Payment Dates in subsequent months. Any funds being held for
future distribution to Securityholders and so used shall be replaced by the
Master Servicer from its own funds by deposit in the Collection Account on or
before the fourth Business Day preceding any Payment Date to the extent that
funds in the Collection Account with respect to such Payment Date shall be less
than payments to Securityholders required to be made on such date.
In the event that the Master Servicer determines that, with respect to
any Payment Date, it will be unable to deposit in the Collection Account an
amount equal to the Advance required to be made not later than the third
Business Day immediately preceding the related Payment Date in the amount
determined by the Master Servicer pursuant to this Section 4.04, it shall give
notice to the Indenture Trustee of its inability to Advance (such notice may be
given by telecopy), not later than 4:00 PM, New York time, on the third Business
Day immediately preceding the related Payment Date, specifying the portion of
such amount that it will be unable to deposit. Not later than 12:00 PM, New York
time, on the related Payment Date, unless by such time the Master Servicer shall
have directly or indirectly deposited in the Payment Account the entire amount
of the Advances required to be made for the related Payment Date, pursuant to
this Section 4.04, the Indenture Trustee shall (a) terminate all of the rights
and obligations of the Master Servicer under this Servicing Agreement in
accordance with Section 6.01 and (b) assume the rights and obligations of the
Master Servicer hereunder, including the obligation to deposit in the Payment
Account an amount equal to the Advance for the Payment Date.
Section 4.05 Compensating Interest Payments. The Master Servicer shall
deposit in the Collection Account not later than the third Business Day
preceding the Payment Date an amount equal to the Compensating Interest for the
related Determination Date. The Master Servicer shall not be entitled to any
reimbursement of any Compensating Interest payment.
Section 4.06 Exchange Act Reporting. (a) The Indenture Trustee and the
Master Servicer shall reasonably cooperate with the Issuer and the Depositor in
connection with the Trust's satisfying the reporting requirements under the
Exchange Act. The Indenture Trustee shall prepare on behalf of the Trust any
Forms 8-K and 10-K customary for similar securities as required by the Exchange
Act and the Rules and Regulations of the Commission thereunder, and the Master
Servicer shall sign (or shall cause another entity acceptable to the Commission
to sign) and the Indenture Trustee shall file (via the Commission's Electronic
Data Gathering and Retrieval System) such forms on behalf of the Depositor or
Issuer (or such other entity). The Depositor and the Issuer hereby grant to the
Indenture Trustee a limited power of attorney to execute any Form 8-K and file
each such document on behalf of the Depositor and the Issuer. Such power of
attorney shall continue until the earlier of (i) receipt by the Indenture
Trustee from the Depositor and the Issuer of written termination of such power
of attorney and (ii) the termination of the Trust. Notwithstanding anything
herein or in the Indenture to the contrary, the Master Servicer, and not the
Indenture Trustee, shall be responsible for executing each Form 10-K filed on
behalf of the Trust.
37
(b) Each Form 8-K shall be filed by the Indenture Trustee within 15
days after each Distribution Date, with a copy of the statement to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
March 30th of each year (or such earlier date as may be required or permitted by
the Exchange Act and the Rules and Regulations of the Commission), the Indenture
Trustee shall file a Form 10-K, in substance as required by applicable law or
applicable Commission staff's interpretations. The Indenture Trustee shall
prepare the Form 10-K and provide the Master Servicer with the Form 10-K no
later than March 20th of each year. The Master Servicer shall execute such Form
10-K upon its receipt and shall provide the original of such executed Form 10-K
to the Indenture Trustee no later than March 25th of each year. Such Form 10-K
shall include as exhibits the Master Servicer's annual statement of compliance
described under Section 3.16 and the accountant's report described under Section
3.17, in each case to the extent they have been timely delivered to the
Indenture Trustee. If they are not so timely delivered, the Indenture Trustee
shall file an amended Form 10-K including such documents as exhibits reasonably
promptly after they are delivered to the Indenture Trustee. The Indenture
Trustee shall have no liability with respect to any failure to properly prepare
or file such periodic reports resulting from or relating to the Indenture
Trustee's inability or failure to obtain any information not resulting from its
own negligence or willful misconduct. The Form 10-K shall also include a
certification in the form attached hereto as Exhibit C-1 (the "Certification"),
in compliance with Rules 13a-14 and 15d-14 under the Exchange Act and any
additional directives of the Commission, which shall be signed by the senior
officer of the Master Servicer in charge of securitization.
(c) In addition, the Indenture Trustee shall sign a certification (in
the form attached hereto as Exhibit C-2) for the benefit of the Master Servicer
and its officers, directors and Affiliates regarding certain aspects of items 1
through 3 of the Certification (provided, however, that the Indenture Trustee
shall not undertake an analysis of any accountant's report attached as an
exhibit to the Form 10-K).
(d) In addition, (i) the Indenture Trustee shall indemnify and hold
harmless the Master Servicer and the Depositor and their officers, directors and
Affiliates from and against any losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach of the Indenture Trustee's
obligations under this Section 4.06 caused by the Indenture Trustee's
negligence, bad faith or willful misconduct in connection therewith, and (ii)
the Master Servicer shall indemnify and hold harmless the Indenture Trustee, the
Master Servicer, the Issuer and their respective officers, directors and
Affiliates from and against any losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach of the Master Servicer's
obligations under this Section 4.06 or the Master Servicer's negligence, bad
faith or willful misconduct in connection therewith. If (i) the indemnification
provided for herein is unavailable or insufficient to hold harmless the Master
Servicer, then the Indenture Trustee agrees that it shall contribute to the
amount paid or payable by the Master Servicer as a result of the losses, claims,
damages or liabilities of the Master Servicer in such proportion as is
appropriate to reflect the relative fault of the Master Servicer on the one hand
and the Indenture Trustee on the other in connection with a breach of the
Indenture Trustee's obligations under this Section 4.06 caused by the Indenture
Trustee's negligence, bad faith or willful misconduct in connection therewith
and (ii) the indemnification provided for herein is unavailable or insufficient
to hold harmless the Indenture Trustee, then the Master Servicer agrees that it
shall contribute to the
38
amount paid or payable by the Indenture Trustee as a result of the losses,
claims, damages or liabilities of the Indenture Trustee in such proportion as is
appropriate to reflect the relative fault of the Indenture Trustee on the one
hand and the Master Servicer on the other in connection with a breach of the
Master Servicer's obligations under this Section 4.06 or the Master Servicer's
negligence, bad faith or willful misconduct in connection therewith.
(e) In the event the Commission permits separate or split
certifications to be made with respect to the items currently contained in the
Certification, the Indenture Trustee shall provide a certification with respect
to items 1 and 2 and the Master Servicer shall provide a certification with
respect to items 3, 4 and 5 contained within the Certification, in each case
substantially in the form of the Certification attached as Exhibit C-1, or other
form as indicated by the Commission for this purpose. In addition, the Indenture
Trustee shall sign a certification (in the form attached hereto as Exhibit C-3)
for the benefit of the Master Servicer and its officers, directors and
Affiliates regarding certain aspects of item 3 of the Certification (provided,
however, that the Indenture Trustee shall not undertake an analysis of any
accountant's report attached as an exhibit to the Form 10-K).
(f) Notwithstanding any other provision of the Basic Documents, the
provisions of this Section 4.06 may be amended by the Master Servicer, the
Issuer and the Indenture Trustee without the consent of the Securityholders.
(g) Prior to January 30th of the first year in which the Indenture
Trustee is able to do so under applicable law, the Indenture Trustee shall file
with the Commission a Form 15D Suspension Notification with respect to the
Trust.
39
ARTICLE V
The Master Servicer
Section 5.01 Liability of the Master Servicer. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 5.02 Merger or Consolidation of or Assumption of the
Obligations of the Master Servicer. Any corporation into which the Master
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to the business
of the Master Servicer, shall be the successor of the Master Servicer,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to sell mortgage loans to and service
mortgage loans for Xxxxxx Xxx or Xxxxxxx Mac.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; provided, that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of Xxxxxx Mae or Xxxxxxx Mac, is reasonably
satisfactory to the Indenture Trustee (as pledgee of the Mortgage Loans) and the
Company (in its sole discretion), is willing to service the Mortgage Loans and
executes and delivers to the Indenture Trustee and the Company an agreement, in
form and substance reasonably satisfactory to the Indenture Trustee and the
Company, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Master Servicer under this Servicing Agreement; provided,
further, that each Rating Agency's rating of the Class 1-A-1, Class 1-A-2, Class
1-M-1, Class 1-M-2, Class 1-M-3, Class 2-A-1, Class 2-M-1, Class 2-M-2 and Class
2-B-1 Bonds in effect immediately prior to such assignment and delegation will
not be qualified, reduced, or withdrawn as a result of such assignment and
delegation (as evidenced by a letter to such effect from each Rating Agency) or
considered to be below investment grade.
Section 5.03 Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master Servicer shall be under any liability to the Company, the
Issuer, the Owner Trustee, the Indenture Trustee or the Bondholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Servicing Agreement, provided, however, that this provision
shall not protect the Master Servicer or any such Person against any liability
which would otherwise be imposed by reason of its willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder or by reason of
its reckless disregard of its obligations and duties hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
may rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Company and held harmless
40
against any loss, liability or expense incurred in connection with any legal
action relating to this Servicing Agreement or the Bonds, including any amount
paid to the Owner Trustee or the Indenture Trustee pursuant to Section 5.06(b),
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Servicing Agreement) and any loss,
liability or expense incurred by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. The Master Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Mortgage Loans in
accordance with this Servicing Agreement, and which in its opinion may involve
it in any expense or liability; provided, however, that the Master Servicer may
in its sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Servicing Agreement, and the rights and duties of
the parties hereto and the interests of the Securityholders hereunder. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Company, and
the Master Servicer shall be entitled to be reimbursed therefor. The Master
Servicer's right to indemnity or reimbursement pursuant to this Section 5.03
shall survive any resignation or termination of the Master Servicer pursuant to
Section 5.04 or 6.01 with respect to any losses, expenses, costs or liabilities
arising prior to such resignation or termination (or arising from events that
occurred prior to such resignation or termination).
Section 5.04 Master Servicer Not to Resign. Subject to the provisions
of Section 5.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or (ii) upon satisfaction of the following conditions: (a) the
Master Servicer has proposed a successor servicer to the Company and the
Indenture Trustee in writing and such proposed successor servicer is reasonably
acceptable to the Company and the Indenture Trustee; and (b) each Rating Agency
shall have delivered a letter (obtained by and at the expense of the Master
Servicer) to the Company and the Indenture Trustee prior to the appointment of
the successor servicer stating that the proposed appointment of such successor
servicer as Master Servicer hereunder will not result in the reduction or
withdrawal of the then current rating of the Bonds or the then current rating of
the Bonds; provided, however, that no such resignation by the Master Servicer
shall become effective until such successor servicer or, in the case of (i)
above, the Indenture Trustee, as pledgee of the Mortgage Loans, shall have
assumed the Master Servicer's responsibilities and obligations hereunder or
another successor Master Servicer has been appointed in accordance with Section
6.02. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02 as
obligations that survive the resignation or termination of the Master Servicer.
The Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Bondholder for any amounts paid by the Master Servicer
pursuant to any provision of this Servicing Agreement. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Indenture Trustee.
Section 5.05 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
41
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 5.04.
Section 5.06 Master Servicer to Pay Indenture Trustee's and Owner
Trustee's Fees and Expenses; Indemnification. (a) The Master Servicer covenants
and agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee
of the Indenture Trustee from time to time, and the Owner Trustee, the Indenture
Trustee and any such co-trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each
of them in the execution of the trusts created under the Trust Agreement, the
Indenture or any other Basic Document and in the exercise and performance of any
of the powers and duties under the Trust Agreement or the Indenture, as the case
may be, of the Owner Trustee, the Indenture Trustee and any co-trustee of the
Indenture Trustee, and the Master Servicer will pay or reimburse (i) the
Indenture Trustee and any co-trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee or any
co-trustee of the Indenture Trustee in accordance with any of the provisions of
this Servicing Agreement or any other Basic Document except any such expense,
disbursement or advance as may arise from its negligence or bad faith and (ii)
the Owner Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by the Owner Trustee in accordance with any of the
provisions of this Servicing Agreement except any such expense, disbursement or
advance as may arise from its willful misconduct, gross negligence or bad faith
or grossly negligent failure to act.
(b) The Master Servicer agrees to indemnify the Indenture Trustee and
the Owner Trustee for, and to hold the Indenture Trustee and the Owner Trustee,
as the case may be, harmless against, any claim, tax, penalty, loss, liability
or expense of any kind whatsoever, incurred without negligence (gross negligence
in the case of the Owner Trustee) or willful misconduct on its part, arising out
of, or in connection with, the failure by the Master Servicer to perform its
duties in compliance with this Servicing Agreement, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Indenture Trustee or
Owner Trustee, as the case may be, shall have given the Master Servicer
written notice thereof promptly after the Indenture Trustee or Owner
Trustee, as the case may be, shall have actual knowledge thereof, it
being understood that failure to give such notice shall not relieve the
Master Servicer of its indemnification obligations hereunder;
(ii) while maintaining control over its own defense, the
Company, the Indenture Trustee or Owner Trustee, as the case may be,
shall cooperate and consult fully with the Master Servicer in preparing
such defense; and
(iii) notwithstanding anything in this Servicing Agreement to
the contrary, the Master Servicer shall not be liable for settlement of
any claim by the Indenture Trustee or the Owner Trustee, as the case
may be, entered into without the prior consent of the Master Servicer,
which consent shall not be unreasonably withheld.
42
(c) The Master Servicer agrees to indemnify the Owner Trustee for, and
to hold the Owner Trustee, harmless against, any claim, tax, penalty, loss,
liability or expense of any kind whatsoever, in connection with the Owner
Trustee's duties under any of the Basic Documents, except to the extent that
such claim, tax, penalty, loss liability or expense is (i) caused by the Owner
Trustee's own willful misconduct, gross negligence or bad faith or grossly
negligent failure to act or (ii) incurred as a result of the inaccuracy of any
representation or warranty contained in Section 6.03 of the Trust Agreement
expressly made by the Owner Trustee.
(d) No termination of this Servicing Agreement or the resignation or
removal of the Owner Trustee or the Indenture Trustee shall affect the
obligations created by this Section 5.06 of the Master Servicer to indemnify the
Indenture Trustee and the Owner Trustee under the conditions and to the extent
set forth herein. This section shall survive the termination of this Servicing
Agreement and the resignation or removal of the Master Servicer. Any amounts to
be paid by the Master Servicer pursuant to this Subsection may not be paid from
the Trust Estate.
43
ARTICLE VI
Default
Section 6.01 Servicing Default. If any one of the following events
(each, a "Servicing Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the
Collection Account or Payment Account any deposit required to be made
under the terms of this Servicing Agreement, including any Advances and
Compensating Interest (other than Servicing Advances), which continues
unremedied for a period of one (1) Business Day after the date upon
which written notice of such failure shall have been given to the
Master Servicer by the Company, the Issuer or the Indenture Trustee; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer (including Servicing Advances) set
forth in the Bonds or in this Servicing Agreement, which failure, in
each case, materially and adversely affects the interests of
Bondholders and which continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring the
same to be remedied, and stating that such notice is a "Notice of
Default" hereunder, shall have been given to the Master Servicer by the
Company, the Issuer or the Indenture Trustee; or
(iii) The entry against the Master Servicer of a decree or
order by a court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a trustee, conservator, receiver
or liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(iv) The Master Servicer shall voluntarily go into
liquidation, consent to the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged, unbonded or unstayed for a period of 60 days; or the
Master Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations;
44
then, and in every such case, so long as a Servicing Default shall not have been
remedied by the Master Servicer, either the Issuer, subject to the direction of
the Indenture Trustee as pledgee of the Mortgage Loans, or the holders of at
least 51% of the aggregate Bond Principal Balance of each Class of Bonds may, by
notice then given in writing to the Master Servicer, terminate all of the rights
and obligations of the Master Servicer as servicer under this Servicing
Agreement other than its right to receive servicing compensation and expenses
for servicing the Mortgage Loans hereunder during any period prior to the date
of such termination and the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans may exercise any and all other remedies
available at law or equity; provided, however, that the successor to the Master
Servicer appointed pursuant to Section 6.02 shall have accepted the duties of
Master Servicer effective upon the resignation or termination of the Master
Servicer. Any such notice to the Master Servicer shall also be given to each
Rating Agency, the Company and the Issuer. On or after the receipt by the Master
Servicer of such written notice, all authority and power of the Master Servicer
under this Servicing Agreement, whether with respect to the Bonds or the
Mortgage Loans or otherwise, shall pass to and be vested in the Indenture
Trustee, pursuant to and under this Section 6.01; and, without limitation, the
Indenture Trustee is hereby authorized and empowered to execute and deliver, on
behalf of the Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan and related documents, or otherwise. Notwithstanding the foregoing, the
parties hereto and the Securityholders by their acceptance of any Security,
acknowledge and agree that there will be a period of transition before the
actual servicing functions can be fully transferred to the Indenture Trustee, as
successor Master Servicer, or to a successor Master Servicer appointed by the
Indenture Trustee pursuant to the provisions hereof, provided, that the
Indenture Trustee shall use its reasonable best efforts to succeed to the actual
servicing functions or find a successor Master Servicer as soon as possible but
no later than 90 days after such termination. 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 or the successor Master
Servicer for administration by it of (i) the property and amounts which are then
or should be part of the Trust Fund or which thereafter become part of the Trust
Estate; (ii) originals or copies of all documents of the Master Servicer
reasonably requested by the Indenture Trustee to enable it to assume the Master
Servicer's duties thereunder; (iii) the rights and obligations of the Master
Servicer under the Subservicing Agreements with respect to the Mortgage Loans;
(iv) all cash amounts which shall at the time be deposited by the Master
Servicer or should have been deposited to the Collection or the Payment Account
or thereafter be received with respect to the Mortgage Loans; and (v) all costs
or expenses associated with the complete transfer of all servicing data and the
completion, correction or manipulation of such servicing data as may be required
by the Indenture Trustee or any successor Master Servicer to correct any errors
or insufficiencies in the servicing data or otherwise to enable the Indenture
Trustee or successor Master Servicer to service the Mortgage Loans properly and
effectively. All reasonable costs and expenses (including, but not limited to,
attorneys' fees) incurred in connection with the succession as Master Servicer,
including amending this Servicing Agreement to reflect such succession as Master
Servicer pursuant to this Section 6.01 shall be paid by the predecessor Master
Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer) upon presentation of reasonable documentation of such
costs and expenses, and if not so paid by the predecessor Master Servicer, shall
be reimbursed by the Trust pursuant to Section 6.07 of the Indenture.
45
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a payment on a Mortgage Loan which was due prior to the
notice terminating the Master Servicer's rights and obligations hereunder and
received after such notice, that portion to which the Master Servicer would have
been entitled pursuant to Sections 3.07 and 3.15 as well as its Master Servicing
Fee in respect thereof, and any other amounts payable to the Master Servicer
hereunder the entitlement to which arose prior to the termination of its
activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(i) after the applicable grace periods specified in such
Section, shall not constitute a Servicing Default if such delay or failure could
not be prevented by the exercise of reasonable diligence by the Master Servicer
and such delay or failure was caused by an act of God or the public enemy, acts
of declared or undeclared war, public disorder, rebellion or sabotage,
epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or
similar causes. The preceding sentence shall not relieve the Master Servicer
from using reasonable efforts to perform its respective obligations in a timely
manner in accordance with the terms of this Servicing Agreement and the Master
Servicer shall provide the Indenture Trustee and the Bondholders with notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Master Servicer shall immediately notify the
Indenture Trustee and the Owner Trustee in writing of any Servicing Default.
Section 6.02 Indenture Trustee to Act; Appointment of Successor. Within
90 days of the time the Master Servicer receives a notice of termination
pursuant to Section 6.01 or sends a notice pursuant to clause (i) of Section
5.04, the Indenture Trustee on behalf of the Bondholders, or other successor
appointed in accordance with this Section 6.02, shall be the successor in all
respects to the Master Servicer in its capacity as servicer under this Servicing
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof, including but
not limited to the provisions of Article VIII. Nothing in this Servicing
Agreement shall be construed to permit or require the Indenture Trustee or any
other successor Master Servicer to (i) succeed to the responsibilities, duties
and liabilities of the initial Master Servicer in its capacity as the Seller
under the Mortgage Loan Sale and Contribution Agreement, (ii) be responsible or
accountable for any act or omission of the Master Servicer prior to the
effectiveness of the Master Servicer's termination hereunder, (iii) require or
obligate the Indenture Trustee, in its capacity as successor Master Servicer, to
purchase, repurchase or substitute any Mortgage Loan, (iv) fund any losses on
any Eligible Investment directed by any other Master Servicer, or (v) be
responsible for the representations and warranties of the Master Servicer,
except as provided herein; provided, however, that the Indenture Trustee, as
successor Master Servicer, shall be required to make any Advances to the extent
that the Master Servicer failed to make such Advances, to the extent such
Advance is not determined by the Indenture Trustee to be nonrecoverable. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Master Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Master Servicer, or (ii) if
the Indenture Trustee is legally unable so to act, the Indenture Trustee on
behalf of the Bondholders may (in the situation described in clause (i)) or
shall (in the situation described in clause (ii)) appoint or petition a court of
competent jurisdiction to appoint any established housing and home finance
institution, bank or other mortgage loan servicer having a net worth of not less
than $10,000,000 as the successor to the Master Servicer
46
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder; provided that the appointment
of any such successor Master Servicer will not result in the qualification,
reduction or withdrawal of the ratings assigned to the Class 1-A-1, Class 1-A-2,
Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 2-A-1, Class 2-M-1, Class 2-M-2 and
Class 2-B-1 Bonds by the Rating Agencies. Pending appointment of a successor to
the Master Servicer hereunder, unless the Indenture Trustee is prohibited by law
from so acting or is unwilling to act as such, the Indenture Trustee shall act
in such capacity as hereinabove provided. In connection with such appointment
and assumption, the successor shall be entitled to receive compensation out of
payments on Mortgage Loans in an amount equal to the compensation which the
Master Servicer would otherwise have received pursuant to Section 3.15 (or such
lesser compensation as the Indenture Trustee and such successor shall agree).
The appointment of a successor Master Servicer shall not affect any liability of
the predecessor Master Servicer which may have arisen under this Servicing
Agreement prior to its termination as Master Servicer (including, without
limitation, the obligation to purchase Mortgage Loans pursuant to Section 3.01,
to pay any deductible under an insurance policy pursuant to Section 3.11 or to
indemnify the Indenture Trustee pursuant to Section 5.06), nor shall any
successor Master Servicer be liable for any acts or omissions of the predecessor
Master Servicer or for any breach by such Master Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Indenture Trustee, the Custodian and such successor shall take
such action, consistent with this Servicing Agreement, as shall be necessary to
effectuate any such succession.
In connection with the termination or resignation of the Master
Servicer hereunder, either (i) the successor Master Servicer, including the
Indenture Trustee if the Indenture Trustee is acting as successor Master
Servicer, shall represent and warrant that it is a member of MERS in good
standing and shall agree to comply in all material respects with the rules and
procedures of MERS in connection with the servicing of the Mortgage Loans that
are registered with MERS, in which case the predecessor Master Servicer shall
cooperate with the successor Master Servicer in causing MERS to revise its
records to reflect the transfer of servicing to the successor Master Servicer as
necessary under MERS' rules and regulations, or (ii) the predecessor Master
Servicer shall cooperate with the successor Master Servicer in causing MERS to
execute and deliver an assignment of Mortgage in recordable form to transfer the
Mortgage from MERS to the Indenture Trustee and to execute and deliver such
other notices, documents and other instruments as may be necessary or desirable
to effect a transfer of such Mortgage Loan or servicing of such Mortgage Loan on
the MERS(R) System to the successor Master Servicer. The predecessor Master
Servicer shall file or cause to be filed any such assignment in the appropriate
recording office. The predecessor Master Servicer shall bear any and all fees of
MERS, costs of preparing any assignments of Mortgage, and fees and costs of
filing any assignments of Mortgage that may be required under this Section 6.02.
The successor Master Servicer shall cause such assignment to be delivered to the
Indenture Trustee promptly upon receipt of the original with evidence of
recording thereon or a copy certified by the public recording office in which
such assignment was recorded.
(b) Any successor, including the Indenture Trustee on behalf of the
Bondholders, to the Master Servicer as servicer shall during the term of its
service as servicer (i) continue to service and administer the Mortgage Loans
for the benefit of the Securityholders, (ii) maintain in force a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Master
47
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.11(g).
(c) Any successor Master Servicer, including the Indenture Trustee on
behalf of the Bondholders, shall not be deemed to be in default or to have
breached its duties hereunder if the predecessor Master Servicer shall fail to
deliver any required deposit to the Collection Account or otherwise cooperate
with any required servicing transfer or succession hereunder.
(d) Notwithstanding anything else herein to the contrary, in no event
shall the Indenture Trustee be liable for any servicing fee or any differential
in the amount of the servicing fee paid hereunder and the amount necessary to
induce any successor Servicer to act as a successor Servicer under this
Servicing Agreement and the transactions set forth or provided for herein.
Section 6.03 Notification to Bondholders. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VI or
Section 5.04, the Indenture Trustee shall give prompt written notice thereof to
the Bondholders, the Owner Trustee, the Company, the Issuer and each Rating
Agency.
Section 6.04 Waiver of Defaults. The Indenture Trustee shall transmit
by mail to all Bondholders, within 10 days after the occurrence of any Servicing
Default known to the Indenture Trustee, unless such Servicing Default shall have
been cured, notice of each such Servicing Default hereunder known to a
Responsible Officer of the Indenture Trustee. The holders of at least 51% of the
aggregate Bond Principal Balance of the Bonds may waive any default by the
Master Servicer in the performance of its obligations hereunder and the
consequences thereof, except a default in the making of or the causing to be
made any required distribution on the Bonds. Upon any such waiver of a past
default, such default shall be deemed to cease to exist, and any Servicing
Default arising therefrom shall be deemed to have been timely remedied for every
purpose of this Servicing Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived. The Master Servicer shall give notice of any such
waiver to the Rating Agencies.
48
ARTICLE VII
Miscellaneous Provisions
Section 7.01 Amendment. This Servicing Agreement may be amended from
time to time by the parties hereto, provided that any amendment be accompanied
by a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Bonds or the rating
then assigned to the Bonds, and the consent of the Indenture Trustee.
Section 7.02 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.03 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if when
delivered to:
(a) in the case of the Master Servicer: Impac Funding Corporation
0000 Xxxx Xxxxxx Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000
Attention: General Counsel
(b) in the case of Rating Agencies: Xxxxx'x Investors Service, Inc.
4th Floor
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Residential Mortgage Monitoring
Unit
Standard & Poor's, a division of The
XxXxxx-Xxxx Companies, Inc.
00 Xxxxx Xxxxxx - 41st Floor
New York, New York 10041
Attention: Asset Backed Surveillance Group
(c) in the case of the Owner Trustee,
the Corporate Trust Office: Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
49
(d) in the case of the Issuer,
to Impac CMB Trust Series 2003-11: c/o IMH Assets Corp.
0000 Xxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
(e) in the case of the Indenture Trustee: Deutsche Bank National Trust Company
0000 Xxxx Xx. Xxxxxx Xxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Impac
CMB Trust Series
2003-11 (IM0311)
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 Bondholder shall be given by first class mail, postage prepaid, at
the address of such Bondholder as shown in the Bond Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any Rating Agency.
Section 7.04 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Bonds or the rights of the Bondholders thereof.
Section 7.05 Third-Party Beneficiaries. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Bondholders,
the Owner Trustee, the Indenture Trustee and their respective successors and
permitted assigns. Except as otherwise provided in this Servicing Agreement, no
other Person will have any right or obligation hereunder. The Indenture Trustee
shall have the right to exercise all rights of the Issuer under this Agreement.
Section 7.06 Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.07 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 7.08 Termination. The respective obligations and
responsibilities of the Master Servicer and the Issuer created hereby shall
terminate upon the satisfaction and discharge of the Indenture pursuant to
Section 4.10 thereof.
50
Section 7.09 No Petition. The Master Servicer, by entering into this
Servicing Agreement, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join in any institution against the Issuer, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations of the Issuer. This section shall
survive the termination of this Servicing Agreement by one year.
Section 7.10 No Recourse. The Master Servicer acknowledges that no
recourse may be had against the Issuer, except as may be expressly set forth in
this Servicing Agreement.
51
ARTICLE VIII
Duties of the Master Servicer
Section 8.01 Administrative Duties. (a) Duties with Respect to the
Indenture. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall consult
with the Owner Trustee as the Master Servicer deems appropriate regarding the
duties of the Issuer under the Indenture. The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Master
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Master Servicer shall take all necessary action that is the
duty of the Issuer to take pursuant to the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master Servicer set forth
in this Servicing Agreement or any of the Basic Documents, the Master
Servicer shall perform such calculations and shall prepare for
execution by the Issuer or the Owner Trustee or shall cause the
preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be
the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to this Servicing Agreement or any of the Basic Documents or
under state and federal tax and securities laws, and at the request of
the Owner Trustee or the Indenture Trustee shall take all appropriate
action that it is the duty of the Issuer to take pursuant to this
Servicing Agreement or any of the Basic Documents. In accordance with
the directions of the Issuer or the Owner Trustee, the Master Servicer
shall administer, perform or supervise the performance of such other
activities in connection with the Bonds (including the Basic Documents)
as are not covered by any of the foregoing provisions and as are
expressly requested by the Issuer, the Indenture Trustee or the Owner
Trustee.
(ii) Notwithstanding anything in this Servicing Agreement or
any of the Basic Documents to the contrary, the Master Servicer shall
be responsible for promptly notifying the Owner Trustee in the event
that any withholding tax is imposed on the Issuer's payments (or
allocations of income) to an Owner (as defined in the Trust Agreement)
as contemplated in Section 5.03 of the Trust Agreement. Any such notice
shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee pursuant to such
provision.
(iii) In carrying out the foregoing duties or any of its other
obligations under this Servicing Agreement, the Master Servicer may
enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that the terms of any such transactions
or dealings shall be in accordance with any directions received from
the Issuer and shall be, in
52
the Master Servicer's opinion, no less favorable to the Issuer in any
material respect than with terms made available to unrelated third
parties.
(c) Tax Matters. The Master Servicer shall prepare, on behalf of the
Owner Trustee, financial statements and such annual or other reports of the
Issuer as are necessary for the preparation by the Indenture Trustee of tax
returns and information reports as provided in Section 5.03 of the Trust
Agreement, including, without limitation, Form 1099.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article VIII unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee and the Indenture Trustee of the proposed action and
the Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the
Indenture Trustee shall not have withheld consent or provided an alternative
direction. For the purpose of the preceding sentence, "non-ministerial matters"
shall include:
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit
brought by or against the Issuer (other than in connection
with the collection of the Mortgage Loans);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Certificate Paying
Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Servicers or the
consent to the assignment by the Certificate Registrar, Paying
Agent or Indenture Trustee of its obligations under the
Indenture; and
(E) the removal of the Indenture Trustee.
Section 8.02 Records. The Master Servicer shall maintain appropriate
books of account and records relating to services performed under this Servicing
Agreement, which books of account and records shall be accessible for inspection
by the Issuer, the Indenture Trustee at any time during normal business hours.
Section 8.03 Additional Information to be Furnished. The Master
Servicer shall furnish to the Issuer and the Indenture Trustee from time to time
such additional information regarding the Mortgage Loans and the Bonds as the
Issuer and the Indenture Trustee shall reasonably request.
53
IN WITNESS WHEREOF, the Master Servicer, the Issuer and the Indenture
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers or representatives all as of the day and year first above
written.
IMPAC FUNDING CORPORATION,
as Master Servicer
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
Title: Senior Vice President
IMPAC CMB TRUST SERIES 2003-11,
as Issuer
Wilmington Trust Company, not in its
individual capacity, but solely as Owner
Trustee
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Financial Services Officer
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Associate
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Associate
Acknowledged and agreed with respect to
Section 5.03 hereof:
IMH ASSETS CORP.,
as Depositor
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
EXHIBIT A
MORTGAGE LOAN SCHEDULE
(Filed Manually)
(In accordance with Rule 202 of Regulation S-T, this Mortgage Loan Schedule is
being filed in paper pursuant to a continuing hardship exemption.)
A-1
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full
Other
Mortgage Loan Repurchased
Please deliver the Mortgage File to
------------------------------------------
-------------------------------------------------------------------------------
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
[Name of Master Servicer]
Authorized Signature
******************************************************************************
TO CUSTODIAN: Please acknowledge this request, and check off documents being
enclosed with a copy of this form. You should retain this form for your files in
accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed
of Trust
[ ] Title Insurance Policy
____________________ [ ] Other:
Name
____________________
Title
____________________
Date
B-1
EXHIBIT C-1
FORM OF CERTIFICATION TO BE PROVIDED BY THE MASTER SERVICER
WITH FORM 10-K
Re: Impac CMB Trust Series 2003-11
Collateralized Asset-Backed Bonds, Series 2003-11
I, [identify the certifying individual], certify that:
l. I have reviewed this annual report on Form 10-K, and all
reports on Form 8-K containing distribution or servicing reports filed in
respect of periods included in the year covered by this annual report, of IMH
Assets Corp. (the "Registrant");
2. Based on my knowledge, the information in these reports,
taken as a whole, does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading as of
the last day of the period covered by this annual report;
3. Based on my knowledge, the distribution or servicing
information required to be provided to the indenture trustee by the servicer
under the servicing, or similar, agreement for inclusion in these reports is
included in these reports;
4. I am responsible for reviewing the activities performed by
the servicer under the servicing, or similar, agreement and based upon my
knowledge and the annual compliance review required under that agreement, and
except as disclosed in the reports, the servicer has fulfilled its obligations
under that agreement; and
5. The reports disclose all significant deficiencies relating
to the servicer's compliance with the minimum servicing standards based upon the
report provided by an independent public accountant, after conducting a review
in compliance with the Uniform Single Attestation Program for Mortgage Bankers
as set forth in the servicing, or similar, agreement, that is included in these
reports.
In giving the certifications above, I have reasonably relied on
information provided to me by the following unaffiliated parties: [the Indenture
Trustee and Sub-Servicers]
Date:
___________________________________
[Signature] [Title] [Company]
C-1-1
EXHIBIT C-2
FORM OF CERTIFICATION TO BE
PROVIDED TO MASTER SERVICER BY THE INDENTURE TRUSTEE
Re: Impac CMB Trust Series 2003-11 (the "Trust" or the "Issuer")
Collateralized Asset-Backed Bonds, Series 2003-11
I, [identify the certifying individual], a [title] of Deutsche
Bank National Trust Company, as Indenture Trustee of the Trust, hereby certify
to Impac Funding Corporation and its officers, directors and affiliates, and
with the knowledge and intent that they will rely upon this certification, that:
1. I have reviewed the annual report on Form 10-K for the
fiscal year [___], and all reports on Form 8-K containing distribution reports
filed in respect of periods included in the year covered by that annual report,
of the Issuer relating to the above-referenced trust;
2. Based on my knowledge, the information in these
distribution reports prepared by the Indenture Trustee, taken as a whole, does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading as of the last day of the period
covered by that annual report; and
3. Based on my knowledge, the distribution information
required to be provided by the Indenture Trustee under the Indenture is included
in these distribution reports.
Capitalized terms used but not defined herein have the
meanings ascribed to them in Appendix A to the Indenture, dated November 6, 2003
(the "Indenture"), between Impac CMB Trust Series 2003-11, as issuer, and
Deutsche Bank National Trust Company, as indenture trustee.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Indenture Trustee
By:__________________________________
Name:
Title:
Date:
C-2-1
EXHIBIT C-3
FORM OF CERTIFICATION TO BE
PROVIDED TO MASTER SERVICER BY THE INDENTURE TRUSTEE
Re: Impac CMB Trust Series 2003-11 (the "Trust" or the "Issuer")
Collateralized Asset-Backed Bonds, Series 2003-11
I, [identify the certifying individual], a [title] of Deutsche
Bank National Trust Company, as Indenture Trustee of the Trust, hereby certify
to Impac Funding Corporation and its officers, directors and affiliates, and
with the knowledge and intent that they will rely upon this certification, that:
1. Based on my knowledge, the distribution information
required to be provided by the Indenture Trustee under the Indenture is included
in these distribution reports.
Capitalized terms used but not defined herein have the
meanings ascribed to them in Appendix A to the Indenture, dated November 6, 2003
(the "Indenture"), between Impac CMB Trust Series 2003-11, as issuer, and
Deutsche Bank National Trust Company, as indenture trustee.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Indenture Trustee
By:_______________________________
Name:
Title:
Date:
C-3-1
