EXHIBIT 10.20
Preferred Mortgage Corporation
OWNER
and
Advanta Mortgage Corp. USA
SERVICER
LOAN SERVICING AGREEMENT
Dated as of
March 8, 1996
Fixed and Adjustable Rate Non-Conforming Mortgage Loans
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................. 4
Section 1.1 Definition of Terms...................................................... 4
ARTICLE II DELIVERY OF MORTGAGE LOAN FILES SERVICING STANDARDS...................... 8
Section 2.1 Transfer of Mortgage Loan Files (Reserved for Future Use)................ 8
Section 2.2 Agreement to Service Mortgage Loans...................................... 8
Section 2.3 Sub-Servicers............................................................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................... 9
Section 3.1 Representations and Warranties of the Servicer........................... 9
Section 3.2 Representations and Warranties of the Owner.............................. 10
ARTICLE IV ACCOUNTING AND REPORTING................................................. 11
Section 4.1 Collection of Mortgage Loan Payments..................................... 11
Section 4.2 Interest Calculations.................................................... 12
Section 4.3 Application of Mortgage Loan Payments.................................... 12
Section 4.4 Establishment of Collection Account; Deposits in Collection Account...... 12
Section 4.5 Withdrawals from the Collection Account.................................. 13
Section 4.6 Establishment of Escrow Account; Deposits in Escrow Account.............. 14
Section 4.7 Withdrawals From Escrow Account.......................................... 15
Section 4.8 Servicing Advances....................................................... 15
Section 4.9 Monthly Remittance Reports............................................... 15
Section 4.10 Servicing Compensation................................................... 16
ARTICLE V ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................... 16
Section 5.1 Enforcement of Due-On-Sale Clause; Assumption............................ 16
Section 5.2 Maintenance of Insurance................................................. 17
Section 5.3 Cancellation of Mortgage Insurance....................................... 18
Section 5.4 Reserved For Future Use.................................................. 18
Section 5.5 Liquidation of Defaulted Mortgage Loans.................................. 18
Section 5.6 Deed-in-Lieu of Foreclosure.............................................. 19
Section 5.7 Real Estate Owned........................................................ 19
ARTICLE VI MISCELLANEOUS PROVISIONS................................................. 20
Section 6.1 Owner to Cooperate....................................................... 20
Section 6.2 Assignment of Agreement.................................................. 20
Section 6.3 Access to Certain Documentation Regarding the Loans...................... 21
Section 6.4 Default By Servicer...................................................... 21
Section 6.5 Default by Owner......................................................... 22
Section 6.6 Reserved for Future Use.................................................. 22
Section 6.7 Indemnification by Owner................................................. 22
Section 6.8 Fidelity Bond and Errors Omissions....................................... 23
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Section 6.9 Indemnification by Servicer........................................ 24
Section 6.10 Amendment.......................................................... 24
Section 6.11 Governing Law...................................................... 24
Section 6.12 Notices............................................................ 24
Section 6.13 Severability of Provisions......................................... 24
Section 6.14 Document Deficiencies.............................................. 25
Section 6.15 Termination........................................................ 25
Section 6.16 Attorneys' Fees.................................................... 25
Section 6.17 No Solicitation.................................................... 25
Section 6.18 Counterparts....................................................... 26
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This Servicing Agreement, dated as of March 8, 1996, is entered into by and
between Preferred Mortgage Corporation, as owner of the Mortgage Loans that are
referred to herein (the "Owner") and Advanta Mortgage Corp, USA, as Servicer
(together with its permitted successors and assigns, the "Servicer").
WHEREAS, the Owner is the owner of certain first and second lien, fixed and
adjustable rate, non-conforming residential mortgage loans; and
WHEREAS, the Owner desires to deliver to Servicer certain Mortgage Loans,
from time to time to be serviced by Servicer in accordance with the terms and
conditions of the Mortgage Loans and this Agreement; and
WHEREAS, it is the intent of the parties that certain Mortgage Loans,
described in Exhibit A attached hereto, are to be delivered for servicing
concurrent with this Agreement and thereafter Owner may deliver additional
Mortgage Loans for Servicing pursuant to the terms hereof, and
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
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Section 1.1 Definition of Terms
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Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
"Accepted Servicing practices": Procedures and practices (including collection
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procedures) that the Servicer customarily employs and exercises in servicing and
administering mortgage loans for its own account.
"Additional Servicing Compensation": Incidental fees or charges provided for in
---------------------------------
the applicable Note and/or Mortgage that are customarily charged by the Servicer
in the ordinary course of performing it's obligations herein including but not
limited to late payment charges, prepayment charges/penalties, assumption
processing charges and assumption fees, modification charges, demand fees,
insufficient funds fees and reconveyance charges.
"Agreement": This Servicing Agreement, including all exhibits hereto, and all
---------
amendments hereof and supplements hereto.
"Borrower": The individual or individuals obligated to repay the Mortgage Loan.
--------
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"Business Day": Any day other than (i) a Saturday or Sunday, or (it) a day in
------------
which banking or savings and loan institutions in San Diego, California or
Wilmington, Delaware are authorized or obligated by law or executive order to be
closed.
"Collection Account": The trust account or accounts which are created and
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maintained by Servicer specifically for the collection of principal and
interest, insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to the Mortgage Loans.
"Errors and Omissions Policy": An insurance policy insuring against losses
---------------------------
caused by errors and omissions of the Servicer and its personnel, including, but
not limited to, losses caused by the failure to pay insurance premiums or taxes
to record or perfect liens, or to properly service Mortgage Loans in accordance
with this Agreement.
"Escrow Account": For each Mortgage Loan, an account maintained by the Servicer
--------------
specifically for the payment of real estate tax assessments and insurance
premiums against Mortgaged Property.
"Escrow Payments": All funds collected by the Servicer to cover expenses of the
---------------
Borrower required to be paid under the Mortgage Loan Documents, including Hazard
Insurance and Flood Insurance, tax assessments and Mortgage Insurance Premiums.
"Event Default": Any one of the conditions or circumstances enumerated in
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Sections 6.4 and 6.5.
"Fidelity Bond": An insurance policy insuring against losses caused by negligent
-------------
or unlawful acts of the Servicer's personnel, "Flood Insurance Policy": An
insurance policy insuring against flood damage to a Mortgaged Premises, required
by loan originators for Mortgaged Premises located in "flood hazard" areas
identified by the Secretary of HUD or the Director of the Federal Emergency
Management Agency.
"Flood Zone Service Contract": A transferable contract maintained for the
---------------------------
Mortgaged Property with a nationally recognized flood zone service provider for
the purpose of obtaining the current flood zone status relating to such
Mortgaged Property.
"Hazard Insurance Policy": A fire and casualty extended coverage insurance
-----------------------
policy insuring against loss or damage from fire and other perils covered within
the scope of standard extended hazard coverage, together with all riders and
endorsements thereto.
"Insurance Policy" Any insurance policy for a Mortgage Loan referred to in this
----------------
Agreement, including Mortgage Insurance Policy, Hazard Insurance Policy, Flood
Insurance Policy, and Title Insurance Policy, including all riders and
endorsements thereto.
"Liquidation Proceeds": Cash received in connection with the liquidation of a
--------------------
defaulted Mortgage Loan, whether through the sale or assignment of the Mortgage
Loan, trustee's sale, foreclosure sale, sale of the Mortgaged Property or
otherwise.
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"Mortgage Insurance policy": Insurance which insures the holder of the Note
-------------------------
against covered losses in the event the Borrower defaults under the Note or the
Security Instrument, including all riders and endorsements thereto,
"Mortgage Insurer": A mortgage guaranty insurance company that has issued a
----------------
Mortgage Insurance Policy in respect of a Mortgage Loan.
"Mortgage Loan Documents": Any and all documents related to a Mortgage Loan,
-----------------------
including the Note, Security Instrument and insurance policies.
"Mortgage Loan Schedule": The schedule of Mortgage Loans in the form of Exhibit
----------------------
A, attached hereto, delivered to Servicer on each Transfer Date, such schedule
setting forth the information as to each Mortgage Loan in form and substance
agreed to by the Servicer and the Owner.
"Mortgage Loan": The individual mortgage loan which is the subject of this
-------------
Agreement delivered from time to time being identified by a Mortgage Loan
Schedule. To the extent applicable and as the context so permits; any and all
references to "Mortgage Loan" or "Mortgage Loans" herein shall be deemed to
include any Mortgage Loan that has become an REO Property.
"Mortgaged Property": The property securing a Note and subject to the lien of
------------------
the related Security Instrument, which property consists of a single parcel of
real property on which is located a one-to four-family detached residential
dwelling, condominium or attached townhouse or rowhouse.
"Nonrecoverable Advance": Any previously made or proposed servicing advance, in
----------------------
the Servicer's good faith determination, that will not or would not be
ultimately recoverable from the related insurance proceeds or Liquidation
Proceeds.
"Note": A manually executed written instrument evidencing the Borrower's
----
promise to repay a stated sum of money, plus interest, to the noteholder by a
specific date according to a schedule of principal and interest payments.
"Owner": Preferred Mortgage Corporation.
-----
"Permitted Investments": Any one or more of the investments detailed on Exhibit
---------------------
B attached hereto.
"Principal Prepayment": Any payment or other recovery of principal on a
--------------------
Mortgage Loan which is received in advance of its scheduled due date, net of any
prepayment penalty or premium thereon which is retained by the Servicer, and is
not accompanied by an amount of interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of prepayment.
"Remittance Date": The date each month on which Servicer distributes to the
---------------
Owner the Owner's portion of the collections on the Mortgage Loans. The
Remittance Date shall be the
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twenty-fifth (25th) day of each calendar month, or the next succeeding Business
Day if the twenty-fifth (25th) day of the month is not a Business Day.
"Remittance Reports": Those monthly reports specified in Section 4.9.
------------------
"REO Property" Mortgaged Premises the title to which is acquired on behalf of
------------
the Owner through foreclosure or deed-in-lieu of foreclosure.
"Security Instrument": A written instrument creating a valid lien on the
-------------------
Mortgaged Premises. A Security Instrument may be in the form of a mortgage, deed
of trust, deed to secure debt or Security deed, including any riders and addenda
thereto.
"Servicer": Advanta Mortgage Corp. USA, or its successor in interest to the
--------
Servicer under this Agreement.
"Servicing Advance": All customary, reasonable and necessary "out of pocket"
-----------------
costs and expenses incurred in the performance by the Servicer of its servicing
obligations and not part of the Servicer's general and administrative expenses,
including but not limited to, the cost of (a) the preservation, restoration and
protection of the Mortgaged Property, (b) any enforcement or judicial
proceedings, including foreclosures, relating to Mortgage Loans or Mortgaged
Properties (c) the management and liquidation of the Mortgaged Property if the
Mortgaged Property is acquired in satisfaction of the Mortgage, and (d) the
maintenance of hazard insurance, payment of property taxes (including tax
penalties) or mortgage insurance premiums.
"Servicing Fee": For each Mortgage Loan, the compensation due the Servicer each
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month.
"Servicing File": With respect to each Mortgage Loan documents delivered to the
--------------
Servicer, including photocopies of the Note and Security Instrument and any
other documents necessary for the Servicer to service the Mortgage Loans in
accordance with the terms of this Agreement.
"Tax Service Contract": A transferable contract maintained for the Mortgaged
--------------------
Property with a tax servicer provider for the purpose of obtaining current
information from local taxing authorities relating to such Mortgaged Property.
"Title Insurance Policy": An American Land Title Association (ALTA) mortgage
----------------------
loan title policy form 1970, or other form of lender's title insurance policy,
insuring the lien priority of the Security Instrument on the Mortgaged Premises.
"Transfer Date": For each Mortgage Loan, the date on which such Mortgage Loan
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is delivered to Servicer for servicing hereunder.
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ARTICLE II
DELIVERY OF MORTGAGE LOAN FILES SERVICING STANDARDS
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Section 2.1 Transfer of Mortgage Loan Files (Reserved for Future Use)
---------------------------------------------------------
Section 2.2 Agreement to Service Mortgage Loans
-----------------------------------
(a) Servicer agrees to service and administer the Mortgage Loans on the
Owner's behalf, in accordance with the terms of this Agreement, the Mortgage
Loans and Accepted Servicing Practices, giving due consideration to customary
and usual standards of practice of prudent institutional residential mortgage
loan servicers of comparable Mortgage Loans and with a view to the maximization
of timely recovery of principal and interest on the Mortgage Loans, but without
regard to: (i) any relationship that Servicer or any of its affiliates may have
with any Borrower or affiliate or manager thereof, (ii) Servicer's obligations
to make advances or to incur servicing expenses with respect to the Mortgage
Loans, or (iii) Servicer's right to receive compensation for its services
hereunder.
(b) Subject to the provisions of Section 2.2(a), above. Servicer shall
have full power and authority to do or cause to be done any and all things in
connection with such servicing and administration which Servicer may deem
necessary or desirable. In accordance with this Agreement, the Owner will
provide Servicer upon request with any powers of attorney necessary to undertake
the duties of Servicer. Servicer agrees to use its best efforts to service and
administer the Mortgage Loans in accordance with applicable state and federal
law.
(c) Without limiting the generality of the foregoing, the Servicer shall
and is hereby authorized and empowered by the Owner to: (i) execute and deliver,
on behalf of the Owner, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, with respect to the Mortgage Loans
and with respect to the related Mortgaged Property, (ii) consent to any
modification of the terms of the Note if the effect of any such modification
will not materially or adversely affect the security afforded by the related
Mortgaged Property, (iii) institute foreclosure proceedings or obtain a deed-in-
lieu of foreclosure on behalf of the Owner, and (iv) take title in the name of
the Owner to any Mortgaged Property upon such foreclosure or delivery of deed in
lieu of foreclosure.
Section 2.3 Sub-Servicers
-------------
The Servicer may, with prior written approval from Preferred Mortgage
Corporation, perform its servicing responsibilities through agents or
independent contractors acting as sub-servicers, but shall not thereby be
released from any of its responsibilities hereunder, and the Servicer shall
diligently pursue all of its rights against such sub-servicer. Notwithstanding
any agreement with a sub-servicer, any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and a sub-servicer
or reference to actions taken through a sub-servicer or otherwise, the Servicer
shall remain obligated and liable to the Owner For the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
agreement without diminution of such obligation or liability by virtue of such
Sub-Servicing
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Agreements or arrangements or by virtue of indemnification from the sub-servicer
for any acts and omissions and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Mortgage Loans and any other transactions or services relating to the Mortgage
Loans involving the sub-servicer shall be deemed to be between the sub-servicer
and the Servicer alone and the Owner shall have no obligations, duties or
liabilities with respect to the sub-servicer including no obligation, duty or
liability of the Owner to pay sub-servicer's fees and expenses. For purposes of
this Agreement, the Servicer shall be deemed to have received payments on
Mortgage Loans when the sub-servicer has received such payments. The Servicer
shall pay all fees and expenses of the sub-servicer from its own funds, the
Servicing Fee or other amounts permitted to be retained by or reimbursed to the
Servicer hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1 Representations and Warranties of the Servicer
----------------------------------------------
Servicer represents and warrants to, and covenants with, the Owner that:
(a) Servicer is, and throughout the term of this Agreement will remain (i)
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and (ii) duly qualified and in good standing to
transact any and all of its business, including the duties under this Agreement;
(b) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and the execution and delivery
of this Agreement by Servicer in the manner contemplated and the performance of
and compliance with the terms will not violate, contravene or create a default
under any applicable federal, state or local laws, licenses or permits;
(c) The execution and delivery of this Agreement by Servicer and the
performance of and compliance with its obligations and covenants do not require
the consent or approval of any governmental authority or, if such consent or
approval is required, it has been or will be obtained prior to such becoming
required;
(d) Assuming the due authorization and valid execution and delivery of this
Agreement by Owner, this Agreement, when executed and delivered by Servicer,
will constitute a valid, legal and binding obligation of Servicer, enforceable
against Servicer in accordance with its terms, except as the enforcement thereof
may be limited by applicable debtor relief laws and except as certain equitable
remedies may not be available regardless of whether enforcement is sought in
equity or law; and
(e) There is no litigation pending or, to Servicer's knowledge threatened,
which, if determined adversely to Servicer, would adversely affect the
execution, delivery or enforceability of this Agreement or Servicer's ability to
perform its obligations hereunder.
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Section 3.2 Representations and Warranties of the Owner
-------------------------------------------
As of the date of this Agreement and each Transfer Date. Owner represents
and warrants to, and covenants with, the Servicer that:
(a) The Owner owns, without limitation, (i) all right, title and interest
in the Mortgage Loans (including, without limitation, the security interest
created thereby), (ii) all the fights as a lender under any Insurance Policy
relating to a Mortgaged Property securing a Mortgage Loan for the benefit of the
owner of such Mortgage Loan, and (iii) all proceeds derived from any of the
foregoing;
(b) Owner is, and throughout the term of this Agreement will remain (1) a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporations and (ii) duly qualified and in good standing
to transact any and all of its business;
(c) The execution, delivery and performance of this Agreement have been
duty authorized by all necessary corporate action and the execution and delivery
of this Agreement by Owner in the manner contemplated and the performance of and
compliance with the terms hereof by it will not violate, contravene or create a
default under any charter document or bylaw of the Owner or any contract,
agreement, or instrument to which the Owner is a party or by which Owner or any
of its property is bound;
(d) The execution and delivery of this Agreement by Owner and the
performance of and compliance with its obligations and covenants do not require
the consent or approval of any governmental authority or, if such consent or
approval is required, it has been or will be obtained prior to such becoming
required;
(e) Assuming the due authorization and valid execution and delivery of this
Agreement by Servicer, this Agreement, when executed and delivered by Owner,
will constitute a valid, legal and binding obligation of Owner, enforceable
against Owner in accordance with its terms, except as the enforcement may be
limited by applicable debtor relief laws and except as certain equitable
remedies may not be available regardless of whether enforcement is sought in
equity or law;
(f) There is no litigation pending or, to Owner's knowledge, threatened,
which, if determined adversely by Owner, would adversely affect the execution,
delivery or enforceability of this Agreement or Owner's ability to perform its
obligations;
(g) Owner holds legal right, title and interest to the Mortgage Loans and
no other party has the right to collect payments with respect thereto and the
Owner has the full power and authority to assign the servicing functions to
Servicer;
(h) All information provided to Servicer by Owners, including any copies of
Mortgage Loan Documents, information relating to the origination of such
Mortgage Loan, the prior servicing experience and any and all of the Mortgage
Loan balances and identification of
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any litigation affecting a contract or the servicing thereof is true, correct
and complete in all material respects;
(i) The information set forth in each Mortgage Loan Schedule is true and
correct in all material respects as of each Transfer Date;
(j) Each Security Instrument is a valid lien on the related Mortgaged
Property;
(k) To the Owner's best knowledge, no Mortgage Loan is subject to any
offset, defense or counterclaim;
(l) To the Owner's best knowledge, the physical property subject to each
Security instrument is free of material damage;
(m) Each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws and regulations, including,
without limitation, usury, equal credit opportunity and disclosure laws and
regulations;
(n) The Owner has not received a written notice of default of any senior
mortgage loan related to a Mortgage Loan which has not been cured by a party
other than such Owner;
(o) To the Owner's best knowledge, no Mortgage Loan is subject to (i) any
mechanics lien or claim for work, labor or material of which the Owner has
received written notice and that is or may be a lien prior to, or equal or
coordinate with, the lien of the related Security Instrument, (it) any
delinquent tax or assessment lien against the related Mortgage Loan;
(p) A lender's title insurance policy or binder, or title report in case of
sound mortgage loans or other assurance of title customary in the relevant
jurisdiction, is in full force and effect with respect to each Mortgage Loan;
(q) Each Mortgage Loan is covered by appropriate Hazard Insurance,
ARTICLE IV
ACCOUNTING AND REPORTING
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Section 4.1 Collection of Mortgage Loan Payments
------------------------------------
(a) Continuously from the date hereof until the principal and interest on
the Mortgage Loans is paid in full, Servicer agrees to proceed diligently to
collect all payments called for under the terms and provisions of the Mortgage
Loans, and shall follow such collection procedures with respect to mortgage
loans comparable to the Mortgage Loans held in its own portfolio, to the extent
such procedures are consistent with this Agreement and the terms of any
Insurance Policy and in accordance with Accepted Servicing Practices.
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(b) The Servicer may in its sole discretion (i) waive late payment charges,
assumption fees, charges for checks returned insufficient funds or other fees
which may be collected in the ordinary course of servicing the Mortgage Loans,
(ii) if a Borrower is in default (as defined in the Mortgage Loan), arrange with
the Borrower a schedule for the payment of delinquent payments due on the
related Mortgage Loan.
Section 4.2 Interest Calculations
---------------------
Monthly interest calculations for periods of a full month must be based on
a 30-day month and 360-day year, if permitted by the Note or by the law.
Interest calculations for periods of less than a full month (such as for a
Liquidation) must be calculated on the basis of actual days elapsed in a month
and a 365-day year unless otherwise provided by applicable federal or state law.
Section 4.3 Application of Mortgage Loan Payments
-------------------------------------
A payment from the Borrower will normally consist of interest, principal,
deposits for insurance and taxes and late charges, if applicable. Payments
received from Borrowers shall be applied in the following order unless otherwise
required by, the Mortgage Loan Documents, applicable state and federal
requirements or by a Mortgage Insurer:
(a) Deposits for taxes and insurance; and
(b) Required monthly interest; and
(c) Required monthly principal; and
(d) All other fees or penalties.
Section 4.4 Establishment of Collection Account; Deposits in Collection Account
-------------------------------------------------------------------
(a) The Servicer shall establish and maintain a Collection Account, (the
"Collection Account"), in the form of a time deposit or demand account, which
may be interest bearing, titled "Advanta Mortgage Corp. USA" in trust for the
Owner. Such Collection Account shall be established with a commercial bank, a
savings bank or a savings and loan association by the Servicer.
(b) The Servicer shall deposit in the Collection Account within two (2)
Business Days of receipt, and retain therein the following payments and
collections received or made with respect to the Mortgage Loans:
(i) all principal collections, including Principal Prepayments;
(ii) all interest collections;
(iii) all Liquidation Proceeds net of expenses;
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(iv) all proceeds received by the Servicer under any Insurance Policy,
other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Borrower in
accordance with Accepted Servicing Procedures; and
(v) all awards or settlements in respect of condemnation proceedings
or eminent domain affecting any Mortgaged Property which are not released to the
Borrower in accordance with Accepted Servicing Practices.
(c) The Servicer may invest all or a portion of the funds in the Collection
Account in Permitted Investments in the name of the Servicer. The Servicer
shall receive as Additional Servicing Compensation all income and gain realized
from any such Permitted Investment. If any principal losses are incurred in
respect of any Permitted Investments, Servicer shall reimburse and restore to
the Collection Account the amount of any such principal losses out of Servicer's
own funds immediately as realized Notwithstanding the foregoing, Servicer's
right to invest funds in the Collection Account shall in no way limit the rights
of Servicer to be compensated for its services as provided in this Agreement.
(d) The requirements in this Section 4.4 for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges, assumption processing charges, modification charges, demand fees,
insufficient funds fees and reconveyance fees need not be deposited by the
Servicer in the Collection Account.
Section 4.5 Withdrawals from the Collection Account
---------------------------------------
The Servicer shall, from time to time, withdraw funds from the Collection
Account for the following purposes:
(a) to reimburse itself for unreimbursed Servicing Advances, and for
accrued and unpaid Servicing Fees, the Servicer's right to reimburse itself
pursuant to this subclause (a) with respect to any Mortgage Loan being limited
to related Liquidation Proceeds, condemnation proceeds, REO Disposition
Proceeds, amounts representing proceeds of any Insurance Policy related to a
Mortgage Loan and such other amounts as may be collected by the Servicer from
the Borrower or otherwise relating to the Mortgage Loan, it being understood
that, in the case of any such reimbursement, the Servicer's right thereto shall
be prior to the rights of Owner;
(b) to reimburse itself for expenses incurred by and reimbursable to it
pursuant to Sections 4.10 and 6.7;
(c) to pay to itself any interest earned on funds deposited in the
Collection Account;
(d) to withdraw any amounts inadvertently deposited in the Collection
Account or not required to be deposited therein;
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(e) to make payments to the Owner in the amounts and in the manner provided
herein; and
(f) to clear and terminate the Collection Account upon the termination of
this Agreement.
If after receipt and application of Liquidation Proceeds in accordance with
the foregoing, the Servicer has sustained an unrecovered loss in connection with
a Servicing Advance, the amount of unrecovered loss shall be reimbursed to the
Servicer, first, from amounts in the Collation Account, or if such funds are
insufficient, by payment to the Servicer by the Owner within ten (10) Business
Days of the receipt of notice by such Owner of such amount.
The Servicer shall distribute that portion of collections on the Mortgage
Loans due to the Owner in the amounts and in the manner provided herein on each
Remittance Date.
Section 4.6 Establishment of Escrow Account; Deposits in Escrow Account
-----------------------------------------------------------
(a) The Servicer shall establish and maintain an Escrow Account, in the
form of a time deposit or demand account, which may be interest bearing, titled,
with respect to Escrow Payments actually held by the Servicer, "Advanta Mortgage
Corp. USA in trust for Borrower's Escrow Payments". Such Escrow Account shall
be established with a commercial bank, a savings bank or a savings and loan
association. The Escrow Account shall be drawable upon by the Servicer as
provided herein.
(b) The Servicer shall deposit in the Escrow Account within two (2)
Business Days of receipt or earlier if so required by law and retain therein:
(i) all Escrow Payments collected on account of the Mortgage Loans, for the
purpose of offering timely payment of any such items as required under the terms
of this Agreement, and (ii) all amounts representing proceeds of any Insurance
Policy which are to be applied to the restoration or repair of any Mortgaged
Property. To the extent required by law, the Servicer shall pay interest on
escrowed funds to the Borrower notwithstanding that the Escrow Account may not
bear interest.
(c) The Servicer may invest the funds in an Escrow Account in Permitted
Investments which shall be in the name of the Servicer in the trust capacity in
which the related Escrow Account is held or its nominee. The Servicer shall
receive as Additional Servicing Compensation an amount equal to all income and
gain realized from any such Permitted Investment, but only to the extent such
gain to Servicer is (i) not prohibited by applicable law and (ii) in excess of
amounts necessary to make any interest payments required by the Mortgage Loan
Documents or applicable law to be made to the applicable Borrower. If any
losses are incurred in respect of any Permitted Investments, Servicer shall
immediately reimburse and restore to the applicable Escrow Account the amount of
any such losses out of Servicer's own funds as realized. Notwithstanding the
foregoing, Servicer's right to invest funds in the Collection Account shall in
no way limit the fights of Servicer to be compensated for its services as
provided in this Agreement.
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Section 4.7 Withdrawals From Escrow Account
-------------------------------
Withdrawals from the Escrow Account shall be made by the Servicer, only
(a) to effect timely payment of taxes, mortgage insurance premiums, flood,
fire and hazard insurance premiums or other items constituting Escrow Payments
for the related Mortgage Loan;
(b) to reimburse the Services for any Servicing Advance made by the
Servicer to effect the payment of taxes or insurance required under the terms of
the related Mortgage Loan, but only from amounts received on the related
Mortgage Loan which represent late payments or collections of Escrow Payments
thereunder;
(c) to refund to any Borrower any funds found to be in excess of the
amounts required under the terms of the related Mortgage Loan;
(d) for application to restoration or repair of the Mortgaged Property;
(e) to pay to the Borrower, to the extent required by law, any interest
paid on the funds deposited in the Escrow Account;
(f) to pay to itself any interest earned on funds deposited in the Escrow
Account;
(g) to remove any deposits made in error; or
(h) to clear and terminate the Escrow Account upon termination of this
Agreement.
Section 4.8 Servicing Advances
------------------
As required, Servicer agrees to make Servicing Advances for the
preservation of any Mortgaged Property, including the payment of accrued and
unpaid taxes, forced placed hazard insurance, repayment of senior liens. It is
understood that Servicer's obligation to make such Servicing Advances shall
continue until (i) the payment in full of the Mortgage Loan or (ii) the date on
which the Mortgaged Property is liquidated; provided, however, Servicer shall
have no obligation to make Servicing Advances if, in the sole determination of
Servicer, such Servicing Advance would constitute a Nonrecoverable Advance.
Section 4.9 Monthly Remittance Reports
--------------------------
(a) The Servicer shall service the Mortgage Loans on an actual/actual
remittance basis with the accounting cutoff with respect to each Remittance Date
of the last day of the month immediately preceding such Remittance Date.
(b) Not later than the fifteenth (15th) day of each calendar month, or the
succeeding business day should the fifteenth not be a business day, the Servicer
shall prepare and deliver the following reports with respect to activity for the
most recently ended prior calendar month:
15
(i) a trial balance report including all Mortgage Loans;
(ii) a monthly remittance report, including an itemization of any fee
withholdings and/or recoveries of servicing advances from the related
remittance:
(iii) a report setting forth any Mortgage Loans added or deleted;
(iv) a report setting forth curtailment or prepayments; and
(v) reports setting forth delinquency detail (including bankruptcy,
foreclosure and REO status).
Section 4.10 Servicing Compensation
----------------------
(a) As compensation for its activities hereunder, the Servicer shall be
entitled to retain as to each Mortgage Loan, a Servicing Fee of .55% (55 basis
points) per annum which shall be retained by Servicer from the interest portion
of the Mortgage Loan payments as received from a Borrower and from Liquidation
Proceeds, as applicable.
(b) Servicer shall be entitled to retain the Additional Servicing
Compensation.
(c) In addition, Owner shall pay Servicer a set-up fee of $15.00 per
Mortgage Loan for each Mortgage Loan transferred to Servicer and serviced
hereunder. Additionally, not later than the twenty-fifth (25th) day of each
calendar month or the succeeding business day should the twenty-fifth not be a
business day, the Servicer shall deliver a bank statement reconciliation of the
Collection Account for the related remittance period.
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 5.1 Enforcement of Due-On-Sale Clause; Assumption
---------------------------------------------
The Servicer is required to enforce any due-on-sale clause in the Note or
Security Instrument to the extent permitted by applicable law upon the transfer
of title to the Mortgaged Property unless (i) the Mortgage Loan Documents,
including riders or addenda permit such a transfer, or (ii) enforcement of the
due-on-sale clause will jeopardize the Mortgage Insurance coverage, if any, on
such Mortgage Loan, In all circumstances of unapproved transfer initiated by the
Borrower, the Servicer is required to promptly notify the Mortgage Insurer of
such transfer and obtain written approval from the Mortgage Insurer (if required
under the applicable Mortgage Insurance Policy) before initiating enforcement
proceedings.
Notwithstanding the preceding paragraph, Owner authorizes Servicer, to
waive, in the sole discretion of Servicer, the enforcement of a due-on-sale
clause on any Mortgage Loan and permit the assumption of such Mortgage Loan,
subject to the following conditions:
16
(a) No material term of the Note, including, but not limited to, the rate
of interest on the Note and the remaining term to maturity, may be changed in
connection with such assumption, provided however, such limitation shall not
apply to interest rate, payment or amortization chances otherwise provided for
under the terms of the Note, such as in the case of an adjustable rate mortgage;
(b) The Servicer has performed a credit review of the new borrower and
determined that the new borrower is a prudent credit risk in the sole opinion of
the Servicer. Owner hereby authorizes, Servicer to apply more liberal credit
standards and underwriting in connection with a request for an assumption of a
Mortgage Loan than Servicer would apply for comparable new loans which
Servicer's is then originating for its own account, if Servicer in its sole
discretion, reasonably believes there is a risk of foreclosure on the Mortgage
Loan in the event the assumption is denied;
(c) The Mortgage Insurer has approved in writing the assumption of the
Mortgage Loan by the new borrower and such Mortgage Loan will continue to be
insured by such Mortgage Insurer;
(d) The new borrower executes documents assuming all the obligations of the
Borrower under the Mortgage Loan Documents;
(e) The Mortgage Loan will continue to be secured, and insured with a Title
Insurance Policy, if any, by a valid security interest upon the Mortgaged
Property of the same lien priority as existed immediately prior to such
assumption; provided however, if Servicer has not been delivered a Title
Insurance Policy on the Transfer Date for any such Mortgage Loan, Servicer shall
have no obligation to inquire into or obtain any title insurance in connection
with any assumption of such a Mortgage Loan; and
(f) The Servicer has determined that the estimated net realizable value of
the Mortgaged Property, in the sole judgment of the Servicer is less than the
then unpaid principal balance of the related Note, plus accrued interest to the
estimated date of the closing of the sale of Mortgaged Property to the new
borrower.
(g) The Servicer shall provide the Owner the original assumption agreement
following execution thereof.
Subject to the terms of the Note and Security Instrument, and applicable
law or regulation, the Servicer may charge a reasonable and customary assumption
fee, and the Servicer may retain such fee as Additional Servicing Compensation.
Section 5.2 Maintenance of Insurance
------------------------
(a) The Servicer shall cause to be maintained with respect to each Mortgage
Loan a Hazard Insurance Policy with a generally acceptable carrier that provides
for fire and extended coverage, and for a recovery of any insurance proceeds
relating to such Mortgage Loan by the Servicer on behalf of the Owner.
17
(b) If the Mortgage Loan relates to a Mortgaged Property identified at
origination in the Federal Register by the Federal Emergency Management Agency
as having a special flood hazard, the Servicer will cause to be maintained with
respect thereto a Flood Insurance Policy with a generally acceptable carrier
which provides for a recovery of any insurance proceeds relating to such
Mortgage Loan by the Servicer on behalf of the Owner.
(c) With respect to each Mortgage Loan that provides for the collection of
escrow funds for the payment of fire and hazard insurance or flood insurance,
the Servicer shall effect the payment thereof prior to the applicable policy
termination date employing for such purpose deposits in the Escrow Account which
shall have been estimated and accumulated by the Servicer in the amounts
sufficient for such purposes. To the extent a Mortgage Loan does not provide
for escrow payments and the Borrower fails to maintain any required insurance
coverage, the Servicer shall by a Servicing Advance make the payment required to
effect the applicable in-force policy for the related Mortgaged Property.
(d) Notwithstanding the proceeding paragraphs, the Servicer at its option
may obtain and maintain, with respect to all or any portion of the Mortgage
Loans a blanket insurance policy with emended coverage insuring against fire,
hazard and flood, as applicable. The Servicer shall be deemed conclusively to
have satisfied its obligations with respect to Hazard Insurance and Flood
Insurance coverage under this Section if such blanket policy names the Servicer
as "Loss Payee" and provides coverage in an amount equal to the aggregate unpaid
principal balance of the Mortgage Loans without co-insurance,
Section 5.3 Cancellation of Mortgage Insurance
----------------------------------
If a Borrower requests cancellation of the Mortgage Insurance Policy, the
Servicer shall ensure that the FNMA guidelines governing cancellation are
followed in connection with any cancellation.
Section 5.4 Reserved For Future Use
-----------------------
Section 5.5 Liquidation of Defaulted Mortgage Loans
---------------------------------------
(a) The Servicer, on behalf of the Owner, shall foreclose upon or otherwise
take title, in the name of Owner, to Mortgaged Property (such as by a deed in
lieu of foreclosure) for any Mortgage Loan which is in default and as to which
no satisfactory arrangements, in the sole reasonable opinion of Servicer, can be
made for collection of delinquent payments. In connection with such foreclosure
or other transfer of title, the Servicer shall exercise the rights and powers
vested in it hereunder, and use the same degree of care and skill in such
exercise or use, as prudent servicers would exercise or use under similar
circumstances in the conduct of their own affairs, including, but not limited
to, making Servicing Advances for the payment of taxes, amounts due with respect
to senior liens, and insurance premiums.
(b) In determining whether or not to foreclose upon or otherwise comparably
transfer title to such Mortgaged Property, the Servicer shall take into account
the existence of any condition upon or impacting the Mortgaged Property in the
nature of hazardous substances,
18
hazardous wastes, infectious waste, toxic substance, solid wastes and so forth,
as such terms now or in the future are defined or listed in, or otherwise
classified pursuant to, or regulated by, any applicable Environmental Laws,
including but not limited to all present and future federal, state or local
laws, ordinances, rules, regulations, decisions and other requirements of
governmental authorities relating to the environment or to any Hazardous
Substance.
Section 5.6 Deed-in-Lieu of Foreclosure
---------------------------
If the Owner and, if applicable, the Mortgage Insurer have approved the
liquidation of a Mortgage Loan by accepting a deed-in-lieu of foreclosure, the
Servicer may accept such deed provided that:
(a) Marketable title, as evidenced by a Title Insurance Policy, can be
conveyed to and acquired by the Owner or its designee;
(b) The transaction complies with all requirements of each Mortgage
Insurer, if any, and does not and will not violate or contravene any restriction
or prohibition of any Mortgage Insurance Policy, if any, or otherwise result in
any loss of or reduction in the coverage of benefits under such policies;
(c) No cash consideration is paid to the Borrower;
(d) The Mortgaged Properties are vacant at the time of the Borrower's
conveyance thereof, unless occupancy has been approved by each Mortgage Insurer,
if any; and
(e) The Servicer has obtained from the Borrower a written acknowledgment
that the deed is being accepted as an accommodation to the Borrower and on the
condition that the Mortgaged Properties will be transferred to the Owner that
owns such Mortgage Loan free and clear of all claims, liens, encumbrances,
attachments, reservations or restrictions except for those to which the
Mortgaged Properties were subject at the time the Mortgaged Properties became
subject to the lien of the Security Instrument.
Upon acquisition of the Mortgaged Properties, the Servicer shall promptly
advise the Owner and each Mortgage Insurer by letter, indicating the details of
the transaction and reasons for the conveyance and providing such other
information as is required by each Mortgage Insurer. Title shall be conveyed
directly from the Borrower to the Owner, or to such other Person designated by
the Owner.
Section 5.7 Real Estate Owned
-----------------
Title, Management and Disposition of REO Property. In the event that title
-------------------------------------------------
to the Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be taken in the name of the
Owner. The Owner agrees to cooperate with Servicer and take such actions as
shall be necessary for the Servicer to take title to the Mortgaged Property in
the name of the Owner.
19
Notwithstanding the generality of the foregoing provisions, the Servicer
shall manage, conserve, protect and operate each REO Property for the Owners
solely for the purpose of its prompt disposition and sale. Pursuant to its
efforts to sell such REO Property, the Servicer shall either itself or through
an agent selected by the Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, but shall not be obligated to, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof as the Servicer deems to be in the best interests of the Owners
for the period prior to the sale of such REO Property. The Servicer shall
attempt to sell the same on such terms and conditions as the Servicer deems to
be in the best interest of the Owner.
The Servicer shall cause to be deposited within two (2) Business Days of
receipt in the Collection Account all revenues received with respect to the
conservation and disposition of each REO Property and shall be permitted to
retain from such revenues funds necessary for the proper operation, management
and maintenance of the REO Property, including reimbursement for its Servicing
Advances and fees of any managing agent acting on behalf of the Servicer.
Possession of Mortgage Files by Servicer. From time to time in connection
----------------------------------------
with the servicing of the Mortgage Loans hereunder, the Servicer may take
possession of all or a portion of the documents relating to the Mortgage Loans
as may be held by the Owner or the Custodian. Such documents shall be held in
trust by the Servicer for the benefit of the Owner as the owner thereof and the
Servicer's possession of such document or documents is at the will of the Owner
for the sole purpose of servicing the related Mortgage Loan, and such retention
and possession by the Servicer is in a custodial capacity only.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
Section 6.1 Owner to Cooperate
------------------
From time to time and as appropriate in the servicing of any Mortgage Loan,
including without limitation, the payment in full of any Mortgage Loan,
notification that payment in full will be escrowed, foreclosure or other
comparable conversion of a Mortgage or collection under any applicable Insurance
Policy, the Owner, upon request of the Servicer shall release or cause the
release and delivery of the related Mortgage Loan Documents to the Servicer.
Section 6.2 Assignment of Agreement
-----------------------
Servicer agrees not to sell, transfer, pledge or otherwise dispose of its
right to receive all or any portion of the Servicing Fees, and any such
attempted sale, transfer, pledge or disposition shall be void, unless such
transfer is made to a successor servicer with the prior written consent of the
Owner.
20
Section 6.3 Access to Certain Documentation Regarding the Loans
---------------------------------------------------
Upon reasonable advance notice, Servicer shall provide reasonable access
during normal business hours at its offices to the Owner, or any agents or
representatives thereof, to any reports and to information and documentation
regarding the Mortgage Loans.
Section 6.4 Default By Servicer
-------------------
Owner may terminate this Agreement upon the happening of any one or more of
the following events:
(a) Falsity in any material respect of any representation of warranty of
Servicer contained in this Agreement and failure of Servicer to cure the
condition or event causing any such representation or warranty to be false
within sixty (60) clays after the Servicer's receipt of written notice from
Owner specifying such falsity and requesting that it be cured or corrected;
(b) Failure of Servicer to duly observe or perform in any material respect
any other covenant, condition, or agreement in this Agreement for a period of
sixty (60) days after receipt of written notice by Servicer from Owner,
specifying such failure and requesting that it be remedied; provided, however,
if the failure stated in the notice cannot be corrected within the applicable
period, Owner and Servicer shall mutually agree to a reasonable extension of
time if corrective action is instituted by Servicer within the applicable period
and is diligently pursued until corrected;
(c) Decree or order of a court, agency or supervisory authority having
jurisdiction in the premises appointing a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceeding affecting Servicer or any of its properties
utilized in connection with the performance of servicing, or for resolving the
liquidation of the affairs of Servicer, if such decree or order shall have
remained in force undischarged or unstayed for a period of ninety (90) days;
(d) Commencement by Servicer as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law;
(e) Consent by Servicer to the appointment of a trustee, conservator,
receiver or liquidator in any insolvent, readjustment of debt, marshaling of
assets and liabilities, or similar proceeding affecting Servicer or
substantially all of its properties; or
(f) Admission in writing by Servicer of its inability to pay debts
generally as they mature, or the making of an assignment for the benefit of
creditors,
If any of the events specified in (c) through (f) above shall occur,
Servicer shall give written notice of such occurrence to Owner within ten (10)
days of the happening of such event, Any such termination shall be effective as
of the date stated in a written notice delivered to Servicer.
21
Section 6.5 Default by Owner
----------------
Servicer may terminate this Agreement upon the happening of any one or more
of the following events:
(a) Falsity in any material respect of any representation or warranty of
Owner contained in this Agreement and failure of Owner to cure the condition or
event causing such representation or warranty to be false within sixty (60) days
after Owner's receipt of written notice from Servicer specifying such falsity
and requesting that it be cured or corrected;
(b) Such other breach of this Agreement by Owner which materially and
adversely affects Servicer, which breach shall continue for a period of sixty
(60) days after receipt of written notice by Owner from Servicer, specifying
such breach and requesting that it be remedied; provided, however, if the breach
stated in the notice cannot be remedied within the applicable period, Servicer
shall consent to a reasonable extension of time if corrective action is
instituted by owner within the applicable period and is diligently pursued until
corrected;
(c) Decree or order of a court, agency or supervisory authority having
jurisdiction in the premises appointing a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceeding affecting Owner or any of its properties
utilized in connection with the performance of Services duties hereunder, or the
winding up or liquidation or the affairs of Owner, if such decree or order shall
have remained in force undischarged or unstayed for a period of ninety (90)
days;
(d) Commencement by Owner as debtor of any case of proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law;
(e) Consent by Owner to the appointment of a trustee, conservator, receiver
or liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceeding affecting Owner or substantially all of its
properties; or
(f) Admission in writing by Owner of its inability to pay debts generally
as they mature, or the making of an assignment for the benefit of creditors.
If any of the events specified in (c) through (f) above shall occur, Owner
shall give written notice of such occurrence to Servicer within ten (10) days of
the happening of such event. Any such termination shall be effective as of the
date stated in a written notice delivered to Owner.
Section 6.6 Reserved for Future Use
-----------------------
Section 6.7 Indemnification by Owner
------------------------
Owner shall indemnify and hold Servicer harmless from and shall reimburse
Servicer for any losses, damages, deficiencies, claims, penalties, forfeitures,
causes of action or expenses of
22
any nature (including reasonable attorneys' fees) incurred by Servicer which
arise out of or result from:
(a) The inaccuracy of any representation of Owner contained in this
Agreement or material breach of any warranty, covenant or agreement made or to
be performed by Owner pursuant to this Agreement;
(b) the failure of the originator of any Mortgage Loan to originate such
Mortgage Loan in accordance with applicable law;
(c) the failure of any prior servicer to service the Mortgage Loan in
accordance with any applicable law;
(d) any matters that occurred prior to the Transfer Date for the Mortgage
Loan involved or any incomplete or incorrect Mortgage Loan data, records or
information provided in connection with the origination or prior servicing of
any Mortgage Loan;
(e) Owner's failure to fulfill the Servicing responsibilities not assumed
by Servicer of otherwise result from Owner preventing, hampering or impeding
Servicer's performance of its duties and responsibilities under this Agreement;
or
(f) Any litigation or claim with respect to the Mortgage Loans not arising
out of, or resulting from, Servicer's failure to observe the terms and covenants
of the Mortgage Loans or this Agreement including specifically any litigation
relating to ARM Loans.
The Servicer shall promptly notify the Owner if a claim is made by a third
party with respect to this Agreement or the Mortgage Loans, and the Servicer at
its option may assume the defense of any such claim. The Owner shall, within
ten (10) Business Days of receiving a statement of amounts advanced by the
Servicer in connection with the defense of any such claim, reimburse the
Servicer for all amounts advanced by it pursuant to this Section 6.7, except to
the extent that such claim is not caused by the Servicer's failure to service
the Mortgage Loans in compliance with the terms of this Agreement.
Section 6.8 Fidelity Bond and Errors Omissions
----------------------------------
Servicer agrees to obtain and maintain at its expense and shall keep in
full force and effect throughout the term of this Agreement, a blanket fidelity
bond and an errors and omissions insurance policy covering its officers and
employees and other persons acting on its behalf in connection with the
servicing activities hereunder. The amount of coverage shall be at least equal
to the coverage that prudent mortgage loan servicers having servicing portfolios
of a similar size. In the event that any such bond or policy ceases to be in
effect, Servicer agrees to obtain a comparable replacement bond or policy with
equivalent coverage. No provision of this Section shall operate to diminish or
restrict or otherwise impair the Servicer's responsibilities and obligations set
forth in this Agreement.
23
Section 6.9 Indemnification by Servicer
---------------------------
Servicer shall indemnify and hold Owner harmless from and shall reimburse
Owner for any losses, damages, deficiencies, claims, causes of action or
expenses of any nature (including reasonable attorneys' fees) incurred by Owner
which arise out of or result from:
(a) The inaccuracy of any representation of Servicer contained in this
Agreement or material breach of any warranty, covenant or agreement made or to
be performed by Servicer pursuant to this Agreement;
(b) Any litigation or claim arising out of, or resulting from, Servicer's
failure to observe the terms and covenants of this Agreement.
(c) The failure of the Servicer to service such Mortgage Loan in accordance
with applicable law.
Section 6.10 Amendment
---------
This Agreement may be amended from time to time by the Owner and the
Servicer by written Agreement signed by the Owner and the Service.
Section 6.11 Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the State
of California, without regard to the conflict of laws or rules thereof, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Section 6.12 Notices
-------
(a) All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail, postage prepaid, to (i) in case of the Servicer, Advanta
Mortgage Corp. USA, 00000 Xxxx Xxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
Attention: SVP Loan Servicing and (ii) in the case of the Owner, Preferred
Mortgage Corporation, 00000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, XX 00000.
Attention: Xx-Xxx Ko, CFO, or such other addressee as the Owner or the Servicer
may hereafter furnish.
(b) Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Paragraph for giving of notice.
Section 6.13 Severability of Provisions
--------------------------
If any one or more of the covenants, agreements, provision or terms of this
Agreement shall be held invalid for any reason whatsoever, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants. agreements, provisions and
24
terms of this Agreement and shall in no way affect the validity or
enforceability of the provisions of this Agreement.
Section 6.14 Document Deficiencies
---------------------
The Servicer shall have no obligations to (i) address or any deficiencies
in Mortgage Loan documents transferred to it, (ii) seek any document missing
from any assignments relating to the transfer of any Mortgage Loan to or from
the Owner. The Servicer's responsibility is solely limited to notifying the
Owner as to any missing or document deficiency it becomes aware of.
Section 6.15 Termination
-----------
(a) The obligations and responsibilities of the Servicer shall terminate
upon the latter of (i) the final payment or other liquidation of the last
Mortgage Loan or (ii) the disposition of all property acquired upon possession
of any Mortgage Loan and the remittance of all funds due thereunder.
(b) Either Owner or Servicer may, at any time and in its sole discretion,
terminate this Agreement upon at least 90 days prior written notice to other
party; provided if the Owner terminates this Agreement, Owner shall pay the
Servicer a termination fee of 1% of the aggregate principal balances of the
Mortgage Loans as of the last day of the related remittance period. If Servicer
terminates this Agreement it shall be liable to pay all reasonable costs
associated with the transfer of Mortgage Loans to Successor Servicer. Such
termination fee shall not be payable as to any Mortgage Loan transferred into a
securitization trust provided Servicer continues to service any such loan.
(c) If Owner transfers servicing of any amount of the Mortgage Loans to
another servicer within six months of the applicable Transfer Date of any such
Mortgage Loan, Owner shall pay to Servicer $100.00 per Mortgage Loan
transferred.
Section 6.16 Attorneys' Fees
---------------
In the event any party hereto brings an action to enforce any of the
provisions of this Agreement, the party against whom judgment is rendered in
such action shall be liable to the others for reimbursement of their costs,
expenses and attorneys' fees, including such costs, expresses and fees as may be
incurred on appeal.
Section 6.17 No Solicitation
---------------
Unless specifically permitted by the Owner in advance, the Servicer agrees
not to use Servicer's records to specifically solicit any Borrower with respect
to the refinancing of a Mortgage Loan, insurance or otherwise.
25
Section 6.18 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one and same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers, all as of the day and year first above
mentioned.
Advanta Mortgage Corp. USA Preferred Mortgage Corporation
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxx Xxxxxxxxx
---------------------- ------------------
Name: Xxxxxxx X. Xxxxxxx Name: Xxxx Xxxxxxxxx
------------------
Title: Senior Vice President Title: CEO
------------------
26
EXHIBIT A
Mortgage Loan Schedule
----------------------
=======================================================================================================
Loan No. Borrower Original Current Interest Interest Next Monthly Escrow
Principal Principal Rate Paid to Due Payment Account
Amount Balance Date Date Amount
========================================================================================================
As of the below designated Transfer Date, the undersigned, Owner,
(a) hereby certifies that the information concerning each Mortgage Loan on
the within Mortgage Loan Schedule is true, accurate and complete, and
(b) hereby reaffirms all of its warranties and representations contained in
that certain Loan Servicing Agreement dated as of _____________________, 19__,
by and between the undersigned Owner and Advanta Mortgage Corp. USA, such
representations and warranties are incorporated heroin by this reference.
Owner: _______[insert name]_______
Transfer Date: ____________________ ____________________________________
By__________________________________
Title_______________________________
EXHIBIT B
Permitted Investments
---------------------
(c) Direct general obligations of the United States or the obligation of
any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(d) Federal Housing Administration debentures.
(e) FHLMC participation certificates and senior debt obligations.
(f) Federal Home Loan Banks consolidated senior debt obligations.
(g) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations.
(h) Federal funds, certificates of deposit, time and demand deposits, and
bankers acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated A-1
or better by SP and P-1 by Xxxxx'x.
(i) Investment agreements approved by the Owner provided:
(i) The agreement is with a bank or insurance Owner which has an
unsecured, uninsured, and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Xxxxx'x and AA or better by SP, or is the
lead bank of a parent bank holding Owner with an uninsured, unsecured and
unguaranteed obligation meeting such rating requirements, and
(ii) Moneys invested thereunder may be withdrawn without any penalty,
premium or charge upon not more than one day's notice (provided such notice
may by amended or canceled at any time prior to the withdrawal date), and
(iii) The agreement is not subordinated to any other obligations of
such insurance Owner or bank, and
(iv) The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
(v) The Owner receives an opinion of counsel that such agreement is an
enforceable obligation of such insurance Owner or bank.
(j) Commercial paper (having original maturities of not more than 365 days)
rated A-1 or better by SP and P-1 or better by Xxxxx'x.
(k) Investments in money market funds rated AAAm or AAAm-G by SP and P-1 by
Xxxxx'x.
(l) Investments approved in writing by the Owner.
Provided that no instrument described above is permitted to evidence either
--------
the right to receive (a) only interest with respect to obligations underlying
such instrument or (b) both principal and interest payments derived from
obligations underlying such instrument and the interest and principal payments
with respect to such instrument provided a yield to maturity at par greater than
120% of the yield to maturity at par of the underlying obligations; and provided
further, that no instrument described above may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
