SALE AND SERVICING AGREEMENT
Dated as of December 1, 1998
Among
IMC HOME EQUITY LOAN OWNER TRUST 1998-7,
as Issuer,
IMC SECURITIES, INC.
as Depositor,
IMC MORTGAGE COMPANY,
as Seller
OCWEN FEDERAL BANK FSB,
as Servicer
and
THE CHASE MANHATTAN BANK
as Indenture Trustee
IMC HOME EQUITY LOAN OWNER TRUST 1998-7
HOME EQUITY LOAN ASSET BACKED NOTES, SERIES 1998-7A AND
HOME EQUITY LOAN ASSET BACKED NOTES, SERIES 1998-7B
CONTENTS
Page
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ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION.......................................................................1
Section 1.01 Definitions............................................................................1
Section 1.02 Use of Words and Phrases..............................................................20
Section 1.03 Captions; Table of Contents...........................................................20
Section 1.04 Opinions..............................................................................20
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE SERVICER AND THE SELLER;
COVENANT OF DEPOSITOR TO CONVEY HOME EQUITY LOANS.......................................................21
Section 2.01 Representations and Warranties of the Depositor.......................................21
Section 2.02 Representations and Warranties of the Servicer........................................23
Section 2.03 Representations and Warranties of the Seller..........................................25
Section 2.04 Covenants of Seller to Take Certain Actions with Respect to the Home
Equity Loans in Certain Situations....................................................28
Section 2.05 Conveyance of the Home Equity Loans and Qualified
Replacement Mortgages.................................................................34
Section 2.06 Acceptance by Indenture Trustee; Certain Substitutions of Home Equity
Loans; Certification by Indenture Trustee.............................................38
Section 2.07 [Reserved]............................................................................39
Section 2.08 Custodian.............................................................................39
Section 2.09 Books and Records.....................................................................40
ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES....................................................................41
Section 3.01 [Reserved.............................................................................41
Section 3.02 Establishment of Accounts.............................................................41
Section 3.03 Flow of Funds.........................................................................41
Section 3.04 Reserve Account.......................................................................43
Section 3.05 Investment of Accounts................................................................44
Section 3.06 Payment of Trust Expenses.............................................................45
Section 3.07 Eligible Investments..................................................................45
Section 3.08 Accounting and Directions by Indenture Trustee........................................46
Section 3.09 Reports by Indenture Trustee to Owners and Note Insurer...............................47
Section 3.10 Reports by Indenture Trustee..........................................................49
ARTICLE IV
SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS....................................................................................50
Section 4.01 Servicer and Sub-Servicers............................................................50
Section 4.02 Collection of Certain Home Equity Loan Payments.......................................51
Section 4.03 Sub-Servicing Agreements..............................................................51
Section 4.04 Successor Sub-Servicers...............................................................52
Section 4.05 Liability of Servicer; Indemnification................................................52
Section 4.06 No Contractual Relationship Between Sub-Servicer, Indenture
Trustee or the Owners.................................................................53
Section 4.07 Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee.....................................................................53
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Section 4.08 Principal and Interest Account........................................................53
Section 4.09 Delinquency Advances and Servicing Advances...........................................55
Section 4.10 Compensating Interest; Repurchase of Home Equity Loans................................55
Section 4.11 Maintenance of Insurance..............................................................56
Section 4.12 Due-on-Sale Clauses; Assumption and Substitution Agreements...........................57
Section 4.13 Realization Upon Defaulted Home Equity Loans; Workout of Home
Equity Loans..........................................................................57
Section 4.14 Indenture Trustee to Cooperate; Release of Files......................................58
Section 4.15 Servicing Compensation................................................................59
Section 4.16 Annual Statement as to Compliance.....................................................59
Section 4.17 Annual Independent Certified Public Accountants' Reports..............................60
Section 4.18 Access to Certain Documentation and Information Regarding the
Home Equity Loans.....................................................................60
Section 4.19 Assignment of Agreement...............................................................60
Section 4.20 Removal of Servicer; Retention of Servicer; Resignation of Servicer...................60
Section 4.21 Inspections by Note Insurer; Errors and Omissions Insurance...........................63
Section 4.22 Additional Servicing Responsibilities for Second Mortgage Loans.......................64
Section 4.23 Adjustable Rate Home Equity Loans.....................................................64
Section 4.24 Administration of the Issuer..........................................................64
ARTICLE V
TERMINATION.............................................................................................65
Section 5.01 Termination...........................................................................65
Section 5.02 Termination Upon Auction Sale.........................................................65
Section 5.03 Redemption of Notes...................................................................65
Section 5.04 Disposition of Proceeds...............................................................66
ARTICLE VI
MISCELLANEOUS...........................................................................................67
Section 6.01 Acts of Owners........................................................................67
Section 6.02 Recordation of Agreement. ...........................................................67
Section 6.03 Duration of Agreement. ..............................................................67
Section 6.04 Successors and Assigns................................................................67
Section 6.05 Severability. .......................................................................67
Section 6.06 Governing Law; Submission to Jurisdiction.............................................67
Section 6.07 Counterparts. .......................................................................68
Section 6.08 Amendment.............................................................................68
Section 6.09 Specification of Certain Tax Matters. ...............................................69
Section 6.10 The Note Insurer......................................................................69
Section 6.11 Third Party Rights....................................................................69
Section 6.12 Notices...............................................................................69
Section 6.13 Benefits of Agreement.................................................................71
Section 6.14 Legal Holidays........................................................................71
Section 6.15 Usury.................................................................................71
Section 6.16 No Petition...........................................................................72
ARTICLE VII
CERTAIN MATTERS REGARDING THE NOTE INSURER..............................................................73
Section 7.01 Trust Estate and Accounts Held for Benefit of the Note Insurer........................73
Section 7.02 Claims Upon the Policy; Policy Payments Account.......................................73
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Section 7.03 Effect of Payments by the Note Insurer; Subrogation...................................74
Section 7.04 Notices to the Note Insurer...........................................................74
Section 7.05 Rights to the Note Insurer To Exercise Rights of Owners...............................75
SCHEDULE IA SCHEDULE OF POOL I HOME EQUITY LOANS
SCHEDULE IB SCHEDULE OF POOL II HOME EQUITY LOANS
EXHIBIT A FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
EXHIBIT B-1 FORM OF INDENTURE TRUSTEE'S RECEIPT
EXHIBIT B-2 FORM OF CUSTODIAN'S RECEIPT
EXHIBIT C FORM OF POOL CERTIFICATION
EXHIBIT D HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
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SALE AND SERVICING AGREEMENT dated as of December 1, 1998 by and among
IMC HOME EQUITY LOAN OWNER TRUST 1998-7, a Delaware business trust (the "Issuer"
or the "Trust"), IMC SECURITIES, INC., a Delaware corporation, in its capacities
as Depositor (the "Depositor"), IMC MORTGAGE COMPANY, a Florida corporation in
its capacity as the Seller (the "Seller"), OCWEN FEDERAL BANK FSB, a federal
savings bank, in its capacity as the servicer (the "Servicer") and THE CHASE
MANHATTAN BANK, a New York banking corporation, in its capacity as the indenture
trustee on behalf of the Owners of the Notes (the "Indenture Trustee").
WHEREAS, the Seller is engaged in the business of originating,
purchasing and servicing home equity loans secured by first and second lien
mortgages and deeds of trust on residential property;
WHEREAS, the Seller desires to sell to the Depositor and the Depositor
desires to purchase from the Seller the Home Equity Loans and the Depositor
desires to sell to the Issuer and the Issuer desires to purchase from the
Depositor the Home Equity Loans and all monies due and to become due thereunder
after December 1, 1998;
WHEREAS, the Issuer desires to purchase a pool of Home Equity Loans
(the "Home Equity Loans") consisting of two subpools ("Pool I" and "Pool II")
which were originated or purchased by the Seller;
WHEREAS, the Seller is willing to sell such Home Equity Loans to the
Depositor and the Depositor is willing to sell such Home Equity Loans to the
Issuer;
WHEREAS, the Servicer has acquired the servicing rights with respect to
the Home Equity Loans and has agreed to service the Home Equity Loans in
accordance with the terms of this Agreement;
WHEREAS, The Chase Manhattan Bank, is willing to serve in the capacity
of Indenture Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Note Insurer") is
intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Issuer, the Depositor, the Seller, the
Servicer, and the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 3.02,
3.04 or 4.08 hereof.
"Accrual Period": With respect to any Payment Date, the calendar month
immediately preceding the calendar month in which such Payment Date occurs.
Calculations of interest will be made on the basis of a 360-day year assumed to
consist of twelve 30-day months.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement": This Sale and Servicing Agreement, as it may be amended
from time to time, including the Exhibits and Schedules hereto.
"Annual Loss Percentage (Rolling Twelve Month)": As of any date of
determination thereof, a fraction, expressed as a percentage, the numerator of
which is the aggregate of the Realized Losses for each of the twelve immediately
preceding Remittance Periods and the denominator of which is the aggregate Loan
Balance as of the beginning of such 12-month period.
"Appraised Value": The appraised value of any Property based upon the
appraisal made at the time of the origination of the related Home Equity Loan,
or, in the case of a Home Equity Loan which is a purchase money mortgage, the
sales price of the Property at such time of origination, if such sales price is
less than such appraised value.
"Auction Sale": The sale of all of the Home Equity Loans in a Loan Pool
pursuant to Section 5.02.
"Auction Sale Reserve Deposit": With respect to any Auction Sale of a
Loan Pool, the amount equal to the lesser of (a) the excess, if any, of (i) the
Loan Balance of the Home Equity Loans in such Loan Pool over (ii) the Note
Principal Balance of the related Series of Notes and (b) the amount by which the
Specified Overcollateralization Amount for the other Loan Pool would exceed the
Overcollateralization Amount for the other Loan Pool if the Mortgage Portfolio
Performance Test was measured using only the Home Equity Loans in such other
Loan Pool; provided however that the Note Insurer, by notice to each of the
parties hereto in accordance with Section 6.12, can expressly waive the
requirement of such an Auction Sale Reserve Deposit. In the event that as a
result of such calculation the Specified Overcollateralization Amount is
unlimited the Auction Sale Reserve Deposit will be the amount determined by
clause (a).
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon, such Person; with respect to the
Depositor and the Servicer, initially including those individuals whose names
appear on the lists of Authorized Officers delivered at the Closing; with
respect to the Indenture Trustee, any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Assistant
Vice President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"Backup Servicer": The Indenture Trustee shall initially serve as
Backup Servicer hereunder in the event of the termination of the Servicer,
subject to the right of the Indenture Trustee to assign such duties to a party
acceptable to the Note Insurer, the Rating Agencies and the Owners of the
majority of the Percentage Interests of the Certificates.
"Bid Solicitation Commencement Date": With respect to Pool I, the first
Monthly Remittance Date on which the aggregate Loan Balance of the Pool I Home
Equity Loans has declined to less than $52,900,000 and with respect to Pool II,
the first Monthly Remittance Date on which the aggregate Loan Balance of the
Pool II Home Equity Loans has declined to less than $7,100,000.
"Bid Solicitation Date": The Remittance Date in each of January, April,
July and October commencing on the first January, April, July or October after
the Bid Solicitation Commencement Date.
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"Business Day": Any day other than a Saturday, Sunday or a day on which
commercial banking institutions in The City of New York, the city in which the
Corporate Trust Office is located, the city in which the principal office of the
Note Insurer is located or the city in which the principal office of the
Servicer is located are authorized or obligated by law or executive order to be
closed.
"Carry-Forward Amount": With respect to either Series of Notes and as
to any Payment Date, the sum of (x) the amount, if any, by which (i) the sum of
(A) the Current Interest for such Series (without regard to any portion thereof
which represents a Preference Amount which is not yet due in accordance with the
Note Insurance Policy) for the immediately preceding Payment Date and (B) any
unpaid Carry-Forward Amounts from all previous Payment Dates exceeded (ii) the
amount of the actual distribution made to the Owners of such Series on such
immediately preceding Payment Date pursuant to Section 3.03(b)(ii) and
3.03(b)(v)(y) hereof plus (y) interest on such excess at the related Note Rate
for such Series of Notes for a period of 30 days.
"Certificate": Any one of the Certificates issued pursuant to the Trust
Agreement.
"Certificate Distribution Account": The Certificate Distribution
Account established in accordance with the Trust Agreement.
"Civil Relief Interest Shortfalls": With respect to any Remittance
Period, for any Home Equity Loan as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, the amount, if any, by which (i) interest collectible on such Home
Equity Loan during the most recently ended Remittance Period is less than (ii)
the sum of (a) one month's interest on the Loan Balance of such Home Equity Loan
at a rate equal to the related Note Rate plus (b) 0.75375% per annum for such
Remittance Period.
"Clean Up Call Date": The first Monthly Remittance Date on which the
Loan Balance of the Home Equity Loans in both Loan Pools combined has declined
to less than 5% of the Maximum Collateral Amount.
"Closing Date": On or about December 10, 1998.
"Code": The Internal Revenue Code of 1986, as amended.
"Compensating Interest": As defined in Section 4.10(a) hereof.
"Corporate Trust Office": The principal office of the Indenture Trustee
at The Chase Manhattan Bank, 000 X. 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Attention: Structured Finance Services Department, IMC 1998-7 or the principal
office of any successor Indenture Trustee hereunder.
"Coupon Rate": The annual rate of interest borne by each Mortgage Note.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Loan Balance or the Coupon Rate of such Home Equity Loan, the
amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on
the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination thereof,
the aggregate of all Realized Losses since the Closing Date as a percentage of
the Maximum Collateral Amount; provided that
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Realized Losses resulting solely from Cram Down Losses shall not be included in
the definition of Realized Losses for purposes of calculating the Cumulative
Loss Percentage.
"Cumulative Loss Test": The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage does not exceed
the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
January 2, 1999 - January 1, 2001 1.25%
January 2, 2001 - January 1, 2002 1.50%
January 2, 2002 - January 1, 2003 1.75%
January 2, 2003 - and thereafter 2.25%
"Current Interest": As applicable, the Pool I Current Interest or the
Pool II Current Interest.
"Custodial Agreement": The Custodial Agreement dated as of December 1,
1998 among the Custodian, the Issuer, the Indenture Trustee, the Depositor, the
Seller and the Servicer.
"Custodian": Bank One Trust Company, N.A., as Custodian on behalf of
the Indenture Trustee pursuant to the Custodial Agreement.
"Cut-Off Date": As of the close of business on December 1, 1998.
"Daily Collections": As defined in Section 4.08(c) hereof.
"Delinquency Advance": As defined in Section 4.09(a) hereof.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the Mortgagor by the close of business on the related Due
Date. A Home Equity Loan is "30 days Delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days Delinquent," "90
days Delinquent" and so on.
"Depositor": IMC Securities, Inc., a Delaware corporation, or any
successor thereto.
"Depository": The Depository Trust Company, 0 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, 00000, and any successor Depository named herein.
"Determination Date": The 15th day of each month, or if such day is not
a Business Day, on the preceding Business Day, commencing in January 1999.
"Due Date": With respect to any Home Equity Loan, the date on which the
Monthly Payment with respect to such Home Equity Loan is required to be paid
pursuant to the related Mortgage Note exclusive of any days of grace.
"Eligible Account": With respect to the Principal and Interest Account,
any of (i) an account or accounts maintained with a federal or state chartered
depository institution or trust company the short-term unsecured debt
obligations of which (or, in the case of a depository institution or trust
company that is the
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principal subsidiary of a holding company, the short-term unsecured debt
obligations of such holding company) are rated P-1 by Xxxxx'x and A-1 by
Standard & Poor's (or comparable ratings if Xxxxx'x and Standard & Poor's are
not the Rating Agencies) at the time any amounts are held on deposit therein,
(ii) an account or accounts the deposits in which are fully insured by the FDIC
(to the limits established by such corporation), the uninsured deposits in which
account are otherwise secured such that, as evidenced by an Opinion of Counsel
delivered to the Indenture Trustee and to each Rating Agency, the Owners of the
Notes will have a claim with respect to the funds in such account or a perfected
first priority security interest against such collateral (which shall be limited
to Eligible Investments) securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which such
account is maintained, (iii) a trust account or accounts maintained with the
trust department of a federal or state chartered depository institution,
national banking association or trust company acting in its fiduciary capacity
or (iv) otherwise acceptable to each Rating Agency without reduction or
withdrawal of their then current ratings of the Notes as evidenced by a letter
from each Rating Agency to the Indenture Trustee. Account may bear interest. The
Servicer shall provide the Indenture Trustee and the Note Insurer with a
statement identifying the location and account information of the Principal and
Interest Account upon a change in the location of such account.
"Eligible Investments": Those investments so designated pursuant to
Section 3.07 hereof.
"Excess Overcollateralization Amount": The Pool I Excess
Overcollateralization Amount or the Pool II Excess Overcollateralization Amount.
"Excess Spread": The Pool I Excess Spread or the Pool II Excess Spread,
as applicable.
"Xxxxxx Xxx": Xxxxxx Xxx, a federally-chartered and privately-owned
corporation existing under the Federal National Mortgage Association Charter
Act, as amended, or any successor thereof.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"File": The documents delivered to the Indenture Trustee pursuant to
Section 2.05(b) hereof pertaining to a particular Home Equity Loan and any
additional documents required to be added to the File pursuant to this
Agreement.
"Final Certification": As defined in Section 2.06(c) hereof.
"Final Payment Date": The Final Payment Date for each Series of Notes
is as follows: Series 1998- 7A, November 20, 2029; and, Series 1998-7B, November
20, 2029.
"Final Recovery Determination": With respect to any defaulted Home
Equity Loan or REO Property (other than a Home Equity Loan purchased by the
Seller or the Servicer), a determination made by the Servicer that all
Liquidation Proceeds which the Servicer, in its reasonable business judgment
expects to be finally recoverable in respect thereof have been so recovered or
that the Servicer believes in its reasonable business judgment the cost of
obtaining any additional recoveries therefrom would exceed the amount of such
recoveries. The Servicer shall maintain records of each Final Recovery
Determination.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Property.
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"Xxxxxxx Mac": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"Highest Lawful Rate": As defined in Section 6.15 hereof.
"Home Equity Loans": Such home equity loans transferred and assigned to
the Trust pursuant to Section 2.05(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the Home Equity Loans
originally so held being identified in the Schedule of Home Equity Loans. The
term "Home Equity Loan" includes the terms "First Mortgage Loan" and "Second
Mortgage Loan." The term "Home Equity Loan" includes any Home Equity Loan which
is Delinquent, which relates to a foreclosure or which relates to a Property
which is REO Property prior to such Property's disposition by the Trust. Any
home equity loan which, although intended by the parties hereto to have been,
and which purportedly was, transferred and assigned to the Trust by the
Depositor, in fact was not transferred and assigned to the Trust for any reason
whatsoever, including, without limitation, the incorrectness of the statement
set forth in Section 2.04(b)(x) hereof with respect to such home equity loan,
shall nevertheless be considered a "Home Equity Loan" for all purposes of this
Agreement.
"Indemnification Agreement": The Indemnification Agreement dated as of
December 2, 1998 among the Note Insurer, the Depositor, the Seller, the Issuer
and the Underwriter.
"Indenture": As applicable, the Pool I Indenture or the Pool II
Indenture.
"Indenture Trustee": The Chase Manhattan Bank, a New York banking
corporation, the Corporate Trust Department of which is located on the date of
execution of this Agreement at 000 X. 00xx Xxxxxx, Xxx Xxxx, XX 00000, not in
its individual capacity but solely as Indenture Trustee under the Indenture, and
any successor hereunder.
"Indenture Trustee Fee": The Pool I Indenture Trustee Fee or the Pool
II Indenture Trustee Fee, as applicable.
"Indenture Trustee Reimbursable Expenses": The sum of (a) any amounts
payable pursuant to the second sentence of Section 6.7 of the Indenture;
provided that such amounts payable as Indenture Trustee Reimbursable Expenses
shall not exceed $50,000 and (b) any and all fees and expenses of the Indenture
Trustee and its agents and counsel in connection with an Auction Sale.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of December 1, 1998, among the Issuer, the Depositor, the Seller, the Servicer
and the Note Insurer, as such agreement may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Home Equity Loan plus any amount remitted under
Section 4.11 hereof.
"Insured Payment": As to any Payment Date, the excess, if any, of (i)
the sum (without duplication) of (a) the Current Interest for both Series of
Notes, (b) the Overcollateralization Deficit and (c) the Preference Amount for
both Series of Notes over (ii) the Total Available Funds (without regard to any
Insured Payment to be made with respect to such Payment Date).
"Interest Remittance Amount": The Pool I Interest Remittance Amount or
the Pool II Interest Remittance Amount, as applicable.
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"Issuer" or "Trust": IMC Home Equity Loan Owner Trust 1998-7, a
Delaware business trust.
"Late Payment Rate": For any Monthly Remittance Date, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
"Liquidation Proceeds": With respect to any Liquidated Loan, all
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Limited Release Date": Any Payment Date on which (x) the 60+ Day
Delinquency Percentage (Rolling Six Month) is greater than 12.00% but less than
18.00%, (y) the O/C Loss Test is satisfied and (z) the Annual Loss Percentage
(Rolling Twelve Month) is not greater than or equal to 1.60%.
"Limited Excess Spread": The Pool I Limited Excess Spread or the Pool
II Limited Excess Spread, as applicable.
"Loan Balance": With respect to each Home Equity Loan and as of any
date of determination, the actual outstanding principal balance thereof on the
Cut-Off Date with respect to the Home Equity Loans excluding payments of
principal due on or prior to the Cut-Off Date, whether or not received, less any
principal payments relating to such Home Equity Loan included in previous
Monthly Remittance Amounts, provided, however, that the Loan Balance for any
Home Equity Loan that has become a Liquidated Loan shall be zero as of the first
day of the Remittance Period following the Remittance Period in which such Home
Equity Loan becomes a Liquidated Loan, and at all times thereafter.
"Loan Pool" Pool I or Pool II, or, if the context requires,
collectively, Pool I and Pool II.
"Loan Purchase Price": With respect to any Home Equity Loan purchased
from the Trust on or prior to a Monthly Remittance Date pursuant to Section
2.03, 2.04, 2.06(b) or 4.10(b) hereof, an amount equal to the Loan Balance of
such Home Equity Loan as of the date of purchase (assuming that the Monthly
Remittance Amount remitted by the Servicer on such Monthly Remittance Date has
already been remitted), plus all accrued and unpaid interest on such Home Equity
Loan at the Coupon Rate to but not including the date of such purchase together
with (without duplication) the aggregate amounts of (i) all unreimbursed
Delinquency Advances and Servicing Advances theretofore made with respect to
such Home Equity Loan, (ii) all Delinquency Advances which the Servicer has
theretofore failed to remit with respect to such Home Equity Loan and (iii) all
reimbursed Delinquency Advances to the extent that reimbursement is not made
from the Mortgagor or from Liquidation Proceeds from the respective Home Equity
Loan.
"Loan-to-Value Ratio": As of any particular date (i) with respect to
any First Mortgage Loan, the percentage obtained by dividing the Appraised Value
into the original principal balance of the Mortgage Note relating to such First
Mortgage Loan and (ii) with respect to any Second Mortgage Loan, the percentage
obtained by dividing the Appraised Value as of the date of origination of such
Second Mortgage Loan into an amount equal to the sum of (a) the remaining
principal balance of the Senior Lien note relating to such First Mortgage Loan
as of the date of origination of the related Second Mortgage Loan and (b) the
original principal balance of the Mortgage Note relating to such Second Mortgage
Loan.
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"Maximum Collateral Amount": $600,008,926.75.
"Monthly Payment": With respect to any Home Equity Loan and any
Remittance Period, the payment of principal, if any, and interest due on the Due
Date in such Remittance Period pursuant to the related Mortgage Note.
"Monthly Remittance Amount": As applicable, the Pool I Monthly
Remittance Amount or the Pool II Monthly Remittance Amount.
"Monthly Remittance Date": The 18th day of each month, or if such day
is not a Business Day, on the preceding Business Day, commencing in January
1999.
"Monthly Reporting Date": With respect to a Payment Date, the related
Determination Date.
"Moody's": Xxxxx'x Investors Service, Inc. or any successor thereto.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Note.
"Mortgage Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Home Equity Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if either
(A) (x) the 60+ Delinquency Percentage (Rolling Six Month) is less than or equal
to 12.00%, (y) the O/C Loss Test is satisfied and (z) the Annual Loss Percentage
(Rolling Twelve Month) for the twelve month period immediately preceding the
date of determination thereof is not greater than or equal to 1.60%; or (B) the
Note Insurer by notice to each of the parties hereto in accordance with Section
6.12, expressly waives compliance with the foregoing tests for such date of
determination.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of expenses incurred by the Servicer (including unreimbursed
Servicing Advances) in connection with the liquidation of any defaulted Home
Equity Loan and unreimbursed Delinquency Advances relating to such Home Equity
Loan. In no event shall Net Liquidation Proceeds with respect to any Liquidated
Loan be less than zero.
"Nonrecoverable Advance": With respect to any Home Equity Loan is any
Delinquency Advance or Servicing Advance (i) which was previously made or is
proposed to be made by the Servicer and (ii) which, in the good faith judgment
of the Servicer, will not, or, in the case of a proposed Delinquency Advance or
Servicing Advance, would not be ultimately recoverable by the Servicer from
Liquidation Proceeds, proceeds of any insurance policies or future payments on
the Home Equity Loan.
"Note": Any one of the Series 1998-7A Notes or the Series 1998-7B
Notes.
"Note Accounts": The Pool I Note Account and the Pool II Note Account.
"Note Insurance Policy": The financial guaranty insurance policy
(number 50753-N) dated December 10, 1998 issued by the Note Insurer to the
Indenture Trustee for the benefit of the Owners pursuant to which the Note
Insurer guarantees Insured Payments.
8
"Note Insurer": Financial Security Assurance Inc., or any successor
thereto, as issuer of the Note Insurance Policy.
"Note Insurer Default": The existence and continuance of any of the
following:
(a) the Note Insurer fails to make a payment required under
the Note Insurance Policy in accordance with its terms; or
(b) the Note Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the benefit
of its creditors or (iii) had an order for relief entered against it under the
United States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, or agent, or receiver for the Note Insurer or for all or any material
portion of its property or (ii) authorizing the taking of possession by a
custodian, trustee, agent, or receiver of the Note Insurer of all or any
material portion of its property.
"Note Principal Balance": The Pool I Note Principal Balance or the Pool
II Note Principal Balance, as applicable.
"O/C Loss Test": The O/C Loss Test for any period set out below is
satisfied if the Cumulative Loss Percentage does not exceed the percentage set
out for such period below:
Cumulative Loss
Period Percentage
------ ----------
January 2, 1999 - January 1, 2000 0.75%
January 2, 2000 - January 1, 2001 1.25%
January 2, 2001 - January 1, 2002 1.90%
January 2, 2002 - January 1, 2003 2.40%
January 2, 2003 - and thereafter 3.00%
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Indenture
Trustee.
"Operative Documents": Collectively, this Agreement, the Indentures,
the Certificate of Trust, the Trust Agreement, the Note Insurance Policy, the
Notes, the Custodial Agreement, the Indemnification Agreement and the Insurance
Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Home Equity Loans as of the Cut-Off Date, which is $600,008,926.75;
$529,001,154.99 with respect to Loan Pool I and $71,007,771.76 with respect to
Loan Pool II.
"Original Pool I Note Principal Balance": $529,000,000.
"Original Pool II Note Principal Balance": $71,000,000.
9
"Overcollateralization Amount": As applicable, the Pool I
Overcollateralization Amount or the Pool II Overcollateralization Amount.
"Overcollateralization Deficiency Amount": The Pool I
Overcollateralization Deficiency Amount or the Pool II Overcollateralization
Deficiency Amount.
"Overcollateralization Deficit": With respect to both Loan Pools and
any Payment Date, the amount, if any, by which (x) the aggregate Note Principal
Balance of both Series of Notes after taking into account all distributions to
be made on such Payment Date (without regard to any Insured Payment or
distribution of Excess Spread to be made on such Payment Date), exceeds (y) the
aggregate Loan Balances of the Home Equity Loans in both Loan Pools as of the
close of business on the last day of the related Remittance Period.
"Overcollateralization Reduction Amount": The Pool I
Overcollateralization Reduction Amount or the Pool I Overcollateralization
Reduction Amount.
"Owner": The Person in whose name a Note is registered in the Register,
and the Note Insurer, to the extent described in Sections 7.01 and 7.05.
"Owner Trustee": Wilmington Trust Company, as owner trustee under the
Trust Agreement, and any successor owner trustee under the Trust Agreement.
"Owner Trustee Fee": The Pool I Owner Trustee Fee or the Pool II Owner
Trustee Fee.
"Paying Agent": Initially, the Indenture Trustee, and thereafter, the
Indenture Trustee or any other Person that meets the eligibility standards for
the Paying Agent specified in Section 6.11 of the Indenture and is authorized by
the Indenture Trustee and the Depositor to make payments on the Certificates on
behalf of the Indenture Trustee.
"Payment Date": Any date on which the Indenture Trustee is required to
make distributions to the Owners, which shall be the 20th day of each month or
if such day is not a Business Day, the next Business Day thereafter, commencing
in the month following the Closing Date. The first Payment Date will be January
20, 1999.
"Percentage Interest": With respect to any Series of Notes, a fraction,
expressed as a decimal, the numerator of which is the Note Principal Balance
represented by such Note and the denominator of which is the aggregate Original
Note Principal Balance represented by all the Notes of such Series on the
Closing Date. With respect to the Certificates, the portion evidenced thereby,
expressed as a percentage, as stated on the face of such Certificate, all of
which shall total 100% with respect to the Certificates.
"Person": Any individual, corporation, limited partnership,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Policy Payments Account": The policy payments account maintained by
the Indenture Trustee pursuant to Section 7.02(b) hereof.
"Pool I": The pool of Home Equity Loans identified in Schedule IA as
having been assigned to Pool I, including any Qualified Replacement Mortgages
delivered in replacement thereof.
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"Pool I Current Interest": With respect Pool I and any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued during the related
Accrual Period at the Series 1998-7A Note Rate on the Pool I Note Principal
Balance immediately prior to such Payment Date, (ii) the related Carry Forward
Amount; and (iii) any portion of the Preference Amount relating to interest owed
to the Owners of the Series 1998-7A Notes (which Preference Amount will be paid
in accordance with the Note Insurance Policy); provided, however, such amount
will be reduced by the amount of any Civil Relief Interest Shortfalls relating
to the Pool I Home Equity Loans.
"Pool I Excess Overcollateralization Amount": With respect to Loan Pool
I and a Payment Date, the excess, if any, of (x) the Pool I
Overcollateralization Amount that would apply on such Payment Date after taking
into account all payments to be made on such Payment Date (except for any
distributions of the Pool I Overcollateralization Reduction Amount on such
Payment Date), over (y) the Pool I Specified Overcollateralization Amount for
such Payment Date.
"Pool I Excess Spread": As to each Payment Date and Loan Pool I, the
amount on deposit in the Pool I Note Account after making the payments required
by Section 3.03(b)(i) - (iii) for such Loan Pool.
"Pool I Indenture": The Indenture, dated as of December 1, 1998 between
the Issuer and the Indenture Trustee, relating to the issuance of the Series
1998-7A Notes.
"Pool I Indenture Trustee Fee": The fee payable monthly to the
Indenture Trustee on each Payment Date in an amount equal to 0.00375% per annum,
on the outstanding aggregate Loan Balance of the Home Equity Loans in Pool I as
of the related Determination Date.
"Pool I Interest Remittance Amount": As of any Monthly Remittance Date,
the excess of (A) the sum, without duplication, of (i) all interest due during
the related Remittance Period with respect to the Pool I Home Equity Loans, (ii)
all Compensating Interest paid by the Servicer on such Monthly Remittance Date
with respect to the Pool I Home Equity Loans, (iii) the portion of the
Substitution Amount relating to interest on the Pool I Home Equity Loans, (iv)
the portion of any Loan Purchase Price relating to interest on any Pool I Home
Equity Loan repurchased during the related Remittance Period and (v) the portion
of Net Liquidation Proceeds relating to interest with respect to the Pool I Home
Equity Loans over (B) the Servicing Fee and other amounts reimbursable to, or
withdrawable from the Principal and Interest Account by, the Servicer.
"Pool I Limited Excess Spread": For any Payment Date that is a Limited
Release Date, the amount of Pool I Excess Spread which would otherwise be
remaining after the distributions made pursuant to Section 3.03(b)(vii) for Loan
Pool I if the Pool I Specified Overcollateralization Amount did not increase
because of the operation of clause (ii)(a) of the definition of Pool I Specified
Overcollateralization Additional Amount.
"Pool I Maximum Collateral Amount": $529,000,000.
"Pool I Monthly Remittance Amount": As of any Monthly Remittance Date,
the sum of (i) the Pool I Interest Remittance Amount for such Monthly Remittance
Date and (ii) the Pool I Principal Remittance Amount for such Monthly Remittance
Date.
"Pool I Note Account": The segregated trust account known as the "Pool
I Note Account" established in accordance with Section 3.2 hereof and maintained
by the Indenture Trustee at the Corporate Trust Office, provided that the funds
in such account shall not be commingled with any other funds held by the
Indenture Trustee.
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"Pool I Note Principal Balance": As of any time of determination, the
Original Pool I Note Principal Balance less the aggregate of all amounts
actually distributed pursuant to Section 3.03(b) hereof with respect to
principal thereon on all prior Payment Dates; provided, however, that solely for
purposes of determining the Note Insurer's rights, as subrogee, the Pool I Note
Principal Balance shall not be reduced by any principal amount paid to the Owner
thereof from Insured Payments.
"Pool I Overcollateralization Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Pool I Home Equity
Loans as of the close of business on the last day of the related Remittance
Period over (y) the Pool I Note Principal Balance for such Payment Date (after
taking into account the payment of the Pool I Principal Remittance Amount
available for payment on such Payment Date).
"Pool I Overcollateralization Deficiency Amount": With respect to Loan
Pool I and any Payment Date, the excess, if any, of (i) the Pool I Specified
Overcollateralization Amount for such Payment Date over (ii) the Pool I
Overcollateralization Amount applicable to such Payment Date.
"Pool I Overcollateralization Deficit": With respect to Pool I and any
Payment Date, the amount, if any, by which (x) the Pool I Note Principal Balance
after taking into account the payment of Pool I Principal Remittance Amount
exceeds (y) the Pool I Loan Balance as of the close of business on the last day
of the related Remittance Period.
"Pool I Overcollateralization Reduction Amount": With respect to Loan
Pool I and any Payment Date, an amount equal to the lesser of (x) the Pool I
Excess Overcollateralization Amount for such Payment Date and (y) the Pool I
Principal Remittance Amount for such Payment Date.
"Pool I Owner Trustee Fee": The fee payable annually on the Payment
Date in January beginning in January 1999 to the Owner Trustee, as provided in
the letter from the Owner Trustee to the Seller dated December 10, 1998.
"Pool I Premium Amount": The amount payable monthly to the Note Insurer
on each Payment Date in an amount equal to 0.25% per annum on the Pool I Note
Principal Balance as of the related Determination Date.
"Pool I Principal Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Servicer with respect to Pool I Home Equity Loans during the related
Remittance Period, (ii) the Loan Balance of each such Pool I Home Equity Loan
that was purchased from the Trust on or prior to such Monthly Remittance Date,
to the extent such Loan Balance was actually received by the Servicer, (iii) any
Substitution Amounts relating to principal delivered by the Seller in connection
with a substitution of a Pool I Home Equity Loan, to the extent such
Substitution Amounts were actually received by the Servicer on or prior to such
Monthly Remittance Date, (iv) the principal portion of all Net Liquidation
Proceeds actually collected by the Servicer with respect to such Pool I Home
Equity Loans during the related Remittance Period (to the extent such Net
Liquidation Proceeds related to principal), and (v) the amount of related
investment losses required to be deposited pursuant to Sections 3.05(e) and
4.08(b).
"Pool I Specified Overcollateralization Additional Amount": If the
Mortgage Portfolio Performance Test is satisfied, zero. Otherwise an amount
equal to the sum of (i) the Pool I Specified Overcollateralization Additional
Amount for the previous Payment Date and (ii) (a) in the event that the 60+
Delinquency Percentage (Rolling Six Month) is greater than 12.00% but less than
18.00% and clause (A)(y) and clause (A)(z) in the definition of Mortgage
Portfolio Performance Test are satisfied, a portion of the Pool I Limited Excess
Spread equal to the product of (1) such Pool I Limited Excess Spread and (2) a
fraction, the
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numerator of which is equal to the 60+ Delinquency Percentage (Rolling Six
Month) less 12.00% and the denominator of which is equal to 6.00%, provided that
such fraction shall not exceed 1.0; or (b) an amount equal to the Pool I Limited
Excess Spread.
"Pool I Specified Overcollateralization Amount": With respect to a
Payment Date the sum of (1) (x) prior to the Stepdown Date, the amount which is
equal to 3.40% of the Pool I Maximum Collateral Amount and (y) after the
Stepdown Date (i) if the Stepdown Requirement is satisfied, the lesser of (A)
the greater of (i) an amount equal to 6.80% of the then outstanding aggregate
Loan Balance of the Home Equity Loans and (ii) 0.50% of the Pool I Maximum
Collateral Amount and (B) an amount equal to 3.40% of the Pool I Maximum
Collateral Amount or (ii) if the Stepdown Requirement is not satisfied, the
amount which is equal to 3.40% of the Pool I Maximum Collateral Amount;
provided, however, that if on any Payment Date the Mortgage Portfolio
Performance Test is not satisfied, then unless such Payment Date is also a
Limited Release Date the Pool I Specified Overcollateralization Amount will be
unlimited during the period that the Mortgage Portfolio Performance is not
satisfied and (2) the Pool I Specified Overcollateralization Additional Amount.
"Pool II": The pool of Home Equity Loans identified in the related
Schedule IB as having been assigned to the Pool II, including any Qualified
Replacement Mortgages delivered in replacement thereof.
"Pool II Current Interest": With respect Pool II and any Payment Date,
an amount equal to the sum of (i) the amount of interest accrued during the
related Accrual Period at the Series 1998-7B Note Rate on the Pool II Note
Principal Balance immediately prior to such Payment Date, (ii) the related Carry
Forward Amount and (iii) any portion of the Preference Amount relating to
interest owed to the Owners of the Series 1998-7B Notes (which Preference Amount
will be paid in accordance with the Note Insurance Policy); provided, however,
such amount will be reduced by the amount of any Civil Relief Interest
Shortfalls relating to the Pool II Home Equity Loans.
"Pool II Excess Overcollateralization Amount": With respect to Loan
Pool II and a Payment Date, the excess, if any, of (x) the Pool II
Overcollateralization Amount that would apply on such Payment Date after taking
into account all payments to be made on such Payment Date (except for any
distributions of the Pool II Overcollateralization Reduction Amount on such
Payment Date), over (y) the Pool II Specified Overcollateralization Amount for
such Payment Date.
"Pool II Excess Spread": As to each Payment Date and Loan Pool II, the
amount on deposit in the Pool II Note Account after making the payments required
by Section 3.03(b)(i) - (iii) for such Loan Pool.
"Pool II Indenture": The Indenture, dated as of December 1, 1998
between the Issuer and the Indenture Trustee, relating to the issuance of the
Series 1998-7B Notes.
"Pool II Indenture Trustee Fee": The fee payable monthly to the
Indenture Trustee on each Payment Date in an amount equal to 0.00375% per annum,
on the outstanding aggregate Loan Balance of the Home Equity Loans in Pool II as
of the related Determination Date.
"Pool II Interest Remittance Amount": As of any Monthly Remittance
Date, the excess of (A) the sum, without duplication, of (i) all interest due
during the related Remittance Period with respect to the Pool II Home Equity
Loans, (ii) all Compensating Interest paid by the Servicer on such Monthly
Remittance Date with respect to the Pool II Home Equity Loans, (iii) the portion
of the Substitution Amount relating to interest on the Pool II Home Equity
Loans, (iv) the portion of any Loan Purchase Price relating to interest on any
Pool II Home Equity Loan repurchased during the related Remittance Period and
(v) the portion of Net Liquidation Proceeds relating to interest with respect to
the Pool II Home Equity Loans over (B) the
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Servicing Fee and other amounts reimbursable to, or withdrawable from the
Principal and Interest Account by the Servicer.
"Pool II Limited Excess Spread": For any Payment Date that is a Limited
Release Date, the amount of Pool II Excess Spread which would otherwise be
remaining after the distributions made pursuant to Section 3.03(b)(vii) for Loan
Pool II if the Pool II Specified Overcollateralization Amount did not increase
because of the operation of clause (ii)(a) of the definition of Pool II
Specified Overcollateralization Additional Amount.
"Pool II Maximum Collateral Amount": $71,000,000.
"Pool II Monthly Remittance Amount": As of any Remittance Date, the sum
of (i) the Pool II Interest Remittance Amount for such Remittance Date and the
Pool II Principal Remittance Amount for such Remittance Date.
"Pool II Note Account": The segregated trust account known as the "Pool
II Note Account" established in accordance with Section 3.2 hereof and
maintained by the Indenture Trustee at the Corporate Trust Office, provided that
the funds in such account shall not be commingled with any other funds held by
the Indenture Trustee.
"Pool II Note Principal Balance": As of any time of determination, the
Original Pool II Note Principal Balance less the aggregate of all amounts
actually distributed pursuant to Section 3.03(b) hereof with respect to
principal thereon on all prior Payment Dates; provided, however, that solely for
purposes of determining the Note Insurer's rights, as subrogee, the Pool II Note
Principal Balance shall not be reduced by any principal amount paid to the Owner
thereof from Insured Payments.
"Pool II Overcollateralization Amount": As of any Payment Date, the
excess, if any, of (x) the aggregate Loan Balances of the Pool II Home Equity
Loans as of the close of business on the last day of the related Remittance
Period over (y) the Pool II Note Principal Balance for such Payment Date (after
taking into account the payment of the Pool II Principal Remittance Amount
available for payment on such Payment Date.
"Pool II Overcollateralization Deficiency Amount": With respect to Loan
Pool II and any Payment Date, the excess, if any, of (i) the Pool II Specified
Overcollateralization Amount for such Payment Date over (ii) the Pool II
Overcollateralization Amount applicable to such Payment Date.
"Pool II Overcollateralization Deficit": With respect to Pool II and
any Payment Date, the amount, if any, by which (x) the Pool II Note Principal
Balance after taking into account the payment of the Pool II Principal
Remittance Amount to be made on such Payment Date exceeds (y) the Pool II Loan
Balance as of the close of business on the last day of the related Remittance
Period.
"Pool II Overcollateralization Reduction Amount": With respect to Loan
Pool II and any Payment Date, an amount equal to the lesser of (x) the Pool II
Excess Overcollateralization Amount for such Payment Date and (y) the Pool II
Principal Remittance Amount for such Payment Date.
"Pool II Owner Trustee Fee": The portion of fee payable annually on the
Payment Date in January beginning in January 1999 to the Owner Trustee, as
provided in the letter from the Owner Trustee to the Seller dated December 10,
1998.
14
"Pool II Premium Amount": The amount payable monthly to the Note
Insurer on each Payment Date in an amount equal to 0.25% per annum on the Pool
II Note Principal Balance as of the related Determination Date.
"Pool II Principal Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Servicer with respect to Pool II Home Equity Loans during the related
Remittance Period, (ii) the Loan Balance of each such Pool II Home Equity Loan
that was purchased from the Trust on or prior to such Monthly Remittance Date,
to the extent such Loan Balance was actually received by the Servicer, (iii) any
Substitution Amounts relating to principal delivered by the Seller in connection
with a substitution of a Pool II Home Equity Loan, to the extent such
Substitution Amounts were actually received by the Servicer on or prior to such
Monthly Remittance Date, (iv) the principal portion of all Net Liquidation
Proceeds actually collected by the Servicer with respect to such Pool II Home
Equity Loans during the related Remittance Period (to the extent such Net
Liquidation Proceeds related to principal), and (v) the amount of related
investment losses required to be deposited pursuant to Sections 3.05(e) and
4.08(b).
"Pool II Specified Overcollateralization Additional Amount": If the
Mortgage Portfolio Performance Test is satisfied, zero. Otherwise an amount
equal to the sum of (i) the Pool II Specified Overcollateralization Additional
Amount for the previous Payment Date and (ii) (a) in the event that the 60+
Delinquency Percentage (Rolling Six Month) is greater than 12.00% but less than
18.00% and clause (A)(y) and clause (A)(z) in the definition of Mortgage
Portfolio Performance Test are satisfied, a portion of the Pool II Limited
Excess Spread equal to the product of (1) such Pool II Limited Excess Spread and
(2) a fraction, the numerator of which is equal to the 60+ Delinquency
Percentage (Rolling Six Month) less 12.00% and the denominator of which is equal
to 6.00%, provided that such fraction shall not exceed 1.0; or (b) an amount
equal to the Pool II Limited Excess Spread.
"Pool II Specified Overcollateralization Amount": With respect to a
Payment Date the sum of (1) (x) prior to the Stepdown Date, the amount which is
equal to 3.40% of the Pool II Maximum Collateral Amount and (y) after the
Stepdown Date (i) if the Stepdown Requirement is satisfied, the lesser of (A)
the greater of (i) an amount equal to 6.80% of the then outstanding aggregate
Loan Balance of the Home Equity Loans and (ii) 0.50% of the Pool II Maximum
Collateral Amount and (B) an amount equal to 3.40% of the Pool II Maximum
Collateral Amount or (ii) if the Stepdown Requirement is not satisfied, the
amount which is equal to 3.40% of the Pool II Maximum Collateral Amount;
provided, however, that if on any Payment Date the Mortgage Portfolio
Performance Test is not satisfied, then unless such Payment Date is also a
Limited Release Date the Pool II Specified Overcollateralization Amount will be
unlimited during the period that the Mortgage Portfolio Performance is not
satisfied and (2) the Pool II Specified Overcollateralization Additional Amount.
"Preference Amount": With respect to a series of Notes means, any
amounts of interest and principal included in previous distributions to the
Owners of the Notes which are recoverable and sought to be recovered as a
voidable preference by a indenture trustee in bankruptcy pursuant to the United
States Bankruptcy Code (11 U.S.C.) as amended from time to time in accordance
with a final, nonappealable order of a court having competent jurisdiction. Such
amount will be paid in accordance with the terms of the Note Insurance Policy.
"Preference Claim": As defined in Section 7.02(d) hereafter.
"Premium Amount": The Pool I Premium Amount or the Pool II Premium
Amount, as applicable.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Servicer in advance of the scheduled Due Date for the payment of
such principal and which is not accompanied by
15
an amount of interest representing the full amount of scheduled interest due on
any Due Date in any month or months subsequent to the month of prepayment,
Substitution Amounts, the portion of the purchase price of any Home Equity Loan
purchased from the Trust pursuant to Section 2.03, 2.04, 2.06(b) or 4.10(b)
hereof representing principal and the proceeds of any Insurance Policy which are
to be applied as a payment of principal on the related Home Equity Loan shall be
deemed to be Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": The principal and interest account
established and maintained by the Servicer pursuant to Section 4.08(a) hereof.
"Principal Remittance Amount": The Pool I Principal Remittance Amount
or the Pool II Principal Remittance Amount, as applicable.
"Property": The underlying property securing a Home Equity Loan.
"Prospectus": The Depositor's Prospectus dated May 29, 1998
constituting part of the Registration Statement.
"Prospectus Supplement": The IMC Home Equity Loan Owner Trust 1998-7
Prospectus Supplement dated December 2, 1998 to the Prospectus.
"Qualified Replacement Mortgage": A Home Equity Loan substituted for
another pursuant to Section 2.03, 2.04 and 2.06(b) hereof, which (i) has a
Coupon Rate at least equal to the Coupon Rate of the Home Equity Loan being
replaced; (ii) is of the same property type or is a single family dwelling and
the same occupancy status or is a primary residence as the Home Equity Loan
being replaced, (iii) shall mature no later than January 1, 2029, (iv) has a
Loan-to-Value Ratio as of the Replacement Cut-Off Date no higher than the
Loan-to-Value Ratio of the replaced Home Equity Loan at such time, (v) shall be
of the same or higher credit quality classification (determined in accordance
with the Seller's credit underwriting guidelines set forth in the Seller's
underwriting manual) as the Home Equity Loan which such Qualified Replacement
Mortgage replaces, (vi) shall be a First Mortgage Loan, (vii) has a Loan Balance
as of the related Replacement Cut-Off Date equal to or less than the Loan
Balance of the replaced Home Equity Loan as of such Replacement Cut-Off Date and
(viii) shall not provide for a "balloon" payment. In the event that one or more
home equity loans are proposed to be substituted for one or more Home Equity
Loans, the Note Insurer may allow the foregoing tests to be met on a weighted
average basis or other aggregate basis acceptable to the Note Insurer, as
evidenced by a written approval delivered to the Indenture Trustee by the Note
Insurer, except that the requirements of clauses (i) and (iv) hereof must be
satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Collectively, Xxxxx'x and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram
Down Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not
less than zero), if any, by which (A) the sum of (x) the Loan Balance thereof as
of the date of liquidation, (y) the amount of accrued but unpaid interest
thereon (to the extent that there are no outstanding advances for such interest
by the Servicer) and (z) the amount of any Cram Down Loss with respect thereto
is in excess of (B) the Net Liquidation Proceeds realized thereon applied in
reduction of such Loan Balance.
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"Redemption Date": With respect to a Series of Notes, the date such
Series of Notes are redeemed pursuant to Article X of the related Indenture.
"Redemption Price": The Redemption Price for a Series of Notes is equal
to the sum of (i) the then outstanding Note Principal Balance of such Series of
Notes plus all accrued and unpaid interest thereon to the related Redemption
Date, (ii) any portion of the Trust Fees and Expenses with respect to the
related Loan Pool due and unpaid on such date (as certified to the Indenture
Trustee by the Note Insurer with respect to the Premium Amount and by the Owner
Trustee with respect to the Owner Trustee Fee), (iii) any expenses incurred by
the Indenture Trustee in conducting the Auction Sale (and all previous auctions
for such Series of Notes), (iv) all amounts owed to the Note Insurer with
respect to the Insurance Agreement (including any amount owed on the unrelated
Loan Pool) as certified to the Indenture Trustee by the Note Insurer, (v) the
Auction Sale Reserve Deposit (vi) any unreimbursed Delinquency Advances and
Servicing Advances with respect to the related Loan Pool (as certified to the
Indenture Trustee by the Servicer).
"Register": The note register maintained by the Registrar in accordance
with Section 2.3 of the Indenture, in which the names of the Owners are set
forth.
"Registrar": The Indenture Trustee, acting in its capacity as Registrar
appointed pursuant to the Indenture, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-48429), including all amendments thereto and including the Prospectus
relating to the Notes.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Indenture Trustee by the Note Insurer
and not previously repaid to the Note Insurer pursuant to Section 3.03(b)(vi)
plus (ii) interest accrued on each such Insured Payment not previously repaid
calculated at the Late Payment Rate and (y)(i) any amounts then due and owing to
the Note Insurer under the Insurance Agreement (including, without limitation,
any unpaid Premium Amount relating to such Payment Date or an earlier Payment
Date) plus (ii) interest on such amounts at the Late Payment Rate. The Note
Insurer shall notify the Indenture Trustee, the Depositor, the Seller and the
Servicer of the amount of any Reimbursement Amount.
"Remittance Period": With respect to each Monthly Remittance Date, the
period commencing the second day of the calendar month immediately preceding
such Monthly Remittance Date and ending the first day of the calendar month in
which such Monthly Remittance Date occurs.
"REO Property": A Property acquired by the Servicer on behalf of the
Trust through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Reserve Account": The segregated trust account established and
maintained in accordance with Section 3.04 and entitled "The Chase Manhattan
Bank as Indenture Trustee for IMC Home Equity Loan Owner Trust 1998-7, Home
Equity Loan Asset Backed Notes, Series 1998-7A and 1998-7B, Reserve Account" on
behalf of the Owners of the Notes and the Note Insurer.
"Reserve Account Requirement": On any Payment Date for a Series of
Notes, the amount specified in Section 3.03(b)(ix) for such Series of Notes.
17
"Schedules of Home Equity Loans": The schedules of Home Equity Loans
listing each Home Equity Loan to be conveyed on the Closing Date. Each Schedule
of Home Equity Loans shall identify each Home Equity Loan by the Servicer's loan
number, borrower's name and address (including the state and zip code) of the
Property and shall set forth as to each Home Equity Loan (a) the lien status,
(b) the Loan-to-Value Ratio as of the Cut-Off Date, (c) the Loan Balance as of
the Cut-Off Date, (d) the Coupon Rate at origination thereof, (e) the original
Loan Balance, (f) the scheduled monthly payment of principal and interest as of
the Closing Date, (g) the maturity date of the related Mortgage Note, (h) the
property type, (i) occupancy status, (j) Appraised Value, (k) the original
term-to-maturity thereof and (l) for adjustable rate Home Equity Loans: (1) the
maximum Coupon Rate, (2) the minimum Coupon Rate, (3) the index, (4) the gross
margin, (5) the lifetime rate cap, (6) the periodic rate cap, (7) the first
adjustment date and (8) the frequency of adjustment.
"Second Mortgage Loan": A Home Equity Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": IMC Mortgage Company, a Florida corporation.
"Senior Lien": With respect to any Second Mortgage Loan, the home
equity loan relating to the corresponding Property having a first priority lien.
"Series": A Series of the Issuer's Notes.
"Series 1998-7A Note Rate": 6.38% per annum; provided that on any
Payment Date after the Redemption Date for Pool I, the Series 1998-7A Note Rate
shall be 6.88% per annum.
"Series 1998-7A Notes": Any one of the Series 1998-7A Notes
substantially in the form attached to the Pool I Indenture as Exhibit A.
"Series 1998-7B Note Rate": 6.52% per annum; provided that on any
Payment Date after the Redemption Date for Pool II, the Series 1998-7B Note Rate
shall be 7.02% per annum.
"Series 1998-7B Notes": Any one of the Series 1998-7B Notes
substantially in the form attached to the Pool II Indenture as Exhibit A.
"Servicer": Ocwen Federal Bank FSB, a federal savings bank, and its
permitted successors and assigns.
"Servicer Loss Test": The Servicer Loss Test for any period set out
below is satisfied, if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
December 2, 1998 - December 1, 1999 1.00%
December 2, 1999 - December 1, 2000 1.75%
December 2, 2000 - December 1, 2001 2.50%
December 2, 2001 - December 1, 2002 3.25%
December 2, 2002 - and thereafter 4.00%
"Servicer Termination Event": As defined in Section 4.20(a) hereof.
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"Servicer Termination Test": The Servicer Termination Test is satisfied
for any date of determination thereof, if (x) the 60+ Delinquency Percentage
(Rolling Six Month) is less than 15.75%, (y) the Servicer Loss Test is satisfied
and (z) the Annual Loss Percentage (Rolling Twelve Month) for the twelve month
period immediately preceding the date of determination thereof is not greater
than 2.25%.
"Servicing Advance": As defined in Section 4.09(b) and Section 4.13(a)
hereof.
"Servicing Fee": With respect to any Home Equity Loan, an amount
retained by the Servicer as compensation for servicing and administration duties
relating to such Home Equity Loan pursuant to Section 4.15 and equal to one
month's interest at 0.50% per annum of the then outstanding principal balance of
such Home Equity Loan as of the first day of each Remittance Period payable on a
monthly basis.
"60-Day Delinquent Loan": With respect to any date of determination
thereof, means (without duplication) all REO Properties, Home Equity Loans in
foreclosure and each Home Equity Loan whether or not liquidated, with respect to
which any portion of a Monthly Payment is, as of the last day of the prior
Remittance Period, two months (calculated from Due Date with respect to such
Home Equity Loan to Due Date) or more past due (without giving effect to any
grace period).
"60+ Delinquency Percentage (Rolling Six Month)": With respect to any
date of determination thereof, the average of the percentage equivalents of the
fractions determined for each of the six immediately preceding Remittance
Periods the numerator of each of which is equal to the aggregate Loan Balance of
60- Day Delinquent Loans as of the end of such Remittance Period and the
denominator of which is the Loan Balance of all of the Home Equity Loans as of
the end of such Remittance Period.
"Specified Overcollateralization Amount": The Pool I Specified
Overcollateralization Amount or the Pool II Specified Overcollateralization
Amount, as applicable.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc. or any successor thereto.
"Stepdown Date": The Determination Date in January 2001.
"Stepdown Requirement": The Stepdown Requirement is satisfied on any
date of determination thereof if, as of such date of determination, either (A)
(x) the 60+ Delinquency Percentage (Rolling Six Month) is less than 11.25%, (y)
the Cumulative Loss Test is satisfied and (z) the Annual Loss Percentage
(Rolling Twelve Month) for the twelve month period immediately preceding the
date of determination thereof is not greater than or equal to 1.00% or (B) the
Note Insurer by notice to each of the parties hereto in accordance with Section
6.12, expressly waives compliance with the foregoing tests for such date of
determination.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
4.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain Home
Equity Loans as permitted by Section 4.03.
"Substitution Amount": As defined in Section 2.03 hereof.
"Total Available Funds": As to each Payment Date and Loan Pool, the sum
of (x) the amount on deposit in both Note Accounts on such Payment Date
(disregarding the amount of any related Insured
19
Payment to be made on such Payment Date) and (y) the amount on deposit in the
Reserve Account less the Trust Fees and Expenses.
"Trust" or "Issuer": IMC Home Equity Loan Owner Trust 1998-7, a
Delaware business trust.
"Trust Agreement": The Owner Trust Agreement dated as of December 1,
1998 between the Depositor and the Owner Trustee.
"Trust Estate": With respect to a Series of Notes, as defined in the
related Indenture.
"Trust Fees and Expenses": As of each Payment Date, an amount equal to
the Premium Amount, the Owner Trustee Fee, the Indenture Trustee Fee and any
Indenture Trustee Reimbursable Expenses.
"Underwriter": PaineWebber Incorporated.
Section 1.02 Use of Words and Phrases.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement as a whole and
not solely to the particular section of this Agreement in which any such word is
used. The definitions set forth in Section 1.01 hereof include both the singular
and the plural. Whenever used in this Agreement, any pronoun shall be deemed to
include both singular and plural and to cover all genders.
Section 1.03 Captions; Table of Contents.
The captions or headings in this Agreement and the Table of Contents
are for convenience only and in no way define, limit or describe the scope and
intent of any provisions of this Agreement.
Section 1.04 Opinions.
Each opinion with respect to the validity, binding nature and
enforceability of documents or Notes may be qualified to the extent that the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law) and may state that no opinion is
expressed on the availability of the remedy of specific enforcement, injunctive
relief or any other equitable remedy. Any opinion required to be furnished by
any Person hereunder must be delivered by counsel upon whose opinion the
addressee of such opinion may reasonably rely, and such opinion may state that
it is given in reasonable reliance upon an opinion of another, a copy of which
must be attached, concerning the laws of a foreign jurisdiction. Any opinion
delivered hereunder shall be addressed to the Rating Agencies, the Note Insurer
and the Indenture Trustee.
END OF ARTICLE I
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE SERVICER AND THE SELLER;
COVENANT OF DEPOSITOR TO CONVEY HOME EQUITY LOANS
Section 2.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Owner Trustee, the Issuer, the Seller, the Servicer, the
Note Insurer and the Owners that as of the Closing Date:
(a) The Depositor is a corporation duly organized and validly existing
and in good standing under the laws governing its creation and existence and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it make such
qualification necessary. The Depositor has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Depositor and its performance
and compliance with the terms of this Agreement and the other Operative
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of the Depositor and will not violate the
Depositor's Certificate of Incorporation, or Bylaws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which the Depositor is a party or by which the Depositor is
bound or violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Depositor or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Depositor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Depositor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Depositor or its properties
or the consequences of which would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(e) No litigation is pending with respect to which the Depositor has
received service of process or, to the best of the Depositor's knowledge,
threatened against the Depositor which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Depositor is a party.
21
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Depositor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Depositor or matters or activities for which the Depositor is
responsible in accordance with the Operative Documents or which are attributable
to the Depositor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Depositor required to be stated therein or necessary to make
the statements contained therein with respect to the Depositor, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Depositor that
materially adversely affects or in the future may (so far as the Depositor can
now reasonably foresee) materially adversely affect the Depositor or the Home
Equity Loans that has not been set forth in the Registration Statement.
(h) Neither the Owner Trustee nor the Depositor has any obligation to
register the Trust as an investment company under the Investment Company Act of
1940, as amended.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state or federal securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Depositor makes no such representation or
warranty), that are necessary or advisable in connection with the purchase and
sale of the Notes and the execution and delivery by the Depositor of the
Operative Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of the Depositor and the performance by the
Depositor of its obligations under this Agreement and such of the other
Operative Documents to which it is a party.
(j) The transactions contemplated by this Agreement are in the ordinary
course of business of the Depositor.
(k) The Depositor has received fair consideration and reasonably
equivalent value in exchange for the sale of its interest in the Home Equity
Loans.
(l) The Depositor did not sell any interest in any Home Equity Loan
with an intent to hinder, delay or defraud any of its creditors.
(m) The Depositor is not insolvent, nor will it be made insolvent by
the sale of the Home Equity Loans, nor is the Depositor aware of any pending
insolvency.
(n) On the Closing Date, the Issuer will have good title to each Home
Equity Loan and such other items comprising the Trust Estate free and clear of
any lien.
(o) No material adverse change affecting any security for the Notes has
occurred prior to delivery of and payment for the Notes.
22
(p) The Depositor is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Depositor or legal
documents associated with the transaction contemplated by this Agreement.
(q) To the best knowledge of the Depositor, there has been no material
adverse change in any information submitted by the Depositor in writing to the
Note Insurer with respect to the transactions contemplated by this Agreement
(unless such information was subsequently supplemented in writing).
It is understood and agreed that the representations and warranties set
forth in this Section 2.01 shall survive delivery of the respective Home Equity
Loans to the Issuer.
Upon discovery by any of the Depositor, the Issuer, the Seller, the
Servicer, the Custodian, any Sub-Servicer, the Note Insurer, any Owner or the
Indenture Trustee (each, for purposes of this paragraph, a party) of a breach of
any of the representations and warranties set forth in this Section 2.01 which
materially and adversely affects the interests of the Owners or of the Note
Insurer, the party discovering such breach shall give prompt written notice to
the other parties. As promptly as practicable, but in any event, within 60 days
of its discovery or its receipt of notice of breach, the Depositor shall cure
such breach in all material respects; provided, however, that if the Depositor
can establish to the reasonable satisfaction of the Note Insurer that it is
diligently pursuing remedial action, then the cure period may be extended for an
additional 90 days with the written approval of the Note Insurer.
Section 2.02 Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the
Depositor, the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the
Note Insurer and the Owners that as of the Closing Date:
(a) The Servicer is a federal savings bank duly organized and validly
existing and in good standing under the laws of the United States of America, is
in compliance with the laws of each state in which any Property is located to
the extent necessary to enable it to perform its obligations hereunder and is in
good standing in each jurisdiction in which the nature of its business, or the
properties owned or leased by it make such qualification necessary. The Servicer
has all requisite power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be conducted
and to enter into and discharge its obligations under this Agreement and the
other Operative Documents to which the Servicer is a party.
(b) The execution and delivery of this Agreement and any other
Operative Document to which it is a party by the Servicer and its performance
and compliance with the terms hereof and thereof have been duly authorized by
all necessary action on the part of the Servicer and will not (i) violate the
Servicer's charter or bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or result
in the breach of, any material contract, agreement or other instrument to which
the Servicer is a party or by which the Servicer is bound or (ii) violate any
statute or any order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Servicer or any of its
properties, which in the case of either clause (i) or (ii) will have a material
adverse effect on the Servicer's ability to perform its obligations under this
Agreement or any other Operative Document to which it is a party.
(c) This Agreement and the Operative Documents to which the Servicer is
a party, assuming due authorization, execution and delivery by the other parties
hereto and thereto, each constitutes a valid, legal and binding obligation of
the Servicer, enforceable against it in accordance with the terms hereof and
thereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
23
(d) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which might have consequences that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer or its properties or will have consequences that would materially and
adversely affect its performance hereunder or under the other Operative
Documents to which the Servicer is a party.
(e) No litigation is pending with respect to which the Servicer has
received service of process or, to the best of the Servicer's knowledge,
threatened against the Servicer which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Document
or that would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect the validity or the
enforceability of the Home Equity Loans or its performance hereunder and the
other Operative Documents to which the Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Servicer contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement in the third
and fourth paragraphs under the heading "The Servicer -- General" and under the
heading "The Servicer -- Delinquency, Loan Loss and Foreclosure Information" are
true and correct in all material respects, and such statements do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and delivery by
the Servicer of the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and effect on
the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the other Operative Documents on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the ordinary
course of business of the Servicer.
(j) To the best knowledge of the Servicer, there has been no material
adverse change in any information submitted by the Servicer in writing to the
Note Insurer with respect to the transactions contemplated by this Agreement
(unless such information was subsequently supplemented in writing).
It is understood and agreed that the representations and warranties set
forth in this Section 2.02 shall survive delivery of the Home Equity Loans to
the Issuer.
Upon discovery by any of the Servicer, the Depositor, the Seller, the
Issuer, the Custodian, any Sub-Servicer, the Note Insurer, any Owner or the
Indenture Trustee (each, for purposes of this paragraph, a party) of a breach of
any of the representations and warranties set forth in this Section 2.02 which
24
materially and adversely affects the interests of the Owners or of the Note
Insurer, the party discovering such breach shall give prompt written notice to
the other parties. As promptly as practicable, but in any event, within 60 days
of its discovery or its receipt of notice of breach, the Servicer shall cure
such breach in all material respects and, upon the Servicer's continued failure
to cure such breach, may thereafter be removed by the Note Insurer or by the
Indenture Trustee with the written consent of the Note Insurer pursuant to
Section 4.20 hereof; provided, however, that if the Servicer can establish to
the reasonable satisfaction of the Note Insurer that it is diligently pursuing
remedial action, then the cure period may be extended for an additional 90 days
with the written approval of the Note Insurer.
Section 2.03 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Servicer,
the Issuer, the Depositor, the Owner Trustee, the Indenture Trustee, the Note
Insurer and the Owners that as of the Closing Date:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and is in good standing in
each jurisdiction in which the nature of its business, or the properties owned
or leased by it make such qualification necessary. The Seller has all requisite
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its performance and
compliance with the terms of this Agreement and the other Operative Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of the Seller and will not violate the Seller's Articles of
Incorporation and Bylaws or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in a
breach of, any material contract, agreement or other instrument to which the
Seller is a party or by which the Seller is bound or violate any statute or any
order, rule or regulation of any court, governmental agency or body or other
tribunal having jurisdiction over the Seller or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Seller is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Seller or its properties or
the consequences of which would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Seller is a
party.
(e) No litigation is pending with respect to which the Seller has
received service of process or, to the best of the Seller's knowledge,
threatened against the Seller which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Seller or its properties
or might have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Seller is a party.
25
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Seller contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement which
describe the Seller or matters or activities for which the Seller is responsible
in accordance with the Operative Documents or which are attributable to the
Seller therein are true and correct in all material respects, and the Prospectus
Supplement does not contain any untrue statement of a material fact with respect
to the Seller required to be stated therein or necessary to make the statements
contained therein with respect to the Seller, in light of the circumstances
under which they were made, not misleading. The Prospectus Supplement does not
contain any untrue statement of a material fact required to be stated therein or
omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Seller that materially adversely
affects or in the future may (so far as the Seller can now reasonably foresee)
materially adversely affect the Seller or the Home Equity Loans that has not
been set forth in the Prospectus Supplement.
(h) Upon the receipt of each Home Equity Loan (including the related
Mortgage Note) and other items of the Trust Estate by the Indenture Trustee, the
Issuer will have good title to such Home Equity Loan (including the related
Mortgage Note) and such other items of the Trust Estate free and clear of any
lien, charge, mortgage, encumbrance or rights of others, except as set forth in
Section 2.04(b)(ix) (other than liens which will be simultaneously released (and
except for the lien of the Indenture)).
(i) Neither the Seller nor any affiliate thereof will report on any
financial statement any part of the Servicing Fee as an adjustment to the sales
price of the Home Equity Loans.
(j) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Seller makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the Notes
and the execution and delivery by the Seller of the Operative Documents to which
it is a party, have been duly taken, given or obtained, as the case may be, are
in full force and effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either the
time within which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and the other Operative Documents on the part of
the Seller and the performance by the Seller of its obligations under this
Agreement and such of the other Operative Documents to which it is a party.
(k) The origination practices used by the Seller with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the mortgage lending business.
(l) The transactions contemplated by this Agreement are in the ordinary
course of business of the Seller.
(m) Neither the Owner Trustee nor the Seller has any obligation to
register the Trust as an investment company under the Investment Company Act of
1940, as amended.
(n) The Seller is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans or the transfer of the servicing rights
relating to the Home Equity Loans to the Servicer, nor is the Seller aware of
any pending insolvency.
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(o) The Seller received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Home Equity Loans and for
the transfer of the servicing rights relating to the Home Equity Loans to the
Servicer.
(p) The Seller did not sell any interest in any Home Equity Loan or the
servicing rights relating to the Home Equity Loans with any intent to hinder,
delay or defraud any of its creditors.
(q) No material adverse change affecting any security for the Notes has
occurred prior to delivery of and payment for the Notes.
(r) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Seller or legal
documents associated with the transaction contemplated by this Agreement.
(s) To the best knowledge of the Seller, there has been no material
adverse change in any information submitted by the Seller in writing to the Note
Insurer with respect to the transactions contemplated by this Agreement (unless
such information was subsequently supplemented in writing).
(t) The Seller agrees to indemnify the Owner Trustee in accordance with
Section 8.2 of the Trust Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 2.03 shall survive delivery of the respective Home Equity
Loans to the Indenture Trustee.
Upon discovery by any of the Issuer, the Depositor, the Servicer, the
Custodian, any Sub-Servicer, any Owner, the Seller, the Note Insurer or the
Indenture Trustee (each, for purposes of this paragraph, a "party") of a breach
of any of the representations and warranties set forth in this Section 2.03
which materially and adversely affects the interests of the Owners or the
interests of the Note Insurer, the party discovering such breach shall give
prompt written notice to the other parties. The Seller hereby covenants and
agrees that within 60 days of its discovery or its receipt of notice of breach,
it shall cure such breach in all material respects or, with respect to a breach
of clause (h) above, the Seller may (or may cause an affiliate of the Seller to)
on or prior to the second Monthly Remittance Date next succeeding such discovery
or receipt of notice (i) substitute in lieu of any Home Equity Loan not in
compliance with clause (h) a Qualified Replacement Mortgage and, if the
outstanding principal amount of such Qualified Replacement Mortgage as of the
applicable Replacement Cut-Off Date is less than the Loan Balance of such Home
Equity Loan as of such Replacement Cut-Off Date, deliver an amount (a
"Substitution Amount") equal to such difference together with the aggregate
amount of (A) all Delinquency Advances and Servicing Advances theretofore made
with respect to such Home Equity Loan and (B) all Delinquency Advances which the
Servicer has theretofore failed to remit with respect to such Home Equity Loan
to the Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Home Equity Loan from the Issuer at the Loan Purchase Price, which
purchase price shall be delivered to the Servicer for deposit in the Principal
and Interest Account. The Seller shall deliver an Officer's Certificate to the
Indenture Trustee and the Note Insurer concurrently with the delivery of a
Qualified Replacement Mortgage pursuant to Sections 2.03, 2.04 and 2.06 stating
that such Home Equity Loan meets the requirements of the definition of a
Qualified Replacement Mortgage, that such Home Equity Loan conforms to the
representations and warranties set out in Section 2.03 and that all other
conditions to the substitution thereof have been satisfied. Any Home Equity Loan
as to which repurchase or substitution was delayed pursuant to this Section
shall be repurchased or substituted for (subject to compliance with Section
2.03, 2.04 or 2.06, as the case may be) upon the occurrence of a default or
imminent default with respect to such Home Equity Loan.
27
Section 2.04 Covenants of Seller to Take Certain Actions with Respect
to the Home Equity Loans in Certain Situations.
(a) Upon the discovery by the Issuer, the Depositor, the Seller, the
Servicer, the Note Insurer, any Sub-Servicer, any Owner, the Custodian or the
Indenture Trustee that the representations and warranties set forth in clause
(b) below were untrue in any material respect as of the Closing Date with the
result that the interests of the Owners or of the Note Insurer are materially
and adversely affected, the party discovering such breach shall give prompt
written notice to the other parties. Upon the earliest to occur of the Seller's
discovery, its receipt of notice of breach from any one of the other parties or
such time as a situation resulting from an existing statement which is untrue
materially and adversely affects the interests of the Owners or of the Note
Insurer, the Seller hereby covenants and warrants that it shall promptly cure
such breach in all material respects or subject to the last three sentences of
Section 2.03 it shall on or before the second Monthly Remittance Date next
succeeding such discovery, receipt of notice or such time (i) substitute in lieu
of each Home Equity Loan which has given rise to the requirement for action by
the Seller a Qualified Replacement Mortgage and deliver the Substitution Amount
to the Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Home Equity Loan from the Trust at a purchase price equal to the
Loan Purchase Price thereof, which purchase price shall be delivered to the
Servicer for deposit in the Principal and Interest Account; provided, however,
that if the Seller can establish to the reasonable satisfaction of the Note
Insurer that it is diligently pursuing remedial action, the period of time in
which the Seller must substitute a Qualified Replacement Mortgage or purchase
such Home Equity Loan may be extended for an additional 30 days with the written
approval of the Note Insurer. It is understood and agreed that the obligation of
the Seller so to substitute or purchase any Home Equity Loan as to which such a
statement set forth below is untrue in any material respect and has not been
remedied shall constitute the sole remedy respecting a discovery of any such
statement which is untrue in any material respect in this Section 2.04 available
to the Owners and the Indenture Trustee.
(b) The Seller hereby represents, warrants and covenants to the
Indenture Trustee, the Issuer, the Servicer, the Note Insurer and the Owners
that as of the Closing Date:
(i) The information with respect to each Home Equity Loan set
forth in the related Schedule of Home Equity Loans is true and
correct as of the Cut-Off Date;
(ii) All the original or certified documentation set forth in
Section 2.05 (including all material documents related thereto) with
respect to each Home Equity Loan has been or will be delivered to
the Custodian on behalf of the Indenture Trustee on the Closing Date
or as otherwise provided in Section 2.05;
(iii) Each Home Equity Loan being transferred to the Trust is
secured by a Mortgage;
(iv) Each Property is improved by a single (one-to-four)
family residential dwelling (except for 4.30% and 3.03% of the Home
Equity Loans in the amounts of $22,736,450.08 and $2,150,586.72 in
Pool I and Pool II, respectively, that are condominiums, planned
unit developments, townhouses, manufactured housing, or multifamily
residential), provided that no more than 1.55% of the Properties in
Pool I are secured by manufactured homes, each of which is
considered to be real property under the applicable local law;
(v) As of the Cut-Off Date, no Home Equity Loan has a
Loan-to-Value Ratio in excess of 90%, except for 2.05% and 3.89%
Home Equity Loans in the amounts of $10,834,439.56 and $2,764,014.19
in Pool I and Pool II, respectively, that had a Loan-to-Value Ratio
not greater than 100%;
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(vi) Each Home Equity Loan is being serviced by the Servicer
in accordance with the terms of this Agreement;
(vii) The Mortgage Note related to each Pool I Home Equity
Loan bears a Coupon Rate of at least 6.00% per annum and the
Mortgage Note related to each Pool II Home Equity Loan bears a
Coupon Rate of at least 6.625% per annum;
(viii) Each Mortgage Note with respect to the Home Equity
Loans will provide for a schedule of substantially level and equal
Monthly Payments which are sufficient to amortize fully the
principal balance of such Mortgage Note on or before its maturity
date except for 1,825 and 109 Home Equity Loans in Pool I and Pool
II, respectively, in the amounts of $131,164,853.34 and
$23,237,691.33 representing 24.79% and 32.73% of the aggregate Loan
Balance of the Home Equity Loans in Pool I and Pool II,
respectively, as of the Cut-Off Date, which may provide for a
"balloon" payment due at the end up to the 20th year;
(ix) As of the Closing Date, each Mortgage is a valid and
subsisting first or second lien of record (or is in the process of
being recorded) on the Property subject in the case of any Second
Mortgage Loan only to a Senior Lien on such Property as noted on
Schedule I attached hereto subject, in all cases, to the exceptions
to title set forth in the title insurance policy or attorney's
opinion of title, with respect to the related Home Equity Loan,
which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such
other exceptions to which similar properties are commonly subject
and which do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be
provided by such Mortgage;
(x) Immediately prior to the transfer and assignment of the
Home Equity Loans by the Seller to the Depositor and by the
Depositor to the Issuer herein contemplated, the Seller and the
Depositor, as the case may be, held good and indefeasible title to,
and was the sole owner of, each Home Equity Loan (including the
related Mortgage Note) subject to no liens, charges, mortgages,
encumbrances or rights of others except as set forth in clause (ix)
or other liens which will be released simultaneously with such
transfer and assignment; and immediately upon the transfer and
assignment herein contemplated, the Issuer will hold good and
indefeasible title to, and be the sole owner of, each Home Equity
Loan subject to no liens, charges, mortgages, encumbrances or rights
of others except as set forth in paragraph (ix) or other liens which
will be released simultaneously with such transfer and assignment
and except for the lien of the Indenture;
(xi) As of the opening of business on the Cut-Off Date, no
Home Equity Loan is 30 days or more Delinquent except that there are
4.58%and 3.20% Home Equity Loans with an outstanding aggregate Loan
Balance of $24,233,202.76 and $2,274,900.94 in Pool I and Pool II,
respectively, that are 30 or more days Delinquent but not more than
59 days Delinquent and there are 0.80% and 0.14% Home Equity Loans
with an aggregate loan balance of $4,217,080.24 and $97,958.45 in
Pool I and Pool II, respectively, that are 60 or more days
Delinquent but not more than 89 days Delinquent;
(xii) There is no delinquent tax or assessment lien on any
Property, and each Property is free of substantial damage and is in
good repair;
(xiii) There is no valid and enforceable offset, defense or
counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of
or interest on such Mortgage Note;
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(xiv) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to,
or equal with, the lien of the related Mortgage except those which
are insured against by any title insurance policy referred to in
paragraph (xvi) below;
(xv) Each Home Equity Loan at the time it was made complied in
all material respects with applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act (as amended by the Xxxxxx Community Development
and Regulatory Improvement Act of 1994) and other consumer
protection laws, usury, equal credit opportunity, disclosure and
recording laws;
(xvi) With respect to each Home Equity Loan either (a) an
attorney's opinion of title has been obtained but no lender's title
insurance policy has been obtained, or (b) a lender's title
insurance policy, issued in standard American Land Title Association
form by a title insurance company authorized to transact business in
the state in which the related Property is situated, in an amount at
least equal to the original balance of such Home Equity Loan
together, in the case of a Second Mortgage Loan, with the
then-original principal amount of the mortgage note relating to the
Senior Lien, insuring the mortgagee's interest under the related
Home Equity Loan as the holder of a valid first or second mortgage
lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the
character referred to in paragraph (ix) above, was effective on the
date of the origination of such Home Equity Loan, and, as of the
Closing Date, such policy is valid and thereafter such policy shall
continue in full force and effect (provided that an attorney's
opinion of title without a lender's title insurance policy has been
obtained with respect to no more than 2% of the Original Aggregate
Loan Balance);
(xvii) The improvements upon each Property are covered by a
valid and existing hazard insurance policy with a carrier generally
acceptable to the Servicer that provides for fire and extended
coverage representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Equity Loan
(together, in the case of a Second Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (B) the minimum
amount required to compensate for damage or loss on a replacement
cost basis or (C) the full insurable value of the Property;
(xviii) If any Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form
meeting the requirements of the current guidelines of the Flood
Insurance Administration is in effect with respect to such Property
with a carrier generally acceptable to the Servicer in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Home Equity Loan (together, in the
case of a Second Mortgage Loan, with the outstanding principal
balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood
Disaster Protection Act of 1973;
(xix) Each Mortgage and Mortgage Note are the legal, valid and
binding obligation of the maker thereof and are enforceable in
accordance with their terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law), and all parties to each
Home Equity Loan had full legal capacity to execute all documents
relating to such Home Equity Loan and convey the estate therein
purported to be conveyed;
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(xx) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Indenture Trustee in any Insurance Policies
applicable to any Home Equity Loans delivered by the Seller
including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Indenture Trustee;
(xxi) As of the Closing Date, no more than 0.28% and 1.31% of
the aggregate Loan Balance of the Home Equity Loans in Pool I and
Pool II, respectively, will be secured by Properties located within
any single zip code area;
(xxii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage have been delivered for recordation or have been
recorded in the appropriate jurisdictions wherein such recordation
is necessary to perfect the lien thereof as against creditors of or
purchasers from the Seller (or, subject to Section 2.05 hereof, are
in the process of being recorded); each Mortgage and assignment of
Mortgage is in recordable form and is acceptable for recording under
the laws of the jurisdiction in which the property securing such
Mortgage is located;
(xxiii) The terms of each Mortgage Note and each Mortgage have
not been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect
the interest of the Owners and the Note Insurer and which has been
delivered to the Indenture Trustee. The substance of any such
alteration or modification is reflected on the related Schedule of
Home Equity Loans;
(xxiv) The proceeds of each Home Equity Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee
to make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making or closing or
recording such Home Equity Loans were paid;
(xxv) The related Mortgage Note is not and has not been
secured by any collateral, pledged account or other security except
the lien of the corresponding Mortgage;
(xxvi) No Home Equity Loan has a shared appreciation feature,
or other contingent interest feature;
(xxvii) Each Property is located in the state identified in
the respective Schedule of Home Equity Loans and consists of one or
more parcels of real property with a residential dwelling erected
thereon;
(xxviii) Each Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
related Home Equity Loan in the event the related Property is sold
without the prior consent of the mortgagee thereunder;
(xxix) Any advances made after the date of origination of a
Home Equity Loan but prior to the Cut-Off Date have been
consolidated with the outstanding principal amount secured by the
related Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term reflected on
the Schedule of Home Equity Loans. The consolidated principal amount
does not exceed the original principal amount of the related Home
Equity Loan.
31
No Mortgage Note permits or obligates the Servicer to make future
advances to the related Mortgagor at the option of the Mortgagor;
(xxx) There is no proceeding pending or threatened for the
total or partial condemnation of any Property, nor is such a
proceeding currently occurring, and each Property is undamaged by
waste, fire, water, flood, earthquake or earth movement;
(xxxi) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie
wholly within the boundaries and building restriction lines of such
Property, and no improvements on adjoining properties encroach upon
such Property, and are stated in the title insurance policy and
affirmatively insured;
(xxxii) No improvement located on or being part of any
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of each Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities and such Property is lawfully occupied under the
applicable law;
(xxxiii) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Owners or the Indenture Trust to the trustee under
the deed of trust, except in connection with a trustee's sale after
default by the related Mortgagor;
(xxxiv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder
thereof adequate for the realization against the related Property of
the benefits of the security, including (A) in the case of a
Mortgage designated as a deed of trust, by trustee's sale and (B)
otherwise by judicial foreclosure. There is no homestead or other
exemption other than any applicable Mortgagor redemption rights
available to the related Mortgagor which would materially interfere
with the right to sell the related Property at a trustee's sale or
the right to foreclose the related Mortgage;
(xxxv) Other than with respect to the Delinquencies noted in
item (xi) hereof, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage
Note and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and neither the
Servicer nor the Seller has waived any default, breach, violation or
event of acceleration;
(xxxvi) No instrument of release or waiver has been executed
in connection with any Home Equity Loan, and no Mortgagor has been
released, in whole or in part, except in connection with an
assumption agreement which has been approved by the primary mortgage
guaranty insurer, if any, and which has been delivered to the
Custodian;
(xxxvii) The maturity date of each Second Mortgage Loan is at
least 12 months prior to the maturity date of the related first home
equity loan if such first home equity loan provides for a balloon
payment.
(xxxviii) Each Home Equity Loan was underwritten in accordance
with the credit underwriting guidelines of the Seller as set forth
in the Seller's Policies and Procedures Manual,
32
as in effect on the date hereof and such Manual conforms in all
material respects to the description thereof set forth in the
Prospectus Supplement;
(xxxix) Each Home Equity Loan was originated based upon a full
appraisal, which included an interior inspection of the subject
property;
(xl) The Home Equity Loans were not selected for sale to the
Issuer by the Seller on any basis intended to adversely affect the
Issuer;
(xli) No more than 5.66% and 1.31% of the aggregate Loan
Balance of the Home Equity Loans in Pool I and Pool II,
respectively, are secured by Properties that are non-owner occupied
Properties (i.e., investor-owned and vacation);
(xlii) The Seller has no actual knowledge that there exist any
hazardous substances, hazard wastes or solid wastes, as such terms
are defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation on
any Property;
(xliii) The Seller was properly licensed or otherwise
authorized, to the extent required by applicable law, to originate
or purchase each Home Equity Loan and the consummation of the
transactions herein contemplated, including, without limitation, the
receipt of interest by the Owners and the ownership of the Home
Equity Loans by the Issuer will not involve the violation of such
laws;
(xliv) With respect to each Property subject to a ground lease
(i) the current ground lessor has been identified and all ground
rents which have previously become due and owing have been paid;
(ii) the ground lease term extends, or is automatically renewable,
for at least five years beyond the maturity date of the related Home
Equity Loan; (iii) the ground lease has been duly executed and
recorded; (iv) the amount of the ground rent and any increases
therein are clearly identified in the lease and are for
predetermined amounts at predetermined times; (v) the ground rent
payment is included in the borrower's monthly payment as an expense
item in determining the qualification of the borrower for such Home
Equity Loan; (vi) the Issuer has the right to cure defaults on the
ground lease; and (vii) the terms and conditions of the leasehold do
not prevent the free and absolute marketability of the Property. As
of the Cut-Off Date, the Loan Balance of the Home Equity Loans with
related Properties subject to ground leases does not exceed 1% of
the Original Aggregate Loan Balance;
(xlv) As of the Closing Date, the Seller has not received a
notice of default of any First Mortgage Loan secured by any Property
which has not been cured by a party other than the Seller.
(xlvi) No Home Equity Loan is subject to a temporary rate
reduction pursuant to a buydown program;
(xlvii) No more than 14.91% and 32.42% of the aggregate Loan
Balance of the Home Equity Loans in Pool I and Pool II,
respectively, was originated under the Seller's non-income
verification program;
(xlviii) The Coupon Rate on each Home Equity Loan is
calculated on the basis of a year of 360 days with twelve 30-day
months;
33
(xlix) Neither the operation of any of the terms of each
Mortgage Note and each Mortgage nor the exercise of any right
thereunder will render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, nor subject it to any right of
rescission, set-off, counterclaim or defense, including, without
limitation, the defense of usury;
(l) Any adjustment to the Coupon Rate on an adjustable rate
Home Equity Loan has been legal, proper and in accordance with the
terms of the related Mortgage Note;
(li) No Home Equity Loan is subject to negative amortization;
(lii) As of the Cut-Off Date, the FTC holder regulation
provided in 16 C.F.R. Part 433 does not apply to any of the Home
Equity Loan; and
(liii) No Home Equity Loan in Loan Pool I has a Loan Balance
in excess of the maximum dollar loan amount limitations for
residential mortgage loans applicable to Xxxxxx Xxx as of the
Cut-Off Date.
(c) In the event that any Qualified Replacement Mortgage is delivered
by the Seller to the Trust pursuant to Section 2.03, Section 2.04 or Section
2.06 hereof, the Seller shall be obligated to take the actions described in
Section 2.04(a) with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the Seller, the Servicer, the Note Insurer, any
Sub-Servicer, the Custodian or the Indenture Trustee that the statements set
forth in subsection (b) above are untrue in any material respect on the date
such Qualified Replacement Mortgage is conveyed to the Trust such that the
interests of the Owners or the Note Insurer in the related Qualified Replacement
Mortgage are materially and adversely affected; provided, however, that for the
purposes of this subsection (c) the statements in subsection (b) above referring
to items "as of the Cut-Off Date" or "as of the Closing Date" shall be deemed to
refer to such items as of the date such Qualified Replacement Mortgage is
conveyed to the Trust. Notwithstanding the fact that a representation contained
in subsection (b) above may be limited to the Seller's or the Depositor's
knowledge, such limitation shall not relieve the Seller of its repurchase
obligation under this Section and Section 2.05 hereof.
(d) It is understood and agreed that the covenants set forth in this
Section 2.04 shall survive delivery of the respective Home Equity Loans
(including Qualified Replacement Mortgages) to the Indenture Trustee or the
Custodian.
(e) Neither the Indenture Trustee nor the Servicer shall have any
duty to conduct any affirmative investigation other than as specifically set
forth in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Home Equity Loan pursuant to this Article II
or the eligibility of any Home Equity Loan for the purpose of this Agreement.
Section 2.05 Conveyance of the Home Equity Loans and Qualified
Replacement Mortgages.
(a) On the Closing Date, the Seller, concurrently with the execution
and delivery hereof, transfers, assigns, sets over and otherwise conveys without
recourse, to the Depositor and the Depositor, concurrently with the execution
and delivery hereof, transfers, assigns, sets over and otherwise conveys without
recourse, to the Issuer, all of its respective right, title and interest in and
to the Home Equity Loans (other than payments of principal and interest due on
the Home Equity Loans on or before the Cut-Off Date). The transfer by the Seller
to the Depositor and by the Depositor to the Issuer of the Home Equity Loans set
forth on the Schedule of Home Equity Loans to the Issuer is absolute and is
intended by all parties hereto to be treated as a sale by the Seller to the
Depositor and by the Depositor to the Issuer. Pursuant to the
34
Indenture, the Issuer will pledge the Trust Estate to the Indenture Trustee to
be held on behalf of the Owners of the Notes.
In the event that such conveyance is deemed to be a loan, the parties
intend that the Seller shall be deemed to have granted to the Depositor and the
Depositor shall be deemed to have granted to the Issuer a security interest in
the Trust Estate, and that this Agreement shall constitute a security agreement
under applicable law.
In connection with the sale, transfer, assignment, and conveyance from
the Seller to the Depositor, the Seller has filed, in the appropriate office or
offices in the States of Delaware and Florida, a UCC-1 financing statement
executed by the Seller as debtor, naming the Depositor as secured party and
listing the Home Equity Loans, and the other property described above as
collateral. The characterization of the Seller as the debtor and the Depositor
as the secured party in such financing statements is solely for protective
purposes and shall in no way be construed as being contrary to the intent of the
parties that this transaction be treated as a sale of the Seller's entire right,
title and interest in the Trust Estate. In connection with such filing, the
Seller agrees that it shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Depositor's interest
in the Trust Estate.
In connection with the sale, transfer, assignment, and conveyance from
the Depositor to the Issuer, the Depositor has filed, in the appropriate office
or offices in the States of Delaware and Florida a UCC-1 financing statement
executed by the Depositor as debtor, naming the Issuer as secured party and
listing the Home Equity Loans, and the other property described above as
collateral. The characterization of the Depositor as a debtor and the Issuer as
the secured party in such financing statements is solely for protective purposes
and shall in no way be construed as being contrary to the intent of the parties
that this transaction be treated as a sale of the Depositor's entire right,
title and interest in the Trust Estate. In connection with such filing, the
Depositor agrees that it shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Issuer's, the Owners'
and the Note Insurer's interest in the Trust Estate.
In connection with the pledge of the Trust Estate from the Issuer to
the Indenture Trustee, on behalf of the Owners of the Notes, the Issuer has
filed, in the appropriate office or offices in the State of Delaware, a UCC-1
Financing Statement executed by the Issuer as debtor, naming the Indenture
Trustee, on behalf of the Owners of the Notes, as the secured party and listing
the Home Equity Loans and the other property described above as collateral. In
connection with such filing, the Issuer agrees that it shall cause to be filed
all necessary continuation statements thereof and to take or cause to be taken
such actions and execute such documents as are necessary to perfect and protect
the Indenture Trustee's interest in the Trust Estate on behalf of the Owners of
the Notes.
(b) In connection with the transfer and assignment of the Home Equity
Loans, the Seller agrees to:
(i) deliver without recourse to the Custodian, on behalf of
the Indenture Trustee, on the Closing Date with respect to each Home
Equity Loan, (A) the original Mortgage Note endorsed in blank or to
the order of "The Chase Manhattan Bank, as Indenture Trustee for the
IMC Home Equity Loan Asset Backed Notes, Series 1998-7A and Series
1998-7B without recourse," (B) (I) the original title insurance
commitment or a copy thereof certified as a true copy by the closing
agent or the Seller, and when available, the original title insurance
policy or a copy certified by the issuer of the title insurance
policy or (II) the attorney's opinion of title, (C) originals or
copies of all intervening assignments certified as true copies by the
closing agent or the Seller, showing a complete chain of title from
origination to the Issuer, if any, including warehousing assignments,
35
if recorded, (D) originals of all assumption and modification
agreements, if any and (E) either: (1) the original Mortgage, with
evidence of recording thereon (if such original Mortgage has been
returned to the Seller from the applicable recording office) or a
copy of the Mortgage certified as a true copy by the closing agent or
the Seller, or (2) a copy of the Mortgage certified by the public
recording office in those instances where the original recorded
Mortgage has been lost or retained by the recording office;
(ii) cause, within 30 days following the Closing Date,
assignments of the Mortgages to The Chase Manhattan Bank, as
Indenture Trustee for the "The Chase Manhattan Bank, as the Indenture
Trustee for the IMC Home Equity Loan Asset Backed Notes, Series
1998-7A and Series 1998-7B without recourse," to be submitted for
recording in the appropriate jurisdictions; provided, however, that
the Seller shall not be required to prepare an assignment for any
Mortgage described in subsection (b)(i)(E)(2) above with respect to
which the original recording information has not yet been received
from the recording office until such information is received;
provided, further, that the Seller shall not be required to record an
assignment of a Mortgage if the Seller furnishes to the Indenture
Trustee and the Note Insurer, on or before the Closing Date, at the
Seller's expense, an opinion of counsel with respect to the relevant
jurisdiction that such recording is not necessary to perfect the
Indenture Trustee's interest in the related Home Equity Loans (in
form and substance satisfactory to the Indenture Trustee, and the
Note Insurer and the Rating Agencies); provided further, however,
notwithstanding the delivery of any legal opinions, (A) each
assignment of Mortgage shall be recorded upon the earliest to occur
of: (i) reasonable direction by the Note Insurer or (ii) the
occurrence of a Servicer Termination Event and (B) the assignment of
Mortgage relating to a specified Home Equity Loan shall be recorded
upon instruction by the Servicer that such recordation is required by
the Servicer as part of its loan resolution process with respect to
such Home Equity Loan; and
(iii) deliver the title insurance policy or title searches,
the original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments
(other than unrecorded warehouse assignments), to the Custodian, on
behalf of the Indenture Trustee, within 15 days of receipt thereof by
the Seller (but in any event, with respect to any Mortgage as to
which original recording information has been made available to the
Seller, within one year after the Closing Date.
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, the assignment of a Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Seller and the Depositor shall be
deemed to have satisfied their obligations hereunder upon delivery to the
Custodian, on behalf of the Indenture Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Not later than ten days following the end of the 30-day period referred
in clause (ii) of this subsection (b), the Seller shall deliver to the
Custodian, on behalf of the Indenture Trustee a list of all Mortgages for which
no Mortgage assignment has yet been submitted for recording by the Seller, which
list shall state the reason why the Seller has not yet submitted such Mortgage
assignments for recording. With respect to any Mortgage assignment disclosed on
such list as not yet submitted for recording for a reason other than a lack of
original recording information, the Custodian, on behalf of the Indenture
Trustee shall make an immediate demand on the Seller to prepare such Mortgage
assignments, and shall inform the Note Insurer, in writing, of the Seller's
failure to prepare such Mortgage assignments. Thereafter, the Custodian, on
behalf of the Indenture Trustee shall cooperate in executing any documents
prepared by the Note Insurer and submitted to the Custodian, on behalf of the
Indenture Trustee in connection with this provision. Following the expiration of
each 30-day period referred to in clause (ii) of this subsection (b), the Seller
shall
36
promptly prepare a Mortgage assignment for any Mortgage for which original
recording information is subsequently received by the Seller, and shall promptly
deliver a copy of such Mortgage assignment to the Custodian, on behalf of the
Indenture Trustee. The Seller agrees that it will follow its normal servicing
procedures and attempt to obtain the original recording information necessary to
complete a Mortgage assignment. In the event that the Seller is unable to obtain
such recording information with respect to any Mortgage prior to the end of the
18th calendar month following the Closing Date and has not provided to the
Custodian, on behalf of the Indenture Trustee a Mortgage assignment with
evidence of recording thereon relating to the assignment of such Mortgage to the
Indenture Trustee, the Custodian, on behalf of the Indenture Trustee shall
notify the Seller of the Seller's obligation to provide a completed assignment
(with evidence of recording thereon) on or before the end of the 20th calendar
month following the Closing Date. A copy of such notice shall be sent by the
Custodian, on behalf of the Indenture Trustee to the Note Insurer. If no such
completed assignment (with evidence of recording thereon) is provided before the
end of such 20th calendar month, the related Home Equity Loan shall be deemed to
have breached the representation contained in clause (xxii) of Section 2.04(b)
hereof; provided, however, that if as of the end of such 20th calendar month the
Seller demonstrates to the satisfaction of the Note Insurer that it is
exercising its best efforts to obtain such completed assignment and, during each
month thereafter until such completed assignment is delivered to the Custodian,
on behalf of the Indenture Trustee, the Seller continues to demonstrate to the
satisfaction of the Note Insurer that it is exercising its best efforts to
obtain such completed assignment, the related Home Equity Loan will not be
deemed to have breached such representation. The requirement to deliver a
completed assignment with evidence of recording thereon will be deemed satisfied
upon delivery of a copy of the completed assignment certified by the applicable
public recording office.
Copies of all Mortgage assignments received by the Custodian, on behalf
of the Indenture Trustee shall be retained in the related File.
All recording required pursuant to this Section 2.05 shall be
accomplished at the expense of the Seller.
(c) In the case of Home Equity Loans which have been prepaid in full
after the Cut-Off Date and prior to the Closing Date, the Seller, in lieu of the
foregoing, will deliver within six (6) days after the Closing Date to the
Indenture Trustee a certification of an Authorized Officer in the form set forth
in Exhibit A.
(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Depositor and the Depositor shall transfer, assign, set
over and otherwise convey without recourse, to the Issuer all right, title and
interest of the Seller in and to any Qualified Replacement Mortgage delivered to
the Custodian, on behalf of the Indenture Trustee on behalf of the Issuer by the
Seller pursuant to Section 2.03, 2.04 or 2.06 hereof and all its right, title
and interest to principal and interest due on such Qualified Replacement
Mortgage after the applicable Replacement Cut-Off Date; provided, however, that
the Seller shall reserve and retain all right, title and interest in and to
payments of principal and interest due on such Qualified Replacement Mortgage on
or prior to the applicable Replacement Cut-Off Date.
(e) As to each Home Equity Loan released from the lien of the Indenture
in connection with the conveyance of a Qualified Replacement Mortgage therefor,
the Indenture Trustee will transfer, assign, set over and otherwise convey
without recourse or representation, on the Seller's order, all of its and the
Issuer's right, title and interest in and to such released Home Equity Loan and
all the Issuer's right, title and interest to principal and interest due on such
released Home Equity Loan after the applicable Replacement Cut-Off Date;
provided, however, that the Issuer shall reserve and retain all right, title and
interest in and to payments of principal and interest due on such released Home
Equity Loan on or prior to the applicable Replacement Cut-Off Date.
37
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Issuer, the Seller agrees to (i) deliver without
recourse to the Custodian, on behalf of the Indenture Trustee on the date of
delivery of such Qualified Replacement Mortgage the original Mortgage Note
relating thereto, endorsed in blank or to the order of "The Chase Manhattan
Bank, as Indenture Trustee for IMC Home Equity Loan Asset Backed Notes, Series
1998-7A and Series 1998-7B without recourse," (ii) cause promptly to be recorded
an assignment in the appropriate jurisdictions, (iii) deliver the original
Qualified Replacement Mortgage and such recorded assignment, together with
original or duly certified copies of any and all prior assignments, to the
Custodian, on behalf of the Indenture Trustee within 15 days of receipt thereof
by the Seller (but in any event within 60 days after the date of conveyance of
such Qualified Replacement Mortgage) and (iv) deliver the title insurance
policy, or where no such policy is required to be provided under Section
2.05(b)(i)(B), the other evidence of title in same required in Section
2.05(b)(i)(B).
(g) As to each Home Equity Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Custodian, on behalf
of the Indenture Trustee shall deliver on the date of conveyance of such
Qualified Replacement Mortgage and on the order of the Seller (i) the original
Mortgage Note relating thereto, endorsed without recourse or representation, to
the Seller, (ii) the original Mortgage so released and all assignments relating
thereto and (iii) such other documents as constituted the File with respect
thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Seller shall prepare a substitute assignment or cure such defect, as the
case may be, and thereafter cause each such assignment to be duly recorded.
Section 2.06 Acceptance by Indenture Trustee; Certain Substitutions of
Home Equity Loans; Certification by Indenture Trustee.
(a) The Indenture Trustee agrees to execute and deliver and to cause
the Custodian to execute and deliver on the Closing Date an acknowledgment of
receipt of the items delivered by the Seller or the Depositor in the forms
attached as Exhibit B-1 and Exhibit B-2 hereto, and declares through the
Custodian that it will hold such documents and any amendments, replacement or
supplements thereto, as well as any other assets included in the definition of
Trust Estate and delivered to the Custodian, on behalf of the Indenture Trustee,
as Indenture Trustee in trust upon and subject to the conditions set forth
herein and in the Indenture for the benefit of the Owners. The Indenture Trustee
agrees, for the benefit of the Owners, to cause the Custodian to review such
items within 45 days after the Closing Date (or, with respect to any Qualified
Replacement Mortgage, within 45 days after the assignment thereof) and to
deliver to the Depositor, the Seller, the Servicer, the Issuer and the Note
Insurer a certification in the form attached hereto as Exhibit C (a "Pool
Certification") to the effect that, as to each Home Equity Loan listed in the
Schedule of Home Equity Loans (other than any Home Equity Loan paid in full or
any Home Equity Loan specifically identified in such Pool Certification as not
covered by such Pool Certification), (i) all documents required to be delivered
to it pursuant to Section 2.05(b)(i) of this Agreement are in its possession,
(ii) such documents have been reviewed by it and have not been mutilated,
damaged or torn and relate to such Home Equity Loan and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Schedule of Home Equity Loans accurately reflects the information set forth
in the File. Neither the Custodian on behalf of the Indenture Trustee, nor the
Indenture Trustee shall have any responsibility for reviewing any File except as
expressly provided in this subsection 2.06(a). Without limiting the effect of
the preceding sentence, in reviewing any File, neither the Custodian nor the
Indenture Trustee shall have any responsibility for determining whether any
document is valid and binding, whether the text of any assignment is in proper
form (except to determine if the Indenture Trustee is the assignee), whether any
document has been recorded in accordance with the requirements of any applicable
jurisdiction or whether a blanket assignment is permitted in any applicable
jurisdiction, but shall only be required to determine whether a document has
been executed, that it appears to be what it purports to be, and, where
applicable,
38
that it purports to be recorded. Neither the Custodian on behalf of the
Indenture Trustee, nor the Indenture Trustee shall be under any duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face, nor shall the Custodian or the Indenture Trustee be
under any duty to determine independently whether there are any intervening
assignments or assumption or modification agreements with respect to any Home
Equity Loan.
(b) If the Custodian, on behalf of the Indenture Trustee during such
45-day period finds any document constituting a part of a File which is not
executed, has not been received, or is unrelated to the Home Equity Loans
identified in the Schedule of Home Equity Loans, or that any Home Equity Loan
does not conform to the description thereof as set forth in the Schedule of Home
Equity Loans, the Custodian, on behalf of the Indenture Trustee shall promptly
so notify the Depositor, the Seller, the Issuer, the Owners and the Note
Insurer. In performing any such review, the Custodian, on behalf of the
Indenture Trustee may conclusively rely on the Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the review of the items delivered by the Seller pursuant to
Section 2.05(b)(i) is limited solely to confirming that the documents listed in
Section 2.05(b)(i) have been executed and received, relate to the Files
identified in the Schedule of Home Equity Loans and conform to the description
thereof in the Schedule of Home Equity Loans. The Seller agrees to use
reasonable efforts to remedy a material defect in a document constituting part
of a File of which it is so notified by the Custodian, on behalf of the
Indenture Trustee. If, however, within 90 days after such notice to it
respecting such defect the Seller has not remedied the defect and the defect
materially and adversely affects the interest in the related Home Equity Loan of
the Owners or the Note Insurer, the Seller will (or will cause an affiliate of
the Seller to) on the next succeeding Monthly Remittance Date (i) substitute in
lieu of such Home Equity Loan a Qualified Replacement Mortgage and deliver the
Substitution Amount to the Servicer for deposit in the Principal and Interest
Account or (ii) purchase such Home Equity Loan at a purchase price equal to the
Loan Purchase Price thereof, which purchase price shall be delivered to the
Servicer for deposit in the Principal and Interest Account.
(c) In addition to the foregoing, the Indenture Trustee also agrees to
cause the Custodian to make a review during the 12th month after the Closing
Date indicating the current status of the exceptions previously indicated on the
Pool Certification (the "Final Certification"). After delivery of the Final
Certification, the Custodian, on behalf of the Indenture Trustee, shall provide
to the Note Insurer no less frequently than monthly updated certifications
indicating the then current status of exceptions, until all such exceptions have
been eliminated.
Section 2.07 [Reserved].
Section 2.08 Custodian.
Notwithstanding anything to the contrary in this Agreement, the parties
hereto acknowledge that the functions of the Indenture Trustee with respect to
the custody, acceptance, inspection and release of the Files pursuant to
Sections 2.05, 2.06 and 4.14 and the related Pool Certification and Final
Certification shall be performed by the Custodian pursuant to the Custodial
Agreement. The fees and expenses of the Custodian will be paid by the Seller.
39
Section 2.09 Books and Records.
The sale of each Home Equity Loan shall be reflected in the Seller's
and the Depositor's balance sheets and other financial statements as a sale of
assets by the Seller and the Depositor, as the case may be, under generally
accepted accounting principles.
END OF ARTICLE II
40
ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 3.01 [Reserved].
Section 3.02 Establishment of Accounts.
The Depositor shall cause to be established on the Closing Date, and
the Indenture Trustee shall maintain, at the Corporate Trust Office, the Pool I
Note Account, to be held by the Indenture Trustee in the name of the Indenture
Trustee, in trust for the Owners of the Series 1998-7A Notes and the Note
Insurer as their interests may appear and the Pool II Note Account, to be held
by the Indenture Trustee in the name of the Indenture Trustee, in trust for the
Owners of the Series 1998-7B Notes and the Note Insurer, as their interest may
appear.
Section 3.03 Flow of Funds.
(a)(i) The Indenture Trustee shall promptly deposit in the Pool I Note
Account, without duplication, upon receipt, (i) any Insured Payments relating to
Pool I received from the Policy Payment Account pursuant to Section 7.02(b)
hereof and (ii) all remittances related to Pool I made to the Indenture Trustee
pursuant to Section 4.08(d)(ii) in an amount equal to the Pool I Monthly
Remittance Amount.
(ii) The Indenture Trustee shall promptly deposit in the Pool II Note
Account, without duplication, upon receipt, (i) any Insured Payments relating to
Pool II received from the Policy Payment Account pursuant to Section 7.02(b)
hereof and (ii) all remittances related to Pool II made to the Indenture Trustee
pursuant to Section 4.08(d)(ii) in an amount equal to the Pool II Monthly
Remittance Amount.
(b) On each Payment Date and for each Series of Notes, the Indenture
Trustee is required to make the following payments and transfers from monies
then on deposit in the related Note Account (or the Reserve Account with respect
to clauses (i), (ii), (iv), (v), (vi) and (viii)) as specified below in the
following order of priority of each such transfer and payment (provided that if
amounts on deposit in the Reserve Account are available to be used with respect
to clauses (i), (ii), (iv), (v), (vi) and (viii) such amounts shall be used
prior to the use of any amounts in the related Note Account):
(i)(A) to the Indenture Trustee, the related Indenture Trustee Fee and
the Indenture Trustee Reimbursable Expenses; (B) to the Owner Trustee, the
related Owner Trustee Fee; and (C) provided that no Note Insurer Default has
occurred and is continuing, to the Note Insurer, the related Premium Amount;
(ii) to the Owners of the related Series of Notes, the related Current
Interest;
(iii) to the Owners of the related Series of Notes, the
related Principal Remittance Amount (less the Overcollateralization Reduction
Amount for the related Series of Notes) plus the portion of the Preference
Amount that relates to principal in reduction of the related Note Principal
Balance until such Note Principal Balance is reduced to zero;
(iv) to the Owners of the related Series of Notes, the related
Excess Spread in an amount not to exceed the Pool I Overcollateralization
Deficit or the Pool II Overcollateralization Deficit, as the case may be, in
reduction of the Note Principal Balance of such Series of Notes, until such Note
Principal Balance is reduced to zero;
(v) to the Owners of the other Series of Notes, the related
Excess Spread remaining after making payments of the amount required in clauses
(i) - (iv), in an amount not to exceed the sum of (x) the
41
Pool I Overcollateralization Deficit or the Pool II Overcollateralization
Deficit (as the case may be) for such other Series of Notes remaining after
taking into account the payment of the amount required by clause (iv) above and
(y) any shortfall in the amount available to pay Current Interest for such other
Series of Notes (after taking into account payment of the amount required by
clauses (i) - (iv) for such other Series of Notes on such Payment Date and from
amounts on deposit in the Reserve Account) until such Pool I
Overcollateralization Deficit or Pool II Overcollateralization Deficit (as the
case may be) and such Current Interest shortfall for the other Series of Notes
are reduced to zero; provided, that such Excess Spread shall be applied first,
with respect to such Current Interest shortfall, and, second to such Pool I
Overcollateralization Deficit or Pool II Overcollateralization Deficit (as the
case may be);
(vi) to the Note Insurer, the related Excess Spread remaining
after making the payments required in clauses (i) - (v) to reimburse the Note
Insurer for any unreimbursed payments of Insured Payments and any other amounts
owing to the Note Insurer under the Insurance Agreement, including any unpaid
Premium Amount (together with interest thereon at the late payment rate
specified in the Insurance Agreement) (amounts in the Reserve Account used to
reimburse the Note Insurer shall be withdrawn therefrom on a pro rata basis
based on the related Excess Spread deposited therein from each Series of Notes);
(vii) to the Owners of the related Series of Notes, the
related Excess Spread remaining after making the payments required in clauses
(i) - (vi) in an amount not to exceed any Overcollateralization Deficiency
Amount (calculated after taking into account the payment of the amounts required
by clauses (i) -(vi)) as a reduction of the Note Principal Balance of such
Series of Notes until such Note Principal Balance is reduced to zero;
(viii) to the Owners of the other Series of Notes, the related
Excess Spread remaining after making the payments required in clauses (i) -
(vii) and to the extent money is not available in the Reserve Account in an
amount not to exceed any Overcollateralization Deficiency Amount (calculated
after taking into account the payment of the amounts required by clauses (i) -
(vii)) as a reduction of the Note Principal Balance of the other Series of Notes
until such Note Principal Balance is reduced to zero; provided that the amount
of Excess Spread distributed to the other Series of Notes in clause (v) and this
clause (viii) cannot exceed the amount of the aggregate Realized Losses and
shortfalls in Current Interest on the Loan Pool related to such other Series of
Notes;
(ix) to the Reserve Account, the related Excess Spread
remaining after making the payments required in clauses (i) - (viii), in an
amount equal to the difference between (x) the Specified Overcollateralization
Amount for the other Series of Notes and (y) the Overcollateralization Amount
for the other Series of Notes (after taking into account the payment of the
amount required by clauses (i) - (viii) above for such other Series of Notes)
less the amount already on deposit in the Reserve Account after the
distributions in clauses (i), (ii), (iv), (v), (vi) and (viii) above;
(x) to the Indenture Trustee, the related Excess Spread
remaining after making the payments required in clauses (i) - (ix), as
reimbursement of the expenses of the Indenture Trustee not reimbursed pursuant
to clause (i) above and incurred in connection with its duties and obligations
under the Indentures; and,
(xi) to the Certificate Distribution Account, the related
Excess Spread remaining after making the payment required by clauses (i) - (x),
for payment to the holders of the Residual Interest as provided in the Trust
Agreement.
42
(c) Notwithstanding any of the foregoing provisions, the aggregate
amounts distributed on all Payment Dates to the Owners of a Series or of the
Notes on account of principal shall not exceed the original Note Principal
Balance of such Series.
(d) Notwithstanding the foregoing, for a Series of Notes, in the event
that a Payment Date is also a Limited Release Date, a portion of the related
Limited Excess Spread equal to the product of (i) such related Limited Excess
Spread and (ii) a fraction, the numerator of which is equal to the 60+
Delinquent Percentage (Rolling Six Month) for such Payment Date less 12.00% and
the denominator of which is equal to 6.00% (provided that such fraction shall
not exceed 1.0) will be included in the related Overcollateralization Deficiency
Amount and shall not be distributed directly to the Certificate Distribution
Account.
(e) Notwithstanding the priority of payments specified in Section
3.03(b), on the Payment Dates during the period from January 1999 through and
including February 2000, in the event that the Mortgage Portfolio Performance
Test is satisfied, the percentage of the Excess Spread for a Series of Notes and
corresponding Payment Date will be paid directly to the Certificate Distribution
Account for payment to the Owners of the Certificates immediately after the
payment in Section 3.03(b)(vi) (and, therefore, such amount of Excess Spread
will be unavailable for the distributions set out in Section 3.03(b)(vii) -
(x)):
Payment Date % of Excess Spread
------------ ------------------
January 1999 0%
February 1999 100%
March 1999 - February 2000 20%
(f) Upon receipt of Insured Payments from the Note Insurer on behalf of
Owners of the Notes, the Indenture Trustee shall deposit such Insured Payments
in the Policy Payments Account. On each Payment Date, pursuant to Section
7.02(b) hereof, such amounts will be transferred from the Policy Payment Account
to the related Note Account and the Indenture Trustee shall distribute such
Insured Payments, or the proceeds thereof in accordance with Section 3.03(b) to
the Owners of such Notes.
(g) The Indenture Trustee or Paying Agent shall (i) receive for each
Owner of the Notes any Insured Payment from the Note Insurer and (ii) disburse
the same to the Owners of the Notes as set forth in Section 3.03(b). Insured
Payments disbursed by the Indenture Trustee or Paying Agent from proceeds of the
Note Insurance Policy shall not be considered payment by the Trust, nor shall
such payments discharge the obligation of the Trust with respect to such Notes
and the Note Insurer shall be entitled to receive the Reimbursement Amount
pursuant to Section 3.03(b)(vi) hereof. Nothing contained in this paragraph
shall be construed so as to impose duties or obligations on the Indenture
Trustee that are different from or in addition to those expressly set forth in
this Agreement.
Section 3.04 Reserve Account.
(a) The Issuer hereby directs the Indenture Trustee to establish at the
Corporate Trust Office, the Reserve Account on or before the Closing Date. On
each Payment Date, the Indenture Trustee shall deposit in the Reserve Account
such amounts described in Section 3.03(b)(ix).
(b) The Indenture Trustee shall withdraw from the Reserve Account and
pay to the Owners of the Notes (or the Note Insurer) an amount in satisfaction
of the requirements of Section 3.03(b)(i), (ii), (iv), (v), (vi) and (viii). To
the extent that amounts on deposit on a Payment Date after giving effect to the
43
requirements of Section 3.03(b)(i), (ii), (iv), (v), (vi) and (viii) exceed the
Reserve Account Requirement, the Indenture Trustee shall deposit such amounts in
the Certificate Distribution Account.
(c) Funds on deposit in the Reserve Account that are withdrawn pursuant
to Section 3.03(b) will be allocated pro-rata based on the required withdrawal
for the two Series of Notes for each subsection of Section 3.03(b).
(d) Funds on deposit in the Reserve Account shall be invested by the
Indenture Trustee in Eligible Investments, selected by the Seller by a written
direction, provided, however, the Indenture Trustee shall not be liable for any
loss arising from such investment in Eligible Investments (other than as obligor
under any Eligible Investment). All such Eligible Investments shall be held by
the Indenture Trustee for the benefit of the beneficiaries of the Reserve
Account. Investment earnings on the Reserve Account shall be credited to the
Reserve Account. Funds on deposit in the Reserve Account shall be invested in
Eligible Investments that will mature so that such funds will be available at
the close of business on the day preceding each Payment Date. Funds deposited in
the Reserve Account on the day which immediately precedes a Payment Date upon
the maturity of any Eligible Investments are not required to be invested
overnight in accordance with the investment provisions contained herein. In the
absence of a written direction regarding the investment of amounts held in the
Reserve Account such amounts shall remain uninvested. Earnings on such
investments shall remain in the Reserve Fund for the benefit of the
beneficiaries of the Reserve Account.
Section 3.05 Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
any Account (other than the Reserve Account) held by the Indenture Trustee for
the benefit of the Owners shall be invested and reinvested by the Indenture
Trustee in trust for the benefit of the Owners and the Note Insurer, as directed
in writing by the Seller, in one or more Eligible Investments bearing interest
or sold at a discount. The bank serving as Indenture Trustee or any affiliate
thereof may be the obligor on any investment which otherwise qualifies as an
Eligible Investment. No investment in any Account shall mature later than the
Business Day immediately preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any Account (other
than the Reserve Account) held by the Indenture Trustee and sufficient
uninvested funds are not available to make such disbursement, the Indenture
Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in such Account. No investments will be liquidated
prior to maturity unless the proceeds thereof are needed for disbursement.
(c) Subject to the terms of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Account
(other than the Reserve Account) held by the Indenture Trustee resulting from
any loss on any Eligible Investment included therein (except to the extent that
the bank serving as Indenture Trustee is the obligor thereon).
(d) The Indenture Trustee shall invest and reinvest funds in the
Accounts (other than the Reserve Account) held by the Indenture Trustee, in
accordance with the written instructions delivered to the Indenture Trustee on
the Closing Date, but only in one or more Eligible Investments bearing interest
or sold at a discount.
If the Seller shall have failed to give investment directions to the
Indenture Trustee then the Indenture Trustee shall invest in money market funds
described in Section 3.07(j) to be redeemable without penalty no later than the
Business Day immediately preceding the next Payment Date.
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(e) All income or other gain from investments in any Account (other
than the Reserve Account) held by the Indenture Trustee shall be deposited in
such Account (other than the Reserve Account) immediately on receipt, and any
loss resulting from such investments shall be charged to such Account (other
than the Reserve Account), as appropriate, subject to the requirement of Section
4.08(b) that the Servicer contribute funds in an amount equal to such loss in
the case of the Principal and Interest Account.
Section 3.06 Payment of Trust Expenses.
(a) The Seller shall pay the amount of the expenses of the Trust (other
than payments of premiums to the Note Insurer) (including the Indenture
Trustee's expenses that are not paid pursuant to Sections 3.03(b)(i)(A) and
3.03(b)(x)) and the Seller shall promptly pay such expenses directly to the
Persons to whom such amounts are due.
(b) The Seller shall pay directly on the Closing Date the reasonable
fees and expenses of counsel to the Indenture Trustee and the Owner Trustee.
(c) In the event the Depositor fails to do so, the Seller shall pay the
fees and expenses (including any "Expenses" (as defined in the Trust Agreement))
of the Owner Trustee.
Section 3.07 Eligible Investments.
The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States,
Xxxxxxx Mac senior debt obligations, and Xxxxxx Mae senior debt obligations, but
excluding any of such securities whose terms do not provide for payment of a
fixed dollar amount upon maturity or call for redemption;
(b) Federal Housing Administration debentures;
(c) Xxxxxxx Mac participation certificates which guaranty timely
payment of principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) Xxxxxx Mae mortgage-backed s ecurities (other than stripped
mortgage securities which are valued greater than par on the portion of unpaid
principal) and senior debt obligations;
(f) Federal funds, certificates of deposit, time 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 by
Standard & Poor's and P-1 by Moody's;
(g) Deposits of any bank or savings and loan association (the long-term
deposit rating of which is Baa3 or better by Moody's and BBB by Standard &
Poor's) which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are insured by the FDIC and held up to the limits
insured by the FDIC;
(h) Repurchase agreements collateralized by securities described in
(a), (c), or (e) above with any registered broker/dealer subject to the
Securities Investors Protection Corporation's jurisdiction and subject to
applicable limits therein promulgated by Securities Investors Protection
Corporation or any
45
commercial bank, if such broker/dealer or bank has an uninsured, unsecured and
unguaranteed short-term or long-term obligation rated P-1 or Aa2, respectively,
or better by Moody's and A-1+ or AA, respectively, or better by Standard &
Poor's, provided:
a. A master repurchase agreement or specific written
repurchase agreement governs the transaction, and
b. The securities are held free and clear of any lien by
the Indenture Trustee or an independent third party
acting solely as agent for the Indenture Trustee, and
such third party is (a) a Federal Reserve Bank, (b) a
bank which is a member of the FDIC and which has
combined capital, surplus and undivided profits of
not less than $125 million, or (c) a bank approved in
writing for such purpose by the Note Insurer, and the
Indenture Trustee shall have received written
confirmation from such third party that it holds such
securities, free and clear of any lien, as agent for
the Indenture Trustee, and
c. A perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed
at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et
seq., in such securities is created for the benefit
of the Indenture Trustee, and
d. The repurchase agreement has a term of thirty days or
less and the Indenture Trustee will value the
collateral securities no less frequently than weekly
and will liquidate the collateral securities if any
deficiency in the required collateral percentage is
not restored within two business days of such
valuation, and
e. The fair market value of the collateral securities in
relation to the amount of the repurchase obligation,
including principal and interest, is equal to at
least 106%.
(i) Commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of Standard & Poor's and
Moody's;
(j) Investments in no load money market funds registered under the
Investment Company Act of 1940 whose shares are registered under the Securities
Act and rated AAAm or AAAm-G by Standard & Poor's and Aaa by Moody's; and
(k) Any other investment permitted by each of the Rating Agencies and
the Note Insurer;
provided, that all instruments described hereunder shall mature at par on or
prior to the next succeeding Payment Date unless otherwise provided in this
Agreement and that no instrument described hereunder may be purchased at a price
greater than par if such instrument may be prepaid or called at a price less
than its purchase price prior to stated maturity.
Section 3.08 Accounting and Directions by Indenture Trustee.
By 12:00 noon, New York time, on each Payment Date (or such earlier
period as shall be agreed by the Seller and the Indenture Trustee), the
Indenture Trustee shall notify (based in part on information provided to the
Indenture Trustee by the Servicer and upon which the Indenture Trustee may rely)
the Seller, the Servicer, the Depositor, each Owner and the Note Insurer, of the
following information with respect to such Payment Date (which notification may
be given by facsimile, or by telephone promptly confirmed in writing):
46
(1) The aggregate amount on deposit in each Note Account
as of the related Determination Date;
(2) The amount of Current Interest and the Principal
Remittance Amount to be distributed on each Series of
Notes;
(3) The amount of any Insured Payment to be made by the
Note Insurer on such Payment Date;
(4) The application of the amounts described in clauses
(1), (3) and (4) above in respect of the payments on
such Payment Date in accordance with Section 3.03
hereof;
(5) The Pool I Note Principal Balance and the Pool II
Note Principal Balance;
(6) The amount, if any, of any Realized Losses for each
Loan Pool for the related Remittance Period; and
(7) The amount of any Overcollateralization Reduction
Amount for each Loan Pool.
Section 3.09 Reports by Indenture Trustee to Owners and Note Insurer.
(a) On each Payment Date, the Indenture Trustee shall transmit a report
in writing to each Owner of a Series of Notes, the Owner Trustee, the Note
Insurer, the Servicer, Standard & Poor's and Moody's, which report shall contain
the following with respect to each Series:
(i) the aggregate distribution with respect to each Series of
Notes (based on a Note in the original principal amount of $1,000)
for such Payment Date;
(ii) the amount of such distributions allocable to principal
on the Home Equity Loans in the related Loan Pool, separately
identifying the aggregate amount of any Prepayments or other
recoveries of principal included therein (based on a Note in the
original principal amount of $1,000);
(iii) the amount of such distribution allocable to interest on
the Home Equity Loans in the related Loan Pool (based on a Note in
the original principal amount of $1,000);
(iv) if the interest paid to the Owners is less than the
Current Interest, the Interest Carry Forward Amount on such Payment
Date;
(v) the principal amount of the Notes (based on a Note in the
original principal amount of $1,000) which will be outstanding after
giving effect to any payment of principal on such Payment Date;
(vi) the aggregate Loan Balance of all Home Equity Loans in
the related Loan Pool after giving effect to any payment of principal
on such Payment Date;
(vii) the amount of any Insured Payment included in the
amounts distributed to the Owners on such Payment Date;
47
(viii) based upon information furnished by the Seller such
information as may be required by Section 6049(d)(7)(C) of the Code
and the regulations promulgated thereunder to assist the Owners in
computing their market discount;
(ix) the weighted average Coupon Rate of the Home Equity Loans
in the related Loan Pool and in both Loan Pools combined;
(x) such other information as the Note Insurer may reasonably
request with respect to delinquent Home Equity Loans in the related
Loan Pool and in both Loan Pools combined;
(xi) the total of any Substitution Amounts or Loan Purchase
Price amounts included in such distribution; and
(xii) the amount on deposit in the Reserve Account immediately
prior to the related Payment Date; the amount deposited therein on
such Payment Date; the amount withdrawn therefrom on such Payment
Date; and the amount therein at the end of such Payment Date.
The Servicer shall provide to the Indenture Trustee the information
described in Section 4.08(d)(iii) and in clause (b) below to enable the
Indenture Trustee to perform its reporting obligations under this Section, and
such obligations of the Indenture Trustee under this Section are conditioned
upon such information being received and the information provided in clauses
(ii), (viii) and (xi) shall be based solely upon information contained in the
monthly servicing report provided by the Servicer to the Indenture Trustee
pursuant to Section 4.08 hereof.
(b) In addition, on each Payment Date the Indenture Trustee will
distribute to each Owner, the Owner Trustee, the Note Insurer, Standard & Poor's
and Moody's, together with the information described in Subsection (a)
preceding, the following information which is hereby required to be prepared by
the Servicer and furnished to the Indenture Trustee for such purpose and the
Note Insurer (via e-mail at xxxxxxxx@xxx.xxx) on or prior to the related Monthly
Reporting Date with respect to each Loan Pool and for all Home Equity Loans (or
both Loan Pools) in the aggregate:
(i) the number and aggregate principal balances of Home
Equity Loans (a) 30-59 days Delinquent, (b) 60-89
days Delinquent and (c) 90 or more days Delinquent,
as of the close of business on the last Business Day
of the calendar month immediately preceding the
Payment Date, (d) the numbers and aggregate Loan
Balances of all Home Equity Loans as of such Payment
Date and (e) the percentage that each of the amounts
represented by clauses (a), (b) and (c) represent as
a percentage of the respective amounts in clause (d);
(ii) the number and dollar amounts of all Home Equity
Loans in foreclosure proceedings as of the close of
business on the last Business Day of the calendar
month immediately preceding such Payment Date,
separately stating, for this purpose, all Home Equity
Loans with respect to which foreclosure proceedings
were commenced in the immediately preceding calendar
month;
(iii) the number of Mortgagors and the Loan Balances of (a)
the related Mortgages involved in bankruptcy
proceedings as of the close of business on the last
Business Day of the calendar month immediately
preceding such Payment Date and (b) Home Equity Loans
that are "balloon" loans;
48
(iv) the existence and status of any REO Properties, as of
the close of business of the last Business Day of the
month immediately preceding the Payment Date;
(v) the book value of any REO Property as of the close of
business on the last Business Day of the calendar
month immediately preceding the Payment Date based on
the most recently available valuation;
(vi) the Cumulative Loss Percentage, the amount of
cumulative Realized Losses, the current period
Realized Losses, and the Annual Loss Percentage
(Rolling Twelve Month); and
(vii) the 60+ Delinquency Percentage (Rolling Six Month)
and the amount of 60+ Day Delinquent Loans.
Section 3.10 Reports by Indenture Trustee.
(a) The Indenture Trustee shall report to the Depositor, the Seller,
the Note Insurer and each Owner, with respect to the amount on deposit in each
Note Account and the identity of the investments included therein, as the
Depositor, the Seller, any Owner or the Note Insurer may from time to time
reasonably request. Without limiting the generality of the foregoing, the
Indenture Trustee shall, at the reasonable request of the Issuer, the Seller,
any Owner or the Note Insurer transmit promptly to the Issuer, the Seller, any
Owner and the Note Insurer copies of all accountings of receipts in respect of
the Home Equity Loans furnished to it by the Servicer and shall notify the
Seller and the Note Insurer if any Monthly Remittance Amount has not been
received by the Indenture Trustee when due.
(b) The Indenture Trustee shall report to the Note Insurer and each
Owner with respect to any written notices it may from time to time receive which
provide an Authorized Officer with actual knowledge that any of the statements
set forth in Section 2.04(b) hereof are inaccurate.
END OF ARTICLE III
49
ARTICLE IV
SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS
Section 4.01 Servicer and Sub-Servicers.
Acting directly or through one or more Sub-Servicers as provided in
Section 4.03, the Servicer shall service and administer the Home Equity Loans
with reasonable care using that degree of skill and attention that it exercises
in servicing comparable home equity loans for itself and others in accordance
with this Agreement and the terms of the respective Home Equity Loans. The
Servicer shall have full power and authority, acting alone, to do or cause to be
done any and all things in connection with such servicing and administration
which it may deem necessary or desirable but without regard to: (i) any
relationship that the Servicer, any Special Servicer or any Affiliate of any of
the Servicer and the Sub-Servicer may have with the related Mortgagor; (ii) the
ownership of any Note by the Servicer or any Affiliate of the Servicer; (iii)
the Servicer's obligation to make Delinquency Advances or Servicing Advances; or
(iv) the right of any of the Servicer or the Sub-Servicer to receive
compensation for its services hereunder or with respect to any particular
transaction.
Subject to Section 4.03 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to all
or certain of the Home Equity Loans through a Sub-Servicer as it may from time
to time designate, but no such designation of a Sub-Servicer shall serve to
release the Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have the rights and powers of the Servicer which have been
delegated to such Sub-Servicer, with respect to such Home Equity Loans under
this Agreement.
Without limiting the generality of the foregoing, but subject to
Sections 4.13 and 4.14, the Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Indenture Trustee to execute and deliver, and may
be authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Owners, the Issuer and the Indenture Trustee or any of
them, (i) any and all instruments of satisfaction or cancellation or of partial
or full release or discharge and all other comparable instruments with respect
to the Home Equity Loans and with respect to the Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property in the name of the Servicer on behalf of the Issuer
and Indenture Trustee, and (iii) to hold title to any Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Issuer and Indenture
Trustee; provided, however, that to the extent any instrument described in
clause (i) preceding would be delivered by the Servicer outside of its usual
procedures for home equity loans held in its own portfolio the Servicer shall,
prior to executing and delivering such instrument, obtain the prior written
consent of the Note Insurer, and provided further, however, that Section 4.13(a)
and Section 4.14(a) shall each constitute a revocable power of attorney from the
Issuer and Indenture Trustee to the Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Home Equity Loan held by the Indenture Trustee hereunder paid in full or
foreclosed (or with respect to which payment in full has been escrowed).
Revocation of the power of attorney created by the final proviso of the
preceding sentence shall take effect upon (i) the receipt by the Servicer of
written notice thereof from the Indenture Trustee, (ii) a Servicer Termination
Event or (iii) the termination of the Notes. The Indenture Trustee shall execute
any documentation furnished to it by the Servicer for recordation by the
Servicer in the appropriate jurisdictions, as shall be necessary to effectuate
the foregoing. Subject to Sections 4.13 and 4.14, the Indenture Trustee shall
execute a power of attorney to the Servicer or any Sub-Servicer and furnish them
with any other documents as the Servicer or such Sub-Servicer shall reasonably
request to enable the Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
50
Upon the request of the Indenture Trustee or the Issuer, the Servicer
shall send to the Indenture Trustee or the Issuer a computer generated tape,
diskette or other machine readable format containing servicing information with
respect to the Home Equity Loans collected by the Servicer.
The Servicer shall give prompt notice to the Indenture Trustee and the
Issuer of any action, of which the Servicer has actual knowledge, to (i) assert
a claim against the Trust or (ii) assert jurisdiction over the Trust.
Servicing Advances incurred by the Servicer or any Sub-Servicer in
connection with the servicing of the Home Equity Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Servicer or such Sub-Servicer to the
extent described in Section 4.09(b) hereof.
Section 4.02 Collection of Certain Home Equity Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans. Consistent
with the servicing standard set forth in the first paragraph of Section 4.01,
the Servicer may in its discretion 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 Home Equity Loan or any other fee or charge which the
Servicer would be entitled to retain hereunder as servicing compensation. In the
event the Servicer shall consent to the deferment of the due dates for payments
due on a Mortgage Note, the Servicer shall nonetheless make payment of any
required Delinquency Advance with respect to the payments so extended to the
same extent as if such installment were due, owing and Delinquent and had not
been deferred, and shall be entitled to reimbursement therefor in accordance
with Section 4.09(a) hereof.
Section 4.03 Sub-Servicing Agreements.
The Servicer may, with the prior written consent of the Note Insurer,
enter into Sub-Servicing Agreements for any servicing and administration of Home
Equity Loans with any institution which is acceptable to the Note Insurer and
which, (x) is in compliance with the laws of each state necessary to enable it
to perform its obligations under such Sub-Servicing Agreement, (y) has
experience servicing home equity loans that are similar to the Home Equity Loans
and (z) has equity of not less than $15,000,000 (as determined in accordance
with generally accepted accounting principles). The Servicer shall give notice
to the Indenture Trustee, the Note Insurer and the Rating Agencies of the
appointment of any Sub-Servicer. For purposes of this Agreement, the Servicer
shall be deemed to have received payments on Home Equity Loans when any
Sub-Servicer, has received such payments. Each Sub-Servicer, shall be required
to service the Home Equity Loans in accordance with this Agreement and any such
Sub-Servicing Agreement shall be consistent with and not violate the provisions
of this Agreement. Each Sub-Servicing Agreement shall provide that the Indenture
Trustee (if acting as successor Servicer) or any other successor Servicer shall
have the option to terminate such agreement without payment of any fees if the
original Servicer is terminated or resigns. The Servicer shall deliver to the
Indenture Trustee and the Note Insurer copies of all Sub-Servicing Agreements
and any amendments or modifications thereof promptly upon the Servicer's
execution and delivery of such instrument. This Agreement shall be deemed notice
to all required parties that the Seller shall be appointed as the interim
Sub-Servicer until such time as servicing has been physically transferred to the
Servicer, which in no event shall occur later than December 31, 1998. The Seller
in its capacity as interim Sub-Servicer will comply with all of the obligations
of a "Servicer" hereunder during the period in which it is acting in such
capacity. IMC will use its best efforts to ensure that the transfer of servicing
will occur by December 31, 1998.
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Section 4.04 Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing Agreement
in accordance with the terms and conditions of such Sub-Servicing Agreement and
to either itself directly service the related Home Equity Loans or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 4.03.
Section 4.05 Liability of Servicer; Indemnification.
(a) The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer, and the Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Home Equity Loans. The Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Servicer by
such Sub-Servicer; provided, however, that nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
(b) The Servicer (except The Chase Manhattan Bank if it is required to
succeed the Servicer hereunder) agrees to indemnify and hold the Issuer, the
Indenture Trustee, the Seller, the Note Insurer and the Depositor harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Issuer, the Seller, the Indenture Trustee, the Note Insurer and the Depositor
may sustain in any way related to the failure of the Servicer to perform its
duties and service the Home Equity Loans in compliance with the terms of this
Agreement. The Servicer shall immediately notify the Issuer, the Indenture
Trustee, the Seller, the Depositor and the Note Insurer if a claim is made by a
third party with respect to this Agreement, and the Servicer shall assume the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Indenture
Trustee, the Depositor, the Seller and the Note Insurer in respect of such
claim. The provisions of this Section 4.05(b) shall survive the termination of
this Agreement and the payment of the outstanding Notes.
(c) Neither the Servicer nor any of its directors, officers, employees
or agents shall be under any liability to the Issuer, the Seller, the Depositor,
the Note Insurer or the Owners of the Notes for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such person against any material breach of
warranties, representations or covenants made herein, or against any specific
liability imposed on the Servicer pursuant hereto, or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer and any director,
officer, employee or agent of the Servicer shall be indemnified and held
harmless by the Issuer (to the extent of the Trust Estates) against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Notes, other than any loss, liability or expense incurred
by reason of willful misfeasance, bad faith or negligence in the performance of
its duties hereunder or by reason of reckless disregard of obligations and
duties hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and, in its opinion, does not involve it
in any expense or liability; provided, however, that the Servicer may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Owners of the Notes hereunder. In such event, unless
the Servicer acts without the consent of the Owners of Notes
52
having a Note Principal Balance of at least 50% of the Notes of both Series in
the aggregate, the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of its duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Issuer (to the extent
of the Trust Estates) and the Servicer shall be entitled to be reimbursed
therefor from the Principal and Interest Account as and to the extent provided
in Section 4.08(d), any such right of reimbursement being prior to the rights of
the Owners of the Notes to receive any amount in the Principal and Interest
Account.
Section 4.06 No Contractual Relationship Between Sub-Servicer,
Indenture Trustee or the Owners.
Any Sub-Servicing Agreement and any other transactions or services
relating to the Home Equity Loans involving a Sub-Servicer shall be deemed to be
solely between the Servicer and the Sub-Servicer, and the Indenture Trustee and
the Owners shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer except as
set forth in Section 4.07.
Section 4.07 Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Servicer hereunder by
the Indenture Trustee pursuant to Section 4.20, it is understood and agreed that
the Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and any Sub-Servicer shall be assumed simultaneously
by the Indenture Trustee without act or deed on part of the Indenture Trustee;
provided, however, that the Indenture Trustee (if acting as successor Servicer)
or any other successor Servicer may terminate the Sub-Servicer as provided in
Section 4.03.
The Servicer shall, upon the reasonable request of the Indenture
Trustee, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held by it and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
Section 4.08 Principal and Interest Account.
(a) The Servicer shall establish and maintain the Principal and
Interest Account in one or more Eligible Accounts. The Principal and Interest
Account shall be identified on the records of the depository institution as
follows: The Chase Manhattan Bank, as Indenture Trustee in trust for the benefit
of the Owners of the IMC Home Equity Loan Asset Backed Notes, Series 1998-7A and
Series 1998-7B and the Note Insurer. If the Principal and Interest Account
ceases to be an Eligible Account hereunder, then the Servicer shall immediately
be required to transfer funds therein to an account meeting the requirements for
an Eligible Account hereunder. The Servicer shall notify the Indenture Trustee,
the Note Insurer and the Owners if there is a change in the name, account number
or institution holding the Principal and Interest Account.
Subject to subsection (c) below, the Servicer shall deposit all
receipts required pursuant to subsection (c) below and related to the Home
Equity Loans to the Principal and Interest Account on a daily basis (but no
later than the first Business Day after receipt).
(b) All funds in the Principal and Interest Account shall be held (i)
uninvested up to the amount insured by the FDIC or (ii) invested in Eligible
Investments. Any investments of funds in the Principal and Interest Account
shall mature or be withdrawable at par on or prior to the immediately succeeding
Monthly
53
Remittance Date. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Servicer. Any investment losses
on funds held in the Principal and Interest Account shall be for the account of
the Servicer and promptly upon the realization of such loss shall be contributed
by the Servicer to the Principal and Interest Account. Any references herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of such investment earnings.
(c) The Servicer shall deposit to the Principal and Interest Account
on the Business Day after receipt, all principal and interest collections on the
Home Equity Loans due after the Cut-Off Date, including any Prepayments and Net
Liquidation Proceeds, other recoveries or amounts related to the Home Equity
Loans received by the Servicer and any income from REO Properties, but net of
(i) Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed
the sum of (I) the Loan Balance of the related Home Equity Loan immediately
prior to liquidation, plus (II) accrued and unpaid interest on such Home Equity
Loan (net of the Servicing Fee) to the date of such liquidation and (III) any
Realized Losses incurred during the related Remittance Period, (ii) principal
(including Prepayments) collected and interest due on the Home Equity Loans on
or prior to the Cut-Off Date, (iii) reimbursements for past Delinquency Advances
and Servicing Advances, which the Servicer has determined are Nonrecoverable
Advances and (iv) reimbursements for amounts deposited in the Principal and
Interest Account representing payments of principal and/or interest on a
Mortgage Note by a Mortgagor which are subsequently returned by a depository
institution as unpaid (all such net amount herein referred to as "Daily
Collections").
(d) (i) The Servicer may make withdrawals for its own account from
the Principal and Interest Account, only for the following purposes:
(A) to pay itself the Servicing Fee, other items
of servicing compensation and investment
earnings on Eligible Investments;
(B) to withdraw amounts that have been deposited
to the Principal and Interest Account in
error;
(C) to reimburse itself pursuant to Section
4.09(a) for unrecovered Delinquency Advances
and Servicing Advances and for any excess
interest collected from a Mortgagor;
(D) to reimburse itself for amounts due it
pursuant to Section 4.05(c); and
(E) to clear and terminate the Principal and
Interest Account following the termination
of the Trust pursuant to Article V.
(ii) The Servicer shall (a) remit to the Indenture Trustee for
deposit in the related Note Account by wire transfer, or otherwise make funds
available in immediately available funds, without duplication, the Daily
Collections, Loan Purchase Prices and Substitution Amounts allocable to a
Remittance Period not later than the related Monthly Remittance Date, and (b) on
each Monthly Reporting Date, deliver to the Indenture Trustee and the Note
Insurer, a monthly servicing report containing (without limitation) the
following information: principal and interest collected in respect of the Home
Equity Loans, scheduled principal and interest that was due on the Home Equity
Loans, relevant information with respect to Liquidated Loans, if any, summary
and detailed delinquency reports, Liquidation Proceeds and other similar
information concerning the servicing of the Home Equity Loans. In addition, the
Servicer shall inform the Indenture Trustee and the Note Insurer in writing on
each Monthly Reporting Date, of the amounts of any Loan Purchase Prices or
Substitution Amounts so remitted during the related Remittance Period.
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(iii) The Servicer shall provide to the Indenture Trustee in writing
the information described in Section 4.08(d)(ii)(b) and in Section 4.09(b) to
enable the Indenture Trustee to perform its reporting requirements under Section
3.09.
Section 4.09 Delinquency Advances and Servicing Advances.
(a) On each Monthly Remittance Date, the Servicer shall be required to
remit to the Indenture Trustee for deposit to the Note Account out of the
Servicer's own funds any Delinquent payment of interest with respect to each
Delinquent Home Equity Loan, which payment was not received on or prior to the
related Remittance Date and was not theretofore advanced by the Servicer. Such
amounts of the Servicer's own funds so deposited are "Delinquency Advances".
The Servicer shall be permitted to reimburse itself on any Business Day
for any Delinquency Advances paid from the Servicer's own funds from late
collections or Liquidation Proceeds on the related Home Equity Loan or from
collections on any Home Equity Loan that are not required to be distributed on
the Payment Date occurring during the month in which such reimbursement is made
(all or any portion of such amount to be replaced on future Monthly Remittance
Dates to the extent required for distribution).
(b) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, (i) Preservation Expenses, (ii) the cost of any enforcement or
judicial proceedings, including foreclosures, (iii) the cost of the management
and liquidation of REO Property and (iv) advances required by Section 4.13(a),
except to the extent that such amounts are determined by the Servicer in its
reasonable business judgment to be a Nonrecoverable Advance. Such costs will
constitute "Servicing Advances". The Servicer may recover a Servicing Advance
from the Mortgagors to the extent permitted by the Home Equity Loans or, if not
theretofore recovered from the Mortgagor on whose behalf such Servicing Advance
was made, from Liquidation Proceeds realized upon the liquidation of the related
Home Equity Loan. The Servicer shall be entitled to recover the Servicing
Advances from the aforesaid Liquidation Proceeds prior to the payment of the
Liquidation Proceeds to any other party to this Agreement.
(c) Notwithstanding the foregoing, in the event that the Servicer
determines in its reasonable business judgment in accordance with the servicing
standards set out herein that any proposed Delinquency Advance or Servicing
Advance would be a Nonrecoverable Advance, the Servicer shall not be required to
make Delinquency Advances or Servicing Advances with respect to such Home Equity
Loan. To the extent that the Servicer previously has made Delinquency Advances
or Servicing Advances with respect to a Home Equity Loan that the Servicer
subsequently determines will be a Nonrecoverable Advance, the Servicer shall be
entitled to reimbursement for such aggregate unreimbursed Delinquency Advances
or Servicing Advances from the Principal and Interest Account. The determination
by the Servicer that it has made a Nonrecoverable Advance or that any proposed
advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced
by an Officer's Certificate delivered to the Indenture Trustee and the Note
Insurer.
Section 4.10 Compensating Interest; Repurchase of Home Equity Loans.
(a) If a Prepayment in full of a Home Equity Loan or a Prepayment of at
least six times a Mortgagor's Monthly Payment occurs during any calendar month,
any difference between (x) the interest collected from the Mortgagor in
connection with such payoff, and (y) the full month's interest at the Coupon
Rate that would be due on the related Due Date for such Home Equity Loan
("Compensating Interest") (but not in excess of the aggregate Servicing Fee for
the related Remittance Period) shall be deposited by the Servicer to the
Principal and Interest Account (or if such difference is an excess, the Servicer
shall retain
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such excess) on the next succeeding Monthly Remittance Date and shall be
included in the Monthly Remittance Amount to be made available to the Indenture
Trustee on such Monthly Remittance Date.
(b) Subject to the clause (c) below, the Servicer has the right and the
option, but not the obligation, to purchase for its own account any Home Equity
Loan which becomes Delinquent, in whole or in part, as to at least three
consecutive monthly installments or any Home Equity Loan as to which enforcement
proceedings have been brought by the Servicer pursuant to Section 4.13 if such
Home Equity Loan is the greatest number of days Delinquent of all then
Delinquent Home Equity Loans in such Loan Pool. Any such Home Equity Loan so
purchased shall be purchased by the Servicer on or prior to a Monthly Remittance
Date at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be deposited in the Principal and Interest Account.
(c) Until such time as all purchases pursuant to clause (b) above
exceed 3% of the original aggregate Loan Balance of the Home Equity Loans in a
Loan Pool, the Servicer may repurchase such Home Equity Loans without having
first notified the Note Insurer of such repurchase. Thereafter, the Servicer
must notify the Note Insurer, in writing, of its intent to repurchase a Home
Equity Loan and the Servicer may not repurchase such Home Equity Loan without
the written consent of the Note Insurer; provided, that the Note Insurer shall
be deemed to have consented to such repurchase unless it notifies the Servicer,
in writing, of its objection to such repurchase within 5 days after its receipt
of the notice of proposed repurchase.
(d) The Net Liquidation Proceeds from the disposition of any REO
Property shall be deposited in the Principal and Interest Account and remitted
to the Indenture Trustee as part of the Daily Collections remitted by the
Servicer to the Indenture Trustee.
Section 4.11 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained with respect to each Home
Equity Loan (and to advance sums on account of the premiums therefor if not paid
by the Mortgagor unless such advance would be a Nonrecoverable Advance) a hazard
insurance policy with a carrier generally acceptable to the Servicer that
provides for fire and extended coverage, and which provides for a recovery by
the Trust of insurance proceeds relating to such Home Equity Loan in an amount
not less than the least of (i) the outstanding principal balance of the Home
Equity Loan (plus the related senior lien loan, if any) (ii) the minimum amount
required to compensate for damage or loss on a replacement cost basis and (iii)
the full insurable value of the premises. The Servicer shall maintain the
insurance policies required hereunder in the name of the mortgagee, its
successors and assigns, as loss payee. The policies shall require the insurer to
provide the mortgagee with 30 days' notice prior to any cancellation or as
otherwise required by law. The Servicer may also maintain a blanket hazard
insurance policy or policies if the insurer or insurers of such policies are
rated investment grade by Xxxxx'x and Standard & Poor's.
(b) If the Home Equity Loan at the time of origination (or if required
by federal law, at any time thereafter) relates to a Property in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, the Servicer will cause to be maintained with
respect thereto a flood insurance policy in a form meeting the requirements of
the then current guidelines of the Federal Insurance Administration with a
carrier generally acceptable to the Servicer in an amount representing coverage,
and which provides for a recovery by the Trust of insurance proceeds relating to
such Home Equity Loan of not less than the least of (i) the outstanding
principal balance of the Home Equity Loan (plus the related senior lien loan, if
any), (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973.
56
Section 4.12 Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. An opinion of counsel,
provided at the expense of the Servicer (which expense shall be a Servicing
Advance), to the foregoing effect shall conclusively establish the
reasonableness of such belief. In such event, the Servicer shall enter into an
assumption and modification agreement with the person to whom such property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Mortgage Note and, unless prohibited by applicable law or the Mortgage
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Mortgage Note; provided, however, that to
the extent any such substitution of liability agreement would be delivered by
the Servicer outside of its usual procedures for home equity loans held in its
own portfolio the Servicer shall, prior to executing and delivering such
agreement, obtain the prior written consent of the Note Insurer. The Home Equity
Loan, as assumed, shall conform in all material respects to the requirements,
representations and warranties of this Agreement. The Servicer shall notify the
Indenture Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Indenture Trustee or to the Custodian on the
Indenture Trustee's behalf the original copy of such assumption or substitution
agreement (indicating the File to which it relates) which copy shall be added by
the Indenture Trustee or by the Custodian on the Indenture Trustee's behalf to
the related File and which shall, for all purposes, be considered a part of such
File to the same extent as all other documents and instruments constituting a
part thereof. The Servicer shall be responsible for recording any such
assumption or substitution agreements. In connection with any such assumption or
substitution agreement, no material term of the Home Equity Loan (including,
without limitation, the required monthly payment on the related Home Equity
Loan, the stated maturity, the outstanding principal amount or the Coupon Rate)
shall be changed nor shall any required monthly payments of principal or
interest be deferred or forgiven. Any fee collected by the Servicer or the
Sub-Servicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the 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
Home Equity Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 4.13 Realization Upon Defaulted Home Equity Loans; Workout of
Home Equity Loans.
(a) The Servicer shall foreclose upon or otherwise comparably effect
the ownership in the name of the Indenture Trustee on behalf of the Trust of
Properties relating to defaulted Home Equity Loans as to which no satisfactory
arrangements can be made for collection of Delinquent payments and which the
Servicer has not purchased pursuant to Section 4.10(b). In connection with such
foreclosure or other conversion, the Servicer shall exercise such of the rights
and powers vested in it hereunder, and use the same degree of care and skill in
their exercise or use, as prudent mortgage lenders would exercise or use under
the circumstances in the conduct of their own affairs and consistent with the
servicing standards set forth herein, including, but not limited to, advancing
funds for the payment of taxes, amounts due with respect to Senior Liens and
insurance premiums. Any amounts so advanced shall constitute "Servicing
Advances" within the meaning of Section 4.09(b) hereof. 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
57
manner and to such extent as is customary in the locality where such REO
Property is located and may, 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 interest of the Owners for the period prior to the sale
of such REO Property. The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on a Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Property.
The Servicer shall not take any such action with respect to any Property known
by the Servicer to contain such wastes or substances or to be within one mile of
the site of such wastes or substances, without the prior written consent of the
Note Insurer.
(b) The Servicer shall determine, with respect to each defaulted Home
Equity Loan when it has recovered, whether through trustee's sale, foreclosure
sale or otherwise, all amounts it expects to recover from or on account of such
defaulted Home Equity Loan, whereupon such Home Equity Loan shall become a
"Liquidated Loan" and the Servicer shall promptly submit a liquidation report in
a form reasonably acceptable to the Note Insurer.
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Equity Loan unless, in the Servicer's
good faith judgment, such modification, waiver or amendment would minimize the
loss that might otherwise be experienced with respect to such Home Equity Loan
and only in the event of a default with respect to such Home Equity Loan or in
the event that a default with respect to such Home Equity Loan is imminent;
provided, however, that no such modification, waiver or amendment shall extend
the maturity date of such Home Equity Loan beyond the Remittance Period related
to the Final Payment Date. Notwithstanding anything set out in this Section
4.13(c) or elsewhere in this Agreement to the contrary, the Servicer shall be
permitted to modify, waive or amend any provision of a Home Equity Loan if
required by statute or a court of competent jurisdiction to do so.
(d) The Servicer shall provide written notice to the Indenture Trustee
and the Note Insurer prior to the execution of any modification, waiver or
amendment of any provision of any Home Equity Loan; provided that if the Note
Insurer does not object in writing to the modification, waiver or amendment
specified in such notice within 5 Business Days after its receipt thereof, the
Servicer may effectuate such modification, waiver or amendment and shall deliver
to the Custodian, on behalf of the Indenture Trustee for deposit in the related
File, an original counterpart of the agreement relating to such modification,
waiver or amendment, promptly following the execution thereof.
Section 4.14 Indenture Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Home Equity Loan (including any
liquidation of such Home Equity Loan through foreclosure or otherwise), or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes, the Servicer shall deliver to the
Custodian, on behalf of the Indenture Trustee the Xxxxxx Xxx "Request for
Release of Documents" (Xxxxxx Mae Form 2009). Upon receipt of such Request for
Release of Documents, the Custodian, on behalf of the Indenture Trustee shall
promptly release the related File, in trust, in its reasonable discretion to (i)
the Servicer, (ii) an escrow agent or (iii) any employee, agent or attorney of
the Indenture Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Servicer is
authorized to give, as attorney-in-fact for the Indenture Trustee and the
mortgagee under the Mortgage which secured the Mortgage Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account or to the Indenture
58
Trustee. In lieu of executing any such satisfaction or assignment, as the case
may be, the Servicer may prepare and submit to the Custodian, on behalf of the
Indenture Trustee, a satisfaction (or assignment without recourse, if requested
by the Person or Persons entitled thereto) in form for execution by the
Indenture Trustee with all requisite information completed by the Servicer; in
such event, the Custodian, on behalf of the Indenture Trustee shall execute and
acknowledge such satisfaction or assignment, as the case may be, and deliver the
same with the related File, as aforesaid.
(b) The Servicer shall have the right to accept applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages. No
application for approval shall be considered by the Servicer without the prior
written consent of the Note Insurer unless: (x) the provisions of the related
Mortgage Note and Mortgage have been complied with; (y) the Loan-to-Value Ratio
and debt-to-income ratio after any release does not exceed the Loan-to-Value
Ratio and debt-to-income ratio of such Mortgage Note on the Cut-Off Date, and
any increase in the Loan-to-Value Ratio shall not exceed 5% unless approved in
writing by the Note Insurer; and (z) the lien priority of the related Mortgage
is not affected. Upon receipt by the Indenture Trustee of an Officer's
Certificate executed on behalf of the Servicer setting forth the action proposed
to be taken in respect of a particular Home Equity Loan and certifying that the
criteria set forth in the immediately preceding sentence have been satisfied,
the Indenture Trustee shall execute and deliver to the Servicer the consent or
partial release so requested by the Servicer. A proposed form of consent or
partial release, as the case may be, shall accompany any Officer's Certificate
delivered by the Servicer pursuant to this paragraph.
Section 4.15 Servicing Compensation.
As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the related Servicing Fee with respect to each
Home Equity Loan. Additional servicing compensation in the form of prepayment
charges, release fees, bad check charges, assumption fees, late payment charges,
prepayment penalties, or any other servicing-related fees, Net Liquidation
Proceeds not required to be deposited in the Principal and Interest Account
pursuant to Section 4.08(c)(i) and similar items may, to the extent collected
from Mortgagors, be retained by the Servicer, unless a successor Servicer is
appointed pursuant to Section 4.20 hereof, in which case the successor Servicer
shall be entitled to such fees as are agreed upon by the Indenture Trustee, the
Note Insurer, the successor Servicer and the majority of the Percentage
Interests of the Certificates.
The right to receive the Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
Section 4.16 Annual Statement as to Compliance.
The Servicer, at its own expense, will deliver to the Indenture
Trustee, the Note Insurer, the Depositor, the Issuer, and the Rating Agencies,
on or before April 30 of each year, commencing in 1999, an Officer's Certificate
stating, as to each signer thereof, that (i) a review of the activities of the
Servicer during such preceding calendar year and of performance under this
Agreement has been made under such officers' supervision, and (ii) to the best
of such officers' knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement for such year, or, if there has been a
default in the fulfillment of all such obligations, specifying each such default
known to such officers and the nature and status thereof including the steps
being taken by the Servicer to remedy such default.
The Servicer shall deliver to the Indenture Trustee, the Note Insurer
and the Rating Agencies, promptly after having obtained knowledge thereof but in
no event later than five Business Days thereafter, written notice by means of an
Officer's Certificate of any event which with the giving of notice or the lapse
of time would become a Servicer Termination Event.
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Section 4.17 Annual Independent Certified Public Accountants' Reports.
On or before April 30 of each year, commencing in 1999, the Servicer,
at its own expense (or if the Indenture Trustee is then acting as Servicer, at
the expense of the Seller, which in no event shall exceed $1,000 per annum),
shall cause to be delivered to the Indenture Trustee, the Note Insurer, the
Depositor, and the Rating Agencies a letter or letters of a firm of independent,
nationally recognized certified public accountants stating that such firm has
examined the Servicer's overall servicing operations in accordance with the
requirements of the Uniform Single Attestation Procedure for Mortgage Bankers,
and stating such firm's conclusions relating thereto.
Section 4.18 Access to Certain Documentation and Information Regarding
the Home Equity Loans.
The Servicer shall provide to the Seller, the Indenture Trustee, the
Note Insurer, the Office of Thrift Supervision (the "OTS"), the FDIC and the
supervisory agents and examiners of each of the FDIC and the OTS (which, in the
case of supervisory agents and examiners, may be required by applicable state
and federal regulations) access to the documentation regarding the Home Equity
Loans, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it.
Section 4.19 Assignment of Agreement.
Other than with respect to entering into Sub-Servicing Agreements
pursuant to Section 4.03 hereof, the Servicer may not assign its obligations
under this Agreement, in whole or in part, unless it shall have first obtained
the written consent of the Indenture Trustee and the Note Insurer, which such
consent shall not be unreasonably withheld; provided, however, that any assignee
must meet the eligibility requirements set forth in Section 4.20(h) hereof for a
successor servicer.
Section 4.20 Removal of Servicer; Retention of Servicer; Resignation of
Servicer.
(a) The Note Insurer or the Indenture Trustee (with the prior written
consent of the Note Insurer) (or, except in the case of item (vi) below, the
Owners, with the consent of the Note Insurer) may remove the Servicer upon the
occurrence of any of the following events (each a "Servicer Termination Event"):
(i) The Servicer shall (A) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or
similar entity with respect to itself or its property, (B) admit in
writing its inability to pay its debts generally as they become due,
(C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, (E) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding or (F) take
corporate action for the purpose of effecting any of the foregoing;
or
(ii) If without the application, approval or consent of the
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or
similar entity with respect to the Servicer or of all or any
substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or
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insolvency law, and, if such proceeding is being contested by the
Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B)
continue undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days; or
(iii) The Servicer shall fail to perform any one or more of
its material obligations hereunder and shall continue in default
thereof for a period of thirty (30) days (one (1) Business Day in the
case of a delay in making a payment required of the Servicer under
this Agreement) after the earlier of (A) actual knowledge of an
officer of the Servicer or (B) receipt of notice from the Indenture
Trustee or the Note Insurer of said failure; provided, however, that
if the Servicer can demonstrate to the reasonable satisfaction of the
Note Insurer that it is diligently pursuing remedial action, then the
cure period may be extended with the written approval of the Note
Insurer; or
(iv) The Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 2.02 which
materially and adversely affects the interests of the Owners or the
Note Insurer for a period of sixty (60) days after the earlier of the
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Servicer can demonstrate to the reasonable satisfaction
of the Note Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Note Insurer; or
(v) The merger, consolidation or other combination of the
Servicer with or into any other entity, unless (A) the Servicer or an
Affiliate of the Servicer is the surviving entity of such combination
or (B) the surviving entity (I) is servicing at least $300,000,000 of
home equity loans that are similar to the Home Equity Loans, (II) has
equity of not less than $10,000,000 (as determined in accordance with
generally acceptable account principles), (III) is consented to by
the Note Insurer (such consent not to be unreasonably withheld) and
(IV) agrees to assume the Servicer's obligations thereunder; or
(vi) The failure of the Servicer (except the Indenture Trustee
in its capacity as successor Servicer) to satisfy the Servicer
Termination Test.
(b) The Servicer shall act as servicer under this Agreement, subject to
the right of removal set forth in subsection (a) hereof, for an initial period
commencing on Closing Date and ending on March 31, 1999, which period may be
extended by the Note Insurer in its sole discretion for a succeeding quarterly
period on December 31, March 31, June 30 and September 30 of each year as
provided below (each such quarterly period for which the Servicer shall be
designated to act as servicer hereunder, a "Term of Service"); provided that
nothing in this Section 4.20(b) shall prohibit the Note Insurer or the Indenture
Trustee from removing the Servicer pursuant to Section 4.20(a). Notwithstanding
the foregoing, the Note Insurer may, in its sole discretion, extend the period
for which the Servicer is to act as such for a period in excess of one quarter
(provided such extension shall be an additional one or more quarters), but any
such extension shall be revocable at any time by the Note Insurer upon written
notice delivered to the Indenture Trustee and the Servicer at least fifteen days
prior to the expiration of the related quarterly period.
(c) The Note Insurer agrees to use its best efforts to inform the
Indenture Trustee of any materially adverse information regarding the Servicer's
servicing activities that comes to the attention of the Note Insurer from time
to time.
(d) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon determination that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the
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Servicer so causing such a conflict being of a type and nature carried on by the
Servicer at the date of this Agreement. Any such determination permitting the
resignation of the Servicer shall be evidenced by an opinion of counsel
acceptable to the Indenture Trustee and the Note Insurer at the expense of the
Servicer to such effect which shall be delivered to the Indenture Trustee and
the Note Insurer.
(e) No removal or resignation of the Servicer shall become effective
until the Indenture Trustee or a successor Servicer shall have assumed the
Servicer's responsibilities and obligations in accordance with this Section.
(f) Upon removal or resignation of the Servicer, the Servicer at its
own expense also shall promptly deliver or cause to be delivered to a successor
servicer or the Indenture Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has maintained
for the Home Equity Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Servicer's possession.
(g) Any collections then being held by the Servicer prior to its
removal and any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly and immediately to the Indenture Trustee or the successor Servicer.
(h) Upon removal or resignation of the Servicer, the Indenture Trustee
may (i) solicit bids for a successor servicer as described below or (ii) shall
appoint the Backup Servicer as Servicer. If the Indenture Trustee elects to
solicit bids for a successor Servicer, the Indenture Trustee agrees to act as
Backup Servicer during the solicitation process and shall assume all duties of
the Servicer (except as otherwise provided in this Agreement). The Indenture
Trustee shall, if it is unable to obtain a qualifying bid and is prevented by
law from acting as Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution and having equity of not less than $15,000,000
(or such lower level as may be acceptable to the Note Insurer), as determined in
accordance with generally accepted accounting principles and acceptable to the
Note Insurer as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder. The compensation of any successor Servicer (other than the Indenture
Trustee in its capacity as successor Servicer) so appointed shall be the amount
agreed to between the successor Servicer, the Note Insurer and the majority of
the Percentage Interests of the Certificates (up to a maximum of 0.50% per annum
on each Home Equity Loan) together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise as provided in
Sections 4.08 and 4.15; provided, however, that in the event that no reasonable
entity (other than the Indenture Trustee in its capacity as successor Servicer)
is willing to assume the capacity of successor Servicer hereunder for a
compensation of no more than 0.50% per annum on each Home Equity Loan, then the
Note Insurer shall solicit bids for the right to service the Home Equity Loans
from three potential successor servicers listed at such time as approved
servicers by Standard & Poor's for residential subprime servicing. In the event
that the bids received are between 0.50% and 0.75% per annum per Home Equity
Loan, the Owners of a majority of the Certificates shall choose the successor
Servicer from among such bidders. In the event that the bids received are for
greater than 0.75% per annum per Home Equity Loan, the Owners of a majority of
the Certificates may reject all such bids. Notwithstanding the foregoing, in the
event that the Indenture Trustee becomes the successor Servicer it shall receive
as its compensation the same compensation paid to the Servicer immediately prior
to the Servicer's removal or resignation.
(i) In the event the Indenture Trustee elects to solicit bids as
provided above, the Indenture Trustee shall solicit, by public announcement,
bids from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor Servicer shall be entitled to
servicing compensation in accordance with clause (h) above, together with the
other servicing compensation in the form of assumption fees, late payment
charges
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or otherwise as provided in Sections 4.08 and 4.15. Within thirty days after any
such public announcement, the Indenture Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid as to
the price it will pay to obtain servicing. The Indenture Trustee shall deduct
from any sum received by the Indenture Trustee from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum less any amounts due the Indenture Trustee or the Trust
from the Servicer shall be paid by the Indenture Trustee to the Servicer at the
time of such sale, transfer and assignment to the Servicer's successor.
(j) The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors of the transfer of
servicing. The Servicer agrees to cooperate with the Indenture Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor Servicer, as applicable, all amounts which then have been or should
have been deposited in the Principal and Interest Account by the Servicer or
which are thereafter received with respect to the Home Equity Loans. Neither the
Indenture Trustee nor any other successor Servicer shall be held liable by
reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer.
(k) The Indenture Trustee or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately (i) record all
assignments of Home Equity Loans not previously recorded in the name of the
Indenture Trustee pursuant to Section 2.05(b)(ii) as a result of an opinion of
counsel and (ii) make all Delinquency Advances and Compensating Interest
payments and deposit them to the Principal and Interest Account which the
Servicer has theretofore failed to remit with respect to the Home Equity Loans;
provided, however, that if the Indenture Trustee is acting as successor
Servicer, the Indenture Trustee shall only be required to make Delinquency
Advances (including the Delinquency Advances described in this clause (k)) if,
in the Indenture Trustee's reasonable good faith judgment, such Delinquency
Advances will ultimately be recoverable from the Home Equity Loans.
(l) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors, to Moody's and to Standard & Poor's of the transfer of
the servicing to the successor.
(m) The Indenture Trustee shall give notice to the Note Insurer, the
Owners, the Owner Trustee, the Seller, Moody's and Standard & Poor's of the
occurrence of any event described in paragraph (a) above of which the Indenture
Trustee is aware.
Section 4.21 Inspections by Note Insurer; Errors and Omissions
Insurance.
(a) At any reasonable time during business hours and from time to time
upon reasonable notice, the Indenture Trustee, the Note Insurer, any Owner or
the Issuer, or any agents thereof may inspect the Servicer's servicing
operations and discuss the servicing operations of the Servicer during the
Servicer's normal business hours with any of its officers or directors;
provided, however, that the costs and expenses incurred by the Servicer or its
agents or representatives in connection with any such examinations or
discussions shall be paid by the Servicer.
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(b) The Servicer (including the Indenture Trustee if it shall become
the Servicer hereunder) agrees to maintain errors and omissions coverage and a
fidelity bond in the form and amount that would meet the requirements of Xxxxxx
Xxx, unless the Servicer has obtained a waiver of such requirements from Xxxxxx
Mae. The Servicer shall be deemed to have complied with this provision if an
affiliate of the Servicer has such errors and omissions policy and fidelity bond
coverage and, by the terms of such insurance policy and fidelity bond, the
coverage afforded thereunder extends to the Servicer.
Section 4.22 Additional Servicing Responsibilities for Second Mortgage
Loans.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations under a First Mortgage
Loan, or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Property sold or foreclosed, the Servicer shall take, on behalf of the
Trust, whatever actions are necessary to protect the interests of the Owners and
the Note Insurer, and/or to preserve the security of the related Home Equity
Loan. The Servicer shall advance the necessary funds to cure the default or
reinstate the lien securing a First Mortgage Loan, if such advance is in the
best interests of the Note Insurer and the Owners; provided, however, that no
such additional advance need be made if such advance would be nonrecoverable.
The Servicer shall thereafter take such action as is necessary to recover the
amount so advanced. Any expenses incurred by the Servicer pursuant to this
Section 4.22 shall be Servicing Advances.
Section 4.23 Adjustable Rate Home Equity Loans.
The Servicer shall enforce each Home Equity Loan in accordance with its
terms and shall timely calculate, record, report and apply all interest rate
adjustments in accordance with the related Mortgage Note. The Servicer's records
shall, at all times, reflect the then current Coupon Rate and monthly payment
and the Servicer shall timely notify the Mortgagor of any changes to the Coupon
Rate or the Mortgagor's monthly payment. If the Servicer fails to make either a
timely or accurate adjustment to the Coupon Rate or monthly payment or to notify
the Mortgagor of such adjustments, upon the Servicer's discovery of such error
and such continued failure, the Servicer shall pay from its own funds any
shortage. If the Servicer's continued failure after notice thereof to make a
scheduled change affects the Trust's rights to make future adjustments under the
terms of such Home Equity Loan, the Servicer shall repurchase such Home Equity
Loan in accordance with the provisions of Article II hereof. Any amounts paid by
the Servicer pursuant to this Section shall not be an advance and shall not be
reimbursable from the proceeds of any Home Equity Loan.
Section 4.24 Administration of the Issuer. The Depositor agrees to
assist the Issuer in performing its duties hereunder and
under the Indenture.
END OF ARTICLE IV
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ARTICLE V
TERMINATION
Section 5.01 Termination.
This Agreement will terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to Section 4.1 of the Indenture or (ii) the disposition of all funds
with respect to the last Home Equity Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the Indenture
Trustee, the Servicer, the Owner Trustee, the Issuer, the Custodian and the Note
Insurer; or (b) the mutual consent of the Servicer, the Seller, the Depositor,
the Note Insurer and all Owners in writing.
Section 5.02 Termination Upon Auction Sale.
(a) On the Bid Solicitation Commencement Date for each Loan Pool, the
Indenture Trustee shall solicit bids for the purchase of all Home Equity Loans
remaining in such Loan Pool at a price equal to no less than the related
Redemption Price. Such solicitation shall be conducted substantially in the
manner described in Exhibit E hereto. In the event that satisfactory bids are
received as described in Exhibit E and an Auction Sale occurs, the proceeds of
the sale of such Home Equity Loans shall be deposited in the related Note
Account.
(b) If satisfactory bids are not received within 30 days of the Bid
Solicitation Commencement Date or Bid Solicitation Date, as the case may be, the
Indenture Trustee shall terminate the solicitation of bids and shall hold a new
auction on each Bid Solicitation Date until such Home Equity Loans are sold.
(c) Upon consummation of the sale of the Home Equity Loans in the
related Loan Pool, the Indenture Trustee shall use the proceeds of the sale to
reimburse the Indenture Trustee, the Owner Trustee, the Note Insurer and the
Servicer the amounts set forth in items (ii), (iii), (iv) and (vi) of the
definition of "Redemption Price," deposit the Auction Sale Reserve Deposit in
the Reserve Account, provide the amount set forth in item (i) of the definition
of "Redemption Price" to the Issuer to be used by the Issuer to redeem the
related Series of Notes pursuant to Article X of the related Indenture and
deposit any remainder in the Certificate Distribution Account.
(d) If an Auction Sale on both Loan Pools has not occurred, the
Servicer and the Note Insurer (in that order) have the right to purchase all of
the Home Equity Loans in both Loan Pools at the Redemption Price on any Monthly
Remittance Date on or after the Clean Up Call Date.
(e) Promptly following any purchase described in this Section 5.02, the
Indenture Trustee will or cause the Custodian to release the Files to the
successful bidder at the Auction Sale or the Servicer or the Note Insurer in the
event of a clean up call or otherwise upon their order, in a manner similar to
that described in Section 4.14 hereof.
Section 5.03 Redemption of Notes. Upon any Auction Sale or clean up
described in Section 5.02, the Issuer shall use the proceeds it receives to
redeem the related Series of Notes, in whole and not in part, and terminate the
Indenture. A Series of Notes will be redeemed upon payment of the related
Redemption Price, and the payment of the amount set forth in clause (i) of the
definition of Redemption Price set forth
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in Section 5.02 to the Owners of such Notes shall be in lieu of the payment
otherwise required to be made to the Owners on such Payment Date in respect of
such Notes.
Section 5.04 Disposition of Proceeds.
The Indenture Trustee shall, upon receipt thereof, deposit the proceeds
of any liquidation of the Trust Estate pursuant to this Article V to the related
Note Account; provided, however, that any amounts representing unreimbursed
Delinquency Advances and Servicing Advances theretofore funded by the Servicer
from the Servicer's own funds shall be paid by the Indenture Trustee to the
Servicer from the proceeds of the Trust Estate.
END OF ARTICLE V
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ARTICLE VI
MISCELLANEOUS
Section 6.01 Acts of Owners.
Except as otherwise specifically provided herein, whenever Owner
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Owners if the Owners of the majority of the
Percentage Interest of the Notes agree to take such action or give such consent
or approval.
Section 6.02 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Owners' expense on
direction of the Owners of the majority of the Percentage Interest of the Notes
or the Note Insurer, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Owners or is necessary for the administration or servicing of the Home
Equity Loans.
Section 6.03 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 6.04 Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto
shall bind its successors and assigns, whether so expressed or not.
Section 6.05 Severability.
In case any provision in this Agreement or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 6.06 Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many
states and outside the United States and the desire to establish with certainty
that this Agreement will be governed by and construed and interpreted in
accordance with the law of a state having a well-developed body of commercial
and financial law relevant to transactions of the type contemplated herein, this
Agreement and each Note shall be construed in accordance with and governed by
the laws of the State of New York applicable to agreements made and to be
performed therein, without giving effect to the conflicts of law principles
thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction of
the United States District Court for the Southern District of New York and any
court in the State of New York located in the City and County of New York, and
any appellate court from any thereof, in any action, suit or proceeding brought
against it or in connection with this Agreement or any of the related documents
or the transactions
67
contemplated hereunder or for recognition or enforcement of any judgment, and
the parties hereto hereby irrevocably and unconditionally agree that all claims
in respect of any such action or proceeding may be heard or determined in such
New York State court or, to the extent permitted by law, in such federal court.
The parties hereto agree that a final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. To the extent
permitted by applicable law, the parties hereto hereby waive and agree not to
assert by way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such courts, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that the
related documents or the subject matter thereof may not be litigated in or by
such courts.
(c) Each of the Depositor, the Issuer and the Seller hereby irrevocably
appoints and designates the Indenture Trustee as its true and lawful attorney
and duly authorized agent for acceptance of service of legal process with
respect to any action, suit or proceeding set forth in paragraph (b) above. Each
of the Issuer, the Seller and the Depositor agrees that service of such process
upon the Indenture Trustee shall constitute personal service of such process
upon it.
(d) Nothing contained in this Agreement shall limit or affect the right
of the Depositor, the Issuer, the Seller, the Servicer or the Note Insurer or
third-party beneficiary hereunder, as the case may be, to serve process in any
other manner permitted by law or to start legal proceedings relating to any of
the Home Equity Loans against any Mortgagor in the courts of any jurisdiction.
Section 6.07 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 6.08 Amendment.
(a) The Indenture Trustee, the Depositor, the Issuer, the Seller and
the Servicer, may at any time and from time to time, with the prior written
approval of the Note Insurer but without the giving of notice to or the receipt
of the consent of the Owners, amend this Agreement, and the Indenture Trustee
shall consent to the amendment for the purposes of (i) curing any ambiguity,
(ii) correcting or supplementing any provisions of this Agreement which are
inconsistent with any other provisions of this Agreement or adding provisions to
this Agreement which are not inconsistent with the provisions of this Agreement,
(iii) adding any other provisions with respect to matters or questions arising
under this Agreement, or (iv) for any other purpose, provided that such
amendment shall not adversely affect in any material respect any Owner. Any such
amendment shall be deemed not to adversely affect in any material respect any
Owner if there is delivered to the Indenture Trustee written notification from
each Rating Agency that such amendment will not cause such Rating Agency to
reduce its then current rating assigned to the Notes. Notwithstanding anything
to the contrary, no such amendment shall (A) change in any manner the amount of,
or delay the timing of, payments which are required to be distributed to any
Owner without the consent of the Owner of such Note, (B) change the percentages
of Percentage Interest which are required to consent to any such amendments,
without the consent of the Owners of all Notes affected then outstanding or (C)
which affects in any manner the terms or provisions of the Note Insurance
Policy.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer, the Depositor and the Issuer by written agreement, with the prior
written consent of the Owners of the majority of the Percentage Interests in the
Notes and the Note Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any
68
manner the rights of the Owners; provided, however, that no such amendment shall
(i) reduce in any manner the amount of, or delay the timing of, collections of
payments on Home Equity Loans or distributions which are required to be made on
any Note, without the consent of the holders of 100% of the Notes, (ii)
adversely affect in any material respect the interests of the holders of the
Notes in any manner other than as described in (i), without the consent of the
holders of 100% of the Notes, or (iii) reduce the percentage of Notes, the
holders of which are required to consent to any such amendment, without the
consent of the holders of 100% of the Notes.
(c) The Note Insurer and the Rating Agencies shall be provided by the
Seller with copies of any amendments to this Agreement, together with copies of
any opinions or other documents or instruments executed in connection therewith.
Section 6.09 Specification of Certain Tax Matters.
Each Owner shall provide the Indenture Trustee with a completed and
executed From W-9 prior to purchasing a Note. The Indenture Trustee shall comply
with all requirements of the Code, and applicable state and local law, with
respect to the withholding from any distributions made to any Owner of any
applicable withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
Section 6.10 The Note Insurer.
Any right conferred to the Note Insurer hereunder shall be suspended
and shall run to the benefit of the Owners during any period in which there
exists a Note Insurer Default; provided, that the right of the Note Insurer to
receive the Premium Amount shall not be suspended if such Note Insurer Default
was a default other than a default under clause (a) of the definition thereof.
At such time as the Notes are no longer Outstanding hereunder and the Note
Insurer has received all Reimbursement Amounts, the Note Insurer's rights
hereunder shall terminate.
Section 6.11 Third Party Rights.
The Indenture Trustee, the Seller, the Issuer, the Depositor, the
Servicer, and the Owners agree that the Note Insurer shall be deemed a
third-party beneficiary of this Agreement as if it were a party hereto.
Section 6.12 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
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The Indenture Trustee: The Chase Manhattan Bank
000 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Structured Finance Services, IMC 1998-7
Tel: (000) 000-0000
Fax: (000) 000-0000
The Depositor: IMC Securities, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
The Issuer: IMC Home Equity Loan Owner Trust 1998-7
c/o Wilmington Trust Company, as Owner Trustee
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Tel: (000) 000-0000
Fax: (000) 000-0000
The Seller: IMC Mortgage Company
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
The Servicer: Ocwen Federal Bank FSB
0000 Xxxx Xxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attention: Secretary
Tel: (000) 000-0000
Fax: (000) 000-0000
The Note
Insurer: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Re: IMC Home Equity Loan Owner Trust 1998-7
Tel: (000) 000-0000
Fax: (000) 000-0000
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The Underwriter: PaineWebber Incorporated
1285 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx (cc: Xxxx Xxxxxx)
Tel: (000) 000-0000
Fax: (000) 000-0000
Moody's: Xxxxx'x Investors Service, Inc.
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: The Residential Mortgage
Monitoring Department
Tel: (000) 000-0000
Fax: (000) 000-0000
Standard & Poor's: Standard & Poor's Ratings Services,
a division of the XxXxxx-Xxxx Companies, Inc.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Residential Mortgage Group
Tel: (000) 000-0000
Fax: (000) 000-0000
Section 6.13 Benefits of Agreement.
Nothing in this Agreement or in the Notes, expressed or implied, shall
give to any Person, other than the Owners, the Note Insurer and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 6.14 Legal Holidays.
In any case where the date of any Payment Date, any other date on which
any distribution to any Owner is proposed to be paid, or any date on which a
notice is required to be sent to any Person pursuant to the terms of this
Agreement (with the exception of any Monthly Remittance Date or any Monthly
Reporting Date) shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Agreement) payment or mailing need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made or mailed on the nominal date of any such Payment
Date, or such other date for the payment of any distribution to any Owner or the
mailing of such notice, as the case may be, and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next succeeding Business Day. In any case where the date of any
Monthly Remittance Date or any Monthly Reporting Date shall not be a Business
Day, then payment or mailing need not be made on such date, but must be made on
the preceding Business Day.
Section 6.15 Usury.
The amount of interest payable or paid on any Note under the terms of
this Agreement shall be limited to an amount which shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the State of New
York or any applicable law of the United States permitting a higher maximum
nonusurious rate that preempts such applicable New York laws, which could
lawfully be
71
contracted for, charged or received (the "Highest Lawful Rate"). In the event
any payment of interest on any Note exceeds the Highest Lawful Rate, the Trust
stipulates that such excess amount will be deemed to have been paid to the Owner
of such Note as a result of an error on the part of the Indenture Trustee acting
on behalf of the Trust and the Owner receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Indenture
Trustee on behalf of the Trust, refund the amount of such excess or, at the
option of such Owner, apply the excess to the payment of principal of such Note,
if any, remaining unpaid. In addition, all sums paid or agreed to be paid to the
Indenture Trustee for the benefit of Owners of Notes for the use, forbearance or
detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Notes.
Section 6.16 No Petition. The Indenture Trustee, the Depositor, the
Seller and the Servicer, by entering into this Agreement, and each Owner, by
accepting a Note, hereby covenant and agree that they will not at any time
institute against the Seller, the Servicer, the Depositor or the Issuer, or join
in any institution against the Seller, the Servicer, the Depositor or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Agreement or any of the Operative Documents.
END OF ARTICLE VI
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ARTICLE VII
CERTAIN MATTERS REGARDING THE NOTE INSURER
Section 7.01 Trust Estate and Accounts Held for Benefit of the Note
Insurer.
The Indenture Trustee shall hold the Trust Estate for the benefit of
the related Owners and the Note Insurer and all references in this Agreement and
in the Notes to the benefit of Owners of the Notes shall be deemed to include
the Note Insurer. The Indenture Trustee shall cooperate in all reasonable
respects with any reasonable request by the Note Insurer for action to preserve
or enforce the Note Insurer's rights or interests under this Agreement and the
Notes.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Home Equity Loans and any REO Properties, and shall maintain the
Principal and Interest Account, for the benefit of the Owners and for the
benefit of the Note Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Owners shall be deemed to include the Note
Insurer.
Section 7.02 Claims Upon the Policy; Policy Payments Account.
(a) In the event that an Insured Payment becomes due pursuant to the
terms of the Note Insurance Policy, the Indenture Trustee shall submit a Notice
(in the form attached to such Note Insurance Policy) in accordance with the
terms of such Note Insurance Policy.
(b) The Indenture Trustee shall establish a separate special purpose
trust account for the benefit of the Owners of the Notes and the Note Insurer
referred to herein as the "Policy Payments Account" over which the Indenture
Trustee shall have exclusive control and sole right of withdrawal. The Indenture
Trustee shall deposit any amount paid under a Note Insurance Policy in the
Policy Payments Account and distribute such amount only for purposes of payment
to the Owners of the Notes of the Insured Payments for which a claim was made
and such amount may not be applied to satisfy any costs, expenses or liabilities
of the Servicer, the Seller, the Depositor, the Custodian, the Indenture Trustee
or the Trust. Amounts paid under the Note Insurance Policy shall be transferred
to the Note Account in accordance with the next succeeding paragraph and
disbursed by the Indenture Trustee to Owners of the Notes in accordance with
Section 3.03. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to pay the
Insured Payments with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Notes to be paid from
funds transferred from the Policy Payments Account shall be noted as provided in
paragraph (c) below in the Register and in the statement to be furnished to
Owners of the Notes pursuant to Section 3.08. Funds held in the Policy Payments
Account shall not be invested by the Indenture Trustee.
On any Payment Date with respect to which a claim has been made under
the Note Insurance Policy, the amount of funds received by the Indenture Trustee
as a result of any claim under the Note Insurance Policy, to the extent required
to make the Insured Payment on such Payment Date shall be withdrawn from the
Policy Payments Account and deposited in the Note Account and applied by the
Indenture Trustee, together with the other funds to be withdrawn from the Note
Account, directly to the payment in full of the Insured Payment due on the
Notes. Funds received by the Indenture Trustee as a result of any claim under
the Note Insurance Policy shall be deposited by the Indenture Trustee in the
Policy Payments Account and used solely for payment to the Owners of the Notes
may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Seller, the Depositor, the Custodian, the Indenture Trustee or the
Trust. Any funds remaining in the Policy Payments Account on the first Business
Day following a Payment Date shall be remitted to the Note Insurer, pursuant to
the instructions of the Note Insurer, by the end of such Business Day.
73
(c) The Indenture Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Note from moneys
received under the Note Insurance Policy. The Note Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Indenture Trustee.
(d) The Indenture Trustee shall promptly notify the Note Insurer and
the Fiscal Agent (as defined in the Note Insurance Policy) of any proceeding or
the institution of any action, of which an Authorized Officer of the Indenture
Trustee has actual knowledge, seeking the avoidance as a preferential transfer
under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Owner of a Note by its purchase of such Note, the Servicer and the Indenture
Trustee hereby agree that, the Note Insurer (so long as no Note Insurer Default
exists) may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim, including
without limitation, (i) the direction of any appeal of any order relating to
such Preference Claim and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without limitation of
the foregoing, the Note Insurer shall be subrogated to the rights of the
Servicer, the Indenture Trustee and each Owner of a Note in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
(e) The Indenture Trustee shall, upon retirement of the Notes, furnish
to the Note Insurer a notice of such retirement, and, upon the retirement of the
Notes and the expiration of the term of the Note Insurance Policy, surrender the
Note Insurance Policy to the Note Insurer for cancellation.
Section 7.03 Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Notes which is made with
moneys received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of such Notes from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Notes within the meaning of Section 3.03. The Depositor, the Servicer and
the Indenture Trustee acknowledge, and each Owner by its acceptance of a Note
agrees, that without the need for any further action on the part of the Note
Insurer, the Depositor, the Servicer, the Indenture Trustee or the Registrar (a)
to the extent the Note Insurer makes payments, directly or indirectly, on
account of principal of or interest on any Notes to the Owners of such Notes,
the Note Insurer will be fully subrogated to the rights of such Owners to
receive such principal and interest from the Trust and (b) the Note Insurer
shall be paid such principal and interest but only from the sources and in the
manner provided herein for the payment of such principal and interest.
The Indenture Trustee, the Seller, the Depositor and the Servicer shall
cooperate in all respects with any reasonable request by the Note Insurer for
action to preserve or enforce the Note Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Owners
as otherwise set forth therein.
Section 7.04 Notices to the Note Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to any of the Owners
shall also be sent to the Note Insurer.
74
Section 7.05 Rights to the Note Insurer To Exercise Rights of Owners.
By accepting its Note, each Owner agrees that unless a Note Insurer
Default exists, the Note Insurer shall have the right to exercise all rights of
the Owners as specified under this Agreement without any further consent of the
Owners.
END OF ARTICLE VII
75
IN WITNESS WHEREOF, the Issuer, the Depositor, the Seller, the
Servicer and the Indenture Trustee have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized, all as of the
day and year first above written.
IMC HOME EQUITY LOAN OWNER TRUST 1998-7
By: WILMINGTON TRUST COMPANY,
as Owner Trustee
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
IMC SECURITIES, INC.
as Depositor
By: /s/ Xxxxxx Xxxxxxxx
------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer
IMC MORTGAGE COMPANY,
as Seller
By: /s/ Xxxxxx Xxxxxxxx
-----------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer
OCWEN FEDERAL BANK FSB,
as Servicer
By: /s/ Xxx X. Xxxxxxxx
-----------------------
Name: Xxx X. Xxxxxxxx
Title: Vice President
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By: /s/ Xxxxxxxx Xxxx
-----------------------
Name: Xxxxxxxx Xxxx
Title: Assistant Vice President
STATE OF FLORIDA )
: ss.:
COUNTY OF HILLSBOROUGH )
On the 10th day of December, 1998, before me, a notary public in and
for the State of Florida, personally appeared Xxxxxx Xxxxxxxx to me known to me,
who, being by me duly sworn, did depose and say that he resides at 0000 Xxxxxx
Xxxxx, Xxxxx, XX 00000; that he is the Chief Executive Officer of IMC
Securities, Inc., a Delaware corporation; one of the parties that executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Xxxxxxxx X. Xxxxx
---------------------
Notary Public
Notary Public, State of Florida
My Commission Expires: September 28, 0000
XXXXX XX XXXXXXX )
: ss.:
COUNTY OF HILLSBOROUGH )
On the 10th day of December, 1998, before me personally came Xxxxxx
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
resides at 0000 Xxxxxx Xxxxx, Xxxxx, XX 00000; that he is Chief Executive
Officer of IMC Mortgage Company, a Florida corporation; and that he signed his
name thereto by order of the respective Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Xxxxxxxx X. Xxxxx
---------------------
Notary Public
Notary Public, State of Florida
My Commission Expires: September 28, 0000
XXXXX XX XXXXXXXX )
: ss.:
COUNTY OF NEW CASTLE )
On the 9th day of December, 1998, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn did depose and say that he/she
resides at Wilmington, Delaware; that he/she is Vice President of Wilmington
Trust Company, a Delaware banking corporation described in and that executed the
above instrument as Owner Trustee; and that he/she signed his/her name thereto
by order of the Board of Directors of said Delaware banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------
Notary Public
Notary Public, State of Delaware
My Commission Expires: October 31, 0000
XXXXX XX XXX XXXX )
: ss.:
COUNTY OF NEW YORK )
On the 10th day of December, 1998, before me personally came Xxxxxxxx
Xxxx, to me known, who, being by me duly sworn did depose and say that he/she
resides at 000 X. 00xx Xx.; that he/she is an Assistant Vice President of The
Chase Manhattan Bank, the New York banking corporation described in and that
executed the above instrument as Indenture Trustee; and that he/she signed
his/her name thereto by order of the Board of Directors of said New York banking
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Xxxx X. Xxxxxxxxxxx
-----------------------
Notary Public
Notary Public, State of New York
My Commission Expires: March 10, 0000
XXXXX XX XXXXXXX )
: ss.:
COUNTY OF PALM BEACH )
On the 8th day of December, 1998, before me, a notary public in and for
the State of Florida, personally appeared Xxx X. Xxxxxxxx, known to me to be a
Vice President of Ocwen Federal Bank FSB, a federal savings bank that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------
Notary Public
Notary Public, State of Florida
My Commission Expires: March 7, 2000
SCHEDULE IA
SCHEDULE OF HOME EQUITY LOANS IN LOAN POOL I
A copy of this Schedule is maintained by the Indenture Trustee at the
Corporate Trust Office and by the Servicer.
SCHEDULE IB
SCHEDULE OF HOME EQUITY LOANS IN LOAN POOL II
A copy of this Schedule is maintained by the Indenture Trustee at the
Corporate Trust Office and by the Servicer.
EXHIBIT A
FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
CERTIFICATE RE: PREPAID LOANS
I, __________________________, _______________ of IMC Mortgage Company
("IMC"), hereby certify that between the "Cut-Off Date" (as defined in the Sale
and Servicing Agreement dated as of December 1, 1998 among IMC Securities, Inc.,
as Depositor, IMC, as Seller, Ocwen Federal Bank FSB, as Servicer, IMC Home
Equity Loan Owner Trust 1998-7, as Issuer and The Chase Manhattan Bank, as
Indenture Trustee) and the "Closing Date," the following schedule of "Home
Equity Loans" (each as defined in the Sale and Servicing Agreement) have been
prepaid in full.
Account Original Current Date Paid
Number Name Amount Balance Off
------ ---- ------ ------- ---
Dated: December __, 1998
By: _________________________
Title: ________________________
X-0
XXXXXXX X-0
INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
The Chase Manhattan Bank, in its capacity as Indenture Trustee (the
"Indenture Trustee") under that certain Sale and Servicing Agreement dated as of
December 1, 1998 (the "Sale and Servicing Agreement") among IMC Securities,
Inc., as Depositor, IMC Mortgage Company, a Florida corporation, as seller
("IMC"), Ocwen Federal Bank FSB, as Servicer, IMC Home Equity Loan Owner Trust
1998-7, as Issuer and The Chase Manhattan Bank, as Indenture Trustee, hereby
acknowledges receipt of the Note Insurance Policy (Policy No. ________) from
Financial Security Assurance Inc. and all other assets of the Trust Estate
received by the Indenture Trustee as of the date hereof.
The Indenture Trustee hereby additionally acknowledges that it shall
cause the Custodian (as defined in the Sale and Servicing Agreement) to review
such items as required by Section 2.06(a) of the Sale and Servicing Agreement.
THE CHASE MANHATTAN BANK, as
Indenture Trustee
By: ________________________________
Name: ________________________________
Title:________________________________
Dated: December __, 1998
X-0-0
XXXXXXX X-0
CUSTODIAN'S ACKNOWLEDGMENT OF RECEIPT
Bank One Trust Company, N.A., in its capacity as custodian (the
"Custodian") under the Custodial Agreement dated as of December 1, 1998 among
the Custodian, IMC Mortgage Company, as seller, Ocwen Federal Bank FSB, as
servicer, IMC Securities, Inc., as Depositor, IMC Home Equity Loan Owner Trust
1998-7, as Issuer and The Chase Manhattan Bank, in its capacity as Indenture
Trustee (the "Indenture Trustee") under that certain Sale and Servicing
Agreement dated as of December 1, 1998 ( the "Sale and Servicing Agreement")
among IMC Securities, Inc., as Depositor, IMC Mortgage Company, a Florida
corporation, as seller and servicer ("IMC"), the Issuer, and the Indenture
Trustee hereby acknowledges receipt (subject to review as required by Section
2.06(a) of the Sale and Servicing Agreement) of the items delivered to it by IMC
with respect to the Home Equity Loans pursuant to Section 2.05(b)(i) of the Sale
and Servicing Agreement, except such items as are listed on Exhibit D to the
Sale and Servicing Agreement.
The Schedules of Home Equity Loans is attached to this Receipt.
The Custodian hereby additionally acknowledges that it shall review
such items as required by Section 2.06(a) of the Sale and Servicing Agreement
and shall otherwise comply with Section 2.06(b) and 2.06(c) of the Sale and
Servicing Agreement as required thereby.
BANK ONE TRUST COMPANY, N.A., as custodian
By: ________________________________
Name: ________________________________
Title: ________________________________
Dated: December __, 1998
B-2-1
EXHIBIT C
FORM OF POOL CERTIFICATION
POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bank One Trust
Company, N.A., in its capacity as Custodian (the "Custodian") under the
Custodial Agreement dated December 1, 1998 between the Custodian, IMC Mortgage
Company, as seller, Ocwen Federal Bank FSB, as servicer, IMC Securities, Inc.,
as Depositor, IMC Home Equity Loan Owner Trust 1998-7, as Issuer and The Chase
Manhattan Bank, a New York banking corporation, acting in its capacity as
indenture trustee (the "Indenture Trustee") of a certain pool of mortgage loans
(the "Pool") heretofore conveyed in trust to the Indenture Trustee, pursuant to
that certain Sale and Servicing Agreement dated as of December 1, 1998 (the
"Sale and Servicing Agreement") among IMC Securities, Inc., as Depositor, IMC
Mortgage Company, as Seller (the "Seller"), Ocwen Federal Bank FSB, as Servicer,
IMC Home Equity Loan Owner Trust 1998-7, as Issuer and the Indenture Trustee;
and
WHEREAS, the Custodian is required, pursuant to Section 2.06(a) of the
Sale and Servicing Agreement, to review the Mortgage Files relating to the Pool
within a specified period following the Closing Date and to notify the Seller
promptly of any defects with respect to the Pool, and the Seller is required to
remedy such defects or take certain other action, all as set forth in Section
2.06(b) of the Sale and Servicing Agreement; and
WHEREAS, Section 2.06(a) of the Sale and Servicing Agreement requires
the Custodian to deliver this Pool Certification upon the satisfaction of
certain conditions set forth therein.
NOW, THEREFORE, the Custodian hereby certifies that it has determined
that all required documents (or certified copies of documents listed in Section
2.05 of the Sale and Servicing Agreement) have been executed or received, and
that such documents relate to the Home Equity Loans identified in the Schedule
of Home Equity Loans pursuant to Section 2.06(a) of the Sale and Servicing
Agreement or, in the event that such documents have not been executed and
received or do not so relate to such Home Equity Loans, any remedial action by
the Seller pursuant to Section 2.06(b) of the Sale and Servicing Agreement has
been completed. The Custodian makes no certification hereby, however, with
respect to any intervening assignments or assumption and modification
agreements.
BANK ONE TRUST COMPANY, N.A., as Custodian
By: __________________________________
Title: ________________________________
Dated: December __, 1998
C-1
EXHIBIT D TO THE SALE AND SERVICING AGREEMENT
HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
Loan Number Borrower Name Original Loan Amount Exception
----------- ------------- -------------------- ---------
D-1
EXHIBIT E
AUCTION SALE BID PROCEDURES
I. Auction Process
a. On the Bid Solicitation Commencement Date, the Indenture
Trustee shall have the right, but not the obligation to engage
an investment bank or other agent (the "Advisor") to assist
the Indenture Trustee in the Auction Sale bid solicitation of
the assets of the proposed auction. In the event that such
Advisor advises the Indenture Trustee that it believes that
the then current market for home equity loans similar to the
Home Equity Loans being offered for auction will not lead to a
bid with a minimum price that exceeds the Redemption Price,
the Indenture Trustee shall cancel the auction process until
the next Bid Solicitation Date.
b. On the Bid Solicitation Commencement Date, the Indenture
Trustee or the Advisor will initiate its general auction
procedures consisting of the following: (i) with the
assistance of the Seller and the Servicer, prepare a general
solicitation package along with a confidentiality agreement;
(ii) prepare a list of qualified bidders, in a commercially
reasonable manner; (iii) initiate contact with all qualified
bidders (which may include the Seller, the Servicer, the Note
Insurer and the Owners of the Certificates); (iv) send a
confidentiality agreement to all qualified bidders; (v) upon
receipt of a signed confidentiality agreement, send
solicitation packages to all interested bidders; and (vi)
notify all potential bidders of the anticipated timetable.
c. The general solicitation package will include: (i) the
prospectus from the public offering of the related Series of
Notes ("Prospectus"); (ii) a copy of all monthly servicing
reports or a copy of all annual servicing reports and, upon a
written request, the prior years' monthly servicing reports;
(iii) a form of a purchase and sale agreement and servicing
agreement for such sale; (iv) a description of the minimum
Redemption Price required to cause the Indenture Trustee to
sell the Home Equity Loans; (v) a formal bidsheet; (vi) a
detailed timetable; and (vii) a preliminary data tape of the
Home Equity Loans as of the most recent Payment Date
reflecting the same data attributes used to create the
original Cut-Off Date tables for the Prospectus.
II. Auction Process
a. The Advisor, the Seller, the Servicer and the Note Insurer
will be allowed to bid in the auction, but will not be
required to do so.
b. The bid solicitation package will indicate the date on or
before the bids must be submitted to the Indenture Trustee
(the "Auction Date").
c. On the Auction Date, all bids will be due by facsimile to such
office as shall be designated by the Indenture Trustee by 1:00
p.m. ET; with the winning bidder to be notified by 2:00 p.m.
ET the next Business Day. All acceptable bids will be due on a
conforming basis on the bid sheet contained in the
solicitation package.
E-1
d. The Issuer and the Servicer will cooperate with the Indenture
Trustee and the Advisor by (a) making their offices available
during normal business hours upon reasonable notice for the
prospective bidders to conduct due diligence, (b) providing
the Indenture Trustee with adequate copies of the data tape
regarding the Home Equity Loans, (c) preparing all
assignments, endorsements and all other documentation
necessary to evidence the transfer of the Home Equity Loans
and (d) making all necessary representations and warranties in
connection with the servicing of the Home Equity Loans.
e. If the Indenture Trustee receives no qualified bids, the
Indenture Trustee shall cancel the Auction.
f. Upon notification to the winning bidder, a one percent (1%)
good faith deposit of the aggregate balance of the unpaid
principal balances of the Home Equity Loans as of the last day
of the preceding Remittance Period will be required to be
wired to the Indenture Trustee upon acceptance of the bid.
This deposit, along with any interest income attributable to
it, will be credited to the purchase price, but will not be
refundable. The Indenture Trustee will establish a separate
account for the acceptance of the good faith deposit, until
such time as the account is fully funded and all monies are
transferred into an account established by the Indenture
Trustee for deposit of such amounts, such time not to exceed
one (1) Business Day before the final Payment Date.
g. The winning bidder will receive on the Auction Date a copy of
the draft purchase and sale agreement and servicing agreement.
E-1
