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000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
PMI Mortgage Insurance Co. (an Arizona corporation hereinafter called the
"Company") agrees to pay to the Insured, in consideration of the premium or
premiums to be paid as hereinafter specified and in reliance upon the Insured's
representations and statements made in any Application for coverage under this
Policy, any loss due to the Default by a Borrower on a Loan, subject to the
terms and conditions contained herein.
To obtain information about this Policy, to register a complaint or to obtain
information about related mortgage guaranty insurance products and services
offered by the Company, the insured or its servicer may call the Company toll
free at 800-288-1970.
Insured's Name and Mailing Address Policy Number
(Insured Identification No.)
IN WITNESS WHEREOF, the Company has caused its Corporate Seal to be affixed
hereto and these presents to be signed by its duly authorized officers in
facsimile to become effective as its original seal and signature and binding on
the Company.
PMI Mortgage Insurance Co.
[GRAPHIC OMITTED]
/s/ L. Xxxxxxx Xxxxx /s/ Xxxxxx X. Xxxxxxxxxx
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L. Xxxxxxx Xxxxx, President Xxxxxx X. Xxxxxxxxxx, Secretary
Authorized Representative
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TERMS AND CONDITIONS
I. Definitions
A. Acquisition Option means the method of determining the amount of the
Insurance Benefit with respect to a Loan as set forth in Section V.,
C., 1.
B. Advances means the reasonable and necessary sums paid by the Insured
with respect to Loan after Default, for the following:
1. Hazard insurance premiums;
2. Real estate property taxes;
3. Property protection and preservation expenses;
4. Property sales expenses;
5. Customary foreclosure costs including Court Expenses and
reasonable attorney's fees;
6. Costs of other customary legal proceedings, as may be necessary
to obtain Good and Merchantable Title to or Possession of the
Property; and
7. Loss mitigation expenses.
C. Anticipated Loss means, in connection with a Claim, an amount equal to
the Company's cost of paying the full Claim Amount calculated in
accordance with Section V., B., less the amount the Company reasonably
anticipates receiving as net proceeds of the sale of the Property,
subtracting also from such proceeds all anticipated costs of the sale
and holding costs, but in any event, such amount shall never be greater
than the Loss calculated under the Percentage Option in accordance with
Section V., C., 2.
D. Application means the Insured's statements and descriptions, both oral
and written, relative to the Loan made in connection with the
application or negotiation for the insurance provided by this Policy,
including the representations made, and documents executed by the
Borrower, as evidenced by documents, writings, electronic media
transfers, telephone data transmissions, and the like.
E. Appropriate Proceedings means any legal or administrative action or
proceeding by the Insured affecting either the Loan or the title to the
Property, and include, but are not limited to:
1. enforcing the terms of the Loan as allowed by the laws where the
Property is located; or
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2. establishing a deficiency amount where appropriate and
permissible and where directed by the Company; or
3. acquiring all the Borrower's right and title to the Property in
the Insured's name, but excluding any voluntary conveyance under
Section IV., D., (Voluntary Conveyance); or
4. asserting the Insured's interest in the Property in a Borrower's
bankruptcy or similar proceeding.
F. Borrower means any Person required to repay the debt obligation created
pursuant to the Loan. The Borrower may be more than one Person, and the
term shall include any co-signer or guarantor of the Loan.
G. Borrower's Own Funds means any funds owned by the Borrower and neither
borrowed from other sources, nor subject to refund, rebate, or
repayment.
H. Borrower's Title means such title to a Property as was vested in the
Borrower at the time of a conveyance to the Insured extinguishing all
of the Borrower's rights in the Property; provided, however, if the
Insured so elects, the redemption period need not have expired. The
deed evidencing such title in the Insured need not be recorded unless
required by applicable law.
I. Certificate means once all conditions for coverage have been satisfied,
the number issued by the Company to a Loan, as listed on a Certificate
Schedule.
J. Certificate Schedule means a list of Loans to which coverage has been
extended under this Policy, and which is attached to this Policy, or
added thereto by endorsement, and any document issued by the Company
pursuant to this Policy amending coverage for a Loan.
K. Claim means the timely filed written request, made on a form provided
by or in a manner approved by the Company, to receive benefits of this
Policy. A Claim received by the Company containing all information or
proof required by the Company shall be called a Perfected Claim.
L. Claim Amount means the actual loss incurred by the Insured with respect
to a Loan as calculated in accordance with Section V., B., (Calculation
of Claim Amount) giving effect to adjustments made by the Company due
to failure of the Insured to mitigate loss.
M. Claim Settlement Period means a sixty (60) day period following the
filing of a Claim with the Company provided that such period shall be
extended by the number of days elapsed from the date the Company sends
notice of deficiency of a Claim to the Insured to the date that the
Insured files a Perfected Claim with the Company.
N. Closed means the later of:
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1. The date on which all Loan documents were executed and delivered;
or
2. The date on which the funds under the Loan were initially
disbursed to or for the benefit of the Borrower.
O. Court Expenses means the out-of-pocket cost of initiating and
conducting Appropriate Proceedings or any eviction proceedings. These
expenses include costs of filing or serving pleadings, conducting
discovery and enforcing judgment. These expenses do not include
reimbursement for any time spent by the Insured or the Insured's
employees, officers or agents, nor do these expenses include attorney's
fees.
P. Default means the failure by a Borrower to pay when due: (i) an amount
equal to or greater than one (1) regular periodic payment due under the
terms of a Loan, or (ii) the failure by a Borrower to pay when due all
amounts due under a Loan after the exercise by the Insured of the "due
on sale" provision of such Loan, provided however, that a Default as
defined in (i) above which is cured within 59 days of the payment due
date, will not be deemed to be a Default for purposes of administration
of this Policy unless the missed payment is the first payment due under
a Loan. Default does not mean any other non-monetary default or
violation of any other term or condition of the Loan, which would allow
for acceleration of the debt or foreclosure or other action to realize
upon the security provided by the Loan.
A Loan is deemed to be in Default for the period for which, as of the
close of business on the installment due date, a scheduled installment
payment has not been made. For example, a Loan is "four periodic
payments in Default" if the periodic payments due on January 1 through
April 1 remain unpaid as of the close of business on April 1.
Q. Default Amount means the unpaid principal balance of a Loan as of the
date of Default excluding any Negative Amortization. If a Loan has been
divided into secured and unsecured portions pursuant to proceedings
under the federal bankruptcy laws, the Default Amount shall include the
unpaid principal balance due under the unsecured portion of the Loan
even if the Insured has written off such unsecured portion of the Loan,
provided that the premium paid has been calculated based on both the
secured and unsecured portions of the Loan.
R. Deficiency Expenses means reasonable attorneys fees and necessary court
costs incurred by the Insured for those Appropriate Proceedings
necessary to pursue or establish a deficiency against the Borrower and
which are in addition to those incurred in standard and customary
foreclosure proceedings, plus additional interest accruing on the Loan,
real estate taxes, casualty insurance premiums and Property
preservation expenses incurred during such Appropriate Proceedings and
any additional related redemption period.
S. Down Payment means (i) a cash contribution made by the Borrower, either
prior to or at the time the Loan is Closed, from the Borrower's Own
Fund's towards the purchase price of the Property, or
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(ii) a verifiable equity in the Property vested in the Borrower only,
after completion of the improvements in accordance with the Original
Appraisal.
T. Effective Date means, provided that the premium has been paid as
required herein, 12:01 a.m. on the date of coverage as indicated on the
Certificate Schedule.
U. Environmental Impairment means Physical Damage to a Property occurring
by reason of environmental contamination including, but not limited to,
nuclear reaction or radioactive waste, toxic waste, poisoning or
pollution of earth or water subjacent to the Property or of the
atmosphere above the Property; or similar hazard including any
condition giving rise to liability under the Comprehensive
Environmental Response, Compensation and Liability Act or any similar
law existing under either federal law or the law of the state where the
Property is located.
V. First Party means (a) the Insured or any officer, employee or agent of
the Insured or (b) any of the following Persons: the correspondent
lender, mortgage loan broker or other intermediary underwriting or
originating the Loan on behalf of the Insured or originating lender, or
escrow or closing agents or anyone under contract with the Insured or
originating lender in connection with the origination of such Loan,
such as an appraiser.
W. FMV means the fair market value of a Property as of a specific date
which shall be equal to the lesser of the appraised value or the sale
price of the Property on that date; or in the event of a foreclosure
sale, the appraised value or estimated value determined in accordance
with customary servicing practices, or the value as determined under
applicable law, where such law prescribes a method for determining the
value of a Property.
X. Good and Merchantable Title means title to the Property, free and clear
of all liens and encumbrances, covenants, conditions, restrictions,
easements and rights of redemption, except for:
1. Any lien established by public bond, assessment or tax, when no
installment, call or payment of or under such bond, assessment or
tax is delinquent; and
2. Any municipal or zoning ordinances, building restrictions or
other restrictions, covenants, regulations of use, provided the
Property is in compliance with, and its intended use and
occupancy is not materially adversely affected by, such
restrictions, covenants, regulations or ordinances; and
3. Easements, rights of way, sewer and utility rights, mineral, oil
or timber rights, or any impediments which will not have a
materially adverse effect on either the transferability of the
Property or the sale thereof to a bona fide purchaser.
The Property must have, at a minimum, the following characteristics to
establish Good and Merchantable Title: (i) adequate means of ingress
and egress; (ii) the right to use of water and sewer facilities
appertaining to the Property, whether such rights be by virtue of
public easement or private
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grant; (iii) the Property must be free of any lien for any toxic waste
or environmental contamination or similar hazard or claim of such
hazard pursuant to the Comprehensive Environmental Response
Compensation and Liability Act, as amended, or similar federal or state
law providing for liens in connection with the clean up of
environmental conditions, and no proceedings to initiate such a lien
may be pending, unless otherwise agreed to by the Company.
Y. Insurance Benefit means the liability of the Company with respect to a
Loan calculated in accordance with this Policy. A right to receive an
Insurance Benefit shall be deemed to have arisen when a Default occurs
while the Policy is in force for a Loan, notwithstanding that the
amount of the Insurance Benefit is not then either presently
ascertainable or due and payable.
Z. Insured means with respect to any Loan:
1. The Person designated on the face of this Policy; or
2. Any Person, other than a natural Person, who owns the Loan,
either for its own benefit or as trustee for the benefit of a
third party.
AA. Loan means any note or other evidence of indebtedness and the
indebtedness it so evidences, together with the mortgage, bond, deed of
trust, or other instrument securing said indebtedness, and to which
coverage under this Policy has been extended.
BB. Negative Amortization means the additions to the principal amount of a
Loan arising from the insufficiency of regularly scheduled payments to
cover interest as it accrues against the principal amount of the Loan
as provided for therein.
CC. Original Appraisal means the appraisal, other report or description of
the Property, obtained by the lender under the Loan at the time it was
originated, which establishes the value of the Property at that time.
DD. Percentage Option means the method of determining the amount of the
Insurance Benefit with respect to a Loan set forth in Section V., C.,
2.
EE. Person means any individual natural person, or any corporation,
partnership, association or other legally recognized entity.
FF. Physical Damage means tangible damage to a Property that materially
adversely affects the use, marketability, or value of the Property,
whether caused by accident or otherwise, including, but not limited to
damage caused by reason of fire, destruction of tangible property,
defects in construction, land subsidence, earth movement or slippage,
flood, earthquake, war, civil insurrection, or riot; and further,
Physical Damage includes Environmental Impairment and the destruction
or removal of chattel items that are considered part of the Property
(see Section I., KK., [Property]) For purposes of this definition
"material" shall mean an amount equal to or greater than $1,500.00 such
that the estimated cost to repair a Property is $1,500.00 or more
before the exclusion set forth in Section III.,
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G., (Physical Damage Exclusion) would apply to exclude coverage for a
Loan. The presence of radon gas, lead paint or asbestos in the dwelling
on the Property shall not be deemed to be Physical Damage.
GG. Policy means this contract of insurance together with all Applications,
all endorsements, and the Certificate Schedule, all of which are
incorporated herein for all purposes.
HH. Possession of the Property means actual and physical occupancy and
control of the Property.
II. Pre-Arranged Sale means:
1. A sale of a Property, with the prior approval of the Company,
arranged by the Insured (or by the Borrower and approved by the
Insured) prior to foreclosure because of a Default by a Borrower,
or by the Insured after foreclosure and before expiration of the
Claim Settlement Period; or
2. A foreclosure or trustee's sale of a Property to a third party,
or redemption from foreclosure, at a price equal to or greater
than the minimum amount specified by the Company to be bid by the
Insured at such sale.
JJ. Pre-Arranged Sale Option means the method of determining the amount of
the Insurance Benefit with respect to a Loan set forth in Section V.,
C., 3.
KK. Property means the real property and all improvements thereon including
any chattel items (including any built-in appliances) which are noted
in the Original Appraisal, including all replacements or additions
thereto, together with all easements and appurtenances, all rights of
access, all rights to use, as well as any co-ownership interests in
common areas, recreational and appurtenant facilities, and all
replacements or additions thereto.
LL. Residential means:
1. A type of building which is designed for occupancy by not more
than four families; or
2. A single-family condominium or planned unit development unit; or
3. Any other single-family residence unit as to which Good and
Merchantable Title may be held or conveyed freely under law, and
which the Company has approved in writing.
MM. Servicer means that Person, other than a natural Person, who at any
time is servicing a Loan (as a master servicer, if subservicing is also
involved) with respect to the Insured's obligations under the Policy.
The Insured shall be presumed to be the Servicer unless the Company is
notified otherwise.
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NN. Uninsured Casualty means Physical Damage to a Property which is either
not covered by casualty insurance, or not covered in an amount
sufficient to restore such Physical Damage to the Property.
OO. Uninsured Loan Balance means, at any time, with respect to a Loan, the
estimated Claim Amount less the Insurance Benefit estimated pursuant to
the Percentage Option.
PP. Any pronouns, when used herein, shall mean the single or plural,
masculine or feminine, as the case may be.
II. Coverage
A. Extension of and Level of Coverage- Extension of coverage to a Loan
under this Policy shall be evidenced by issuance of a Certificate
number on the Certificate Schedule. The Certificate Schedule and the
Application for each Loan are incorporated herein by reference and made
a part hereof for all purposes. The Policy is issued in reliance upon
the Application and on the representations made in connection
therewith. Coverage shall commence upon the payment of the initial
premium, as of the Effective Date of the Certificate Schedule. The
coverage level for each Loan shall be as follows:
------------------ ----------------- -----------------
LTV LTV Range Coverage
------------------ ----------------- -----------------
65 60.01 to 65 8%
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70 65.01 to70 15%
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75 70.01 to 75 20%
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80 75.01 to 80 25%
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85 80.01 to 85 30%
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90 85.01 to 90 34%
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95 90.01 to 95 37%
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100 95.01 to 100 40%
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B. Initial Premium - On the Effective Date of the Certificate Schedule,
the Insured shall forward the appropriate initial premium due to the
Company to establish coverage as of the Effective Date.
C. Payment of Renewal Premium - For coverage to be renewed, the entire
renewal premium must be paid no later than the fifteenth (15th) day of
the second month following the month in which each anniversary of the
Effective Date occurs. For example, if the Effective Date was January
12, renewal premium must be paid by March 15. The Company shall give
the Servicer, if a Servicer is shown on the records of the Company, or
otherwise, the Insured, notice of the renewal premium due date. If the
renewal premium is not paid by the last day of the grace period
provided above, then the liability of the Company shall terminate as of
12:01 a.m. on the later of the last anniversary of the Effective Date
through which the premium has been paid, or, if a non-payment notice is
required by applicable
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law, the last day of the cure period specified in such non-payment
notice or as may be required by applicable law (the "Lapse Date").
However, failure to pay a renewal premium will not impair or terminate
coverage for Defaults occurring prior to the Lapse Date.
Notwithstanding the foregoing, if the renewal premium is not paid by
the last day of the above-stated grace period and such Loan is among a
group of Loans whose coverage has lapsed due to the transfer, seizure
or surrender of the servicing for such Loans, the Insured shall have an
additional sixty (60) day grace period in which to pay the renewal
premium for such Loan.
D. Full Premium Payment - The Company shall have the right to hold in a
suspense account for up to ninety (90) days any premium payment
received, without obligation to apply such premium to coverage while
any of the following circumstances exist:
1. The payment received is less than the full amount of the premium
due with respect to a Certificate;
2. Information received with the payment is insufficient to identify
the Loan to which the payment applies.
At the end of the ninety (90) day period if the Company has not been
able to resolve the suspended premium payment with the Insured, then
the Company shall either refund the payment or be deemed to have
accepted and applied it without lapse of coverage. Where the Company
has received notice that there is a Servicer for a Loan then, if a
premium is refunded, the Insured shall be notified that such refund was
made and shall have sixty (60) days from such notice to cure or perform
the conditions precedent to coverage.
E. Cancellation by the Insured of Coverage for a Loan - The Insured may
cancel coverage with respect to a Loan by making a request for
cancellation to the Company in writing or via any medium acceptable to
the Company. Upon receipt thereof, for coverage having refundable
premiums, the Company shall refund such sum as may be determined to be
due in accordance with the appropriate cancellation or premium
schedule. The Company reserves the right to net out any unpaid premium
from any premium refund. However, no refund on a Certificate will be
paid if a notice of Default has been filed unless the Insured waives
its rights to the Insurance Benefit with respect to that Loan.
Cancellation of coverage for a Loan will not cancel this Policy.
F. Cancellation of Policy - Once coverage has become effective with
respect to a Loan, this Policy may not be canceled by the Company for
as long as any Certificate assigned under this Policy remains in force.
If the Insured desires to cancel this Policy, it may do so by canceling
all outstanding Certificates that have been issued under this Policy.
G. Loan Modifications - Unless prior written approval is obtained from the
Company, the Insured shall not make any change in the terms of any Loan
including, but not limited to, any change in the amount of the
indebtedness, the interest rate, the use of escrow funds or other
funds, term or amortization schedule of the Loan, change in the
Property, nor release any Borrower from liability on
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a Loan, provided, however, that changes in the Loan permitted by the
instrument evidencing the Loan shall be deemed approved without prior
approval.
H. Assumptions and Balloon Restructures - The renewal or restructure of a
Loan at the maturity of a Balloon Payment (hereinafter defined) and the
assumption of a Loan by a purchaser of the Property, with or without
the release of the original Borrower, are changes to a Loan requiring
the Company's prior approval as set forth in Section II., G., (Loan
Modifications) above, provided, however, that if under applicable law,
the Insured cannot enforce the "Due on Sale" provision of a Loan, then
the Company will be deemed to have approved the assumption of such
Loan. Notwithstanding anything to the contrary in this Section II., H.,
the Company will be deemed to have approved the assumption of any Loan
where no release is requested and under Section II-406.02 of the
Federal National Mortgage Association's Servicing Guide or any
successor provision thereof, or any similar provision of the Federal
Home Loan Corporation's Sellers' & Servicers' Guide, the assumption is
an "exempt transaction" that the Servicer is to approve without review
of the terms of the transaction.
I. Increase in Loan Amount - In addition to the approval requirement of
Section II., G., (Loan Modifications) above, if the principal balance
of a Loan is increased (excluding any Negative Amortization), the
Insured shall pay an additional premium corresponding to the increase
in coverage, at the then prevailing premium rate.
J. Approval of Loan Modifications - The Company shall not unreasonably
withhold any approval required to be obtained in connection with any of
the changes listed in Sections II., G., and H.,; however, failure by
the Insured to obtain any such approval with respect to any Loan shall
constitute a waiver of coverage for that Loan and the Company shall
refund premium for the period following such waiver.
K. Servicing - The Loans will be serviced by one of five servicers
qualified and approved by the Company and the Insured. Unless the prior
written approval of the Company is obtained, the Servicing of any of
the Loans may not be transferred, sold, or assigned unless such
transfer, sale or assignment is approved in writing by the Company. The
Company shall not unreasonably withhold approval of a proposed
servicer. The Company's approval shall be deemed to be given for the
transfer, sale or assignment of all or part of the Loans to a federally
insured bank or savings association, an institutional investor, the
Federal Home Loan Mortgage Corporation ("Xxxxxxx Mac"), Xxxxxx Mae, or
to a Xxxxxx Xxx or Xxxxxxx Mac approved mortgage banker, provided that
notice of the same is given as required by this paragraph.
L. Change of Insured - If all of the Loans are transferred, sold or
assigned by the Insured, coverage will continue PROVIDED THAT (a)
notice thereof is given to the Company within thirty (30) days of such
change, (b) the change in ownership, however denominated, is not
occasioned by the redemption, repurchase, cancellation or other method
of extinguishing the transaction pursuant to which the Loans were
securitized, and (c) the Company approves the change in writing. The
Company shall not unreasonably withhold approval of an new Insured.
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M. Coordination and Duplication of Insurance Benefits -
1. If any portion of a Loan is uninsured, all payments made by the
Borrower on the Loan shall be allocated to the insured portion of
the Loan in the same ratio as the insured principal amount bears
to the total principal amount of the Loan. The Insurance Benefit
hereunder shall likewise be calculated on the same pro rata
basis.
2. The Insured shall not carry duplicate mortgage guaranty insurance
(other than mortgage guaranty pool insurance or supplemental
mortgage guaranty insurance) on any Loan.
3. If at the time of Default there is any other valid and
collectible insurance in effect for the Loan which would attach
if this insurance were not in effect, then the coverage under
this Policy shall apply only as excess coverage and in no event
as contributing insurance.
N. Mitigation of Loss - The Insured and its Servicer shall attempt to
limit and mitigate loss by adhering to customary servicing standards
applicable to delinquent Loans, which may include in appropriate cases,
but is not limited to, trying to obtain a cure of Defaults and trying
to effectuate a Pre-Arranged Sale or voluntary conveyance of the
Property. The Insured shall permit the Company to participate in
workout activities for any Loan in Default. Failure of the Insured to
materially comply with this Section II., N., with respect to any Loan
shall entitle the Company to adjust the Claim Amount by the amount the
Company was damaged by such noncompliance. The Company shall attempt to
limit and mitigate any loss to the Insured which will not be covered by
the Insurance Benefit provided under this Policy.
III. Exclusions from Coverage
The Company shall not be liable for, and the Policy shall not apply to,
extend to or cover the exclusions listed below. In the event that coverage
is excluded for any Loan, the Company will refund all premium for that Loan
for the period following the occurrence of the event giving rise to such
exclusion. Except where prohibited by law, if the damage to the Company
arising from an excluded event can be reasonably quantified, the Company
shall adjust the Claim Amount by the amount of such damage rather than
exclude coverage altogether for such Loan, unless a refund of premium as
provided for in the preceding sentence would provide a greater payment to
the Insured.
A. Balloon Payment Exclusion - Any Claim arising out of or in connection
with the failure of the Borrower to make any payment of principal and
interest due under the Loan, which payment becomes due when the Insured
exercises its right to call the Loan when not in default or because the
term of the Loan is shorter than the amortization period, and which
payment is for an amount more than twice the regular periodic payment
of principal and interest that are set forth in the Loan (commonly
referred to as a "Balloon Payment"); provided, however, that this
Exclusion shall not apply if the Insured or its Servicer offers the
Borrower in writing, before the due date of the Balloon Payment, a
renewal or extension of the Loan, or a new loan at then current market
rates, in an
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amount not less than the then outstanding principal balance and with
no decrease in the amortization period and the Borrower declines to
seek such renewal or refinancing.
B. Effective Date Exclusion - Any Claim resulting from a Default occurring
before the Effective Date of the Policy or after its lapse,
cancellation, or expiration; or after coverage is canceled with respect
to the Loan.
C. Incomplete Construction Exclusion - Any Claim when, as of the date of
such Claim, construction of the Property had not been completed in
accordance with the construction plans and specifications approved by
the Loan originator at the time the Loan was originated or in
accordance with the Original Appraisal. (This Incomplete Construction
Exclusion shall not apply if the construction of the Property has been
fully completed and, if Physical Damage occurs during construction, any
repairs necessary to restore the Property to its complete condition,
reasonable wear and tear excepted, have been completed.) However,
coverage for a Default occurring during construction may be excluded by
Section III., B., (Effective Date Exclusion) above.
D. Residential Property Exclusion - Any Claim where the Property is not,
as of the date the Loan is Closed, on the Effective Date, and on the
date the Claim is filed, Residential real property.
E. Negligence and Fraud Exclusion - Any Claim involving or arising out of,
or any Claim where the origination of the Loan or extension of coverage
hereunder involved or arose out of, any dishonest, fraudulent,
criminal, or knowingly wrongful act (including error or omission) by
the Insured, the Servicer or any agent of the Insured or Servicer; or
any Claim involving or arising out of the negligence of the Insured or
the Servicer, which negligence is material either to the acceptance of
the risk or to the hazard assumed by the Company.
F. Non-Approved Servicer Exclusion - Any Claim occurring when the
Servicer, at the time of Default or thereafter, was not approved by the
Company, provided, however, that this Non-Approved Servicer Exclusion
shall not apply to any Loan for which a Default occurs within 150 days
after the Company withdraws approval of the Servicer for such Loan. If
the Company decides to withdraw approval of a Servicer it shall give
written notice of that decision to the Insured for each affected Loan
as shown in the Company's records.
G. Physical Damage Exclusion - Any Claim where there is Physical Damage to
the Property, occurring or manifesting itself after the Effective Date;
provided, however, that this exclusion will not apply (i.e., the
Company will provide coverage for a Claim) where Physical Damage has
occurred to the Property if:
1. The Default giving rise to a Claim was not primarily caused by an
Uninsured Casualty occurring prior to such Default, and the
Company has elected to pay either the Percentage Option or the
Pre-Arranged Sale Option as the Insurance Benefit for the Loan;
or
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2. The Property has been restored to its condition as reported in
the Original Appraisal (as fully completed), reasonable wear and
tear excepted. The Insured may elect to accept a reduction in the
Claim Amount by an amount equal to the estimated cost to
completely restore the Property as would otherwise be required by
this exclusion rather than be required to restore the Property to
obtain an Insurance Benefit under this Policy. In the event the
Company relies on an estimate for such restoration that is not
obtained by the Insured, then the Company shall, at the request
of the Insured, provide a copy of such estimate to the Insured.
H. Loan to Value Ratio Exclusion - Any Claim where the original principal
balance of the Loan exceeded one hundred percent (100%) of the FMV of
the Property at the time the Loan was originated, and such fact was not
disclosed to the Company at the time coverage under this Policy was
extended to such Loan.
I. Negative Amortization Exclusion - Unless otherwise endorsed, any
Negative Amortization with respect to a Loan.
J. Defenses to Loan Exclusion - That portion of any Claim equal to the
amount of the indebtedness from which the Borrower is released, or any
Claim against which the Borrower successfully asserts defenses that
have the effect of releasing, in whole or in part, the Borrower's
obligations to repay the Loan, provided, however, this Defenses to Loan
Exclusion shall not apply where the release of the Borrower is the
result of a bankruptcy "cram down" so long as the Insured has continued
to pay premium on the full amount of the indebtedness and that all
other conditions of this Policy have met.
K. Environmental Impairment Exclusion - Any Claim where there is
Environmental Impairment to the Property which existed prior to the
Effective Date if the existence, or suspected existence, of the
Environmental Impairment was not disclosed in the Application and the
Environmental Impairment (i) is a principal cause of the Default, and
(ii) has made the principal Residential structure on the Property
uninhabitable. A structure will be considered "uninhabitable" if
generally recognized standards for residential occupancy are violated
or if, in the absence of such standards, a fully informed and
reasonable person would conclude that such structure was not safe to
live in without fear of injury to health or safety. Notwithstanding the
foregoing, this exclusion shall not apply if the Insured has removed or
remedied the condition that constitutes the Environmental Impairment or
the Insured has removed the hazardous character of such condition in
accordance with applicable federal, state or local laws.
IV. Conditions Precedent to Payment of Claim
The following Claim payment procedures contain the conditions precedent to,
and additional limitations upon the Company's obligation to pay Insurance
Benefits under this Policy:
A. Notice of Default - The Insured shall give the Company notice:
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1. Within forty-five (45) days of Default, if it occurs when the
first payment is due under a Loan; or
2. Not later than the last business day of the month following the
month in which the first of the following events occur:
a. The date when the Borrower becomes three (3) periodic payments
in Default on the Loan if the periodic payments are made monthly,
and not later than ninety (90) days after the occurrence of a
Default for Loans having periodic payments more often than once a
month; or
b. Foreclosure or other Appropriate Proceedings have been
commenced.
Such notice shall be on forms provided by or approved by the Company or
via a medium acceptable to the Company. Unavailability of Company forms
is not a valid reason for delay in reporting. Failure to report a
Default as required by this Section IV., B., shall entitle the Company
to deduct from the Claimable Amount of a Claim thirty (30) days of
interest accruing on the Loan during the period between the date the
notice of Default should have been filed and the date it was submitted
to the Company.
B. Monthly Reports - Following a notice of Default on a Loan or the
commencement of Appropriate Proceedings, the Insured shall give the
Company monthly reports on forms furnished or approved by the Company
or via a medium acceptable to the Company, on the status of the Loan
and on the servicing efforts undertaken to remedy the Default or
conclude the Appropriate Proceedings. These monthly reports shall
continue until the Borrower is no longer in Default, the Appropriate
Proceedings terminate, or until title to the Property has been
transferred to the Insured.
C. Company's Options after Notice of Default - If the Company so directs,
at any time after receiving the Insured's notice of Default, the
Insured shall file a Claim within twenty (20) days and the Company may
elect to pay the Insurance Benefit pursuant to the Percentage Option.
Thereafter, following the Insured's acquisition of the Borrower's Title
to the Property, the Insured shall be entitled to file a supplemental
Claim in an amount equal to the sum of the Advances not included in the
initial Claim, plus any Deficiency Expenses (See Section I.,R.) subject
to the limitations and deductions of Section V., B., (Calculation of
Claim Amount) and such supplemental Claim shall be paid by the Company
in accordance with the Percentage Option.
D. Voluntary Conveyance - The Insured may accept a conveyance of title
from the Borrower in lieu of foreclosure or other proceedings if:
1. The ability of the Insured to preserve, transfer and assign to
the Company the Insured's rights against the Borrower is not
impaired; and
2. The rights of the Company under this Policy against such Borrower
are not adversely affected; or if
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3. The written approval of the Company has been obtained; provided,
however, it is understood that such approval shall not constitute
nor be deemed an admission of liability by the Company with
respect to coverage for the related Loan.
E. Appropriate Proceedings - The Insured MUST begin Appropriate
Proceedings when the Loan becomes six (6) months in Default unless the
Company provides written instructions that some other action be taken.
The Company reserves the right to direct the Insured to institute
Appropriate Proceedings at any time after Default. When either
defending against or bringing Appropriate Proceedings, the Insured
shall report the status of these proceedings to the Company as
reasonably and expeditiously as possible.
In conducting Appropriate Proceedings, the Insured shall:
1. Diligently pursue the Appropriate Proceedings once they have
begun;
2. Apply for the appointment of a receiver and assignment of rents,
if permitted by law, requested by the Company, and appropriate
for the Property;
3. At the request of the Company, furnish the Company with copies of
all notices and pleadings filed or required in the Appropriate
Proceedings;
4. Act so that its ability to preserve, transfer and assign to the
Company its rights against the Borrower is not impaired; and so
that the rights of the Company under this Policy against the
Borrower are not adversely affected, including any rights to
obtain a deficiency judgment, provided that the Insured shall not
be required to pursue or establish a deficiency against the
Borrower in those states where the Company is not permitted to
pursue such a deficiency;
5. Bid an amount at the foreclosure sale which is not less than the
minimum amount nor more than the maximum amount set forth below,
unless the Company notifies the Insured of other instructions or
waives its right to give bidding instructions, in writing.
a. If the FMV of a Property is less than the Uninsured Loan
Balance, the Insured shall start bidding at not less than the FMV
of the Property and may continue bidding up to a maximum of the
Uninsured Loan Balance.
b. If the FMV of a Property is greater than the Uninsured Loan
Balance, the Insured shall start bidding at not less than the
Uninsured Loan Balance up to a maximum amount equal to the Claim
Amount.
If other bidding instructions are provided they will not specify
a maximum bid that is less than the Uninsured Loan Balance, and,
if the Property is subject to redemption for less than the
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outstanding amount of the Loan, then such other bidding
instructions will not specify an opening bid of less than the
Uninsured Loan Balance.
F. Pre-Arranged Sales - In the event of Default on a Loan, it shall be a
condition precedent to payment of any Insurance Benefit on the Loan
that (i) the Insured attempt to obtain a Pre-Arranged Sale of the
Property whenever reasonable, and (ii) the Insured shall authorize its
broker, when requested by the Company, to release marketing information
for the Property to the Company, if requested by the Company, unless
the Insured shall have notified the broker that the Company's right to
acquire the Property has expired or been waived. For purposes of this
section, a "Pre-Arranged Sale Offer" means an offer to purchase the
Property received by the Insured, together with a schedule of (i)
expense items proposed by the Insured to be included in the settlement
amount of the Pre-Arranged Sale Offer is accepted and the proposed
Property sale closes, and (ii) the Insured's then-estimated amounts
thereof. Pre-Arranged Sale Offers that the Insured chooses to submit to
the Company will be approved or rejected by the Company.
G. Claim Requirements - The Insured must provide the Company with:
1. A completed form furnished or approved by the Company for payment
of a Claim ("Claim for Loss Form"); and
2. All information reasonably requested on the Claim for Loss Form
together with all documentation requested on or necessary to
complete such Claim for Loss Form; and
3. Evidence satisfactory to the Company that the Insured has
acquired the Borrower's Title to the Property, except where the
Company has elected the Pre-Arranged Sale Option provided,
however, if the primary cause of the Default was a circumstance
or event which would prevent the Insured from obtaining Good and
Merchantable Title, then no matter which settlement option the
Company elects, the Insured must comply with the requirements of
Section IV., G., 4, as if the Company had elected the Acquisition
Option; and
4. In the event the Company elects the Acquisition Option, a
recordable deed in normal and customary form containing the usual
warranties and covenants conveying to the Company or its designee
Good and Merchantable Title to the Property, along with evidence
satisfactory to the Company that the Insured has acquired and can
convey to the Company or its designee Good and Merchantable Title
to the Property; and
5. All other documentation or information reasonably requested by
the Company for purposes of investigating and/or adjusting the
Claim; and
6. Access to the Property for purposes of determining its value, and
for investigating and/or adjusting the Claim; provided, however,
if the Company elects the Acquisition Option, then Possession of
the Property must be provided by the Insured, unless the Company
waives this requirement in writing.
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V. Loss Payment Procedure
A. Filing of Claim - The Insured shall file a Claim no later than sixty
(60) days after the earlier of acquiring the Borrower's Title to the
Property or a Pre-Arranged Sale, provided that if the Company elects to
acquire the Property, then no later than sixty (60) days after the
Insured acquires Good and Merchantable Title to the Property. Failure
of the Insured to file a Claim within this time period shall (i)
relieve the Company of any obligation to include in the Claim Amount
interest and Advances accruing on the Loan after such sixty (60) day
period has expired, and (ii) entitle the Company to adjust such Claim
to the extent that the Company is prejudiced by such late filing of the
Claim, up to 100% of the Insurance Benefit.
Unavailability of Company forms is not a valid reason to delay filing a
Claim. If a Claim filed by the Insured is incomplete the Company shall
within twenty (20) days of receipt of a Claim, notify the Insured of
all items needed to perfect such Claim. If no notice of deficiency of
the Claim is sent within the twenty (20) day period following receipt
of the Claim by the Company, then the Claim shall be deemed to be
perfected as of the date the Company received the Claim.
B. Calculation of Claim Amount - The Claim Amount for any Loan shall be an
amount equal to the sum of:
1. The Default Amount but excluding any portion of the principal
balance attributable to any increase therein after the first
payment is due and payable, and excluding capitalized penalty
interest or late payment charges. (See Section III., I.,
(Negative Amortization Exclusion) THIS POLICY DOES NOT COVER
NEGATIVE AMORTIZATION UNLESS SUCH COVERAGE IS ENDORSED FOR A
LOAN); and
2. The amount of accumulated delinquent interest due on the Loan at
the contract rate stated in the Loan from the date of Default
through the date that the Claim is submitted to the Company, but
excluding applicable late charges and penalty interest;
additional interest computed on the Default Amount until the
Pre-Arranged Sale of the Property, and thereafter until the
Pre-Arranged Sale closing information is submitted, computed on
the Default Amount reduced by the net proceeds of such
Pre-Arranged Sale (For purposes of this Section, "late charges
and penalty interest" includes, but is not limited to, increases
in interest rate caused by non-performance of the Borrower. In no
event will the Claim Amount include interest at a rate other than
what the Insured would receive if the Loan were paid as current
in accordance with its own terms); and
3. The amount of Advances made by the Insured; provided that:
a. Attorney's fees advanced thereunder shall not exceed three
percent (3%) of the sum of the (1) and (2) above; and
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b. Payment for Advances other than Attorney's fees, shall be
prorated through the earlier of the date the Claim is submitted
to the Company or the Pre-Arranged Sale of the Property;
less:
4. All rents and other payments (excluding proceeds of fire and
extended coverage insurance and proceeds of a Pre-Arranged Sale)
collected or received by the Insured, which are derived from or
in any way related to the Property;
5. The amount of cash available to the Insured remaining in any
escrow account as of the last payment date;
6. The amount of cash to which the Insured has retained the right of
possession as security for the Loan; and
7. The amount paid under applicable fire and extended coverage
policies which has not been applied to either the restoration of
the Property, if the Property suffered Physical Damage, or to the
payment of the Loan; and
8. The amount expended by the Insured for Advances requiring
approval by the Company which are not in compliance with the
Company's guidelines and which have not been approved by the
Company.
C. Payment of Insurance Benefit - The Company, at its sole option, shall
elect one of the following three options and pay to the Insured, on or
before the last day of the Claim Settlement Period, as the Insurance
Benefit, either:
1. The Acquisition Option which shall equal the Claim Amount less
the amount of any payments of Loss previously made by the Company
with respect to the Loan, payable in exchange for the conveyance
of Good and Merchantable Title to and Possession of the Property;
provided, however, that if the Insured is unable to perform any
conditions precedent to payment of a Claim within the later of
thirty (30) days after the redemption period or ninety (90) days
after the Claim Adjustment Period, then, so long as the Claim is
not otherwise excluded, the Insured may retain title to the
Property and the Insurance Benefit under this Acquisition Option
shall be an amount equal to the Company's Anticipated Loss in
connection with such Property ; or
2. The Percentage Option which is an amount equal to the Claim
Amount multiplied by the percentage of coverage specified in this
Policy, or
3. The Pre-Arranged Sale Option is an amount equal to the lesser of
the Percentage Option or the Insured's actual loss in connection
with a Pre-Arranged Sale of the Property. The Insured's actual
loss shall be an amount equal to the Claim Amount plus all
reasonable costs incurred in obtaining and closing such sale less
the proceeds of the Pre-Arranged Sale.
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In addition to payment under one of the foregoing options, the Company
will pay whatever Deficiency Expenses are payable to the Insured
pursuant to Section V., D. (Deficiency Expenses).
In the event that a Pre-Arranged Sale fails to close prior to the end
of the Claim Settlement Period, the Company may postpone payment of the
Insurance Benefit for up to (90) ninety days, or if earlier, until such
Pre-Arranged Sale closes or is terminated, provided that interest on
the Default Amount at the rate due upon the Loan during such
postponement is paid to the Insured.
Further, in the event the Property is redeemed after the payment of the
Percentage Option, the Insured shall be obligated to promptly refund to
the Company the amount, if any, by which the redemption price plus the
Insurance Benefit exceeds the Claim Amount.
In the event the Company does not pay the Insurance Benefit within the
Claim Settlement Period, it will pay interest on the Insurance Benefit
at the rate due under the Loan from the last day of the Claim
Settlement Period until the Claim is paid.
D. Deficiency Expenses - Notwithstanding the provisions of Section V., C.,
(Payment of Insurance Benefit) above, in the case where a deficiency
against the Borrower is being pursued solely at the request of the
Company, then any Deficiency Expenses shall be added to the amount of
the Insurance Benefit. If a deficiency against a Borrower is being
pursued as part of Appropriate Proceedings, for the benefit of both the
Insured and the Company, then at the time such deficiency rights are
established or a deficiency judgment is obtained, whichever shall occur
first, the Deficiency Expenses plus any similar expenses incurred by
the Company in connection with such deficiency shall be settled between
the parties on the same pro rata basis set forth in Section VI., B.
(Subrogation) for the settlement of deficiency recoveries. Expenses and
costs arising after that point shall be treated as collection expenses
to be netted against the deficiency recovery, if any, (and, if none, to
be shared between the parties on the same pro rata basis when it
becomes clear that nothing will be recovered).
To facilitate the decision of whether to pursue or establish a
deficiency against a Borrower, the Insured shall provide the Company
with any information it may have relevant to collecting on a deficiency
judgment for that case. The Company will discuss all such information
it may have with the Insured so that the parties can decide whether any
Appropriate Proceedings (necessary to establishing or pursuing a
deficiency) are to be pursued for the benefit of both parties or
whether one of the parties will elect not to participate in any
recovery. The Insured will be deemed to be participating in Appropriate
Proceedings solely at the request of the Company when such proceedings
are not a condition precedent to obtaining Borrower's Title to or
Possession of a Property and, after the parties have exchanged
information on the Loan, the Insured has advised the Company in writing
why the Insured does not wish to participate in such proceedings.
E. Discharge of Obligation - Any payment by the Company in accordance with
Section V., C., (Payment of Insurance Benefit) and, if applicable,
Section V., D., (Deficiency Expenses) or Section IV., C., (Company's
Options after Notice of Default), taking into account appropriate
adjustments,
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shall be a full and final discharge of the Company's obligation under
this Policy with respect to the related Loan. Notwithstanding the
preceding sentence, the Company shall not be relieved of its obligation
to pay any appropriate supplemental Claims filed pursuant to Section
IV., C., (Company's Options after Notice of Default) or as may
otherwise be agreed to by the Company.
VI. Additional Conditions
A. Proceedings of Eminent Domain - In the event that part or all of the
Property is taken by eminent domain, condemnation or by any other
proceedings by federal, state or local governmental unit or agency, the
Insured shall require that the Borrower apply the maximum permissible
amount of any compensation awarded in such proceedings to reduce the
principal balance of the Loan, in accordance with the law of the
jurisdiction where the Property is located.
B. Subrogation - The Company shall be subrogated pro rata, to the full
extent permitted by law (except where the Company is prohibited by law
from pursuing recovery of a Loan), to all of the Insured's Recovery
Rights with respect to a Loan, upon payment of a Claim hereunder.
"Recovery Rights" shall mean all rights of recovery against the
Borrower and any other Person or organization relating to the Loan or
to the Property. The Company's pro rata share of the net deficiency
recovered (i.e., amounts recovered less reasonable costs and expenses)
with respect to any Loan shall be the amount of the Insurance Benefit
divided by the amount of the deficiency judgment. Internal staff costs
and overhead expenses shall not be deducted in determining the amount
of a net deficiency recovery unless specifically agreed to in writing
by the parties.
The Insured hereby designates the Company its exclusive agent (i) to
pursue all of the Insured's Recovery Rights to which the Company has
not become subrogated by payment of a Claim (i.e., the Insured's share
of the Recovery Rights), (ii) to file any action in the Company's name
as assignee of the Insured, to collect on the Insured's Recovery
Rights, and (iii) to settle and compromise any such Recovery Rights on
behalf of the Insured, it being understood and agreed that the Company
shall have the exclusive rights to pursue and settle all Recovery
Rights for any Loan on which a Claim payment is made hereunder, unless
waived in writing by the Company. If the Company decides not to pursue
Recovery Rights with respect to a Loan, then the Company shall issue a
written waiver of its subrogation and management rights to the Insured.
The Insured shall execute and deliver at the request of the Company
such instruments and documents, and undertake such actions as may be
necessary to transfer, assign and secure such Recovery Rights to the
Company. The Insured shall refrain from any action, either before or
after payment of a Claim hereunder that shall prejudice such Recovery
Rights.
Notwithstanding any provision in the foregoing paragraph to the
contrary, in the event the Insured has, in addition to Recovery Rights
against a Borrower or any other Person, a claim or claims against such
Borrower or other Person not related to the Recovery Rights, then the
Insured shall have the right to pursue in its own name all the Recovery
Rights in conjunction with the Insured's other claim or claims, and the
Company will waive its right to manage the pursuit of the Recovery
Rights.
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The execution by the authorized party, even if it be a party other than
the Insured, of a release or waiver of the right to collect the unpaid
balance of a Loan, if it has such effect, shall release the Company
from its obligations hereunder to the extent and amount of such release
or waiver, unless the Company is prohibited by law from pursuing
recovery of such Loan.
C. Representations and Reliance; Incontestability - All statements made by
the Insured, the Servicer, the Borrower or any other Person in any part
of the Application, including the Original Appraisal, plans and
specifications, or any exhibits or documents submitted therewith, are
deemed to be the Insured's representations. The Company has issued this
Policy and has extended coverage to each Loan listed on the Certificate
Schedule in reliance on the correctness and completeness of such
representations as made or deemed to be made by the Insured.
No Claim otherwise payable under this Policy with respect to a Loan
will be denied, nor will the coverage for such Loan be rescinded, based
on any misrepresentation in the Application made by the Borrower or any
Person other than a First Party, once twelve (12) regularly scheduled
periodic payments have been made on that Loan from the Borrower's Own
Funds.
Notwithstanding the foregoing provisions of this Section VI., C.,, the
Company will not be precluded from denying a Claim or rescinding
coverage for a Loan where prior to the Borrower making twelve (12)
regularly scheduled payments from the Borrower's Own Funds, the Company
notifies the Insured in writing that the Company has sufficient
evidence to establish a reasonable belief that there was a material
misrepresentation made in the Application with respect to such Loan and
the Company provides a reasonable description of such
misrepresentation.
D. Notice - Premium payments are to be paid as provided in Sections II.,
B., and C., and sent to the Company at the address listed on the
Commitment, or as otherwise instructed by the Company in writing. All
other notices, Claims, tenders, reports and other data required to be
submitted to the Company by the Insured shall be either (i) mailed
postpaid, (ii) sent by overnight courier, (iii) transmitted
electronically or via magnetic tape or other media in a manner approved
by the Company, or (iv) sent by telephonic facsimile transmission, to
the Company's home office at the following address and facsimile
number:
For Claim matters:
PMI Mortgage Insurance Co.
P. O. Xxx 000000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Claim Department
Facsimile Number: (000) 000-0000
For Customer Service matters:
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PMI Mortgage Insurance Co.
X.X. Xxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Customer Service Department
Facsimile Number: (000) 000-0000
All notices to the Insured shall be given to the Servicer unless the
Company has not been notified that a Loan is being serviced by a Person
other than the Insured, and shall be either (i) mailed postpaid, (ii)
sent by overnight courier, (iii) transmitted electronically or
magnetically in a manner approved by the Insured, or (iv) sent by
telephonic facsimile transmission, to the Servicer, at the address and
facsimile number provided in writing by the Insured to the Company, or
to the last known address and facsimile number for that Servicer,
except that for facsimile transmissions, the Company shall confirm
telephonically or otherwise the accuracy of the facsimile number used.
Nonpayment notices under Section II., C. and notices required under
Section III., F. shall be sent to both the Insured and the Servicer
whenever the Company has been notified that the Servicer is a Person
other than the Insured. All notices to the Insured and Servicer will be
sent to those Persons whom the Company was last notified as owning or
servicing the Loan, respectively, at the last known address for such
Persons as reflected in the records of the Company.
Either party may notify the other of a change in address in the same
manner as provided for giving notice. All notices, Claims, tenders,
reports and other data required to be submitted to the Company or to
the Insured shall be deemed to have been given five (5) days after the
same is deposited in the U.S. Mail, delivered to an overnight courier,
or transmitted in a manner approved above, unless actually received
earlier. If the Insured requests that notices be sent to a third party
other than the Insured and Servicer, the Company agrees to use its best
efforts to give such notices but the Company shall not incur any
liability for failure to send any notice to any third parties.
E. Reports and Examinations - As pertinent to any Loan or the Policy, the
Company may call on the Insured for such reports as it may deem
reasonably necessary, and may inspect the files, books and records of
the Insured as they pertain to any Loan or to the Policy. The Company
has the right to require that any information which the Insured is
required to provide under this Policy be certified as to its
truthfulness and accuracy by an officer or properly authorized employee
of either or both the Insured and the Servicer.
F. Arbitration - Unless prohibited by applicable law, any controversy or
dispute, including any Claim made hereunder, arising out of or relating
to this Policy, may, upon the mutual consent of all parties to the
dispute, be settled by binding arbitration in accordance with the title
insurance rules of the American Arbitration Association in effect on
the date the demand for arbitration is made. If this remedy is elected
by all parties to the dispute, then the decision of the arbitrator(s)
shall be final and binding on all the parties, and shall be enforceable
in any court of competent jurisdiction in the United States of America.
G. Suit -
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1. No suit or action for recovery of any Claim or Insurance Benefit
under this Policy shall be sustained in any court of law or
equity unless the Insured has materially and substantially
complied with the terms and conditions of this Policy, and unless
the suit or action in equity is commenced within three (3) years
or such longer period of time as may be required by applicable
law, after (i) the Claim has been presented to the Company or
(ii) the date on which the cause of action accrued, whichever is
earlier. No suit or action on a Claim or Insurance Benefit may be
brought against the Company until sixty (60) days have elapsed
from the later of the date that the Insured is notified that
Claim is perfected or from the date the Claim is deemed to be a
Perfected Claim, unless the subject matter of the suit or action
is whether a Perfected Claim has been filed.
2. If a dispute arises concerning the Loan and involving either the
Property or the Insured, the Company has the right to protect its
interest by defending any action arising from such dispute, even
if the allegations involved are groundless, false or fraudulent.
The Company is NOT REQUIRED to defend any lawsuit involving
either the Insured, the Property or the Loan. The Company shall
also have the right to direct the Insured to institute suit on
the Insured's behalf, if this suit is necessary or appropriate to
preserve the Company's rights in connection with a Loan or
Property. If any litigation costs and expenses incurred by either
the Company or the Insured under this Section VI., G., arise out
of an action involving the negligent or wrongful conduct or
breach of contract on the part of the Insured, then the Insured
shall bear all such costs and expenses, and in all other cases,
the Company shall bear such costs and expenses.
H. Parties in Interest - This contract shall be binding upon and inure to
the benefit of the Company and its successors and assigns and the
Insured and its permitted successors and assigns. Neither the Borrower,
nor any successive owner of a Property, nor any pool insurance carrier,
nor any other Person is included or intended as a third party
beneficiary to this Policy. Payments made to the Insured hereunder are
intended as indemnification for actual loss and shall not affect nor
impair the Insured's rights of recovery against the Borrower subject,
however, to the provisions of Section VI., B., (Subrogation). Because
the Company and the Insured are the only parties to the Policy, they
may agree to modify or amend or terminate this Policy or any
Certificate without the consent of, or notice to, any Borrower,
Servicer or any other Person.
I. Agency - Neither the Insured, its Servicer, its originators, nor any of
their respective employees or agents shall be or shall be deemed to be
agents of the Company, nor shall the Company be or be deemed to be an
agent of the Insured or Servicer except to the extent of the Recovery
Rights assigned to the Company pursuant to Section IV., B.,
(Subrogation). The Servicer is deemed to be an agent of the Insured for
all purposes under this Policy, including, but not limited to, for
receiving notices, payments of Insurance Benefit, settling Claims, and
performing acts required of the Insured under this Policy excepting for
receipt of notices required under Section III., F., (Non-Approved
Servicer).
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J. Governing Law; Conformity to Statute - This Policy, including the
Certificate Schedule, Claim or Insurance Benefit related to any Loan,
shall be governed by the law of the jurisdiction in which the original
named Insured is located as shown in on the face page hereof. Any
provision of this Policy which is in conflict with the law of the
aforesaid jurisdiction is hereby amended to conform to the minimum
requirements of that law.
K. Electronic Data Storage - It is understood that the Company may store
information, the contents or images of documents or other data on
electronic media or other media generally accepted for business records
(such as microfiche). The Company and Insured agree that the data
stored on such electronic or other media are equally acceptable between
the parties for all purposes as information, documents or other data
maintained in printed or written form, including but not limited to,
for the purposes of litigation or arbitration.
L. No Waiver - Except as provided in Section VI., C., Representations and
Reliance; Incontestability, nothing contained in this Policy shall be
deemed to waive or limit the Company's rights arising at law or in
equity to rescind or reform this Policy or the Certificate in the event
that material misrepresentations of fact or fraudulent statements were
relied upon by the Company in issuing this Policy or extending coverage
hereunder to any Loan.
