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EXHIBIT 99.2
MASTER SERVICING AGREEMENT
Dated as of June 1, 1997
among
SEQUOIA MORTGAGE TRUST 1, Issuer,
and
REDWOOD TRUST, INC.
and
NORWEST BANK MINNESOTA, N.A., Master Servicer
and
FIRST UNION NATIONAL BANK, Trustee
Relating to the Pledged Mortgages
Pledged as Collateral for the Issuer's
Collateralized Mortgage Bonds,
in the Aggregate Initial
Principal Amount of $534,347,000
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TABLE OF CONTENTS
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PRELIMINARY STATEMENT...................................................................... 1
1. Defined Terms...................................................................... 2
2. Mortgage Documents................................................................. 25
(a) Custodian to Retain Possession of Documents................................. 25
(b) Custodian to Cooperate; Release of Trustee
Mortgage Files.............................................................. 29
(c) Representations, Warranties and Covenants of the
Issuer, Redwood and the Master Servicer..................................... 30
(d) Covenants of the Master Servicer............................................ 34
3. General Duties of the Master Servicer.............................................. 34
(a) Master Servicer to Master Service Pledged
Mortgages................................................................... 34
(b) Servicing; Enforcement of the Obligations of
Servicers................................................................... 35
(c) Successor Servicers......................................................... 36
(d) Rights of the Issuer and the Trustee in Respect of
the Master Servicer......................................................... 37
(e) Trustee to Act as Master Servicer........................................... 37
(f) Collection of Pledged Mortgage Payments; Bond
Account; Distribution Account............................................... 37
(g) Access to Certain Documentation and Information
Regarding the Pledged Mortgages............................................. 43
(h) Determination of LIBOR, the Fed Funds Rates ................................ 43
(i) Access to Certain Documentation............................................. 46
(j) Annual Statement as to Compliance........................................... 46
(l) Errors and Omissions Insurance; Fidelity Bond............................... 48
(m) Master Servicer Monthly Data................................................ 48
(n) Claims Upon the MBIA Policy................................................. 50
(o) Optional Purchase of Pledged Mortgages...................................... 51
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TABLE OF CONTENTS (CONT'D)
Page
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4. General Duties of the Servicers.................................................... 51
(a) Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies.................................................. 51
(b) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.................................................................. 53
(c) Realization Upon Defaulted Pledged Mortgages;
Purchase of Certain Pledged Mortgages....................................... 55
(d) Collection of Taxes, Assessments and Similar
Items; Escrow Accounts...................................................... 58
(e) Documents, Records and Funds in Possession of
Servicer to be Held for Trustee............................................. 58
(f) Annual Independent Public Accountants' Servicing
Statement; Financial Statements............................................. 59
5. Advances........................................................................... 59
6. Master Servicing Compensation and Expenses......................................... 60
(a) Master Servicer Compensation................................................ 60
(b) Servicer Compensation....................................................... 60
7. Master Servicer.................................................................... 61
(a) Liabilities of the Master Servicer.......................................... 61
(b) Merger or Consolidation of the Master Servicer.............................. 61
(c) Limitation on Liability of the Master Servicer and
Others...................................................................... 61
(d) Limitation on Resignation of the Master Servicer............................ 64
8. Master Servicing Default; Termination and Liabilities.............................. 64
(a) Master Servicing Default.................................................... 64
(b) Trustee to Act; Appointment of Successor.................................... 66
(c) Notification to Bondholders................................................. 68
9. Miscellaneous...................................................................... 68
(a) Term of Master Servicing Agreement.......................................... 68
(b) Assignment.................................................................. 68
(c) Notices..................................................................... 68
(d) Inspection and Audit Rights................................................. 70
(e) Governing Law............................................................... 70
(f) Amendments.................................................................. 70
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TABLE OF CONTENTS (CONT'D)
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(g) Severability................................................................ 70
(h) No Joint Venture............................................................ 71
(j) Limitation of Liability of Wilmington Trust
Company..................................................................... 71
(k) Nonpetition Covenants....................................................... 71
(l) Third Party Beneficiary..................................................... 72
SCHEDULE I Schedule of Pledged Mortgages......................................S-I-1
SCHEDULE II Representations and Warranties of the Master
Servicer..........................................................S-II-1
SCHEDULE III Representations and Warranties as to the
Pledged Mortgages................................................S-III-1
SCHEDULE IV Representations and Warranties of the Issuer......................S-IV-1
SCHEDULE V Servicing Agreements...............................................S-V-1
SCHEDULE VI Payment Schedule..................................................S-VI-1
SCHEDULE VII Purchase and Sale Agreements......................................S-VI-1
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MASTER SERVICING AGREEMENT
THIS MASTER SERVICING AGREEMENT is made and entered into as of
June 1, 1997, by and among Sequoia Mortgage Trust 1, a statutory business trust
formed under the laws of the State of Delaware (the "Issuer"), Redwood Trust,
Inc. ("Redwood"), Norwest Bank Minnesota, N.A. ("Norwest"), a national banking
association (the "Master Servicer") and First Union National Bank, a national
banking association (in its capacity as trustee under the Indenture referred to
below, the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing bonds secured
by mortgage collateral. The Issuer has entered into a trust indenture, dated as
of June 1, 1997 (the "Indenture"), between the Issuer and the Trustee, pursuant
to which the Issuer intends to issue its Collateralized Mortgage Bonds, in the
aggregate initial principal amount of $534,347,000 (the "Bonds"). Pursuant to
the Indenture, as security for the indebtedness represented by such Bonds, the
Issuer is and will be pledging to the Trustee, or granting the Trustee a
security interest in, among other things, certain Pledged Mortgages, its rights
under this Agreement, the Servicing Agreements, the Mortgage Loan Purchase
Agreement, the Bond Account, the Distribution Account and certain Insurance
Policies (as each such term is defined herein).
The parties desire to enter into this Agreement to provide,
among other things, for the master servicing of the Pledged Mortgages by the
Master Servicer. The Master Servicer acknowledges that, in order further to
secure the Bonds, the Issuer is and will be granting to the Trustee a security
interest in, among other things, its rights under this Agreement, and the Master
Servicer agrees that all covenants and agreements made by the Master Servicer
herein with respect to the Pledged Mortgages shall also be for the benefit and
security of the Trustee and Holders of the Bonds and MBIA. For its services
hereunder, the Master Servicer will receive a Master Servicing Fee (as defined
herein).
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Redwood has entered into Servicing Agreements (as defined
herein) with Servicers (as defined herein) to perform, as independent
contractors, servicing functions with respect to the Pledged Mortgages. For its
services under a Servicing Agreement, each Servicer will receive a Servicing Fee
(as provided therein) with respect to each Pledged Mortgage serviced by it
thereunder.
In addition, the Issuer will enter into a Management Agreement,
dated as of the date hereof, with Redwood (in such capacity, the "Manager"),
pursuant to which the Manager will conduct certain operations of the Issuer.
Actions by or required of the Issuer hereunder may be performed on its behalf by
the Manager or any sub-manager appointed to act for the Issuer.
1. Defined Terms.
Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Agreement, and the definitions of such terms are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms. Capitalized terms
that are used but not defined in this Agreement and which are defined in the
Indenture have the meanings assigned to them therein.
"ADJUSTED NET MORTGAGE RATE" means, as to each Pledged Mortgage
and at any time, the per annum rate equal to the Mortgage Rate less the related
Servicing Fee Rate.
"ADJUSTMENT DATE" means, as to any Pledged Mortgage, a date on
which the related Mortgage Rate adjusts pursuant to the terms thereof.
"ADVANCE" means any advance of a payment of principal and
interest due on a Pledged Mortgage required to be made by a Servicer with
respect to any Payment Date pursuant to the related Servicing Agreement.
"AGREEMENT" means this Master Servicing Agreement, as the same
may be amended or supplemented from time to time.
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"AMOUNT HELD FOR FUTURE DISTRIBUTION" means, as to any Payment
Date, the aggregate amount held in the Bond Account at the close of business on
the related Calculation Date on account of (i) Principal Prepayments and
Liquidation Proceeds credited by the related Servicer as having been received
after the second month prior to the month of such Payment Date and (ii) all
Scheduled Payments due after the related Due Date.
"APPRAISED VALUE" means (i) with respect to a Pledged Mortgage
other than a Refinancing Pledged Mortgage, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Pledged Mortgage and (b) the sales price of the Mortgaged Property at
the time of the origination of such Pledged Mortgage; or (ii) with respect to a
Refinancing Pledged Mortgage, the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of such Refinancing Pledged
Mortgage.
"AVAILABLE FUNDS" means, as to any Payment Date, the sum of (i)
the aggregate amount of Scheduled Payments on the Pledged Mortgages due on the
related Due Date and received by the Master Servicer on or prior to the related
Withdrawal Date (net of the related Servicing Fees), (ii) any amounts
representing miscellaneous fees and collections, including assumption fees
collected from Mortgagors, to the extent not paid to the Master Servicer or any
Servicer, and any amounts payable by the Master Servicer or Redwood as
reimbursement of any investment losses incurred in the Distribution Account or
in the Bond Account, respectively, (iii) any unscheduled payments and receipts
on the Pledged Mortgages, credited by the related Servicer as having been
received during the second calendar month preceding the month of such Payment
Date including all partial or full prepayments received during such month and
compensating interest paid by the applicable Servicer or Master Servicer if and
to the extent provided for by the Servicing Agreement or Master Servicing
Agreement, respectively; (iv) amounts received with respect to such Payment Date
as the purchase price in respect of a Defective Pledged Mortgage or Delinquent
Pledged Mortgage repurchased by Redwood or a Servicer or a Convertible Pledged
Mortgage repurchased by a Servicer, a subservicer or Redwood, or any
Substitution Adjustment Amount in respect of a Defective Pledged Mortgage that
has been substituted for in lieu of repurchase by Redwood, and the proceeds of
any purchase of a
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Pledged Mortgage by a Servicer pursuant to the applicable Servicing Agreement;
and (v) all Advances made for such Payment Date in respect of the Pledged
Mortgages, in each case net of amounts reimbursable therefrom to the Master
Servicer, the Trustee or any Servicer pursuant to Section 3(f)(iii).
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act
of 1978, as amended.
"BASE SPECIFIED OVERCOLLATERALIZATION AMOUNT" means the product
of (a) the Target Percentage and (b) the Pool Principal Balance as of July 1,
1997.
"BASIC PRINCIPAL AMOUNT" means for any Payment Date the lesser
of (a) the Net Available Funds remaining after distribution of the Interest
Payment Amount and any Bondholders' Interest Carryover for such Payment Date,
(b) the Principal Distributable Amount for such Payment Date and (c) the amount
necessary, if any, to reduce the Bond Principal Balance of the Bonds to the
Targeted Principal Balance for such Payment Date.
"BOND ACCOUNT" means, with respect to the Bonds, the separate
Eligible Account created and maintained by the Master Servicer pursuant to
Section 3(f) with a depository institution in the name of the Master Servicer
for the benefit of the Trustee on behalf of the Bondholders and MBIA and
designated "Bond Account - Norwest Bank Minnesota, N.A., in trust for the
registered holders of Sequoia Mortgage Trust 1 Collateralized Mortgage Bonds and
MBIA."
"BONDHOLDER" or "HOLDER" means the Person in whose name a Bond
is registered in the Bond Register (as defined in the Indenture).
"BONDHOLDERS' INTEREST CARRYOVER" means the aggregate of the
Class A-1 Bondholders' Interest Carryover and Class A-2 Bondholders' Interest
Carryover as of any date of determination.
"BOND PRINCIPAL BALANCE" means the aggregate of the Principal
Amounts of both Classes of Bonds as of any date of determination.
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"BONDS" mean the Issuer's Collateralized Mortgage Bonds Class
A-1 and Class A-2.
"BUSINESS DAY" means any day other than (i) a Saturday or a
Sunday, or (ii) a day on which banking institutions in the State of Maryland,
The City of New York or the city in which the Corporate Trust Office (as defined
in the Indenture) of the Trustee is located are authorized or obligated by law
or executive order to be closed.
"CALCULATION DATE" means, as to any Payment Date, the second
Business Day prior to such Payment Date.
"CERTIFICATE PAYING AGENT" means the Person acting in such
capacity pursuant to the Deposit Trust Agreement which shall initially be the
Trustee.
"CLASS A-1 BONDHOLDERS' INTEREST CARRYOVER" means for any
Payment Date for which interest on the Principal Amount of the Class A-1 Bonds
is to be calculated (pursuant to the definition of Class A-1 Interest Payment
Amount) at the Weighted Average Net Mortgage Rate, the sum of (i) the excess of
(x) the amount of interest that would have accrued on such Principal Amount for
the related Interest Accrual Period at the Class A-1 Interest Rate over (y) the
amount of interest accrued on such Principal Amount for such Interest Accrual
Period at the Weighted Average Net Mortgage Rate and (ii) any amount calculated
pursuant to clause (i) above for any previous Payment Date that remains unpaid
together with interest on such unpaid amount at the Class A-1 Interest Rate.
"CLASS A-2 BONDHOLDERS' INTEREST CARRYOVER" means for any
Payment Date for which interest on the Principal Amount of the Class A-2 Bonds
is to be calculated (pursuant to the definition of Class A-2 Interest Payment
Amount) at the Weighted Average Net Mortgage Rate, the sum of (i) the excess of
(x) the amount of interest that would have accrued on such Principal Amount for
the related Interest Accrual Period at the Class A-2 Interest Rate over (y) the
amount of interest accrued on such Principal Amount for such Interest Accrual
Period at the Weighted Average Net Mortgage Rate and (ii) any amount calculated
pursuant to clause (i) above for any previous Payment Date that remains
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unpaid together with interest on such unpaid amount at the Class A-2 Interest
Rate.
"CLASS A-1 INTEREST PAYMENT AMOUNT" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-1 Interest Rate on the
then outstanding Principal Amount of the Class A-1 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-1
Interest Rate; provided, that, solely in the case where a MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-1 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded for such Payment Date
regardless of any continuation of such MBIA Default).
"CLASS A-2 INTEREST PAYMENT AMOUNT" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-2 Interest Rate on the
then outstanding Principal Amount of the Class A-2 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-2
Interest Rate; provided, that, solely in the case where a MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-2 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded
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for such Payment Date regardless of any continuation of such MBIA Default).
"CLASS A-1 INTEREST RATE" means (a) for the first Payment Date,
6.02844% per annum, (b) for each Payment Date after the first Payment Date and
up to and including the Payment Date on which the Issuer is first permitted to
exercise its option to redeem the Bonds pursuant to the Indenture, the lesser of
(i) a per annum floating rate equal to LIBOR, for the related Interest Accrual
Period plus 0.38% and (ii) 10% per annum and (c) for each Payment Date after the
Payment Date on which the Issuer is first permitted to exercise its option to
redeem the Bonds pursuant to the Indenture, the lesser of (i) a per annum
floating rate equal to LIBOR for the related Interest Accrual Period plus 0.76%
and (ii) 10.38% per annum.
"CLASS A-2 INTEREST RATE" means (a) for the first Payment Date,
6.04% per annum, (b) for each Payment Date after the first Payment Date and up
to and including the Payment Date on which the Issuer is first permitted to
exercise its option to redeem the Bonds pursuant to the Indenture, the lesser of
(i) a per annum floating rate equal to the Fed Funds Average Rate, for the
related Interest Accrual Period plus 0.54% and (ii) 10% per annum and (c) for
each Payment Date after the Payment Date on which the Issuer is first permitted
to exercise its option to redeem the Bonds pursuant to the Indenture, the lesser
of (i) a per annum floating rate equal to the Fed Funds Average Rate for the
related Interest Accrual Period plus 0.92% and (ii) 10.38% per annum.
"CLOSING DATE" means July 29, 1997.
"CODE" means the Internal Revenue Code of 1986, including any
successor or amendatory provisions.
"COMPANY" means Sequoia Mortgage Funding Corporation, a Delaware
corporation, which, as of the Closing Date, owns all of the outstanding
beneficial interests in the Issuer.
"CUSTODIAL AGREEMENTS" means the agreements between the Trustee
and each Custodian.
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"CUSTODIAN" means Bankers Trust Company of California, N.A., and
Norwest Bank Minnesota, N.A., each as custodian under a Custodial Agreement.
"CUT-OFF DATE" means, with respect to the Pledged Mortgages,
June 1, 1997.
"CUT-OFF DATE PRINCIPAL BALANCE" means, as to any Pledged
Mortgage, the Stated Principal Balance thereof as of the close of business on
the Cut-off Date.
"DEBT SERVICE REDUCTION" means, with respect to any Pledged
Mortgage, a reduction in the Scheduled Payment for such Pledged Mortgage by a
court of competent jurisdiction in a proceeding under the Bankruptcy Code which
became final and non-appealable, except such a reduction resulting from a
Deficient Valuation or any reduction that results in a permanent forgiveness of
principal.
"DEBT SERVICE REDUCTION PLEDGED MORTGAGE" means any Pledged
Mortgage that became the subject of a Debt Service Reduction.
"DEFECTIVE PLEDGED MORTGAGE" means any Pledged Mortgage required
to be repurchased or substituted by Redwood pursuant to Section 2(a)(ii) or
2(c)(iv) hereof.
"DEFICIENCY AMOUNT" means (i) for any Payment Date prior to the
Stated Maturity, an amount equal to the sum of (x) the excess, if any, of the
Interest Payment Amount over the Net Available Funds for such Payment Date and
(y) the Subordination Deficit, if any; (ii) for the Stated Maturity, an amount
equal to the sum of (a) the excess, if any, of the Interest Payment Amount over
the Net Available Funds for such Payment Date and (b) the excess, if any, of the
Bond Principal Balance of the Bonds over Net Available Funds not used to pay the
Interest Payment Amount for such Stated Maturity; and (iii) for any date on
which the acceleration or redemption of the Bonds has been directed or consented
to by MBIA pursuant to the Agreement, an amount equal to the excess, if any, of
the sum of the Bond Principal Balance of the Bonds, together with accrued and
unpaid interest thereon through the date of payment of such accelerated or
redeemed Bonds, over the Net Available Funds for such Payment
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Date; provided, that, for purposes of determining the Deficiency Amount, the
Interest Payment Amount shall be calculated without regard or reference to the
Weighted Average Net Mortgage Rate.
"DEFICIENT VALUATION" means, with respect to any Pledged
Mortgage, a valuation by a court of competent jurisdiction of the Mortgaged
Property in an amount less than the then outstanding indebtedness under the
Pledged Mortgage, or any reduction in the amount of principal to be paid in
connection with any Scheduled Payment that results in a permanent forgiveness of
principal, which valuation or reduction results from an order of such court
which is final and non-appealable in a proceeding under the Bankruptcy Code.
"DELETED PLEDGED MORTGAGE" has the meaning ascribed thereto in
Section 2(c)(iv) hereof.
"DELINQUENT PLEDGED MORTGAGE" means any Pledged Mortgage as to
which any Scheduled Payment is 60 days or more delinquent.
"DEPOSIT TRUST AGREEMENT" means the Amended and Restated Deposit
Trust Agreement, dated as of July 17, 1997, between the Company and the Owner
Trustee, as such Deposit Trust Agreement may be amended or supplemented from
time to time.
"DISTRIBUTION ACCOUNT" means the Eligible Account or Accounts
created and maintained with the Trustee pursuant to Section 8.02 of the
Indenture, to which shall be remitted from time to time certain of the funds the
Master Servicer has collected and deposited in the Bond Account with respect to
the Pledged Mortgages, as required hereunder and under the Indenture.
"DUE DATE" means, with respect to each Payment Date, the first
day of the month preceding the month of such Payment Date.
"DUE PERIOD" means, with respect to any Payment Date, the period
beginning on the second day of the second preceding calendar month and ending on
the Due Date in the month preceding the month of such Payment Date.
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"ELIGIBLE ACCOUNT" means any of (i) a segregated 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 principal
subsidiary of a holding company, the debt obligations of such holding company,
but only if Xxxxx'x is not a Rating Agency) have the highest short-term ratings
of each Rating Agency at the time any amounts are held on deposit therein and
the long term debt obligations of which shall be rated AA or higher by S&P and
Aa or higher by Moody's, or (ii) a segregated trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution or trust company, acting in its fiduciary capacity acceptable to
each Rating Agency and MBIA, having capital and surplus not less than
$100,000,000 or (iii) any other account acceptable to each Rating Agency and
MBIA. Eligible Accounts may bear interest, and may include, if otherwise
qualified under this definition, accounts maintained with the Master Servicer or
the Trustee.
"ESCROW ACCOUNT" means the Eligible Account or Accounts
established and maintained pursuant to the applicable Servicing Agreement.
"EXCESS CASH FLOW PRINCIPAL AMOUNT" means, for any Payment Date
the lesser of (i) the Net Monthly Excess Cashflow, if any, for such Payment Date
and (ii) the amount necessary, if any, after application of the Basic Principal
Amount for such Payment Date, to reduce the Principal Amount of the Bonds to the
Targeted Principal Balance for such Payment Date.
"EXCESS PROCEEDS" means, with respect to any Liquidated Pledged
Mortgage, the amount, if any, by which the sum of any Liquidation Proceeds of
such Pledged Mortgage received in the calendar month in which such Pledged
Mortgage became a Liquidated Pledged Mortgage, net of any amounts previously
reimbursed to the Master Servicer or the related Servicer as Nonrecoverable
Advance(s) with respect to such Pledged Mortgage pursuant to Section 3(f)(iii),
exceeds (a) the unpaid principal balance of such Liquidated Pledged Mortgage as
of the Due Date in the month in which such Pledged Mortgage became a Liquidated
Pledged Mortgage plus (b) accrued interest at the Mortgage Rate from the Due
Date as to which interest was last paid or advanced (and not
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reimbursed) to Bondholders up to the Due Date applicable to the Payment Date
immediately following the calendar month during which such liquidation occurred.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FED FUNDS AVERAGE RATE" means for the Class A-2 Bonds, and for
any Interest Accrual Period and the related Payment Date, the sum of each day's
Fed Funds Rate (as defined herein) during the applicable Fed Funds Calculation
Period, divided by the number of days in such Fed Funds Calculation Period.
"FED FUNDS CALCULATION PERIOD" means, for each Interest Accrual
Period will be Interest Accrual Period Payment Date, the period commencing on
the 25th of the second month preceding such Interest Accrual Period and ending
on the 24th day of the month preceding such Interest Accrual Period.
"FED FUNDS RATE" means, for each Interest Accrual Period and
each Fed Funds Interest Determination Date occurring therein, the per annum rate
established in accordance with the provisions of Section 3(h)(ii) of this
Agreement.
"FED FUNDS BUSINESS DAY" means any day other than a Saturday or
Sunday or a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close.
"FED FUNDS INTEREST DETERMINATION DATE" shall have the meaning
set forth in Section 3(h)(ii) of this Agreement.
"FED FUNDS INTEREST RESET DATE" shall have the meaning set forth
in Section 3(h)(ii) of this Agreement.
"FHLMC" means the Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created and existing under Title
III of the Emergency Home Finance Act of 1970, as amended, or any successor
thereto.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
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"FNMA" means the Federal National Mortgage Association, a
federally chartered and privately owned corporation organized and existing under
the Federal National Mortgage Association Charter Act, or any successor thereto.
"INDENTURE" means the trust indenture, dated as of the date
hereof, between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
"INDEPENDENT ACCOUNTANTS" shall have the meaning ascribed to
such term under the Indenture.
"INDEX" means, as to each Pledged Mortgage, the index from time
to time in effect for the adjustment of the Mortgage Rate set forth as such on
the related Mortgage Note.
"INDEX PAGE" means Telerate Page 3750 or such other pages as may
replace such page on that service for the purpose of displaying LIBOR quotations
of major banks.
"INSURANCE AGREEMENT" means the insurance agreement, dated as of
July 1, 1997, between the Issuer, MBIA, Redwood, Sequoia, the Master Servicer
and the Trustee.
"INSURANCE POLICY" means, with respect to any Pledged Mortgage,
any primary mortgage guaranty insurance policy or other insurance policy with
respect to the Pledged Mortgages, including all riders and endorsements thereto
in effect, including any replacement policy or policies for any Insurance
Policies (but shall not include the MBIA Policy).
"INSURANCE PROCEEDS" means proceeds paid by an insurer pursuant
to any Insurance Policy, other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.
"INSURED EXPENSES" means amounts applied out of payments made by
an insurer under an Insurance Policy to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the applicable
Servicing Agreement.
"INSURED PAYMENT" has the meaning set forth in the MBIA Policy.
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"INSURER REIMBURSEMENT AMOUNT" means, as of any Payment Date,
the sum of (i) all amounts previously paid by MBIA under the MBIA Policy which
have not previously been reimbursed, (ii) all other amounts due to MBIA under
the Insurance Agreement, other than the insurance premium and (iii) interest on
the foregoing at the Late Payment Rate (as defined in the Insurance Agreement.)
"INTEREST ACCRUAL PERIOD" means, with respect to each Class of
Bonds and any Payment Date, the period commencing on the immediately preceding
Payment Date (or, in the case of the first Interest Accrual Period, commencing
on the Closing Date) and ending on the date immediately preceding such Payment
Date.
"INTEREST CONVERSION DATE" means, as to the Pledged Mortgages,
the date on which the first Adjustment Date occurs.
"INTEREST PAYMENT AMOUNT" means, as of any Payment Date, the sum
of the Class A-1 Interest Payment Amount and the Class A-2 Interest Payment
Amount.
"INVESTOR CERTIFICATE" shall have the meaning ascribed thereto
in the Deposit Trust Agreement.
"LIBOR" means, for each Interest Accrual Period, the per annum
rate established in accordance with the provisions of Section 3(h)(i) of this
Agreement.
"LIBOR BUSINESS DAY" means a day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"LIBOR RATE DETERMINATION DATE" means the second LIBOR Business
Day prior to the commencement of each Interest Accrual Period for the Class A-1
Bonds after the initial Interest Accrual Period.
"LIQUIDATED PLEDGED MORTGAGE" means with respect to any Payment
Date, a defaulted Pledged Mortgage (including any REO Property) which was
liquidated in the second calendar month preceding the month of such Payment Date
and as to which the Master Servicer has certified (in accordance with this
Agreement) that it has received all amounts it expects to receive in
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connection with the liquidation of such Pledged Mortgage including the final
disposition of an REO Property.
"LIQUIDATION PROCEEDS" means amounts, including Insurance
Proceeds, received in connection with the partial or complete liquidation of
defaulted Pledged Mortgages, whether through trustee's sale, foreclosure sale or
otherwise or amounts received in connection with any condemnation or partial
release of a Mortgaged Property and any other proceeds received in connection
with an REO Property, less the sum of related unreimbursed Master Servicing
Fees, Servicing Fees, Master Servicer Advances, Servicing Advances and Advances
and net of any other unreimbursed expenses incurred in connection with
liquidation or foreclosure.
"LOAN-TO-VALUE RATIO" means, with respect to any Pledged
Mortgage and as to any date of determination, the fraction (expressed as a
percentage) the numerator of which is the principal balance of the related
Pledged Mortgage at such date of determination and the denominator of which is
the Appraised Value of the related Mortgaged Property.
"MANAGEMENT AGREEMENT" means the management agreement dated as
of June 1, 1997 between the Issuer and Redwood, as Manager.
"MANAGEMENT FEE" means the compensation payable to Redwood under
the Management Agreement which shall equal $1,000 per month.
"MARGIN" means as to each Pledged Mortgage, the percentage
amount set forth on the related Mortgage Note which is to be added to the Index
in calculating the Mortgage Rate thereon.
"MASTER SERVICER" means Norwest Bank Minnesota, N.A., a national
banking association, and its successors and assigns, in its capacity as master
servicer hereunder.
"MASTER SERVICER ADVANCE" means, an advance to be made by the
Master Servicer with respect to any Payment Date pursuant to Section 5.
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"MASTER SERVICER ADVANCE DATE" means as to any Payment Date, the
Business Day prior to such Payment Date.
"MASTER SERVICING DEFAULT" means a master servicing default as
described under Section 8(a) of this Agreement.
"MASTER SERVICING FEE" means as to any Payment Date, the amount
specified in Section 6(a) of this Agreement.
"MAXIMUM RATE" means as to any Pledged Mortgage, the maximum
rate set forth on the related Mortgage Note at which interest can accrue on such
Pledged Mortgage.
"MBIA" means MBIA Insurance Corporation, a stock insurance
company organized and created under the laws of the State of New York and any
successors thereto.
"MBIA POLICY" means the irrevocable financial guaranty insurance
policy (Policy No. 24483) issued by MBIA with respect to the Bonds.
"MBIA PREMIUM" means with respect to each Payment Date, the
premium payable to MBIA in accordance with Paragraph 1(a)(i), (b) and (c) of the
MBIA Insurance Corporation Commitment To Issue A Financial Guaranty Insurance
Policy dated July 29, 1997.
"MBIA PREMIUM RATE" means the rate per annum set forth in the
Insurance Agreement.
"MINIMUM RATE" means as to any Pledged Mortgage, the minimum
rate set forth on the related Mortgage Note at which interest can accrue on such
Pledged Mortgage.
"MOODY'S" means Xxxxx'x Investors Service, Inc., or any
successor thereto. If Xxxxx'x is designated as a Rating Agency in the Indenture,
for purposes of Section 9(c) the address for notices to Moody's shall be Xxxxx'x
Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Residential Pass-Through Monitoring, or such other address as Moody's may
hereafter furnish to the Issuer and the Master Servicer.
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"MORTGAGE" means the mortgage, deed of trust or other instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
"MORTGAGE DOCUMENTS" mean the mortgage documents pertaining to a
particular Pledged Mortgage and delivered to the related Custodian pursuant to
this Agreement and the related Custodial Agreement.
"MORTGAGE LOAN PURCHASE AGREEMENT" means the mortgage loan
purchase agreement dated as of June 1, 1997 among Redwood, Sequoia and the
Issuer.
"MORTGAGE NOTE" means the original executed note or other
evidence of indebtedness evidencing the indebtedness of a Mortgagor under a
Pledged Mortgage.
"MORTGAGE RATE" means the annual rate of interest borne by a
Mortgage Note from time to time.
"MORTGAGED PROPERTY" means the underlying property securing a
Pledged Mortgage.
"MORTGAGOR" means the obligor(s) on a Mortgage Note.
"NET AVAILABLE FUNDS" means, for any Payment Date the Available
Funds for such Payment Date less the Management Fee and the MBIA Premium.
"NET MONTHLY EXCESS CASHFLOW" means for any Payment Date the
amount of Net Available Funds, if any, remaining after payment of (i) the
Interest Payment Amount, (ii) any outstanding Bondholders' Interest Carryover,
(iii) the Basic Principal Amount and (iv) the Insurer Reimbursement Amount.
"NET MORTGAGE RATE" means, as to any Pledged Mortgage and
Payment Date, the related Mortgage Rate as of the Due Date in the month
preceding the month of such Payment Date reduced by the related Expense Fee
Rate.
"NON-RFC WITHDRAWAL DATE" means, as to any Payment Date, the
fifth Business Date prior to such Payment Date.
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"NONRECOVERABLE ADVANCE" means any portion of an Advance,
Servicing Advance or Master Servicer Advance previously made or proposed to be
made by the Master Servicer or the related Servicer, as the case may be, that,
in the good faith judgment of the Master Servicer or such Servicer, will not be
ultimately recoverable from the related Mortgagor, related Liquidation Proceeds
or otherwise.
"OFFICER'S CERTIFICATE" means a certificate (i) signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a Managing
Director, a Vice President (however denominated), an Assistant Vice President,
the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Master Servicer, or (ii) if provided for in this Agreement,
signed by a Servicing Officer, as the case may be, and delivered to the Trustee
and MBIA as required by this Agreement.
"OPINION OF COUNSEL" means a written opinion of counsel, who may
be counsel for a Servicer, the Master Servicer or the Issuer, as applicable,
including, in-house counsel, reasonably acceptable to the Trustee and MBIA.
Except as specifically provided herein, no Opinion of Counsel shall be at the
expense of the Master Servicer.
"ORIGINAL CLASS A-1 PRINCIPAL AMOUNT" means $334,347,000.
"ORIGINAL CLASS A-2 PRINCIPAL AMOUNT" means $200,000,000.
"ORIGINAL PLEDGED MORTGAGE" means the Pledged Mortgage
refinanced in connection with the origination of a Refinancing Pledged Mortgage.
"ORIGINAL POOL PRINCIPAL BALANCE" means the Pool Principal
Balance as of the Cut-off Date which is equal to $543,050,415.20.
"OTS" means the Office of Thrift Supervision.
"OUTSTANDING" shall have the meaning ascribed thereto in the
Indenture.
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"OUTSTANDING PLEDGED MORTGAGE" means, as of any Due Date, a
Pledged Mortgage with a Stated Principal Balance greater than zero which was not
the subject of a Principal Prepayment in Full prior to such Due Date and which
did not become a Liquidated Pledged Mortgage prior to such Due Date.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as Owner Trustee
under the Deposit Trust Agreement, until a successor Person shall have become
the Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.
"PAYMENT DATE" means, with respect to the Bonds and the Investor
Certificate, the 4th day of each calendar month after the initial issuance of
the Bonds and the Investor Certificate or, if such 4th day is not a Business
Day, the next succeeding Business Day, commencing in August 1997.
"PERIODIC RATE CAP" means, as to any Pledged Mortgage and any
Adjustment Date, the maximum allowable percent increase to the related Mortgage
Rate on any such Adjustment Date, as specified in the related Mortgage Note.
"PERMITTED INVESTMENTS" means, at the time, any one or more of
the following obligations and securities.
(i) obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency;
(iii) commercial paper which is then receiving the highest
commercial paper rating of each Rating Agency;
(iv) certificates of deposit, demand or time deposits, or
bankers' acceptances issued by any depository institution or trust
company incorporated under the laws of the United States or of any state
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thereof and subject to supervision and examination by federal and/or
state banking authorities, provided that the commercial paper and/or
long-term unsecured debt obligations of such depository institution or
trust company (or in the case of the principal depository institution in
a holding company system, the commercial paper or long-term unsecured
debt obligations of such holding company, but only if Xxxxx'x Investors
Service, Inc. ("Xxxxx'x") is a Rating Agency) are then rated one of the
two highest long-term and the highest short-term ratings of each Rating
Agency for such securities;
(v) demand or time deposits or certificates of deposit
issued by any bank or trust company or savings institution to the extent
such deposits are fully insured by the FDIC;
(vi) repurchase obligations with respect to any security
described in clauses (i) above, in either case entered into with a
depository institution or trust company (acting as principal) described
in clause (iv) above;
(vii) securities (other than stripped bonds, stripped coupons
or instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any
state thereof which have the highest rating of each Rating Agency
(except if the Rating Agency is Moody's, such rating shall be the
highest commercial paper rating of Moody's for any such securities);
(viii) interests in any money market fund which invests only in
other Permitted Investments which at the date of acquisition of the
interests in such fund and throughout the time such interests are held
in such fund has the highest applicable rating by each applicable Rating
Agency;
(ix) short term investment funds which invest only in other
Permitted Investments sponsored by any trust
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company or national banking association incorporated under the laws of
the United States or any state thereof which are rated by each
applicable Rating Agency in their respective highest applicable rating
category;
(x) such other investments having a specified stated
maturity and bearing interest or sold at a discount acceptable to MBIA
and to each applicable Rating Agency as will not result in a change in
the rating (without regard to the existence of the MBIA Policy) then
assigned to the Bonds by each Rating Agency, as evidenced by a signed
writing delivered by each Rating Agency; and
(xi) any mutual fund, money market funds, common trust fund
or other pooled investment vehicle, the assets of which are limited to
instruments that otherwise would constitute Permitted Investments
hereunder, including any fund managed by the Master Servicer or any
affiliate of the Master Servicer or any fund to which the Master
Servicer or any affiliate of the Master Servicer acts as an advisor,
provided that such fund has the highest applicable rating by each Rating
Agency,
provided, that no such instrument shall be a Permitted Investment if (i)
such instrument evidences the right to receive interest only payments
with respect to the obligations underlying such instrument or (ii) such
instrument would require the Issuer to register as an investment company
under the Investment Company Act of 1940, as amended.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
"PLEDGED MORTGAGE" means such of the mortgage loans granted by
the Issuer to the Trustee under the Indenture as security for the Bonds, as from
time to time are held as part of the Trust Estate (including any REO Property),
the mortgage loans
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so held being identified in the Schedule of Pledged Mortgages, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.
"POOL PRINCIPAL BALANCE" means, with respect to any Payment
Date, the aggregate of the Stated Principal Balances of the Pledged Mortgages
which were Outstanding Pledged Mortgages on the Due Date in the month preceding
the month of such Payment Date.
"POOL PRINCIPAL BALANCE AS OF JULY 1, 1997" means
$527,419,918.26.
"PREPAYMENT INTEREST SHORTFALL" means, as to any Payment Date,
Pledged Mortgage and Principal Prepayment, the amount, if any, by which one
month's interest at the related Mortgage Rate on such Principal Prepayment
exceeds the amount of interest paid in connection with such Principal
Prepayment.
"PREPAYMENT PERIOD" means, as to any Payment Date, the second
calendar month preceding the month of such Payment Date.
"PRIMARY INSURANCE POLICY" means each policy of primary mortgage
guaranty insurance or any replacement policy therefor with respect to any
Pledged Mortgage.
"PRINCIPAL BALANCE" shall have the meaning ascribed thereto in
the Indenture.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any Payment Date,
the sum of:
(i) the principal portion of all Scheduled Payments on the
Pledged Mortgages received or advanced (whether pursuant to a Servicer
Advance or a Master Servicing Advance) on the Pledged Mortgages with
respect to the related Due Date;
(ii) the principal portion of Purchase Prices and all
Substitution Adjustment Amounts paid by Redwood or the Company or in
respect of any Converted Pledged Loan, paid by the Servicer or any other
Person purchasing such loan, in each case received on or prior
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to the related Withdrawal Date, to the extent not part of the Principal
Distributable Amount for any previous Payment Date; and
(iii) the principal portion of all other unscheduled
collections received during the second preceding calendar month (or
deemed to be received during such month) (including, without limitation,
full and partial principal prepayments made by the respective
Mortgagors, Liquidation Proceeds and Insurance Proceeds), to the extent
not previously distributed.
"PRINCIPAL PAYMENT AMOUNT" means for any Payment Date the sum of
the Basic Principal Amount, the Excess Cash Flow Principal Amount and the amount
of any Insured Payment made with respect to a Subordination Deficit, if any;
provided however, in no event (and regardless of the amount of Net Available
Funds for such Payment Date) shall the Principal Payment Amount (i) for any
Payment Date, be less than the excess, if any, of the Principal Balance of the
Bonds immediately prior to such Payment Date over the Pool Principal Balance
with respect to such Payment Date and, (ii) for the Stated Maturity, be less
than the Principal Balance of the Bonds; and provided, further, that in no event
will the Principal Payment Amount with respect to any Payment Date be greater
than the then outstanding Principal Balance of the Bonds.
"PRINCIPAL PREPAYMENT" means any payment of principal by a
Mortgagor on a Pledged Mortgage that is received in advance of its scheduled Due
Date and is not accompanied by an amount representing scheduled interest due on
any date or dates in any month or months subsequent to the month of prepayment.
"PRINCIPAL PREPAYMENT IN FULL" means any Principal Prepayment
made by a Mortgagor of the entire principal balance of a Pledged Mortgage.
"PROSPECTUS SUPPLEMENT" means the Prospectus Supplement dated
July 25, 1997 relating to the Bonds.
"PUD" means Planned Unit Development.
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"PURCHASE PRICE" means, with respect to the purchase of any
Pledged Mortgage from the Issuer an amount equal to the sum of (i) 100% of the
unpaid principal balance of the Pledged Mortgage on the date of such purchase,
and (ii) accrued interest thereon at the applicable Mortgage Rate from the date
through which interest was last paid by the Mortgagor to the Due Date in the
month prior to the month in which the Purchase Price is to be distributed to
Bondholders.
"QUALIFIED INSURER" means a mortgage guaranty insurance company
duly qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection with
the insurance policy issued by such insurer, duly authorized and licensed in
such states to transact a mortgage guaranty insurance business in such states
and to write the insurance provided by the insurance policy issued by it,
approved as a FNMA- or FHLMC-approved mortgage insurer or having a claims paying
ability rating of at least "AA" or equivalent rating by a nationally recognized
statistical rating organization. Any replacement insurer with respect to a
Pledged Mortgage must have at least as high a claims paying ability rating as
the insurer it replaces had on the Closing Date.
"RFC" means Residential Funding Corporation, a Servicer under a
Servicing Agreement, including any successor servicer under such Servicing
Agreement.
"RFC WITHDRAWAL DATE" means, with respect to Payment Date, one
Business Day prior to such Payment Date.
"RATING AGENCY" shall mean each of the Rating Agencies specified
in the Indenture. If either such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the Issuer
and acceptable to MBIA, notice of which designation shall be given to the
Trustee. References herein to a given rating or rating category of a Rating
Agency shall mean such rating category without giving effect to any modifiers.
"REALIZED LOSS" means, with respect to each Liquidated Pledged
Mortgage, an amount (not less than zero or more than the
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Stated Principal Balance of the Liquidated Pledged Mortgage) as of the date of
such liquidation, equal to (i) the Stated Principal Balance of the Liquidated
Pledged Mortgage as of the date of such liquidation, plus (ii) interest at the
Adjusted Net Mortgage Rate from the Due Date as to which interest was last paid
or advanced (and not reimbursed) to Bondholders up to the Due Date in the month
prior to the month in which Liquidation Proceeds are required to be distributed
on the Stated Principal Balance of such Liquidated Pledged Mortgage from time to
time, minus (iii) the Liquidation Proceeds, if any, received during the month in
which such liquidation occurred, to the extent applied as recoveries of interest
at the Adjusted Net Mortgage Rate and to principal of the Liquidated Pledged
Mortgage. With respect to each Pledged Mortgage which has become the subject of
a Deficient Valuation, if the principal amount due under the related Mortgage
Note has been reduced, the difference between the principal balance of the
Pledged Mortgage outstanding immediately prior to such Deficient Valuation and
the principal balance of the Pledged Mortgage as reduced by the Deficient
Valuation. With respect to each Pledged Mortgage which has become the subject of
a Debt Service Reduction and any Payment Date, the amount, if any, by which the
principal portion of the related Scheduled Payment has been reduced.
"REDWOOD" means Redwood Trust, Inc.
"REFINANCING PLEDGED MORTGAGE" means any Pledged Mortgage
originated in connection with the refinancing of an existing mortgage loan.
"RELIEF ACT" means the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"RELIEF ACT REDUCTIONS" means, with respect to any Payment Date
and any Pledged Mortgage as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Pledged Mortgage for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.
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"REO PROPERTY" means a Mortgaged Property acquired by the Trust
Estate through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Pledged Mortgage.
"REPLACEMENT PLEDGED MORTGAGE" means a Pledged Mortgage
substituted for a Deleted Pledged Mortgage which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
attached to the related Custodial Agreement, (i) have a principal balance, after
deduction of the principal portion of the Scheduled Payment due in the month of
substitution, not in excess of, and not more than 20% less than, the Stated
Principal Balance of the Deleted Pledged Mortgage; (ii) be accruing interest at
a rate no lower than and not more than 1.0% per annum higher than, that of the
Deleted Pledged Mortgage and bear interest based on an Index that is Libor or
U.S. treasury based; (iii) have a Loan-to-Value Ratio no higher than that of the
Deleted Pledged Mortgage; (iv) have a Mortgage Rate not lower than, and not more
than 1.0% per annum higher than that of the Deleted Pledged Mortgage; (v) have a
remaining term to maturity no greater than (and not more than 36 months less
than that of the Deleted Pledged Mortgage; and (vi) comply with each
representation and warranty set forth in Schedule III hereto.
"REQUEST FOR RELEASE" means the Request for Release submitted by
a Servicer or Redwood to the Trustee, substantially in one of the forms attached
to the related Custodial Agreement, as appropriate.
"REQUIRED INSURANCE POLICY" means with respect to any Pledged
Mortgage, any insurance policy that is required to be maintained from time to
time under the related Servicing Agreement.
"SAIF" means the Savings Association Insurance Fund, or any
successor thereto.
"S&P" means Standard & Poor's Ratings Services, a division of
XxXxxx-Xxxx Inc. If S&P is designated as a Rating Agency in the Indenture, for
purposes of Section 9(c) the address for notices to S&P shall be Standard &
Poor's Ratings Group, 00 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention:
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Mortgage Surveillance Monitoring, or such other address as S&P may hereafter
furnish to the Issuer and the Master Servicer.
"SCHEDULE OF PLEDGED MORTGAGES" means the schedule attached
hereto as Schedule I listing the Pledged Mortgages to be master serviced by the
Master Servicer pursuant to this Agreement (as from time to time amended by the
Issuer to reflect the addition of Replacement Pledged Mortgages and the deletion
of Deleted Pledged Mortgages pursuant to the provisions of this Agreement and
Section 8.04 of the Indenture) pledged to the Trustee as part of the Trust
Estate and from time to time subject to this Agreement and the Indenture,
setting forth the following information with respect to each Pledged Mortgage:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the
Mortgaged Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Original Pool Principal Balance;
(vi) the first payment date of the Pledged Mortgage;
(vii) the Scheduled Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at
the time of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is
either (a) a detached single family dwelling, (b) attached single family
dwelling, (c) a dwelling in a PUD, (d) a condominium unit, (e) a two- to
four-unit residential property or (f) a Cooperative Unit;
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(xi) the Mortgage Rate in effect as of the Cut-off Date;
(xii) the Servicing Fee Rate;
(xiii) the Maximum Rate and the Minimum Rate;
(xiv) the Periodic Rate Cap;
(xv) the Adjustment Date;
(xvi) the Margin;
(xvii) the purpose for the Pledged Mortgage; and
(xviii) the type of documentation program pursuant to which the
Pledged Mortgage was originated.
Such schedule shall also set forth (a) the total of the amounts
described under (iv) and (vii) above and (b) the weighted average, weighted on
the basis of the Original Pool Principal Balance, of the amounts described under
(xi) and (xii) above, in each case for all of the Pledged Mortgages.
"SCHEDULED PAYMENT" means the scheduled monthly payment on a
Pledged Mortgage due on any Due Date allocable to principal and/or interest on
such Pledged Mortgage which, unless otherwise specified herein, shall give
effect to any related Debt Service Reduction and any Deficient Valuation that
affects the amount of the monthly payment due on such Pledged Mortgage.
"SEQUOIA" means Sequoia Mortgage Funding Corporation, a Delaware
corporation, and its successors and assigns.
"SERVICER" means any person with which Redwood has entered into
a Servicing Agreement.
"SERVICING ACCOUNT" means the separate Eligible Account or
Accounts created and maintained pursuant to each Servicing Agreement.
"SERVICING ADVANCES" means all customary, reasonable and
necessary "out of pocket" costs and expenses incurred in the
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performance by a Servicer of its servicing obligations, including, but not
limited to, the cost of (i) the preservation, restoration and protection of a
Mortgaged Property, (ii) any enforcement or judicial proceedings, including
foreclosures, and (iii) the management and liquidation of any REO Property.
"SERVICING AGREEMENT" means any agreement between Redwood and
the related Servicer relating to servicing and/or administration of certain
Pledged Mortgages as provided in Schedule V.
"SERVICING FEE" means, as to each Pledged Mortgage and any
Payment Date, an amount equal to one month's interest at the applicable
Servicing Fee Rate on the Stated Principal Balance of such Pledged Mortgage.
"SERVICING FEE RATE" means, with respect to any Pledged
Mortgage, the per annum rate set forth in the Schedule of Pledged Mortgages for
such Pledged Mortgage.
"SERVICING OFFICER" means any officer of the Master Servicer or
any Servicer involved in, or responsible for, the administration and servicing
of the Pledged Mortgage whose name and facsimile signature appear on a list of
servicing officers furnished to the Trustee and MBIA by the Master Servicer or
any Servicer on the Closing Date pursuant to this Agreement, as such list may
from time to time be amended.
"SERIOUS DELINQUENCIES" means for any Payment Date, the average
for the immediately preceding six calendar months of, with respect to each Due
Period, the percentage equivalent of a fraction, the numerator of which is the
sum of the aggregate principal balances (without duplication) of (i) Pledged
Mortgages which are 90 or more days delinquent, (ii) Pledged Mortgages in
bankruptcy and 90 or more days delinquent, (iii) Pledged Mortgages in
foreclosure plus (iv) Pledged Mortgages relating to REO Properties and the
denominator of which is the Pool Principal Balance.
"SPECIFIED OVERCOLLATERALIZATION AMOUNT" means:
(a) For any Payment Date occurring during the period commencing on
the Closing Date and ending on the earlier of the
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thirtieth Payment Date following the Closing Date and the Payment Date upon
which the Pool Principal Balance is less than or equal to one-half of the Pool
Principal Balance as of July 1, 1997, the Specified Overcollateralization Amount
means the greater of:
(i) the Base Specified Overcollateralization Amount; and
(ii) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance;
(b) If, prior to the thirtieth Payment Date following the Closing
Date, the Pool Principal Balance is less than or equal to one-half of the Pool
Principal Balance as of July 1, 1997, the Specified Overcollateralization Amount
until the thirtieth Payment Date means the greater of:
(i) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance; and
(ii) the lesser of (i) the Base Specified
Overcollateralization Amount, and (ii) the greater of (a) the product of
(x) two (2) times the Target Percentage and (y) the Pool Principal
Balance as of the applicable Payment Date and (b) the product of (a) the
Serious Delinquencies and (b) the Pool Principal Balance;
(iii) an amount equal to 0.50% of the Original Pool Principal
Balance;
(c) For any Payment Date occurring after the thirtieth Payment Date
following the Closing Date the Specified Overcollateralization Amount means the
greater of:
(i) the lesser of (A) the Base Specified
Overcollateralization Amount and (B) the product of (x) two times the
Target Percentage and (y) the Pool Principal Balance as of the
applicable Payment Date;
(ii) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance; and
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(iii) an amount equal to 0.50% of the Original Pool Principal
Balance.
"STATED MATURITY" shall have the meaning ascribed thereto in the
Indenture.
"STATED PRINCIPAL BALANCE" means, as to any Pledged Mortgage and
Due Date, the unpaid principal balance of such Pledged Mortgage as of such Due
Date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any moratorium
or similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Pledged Mortgage) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment by
the related Mortgagor.
"SUBORDINATION DEFICIT" means, with respect to a Payment Date,
the amount, if any, by which (x) the aggregate Principal Balance of the Bonds as
of such Payment Date, and following the making of all payments to be made on
such Payment Date (except for any payment to be made as to principal from
proceeds of the MBIA Policy), exceeds (y) the Pool Principal Balance with
respect to such Payment Date.
"SUBSTITUTION ADJUSTMENT AMOUNT" has the meaning ascribed to
such term pursuant to Section 2(c)(iv).
"TARGET PERCENTAGE" means 1.65%.
"TARGETED PRINCIPAL BALANCE" means for any Payment Date the
Principal Amount of the Bonds that is equal to (x) the Pool Principal Balance
with respect to such Payment Date minus (y) the Specified Overcollateralization
Amount for such Payment Date.
"TRUST ESTATE" shall have the meaning ascribed to such term in
the Indenture.
"TRUST RECEIPT" means, as applicable, either the Initial Trust
Receipt in the form of Exhibit One-A to a Custodial Agreement or the Final Trust
Receipt in the form of Exhibit One-B to a Custodial Agreement.
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"TRUSTEE MORTGAGE FILE" means, with respect to each Pledged
Mortgage, the original documents and instruments relating thereto to be retained
in the custody and possession of the related Custodian pursuant to the related
Custodial Agreement.
"WEIGHTED AVERAGE NET MORTGAGE RATE" means, as to any Payment
Date, the weighted average of the Net Mortgage Rates weighted on the basis of
the Stated Principal Balances of the Pledged Mortgages as of the related Due
Date.
"WITHDRAWAL DATE" means, with respect to a Payment Date, either
the Non-RFC Withdrawal Date or the RFC Withdrawal Date.
2. Mortgage Documents.
(a) Custodian to Retain Possession of Documents.
(i) Concurrently with the execution and delivery hereof, the
Issuer has pledged, transferred and assigned to the Trustee for the benefit of
the Bondholders and MBIA, as collateral for the payment of principal and
interest on the Bonds, all right, title and interest of the Issuer in and to the
Trust Estate for the Bonds, including the Pledged Mortgages. Prior to or
contemporaneous with the execution of this Agreement, or within the applicable
time periods specified below, the Issuer shall have delivered or caused to be
delivered to the applicable Custodian, with respect to each Pledged Mortgage all
originals of the Mortgage Documents and any other instruments relating thereto
specified in the related Custodial Agreements, including each item in the
Trustee Mortgage File.
In the event that in connection with any Pledged Mortgage the
Issuer cannot deliver (i) the original recorded Mortgage, (ii) all interim
recorded assignments or (iii) the lender's title policy (together with all
riders thereto) satisfying the requirements set forth in the Custodial
Agreements, concurrently with the execution and delivery hereof, the Issuer
shall promptly deliver to the applicable Custodian, in accordance with the terms
and conditions of the related Custodial Agreement, (x) in the case of such
original Mortgage or such interim assignment, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public
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recording office, or a copy thereof, certified, if appropriate, by the relevant
recording office, but in no event shall any such delivery of the original
Pledged Mortgage and each such interim assignment or a copy thereof, certified,
if appropriate, by the relevant recording office, be made later than one year
following the Closing Date, or, (y) in the case of such title policy, no later
than 120 days following the Closing Date; provided, however, that in the event
the Issuer is unable to deliver by such date each Mortgage and each such interim
assignment by reason of the fact that any such documents have not been returned
by the appropriate recording office, or, in the case of each such interim
assignment, because the related Mortgage has not been returned by the
appropriate recording office, the Issuer shall deliver such documents to the
related Custodian as promptly as possible upon receipt thereof and, in any
event, within 180 days following the Closing Date. The Issuer shall forward or
cause to be forwarded to the related Custodian (a) from time to time additional
original documents evidencing an assumption or modification of a Pledged
Mortgage and (b) any other documents required to be delivered by the Issuer to a
Custodian. In the event that the original Mortgage is not delivered and in
connection with the payment in full of the related Pledged Mortgage the public
recording office requires the presentation of a "lost instruments affidavit and
indemnity" or any equivalent document, because only a copy of the Mortgage can
be delivered with the instrument of satisfaction or reconveyance, the Issuer
shall execute and deliver or cause to be executed and delivered such a document
to the public recording office. In the case where a public recording office
retains the original recorded Mortgage or in the case where a Mortgage is lost
after recordation in a public recording office, the Issuer shall deliver to the
related Custodian a copy of such Mortgage certified by such public recording
office to be a true and complete copy of the original recorded Mortgage.
With respect to Redwood's obligation to deliver the Trustee
Mortgage File for each Pledged Mortgage pursuant to Section 3 of the Mortgage
Loan Purchase Agreement, as promptly as practicable subsequent to such pledge,
transfer and assignment, and in any event within thirty (30) days thereafter,
Redwood shall (i) affix the Trustee's name to each assignment of Mortgage, as
the assignee thereof, (ii) cause such assignment to be in proper form for
recording in the appropriate public office
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for real property records within thirty (30) days after receipt thereof and
(iii) cause to be delivered for recording in the appropriate public office for
real property records the assignments of the Mortgages to the Trustee, except
that, with respect to any assignment of a Mortgage as to which Redwood has not
received the information required to prepare such assignment in recordable form,
Redwood's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after the receipt thereof, and Redwood need not cause to
be recorded any assignment which relates to a Pledged Mortgage in any
jurisdiction under the laws of which, as evidenced by an Opinion of Counsel,
from local counsel, delivered by Redwood (at Redwood's expense) to the Trustee
and MBIA in accordance with Section 3.11 of the Indenture, the recordation of
such assignment is not necessary to protect the Trustee's and the Bondholders'
and MBIA's interest in the related Pledged Mortgage; provided, however,
notwithstanding the delivery of any legal opinions, each assignment of Mortgage
shall be recorded upon the earliest to occur of (i) the direction by MBIA, (ii)
the occurrence of a Master Servicing Default hereunder or a default of under the
Indenture, or (iii) any bankruptcy, insolvency or foreclosure with respect to
the related Mortgagor.
In the case of Pledged Mortgages that have been prepaid in full
as of the Closing Date, the Issuer, in lieu of delivering the above documents to
the related Custodian, will deposit in the Bond Account the portion of such
payment that is required to be deposited in the Bond Account pursuant to Section
3(f).
Until the Bonds have been paid in full and the Issuer has
otherwise fulfilled its obligations under the Indenture, the Custodian shall
retain possession and custody of each Trustee Mortgage File in accordance with
and subject to the terms and conditions set forth in the Indenture and this
Agreement.
(ii) On the Closing Date, the Trustee shall receive a Trust
Receipt from each Custodian, whereby the Custodian acknowledges receipt of the
documents identified the applicable Trust Receipt and declares that it holds and
will hold such documents and the other documents delivered to it constituting
the Trustee Mortgage Files, and that it holds or will hold such other assets as
are included in the Trust Estate, in trust for
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the exclusive use and benefit of the Trustee on behalf of all present and future
Bondholders and MBIA. The related Custodian acknowledges that it will maintain
possession of the Mortgage Notes in the State(s) provided in the applicable
Custodial Agreement, unless otherwise permitted by the Trustee, the Rating
Agencies and MBIA.
Each Custodian has agreed, pursuant to the related Custodial
Agreement, to execute and deliver on the Closing Date to the Issuer, MBIA and
the Trustee a Trust Receipt constituting an initial such receipt in the form
attached to the related Custodial Agreement. Based on its review and examination
required by and in accordance with the applicable Custodial Agreement, and only
as to the documents identified in such Initial Certification, the related
Custodian acknowledges that such documents appear regular on their face and
relate to such Pledged Mortgage; provided that the related Custodian shall be
under no obligation to ascertain that, except as therein provided, any
information set forth in said schedule is accurate. Neither the Trustee nor the
related Custodian shall be under any duty or obligation to inspect, review or
examine said documents, instruments, certificates or other papers to determine
that the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded in the real estate records or
that they are other than what they purport to be on their face.
Not later than 180 days after the Closing Date, the Custodian
shall deliver to the Issuer, the Insurer and the Trustee the applicable Trust
Receipt, with any applicable exceptions noted thereon.
If, in the course of such review, a Custodian finds any document
constituting a part of a Trustee Mortgage File which does not meet the
requirements of the applicable Custodial Agreement, such Custodian shall list
such as an exception in the Final Certification; provided, however, that such
Custodian shall not make any determination as to whether (i) any endorsement is
sufficient to transfer all right, title and interest of the party so endorsing,
as noteholder or assignee thereof, in and to that Mortgage Note or (ii) that any
assignment is in recordable form or is sufficient to effect the assignment of
and transfer to the assignee thereof under the mortgage to which the assignment
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relates. Redwood shall promptly correct or cure such defect within 90 days from
the date it was so notified of such defect and, if Redwood does not correct or
cure such defect within such period, Redwood shall either (a) substitute for the
related Pledged Mortgage a Replacement Pledged Mortgage, which substitution
shall be accomplished in the manner and subject to the conditions set forth in
Section 2(c)(iv), or (b) purchase such Pledged Mortgage from the Trustee within
60 days from the date Redwood was notified of such defect in writing at the
Purchase Price of such Pledged Mortgage. Any such substitution pursuant to (a)
above shall not be effected prior to the delivery to the Custodian of a Request
for Release. The Purchase Price for any such Pledged Mortgage purchased pursuant
to clause (b) shall be deposited by Redwood in the Bond Account on or prior to
the applicable Withdrawal Date in the month following the month of purchase and,
upon receipt of such deposit and the related Request for Release, the related
Custodian shall release the related Trustee Mortgage File to Redwood and shall
execute and deliver at Issuer's request such instruments of transfer or
assignment prepared by the Issuer and the Trustee, in each case without
recourse, as shall be necessary to vest in Redwood, or a designee, the Issuer's
and the Trustee's interest in any Pledged Mortgage released pursuant hereto.
Each Custodian shall retain possession and custody of each
Trustee Mortgage File in accordance with and subject to the terms and conditions
set forth in the related Custodial Agreement. The Issuer or the Trustee shall
promptly deliver to the related Custodian, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Trustee Mortgage File as come into the possession of the respective Issuer or
Trustee from time to time.
It is understood and agreed that the obligation of Redwood to
substitute for or to purchase any Pledged Mortgage which does not meet the
requirements set forth in the related Custodial Agreement shall constitute the
sole remedy respecting such defect available to the Trustee and any Bondholder
against Redwood.
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(b) Custodian to Cooperate; Release of Trustee Mortgage Files.
Upon the payment in full of any Pledged Mortgage, or the receipt
by a Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, or for any other servicing procedure to be
performed in connection with a Pledged Mortgage, the related Servicer will
immediately notify the Trustee by delivering, or causing to be delivered, a
Request for Release, all in accordance with Section 8.08(c) of the Indenture.
Upon receipt of such request, the Trustee shall promptly notify the related
Custodian, who will release the related Trustee Mortgage File to the Servicer in
accordance with the terms of the applicable Custodial Agreement. Subject to the
further limitations set forth below, the related Servicer shall cause the
Trustee Mortgage File or documents so released to be returned to the Trustee
when the need therefor by the related Servicer no longer exists, unless the
Pledged Mortgage is liquidated and the proceeds thereof are deposited in the
Bond Account, in which case the related Servicer shall deliver to the Trustee a
Request for Release, signed by a Servicing Officer of the related Servicer.
If the related Servicer at any time seeks to initiate a
foreclosure proceeding in respect of any Mortgaged Property as authorized by the
related Servicing Agreement, the related Servicer shall deliver or cause to be
delivered to the Trustee, for signature, as appropriate, any court pleadings,
requests for trustee's sale or other documents necessary to effectuate such
foreclosure or any legal action brought to obtain judgment against the Mortgagor
on the Mortgage Note or the Mortgage or to obtain a deficiency judgment or to
enforce any other remedies or rights provided by the Mortgage Note or the
Mortgage or otherwise available at law or in equity.
(c) Representations, Warranties and Covenants of the Issuer, Redwood
and the Master Servicer.
(i) Norwest Bank Minnesota, N.A., in its capacity as Master
Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the
Issuer, MBIA and the
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Trustee, as of the Closing Date, or if so specified therein, as of the
Cut-off Date.
(ii) Redwood hereby represents, warrants and agrees that:
(A) the representations and warranties as set forth in Schedule III
hereto, and by this reference incorporated herein to the Issuer,
MBIA and the Trustee, are true and correct as of the Closing
Date, or if so specified therein, as of the Cutoff Date;
(B) the execution, delivery and performance of this Agreement by it
are within its powers and have been duly authorized by all
necessary action on its part;
(C) the execution, delivery and performance of this Agreement will
not violate or conflict with (i) its charter or bylaws, (ii) any
resolution or other corporate action by it, (iii) any decisions,
statutes, ordinances, rulings, directions, rules, regulations,
orders, writs, decrees, injunctions, permits, certificates or
other requirements of any court or other governmental or public
authority in any way applicable to or binding upon it, and (iv)
will not result in or require the creation, except as provided
or contemplated by this Agreement, of any lien, mortgage,
pledge, security interest, charge or encumbrance of any kind
upon the Pledged Mortgages; and
(D) this Agreement has been duly executed by it and is its legally
valid and binding obligation, enforceable against it in
accordance with this Agreement's terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity.
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(iii) The Issuer hereby makes the representations and
warranties set forth in Schedule IV hereto, and by this reference
incorporated herein, to the Trustee and the Master Servicer, as of the
Closing Date.
(iv) Upon discovery by any of the parties hereto or
MBIA, of a breach of a representation or warranty (without regard to any
limitation regarding the knowledge of Redwood contained therein)
described in Section 2(c)(ii) that materially and adversely affects the
value of any Pledged Mortgage or the interests of the Bondholders or
MBIA in any Pledged Mortgage, the party discovering such breach shall
give prompt notice thereof to the other parties and MBIA. Redwood hereby
covenants that within 90 days of the earlier of its discovery or its
receipt of written notice from any party of a breach of any
representation or warranty (without regard to any limitation regarding
the knowledge of Redwood contained therein) made pursuant to Section
2(c)(ii) which materially and adversely affects the value of any Pledged
Mortgage or the interests of the Bondholders or MBIA, in any Pledged
Mortgage, it shall cure such breach in all material respects, and if
such breach is not so cured, shall, (i) remove such Pledged Mortgage (a
"Deleted Pledged Mortgage") from the Trust Estate and substitute in its
place a Replacement Pledged Mortgage, in the manner and subject to the
conditions set forth in this Section 2(c); or (ii) purchase the affected
Pledged Mortgage or Pledged Mortgages from the Issuer with the Trustee
releasing its lien thereon at the Purchase Price in the manner set forth
below; provided, however, that any such substitution pursuant to (i)
above shall not be effected prior to the delivery to the Trustee of a
Request for Release, and the Trustee Mortgage File for any such
Replacement Pledged Mortgage. Redwood shall promptly reimburse the
Trustee or MBIA for any expenses reasonably incurred by the Trustee or
MBIA in respect of enforcing the remedies for such breach.
With respect to the representations and warranties described in
this Section 2(c) which are made to the best of Redwood's knowledge, if
it is discovered by either the Issuer or the Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of any Pledged
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Mortgage, the interests of the Bondholders or MBIA therein,
notwithstanding Redwood's lack of knowledge with respect to the
substance of such representation or warranty, such inaccuracy shall be
deemed a breach of the applicable representation or warranty.
With respect to any Replacement Pledged Mortgage or Mortgages,
Redwood shall deliver to the Custodian for the benefit of the
Bondholders and MBIA the Mortgage Note, the Mortgage, the related
assignment of the Mortgage, and such other documents and agreements as
are required by the Custodial Agreements with the Mortgage Note endorsed
and the Mortgage assigned as required by Custodial Agreement. No
substitution is permitted to be made in any calendar month after the
Withdrawal Date for such month. Scheduled Payments due with respect to
Replacement Pledged Mortgages in the month of substitution shall not be
part of the Trust Estate and will be retained by Redwood on the next
succeeding Payment Date. For the Second Payment Date following the month
of substitution, Available Funds will include the monthly payment due on
any Deleted Pledged Mortgage for such month and thereafter Redwood shall
be entitled to retain all amounts received in respect of such Deleted
Pledged Mortgage.
Redwood shall amend the Schedule of Pledged Mortgages for the
benefit of the Bondholders and MBIA to reflect the removal of such
Deleted Pledged Mortgage or Mortgages and the substitution of the
Replacement Pledged Mortgage or Mortgages and the Issuer shall deliver
the amended Schedule of Pledged Mortgages to the Trustee and MBIA. Upon
such substitution, the Replacement Pledged Mortgage or Mortgages shall
be subject to the terms of this Agreement in all respects, and Redwood
shall be deemed to have made with respect to such Replacement Pledged
Mortgage or Mortgages, as of the date of substitution, the
representations and warranties made pursuant to Section 2(c)(ii) with
respect to such Pledged Mortgage or Mortgages. Upon any such
substitution and the deposit to the Bond Account of the amount required
to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall cause the
release of the Trustee Mortgage File held by the applicable Custodian
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for the benefit of the Bondholders and MBIA relating to such Deleted
Pledged Mortgage or Mortgages to Redwood and shall execute and deliver
at Redwood's direction such instruments of transfer or assignment
prepared by Redwood, in each case without recourse, as shall be
necessary to vest title in Redwood, the Issuer's and the Trustee's
interest in any Deleted Pledged Mortgage or Mortgages substituted for
pursuant to this Section 2(c).
For any month in which Redwood substitutes one or more
Replacement Pledged Mortgages for one or more Deleted Pledged Mortgages,
Redwood will determine the amount (if any) by which the aggregate
principal balance of all such Replacement Pledged Mortgages as of the
date of substitution is less than the aggregate Stated Principal Balance
of all such Deleted Pledged Mortgages (after application of the
scheduled principal portion of the monthly payments due in the month of
substitution). The amount of such shortage (the "Substitution Adjustment
Amount") shall be deposited into the Bond Account by Redwood on or
before the related Withdrawal Date for the Payment Date in the month
succeeding the calendar month during which the related Pledged Mortgage
became required to be purchased or replaced hereunder.
In the event that Redwood shall have purchased a Pledged
Mortgage, the Purchase Price therefor shall be deposited in the Bond
Account pursuant to Section 3(f) and in compliance with the provisions
of Section 8.04 of the Indenture before the related Withdrawal Date for
the Payment Date in the month following the month during which the
Issuer became obligated hereunder to purchase or replace such Pledged
Mortgage and upon such deposit of the Purchase Price and receipt of a
Request for Release in the form attached to the related Custodial
Agreement, the Trustee shall cause the release of the related Trustee
Mortgage File held by the applicable Custodian for the benefit of the
Bondholders and MBIA to Redwood, and the Trustee shall execute and
deliver at Redwood's direction such instruments of transfer or
assignment prepared by Redwood, in each case without recourse, as shall
be necessary to transfer title from the Issuer and release of the
Trustee's lien thereon pursuant to Sections 8.08(c) and 8.12 of the
Indenture. It is understood and agreed that the obligation under this
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Agreement of Redwood to cure, purchase or replace any Pledged Mortgage
as to which a breach has occurred and is continuing shall constitute the
sole remedy against Redwood respecting such breach available to
Bondholders or the Trustee on their behalf; provided, however, that
Redwood will indemnify the Issuer and the Insurer for any damages caused
by the breach of either of the following two representations: (1) none
of the Pledged Mortgages are "consumer credit contracts" or "purchase
money loans" for goods or services as such terms are defined in 16 C.F.R
section 433.1 and (2) none of the Pledged Mortgages are "mortgages" as
such term is defined in 15 U.S.C. 1602(aa).
The representations and warranties made pursuant to this Section
2(c) shall survive delivery of the respective Trustee Mortgage Files to
the Custodian for the benefit of the Bondholders and MBIA, provided,
however, that those made pursuant to Section 2(c)(ii)(A) shall not be
assignable by the Trustee without Redwood's express written permission.
(d) Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Issuer and the Trustee as
follows:
(i) the Master Servicer shall comply in the performance of
its obligations under this Agreement with all reasonable rules and
requirements of MBIA under the MBIA Policy; and
(ii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the
Issuer, any affiliate of the Issuer, MBIA or the Trustee and prepared by
the Master Servicer pursuant to this Agreement will contain any untrue
statement of a material fact or omit to state a material fact necessary
to make such information, certificate, statement or report not
misleading.
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3. General Duties of the Master Servicer.
(a) Master Servicer to Master Service Pledged Mortgages.
The parties agree that, subject to the provisions of Section 8
hereof, the Master Servicer shall master service the Pledged Mortgages in
accordance with the terms of this Agreement. In that regard, the Master Servicer
shall supervise, administer, monitor and oversee the servicing of the Mortgage
Loans by each Servicer pursuant to the terms of its Servicing Agreement, on
behalf of the Issuer and the Trustee and for the benefit of the Bondholders and
MBIA, in accordance with this Agreement and applicable laws and regulations and
giving due consideration to customary and usual standards of practice of prudent
mortgage lenders and master servicers. In addition, the Master Servicer shall
(i) oversee and consult with each Servicer as appropriate from time to time to
fulfill the Master Servicer's obligations hereunder, (ii) receive, review and
evaluate all reports, information and other data and documents provided to the
Master Servicer by each Servicer and (iii) otherwise exercise its best efforts,
as more fully set forth in Section 3(b), to cause each Servicer to perform and
observe the covenants, obligations and conditions required to be performed under
its Servicing Agreement.
(b) Servicing; Enforcement of the Obligations of Servicers.
(i) Redwood has entered into or is the assignee of the
Servicing Agreements listed on Schedule V hereto, and on the Closing
Date it assigned all of its rights, title and interest in and to such
Servicing Agreements to the Issuer. The Issuer, the Trustee and the
Bondholders, by their purchase and acceptance of the Bonds, acknowledge
and agree that the Pledged Mortgages shall be serviced by the Servicers
in accordance with the terms and provisions of the Servicing Agreements
and authorize the Master Servicer to enforce the Servicing Agreements
pursuant to the terms of this Agreement. Redwood has (i) provided to
each Servicer notice of the assignment of the related Servicing
Agreement to the Issuer, in accordance with the provisions of such
Servicing Agreement, and of the appointment of Norwest as Master
Servicer hereunder, and has instructed each Servicer to remit all
amounts required to be paid to the owner of the
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related Pledged Mortgages under its Servicing Agreement to the Master
Servicer, and (ii) has received from each Servicer acknowledgement of
such assignment and appointment and of the Master Servicer's authority
to enforce the related Servicing Agreement on behalf of the Trust and
such Servicer's agreement to remit all such amounts to the Master
Servicer.
(ii) As part of its master servicing activities hereunder,
the Master Servicer, for the benefit of the Trustee and the Bondholders
and MBIA, shall use its best reasonable efforts to enforce the
obligations of each Servicer under the related Servicing Agreement, to
the extent that the non-performance of any such obligation would have
material and adverse effect on a Pledged Mortgage. Such enforcement,
including, without limitation, the legal prosecution of claims,
termination of Servicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at
such time as the Master Servicer, in its good faith business judgment,
would require were it the owner of the related Pledged Mortgages;
provided, that, the Master Servicer shall be entitled to be reimbursed
for the costs and expenses associated with any such enforcement (i) from
a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the
related Pledged Mortgage, (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such
enforcement is directed, and (iii) if the amounts described in the
preceding clauses (i) and (ii) are insufficient to reimburse the Master
Servicer for all amounts so advanced, then the outstanding amount of any
such advance shall be reimbursable out of amounts in the Bond Account.
Provided no MBIA Default has occurred and is continuing, the Master
Servicer shall consult with MBIA prior to the initiation of any
enforcement measure under this Section 3(b)(ii). In the event the Master
Servicer and MBIA cannot agree on the enforcement measure, the decision
of the Master Servicer shall control; provided, that MBIA shall have the
right to control the time, method and place of conducting all proceeding
related to such enforcement measure and if the enforcement measure is
legal prosecution
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of a claim against a Servicer, the provisions of Section 7(c)(ii) shall
apply.
(c) Successor Servicers.
(i) The Issuer as owner of the Pledged Mortgages and the
Trustee as lienholder with respect thereto, pursuant to the Servicing
Agreements, hereby authorize and appoint the Master Servicer as their
agent to exercise all rights of the party entitled to exercise ownership
rights with respect to the Pledged Mortgages in accordance with the
terms of the Servicing Agreements, including, without limitation, the
power to terminate the Servicing Agreement and the related Servicers
according to the terms and conditions of such Servicing Agreements,
without any limitation by virtue of this Agreement; provided, however,
that in the event of termination of any Servicing Agreement by the
Master Servicer or the related Servicer, the Master Servicer shall
either act as servicer of the related Pledged Mortgages in accordance
with the terms of the related Servicing Agreement (with such
modifications as described in this Agreement) or enter into a Servicing
Agreement with a successor Servicer acceptable to MBIA which will be
bound by the terms of the related Servicing Agreement in accordance with
the terms of related Servicing Agreement (with such modifications as
described in this Agreement). If the Master Servicer or any affiliate of
the Master Servicer acts as servicer, it will not assume liability for
the representations and warranties of the Servicer which it replaces.
(ii) Notwithstanding the provisions of this Section 3 or of
any Servicing Agreement, the Master Servicer shall be under no
obligation, either as Master Servicer or as successor Servicer under a
Servicing Agreement, to purchase any Pledged Mortgage including any
Converted Pledged Mortgages.
(d) Rights of the Issuer and the Trustee in Respect of the Master
Servicer.
The Issuer may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any
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defaulted obligation of the Master Servicer hereunder and in connection with any
such defaulted obligation to exercise the related rights of the Master Servicer
hereunder; provided that the Master Servicer shall not be relieved of any of its
obligations hereunder by virtue of such performance by the Issuer or its
designee. Neither the Trustee nor the Issuer shall have any responsibility or
liability for any action or failure to act by the Master Servicer nor shall the
Trustee or the Issuer be obligated to supervise the performance of the Master
Servicer hereunder or otherwise.
(e) Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no
longer be the Master Servicer hereunder (including by reason of a Master
Servicing Default), unless a successor Master Servicer acceptable to MBIA has
been appointed, the Trustee or its successor shall thereupon assume all of the
rights and obligations of the Master Servicer hereunder arising thereafter,
except that the Trustee shall not be (i) liable for losses of the Master
Servicer pursuant to Section 3(f)(ix) or any acts or omissions of the
predecessor Master Servicer hereunder, (ii) obligated to make Servicing Advances
or Master Servicing Advances if it is prohibited from doing so by applicable
law, or (iii) deemed to have made any representations and warranties of the
Master Servicer hereunder. Any such assumption shall be subject to Section 8(b).
If the Master Servicer shall for any reason no longer be the Master Servicer
(including by reason of any Master Servicing Default), unless a successor Master
Servicer acceptable to MBIA has been appointed, the Trustee or its successor
shall succeed to any rights of the Master Servicer under this Agreement and any
obligations of the Master Servicer under this Agreement arising thereafter
including, with respect to the Servicing Agreements, all rights and obligations
of the Master Servicer related thereto as contemplated by Section 3(b).
(f) Collection of Pledged Mortgage Payments; Bond Account;
Distribution Account.
(i) The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Servicing
Agreements from the related Servicers.
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(ii) The Master Servicer shall establish and maintain a Bond
Account, which shall be an Eligible Account, into which the Master
Servicer shall deposit or cause to be deposited on a daily basis, or to
the extent same day deposit is unavailable, within one Business Day of
receipt, provided, that, any investment earnings accrued between receipt
by the Master Servicer and deposit in the Bond Account, will be
deposited into the Bond Account, except as otherwise specifically
provided herein, the following payments and collections remitted by
Servicers or received by it in respect of Pledged Mortgages subsequent
to the Cutoff Date (other than in respect of principal and interest due
on the Pledged Mortgages on or before the Cut-off Date) and the
following amounts required to be deposited hereunder:
(A) all payments on account of principal on the Pledged Mortgages,
including Principal Prepayments and the principal component of
any Servicer Advance remitted to it by the Servicers;
(B) all payments on account of interest on the Pledged Mortgages,
net of the sum of the related Servicing Fee, and the interest
component of any Servicer Advance remitted to it by the
Servicers;
(C) all Insurance Proceeds and Liquidation Proceeds;
(D) any other payments, collections and other amounts remitted to it
by a Servicer pursuant to the related Servicing Agreement in
respect of the Pledged Mortgages;
(E) any amount required to be deposited by Redwood in connection
with any realized losses on Permitted Investments pursuant to
clause (ix) of this Section 3(f);
(F) all Purchase Prices from Redwood or any other person and all
Substitution Adjustment Amounts;
(G) all Master Servicing Advances made by the Master Servicer
pursuant to Section 5; and
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(H) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer
shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of
prepayment penalties, late payment charges or assumption fees, if
collected, need not be remitted by the Master Servicer. In the event
that the Master Servicer shall remit any amount not required to be
remitted, it may at any time withdraw or direct the institution
maintaining the Bond Account to withdraw such amount from the Bond
Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice
thereof to the Trustee or such other institution maintaining the Bond
Account which describes the amounts deposited in error in the Bond
Account. The Master Servicer shall maintain adequate records with
respect to all withdrawals made pursuant to this Section 3(f). All funds
deposited in the Bond Account shall be held in trust for the Bondholders
and MBIA until withdrawn in accordance with clauses (iii), (iv) and (vi)
below.
(iii) Permitted Withdrawals from the Bond Account.
The Master Servicer may from time to time make withdrawals from
the Bond Account for the following purposes:
(A) to reimburse the Master Servicer or Servicer, as applicable, for
unreimbursed Master Servicer Advances, Advances, or Servicing
Advances made by it, such right of reimbursement pursuant to
this subclause (iii) being limited to amounts received on the
Pledged Mortgage(s) (including Insurance Proceeds and
Liquidation Proceeds) in respect of which any such Master
Servicer Advance or Servicing Advance was made;
(B) to reimburse the related Servicer or Master Servicer for any
Nonrecoverable Advance previously made;
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(C) to pay to the purchaser, with respect to each Pledged Mortgage
or property acquired in respect thereof that has been purchased
pursuant to Section 2(a)(ii), 2(c)(iv) or 4(c), all amounts
received thereon after the date of such purchase;
(D) to reimburse the Master Servicer for expenses incurred and
reimbursable pursuant to Section 3(b)(ii) and Section 7(c) up to
an amount not to exceed $150,000 per annum in any calendar year
and to pay to the Trustee amounts due to it pursuant to Section
6.07(2) and (3) of the Indenture up to an amount not to exceed
$150,000 per annum in any calendar year;
(E) to withdraw any amount deposited in the Bond Account and not
required to be deposited therein;
(F) to withdraw investment earnings payable to Redwood;
(G) on each of the Non-RFC Withdrawal Date and the RFC Withdrawal
Date to withdraw Available Funds for such Payment Date, to the
extent on deposit, and remit such amount to the Distribution
Amount; and
(H) to clear and terminate the Bond Account upon termination of this
Agreement pursuant to Section 9(a).
The Master Servicer shall keep and maintain separate accounting,
on a Pledged Mortgage by Pledged Mortgage basis, for the purpose of
justifying any withdrawal from the Bond Account pursuant to such
subclauses (A), (B), (D) and (E). Prior to making any withdrawal from
the Bond Account pursuant to subclause (B), the Master Servicer shall
deliver to the Trustee an Officer's Certificate of a Servicing Officer
indicating the amount of any previous Master Servicer Advance, Advances,
or Servicing Advance determined by the Master Servicer or the Servicer
to be a Nonrecoverable Advance and identifying the related Pledged
Mortgage(s).
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(iv) On each Withdrawal Date, after payment of any amounts
described in clauses (A) through (H) of Section 3(f)(iii) of this Agreement, the
Master Servicer will withdraw from the Bond Account the Available Funds for the
related Payment Date (other than any amounts in respect of investment losses on
amounts on deposit in the Distribution Account which shall be deposited pursuant
to Section 3(f)(ix)), and will deposit such amount in the Distribution Account.
(v) On the Calculation Date, the Master Servicer will deposit
into the Distribution Account the amount of any investment losses in such
account which have not been previously deposited.
(vi) On the first Payment Date, in August 1997, the Master
Servicer shall instruct the Trustee to withdraw and distribute the amounts set
forth in Schedule VI hereof.
(vii) On each Payment Date beginning in September, 1997, the
Master Servicer shall instruct the Trustee to withdraw the Available Funds on
deposit in the Distribution Account (and any amounts deposited therein pursuant
to claims under the MBIA Policy) and distribute such funds, and the Trustee upon
being so instructed will distribute such funds on each such Payment Date, in the
following order of priority in each case, to the extent of funds remaining:
(A) first, the MBIA Premium plus any unpaid MBIA Premium for prior
months to MBIA and, second, the Management Fee to the Manager;
(B) the Class A-1 Interest Payment Amount and the Class A-2 Interest
Payment Amount for such Payment Date to the Class A-1
Bondholders and the Class A-2 Bondholders, respectively, with
any shortfall in such amounts to be allocated between each such
Class on a pro rata basis (based on the ratio of each such
amount to the total of such amounts);
(C) the Class A-1 Bondholders' Interest Carryover and the Class A-2
Bondholders' Interest Carryover for such Payment Date to the
Class A-1 Bondholders and
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the Class A-1 Bondholders, respectively, with any shortfall in
such amounts to be allocated between each such Class on a pro
rata basis (based on the ratio of each such amount to the total
of such amounts);
(D) the Basic Principal Payment Amount for such Payment Date to the
Class A-1 Bondholders and Class A-2 Bondholders, pro rata based
on the respective Principal Amounts of each such Class;
(E) the aggregate amount of previously unreimbursed Insurer
Reimbursement Amounts to MBIA;
(F) the Excess Cash Flow Principal Amount for such Payment Date to
the Class A-1 Bondholders and the Class A-2 Bondholders pro rata
based on the respective Principal Amounts of each such Class;
(G) to reimburse the Master Servicer for expenses incurred by it and
reimbursable pursuant to Section 3(b)(ii) and Section 7(c), to
the extent that any amounts exceed $150,000 in any calendar year
and only that portion of such amounts in excess of $150,000
incurred during such calendar year and to pay to the Trustee
amounts due to it pursuant to Section 6.07(2) and (3) of the
Indenture, to the extent that any amounts exceed $150,000 in any
calendar year and only that portion of such amounts in excess of
$150,000 incurred during such calendar year and to reimburse the
Owner Trustee for all reasonable expenses incurred pursuant to
Section 6.06(b) or Section 6.06(c) of the Deposit Trust
Agreement but only to the extent the Depositor shall have failed
to reimburse the Owner Trustee for such reasonable expenses, and
any amounts due and owing to the Manager under the Management
Agreement other than the Management Fee; and
(H) the remaining amount of Available Funds on deposit in the
Distribution Account, if any, for such Payment Date, to the
Certificate Paying Agent
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appointed pursuant to the Deposit Trust Agreement (which shall
initially be the Trustee) for the distribution of such amount
pursuant to the terms of such agreement on the Investor
Certificates.
The Master Servicer may conclusively rely on written notice from the
Issuer as to all payment instructions with respect to the amounts to be
distributed to the Certificate Paying Agent pursuant to clause (H) above.
(viii) [Reserved.]
(ix) Each institution at which the Bond Account and the
Distribution Account is maintained shall invest the funds therein as
directed in writing by Redwood or by the Master Servicer, respectively,
in Permitted Investments, which shall mature not later than (i) in the
case of the Bond Account, the Non-RFC Withdrawal Date with respect to
Available Funds to be withdrawn on that date and the RFC Withdrawal Date
with respect to Available Funds to be withdrawn on that date, and (ii)
in the case of the Distribution Account, the Business Day next preceding
the related Payment Date (except that if the Distribution Account is
held at the Trustee, any Permitted Investment shall mature not later
than such Payment Date) and, in each case, shall not be sold or disposed
of prior to its maturity. All such Permitted Investments shall be made
in the name of the Trustee, for the benefit of the Bondholders and MBIA.
All income and gain (net of any losses) realized from any such
investment of funds on deposit in the Bond Account and the Distribution
Account shall be for the benefit of Redwood or the Master Servicer,
respectively, and shall be remitted to it monthly as provided herein.
The amount set forth in the preceding sentence with respect to the Bond
Account shall be compensation payable to Redwood as manager of the Trust
under the Management Agreement, in addition to the Management Fee, and
with respect to the Distribution Account shall be the "Master Servicing
Fee" for such period and the related Payment Date. The amount of any
realized losses in the Bond Account or the Distribution Account incurred
in any such account in respect of any such investments shall promptly be
deposited by Redwood in the Bond Account or the Master Servicer in the
Distribution
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Account, as applicable. The Trustee in its fiduciary capacity shall not
be liable for the amount of any loss incurred in respect of any
investment or lack of investment of funds held in the Bond Account or
the Distribution Account and made in accordance with this Section 3(f).
(x) The Master Servicer shall give notice to the Trustee, the
Issuer, MBIA and each Rating Agency of any proposed change of the
location of the Bond Account not later than 30 days and not more than 45
days prior to any change thereof.
(g) Access to Certain Documentation and Information Regarding the
Pledged Mortgages.
The Master Servicer shall afford the Issuer, MBIA and the Trustee
reasonable access to all records and documentation regarding the Pledged
Mortgages and all accounts, insurance information and other matters relating to
this Agreement maintained by the Master Servicer, such access being afforded
without charge, but only upon reasonable request and during normal business
hours at the office designated by the Master Servicer. The Master Servicer shall
provide MBIA with a copy of all reports that it receives from the Servicers.
Upon reasonable advance notice in writing, the Master Servicer
will provide to each Bondholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Pledged Mortgages maintained by the Master Servicer
sufficient to permit such Bondholder to comply with applicable regulations of
the OTS or other regulatory authorities with respect to investment in the Bonds;
provided that the Master Servicer shall be entitled to be reimbursed by each
such Bondholder for actual expenses incurred by the Master Servicer in providing
such reports and access.
(h) Determination of LIBOR, the Fed Funds Rates and Certain Other
Amounts.
(i) With respect to the Class A-1 Bonds, LIBOR will be
determined as follows:
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On the second LIBOR Business Day prior to the commencement of each
Interest Accrual Period after the Initial Accrual Period for the Class A-1 Bonds
(each a "LIBOR Rate Determination Date"), the Master Servicer will determine
LIBOR.
"LIBOR" means, as of any LIBOR Rate Determination Date, the rate for
deposits in United States dollars for a period equal to the relevant Interest
Accrual Period (commencing to the first day of such Interest Accrual Period)
which appears in the Telerate Page 3750 as of 11:00 a.m., London time, on such
date. If such rate does not appear on Telerate Page 3750, the rate for that day
will be determined on the basis of the rates at which deposits in United States
dollars are offered by the Reference Banks at approximately 11:00 a.m., London
time, on that day to prime banks in the London interbank market for a period
equal to the relevant Interest Accrual Period (commencing on the first day of
such Interest Accrual Period). The Master Servicer will request the principal
London office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, the rate for that day will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Master Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to the relevant
Interest Accrual Period (commencing on the first day of such Interest Accrual
Period).
"Telerate Page 3750" means the display page currently so designated on
the Dow Xxxxx Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices) and
"Reference Banks" means leading banks selected by the Master Servicer and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market.
The Class A-1 Interest Rate for the First Payment Date will equal
6.02844% per annum.
The establishment of LIBOR by the Master Servicer and the Master
Servicer's subsequent calculation of the Bond Interest Rate on the Class A-1
Bonds for the Interest Accrual Period, in
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the absence of willful misconduct, bad faith or manifest error, will be final
and binding. The Bond Interest Rate on the Class A-1 Bonds for any applicable
Interest Accrual Period may be obtained by telephoning the Master Servicer at
(000) 000-0000.
(ii) The Fed Funds Rate will reset each Fed Funds Business Day
other than the last Fed Funds Business Day of each Fed Funds Calculation
Period (each, a "Fed Funds Interest Reset Date"). The Fed Funds Rate in
effect on each day of each Fed Funds Calculation Period will be (a) if
such day is a Fed Funds Interest Reset Date, the Fed Funds Rate
determined as of such Fed Funds Business Day (each a "Fed Funds Interest
Determination Date"), or (b) if such day is not a Fed Funds Interest
Reset Date, the Fed Funds Rate in effect on the immediately preceding
Fed Funds Interest Reset Date.
The "Fed Funds Rate", with respect to a Fed Funds Interest Reset Date,
means (in the following order of priority):
(1) the rate with respect to the related Fed Funds Interest
Determination Date (expressed as a percentage per annum)
that appears opposite the caption "Federal Funds
Effective" on Telerate Page 120 (as defined below) as of
11:00 a.m., New York City time on such Fed Funds Interest
Reset Date;
(2) if such rate does not appear on Telerate Page 120
as of 11:00 a.m., New York City time, on such Fed
Funds Interest Reset Date, then the Fed Funds Rate
with respect to such Fed Funds Interest Reset Date
will be the rate with respect to the related Fed
Funds Interest Determination Date (expressed as a
percentage per annum) that appears on Reuters
Screen NYAA Page (as defined below) as of 11:00
a.m., New York City time, on such Fed Funds
Interest Reset Date;
(3) if such rate does not appear on Reuters Screen
NYAA Page as of 11:00 a.m., New York City time, on
such Fed Funds Interest Reset Date, then the
Master Servicer will request three leading brokers
of Federal Funds transactions in The City of New
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York to provide the rate (expressed as a
percentage per annum) for the last transaction in
overnight Federal Funds arranged by such broker on
the related Fed Funds Interest Determination Date.
If rates are provided by such three brokers, then
the Fed Funds Rate with respect to such Fed Funds
Interest Reset Date will be the arithmetic mean
(rounded to the nearest one hundred-thousandth of
one percentage point with five one-millionths of
one percentage point rounded upwards) of such
rates; and
(4) if fewer than three such rates are provided, then
the Fed Funds Rate with respect to such Fed Funds
Interest Reset Date will be the Fed Funds Rate for
the preceding Fed Funds Interest Reset Date (or,
in the case of the first Fed Funds Interest Reset
Date, the immediately preceding Fed Funds Business
Day on which a rate appeared on Telerate Page 120
as described in (1) above).
If a rate that initially appears on Telerate Page 120 or Reuters Screen
NYAA Page, as the case may be, as of 11:00 a.m., New York City Time, on the
applicable Fed Funds Interest Reset Date is superseded on Telerate Page 120 or
Reuters Screen NYAA Page, as the case may be, by a corrected rate before 12:00
noon, New York City time, on such Fed Funds Interest Reset Date, such corrected
rate as so superseded on the applicable page shall be the applicable rate for
calculating the applicable Fed Funds Rate for such Fed Funds Interest
Determination Date.
"Reuters Screen NYAA Page" means the display designated as page "Reuters
Screen NYAA Page" on the Reuters Monitor Money Rates Service (or such other page
selected by the Master Servicer as may replace the NYAA page on that service for
the purpose of displaying Federal Funds rates).
"Telerate Page 120" means the display designated as "Page 120" on the
Dow Xxxxx Telerate Service (or such other page selected by the Master Servicer
as may replace Page 120 on that service for the purpose of displaying daily
Federal Funds rates).
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All percentages resulting from a calculation with respect to the Fed
Funds Rate or the Class A-2 Interest Rate based on the Fed Funds Rate for any
Interest Accrual Period will be rounded by the Master Servicer to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from such calculation will be rounded to the nearest cent, with one-half cent
rounded upwards.
The establishment of Fed Funds Rate by the Master Servicer and the
Master Servicer's subsequent calculation of the Class A-2 Interest Rate and the
Fed Funds Average Rate for the Interest Accrual Period, in the absence of
willful misconduct, bad faith or manifest error, will be final and binding. The
Class A-2 Interest Rate and the applicable Fed Funds Rate and Fed Funds Average
Rate will be made available by the Master Servicer to persons telephoning the
Master Servicer at 410-884-2000.
(i) Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Bonds and the examiners
and supervisory agents of the OTS, the FDIC and such other authorities, access
to the documentation regarding the Pledged Mortgages within the possession of
the Master Servicer and required by applicable regulations of the OTS and the
FDIC. Such access shall be afforded without charge, but only upon reasonable and
prior written request and during normal business hours at the offices designated
by the Master Servicer. Nothing in this Section 3(i) shall limit the obligation
of the Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Master Servicer to
provide access as provided in this Section 3(i) as a result of such obligation
shall not constitute a breach of this Section 3(i).
(j) Annual Statement as to Compliance.
The Master Servicer shall deliver to the Issuer, MBIA and the
Trustee on or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 1997 fiscal year, an Officer's Certificate stating, as
to the signer thereof, that (i)
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a review of the activities of the Master Servicer during the preceding calendar
year and of the performance of the Master Servicer under this Agreement has been
made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review and following reasonable inquiry, no Default or
Event of Default has occurred under this Agreement or the Insurance Agreement to
which it is a party, or if a Default or Event of Default has occurred,
specifying the nature thereof and, if the Master Servicer has a right to cure
pursuant to Section 7(a) of the Master Servicing Agreement, stating in
reasonable detail (including, if applicable, any supporting calculations) the
steps, if any, being taken by the Master Servicer to cure such Default or Event
of Default or to otherwise comply with the terms of this Agreement or
Transaction Document to which such Default or Event of Default relates, (iii) to
the best of such officer's knowledge, each Servicer has fulfilled all its
obligations under its Servicing Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and (iv) the
Master Servicer has in full force and effect a blanket fidelity bond (or direct
surety bond) and an errors and omissions insurance policy in accordance with the
terms and requirements of Section 3(l) of the Master Servicing Agreement. The
Master Servicer shall promptly forward to the Issuer, MBIA and the Trustee
copies of the annual compliance statements delivered to the Master Servicer
pursuant to the Servicing Agreements. The Trustee shall forward a copy of each
such statement to each Rating Agency.
(k) The Master Servicer hereby acknowledges that concurrently with the
execution of this Agreement, the Trustee has acquired and holds a security
interest in the Trustee Mortgage Files and in all Pledged Mortgages represented
by such Trustee Mortgage Files and in all funds now or hereafter held by, or
under the control of, the Master Servicer that are collected by the Master
Servicer in connection with the Pledged Mortgages, whether as Scheduled
Payments, as Principal Prepayments, or as Liquidation Proceeds or Insurance
Proceeds, and in all proceeds of the foregoing and proceeds of proceeds (but
excluding any Master Servicing Fees and any other amounts or reimbursements to
which the Master Servicer is entitled under this Agreement). The Master Servicer
agrees that so long as the Pledged Mortgages are assigned to the Trustee, all
Trustee Mortgage Files (and any
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documents or instruments constituting a part of such files), and such funds
which come into the possession or custody of, or which are subject to the
control of, the Master Servicer shall be held by the Master Servicer for and on
behalf of the Trustee as the Trustee's agent and bailee for purposes of
perfecting the Trustee's security interest therein, as provided by Section 9-305
of the Uniform Commercial Code of the state in which such property is located,
or by other laws, as specified in Section 8.10 of the Indenture. The Master
Servicer hereby accepts such agency and acknowledges that the Trustee, as
secured party, will be deemed to have possession at all times of all Trustee
Mortgage Files and any other documents or instruments constituting a part of
such files, such funds and other items for purposes of Section 9-305 of the
Uniform Commercial Code of the state in which such property is held by the
Master Servicer. The Master Servicer also agrees that it shall not create, incur
or subject any Trustee Mortgage File or other documents relating to a Pledged
Mortgage which are in the possession of the Master Servicer with respect to each
Pledged Mortgage or any funds that are deposited in the Distribution Account,
the Bond Account, or any funds that otherwise are or may become due or payable
to the Trustee for the benefit of the Bondholders and MBIA, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance
(other than the claims of the Bondholder and MBIA), or assert by legal action or
otherwise any claim or right of set-off against any such Trustee Mortgage File
or any funds collected or held by, or under the control of, the Master Servicer
from time to time in respect of a Pledged Mortgage.
(l) Errors and Omissions Insurance; Fidelity Bond.
The Master Servicer shall obtain and maintain in force, (a) a
policy or policies of insurance covering errors and omissions in the performance
of its obligations as Master Servicer hereunder, and (b) a fidelity bond in
respect of its officers, employees and agents. In the event that any such policy
or bond ceases to be in effect, the Master Servicer shall obtain a comparable
replacement policy or bond. The coverage under each such policy and bond shall
be in such an amount as is customary therefor for the business of master
servicing residential mortgage loans.
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(m) Master Servicer Monthly Data.
On or before noon California time on the Payment Date, the Master
Servicer shall provide to the Trustee with respect to the Pledged Mortgages, a
data file in a format which is mutually agreed upon by the Master Servicer and
the Trustee. The Trustee shall be under no duty to recalculate, verify or
recompute the information provided to it by the Master Servicer under this
Section 3(m). Not later than each Payment Date, the Master Servicer shall
prepare and forward to the Trustee, MBIA, the Issuer and each Rating Agency a
statement (each, a "Payment Date Statement") setting forth with respect to the
related distribution:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest;
(iii) if the distribution to the Holders of such Class of
Bonds is less than the full amount that would be distributable to such
Holders pursuant to Section 2.03(b) on such Payment Date if there were
sufficient funds available therefor, the amount of the shortfall and the
allocation thereof as between principal and interest;
(iv) the Principal Amount of each Class of Bonds after giving
effect to the distribution of principal on such Payment Date;
(v) the Pool Principal Balance for the following Payment Date;
(vi) the amount of the Servicing Fees paid to or retained by
the Servicers (with respect to the Servicers, in the aggregate) with
respect to such Payment Date;
(vii) the Bond Interest Rate for each such Class of Bonds with
respect to such Payment Date;
(viii) the amount of Advances and Master Servicing Advances
included in the distribution on such Payment Date
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and the aggregate amount of Advances and Master Servicing Advances
outstanding as of the close of business on such Payment Date;
(ix) the number and aggregate principal amounts of Pledged
Mortgages (A) delinquent (exclusive of Pledged Mortgages in foreclosure)
(1) 30 to 59 days (2) 60 to 89 days and (3) 90 or more days and (B) in
foreclosure and delinquent (1) 1 to 29 days (2) 60 to 89 days and (3) 90
or more days, as of the close of business on the last day of the second
calendar month preceding such Payment Date;
(x) for each of the preceding 12 calendar months, or all
calendar months since the Cut-off Date, whichever is less and in each
case ending with the second calendar month prior to the month of such
Payment Date, the aggregate dollar amount of the Scheduled Payments (A)
due on all Outstanding Pledged Mortgages on each of the Due Dates in
each such month and (B) delinquent 60 days or more on each of the Due
Dates in each such month;
(xi) with respect to any Pledged Mortgage that became a REO
Property during the second preceding calendar month, the loan number and
Stated Principal Balance of such Pledged Mortgage as of the close of
business on the Calculation Date preceding such Payment Date and the
date of acquisition thereof;
(xii) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of business
on the Calculation Date preceding such Payment Date;
(xiii) the aggregate amount of Realized Losses incurred during
the second preceding calendar month;
(xiv) the amount available for distribution to the Holder of
the Investor Certificate, pursuant to Section 3(f)(vii)(H) of this
Agreement;
(xv) any amount payable under the Bond Insurance Policy; and
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(xvi) the amount of the Serious Delinquencies.
Within a reasonable period of time after the end of each calendar
year, the Master Servicer shall furnish to each Person who at any time during
the calendar year was a Bondholder and has requested such information and to
MBIA, a statement containing the information set forth in subclauses (i), (ii)
and (vi) of this Section 3(m) aggregated for such calendar year or applicable
portion thereof during which such Person was a Bondholder. Such obligation of
the Master Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Master Servicer
pursuant to any requirements of the Code as from time to time in effect.
The Master Servicer upon request, as required by law, shall supply to
the Trustee at least fifteen calendar days prior to any applicable filing date
prescribed by law of Internal Revenue Service regulation, and the Trustee, as
agent for the Issuer, and upon receipt from the Master Servicer, shall transmit
by mail to each Bondholder, as such Bondholder's name and address appears in the
Bond Register, and to the Internal Revenue Service, within the time limits
prescribed by law, the amount of interest and original issue discount (which
original issue discount shall be calculated by the Master Servicer), if any,
paid or accrued with respect to Bonds held by such Bondholder.
(n) As required by the Code or the Treasury regulations thereunder, the
Master Servicer shall supply to the Trustee and the Trustee, as agent for the
Master Servicer, and upon receipt from the Master Servicer, shall transmit by
mail to each Bondholder appropriate tax accounting information, and any other
tax accounting information that a Bondholder reasonably requests, to enable it
to prepare its tax returns.
(o) Claims Upon the MBIA Policy.
(i) By noon, New York City time, on the Calculation Date, the
Master Servicer shall confirm to the Trustee whether a Deficiency Amount
will exist on the related Payment Date. If a Deficiency Amount will
exist, the Master Servicer shall determine the amount of such
Deficiency Amount and shall complete on behalf of the
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Trustee a notice in the form of Exhibit A to the MBIA Policy (a
"Notice") and submit such Notice to MBIA or its fiscal agent (with a
copy to the Trustee), as set forth in the MBIA Policy not later than
12:00 noon New York City time on the second Business Day preceding such
Payment Date as a claim for an Insured Payment in an amount equal to
such Deficiency Amount.
(ii) With respect to any Preference Amount (as defined in the
MBIA Policy), MBIA shall pay any Insured Payment that is a Preference
Amount on the Business Day (as defined in the MBIA Policy) following
receipt on a Business Day by MBIA's fiscal agent of the items listed
below. The Master Servicer, as agent of Trustee, shall provide to MBIA
upon the request of MBIA:
(A) a certified copy of the final nonappealable order of a
court having competent jurisdiction ordering the recovery by a
trustee in bankruptcy as voidable preference amounts included in
previous distributions under Section 2.03(b) of the Indenture to
any Owner pursuant to the United States Bankruptcy Code.
(B) an opinion of counsel satisfactory to MBIA, and upon which
MBIA shall be entitled to rely, stating that such order is final
and is not subject to appeal;
(C) an assignment in such form as reasonably required by the
Insurer, irrevocably assigning to MBIA all rights and claims of
the Master Servicer, the Trustee and any Bondholder relating to
or arising under the Transaction Documents against the debtor
which made such preference payment or otherwise with respect to
such preference amount; and
(D) appropriate instruments to effect (when executed by the
affected party) the appointment of the Insurer as agent for the
Trustee and any Owner in any legal proceeding relating to such
preference payment being in a form satisfactory to MBIA.
(iii) The Master Servicer shall keep a complete and accurate
record of the amount of interest and principal paid
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in respect of any Bonds from moneys received under the MBIA Policy. MBIA
shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior written notice to
the Master Servicer.
(p) Optional Purchase of Pledged Mortgages
The Master Servicer shall have the option to purchase all of the
remaining Pledged Mortgages on any Payment Date after the Payment Date with
respect to which the Pool Principal Balance is equal to 10% or less of the
Initial Pool Principal Balance at a price equal to the aggregate Purchase Price
of the Pledged Mortgages as of such Payment Date; provided, however, such option
shall be subject to the provisions of Section 10.01 of the Indenture.
4. General Duties of the Servicers
This Section 4 describes, in summary form, the Servicing
Agreements entered into among Redwood and the various Servicers who will service
the Pledged Mortgages. To the extent that any Servicing Agreement conflicts with
the summaries set forth in this Agreement, the provisions of the applicable
Servicing Agreement will govern. This section is for informational purposes only
and does not establish responsibilities and shall not be construed to impose any
obligations or duties on any Person, including, in particular, the Master
Servicer or any Servicer.
(a) Maintenance of Hazard Insurance; Maintenance of Primary
Insurance Policies.
(i) The Servicer shall cause to be maintained, in accordance with
the terms and conditions of the related Servicing Agreement, for each
Pledged Mortgage, hazard insurance with extended coverage in an amount
that is at least equal to the lesser of (A) the maximum insurable value
of the improvements securing such Pledged Mortgage or (B) the greater of
(y) the outstanding principal balance of the Pledged Mortgage and (z) an
amount such that the proceeds of such policy shall be sufficient to
prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
Each such policy of standard hazard insurance shall contain, or have
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an accompanying endorsement that contains, a standard mortgagee clause.
To the extent it may do so without breaching the related Servicing
Agreement, the Master Servicer shall replace any Servicer that does not
cause such insurance, to the extent it is available, to be maintained.
Any amounts collected by the related Servicer under any such policies
(other than the amounts to be applied to the restoration or repair of
the related Mortgaged Property or amounts released to the Mortgagor in
accordance with the Servicer's normal servicing procedures) shall be
deposited in the Bond Account or the related Servicing Account, as
applicable. Any cost incurred by any Servicer in maintaining any such
insurance shall not, for the purpose of calculating payments to the
Bondholders or remittances to the Trustee for their benefit, be added to
the principal balance of the Pledged Mortgage, notwithstanding that the
terms of the Pledged Mortgage so permit. Such costs shall be recoverable
by the Servicer out of late payments by the related Mortgagor or out of
Liquidation Proceeds to the extent permitted by Section 3(f). It is
understood and agreed that no earthquake or other additional insurance
is to be required of any Mortgagor or maintained on property acquired in
respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time
of origination of the Pledged Mortgage in a federally designated special
flood hazard area and such area is participating in the national flood
insurance program, the related Servicer shall cause flood insurance to
be maintained with respect to such Pledged Mortgage. Such flood
insurance shall be in an amount equal to the least of (A) the original
principal balance of the related Pledged Mortgage, (B) the replacement
value of the improvements which are part of such Mortgaged Property, and
(C) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program.
In the event that the Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Pledged
Mortgages covered by the related Servicing Agreement, it shall
conclusively be deemed to have satisfied its obligations as set forth in
the first sentence
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of this Section 4(a)(i), it being understood and agreed that such policy
may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If
such policy contains a deductible clause, the Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section
4(a)(i), and there shall have been a loss that would have been covered
by such policy, deposit in the Bond Account the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as Servicer of Pledged Mortgages, each
Servicer has agreed to present, on behalf of itself, the Issuer and the
Trustee for the benefit of the Bondholders, claims under any such
blanket policy.
(ii) No Servicer shall take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss
which, but for the actions of such Servicer, would have been covered
thereunder. The Servicer shall not cancel or refuse to renew any such
Primary Insurance Policy that is in effect at the date of the initial
issuance of the Bonds and is required to be kept in force hereunder
unless the replacement Primary Insurance Policy for such canceled or
non-renewed policy is maintained with a Qualified Insurer. The related
Servicer shall not be required to maintain any Primary Insurance Policy
with respect to any Pledged Mortgage with a Loan-to-Value Ratio less
than or equal to 80% as of any date of determination or, based on a new
appraisal, the principal balance of such Pledged Mortgage represents 80%
or less of the new Appraised Value. Each Servicer agrees to effect the
timely payment of the premiums on each Primary Insurance Policy, and
such costs not otherwise recoverable shall be recoverable by the related
Servicer from the related liquidation proceeds.
In connection with its activities as Servicer of Pledged
Mortgages, each Servicer agrees to present on behalf of itself, the
Trustee and the Bondholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action
as shall be necessary to permit recovery under any Primary Insurance
Policies respecting defaulted Pledged Mortgages. Any amounts
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collected by a Servicer under any Primary Insurance Policies shall be
deposited in the Servicing Account, the Collection Account or the Bond
Account, as applicable.
(b) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(i) Except as otherwise provided in this Section 4(b), when any
property subject to a Mortgage has been conveyed by the Mortgagor, the
related Servicer shall, to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage
Note or Mortgage, to the extent permitted under applicable law and
governmental regulations, but only to the extent that such enforcement
will not adversely affect or jeopardize coverage under any Required
Insurance Policy. Notwithstanding the foregoing, the related Servicer is
not required to exercise such rights with respect to a Pledged Mortgage
if the Person to whom the related Mortgaged Property has been conveyed
or is proposed to be conveyed satisfies the terms and conditions
contained in the Mortgage Note and Mortgage related thereto and the
consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a
condition to such transfer. In the event that (A) the related Servicer
is prohibited by law from enforcing any such due-on-sale clause, (B)
coverage under any Required Insurance Policy would be adversely
affected, (C) the Mortgage Note does not include a due-on-sale clause or
permits assumptions of the Mortgage Note subject to certain conditions,
or (D) nonenforcement is otherwise permitted hereunder, the Servicer is
authorized by the related Servicing Agreement, subject to certain
provisions of the related Servicing Agreement, to take or enter into an
assumption and modification agreement from or with the person to whom
such property has been or is about to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Pledged Mortgage shall continue to be covered
(if so covered before the Servicer enters such agreement) by the
applicable Required Insurance Policies. The Servicer, subject to certain
provisions of the related Servicing Agreement, is
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also authorized by the related Servicing Agreement with the prior
approval of the insurers under any Required Insurance Policies 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.
Notwithstanding the foregoing, the Servicer shall not be deemed to be in
default under the applicable Section of the related Servicing Agreement
by reason of any transfer or assumption which the Servicer reasonably
believes it is restricted by law from preventing, for any reason
whatsoever.
(ii) Subject to the Servicer's duty to enforce any due-on-sale
clause as described above, in any case in which a Mortgaged Property has
been conveyed to a Person by a Mortgagor, and such Person is to enter
into an assumption agreement or modification agreement or supplement to
the Mortgage Note or Mortgage that requires the signature of the
Trustee, or if an instrument of release signed by the Trustee is
required releasing the Mortgagor from liability on the Pledged Mortgage,
the Servicer shall prepare and deliver or cause to be prepared and
delivered to the Trustee for signature and shall direct, in writing, the
Trustee to execute the assumption agreement with the Person to whom the
Mortgaged Property is to be conveyed and such modification agreement or
supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or
Mortgage or otherwise to comply with any applicable laws regarding
assumptions or the transfer of the Mortgaged Property to such Person. In
connection with any such assumption, no material term of the Mortgage
Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Servicer in accordance with
its underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered to
the Trustee for execution by it, the Servicer shall deliver an Officer's
Certificate signed by a servicing officer of the Servicer stating that
the requirements described in this subsection have been met in
connection therewith. The Servicer shall notify the Trustee that any
such substitution or assumption agreement has been completed by
forwarding to
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the Trustee the original of such substitution or assumption agreement,
which in the case of the original shall be forwarded to the Custodian
and added to the related Trustee Mortgage File and shall, for all
purposes, be considered a part of such Trustee Mortgage File to the same
extent as all other documents and instruments constituting a part
thereof. Any fee collected by any Servicer for entering into an
assumption or substitution of liability agreement will be retained by
the Servicer as additional servicing compensation.
(c) Realization Upon Defaulted Pledged Mortgages; Purchase
of Certain Pledged Mortgages.
Each Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Pledged Mortgages as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, each Servicer shall follow
such practices and procedures as it shall deem necessary or advisable, as shall
be normal and usual in its general mortgage servicing activities and as shall
meet the requirements of the insurer under any Required Insurance Policy.
Notwithstanding the foregoing, no Servicer shall be required to expend its own
funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (A) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Pledged Mortgage after
reimbursement to itself of such expenses and (B) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Bond Account). Each Servicer shall
be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the liquidation proceeds with respect to the related Mortgaged
Property, as provided in the definition of Liquidation Proceeds. If a Servicer
has knowledge that a Mortgaged Property which the Servicer is contemplating
acquiring in foreclosure or by deed in lieu of foreclosure is located within a 1
mile radius of any site listed in the Expenditure Plan for the Hazardous
Substance Clean Up Bond Act of 1984 or other site with environmental or
hazardous waste risks known to the Servicer, that Servicer will, prior to
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acquiring the Mortgaged Property, consider such risks and only take action in
accordance with its established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the Bondholders, or
its nominee, on behalf of the Bondholders. The Trustee's name shall be placed on
the title to such REO Property solely as the Trustee under the Indenture and not
in its individual capacity. The related Servicer shall ensure that the title to
such REO Property references the Indenture and the Trustee's capacity
thereunder. Pursuant to its efforts to sell such REO Property, the related
Servicer shall either itself or through an agent selected by the related
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the
Bondholders, rent the same, or any part thereof, as the related Servicer deems
to be in the best interest of the Bondholders for the period prior to the sale
of such REO Property. The net monthly rental income, if any, from such REO
Property shall be deposited in the Bond Account no later than the close of
business on each Determination Date. The related Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code with
respect to foreclosures and abandonments, the tax reporting required by Section
6050H of the Code with respect to the receipt of mortgage interest from
individuals and, if required by Section 6050P of the Code with respect to the
cancellation of indebtedness by certain financial entities, by preparing such
tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing.
The decision of a Servicer to foreclose on a defaulted Pledged
Mortgage shall be subject to a determination by such Servicer that the proceeds
of such foreclosure would exceed the costs and expenses of bringing such a
proceeding. The income earned from the management of any REO Properties, net of
reimbursement to the Servicer for expenses incurred (including any property or
other taxes) in connection with such management and net of unreimbursed
Servicing Fees, Advances and Servicing Advances, shall be applied to the payment
of principal of and interest on the related defaulted Pledged Mortgages (with
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interest accruing as though such Pledged Mortgages were still current and
adjustments, if applicable, to the Mortgage Rate were being made in accordance
with the terms of the Mortgage Note) and all such income shall be deemed, for
all purposes in this Agreement, to be payments on account of principal and
interest on the related Mortgage Notes and shall be deposited into the Bond
Account. To the extent the net income received during any calendar month is in
excess of the amount attributable to amortizing principal and accrued interest
at the related Mortgage Rate on the related Pledged Mortgage for such calendar
month, such excess shall be considered to be a partial prepayment of principal
of the related Pledged Mortgage.
The proceeds from any liquidation of a Pledged Mortgage, as well
as any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the related Servicer for any related unreimbursed
Advances or Servicing Advances and Servicing Fees, as applicable; second, to
reimburse the related Servicer for any unreimbursed Servicer Advances, as
applicable, and to reimburse the Bond Account for any Nonrecoverable Advances
(or portions thereof) that were previously withdrawn by the Master Servicer
pursuant to Section 3(f) that related to such Pledged Mortgage; third, to
accrued and unpaid interest (to the extent no Advance or Servicer Advance has
been made for such amount or any such Advance or Servicer Advance has been
reimbursed) on the Pledged Mortgage or related REO Property at the Net Mortgage
Rate to the Due Date occurring in the month in which such amounts are required
to be distributed; and fourth, as a recovery of principal of the Pledged
Mortgage. Excess Proceeds, if any, from the liquidation of a Liquidated Pledged
Mortgage will be retained by the Servicer as additional servicing compensation
pursuant to the terms of the related Servicing Agreement.
Each Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Issuer any Pledged Mortgage which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Pledged Mortgage purchased hereunder shall be deposited in the
Bond Account and the Trustee, upon receipt of a Request for Release, shall cause
to be released to the purchaser
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of such Pledged Mortgage the related Trustee Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Pledged Mortgage, in each case without recourse, as shall be necessary to
vest in the purchaser of such Pledged Mortgage any Pledged Mortgage released
pursuant hereto and the purchaser of such Pledged Mortgage shall succeed to all
the Issuer's and the Trustee's right, title and interest in and to such Pledged
Mortgage and all security and documents related thereto. Such assignment shall
be an assignment outright and not for security. The purchaser of such Pledged
Mortgage shall thereupon own such Pledged Mortgage, and all security and
documents, free of any further obligation to the Issuer, the Trustee or the
Bondholders with respect thereto.
(d) Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.
(i) To the extent required by the related Mortgage Note and not
violative of current law, each Servicer shall, in accordance with the
terms of the related Servicing Agreement establish and maintain one or
more accounts (each, an "Escrow Account") and deposit and retain therein
all collections from the Mortgagors (or advances by the Servicer) for
the payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing herein shall
require any Servicer to compel a Mortgagor to establish an Escrow
Account in violation of applicable law.
(ii) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable
items, to reimburse the related Servicer out of related collections for
any payments made pursuant to Sections 4(d) (with respect to taxes and
assessments and insurance premiums) and 4(a) (with respect to hazard
insurance), to refund to any Mortgagors any sums determined to be
overages, to pay interest, if required by law or the terms of the
related Mortgage or Mortgage Note, to Mortgagors on balances in the
Escrow Account or to clear and terminate the Escrow Account at the
termination of this Agreement in accordance with Section 9(a). The
Escrow Accounts shall not be a part of the Trust Estate.
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(e) Documents, Records and Funds in Possession of Servicer
to be Held for Trustee.
The related Servicer shall deliver all documents and instruments
relating to the Pledged Mortgages coming into the possession of the related
Servicer from time to time and shall account fully to the Trustee for any funds
received by the Servicer or which otherwise are collected by the Servicer as
Liquidation Proceeds or Insurance Proceeds in respect of any Pledged Mortgage.
All Trustee Mortgage Files, including without limitation the Mortgage Documents
contained therein, funds collected or held by, or under the control of, the
Servicer from time to time in respect of any Pledged Mortgages, whether from the
collection of principal and interest payments or from Liquidation Proceeds or
Insurance Proceeds, including but not limited to any funds on deposit in any
Eligible Account and any other items constituting a part of the Trust Estate
which from time to time come into the possession of the Servicer, shall be held
by the Servicer for and on behalf of the Trustee and the Bondholders and MBIA as
specified in Section 8.10 of the Indenture, and shall be and remain the sole and
exclusive property of the Trustee, subject to the applicable provisions of this
Agreement and the Indenture.
(f) Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
Pursuant to the Servicing Agreements, on or before 120 days after
the end of each Servicer's fiscal year, commencing with its 1997 fiscal year,
each Servicer at its expense shall cause a nationally recognized firm of
independent public accountants (who may also render other services to a Servicer
or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Master Servicer to
the effect that such firm has examined certain documents and records relating to
the servicing of Pledged Mortgages under the related Servicing Agreement or of
mortgage loans under servicing agreements substantially similar to the related
Servicing Agreement (such statement to have attached thereto a schedule setting
forth the servicing agreements covered thereby) and that, on the basis of such
examination, conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the
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Audit Program for Mortgages serviced for FNMA and FHLMC, such servicing has been
conducted in compliance with such servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and FHLMC requires it to report. Copies of such
statement shall be provided by each Servicer to the Master Servicer who will,
(1) in turn provide such statements to the Trustee, the Issuer and MBIA and (2)
notify the Trustee, the Issuer and MBIA of the failure of any Servicer to
provide such statements as required under the applicable Servicing Agreement.
5. Advances.
The Master Servicer shall determine on or before each Master
Servicer Advance Date whether any Servicer has failed to make any Advance of any
Scheduled Payment of principal and interest required to be made by such Servicer
pursuant to the terms of its Servicing Agreement. If the Master Servicer
determines that any such Servicer has failed to make any such required Advance
the Master Servicer shall make such Advance (a "Master Servicer Advance") on or
before the Master Servicer Advance Date, by either (i) depositing into the
Distribution Account an amount equal to the Master Servicer Advance or (ii)
making an appropriate entry in its records relating to the Distribution Account
that any Amount Held for Future Distribution has been used by the Master
Servicer in discharge of its obligation to make any such Master Servicer Advance
(any funds so applied shall be replaced by the Master Servicer by deposit in the
Distribution Account no later than the close of business on the next Master
Servicer Advance Date); provided, however, in no event shall the Master Servicer
be required to make any Master Servicer Advance that the Master Servicer
determines would constitute a Nonrecoverable Advance. The Master Servicer shall
be entitled to be reimbursed from the Bond Account for all Master Servicer
Advances of its own funds made pursuant to this Section 5 as provided in Section
3(f)(iii). The Master Servicer shall inform the Trustee of the amount of the
Advance to be made on each Master Servicer Advance Date no later than the second
Business Day before the related Payment Date.
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The Master Servicer shall deliver to the Trustee on the related
Master Servicer Advance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Master
Servicer Advance determined by the Master Servicer to be a Nonrecoverable
Advance.
6. Master Servicing Compensation and Expenses.
(a) Master Servicer Compensation.
As compensation for its activities hereunder, the Master Servicer
shall be entitled to the Master Servicing Fee which shall equal the investment
earnings (net of any losses) on the moneys deposited in the Distribution
Account. On or prior to each Payment Date, the Master Servicer shall be entitled
to withdraw the related Master Servicing Fee from the Distribution Account.
The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder and
shall not be entitled to reimbursement therefor except as specifically provided
in this Agreement.
(b) Servicer Compensation.
As compensation for its activities under its Servicing Agreement,
each Servicer shall be entitled to retain out of each payment of interest on a
Pledged Mortgage (or portion thereof) an amount equal to interest at the
applicable Servicing Fee Rate on the Stated Principal Balance of the related
Pledged Mortgage for the period covered by such interest payment as provided in
the related Servicing Agreement.
Additional servicing compensation in the form of pre-payment
penalties, assumption fees and late payment charges shall be retained by the
Servicers if and to the extent provided in the related Servicing Agreement. Each
Servicer shall be required to pay all expenses incurred by it in connection with
its servicing activities under its Servicing Agreement (including payment of any
premium for hazard insurance and any Primary Insurance Policy and maintenance of
the other forms of insurance coverage required by this Agreement and its
Servicing Agreement) and shall not be entitled to reimbursement therefor except
as specifically pro-
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vided in its Servicing Agreement and not inconsistent with this Agreement.
7. Master Servicer.
(a) Liabilities of the Master Servicer.
The Master Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically imposed upon and undertaken by it
herein.
(b) Merger or Consolidation of the Master Servicer.
Any Person into which the Master Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Master Servicer shall be a party, or any person succeeding to the business
of the Master Servicer, shall be the successor of the Master Servicer hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person to the Master Servicer
shall be qualified to perform the obligations of the Master Servicer under this
Agreement and, so long as no MBIA default has occurred and is continuing, be
reasonably acceptable to MBIA.
(c) Limitation on Liability of the Master Servicer and
Others.
(i) Neither the Master Servicer nor any of the directors,
officers, employees or agents of the Master Servicer shall be under any
liability to the Issuer, the Bondholders or any other Person 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 Master Servicer or
any such Person against any breach of representations or warranties made
by it herein or protect the Master Servicer or any such Person from any
liability which would otherwise be imposed by reasons of the Master
Servicer's willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties hereunder. The
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Master Servicer and any director, officer, employee or agent of the
Master Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Master Servicer and any director,
officer, employee or agent of the Master Servicer shall be indemnified
by the Issuer and held harmless against any loss, liability or expense
incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Bonds, other than any loss,
liability or expense related to any specific Pledged Mortgage or Pledged
Mortgages (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of the Master Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties
hereunder or by reason of reckless disregard of its obligations and
duties hereunder. The Master Servicer shall not be under any obligation
to appear in, prosecute or defend any legal action that is not
incidental to its respective duties hereunder and which in its opinion
may involve it in any expense or liability; provided, however, that the
Master Servicer may in its discretion undertake any such action that it
may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and interests of the Issuer, the
Trustee and the Bondholders hereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Issuer, and the Master Servicer
shall be entitled to be reimbursed therefor out of the Bond Account;
provided, however, that unless a MBIA Default exists, the Master
Servicer shall notify MBIA of such legal action (provided that the
failure to notify MBIA shall not waive the rights of the Master Servicer
to indemnification) and such indemnification by the Issuer out of the
Bond Account shall be preconditioned on the Master Servicer's duty (i)
to allow MBIA to control the defense or settlement of any such action
and (ii) to allow MBIA to direct the Master Servicer with respect
thereto; provided, further, that (a) if MBIA does not assume control of
the defense of any such action within a reasonable period of time after
the filing of such action,
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the Master Servicer shall have the right to act on its own in defending
the action until such time as MBIA assumes control of the defense, (b)
the Master Servicer along with MBIA shall have the right to consent to
any counsel hired to defend the Master Servicer (which consent of the
Master Servicer shall not be unreasonably withheld) and (c) the Master
Servicer along with MBIA shall have the right to consent to any
settlement if the amount of such settlement is less than full
indemnification and the Master Servicer would not be fully released from
liability with respect to such action as a result of such settlement.
Any amounts payable to the Master Servicer, or any director, officer,
employee or agent of the Master Servicer, in respect of indemnification
provided by this paragraph (c)(i), or pursuant to any other right of
reimbursement from the Bond Account that the Master Servicer, or any
director, officer, employee or agent of the Master Servicer, may have
hereunder in its capacity as such, may be withdrawn by the Master
Servicer from the Bond Account at any time subject to a maximum amount
of $150,000 in any calendar year pursuant to Section 3(b)(ii) and
Section 3(f)(iii)(D) of this Agreement. Any such amounts due to the
Master Servicer, or any director, officer, employee or agent of the
Master Servicer, in excess of $150,000 in such calendar year shall be
reimbursable pursuant to Section 3(f)(vii)(G).
(ii) With respect to legal prosecution of a claim by the Master
Servicer against a Servicer pursuant to Section 3(b)(ii) hereof, unless
a MBIA Default has occurred and is continuing, the Master Servicer shall
notify MBIA of such legal action and such indemnification by the Issuer
out of the Bond Account shall be preconditioned on the Master Servicer's
duty (i) to allow MBIA to control the prosecution and settlement of any
such claim and (ii) to allow MBIA to direct the Master Servicer with
respect thereto; provided further, that (a) if MBIA does not assume
control of the prosecution of any such claim within a reasonable period
of time after the filing of such claim, the Master Servicer shall have
the right to act on its own in prosecuting the claim until such time as
MBIA assumes control of the prosecution, (b) the Master Servicer along
with MBIA shall have the right to consent to any counsel hired by the
Master Servicer to prosecute such claim (which consent of
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the Master Servicer shall not be unreasonably withheld) and (c) the
Master Servicer along with MBIA shall have the right to consent to any
settlement if the amount of such settlement is less than an amount
sufficient to cover all amounts due in respect of the related Pledged
Mortgage and the amounts advanced by the Master Servicer in connection
with such claim. Any amounts payable to the Master Servicer or any
director, officer, employee or agent of the Master Servicer, in respect
of indemnification provided by this paragraph (c)(ii), or pursuant to
any right of reimbursement from the Bond Account that the Master
Servicer, or any director, officer, employee or agent of the Master
Servicer may have hereunder in its capacity as such, may be withdrawn by
the Master Servicer from the Bond Account at any time, subject to a
maximum amount of $150,000 in any calendar year pursuant to Section
3(b)(ii) and Section 3(f)(iii)(D) of this Agreement. Any such amount due
the Master Servicer, or any director officer, employee or agent of the
Master Servicer in excess of $150,000 in such calendar year shall be
reimbursable pursuant to Section 3(f)(vii)(G) of this Agreement.
(d) Limitation on Resignation of the Master Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (a) upon appointment of a successor master
servicer reasonably acceptable to MBIA and receipt by the Trustee of a letter
from each Rating Agency that such a resignation and appointment will not result
in a downgrading of the rating of any of the Bonds (without regard to the MBIA
Policy) and with the prior written consent of MBIA, which consent will not be
unreasonably withheld or (b) upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel at the expense of the Master Servicer to such effect
delivered to the Trustee and the Insurer which opinion of counsel shall be
reasonably acceptable to the Trustee and MBIA. No such resignation shall become
effective until the Trustee or a successor master servicer reasonably acceptable
to MBIA shall have assumed the Master Servicer's responsibilities, duties,
liabilities and obligations hereunder.
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8. Master Servicing Default; Termination and Liabilities.
(a) Master Servicing Default.
Any of the following acts or occurrences shall constitute a
Master Servicing Default by the Master Servicer under this Agreement:
(i) any failure by the Master Servicer to deposit in the
Bond Account or remit to the Trustee any payment (other than a payment
required to be made under Section 5) required to be made under the terms
of this Agreement, which failure shall continue unremedied for three
days after the date upon which written notice of such failure shall have
been given to the Master Servicer by the Trustee, MBIA or the Issuer or
to the Master Servicer, the Trustee and the Issuer by the Holders of
Bonds representing more than 50% of the aggregate Principal Amount of
the Bonds with the prior written consent of MBIA; or
(ii) any failure by the Master Servicer to observe or perform
in any material respect any other of the covenants or agreements on the
part of the Master Servicer contained in this Agreement, which failure
shall continue unremedied for a period of 30 days after the date on
which written notice of such failure shall have been given to the Master
Servicer by the Trustee, MBIA or the Issuer or to the Master Servicer,
the Trustee and the Issuer by the Holders of Bonds representing more
than 50% of the aggregate Principal Amount of the Bonds with the prior
written consent of MBIA provided that such 30 day period shall be
extended by an additional 30 days upon delivery by the Master Servicer
to the Trustee, MBIA and the Issuer of written notice of the steps being
taken by the Master Servicer to remedy such failure; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer and such decree or order shall have
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remained in force undischarged or unstayed for a period of 60
consecutive days; or
(iv) the Master Servicer shall consent to the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Master Servicer or all or
substantially all of the property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations; or
(vi) any failure of the Master Servicer to make any Advance
in the manner and at the time required to be made pursuant to Section 5
which continues unremedied for a period of one Business Day after the
date of such failure.
If a Master Servicing Default described in clauses (i) to (v) of
this Section 8(a) shall occur, then, and in each and every such case, so long as
such Master Servicing Default shall not have been remedied the Trustee may, with
the prior written consent of MBIA, and shall at the direction of MBIA (subject
to Section 3.07 and Section 8.11 of the Indenture), by notice in writing to the
Master Servicer (with a copy to each Rating Agency and MBIA), and in addition to
any other rights the Trustee may have on behalf of the Bondholders or MBIA as a
result of such Master Servicing Default, terminate all of the rights and
obligations of the Master Servicer thereafter arising under this Agreement and
in and to the Pledged Mortgages and the proceeds thereof, other than its rights
as a Bondholder under the Indenture and its obligations which are not assumed by
the Trustee pursuant to clauses (i), (iii) and (v) of Section 3(f). If a Master
Servicing Default described in clause (vi) shall occur, the Trustee shall, by
notice in writing to the Master Servicer and the Issuer, terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the Pledged Mortgages and the proceeds thereof, other than
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its rights as a Bondholder under the Indenture and its obligations which are not
assumed by the Trustee pursuant to clauses (i), (iii) and (v) of Section 3(f).
On and after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Pledged Mortgages or otherwise, unless an alternative successor Master
Servicer reasonably acceptable to MBIA shall have been appointed, shall pass to
and be vested in the Trustee. The Trustee shall thereupon make any Advance
described in clause (vi) subject to clause (ii) of the first sentence of Section
3(f). The Trustee is hereby authorized and empowered to execute and deliver, on
behalf of the Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Pledged Mortgages and related documents, or otherwise. The Master Servicer
agrees to cooperate with the Trustee in effecting the termination of the Master
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Trustee of all cash amounts which shall at the time be
credited to the Bond Account or thereafter be received by the Master Servicer
with respect to the Pledged Mortgages.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Pledged Mortgage which was due prior
to the notice terminating such Master Servicer's rights and obligations as
Master Servicer hereunder and received after such notice, that portion thereof
to which such Master Servicer would have been entitled pursuant to Section
3(f)(iii)(A), (B) or (D) or 3(f)(vii)(G), and any other amounts payable to such
Master Servicer hereunder the entitlement to which arose prior to the
termination of its activities hereunder.
(b) Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a), the Trustee shall, subject to and to the
extent provided in Section 3(f), unless an alternative Master Servicer
reasonably acceptable to
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MBIA has been appointed, be the successor to the Master Servicer in its capacity
as master servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof and applicable law including the obligation to make Advances
pursuant to Section 5. As compensation therefor, the Trustee shall be entitled
to all funds relating to the Pledged Mortgages that the Master Servicer would
have been entitled to charge to the Bond Account or Distribution Account if the
Master Servicer had continued to act hereunder. Notwithstanding the foregoing,
if the Trustee has become the successor to the Master Servicer in accordance
with Section 8(a), the Trustee may, if it shall be unwilling to so act, or
shall, if it is prohibited by applicable law from making Advances pursuant to
Section 5 or if it is otherwise unable to so act, appoint, or petition a court
of competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to MBIA the appointment of which does not adversely
affect the then current rating of the Bonds (without regard to the existence of
the MBIA Policy) by each Rating Agency as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Any successor to the Master
Servicer shall be an institution which is a FNMA and FHLMC approved
seller/servicer in good standing, which has a net worth of at least $15,000,000,
which is willing to master service the Pledged Mortgages and which executes and
delivers to the Issuer, MBIA and the Trustee an agreement accepting such
delegation and assignment, containing an assumption by such Person of the
rights, powers, duties, responsibilities, obligations and liabilities of the
Master Servicer (other than liabilities of the Master Servicer under Section
7(c) incurred prior to termination of the Master Servicer under Section 8(a)),
with like effect as if originally named as a party to this Agreement; provided
that each Rating Agency acknowledges that its rating of the Bonds (without
regard to the existence of the MBIA Policy) in effect immediately prior to such
assignment and delegation will not be qualified or reduced as a result of such
assignment and delegation. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from so
acting, shall, subject to Section 3(f), act in such capacity as hereinabove
provided. In connection with such
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appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of earnings on the accounts as it and such
successor and MBIA shall agree; provided, however, that no such compensation
shall be in excess of the Master Servicing Fee permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the preceding Master Servicer to deliver
or provide, or any delay in delivering or providing, any cash, information,
documents or records to it.
Any successor to the Master Servicer as master servicer shall
give notice to the Servicers of such change of master servicer and shall, during
the term of its service as master servicer, maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to Section
3(l).
(c) Notification to Bondholders.
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Bondholders, the Issuer, MBIA and each Rating Agency.
(ii) Within 60 days after the occurrence of any Master Servicing
Default, the Trustee shall transmit by mail to all
Bondholders and the Issuer notice of each such Master Servicing Default
hereunder known to the Trustee, unless such Master Servicing Default
shall have been cured or waived.
9. Miscellaneous.
(a) Term of Master Servicing Agreement.
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on
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which the Issuer issues the Bonds and shall terminate as to each Pledged
Mortgage upon (i) the payment in full of all principal and interest due under
such Pledged Mortgage or other liquidation of such Pledged Mortgage as
contemplated by this Agreement, (ii) the termination of the Master Servicer's
rights and powers under this Agreement by the Trustee as provided in Section
8(a) of this Agreement, or (iii) the release by the Trustee of its security
interest in such Pledged Mortgage.
(b) Assignment.
Notwithstanding anything to the contrary contained herein, except
as provided in Section 6(b), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and MBIA and written
notice to the Issuer.
(c) Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered at the following
addresses of the parties:
The Master
Servicer: Norwest Bank Minnesota, N.A.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Master Servicing Department
(Sequoia 1)
Facsimile No: (000) 000-0000
The Issuer: Sequoia Mortgage Trust 1
----------
c/o Wilmington Trust Company,
as Owner Trustee
Xxxxxx Square North
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust
Administration
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With a copy to:
Sequoia Mortgage Funding Corporation
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Sequoia Mortgage
Trust 1 Officer
Redwood: Redwood Trust, Inc.
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxx Xxxxxx, XX 00000
Attention: Sequoia Mortgage
Trust 1 Officer
The Trustee: First Union National Bank
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, X.X. 00000
Attention: Corporate Trust Department
MBIA: MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Insured Portfolio
Management-Structured
Finance (IPM-SF)
(Sequoia Mortgage
Trust/Collateralized
Mortgage Bonds Class A-1
and Class A-2 Bonds)
Telecopy No.: (000) 000-0000
Confirmation: (000) 000-0000
Any Rating Agency: The address specified therefor in the
definition corresponding to the name
of such Rating Agency.
Any of the parties may at any time give notice in writing to the
others of a change of its address for the purpose of this Section 8(c).
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(d) Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it
will permit any representative of the Issuer, MBIA or the Trustee during the
Master Servicer's normal business hours, to examine all the books of account,
records, reports and other papers of the Master Servicer relating to the Pledged
Mortgages, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants selected by the Trustee or
MBIA and to discuss its affairs, finances and accounts relating to the Pledged
Mortgages with its officers, employees and independent public accountants (and
by this provision the Master Servicer hereby authorizes said accountants to
discuss with such representative such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any
out-of-pocket expense incident to the exercise by the Issuer, MBIA or the
Trustee of any right under this Section 8(d) shall be borne by the party
requesting such inspection.
(e) Governing Law.
This Agreement shall be construed in accordance with and governed
by the substantive laws of the State of New York applicable to agreements made
and to be performed in the State of New York and the obligations, rights and
remedies of the parties hereto and the Bondholders shall be determined in
accordance with such laws.
(f) Amendments.
This Agreement shall not be amended, changed, modified,
terminated or discharged in whole or in part except (i) by an instrument in
writing signed by all parties hereto, or their respective successors or assigns,
(ii) in compliance with Section 8.09 of the Indenture and (iii) with the prior
written consent of MBIA, provided, however, amendments to the Specified
Overcollateralization Amount, the Base Specified Overcollateralization Amount,
the Target Percentage and the Serious Delinquencies, may be made solely upon (i)
the written consent of the Issuer and MBIA and (ii) an opinion of tax counsel to
the Issuer, without regard to Section 8.09 of the Indenture.
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(g) Severability.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement.
(h) No Joint Venture.
The Master Servicer and the Issuer are not partners or joint
venturers with each other and nothing herein shall be construed to make them
such partners or joint venturers or impose any liability as such of either of
them.
(i) Execution in Counterparts.
This Agreement may be executed in one or more counterparts, any
of which shall constitute an original as against any party whose signature
appears on it, and all of which shall together constitute a single instrument.
This Agreement shall become binding when one or more counterparts, individually
or taken together, bear the signatures of all parties.
(j) Limitation of Liability of Wilmington Trust Company.
It is expressly understood and agreed by the parties hereto that
(a) this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of Sequoia Mortgage Trust
1 under the Deposit Trust Agreement, in the exercise of the powers and authority
conferred and vested in it as Owner Trustee, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation,
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representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or the other Operative Agreements.
(k) Nonpetition Covenants.
Notwithstanding any prior termination of this Agreement, the
Master Servicer and the Trustee shall not, prior to the date which is one year
and one day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer (or any assignee) to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
(l) Third Party Beneficiary.
MBIA shall be a third party beneficiary of this Agreement and
shall be entitled to enforce the provisions hereof as if a party hereto.
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IN WITNESS WHEREOF, each party has caused this Master Servicing
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
SEQUOIA MORTGAGE TRUST 1,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Its: Administrative Account Manager
---------------------------------------
REDWOOD TRUST, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Its: President and CFO
---------------------------------------
NORWEST BANK MINNESOTA, N.A.,
as Master Servicer
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Its: Vice President
---------------------------------------
FIRST UNION NATIONAL BANK,
as Bond Trustee
By: /s/ Pablo de la Canal
----------------------------------------
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Its: Assistant Vice President
---------------------------------------
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SCHEDULE I
Schedule of Pledged Mortgages
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SCHEDULE II
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties of the Master Servicer
Norwest Bank Minnesota, N.A. ("Norwest") hereby makes the
representations and warranties set forth in this Schedule II to the Issuer, MBIA
and the Trustee, as of the Closing Date. Capitalized terms used but not
otherwise defined in this Schedule II shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series, among Norwest, as Master Servicer, Sequoia Mortgage
Trust 1, as Issuer, and First Union National Bank, as Trustee.
(1) Norwest is duly organized as a national banking
association and is validly existing and in good standing under the laws
of the United States of America and is duly authorized and qualified to
transact any and all business contemplated by the Master Servicing
Agreement to be conducted by Norwest.
(2) Norwest has the full power and authority to master
service the Pledged Mortgages, and to execute, deliver and perform its
obligations under, the Master Servicing Agreement and has duly
authorized by all necessary action on the part of Norwest the execution,
delivery and performance of the Master Servicing Agreement; and the
Master Servicing Agreement, and, assuming the due authorization,
execution and delivery thereof by the other parties thereto, constitutes
a legal, valid and binding obligation of Norwest, enforceable against
Norwest in accordance with its terms, except that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights
generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may
be brought.
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(3) The execution and delivery of the Master Servicing
Agreement by Norwest, the master servicing of the Pledged Mortgages by
Norwest under the Master Servicing Agreement, the consummation of any
other of the transactions contemplated by the Master Servicing
Agreement, and the fulfillment of or compliance with the terms thereof
will not (A) result in a material breach of any term or provision of the
charter or by-laws of Norwest or (B) materially conflict with, result in
a material breach, violation or acceleration of, or result in a material
default under, the terms of any other material agreement or instrument
to which Norwest is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation
applicable to Norwest of any court, regulatory body, administrative
agency or governmental body having jurisdiction over Norwest.
(4) No litigation is pending or, to the best of Norwest's
knowledge, threatened against Norwest that would materially and
adversely affect the execution or delivery of the Master Servicing
Agreement by Norwest or enforceability of the Master Servicing Agreement
against Norwest or the ability of Norwest to master service the Pledged
Mortgages or to perform any of its other obligations under the Master
Servicing Agreement in accordance with the terms thereof.
(5) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by Norwest of its obligations under the Master
Servicing Agreement, or if any such consent, approval, authorization or
order is required, Norwest has obtained the same.
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SCHEDULE III
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties as to the Pledged Mortgages
In the Mortgage Loan Purchase Agreement (which is hereby assigned
to the Trustee), Redwood (the "Seller") will make the representations and
warranties set forth in this Schedule III, as of the Closing Date, or if so
specified herein, as of the Cut-off Date. Capitalized terms used but not
otherwise defined in this Schedule III shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series of Bonds, issued by Sequoia Mortgage Trust 1.
(1) The information set forth on Schedule I to the Master
Servicing Agreement with respect to each Pledged Mortgage and the
computer tape describing the Pledged Mortgages delivered to the Insurer
prior to closing are true and correct in all material respects as of the
Closing Date.
(2) The Pledged Mortgages, individually and in the
aggregate, conform in all material respects to the descriptions thereof
in the Prospectus Supplement. The Pledged Mortgages are not being
transferred with any intent to hinder, delay or defraud any creditors.
(3) With respect to any Pledged Mortgage that is not a
Cooperative Loan, each Mortgage is a valid and enforceable first lien on
the Mortgaged Property subject only to (a) the lien of non-delinquent
current real property taxes and assessments, (b) covenants, conditions
and restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection
with the origination of the related Pledged Mortgage, and (c) other
matters to which like properties are commonly subject which
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do not materially interfere with the benefits of the security intended
to be provided by such Mortgage.
(4) Immediately prior to sale to the Company and the
Issuer for pledge to the Trustee for the benefit of the Bondholders, the
Seller had good title to, and was the sole owner of, each Pledged
Mortgage free and clear of any pledge, lien, encumbrance or security
interest and had full right and authority, subject to no interest or
participation of, or agreement with, any other party, to pledge and
assign the same pursuant to the Indenture. Immediately after the sale by
the Company to the Issuer, the Issuer had good title to, and was the
sole owner of, each Pledged Mortgage free and clear of any pledge, lien,
encumbrance or security interest and had full right and authority,
subject to no interest or participation of, or agreement with, any other
party (other than the Servicers pursuant to the Servicing Agreements) to
pledge and assign the same pursuant to the Indenture. Except as
previously described in writing to the Trustee and MBIA with respect to
the Pledged Mortgages, there is only one executed Mortgage Note not
stamped as a duplicate. The rights with respect to each Pledged Mortgage
are assignable by the Seller without the consent of any Person other
than consents which will have been obtained on or before the Closing
Date.
(5) There is no delinquent tax or assessment lien
against any Mortgaged Property.
(6) There is no valid offset, claim, defense or
counterclaim to any Mortgage Note or Mortgage, including the obligation
of the Mortgagor to pay the unpaid principal of or interest on such
Mortgage Note.
(7) To best of Seller's knowledge there are no mechanics'
liens or claims for work, labor or material affecting any Mortgaged
Property which are or may be a lien prior to, or equal with, the lien of
such Mortgage, except those which are insured against by the title
insurance policy referred to in item (11) below. No Mortgaged Property
is damaged by waste, fire, earthquake or earth movement, windstorm,
flood, other types of water damage, tornado or other casualty so as to
affect adversely the
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value of the property as security for such Pledged Mortgage or the use
for which the premises was intended.
(8) To the best of Seller's knowledge, each Mortgaged
Property is free of material damage, and is in good repair.
(9) Each Pledged Mortgage at origination complied in all
material respects with applicable state and federal laws, including,
without limitation, usury, equal credit opportunity, real estate
settlement procedures, truth-in-lending and disclosure laws, and
consummation of the transactions contemplated hereby will not involve
the violation of any such laws.
(10) As of the Closing Date, no prior holder of any
Mortgage has modified the Mortgage in any material respect (except that
a Pledged Mortgage may have been modified by a written instrument which
has been recorded or submitted for recordation, if necessary, to protect
the interests of the Bondholders and which has been delivered to the
Trustee); satisfied, cancelled, subordinated or rescinded such Mortgage
in whole or in part; released the related Mortgaged Property in whole or
in part from the lien of such Mortgage; or executed any instrument of
release, cancellation, subordination, rescission, modification or
satisfaction with respect thereto. No action on the part of any
Mortgagor which would otherwise cause the related Pledged Mortgage to be
in default has been waived.
(11) A lender's policy of title insurance together with a
condominium endorsement and an extended coverage endorsement, if
applicable, and a variable rate endorsement in an amount at least equal
to the Cut-off Date Stated Principal Balance of each such Pledged
Mortgage or a commitment (binder) to issue the same was effective on the
date of the origination of each Pledged Mortgage, each such policy is
valid and remains in full force and effect, and each such policy was
issued by a title insurer qualified to do business in the jurisdiction
where the Mortgaged Property is located and acceptable to FNMA or FHLMC
and is in a form acceptable to FNMA or FHLMC, which policy insures the
Seller and successor owners of indebtedness secured by the insured
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Mortgage, (a) as to the first priority lien of the Mortgage subject to
the exceptions set forth in paragraph (3) above and (b) against loss by
reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage Note and Mortgage with respect to
adjustment in the Mortgage Rate and Scheduled Payment; to the best of
the Seller's knowledge, no claims have been made under such mortgage
title insurance policy and no prior holder of the related Mortgage,
including the Seller, the Company or the Issuer, has done, by act or
omission, anything which would impair the coverage of such mortgage
title insurance policy.
(12) Each Pledged Mortgage was originated by an entity
that satisfied at the time of origination the requirements of Section
3(a)(41) of the Securities Exchange Act of 1934, as amended.
(13) To the best of Seller's knowledge, all of the
improvements which were included for the purpose of determining the
Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged
Property.
(14) To the best of Seller's knowledge, no
improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or
regulation. To the best of Seller's knowledge, all inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the Mortgaged 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, unless the lack thereof would
not have a material adverse effect on the value of such Mortgaged
Property, and the Mortgaged Property is lawfully occupied under
applicable law. To the best of the Seller's knowledge, all parties which
have had any interest in each Pledged Mortgage whether as Mortgagee,
assignee, pledgee or otherwise, and including, without limitation, the
Seller and/or during the period in which they held and disposed such
interest, were, in compliance with any and all applicable licensing
requirements of the
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laws of the State where in the Property securing the Pledged Mortgage is
located.
(15) The Mortgage Note and the related Mortgage are
genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms and under
applicable law. To the best of Seller's knowledge, all parties to the
Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties. Each Pledge Mortgage
was recorded, and all subsequent assignments of the original Mortgage
have been recorded in appropriate jurisdictions where recordation is
necessary to perfect the lien thereof as against creditors of the
Seller. Each Pledged Mortgage and assignment of Pledged Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in the property securing such Mortgage is located. The sale
of the Pledged Mortgages and the related Mortgage Notes does not violate
the terms and provisions of any loan or agreement to which the Seller is
party or to which it is bound.
(16) The proceeds of the Pledged Mortgage have been fully
disbursed, there is no requirement for future advances thereunder and
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 the Pledged Mortgages were paid.
(17) The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security, including, (i) in the case of
a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. Each Pledged Mortgage contains a
provision for the acceleration of the unpaid principal balance of the
related Pledged Mortgage in the event that the property securing such
Pledged Mortgage is sold or
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transferred without the prior written consent of the Mortgagee
thereunder.
(18) 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
Trust Estate to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(19) Each Mortgage Note and each Mortgage is in
substantially one of the forms acceptable to FNMA or FHLMC, with such
riders as have been acceptable to FNMA or FHLMC, as the case may be.
(20) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made, and no escrow
deposits or payments of other charges or payments due Seller have been
capitalized under the Mortgage or the related Mortgage Note.
(21) There is no pledged account or other security other
than real estate securing the Mortgagor's obligations.
(22) No Pledged Mortgage has a shared appreciation
feature, or other contingent interest feature. With respect to each
Pledged Mortgage, the payments required of the Mortgagor are and will be
such that the Pledged Mortgage will fully amortize over its term. No
Pledged Mortgage requires a balloon payment at the end of its term.
(23) Each Pledged Mortgage is assumable if the proposed
transferee submits certain information required to evaluate the
transferee's ability to repay the Pledged Mortgage and the holder of the
Mortgage Note reasonably determines that the security for the Pledged
Mortgage would not be impaired by the assumption.
(24) Except with respect to_________Pledged Mortgages
representing approximately ___% of the Cut-off Date Pool
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Principal Balance, each Pledged Mortgage which had a Loan-to-Value
Ratio at origination in excess of 80% is the subject of a Primary
Insurance Policy that insures that portion of the original principal
balance of the related Pledged Mortgage equal to the product of the
original principal balance thereof and a fraction, the numerator of
which is the excess of the original principal balance of the related
Pledged Mortgage over 75% of the lesser of the appraised value and
selling price of the related Mortgaged Property and the denominator of
which is the original principal balance of the related Pledged Mortgage,
plus accrued interest thereon and related foreclosure expenses. Each
such Primary Insurance Policy is issued by a Qualified Insurer
acceptable to each of the Rating Agencies. All provisions of any such
Primary Insurance Policy have been and are being complied with, any such
policy is in full force and effect, and all premiums due thereunder have
been paid. Any Mortgage subject to any such Primary Insurance Policy
obligates the Mortgagor thereunder to maintain such insurance and to pay
all premiums and charges in connection therewith. The Mortgage Rate for
each Pledged Mortgage is net of any such insurance premium.
(25) At the Cut-off Date, the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance
policy with a generally acceptable carrier that provides for fire and
extended coverage and coverage for such other hazards as are customary
in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of (i) the maximum insurable value of
the improvements securing such Pledged Mortgage or (ii) the greater of
(a) the outstanding principal balance of the Pledged Mortgage and (b) an
amount such that the proceeds of such policy shall be sufficient to
prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
If the Mortgaged Property is a condominium unit, it is included under
the coverage afforded by a blanket policy for the condominium unit. All
such individual insurance policies and all flood policies referred to in
item (26) below contain a standard mortgagee clause naming the
applicable Servicer or the original mortgagee, and its successors in
interest, as mortgagee, and the Seller has received no notice that any
premiums due and payable thereon have not
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been paid; the Mortgage obligates the Mortgagor thereunder to maintain
all such insurance including flood insurance at the Mortgagor's cost and
expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor.
(26) If the Mortgaged 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 Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the original outstanding principal balance of
the Pledged Mortgage, (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, as amended.
(27) To the best of the Seller's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of any Mortgaged Property, nor is such a proceeding currently occurring.
There are no proceedings pending, or to the best of the Seller's
knowledge threatened, wherein the Mortgagor or any governmental agency
has alleged that any Pledged Mortgage is illegal or unenforceable.
(28) Except as discussed in the Prospectus Supplement,
there is no material monetary default existing under any Mortgage or the
related Mortgage Note and, to the best of the Seller's knowledge, there
is no material 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 under the Mortgage or the
related Mortgage Note; and Seller has not waived any default, breach,
violation or event of acceleration.
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(29) Other than with respect to Mortgaged Property
underlying a Cooperative Loan, each Mortgaged Property is improved by a
one- to four-family residential dwelling including condominium units and
dwelling units in PUDs, which, to the best of Seller's knowledge, does
not include mobile homes and does not constitute other than real
property under state law.
(30) Each Pledged Mortgage is being serviced by the Master
Servicer or a Servicer as provided in Section 3(b) of the Master
Servicing Agreement.
(31) There is no obligation on the part of the Seller or
any other party under the terms of the Mortgage or related Mortgage Note
to make payments in addition to those made by the Mortgagor. The Seller
has clearly fulfilled all obligations under or in connection with the
acquisition and assignment on the Pledged Mortgages and the related
Mortgage Notes, including, without limitation, giving any notices or
consents necessary to affect the acquisition of the Pledged Mortgages
and the related Mortgage Notes by the Trustee on behalf of the Trust and
has done nothing to impair the rights of the Trustee, MBIA or the
Bondholders with respect therein.
(32) Any future advances made prior to the Cut-off Date
have been consolidated with the outstanding principal amount secured by
the Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the Schedule
of Pledged Mortgages. The consolidated principal amount does not exceed
the original principal amount of the Pledged Mortgage. The Mortgage Note
does not permit or obligate the Master Servicer to make future advances
to the Mortgagor at the option of the Mortgagor. The applicable interest
rate is adjusted in accordance with the terms of the related Mortgage
Note. All required notices of interest rate adjustments have been sent
to each Mortgagor on a timely basis and the computations of such
adjustments were properly calculated. All interest rate adjustments have
been made in accordance with all applicable law.
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(33) There are no defaults in complying with the terms of
the Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid, or an
escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed, but is
not yet due and payable. Except for (A) payments in the nature of escrow
payments, and (B) interest accruing from the date of the Mortgage Note
or date of disbursement of the Mortgage proceeds, whichever is later, to
the day which precedes by one month the Due Date of the first
installment of principal and interest, including without limitation
taxes and insurance payments, the related Servicer has not advanced
funds, or induced, solicited or knowingly received any advance of funds
by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required by the Mortgage.
(34) Each Pledged Mortgage was acquired by Seller in all
material respects in accordance with the guidelines set forth in the
Prospectus Supplement. The Seller used no selection procedure that
identified the Pledged Mortgages as being less desirable or valuable
than other comparable mortgage loans acquired by the Seller. The Pledged
Mortgages are representative of the Seller's portfolio of mortgage
loans.
(35) Prior to the approval of the Pledged Mortgage
application, an appraisal of the related Mortgaged Property was obtained
from a qualified appraiser, duly appointed by the originator, who had no
interest, direct or indirect in the Mortgaged Property or in any loan
made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Pledged Mortgage; such appraisal is
in a form acceptable to FNMA or FHLMC.
(36) None of the Pledged Mortgages is a graduated payment
mortgage loan or a growing equity mortgage loan or subject to a buy down
or similar arrangement.
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(37) Any leasehold estate securing a Pledged Mortgage has
a term of not less than five years in excess of the term of the related
Pledged Mortgage.
(38) The sale, transfer, assignment and conveyance of
Pledged Mortgages by the Seller pursuant to the Mortgage Sale Agreement
is not subject to and will not result in any tax, fee or governmental
charge payable by the Seller, the Issuer, the Depositor or the Trustee
to any federal, state or local government ("Transfer Taxes") other than
Transfer Taxes which have or will be paid by the Seller as due. In the
event that the Issuer, the Depositor or the Trustee receives actual
notice of any Transfer Taxes arising out of the transfer, assignment and
conveyance of the Pledged Mortgages, on written demand by the Issuer,
the Depositor or the Trustee, or upon the Seller's otherwise being given
notice thereof by the Issuer, the Depositor or the Trustee, the Seller
shall pay, and otherwise indemnify and hold the Issuer, the Trustee and
MBIA harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Bondholders, the Trustee,
the Issuer, the Depositor and MBIA shall have no obligation to pay such
Transfer Taxes).
(39) None of the Pledged Mortgages are "consumer
credit contracts" or "purchased money loans" for goods or
services as such terms are defined in 16 C.F.R. Section 433.1 and
none of the Pledged Mortgages are "mortgages" as such term
is defined in 15 U.S.C. Section 1602(aa).
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SCHEDULE IV
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties of the Issuer
Sequoia Mortgage Trust 1 (the "Issuer") hereby makes the representations
and warranties set forth in this Schedule IV to the Master Servicer, MBIA and
the Trustee, as of the Closing Date. Capitalized terms used but not otherwise
defined in this Schedule IV shall have the meanings ascribed thereto in the
Master Servicing Agreement (the "Master Servicing Agreement") relating to the
above-referenced Series, among Norwest Bank Minnesota, N.A., as Master Servicer,
Sequoia Mortgage Trust 1, as Issuer, and First Union National Bank, as Trustee.
(A) The Issuer is a statutory business trust duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and possesses all requisite authority, power, licenses,
permits and franchises to conduct any and all business contemplated by
the Master Servicing Agreement and to comply with its obligations under
the terms of this Agreement, the performance of which have been duly
authorized by all necessary action.
(B) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing
its operations, or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
the Issuer is a party or by which it may be bound, or (C) constitute a
material violation of any statute, order or regulation applicable to the
Issuer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Issuer; and the Issuer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
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governmental body having jurisdiction over it which breach or violation
may materially impair the Issuer's ability to perform or meet any of its
obligations under the Master Servicing Agreement.
(C) This Agreement, and all documents and instruments
contemplated hereby, which are executed and delivered by the Issuer,
will, assuming due authorization, execution by and delivery to the other
parties hereto and thereto, constitute valid, legal and binding
obligations of the Issuer, enforceable in accordance with their
respective terms, except that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(D) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(E) Immediately prior to the pledge of the Pledged Mortgages to
the Trustee, the Issuer had good title to, and was the sole owner of,
each Pledged Mortgage free and clear of any liens, charges or
encumbrances or any ownership or participation interests in favor of any
other Person.
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SCHEDULE V
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Servicing Agreements
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SCHEDULE VI
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Payment Schedule
August 4, 1997
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SCHEDULE VII
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Purchase and Sale Agreements
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