EXHIBIT 4.1
================================================================================
DB DRAFT
5/24/99
SALE AND SERVICING AGREEMENT
Dated as of May 1, 1999
by and among
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1,
(Trust)
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
(Depositor)
HOMEGOLD, INC.,
(Originator and Servicer)
FAIRBANKS CAPITAL CORP.,
(Back-up Servicer)
and
FIRST UNION NATIONAL BANK,
(Indenture Trustee)
HomeGold Home Equity Asset Backed Notes,
Series 1999-1
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.........................................................................1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans..........................................................1
Section 2.02. [Reserved]............................................................................2
Section 2.03. Mortgage Files and Documents..........................................................2
Section 2.04. Acceptance by Indenture Trustee.......................................................4
Section 2.05. Repurchase or Substitution of Mortgage Loans..........................................5
Section 2.06. Representations and Warranties of the Depositor.......................................8
Section 2.07. Representations, Warranties and Covenants of the Servicer.............................9
Section 2.08. Representations and Warranties of the Trust..........................................11
Section 2.09. Issuance of Securities...............................................................12
Section 2.10. Satisfaction and Discharge of Warehouse Liens........................................12
ARTICLE III
ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY
Section 3.01. Servicer to Act as Servicer..........................................................13
Section 3.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers..........................14
Section 3.03. Successor Sub-Servicers..............................................................16
Section 3.04. Liability of the Servicer............................................................16
Section 3.05. No Contractual Relationship between Sub-Servicers and Trust, Indenture
Trustee, Noteholders or Insurer......................................................16
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by Indenture
Trustee..............................................................................17
Section 3.07. [Collection of Certain Mortgage Loan Payments........................................17
Section 3.08. Sub-Servicing Accounts...............................................................18
Section 3.09. [Reserved]...........................................................................18
Section 3.10. Collection Accounts..................................................................18
Section 3.11. Withdrawals from the Collection Account..............................................21
Section 3.12. [Reserved]...........................................................................22
Section 3.13. Administrative Duties................................................................22
Section 3.14. Investment of Funds in the Investment Accounts.......................................24
Section 3.15. [intentionally omitted]..............................................................25
Section 3.16. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage.............................................................................25
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption Agreements............................27
Section 3.18. Realization Upon Defaulted Mortgage Loans............................................28
Section 3.19. Indenture Trustee to Cooperate; Release of Mortgage Files............................30
Section 3.20. Servicing Compensation...............................................................31
Section 3.21. Reports to the Indenture Trustee; Collection Account Statements......................32
Section 3.22. Statement as to Compliance...........................................................32
Section 3.23. Independent Public Accountants' Servicing Report.....................................33
Section 3.24. Access to Certain Documentation......................................................33
Section 3.25. Title, Management and Disposition of REO Property....................................34
Section 3.26. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls.............36
Section 3.27. [Reserved]...........................................................................36
Section 3.28. Obligations of the Servicer in Respect of Monthly Payments...........................36
Section 3.29. [Reserved]...........................................................................37
(i)
Section 3.30. Obligations Under Indenture..........................................................37
Section 3.31. Records..............................................................................37
Section 3.32. Additional Information to be Furnished to the Trust..................................37
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
Section 4.01. Payments and Distributions...........................................................37
Section 4.02. Statements to Securityholders........................................................37
Section 4.03. Monthly Advances.....................................................................41
Section 4.04. Determination of Realized Losses.....................................................43
Section 4.05. Compliance with Withholding Requirements.............................................43
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer..........................................43
Section 6.02. Merger or Consolidation of the Depositor or the Servicer.............................43
Section 6.03. Limitation on Liability of the Depositor, the Servicer and Others....................44
Section 6.04. Limitation on Resignation of the Servicer............................................45
Section 6.05. Rights of the Trust, the Depositor and Others in Respect of the Servicer.............47
Section 6.06. Limitation of Liability..............................................................47
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default...........................................................48
Section 7.02. Back-up Servicer to Act; Appointment of Successor Servicer...........................51
Section 7.03. Notification to Noteholders and Trust................................................53
Section 7.04. Waiver of Servicer Events of Default.................................................53
Section 7.05. The Back-up Servicer.................................................................53
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
Section 8.01. Duties, Responsibilities, Etc. of Indenture Trustee..................................54
Section 8.02. Replacement of Indenture Trustee; Successor Indenture Trustee;
Appointment of Co- or Separate Indenture Trustee.....................................55
Section 8.03. Representations and Warranties of the Indenture Trustee..............................55
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
Section 9.01. Rights of the Insurer to Exercise Rights of Class A Noteholders......................56
Section 9.02. Indenture Trustee to Act Solely with Consent of the Insurer..........................57
Section 9.03. Trust Property and Accounts Held for Benefit of the Insurer..........................57
Section 9.04. Notices to the Insurer...............................................................57
Section 9.05. Third-Party Beneficiary..............................................................57
Section 9.06. Termination of the Servicer..........................................................57
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
Section 10.01. Termination Upon Early Redemption of the Notes or Liquidation of All
Mortgage Loans; Right of Servicer and Insurer to Purchase Mortgage Loans.............58
Section 10.02. Sale and Purchase of Mortgage Loans..................................................58
Section 10.03. [Reserved]...........................................................................60
(ii)
ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment............................................................................60
Section 12.02. Recordation of Agreement; Counterparts...............................................62
Section 12.03. [Reserved]...........................................................................62
Section 12.04. Governing Law........................................................................62
Section 12.05. Notices..............................................................................62
Section 12.06. Severability of Provisions...........................................................63
Section 12.07. Notice to Rating Agencies and Insurer................................................63
Section 12.08. Article and Section References.......................................................64
Section 12.09. Confirmation of Intent...............................................................64
Exhibit A Glossary of Defined Terms
Exhibit B [Reserved]
Exhibit C-1 Form of Indenture Trustee's Initial Certification
Exhibit C-2 Form of Indenture Trustee's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Schedule 1 Mortgage Loan Schedule
(iii)
This Sale and Servicing Agreement, dated as of May 1, 1999, among HOMEGOLD HOME
EQUITY LOAN TRUST 1999-1 (the "Trust"), PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor, HOMEGOLD, INC., as Servicer, FAIRBANKS CAPITAL CORP.,
as Back-up Servicer and FIRST UNION NATIONAL BANK, as Indenture Trustee.
PRELIMINARY STATEMENT:
The Depositor desires to transfer, assign, set over and otherwise
convey to the Trust, and the Trust desires to purchase and acquire from the
Depositor, certain mortgage loans acquired or to be acquired by the Depositor
and certain other related property.
The Trust proposes to issue Notes secured by such mortgage loans
pursuant to an indenture entered into with the Indenture Trustee.
The Servicer is willing to service all such mortgage loans.
Fairbanks Capital Corp. is willing to serve in the capacity as
Back-up Servicer hereunder.
In consideration of the mutual agreements herein contained, the
Trust, the Depositor, the Servicer, the Back-up Servicer and the Indenture
Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
For purposes of this Agreement, all capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed thereto
in Exhibit A hereto. Unless otherwise specified, all calculations described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans.
In consideration of the Trust's delivery of the Certificate
issuable pursuant to Section 4.2 of the Trust Agreement to or upon the written
order of the Depositor, the Depositor, concurrently with the execution and
delivery hereof, does hereby transfer, assign, set over and otherwise convey to
the Trust, subject to the Warehouse Liens thereon, without recourse (except as
provided herein) all the right,
title and interest of the Depositor, including any security interest therein for
the benefit of the Depositor, in and to the Mortgage Loans, the rights of the
Depositor under the Unaffiliated Seller's Agreement, the Purchase Agreement and
Assignment, and all other assets included or to be included in the Trust
Property. Such assignment includes all interest and principal received by the
Depositor, the Unaffiliated Seller, or the Servicer on or after the Cut-off Date
with respect to the Mortgage Loans. The Trust shall treat the conveyance of the
Mortgage Loans pursuant to this Section 2.01 as a tax free capital contribution.
Section 2.02. [Reserved]
Section 2.03. Mortgage Files and Documents.
(a) In connection with each transfer and assignment contemplated
by Section 2.01 hereof, the Depositor will cause the Originator to
deliver to, and deposit with, the Indenture Trustee the following
documents or instruments with respect to each Mortgage Loan (a
"Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in substantially
the following form: "Pay to the order of First Union National
Bank, as Indenture Trustee for the registered holders of HomeGold
Home Equity Loan Asset Backed Notes, Series 1999-1, without
recourse," with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the Person
so endorsing to the Indenture Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon or, if such Mortgage or power of
attorney has been submitted for recording but has not been
returned form the applicable public recording office or is not
otherwise available, a copy of such Mortgage or power of
attorney, as the case may be, certified by the Servicer to be a
true and complete copy of the original submitted for recording
with the recorded original to be delivered by the Servicer to the
Indenture Trustee promptly after receipt thereof;
(iii) an original Assignment of the Mortgage executed
substantially in the following form: "First Union National Bank,
as Indenture Trustee for the registered holders of HomeGold Home
Equity Loan Asset Backed Notes, Series 1999-1";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Indenture
Trustee as contemplated by the immediately preceding clause (iii)
or, if any such Assignment has been submitted for recording but
has not been returned
2
from the applicable public recording office or is not otherwise
available, a copy of such Assignment certified by the Servicer
to be a true and complete copy of the original submitted for
recording with the recorded original to be delivered by the
Servicer to the Indenture Trustee promptly after receipt thereof;
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) except with respect to Mortgage Loans originated in a
program which required no title insurance, the original or a copy
of the lender's title insurance policy, together with all
endorsements or riders that were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as
a first or second lien on the Mortgaged Property represented
therein as a fee interest vested in the Mortgagor, or in the
event such original or copy of title policy is unavailable, a
written commitment or uniform binder or preliminary report of
title issued by the title insurance or escrow company.
(b) The Depositor shall cause the Originator, no later than 30
days following the Originator's receipt of original recording
information and in any event within one year following the Closing
Date, to submit or cause to be submitted for recording, at no expense
to the Trust, the Indenture Trustee or the Insurer, in the appropriate
public office for real property records, each Assignment referred to
in Sections 2.03(a)(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein,
the Depositor shall promptly prepare or cause to be prepared a
substitute Assignment or cure or cause to be cured such defect, as the
case may be, and thereafter cause each such Assignment to be duly
recorded.
(c) If any original Mortgage Note referred to in Section
2.03(a)(i) cannot be located, the obligations of the Depositor to
cause the Originator to deliver such documents shall be deemed to be
satisfied upon delivery to the Indenture Trustee of a photocopy of the
original of such Mortgage Note, with a Lost Note Affidavit to follow
within one Business Day. If any of the documents referred to in
Section 2.03(a)(ii), (iii) or (iv) above has as of the Closing Date
been submitted for recording but either (x) has not been returned from
the applicable public recording office or (y) such public recording
office has retained the original of such document, the obligations of
the Depositor to cause the Originator to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Indenture Trustee
of a copy of each such document certified by the Originator in the
case of (x) above or the applicable public recording office in the
case of (y) above to be a true and complete copy of the original that
was submitted for recording and (2) if such copy is certified by the
Originator, delivery to the Indenture Trustee promptly upon receipt
thereof of either the original or a copy of such document certified by
the applicable public recording office to be a true and complete copy
of the original. Notice shall be provided to
3
the Indenture Trustee, the Insurer and the Rating Agencies by the
Originator if delivery pursuant to clause (2) above will be made more
than 180 days after the Closing Date. If the original or copy of
lender's title insurance policy was not delivered pursuant to Section
2.03(a)(vi) above (if required thereunder), the Depositor shall cause
the Originator to deliver to the Indenture Trustee, promptly after
receipt thereof, the original or a copy of the lender's title
insurance policy. The Depositor shall cause the Originator to deliver
to the Indenture Trustee promptly upon receipt thereof any other
original documents constituting a part of a Mortgage File received
with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any
Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Indenture Trustee are and shall be held by or
on behalf of the Trust, the Originator, the Depositor or the Servicer,
as the case may be, in trust for the benefit of the Indenture Trustee
on behalf of the Noteholders and the Insurer. In the event that any
such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be
delivered promptly to the Indenture Trustee. Any such original
document delivered to or held by the Trust, the Depositor or the
Originator that is not required pursuant to the terms of this Section
to be a part of a Mortgage File, shall be delivered promptly to the
Servicer.
(e) The Depositor herewith delivers to the Indenture Trustee for
the benefit of the Noteholders and the Insurer an executed copy of the
Unaffiliated Seller's Agreement. In addition to the foregoing, the
Depositor shall cause the Insurer to deliver the Policy to the
Indenture Trustee for the benefit of the Noteholders.
Section 2.04. Acceptance by Indenture Trustee.
(a) The Indenture Trustee acknowledges receipt of the Policy and,
subject to the provisions of Section 2.03 and subject to the review
described in the next paragraph below and any exceptions noted on the
exception report described in the next paragraph below, the documents
referred to in Section 2.03 (other than such documents described in
Section 2.03(a)(v)) above and all other assets included in the
definition of "Trust Property" (to the extent of amounts deposited
into the Collection Account and the Redemption Account) and declares
that it holds and will hold such documents and the other documents
delivered and to be delivered to it constituting a Mortgage File, and
that it holds or will hold all such assets and such other assets
included in the definition of "Trust Property" in trust for the
exclusive use and benefit of all present and future Noteholders and
the Insurer in accordance with the provisions of this Agreement and
the Indenture.
(b) The Indenture Trustee agrees, for the benefit of the
Noteholders and the Insurer, to review each Mortgage File relating to
the Mortgage Loans and
4
within 30 days after the Closing Date, and to certify in substantially
the form attached hereto as Exhibit C-1 that, as to each Mortgage Loan
(other than any Mortgage Loan which has been certified as having been
paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage
File required to be delivered to it pursuant to this Agreement are in
its possession, (ii) such documents have been reviewed by it and
appear regular on their face and relate to such Mortgage Loan, (iii)
based on its examination and only as to the foregoing, the information
set forth in the Mortgage Loan Schedule that corresponds to items (1)
through (3), (6), (9)(A), (10), (13), (16) and (23) of the definition
of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting
such review, the Indenture Trustee is under no duty or obligation (i)
to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they
purport to be on their face, or (ii) to determine whether any Mortgage
File should include any of the documents specified in clause (v) of
Section 2.03(a).
(c) Prior to the first anniversary date of this Agreement the
Indenture Trustee shall deliver to the Trust, the Depositor, the
Servicer and the Insurer a final certification in the form annexed
hereto as Exhibit C-2 evidencing the completeness of the Mortgage
Files, with any applicable exceptions noted thereon.
(d) If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to
above, the Indenture Trustee finds any document or documents
constituting a part of a Mortgage File to be missing or defective in
any material respect, at the conclusion of its review the Indenture
Trustee shall so notify the Trust, the Depositor, the Unaffiliated
Seller, the Servicer and the Insurer. In addition, upon the discovery
by the Trust, the Depositor, the Servicer or the Indenture Trustee of
a breach of any of the representations and warranties made by the
Unaffiliated Seller in the Unaffiliated Seller's Agreement, or by the
Originator in the Purchase Agreement and Assignment in respect of any
Mortgage Loan which materially adversely affects such Mortgage Loan or
the interests of the Noteholders or the Insurer in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to
the other parties and the Insurer.
Section 2.05. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage
File or of the breach by the Unaffiliated Seller of any
representation, warranty or covenant under the Unaffiliated Seller's
Agreement, by the Originator in the Purchase Agreement and Assignment
in respect of any Mortgage Loan which materially
5
adversely affects the value of such Mortgage Loan or the interest
therein of the Noteholders or the Insurer, the party discovering such
defect, missing document or breach shall promptly notify the Trust,
the Originator, the Unaffiliated Seller, the Servicer, the Depositor
and the Insurer of such defect, missing document or breach and request
that the Unaffiliated Seller, and the Originator deliver such missing
document or cure such defect or breach within 60 days from the date
the Unaffiliated Seller, and the Originator were notified of such
missing document, defect or breach, and if the Unaffiliated Seller, or
the Originator does not deliver such missing document or cure such
defect or breach in all material respects during such period, the
Indenture Trustee shall enforce the Unaffiliated Seller's obligation
under the Unaffiliated Seller's Agreement, and the Originator's
obligation under the Purchase Agreement and Assignment (i) in
connection with any such breach that could not reasonably have been
cured within such 60-day period, if the Unaffiliated Seller, or the
Originator shall have commenced to cure such breach within such 60-day
period, to proceed thereafter diligently and expeditiously to cure the
same within the period provided under the Unaffiliated Seller's
Agreement, or the Purchase Agreement and Assignment and (ii) in
connection with any such breach (subject to clause (i) above) or in
connection with any missing document defect, to repurchase such
Mortgage Loan from the Trust Property at the Purchase Price within 60
days after the date on which it was notified (subject to Section
2.05(e)) of such missing document, defect or breach, if and to the
extent that the Unaffiliated Seller is obligated to do so under the
Unaffiliated Seller's Agreement, and the Originator is obligated to do
so under the Purchase Agreement and Assignment. The Purchase Price for
the repurchased Mortgage Loan shall be deposited in the Collection
Account and the Indenture Trustee, upon receipt of written
certification from the Servicer of such deposit, shall release the
related Mortgage File to the Unaffiliated Seller or the Originator, as
the case may be, and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the
Unaffiliated Seller or the Originator shall furnish to it and as shall
be necessary to vest in the Unaffiliated Seller or the Originator, as
the case may be, any Mortgage Loan released pursuant hereto and the
Indenture Trustee shall have no further responsibility with regard to
such Mortgage File. In lieu of repurchasing any such Mortgage Loan as
provided above, if so provided in the Purchase Agreement and
Assignment, the Originator may cause such Mortgage Loan to be removed
from the Trust Property (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set forth
in Section 2.05(d). It is understood and agreed that the obligation of
the Unaffiliated Seller and the Originator to cure or to repurchase
(or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to
which such a breach has occurred and is continuing shall constitute
the sole remedy respecting such omission, defect or breach available
to the Indenture Trustee on behalf of the Noteholders and the Insurer.
(b) [Reserved]
6
(c) [Reserved]
(d) As to any Deleted Mortgage Loan for which the Originator
substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Originator delivering to the
Indenture Trustee, for such Qualified Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage, the Assignment to the
Indenture Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.03,
together with an Officers' Certificate providing that each such
Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below),
if any, in connection with such substitution. The Indenture Trustee
shall acknowledge receipt for such Qualified Substitute Mortgage Loan
or Loans and, within ten Business Days thereafter, review such
documents as specified in Section 2.04 and deliver to the Depositor,
the Servicer and the Insurer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially in
the form attached hereto as Exhibit C-1, with any applicable
exceptions noted thereon. Within one year of the date of substitution,
the Indenture Trustee shall deliver to the Depositor, the Servicer and
the Insurer a certification substantially in form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or
Loans, with any applicable exceptions noted thereon. Monthly Payments
due with respect to Qualified Substitute Mortgage Loans in the month
of substitution are part of the Trust and will be retained by the
Trust. For the month of substitution, payments and distributions
hereunder and under the Indenture will reflect the collections and
recoveries in respect of such Deleted Mortgage Loan in the Collection
Period preceding the month of substitution and the Originator shall
thereafter be entitled to retain all amounts from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage
Loan and shall thereafter be entitled all amounts subsequently
received in respect of such Deleted Mortgage Loan. The Servicer shall
amend the Mortgage Loan Schedule to reflect the removal of such
Deleted Mortgage Loan from the terms of this Agreement and the
substitution of the Qualified Substitute Mortgage Loan or Loans and
shall deliver a copy of such amended Mortgage Loan Schedule to the
Indenture Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and
shall be subject in all respects to the terms of this Agreement and,
in the case of a substitution effected by the Originator, the Purchase
Agreement and Assignment, including, in the case of a substitution
effected by the Originator all applicable representations and
warranties thereof included in the Purchase Agreement and Assignment
as of the date of substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-off Date, together
with one month's interest on such
7
principal balance at the applicable Net Mortgage Rate. On the date of such
substitution, the Originator will deliver or cause to be delivered to the
Servicer for deposit in the Collection Account an amount equal to the
Substitution Shortfall Amount, if any, and the Indenture Trustee, upon receipt
of the related Qualified Substitute Mortgage Loan or Loans and certification by
the Servicer of such deposit, shall release to the Originator the related
Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Originator shall
deliver to it and as shall be necessary to vest therein any Deleted Mortgage
Loan released pursuant hereto.
Section 2.06. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trust and
the Indenture Trustee for the benefit of the Noteholders and the
Insurer that as of the Closing Date the assignment of the Depositor's
rights, but none of its obligations, under the Unaffiliated Seller's
Agreement is valid, enforceable and effective to permit the Indenture
Trustee to enforce the obligations of the Unaffiliated Seller
thereunder.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.06 shall survive delivery of
the Mortgage Files to the Indenture Trustee and shall inure to the
benefit of the Trust, the Noteholders and the Insurer notwithstanding
any restrictive or qualified endorsement or assignment. Upon discovery
by any of the Trust, the Depositor, the Servicer or the Indenture
Trustee of a breach of any of such representations and warranties
which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Noteholders and the Insurer, the party
discovering such breach shall give prompt written notice to the other
parties hereto, the Originator and the Insurer and in no event later
than two Business Days from the date of such discovery.
(c) The Depositor is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its
incorporation.
(d) The Depositor has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and
perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Depositor has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery hereof by the Trust, the
Servicer and the Indenture Trustee, constitutes a legal, valid and
binding obligation of the Depositor, enforceable against it in
accordance with its terms except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity.
8
(e) The execution and delivery of this Agreement by the Depositor
and the performance of and compliance with the terms of this Agreement
will not (a) violate the Depositor's charter or by-laws or any law,
rule, regulation, order, judgment, award, administrative
interpretation, injunction, writ, decree or the like affecting the
Depositor or by which the Depositor is bound or (b) result in a breach
of or constitute a default under any indenture or other material
agreement to which the Depositor is a party or by which the Depositor
is bound, which in the case of either clause (a) or (b) will have a
material adverse effect on the Depositor's ability to perform its
obligations under this Agreement.
(f) There are no actions or proceedings against, investigations
known to it of, the Depositor before any court, administrative or
other tribunal (A) that might prohibit its entering into this
Agreement, (B) seeking to prevent the consummation of the transactions
contemplated by this Agreement or (C) that might prohibit or
materially and adversely affect the performance by the Depositor of
its obligations under, or validity or enforceability of, this
Agreement.
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained prior to the
Closing Date.
Section 2.07. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the
Noteholders, the Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Servicer is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is and will remain duly licensed under and in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the
Mortgage Loan in accordance with the terms of this Agreement;
(ii) The Servicer has the full power and authority to
conduct its business as presently conducted by it and to execute,
deliver and perform, and to enter into and consummate, all
transactions contemplated by this Agreement. The Servicer has
duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement, and
this Agreement, assuming
9
due authorization, execution and delivery hereof by the Trust,
the Depositor and the Indenture Trustee, constitutes a legal,
valid and binding obligation of the Servicer, enforceable against
it in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Servicer and the performance of and compliance with the terms of
this Agreement will not (a) violate the Servicer's charter or
by-laws or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the
like affecting the Servicer or by which the Servicer is bound or
(b) result in a breach of or constitute a default under any
indenture or other material agreement to which the Servicer is a
party or by which the Servicer is bound, which in the case of
either clause (a) or (b) will have a material adverse effect on
the Servicer's ability to perform its obligations under this
Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant of it contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Servicer will
deliver possession of a complete Mortgage File, except for such
documents as have been delivered to the Indenture Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Servicer before any court,
administrative or other tribunal (A) that might prohibit its
entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement
or (C) that might prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or validity
or enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
consummation of the transactions contemplated by this Agreement,
except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.07 shall survive delivery of the
Mortgage Files to the Indenture Trustee and shall inure to the benefit of the
Trust, the Indenture Trustee,
10
the Depositor, the Noteholders and the Insurer. Upon discovery by any of the
Trust, the Depositor, the Servicer or the Indenture Trustee of a breach of any
of the foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Noteholders and the Insurer, the party discovering such breach shall give prompt
written notice (but in no event later than two Business Days following such
discovery) to the parties hereto, the Originator and the Insurer.
Section 2.08. Representations and Warranties of the Trust.
The Trust hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the
Noteholders, the Servicer, the Insurer and to the Depositor that as of the
Closing Date or as of such date specifically provided herein:
(a) The Trust is duly organized, validly existing and in good
standing as a Delaware Business Trust under the laws of the State of
Delaware.
(b) The Trust has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and
perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Trust has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery hereof by the Depositor, the
Servicer and the Indenture Trustee, constitutes a legal, valid and
binding obligation of the Trust, enforceable against it in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity.
(c) The execution and delivery of this Agreement by the Trust and
the performance of and compliance with the terms of this Agreement
will not (a) violate the Certificate of Trust, Trust Agreement or
other constituent documents of the Trust or any law, rule, regulation,
order, judgment, award, administrative interpretation, injunction,
writ, decree or the like affecting the Trust or by which the Trust is
bound or (b) result in a breach of or constitute a default under any
indenture or other material agreement to which the Trust is a party or
by which the Trust is bound, which in the case of either clause (a) or
(b) will have a material adverse effect on the Trust's ability to
perform its obligations under this Agreement.
(d) There are no actions or proceedings against, investigations
known to it of, the Trust before any court, administrative or other
tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the consummation of the transactions contemplated
by this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Trust of its obligations
under, or validity or enforceability of, this Agreement.
11
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Trust of, or compliance by the Trust with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or
orders, if any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations and
warranties set forth in this Section 2.08 shall survive delivery of the Mortgage
Files to the Indenture Trustee and shall inure to the benefit of the Noteholders
and the Insurer notwithstanding any restrictive or qualified endorsement or
assignment. Upon discovery by any of the Depositor, the Servicer or the
Indenture Trustee of a breach of any of such representations and warranties
which materially and adversely affects the value of any Mortgage Loan or the
interests therein of the Noteholders and the Insurer, the party discovering such
breach shall give prompt written notice to the other parties hereto, the
Originator and the Insurer and in no event later than two Business Days from the
date of such discovery.
Section 2.09. Issuance of Securities.
(a) The Trust acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the
provisions of Sections 2.02, 2.03 and 2.04, together with the
assignment to it of all other assets included in the Trust Property,
receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery, the Trust and Indenture Trustee, pursuant to
the written request of the Trust, are executing, authenticating and
delivering the Notes to or upon the order of the Trust, in accordance
with the terms of the Indenture.
(b) In consideration of the conveyance to it by the Depositor of
the Mortgage Loans as contemplated in Section 2.01, subject to the
provisions of sections 2.03 and 2.04, the Owner Trustee is executing,
authenticating and delivering on behalf of the Trust the Certificate
issuable pursuant to Section 4.2 of the Trust Agreement to or upon the
written order of the Depositor.
Section 2.10. Satisfaction and Discharge of Warehouse Liens.
(a) The Trust agrees to satisfy and discharge, effective on the
Closing Date, all Warehouse Liens with respect to the Mortgage Loans.
(b) [Reserved]
12
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST PROPERTY
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on
behalf of the Indenture Trustee and in the best interests of and for the benefit
of the Securityholders and the Insurer (as determined by the Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or
any Affiliate of the Servicer or any Sub-Servicer may have with
the related Mortgagor;
(ii) the ownership of any Security by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make Monthly Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable. The
Servicer shall promptly notify the Back-up Servicer in writing of any event,
circumstance or occurrence which materially adversely affects the ability of the
Servicer to Service the Mortgage Loans or to otherwise perform and carry out its
duties, responsibilities and obligations under and in accordance with this
Agreement. Without limiting the generality of the foregoing, the Servicer in its
own name or in the name of a Sub-Servicer is hereby authorized and empowered
when the Servicer believes it reasonably necessary in its best judgment in order
to comply with its servicing duties hereunder, to execute and deliver, on behalf
of the Indenture Trustee and the Noteholders or any of them, and upon notice to
the Indenture Trustee, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Mortgage Loans and the
13
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Indenture Trustee, the Noteholders and the Insurer. The Servicer shall service
and administer the Mortgage Loans in accordance with applicable state and
federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. The Servicer shall also comply in the performance of
this Agreement with all reasonable rules and requirements of each insurer under
any standard hazard insurance policy. Subject to Section 3.19, the Indenture
Trustee shall execute, at the written request of the Servicer, and furnish the
Servicer and any Sub-Servicer any special or limited powers of attorney and
other documents necessary or appropriate to enable the Servicer or any
Sub-Servicer to carry out their servicing and administrative duties hereunder
and the Indenture Trustee shall not be liable for the actions of the Servicer or
any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph, the
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or payments to Noteholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that the Servicer shall have obtained the consent of the
Insurer and provided such agreements would not result in a withdrawal
or a downgrading by any Rating Agency of the rating or any shadow
rating on the Notes) with Sub-Servicers, for the servicing and
administration of the Mortgage Loans.
(b) Each Sub-Servicer shall be (i) authorized to transact
business in the state or states where the related Mortgaged Properties
it is to service are situated, if and to the extent required by
applicable law to enable the Sub-Servicer to perform its obligations
hereunder and under the Sub-Servicing Agreement, (ii) an institution
approved as a mortgage loan originator by the Federal Housing
Administration or an institution the deposit accounts in which are
insured by the FDIC, and (iii) a FHLMC or FNMA approved mortgage
servicer. Each Sub-Servicing Agreement must impose on the Sub-Servicer
requirements
14
conforming to the provisions set forth in Section 3.08 and provide for
servicing of the Mortgage Loans consistent with the terms of this
Agreement. The Servicer will examine each Sub-Servicing Agreement and
will be familiar with the terms thereof. The terms of any
Sub-Servicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or
enter into different forms of Sub-Servicing Agreements; provided,
however, that any such amendments or different forms shall be
consistent with and not violate the provisions of this Agreement, and
that no such amendment or different form shall be made or entered into
which could be reasonably expected to be materially adverse to the
interests of the Noteholders, without the consent of the Insurer. Any
variation without the consent of the Insurer from the provisions set
forth in Section 3.08 relating to insurance or priority requirements
of Sub-Servicing Accounts, or credits and charges to the Sub-Servicing
Accounts or the timing and amount of remittances by the Sub-Servicers
to the Servicer, are conclusively deemed to be inconsistent with this
Agreement and therefore prohibited. The Servicer shall deliver to the
Indenture Trustee, the Back-up Servicer and the Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof,
promptly upon the Servicer's execution and delivery of such
instruments.
(c) As part of its servicing activities hereunder, the Servicer,
for the benefit of the Indenture Trustee, the Noteholders and the
Insurer, shall enforce the obligations of each Sub-Servicer under the
related Sub-Servicing Agreement, of the Unaffiliated Seller under the
Unaffiliated Seller's Agreement, and of the Originator under the
Purchase Agreement and Assignment, including, without limitation, any
obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan
on account of missing or defective documentation or on account of a
breach of a representation, warranty or covenant, as described in
Section 2.05(a). Such enforcement, including, without limitation, the
legal prosecution of claims, termination of Sub-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 Servicer, in
its good faith business judgment, would require were it the owner of
the related Mortgage Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only
(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 Mortgage Loans, or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Unaffiliated Seller's
Agreement against the Unaffiliated Seller shall be effected by the
Servicer and the Originator in accordance with the foregoing
provisions of this paragraph. Enforcement of the Purchase Agreement
and Assignment against the Originator shall be effected by the
Indenture Trustee in accordance with the provisions of this paragraph.
15
Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement but only with the prior consent of the Insurer. In the
event of termination of any Sub-Servicer, all servicing obligations of such
Sub-Servicer shall be assumed simultaneously by the Servicer without any act or
deed on the part of such Sub-Servicer or the Servicer, and the Servicer either
shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 3.02. The Sub-Servicer shall give written notice to the Back-up Servicer
and the Insurer of the termination of any Sub-Servicer.
Any Sub-Servicing Agreement shall include the provision that (i)
such agreement may be immediately terminated by the Back-up Servicer or
Indenture Trustee without fee, in accordance with the terms of this Agreement,
in the event that the Servicer shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default) or (ii) clearly and
unambiguously states that any termination fee is the sole responsibility of the
Servicer and none of the Trust, the Back-up Servicer, the Indenture Trustee, the
Securityholders or the Insurer has any liability therefor, regardless of the
circumstances surrounding such termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee, the Noteholders and the Insurer for the servicing and
administering of the Mortgage Loans in accordance with the provisions of Section
3.01 without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer by such Sub-Servicer and nothing contained
in this Agreement shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship between Sub-Servicers
and Trust, Indenture Trustee, Noteholders or Insurer.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and none of the Trust, the Back-up Servicer, the Indenture
Trustee, the Securityholders or the Insurer shall be deemed to be a party
thereto or to have any claims, rights, obligations, duties or liabilities with
respect to the Sub-Servicer except as set forth in Section 3.06. The Servicer
shall be solely liable for all fees owed by it to any Sub-S
16
Servicer, irrespective of whether the Servicer's compensation pursuant to this
Agreement is sufficient pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the original Servicer shall for any reason no longer
be the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Indenture Trustee or its designee shall thereupon assume all of
the rights and obligations of the Servicer under each Sub-Servicing Agreement
that the Servicer may have entered into, unless the Indenture Trustee (at the
direction of the Insurer) elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03. Upon such assumption, the
Back-up Servicer, its designee or the successor servicer for the Back-up
Servicer appointed pursuant to Section 7.02 shall be deemed, subject to Section
3.03, to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under any Sub-Servicing Agreement.
The Servicer at its expense shall, upon request of the Indenture
Trustee or the Back-up Servicer, deliver to the assuming party all documents and
records relating to each Sub-Servicing Agreement and the Mortgage Loans then
being serviced and an accounting of amounts collected and held by or on behalf
of it, and otherwise use its best efforts to effect the orderly and efficient
transfer of the Sub-Servicing Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any late
payment charge or, if applicable, penalty interest, (ii) extend the due dates
for the Monthly Payments due on a Mortgage Note for a period of not greater than
90 days, or (iii) if the Servicer provides prior written notice to the Insurer
to which the Insurer does not object within two Business Days, extend the due
dates for Monthly Payments due on a Mortgage Loan for a period of not greater
than 180 days; provided, that any extension pursuant to clause (ii) or clause
(iii) above shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder; and provided, further, that no more than
two such extensions shall be granted with respect to any single Mortgage Loan.
17
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
Section 3.09. [Reserved].
Section 3.10. Collection Accounts.
(a) On behalf of the Indenture Trustee, the Servicer shall
establish and maintain one or more accounts (such account or accounts,
the "Collection Account"), held in trust for the benefit of the
Indenture Trustee, the Noteholders and the Insurer. On behalf of the
Indenture Trustee, the Servicer shall deposit or cause to be deposited
in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan
servicing activities on a daily basis, and in no event more than one
Business Day after the Servicer's receipt thereof, and shall
thereafter deposit in the Collection Account, in no event more than
one Business Day after the deposit of such payments into such clearing
account, the following payments and collections received or made by it
on or subsequent to the Cut-off Date:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans in each Group;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan in each Group;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property and amounts paid by the Servicer in connection
with a purchase of Mortgage Loans and REO Properties in each
Group pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.14 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account with respect to the Mortgage Loans in
each Group;
18
(v) any amounts required to be deposited by the
Servicer pursuant to the second paragraph of Section 3.16(a)
in respect of any blanket policy deductibles with respect to
the Mortgage Loans in each Group; and
(vi) any Purchase Price or Substitution Shortfall
Amount delivered to the Servicer.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment or late
payment charges or assumption fees need not be deposited by the Servicer in the
Collection Account. In the event the Servicer shall deposit in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding.
(b) The Indenture Trustee shall establish and maintain the
Distribution Account in accordance with the provisions of Section 8.7
of the Indenture. The Servicer shall deliver to the Indenture Trustee
in immediately available funds for deposit in the Distribution Account
on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Distribution Amount for the
related Payment Date then on deposit in the Collection Account, and
(ii) on each Business Day as of the commencement of which the balance
on deposit in the Collection Account exceeds $75,000 following any
withdrawals pursuant to the next succeeding sentence, the amount of
such excess, but only if the Collection Account constitutes an
Eligible Account solely pursuant to clause (ii) of the definition of
"Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any
Business Day and the Collection Account constitutes an Eligible
Account solely pursuant to clause (ii) of the definition of "Eligible
Account," the Servicer shall, on or before 3:00 p.m. New York time on
such Business Day, withdraw from the Collection Account any and all
amounts payable or reimbursable to the Depositor, the Servicer, the
Indenture Trustee, the Unaffiliated Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons
entitled thereto.
(c) Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section
3.14. The Servicer shall give notice to the Indenture Trustee and the
Insurer of the location of the Collection Account maintained by it
when established and prior to any change thereof. The Indenture
Trustee shall give notice to the Servicer, the Trust, the Depositor
and the Insurer of the location of the Distribution Account when
established and prior to any change thereof.
19
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in the
Distribution Account. In the event the Servicer shall deliver to the
Indenture Trustee for deposit in the Distribution Account any amount
not required to be deposited therein, it may at any time request that
the Indenture Trustee withdraw such amount from the Distribution
Account and remit to it any such amount, any provision herein to the
contrary notwithstanding. In addition, the Servicer shall deliver to
the Indenture Trustee from time to time for deposit the amounts set
forth in clauses (i) through (v) below, and the Indenture Trustee
shall deposit such amounts in the Distribution Account:
(i) any Monthly Advances for each Group, as required
pursuant to Section 4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.25(d) or (f) in connection with any REO Property
in each Group;
(iii) any amounts to be paid in connection with a
purchase of Mortgage Loans and REO Properties in each Group
pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.26 in connection with any Prepayment Interest
Shortfalls; and
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such
matters.
(e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or
other source, the Indenture Trustee shall deposit such funds in the
Distribution Account, subject to withdrawal thereof pursuant to
Section 7.02(b) or as otherwise permitted hereunder. In addition, the
Servicer shall deposit in the Distribution Account any amounts
required to be deposited pursuant to Section 3.14 in connection with
losses realized on Permitted Investments with respect to funds held in
the Distribution Account.
(f) Notwithstanding any contrary provision of this Agreement
(including the provisions of this Section 3.10), (i) the Servicer
shall be deemed to be in compliance with the provisions of this
Section 3.10 if amounts in any clearing account referred to in Section
3.10(a) which the Servicer would otherwise be required by this Section
3.10 to deposit or cause to be deposited into the Collection Account
are instead deposited or caused to be deposited into the Distribution
Account provided that such deposit into the Distribution Account is
made within the time period that such amount would otherwise have been
required to be deposited into the Collection Account (i.e., within one
Business Day of the Servicer's receipt thereof), (ii) amounts
otherwise payable or distributable from the Collection Account may be
paid or distributed from the
20
Distribution Account to the extent of any funds deposited into the
Distribution Account rather than the Collection Account pursuant to
clause (i) (as certified by the Servicer), and (iii) the provisions of
this Agreement (including references herein to the Collection Account
and the Distribution Account) shall be interpreted and construed to
give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account.
The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Indenture Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.18(d), to reimburse the Servicer
for Monthly Advances, but only to the extent of amounts received
which represent Late Collections (net of the related Servicing
Fees) of Monthly Payments on Mortgage Loans with respect to which
such Monthly Advances were made in accordance with the provisions
of Section 4.03;
(iii) subject to Section 3.18(d), to pay the Servicer or any
Sub-Servicer any unpaid Servicing Fees and reimburse any
unreimbursed Servicing Advances with respect to each Mortgage
Loan, but only to the extent of any Liquidation Proceeds and
Insurance Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Servicer Remittance Date
any interest or investment income earned on funds deposited in
the Collection Account;
(v) to pay to the Servicer, the Depositor or the
Unaffiliated Seller, as the case may be, with respect to each
Mortgage Loan that has previously been purchased or replaced
pursuant to Section 2.05 all amounts received thereon not
included in the Purchase Price or the Substitution Shortfall
Amount;
(vi) from proceeds on the Collection Account with respect to
the Mortgage Loans in the related Group to reimburse the Servicer
for any Monthly Advance or Servicing Advance previously made
which the Servicer has determined to be a Nonrecoverable Monthly
Advance in accordance with the provisions of Section 4.03;
(vii) from proceeds on the Collection Account with respect
to the Mortgage Loans in the related Group to reimburse the
Servicer or the Depositor for expenses incurred by or
reimbursable to the Servicer or the Depositor, as the case may
be, pursuant to Section 6.03;
21
(viii) from proceeds on the Collection Account with respect
to the Mortgage Loans in the related Group to reimburse the
Servicer or the Indenture Trustee, as the case may be, for
expenses reasonably incurred in respect of the breach or defect
giving rise to the purchase obligation under Section 2.05 or
Section 2.06 of this Agreement that were included in the Purchase
Price of the Mortgage Loan, including any expenses arising out of
the enforcement of the purchase obligation;
(ix) from proceeds on the Collection Account with respect to
the Mortgage Loans in the related Group to pay, or to reimburse
the Servicer for advances in respect of, expenses incurred in
connection with any Mortgage Loan pursuant to Section 3.18(b);
and
(x) to clear and terminate the Collection Account upon
termination of this Agreement pursuant to Section 10.01(a).
The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclauses (vi) and (vii)
above.
Section 3.12. [Reserved].
Section 3.13. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Trust under the
Indenture. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of
the Trust under the Indenture. The Servicer shall monitor the
performance of the Trust and shall advise the Owner Trustee when
action is necessary to comply with the Trust's duties under the
Indenture. The Servicer shall prepare for execution by the Trust
or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates
and opinions as it shall be the duty of the Trust to prepare,
file or deliver pursuant to the Indenture. In furtherance of the
foregoing, the Servicer shall take all necessary action that is
the duty of the Trust to take pursuant to the Indenture
including, without limitation, pursuant to Sections 3.4, 3.5,
3.6, 3.7, 3.9, 3.16, 3.19, 7.1, 7.3, and of the Indenture.
(b) Duties with Respect to the Trust.
(i) In addition to the duties of the Servicer set forth
in this Agreement or any of the Basic Documents, the
Servicer shall perform such calculations and shall prepare
for execution by the Trust or the Owner Trustee or shall
cause the preparation by other appropriate
22
Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the
duty of the Trust or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic
Documents or under state and federal tax and securities laws
shall take all appropriate action that it is the duty of the
Trust to take pursuant to this Agreement or any of the
Basic Documents. In accordance with the directions of the
Trust or the Owner Trustee, the Servicer shall administer,
perform or supervise the performance of such other
activities in connection with the Collateral (including the
Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Trust or
the Owner Trustee and are reasonably within the capability
of the Servicer.
(ii) Notwithstanding anything in this Agreement or the
Basic Documents to the contrary, the Servicer shall be
responsible for performance of the duties of the Trust set
forth in Article VIII of the Trust Agreement with respect
to, among other things, accounting and reports to the
Certificateholder (as defined in the Trust Agreement).
(iii) The Servicer shall perform the duties of the
Servicer specified in Section 14.2 of the Trust Agreement
required to be performed in connection with the resignation
or removal of the Owner Trustee, and any other duties
expressly required to be performed by the Servicer under
this Agreement or any of the Basic Documents.
(iv) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Servicer may
enter into transactions with or otherwise deal with any of
its Affiliates; provided, however, that the terms of any
such transactions or dealings shall be in accordance with
any directions received from the Trust and shall be, in the
Servicer's opinion, no less favorable to the Trust in any
material respect.
(c) Tax Matters. The Servicer shall prepare and file, on
behalf of the Trust, all tax returns, tax elections, financial
statements, and such annual or other reports of the Trust as are
necessary for the preparation of tax reports as provided in
Article VIII of the Trust Agreement. All tax returns will be
signed by the Owner Trustee on behalf of the Trust.
(d) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the
Servicer shall not take any action pursuant to this Article III
unless within a reasonable time before the taking of such action,
the Servicer shall have notified the Owner Trustee and the
Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Trustee shall
not have withheld consent or provided an alternative direction.
For the purpose of the preceding sentence, "non-ministerial
matters" shall include:
23
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the Trust
and the compromise of any action, claim or lawsuit brought
by or against the Trust (other than in connection with the
collection of the Mortgage Loans);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Note Registrars, Note
Paying Agents and successor Trustees pursuant to the
Indenture or the appointment of successor Servicers or the
consent to the assignment by the Note Registrar, Note Paying
Agent or Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
Section 3.14. Investment of Funds in the Investment Accounts.
(a) The Servicer may direct any depository institution
maintaining the Collection Account, the Expense Account, the
Distribution Account and the Servicing Accounts (each, for purposes of
this Section 3.14, an "Investment Account"), to invest the funds in
such Investment Account in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on
demand, (i) no later than the Business Day immediately preceding the
next Payment Date, if a Person other than the Indenture Trustee is the
obligor thereon, and (ii) no later than the next Payment Date, if the
Indenture Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name
of the Indenture Trustee (in its capacity as such) or in the name of a
nominee of the Indenture Trustee. The Indenture Trustee on behalf of
the Noteholders shall be entitled to sole possession over each such
investment and the income thereon, and any certificate or other
instrument evidencing any such investment shall be delivered directly
to the Indenture Trustee or its agent, together with any document of
transfer necessary to transfer title to such investment to the
Indenture Trustee or its nominee. In the event amounts on deposit in
an Investment Account are at any time invested in a Permitted
Investment payable on demand, the Indenture Trustee shall at the
direction of the Servicer:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the
last day such Permitted Investment may otherwise mature
hereunder in an amount equal to the lesser of (1) all
amounts then payable
24
thereunder and (2) the amount required to be withdrawn
on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Indenture Trustee that such Permitted Investment would
not constitute a Permitted Investment in respect of
funds thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the
Distribution Account and the Servicing Accounts held by or on behalf
of the Servicer or the Indenture Trustee, shall be for the benefit of
the Servicer and shall in the case of the Servicer Accounts and the
Collection Account be subject to its withdrawal in accordance with
Section 3.09 and Section 3.11, respectively. The Servicer shall
deposit in the Collection Account, the Expense Account or the
Distribution Account, as applicable, the amount of any loss incurred
in respect of any such Permitted Investment made with funds in such
accounts immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Indenture Trustee may and, subject
to Section 6.1 of the Indenture and Section 6.2(g) of the Indenture,
upon the request of the Insurer, shall take such action as may be
appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate proceedings.
Section 3.15. [intentionally omitted]
Section 3.16. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser
of the current principal balance of such Mortgage Loan and the amount
necessary to fully compensate for any damage or loss to the
improvements which are a part of such property on a replacement cost
basis, in each case in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained
in the related hazard insurance policy. The Servicer shall also cause
to be maintained fire and hazard insurance with extended coverage on
each REO Property in an amount which is at least equal to the lesser
of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding principal balance of
the related Mortgage Loan at the time it became an REO Property, plus
accrued interest at the Mortgage Rate and related
25
Servicing Advances. The Servicer will comply in the performance of
this Agreement with all reasonable rules and requirements of each
insurer under any such hazard policies. Any amounts to be collected by
the Servicer under any such policies (other than amounts to be applied
to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with
the procedures that the Servicer would follow in servicing loans held
for its own account, subject to the terms and conditions of the
related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if
received in respect of a Mortgage Loan, or in the REO Account, subject
to withdrawal pursuant to Section 3.25, if received in respect of an
REO Property. Any cost incurred by the Servicer in maintaining any
such insurance shall not, for the purpose of calculating distributions
to Noteholders and the Insurer, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any
Mortgagor 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 or REO Property is at any time in
an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Servicer will
cause to be maintained a flood insurance policy in respect thereof.
Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in
such program).
In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its obligations as set
forth in the first two sentences of this Section 3.16, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.16, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Indenture Trustee, the Noteholders and the
Insurer, claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and
omissions for failure in the performance of the Servicer's obligations
under this Agreement, which policy or policies shall be in such form
and amount that would meet the requirements of FNMA or FHLMC if it
were the purchaser of the Mortgage Loans. The
26
Servicer shall also maintain a fidelity bond in the form and amount
that would meet the requirements of FNMA or FHLMC, unless the Servicer
has obtained a waiver of such requirements from FNMA or FHLMC. The
Servicer shall be deemed to have complied with this provision if an
Affiliate of the Servicer has such errors and omissions and fidelity
bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. Any
such errors and omissions policy and fidelity bond shall by its terms
not be cancelable without thirty days' prior written notice to the
Indenture Trustee. The Servicer shall also cause each Sub-Servicer to
maintain a policy of insurance covering errors and omissions and a
fidelity bond which would meet such requirements.
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Indenture Trustee
that any such substitution or assumption agreement has been completed by
forwarding to the Indenture Trustee the executed original of such
27
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.17, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.18. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with the
servicing standard set forth in Section 3.01, to foreclose upon or
otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to
which no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.07. The Servicer shall be
responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated
in Sections 3.11 and 3.25. The foregoing is subject to the provision
that, in any case in which Mortgaged Property shall have suffered
damage from an Uninsured Cause, the Servicer shall not be required to
expend its own funds toward the restoration of such property unless
it shall determine in its discretion that such restoration will
increase the proceeds of liquidation of the related Mortgage Loan
after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section 3.18
or any other provision of this Agreement, with respect to any Mortgage
Loan as to which the Servicer has received actual notice of, or has
actual knowledge of, the presence of any toxic or hazardous substance
on the related Mortgaged Property, the Servicer shall not, on behalf
of the Trust, the Indenture Trustee, the Insurer or otherwise, either
(i) obtain title to such Mortgaged Property as a result of or in lieu
of foreclosure or otherwise, or (ii) otherwise acquire possession of,
or take any other action with respect to, such Mortgaged Property, if,
as a result of any such action, the Trust, the Indenture Trustee, the
Noteholders or the Insurer would be considered to hold title to, to be
a "mortgagee-in-possession" of, or to be an "owner" or "operator" of
such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a
prudent report prepared by a Person who regularly conducts
environmental audits using customary industry standards, that:
28
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best
economic interest of the Indenture Trustee, the Noteholders
and the Insurer to take such actions as are necessary to
bring the Mortgaged Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any
hazardous substances, hazardous materials, hazardous wastes
or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Indenture Trustee, the
Noteholders and the Insurer to take such actions with
respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.18 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11(ix), such right of reimbursement being prior to the rights of Noteholders
to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the
best economic interest of the Indenture Trustee, Noteholders and the Insurer to
take such actions as are necessary to bring any such Mortgaged Property into
compliance with applicable environmental laws, or to take such action with
respect to the containment, cleanup or remediation of hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials affecting
any such Mortgaged Property, then the Servicer shall take such action as it
deems to be in the best economic interest of the Indenture Trustee, Noteholders
and the Insurer. The cost of any such compliance, containment, cleanup or
remediation shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11 (ix), such right of reimbursement being prior to the rights of Noteholders
to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans.
(c) The Servicer may at its option purchase from the Trust any
Mortgage Loan that is 90 days or more delinquent, which the Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing
to the Indenture Trustee and the Insurer prior to purchase), at a
price equal to the Purchase Price. The Purchase Price for any Mortgage
Loan purchased hereunder shall be deposited in the Collection Account,
and the Indenture Trustee, upon receipt of written certification from
29
the Servicer of such deposit, shall release or cause to be released to
the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without
recourse, as the Servicer shall furnish and as shall be necessary to
vest in the Servicer title to any Mortgage Loan released pursuant
hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial
collection of Insurance Proceeds or Liquidation Proceeds, in respect
of any Mortgage Loan, will be applied in the following order of
priority: first, to reimburse the Servicer or any Sub-Servicer for any
related unreimbursed Servicing Advances and Monthly Advances, pursuant
to Section 3.11(ii) or (iii); second, to accrued and unpaid interest
on the Mortgage Loan, to the date of the Final Recovery Determination,
or to the Due Date prior to the Payment Date on which such amounts are
to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery allocated to interest is less than
the full amount of accrued and unpaid interest due on such Mortgage
Loan, the amount of such recovery will be allocated by the Servicer as
follows: first, to unpaid Servicing Fees; and second, to the balance
of the interest then due and owing. The portion of the recovery so
allocated to unpaid Servicing Fees shall be reimbursed to the Servicer
or any Sub-Servicer pursuant to Section 3.11(iii). The portion of the
recovery allocated to interest (net of unpaid Servicing Fees) and the
portion of the recovery allocated to principal of the Mortgage Loan
shall be applied as follows: first, to reimburse the Servicer for any
related unreimbursed Monthly Advances in accordance with Section 3.11
(ii), and second, as part of the amounts to be transferred to the
Distribution Account in accordance with Section 3.10(b).
Section 3.19. Indenture Trustee to Cooperate; Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will immediately notify the
Indenture Trustee and the Insurer by a certification in the form of Exhibit E-2
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee shall promptly release the related Mortgage File to the Servicer. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.
Subject to the following sentence from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, including,
for this purpose,
30
collection under any insurance policy relating to the Mortgage Loans, the
Indenture Trustee shall, upon request of the Servicer and delivery to the
Indenture Trustee of a Request for Release in the form of Exhibit E-1, release
the related Mortgage File to the Servicer, and the Indenture Trustee shall, at
the direction of the Servicer, execute such documents as shall be necessary to
the prosecution of any such proceedings. Such Request for Release shall obligate
the Servicer to return each and every document previously requested from the
Mortgage File to the Indenture Trustee when the need therefor by the Servicer no
longer exists, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds no longer exist, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or nonjudicially, and
the Servicer has delivered to the Indenture Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Indenture
Trustee shall execute and deliver to the Servicer, with copies to the Insurer to
be delivered by the Servicer, any court pleadings, requests for trustee's sale
or other documents necessary to the foreclosure or trustee's sale in respect of
a Mortgaged Property or to any legal action brought to obtain judgment against
any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Indenture Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale.
Section 3.20. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan payable in each Group solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.26. In addition, the Servicer shall be
entitled to recover unpaid related Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.25. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement;
31
provided, however, that the Servicer may pay any fee to a Sub-Servicer out of
the Servicing Fee.
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.26)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, and pursuant to Section 3.25(b) to withdraw from any REO
Account, as additional servicing compensation, interest or other income earned
on deposits therein, subject to Section 3.14 and Section 3.26, and shall also be
entitled to interest or other income earned on other Investment Accounts
pursuant to the Indenture. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder (including
premiums for the insurance required by Section 3.16, to the extent such premiums
are not paid by the related Mortgagors or by a Sub-Servicer, servicing
compensation of each Sub-Servicer, and to the extent provided in Section 6.7 of
the Indenture, the fees and expenses of the Indenture Trustee) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
Section 3.21. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the Servicer
shall forward to the Trust, the Indenture Trustee, the Insurer and the Depositor
a statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Payment Date with respect to the
Mortgage Loans in Group I or Group II, and showing, for the period covered by
such statement, the aggregate amount of deposits into and withdrawals from the
Collection Account of each category of deposit specified in Section 3.10(a) and
each category of withdrawal specified in Section 3.11. Such statement may be in
the form of the then current FNMA Monthly Accounting Report for its Guaranteed
Mortgage Pass-Through Program with appropriate additions and changes, and shall
also include information as to the aggregate of the outstanding principal
balances of all of the Mortgage Loans in Group I and Group II as of the last day
of the calendar month immediately preceding such Payment Date. Copies of such
statement shall be provided by the Indenture Trustee to any Securityholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Security, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Indenture Trustee.
Section 3.22. Statement as to Compliance.
The Servicer will deliver to the Trust, the Indenture Trustee,
the Insurer and the Depositor not later than 90 days following the end of the
fiscal year of the Servicer, which as of the Closing Date ends on the last day
in December, an Officers' Certificate stating, as to each signatory thereof,
that (i) a review of the activities of the Servicer during the preceding year
and of performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this
32
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. Copies of any such report shall be
provided by the Indenture Trustee to any Securityholder and to any Person
identified to the Indenture Trustee as a prospective transferee of a Security,
upon request at the expense of the requesting party, provided such report is
delivered by the Servicer to the Indenture Trustee.
Section 3.23. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of
the Servicer, the Servicer, at its expense, shall cause a nationally recognized
firm of independent certified public accountants to furnish to the Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Servicer which includes an assertion
that the Servicer has complied with certain minimum residential mortgage loan
servicing standards, identified in the Uniform Single Audit Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with respect
to the servicing of residential mortgage loans during the most recently
completed fiscal year and (ii) on the basis of an examination conducted by such
firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. In rendering its report such firm may rely, as to matters
relating to the direct servicing of residential mortgage loans by Sub-Servicers,
upon comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Sub-Servicers. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Trust, the Indenture Trustee, the Insurer
and each Rating Agency. Copies of such report shall be provided by the Indenture
Trustee to any Securityholder upon request at the Servicer's expense, provided
that such report is delivered by the Servicer to the Indenture Trustee and such
report does not prohibit such delivery.
Section 3.24. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision,
the FDIC, and any other federal or state banking or insurance regulatory
authority that may exercise authority over any Securityholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Securityholder, the Insurer, the
Trust, the Indenture Trustee and to any Person identified to the Servicer as a
prospective transferee of a Security, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.
33
Section 3.25. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Indenture Trustee, or its nominee, on behalf
of the Noteholders, the Certificateholder and the Insurer.
(b) The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property separate
and apart from its own funds and general assets and shall establish
and maintain with respect to REO Properties an account held in trust
for the Indenture Trustee for the benefit of the Noteholders and the
Insurer (the "REO Account"), which shall be an Eligible Account. The
Servicer shall be permitted to allow the Collection Account to serve
as the REO Account, subject to separate ledgers for each REO Property.
The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement,
to do any and all things in connection with any REO Property as are
consistent with the manner in which the Servicer manages and operates
similar property owned by the Servicer or any of its Affiliates, on
such terms and for such period as the Servicer deems to be in the best
interests of the Noteholders and the Insurer. In connection therewith,
the Servicer shall deposit, or cause to be deposited, on a daily basis
in the REO Account all revenues received by it with respect to an REO
Property and shall withdraw therefrom funds necessary for the proper
operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect of
such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
34
(iv) the terms and conditions of any such contract shall not
be inconsistent herewith;
(v) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay all
costs and expenses incurred in connection with the operation and
management of such REO Property, including those listed above and
remit all related revenues (net of such costs and expenses) to
the Servicer soon as practicable, but in no event later than
thirty days following the receipt thereof by such Independent
Contractor;
(vi) none of the provisions of this Section 3.25(c) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Servicer of
any of its duties and obligations to the Indenture Trustee on
behalf of the Noteholders and the Insurer with respect to the
operation and management of any such REO Property; and
(vii) the Servicer shall be obligated with respect thereto
to the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of
such REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.20 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.25(c)(iii).
(d) In addition to the withdrawals permitted under Section
3.25(c), the Servicer may from time to time make withdrawals from the
REO Account for any REO Property: (i) to pay itself or any
Sub-Servicer unpaid Servicing Fees in respect of the related Mortgage
Loan; and (ii) to reimburse itself or any Sub-Servicer for
unreimbursed Servicing Advances and Monthly Advances made in respect
of such REO Property or the related Mortgage Loan. On the Servicer
Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Distribution Account in
accordance with Section 3.10(d)(ii), for payment on the related
Payment Date in accordance with Section 8.3 of the Indenture, the
income from the related REO Property received during the prior
calendar month, net of any withdrawals made pursuant to Section
3.25(c) or this Section 3.25(d).
(e) Subject to the time constraints set forth in Section 3.25(a),
each REO Disposition shall be carried out by the Servicer at such
price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall
35
be normal and usual in its general servicing activities and as are in
accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related
Mortgage Loan and net of any payment or reimbursement to the Servicer
or any Sub-Servicer as provided above, shall be deposited in the
Distribution Account in accordance with Section 3.10(d)(ii) on the
Servicer Remittance Date in the month following the receipt thereof
for payment on the related Payment Date in accordance with Section 8.3
of the Indenture.
(g) The Servicer shall file information returns with respect to
the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged
Property as required by Sections 6050H, 6050J and 6050P of the Code,
respectively. Such reports shall be in form and substance sufficient
meet the reporting requirements imposed by such Sections 6050H, 6050J
and 6050P of the Code.
Section 3.26. Obligations of the Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Payment Date
resulting solely from Principal Prepayments during the related Collection Period
and (ii) the total amount of its Servicing Fee for the most recently ended
calendar month.
Section 3.27. [Reserved].
Section 3.28. Obligations of the Servicer in Respect of Monthly
Payments.
In the event that a shortfall in any collection on or liability
with respect to any Mortgage Loan results from or is attributable to adjustments
to Monthly Payments or Stated Principal Balances that were made by the Servicer
in a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the Servicer, upon discovery or receipt of notice thereof,
immediately shall deliver to the Indenture Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Indenture Trustee, the Insurer, the
Depositor and any successor servicer in respect of any such liability. Such
indemnities shall survive the termination or discharge of this Agreement.
36
Section 3.29. [Reserved].
Section 3.30. Obligations Under Indenture.
The Servicer agrees to perform the obligations stated in the
Indenture to be performed by the Servicer, including, without limitation, (i)
provision of the notice of the amounts, if any, that the Insurer has paid in
respect of the Notes pursuant to Section 2.6(d) of the Indenture, (ii) payment
of the expenses and fees referred to in Sections 5.13, 6.7, 6.8 and 6.10(e) of
the Indenture, and (iii) advising the Indenture Trustee with respect to the
manner of surrender of Notes as contemplated in Section 8.3(f) of the Indenture.
Section 3.31. Records.
The Servicer shall maintain appropriate books of account and
records relating to services performed under this Agreement, which books of
account and records shall be accessible for inspection by the Trust at any time
during normal business hours.
Section 3.32. Additional Information to be Furnished to the
Trust.
The Servicer shall furnish to the Trust from time to time such
additional information regarding the Collateral as the Trust shall reasonably
request.
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
MONTHLY ADVANCES; REALIZED LOSSES; WITHHOLDING
Section 4.01. Payments and Distributions.
The Securityholders shall have the right to receive payments and
distributions in respect of the Securities as set forth in the Indenture and the
Trust Agreement.
Section 4.02. Statements to Securityholders.
On each Servicer Remittance Date, the Servicer shall deliver to
the Trust, the Back-up Servicer, the Indenture Trustee, the Insurer and the
Rating Agencies by telecopy (or by such other means as the Servicer and the
Trust, the Indenture Trustee, the Insurer or the Rating Agencies, as the case
may be, may agree from time to time) a report prepared by the Servicer with
respect to each Group of Mortgage Loans as to the distributions to be made on
the related Payment Date and shall forward to the Indenture Trustee and the
Back-up Servicer by overnight mail a computer readable magnetic tape or diskette
of such report. Both reports (each a "Remittance Report") shall contain the
following information:
37
1. the amount of the payment to be made on such Payment Date to
the Holders of each Class of Class A Notes allocable to
principal;
2. the amount of the payment to be made on such Payment Date to
the Holders of each Class of Class A Notes allocable to
interest;
3. the aggregate amount of servicing compensation received by
the Servicer during the related Collection Period and such
other customary information within the knowledge of the
Indenture Trustee as the Indenture Trustee deems necessary
or desirable, or which a Securityholder reasonably requests,
to enable Securityholders to prepare their tax returns;
4. the Scheduled Payments for each Group for such Payment Date
and the respective provisions thereof allocable to principal
and interest;
5. the Available Distribution Amount for each Group for such
Payment Date;
6. the amount, if any, by which the Scheduled Payments for each
Group for such Payment Date exceeds the Available
Distribution Amount for the related Class expected to be on
deposit in the Distribution Account on such Payment Date;
7. the amount of Monthly Advances for each Group to be made by
the Servicer in respect of the related Payment Date, the
aggregate amount of Monthly Advances for each Group
outstanding after giving effect to such Monthly Advances,
and the aggregate amount of Nonrecoverable Monthly Advances
for each Group in respect of such Payment Date;
8. with respect to any reimbursement to be made to the Insurer
on such Payment Date pursuant to Sections 8.3(a)(iii) and
(v) of the Indenture, the amount, if any, allocable to
principal and the amount allocable to interest;
9. Cumulative Insurance Payments for each Group after giving
effect to the distributions to be made on such Payment Date;
10. the Delinquency Percentage for each Group for the related
Collection Period;
11. the Cumulative Loss Percentage for each Group for such
Payment Date;
12. the amount of any Insurance Payment to be made to each Class
of Class A Noteholders on such Payment Date, the amount of
any
38
reimbursement payment to be made to the Insurer on such
Payment Date pursuant to Section 8.3(a)(iii) of the
Indenture and the amount of Cumulative Insurance Payments
after giving effect to any such Insurance Payment to such
Class A Noteholders or any such reimbursement payment to the
Insurer;
13. the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties in each Group at the close of
business on such Payment Date;
14. the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage
Rate of the Mortgage Loans in each Group as of the related
Due Date;
15. the number and aggregate unpaid principal balance of
Mortgage Loans in each Group (a) 30 days past due, (b) 60
days past due, (c) 90 or more days past due and (d) as to
which foreclosure proceedings have been commenced;
16. with respect to any Mortgage Loan that became an REO
Property in each Group during the preceding calendar month,
the loan number of such Mortgage Loan, the unpaid principal
balance and the Stated Principal Balance of such Mortgage
Loan as of the date it became an REO Property;
17. the book value of any REO Property in each Group as of the
close of business on the last Business Day of the calendar
month preceding the Payment Date;
18. the aggregate amount of Principal Prepayments for each Group
made during the related Collection Period;
19. the aggregate amount of Realized Losses for each Group
incurred during the related Collection Period;
20. the aggregate amount of extraordinary expenses withdrawn
from the Collection Account or the Distribution Account for
such Payment Date;
21. the Note Principal Balance for each Class after giving
effect to the distributions to be made on such Payment Date;
22. the Note Factor for each Class of Notes applicable to such
Payment Date;
23. the Interest Distribution Amount in respect of each Class of
Class A Notes for such Payment Date and the respective
portions thereof, if any, paid under the Policy or (in the
event of a
39
Deficiency Event) remaining unpaid following the
distributions to be made in respect of such Notes on such
Payment Date;
24. the aggregate amount of any Prepayment Interest Shortfalls
for each Class for such Payment Date, to the extent not
covered by payments by the Servicer pursuant to Section
3.26;
25. the aggregate amount of Relief Act Interest Shortfalls for
each Class for such Payment Date;
26. the Required Overcollateralization Amount for each Class for
such Payment Date;
27. the Subordination Overcollateralization Amount for each
Class, if any, for such Payment Date;
28. the Subordination Overcollateralization Amount for each
Class, if any, for such Payment Date; and
29. the amount of the distribution to be made on such Payment
Date to the Holder of the Certificate.
[No later than the (10) Business Days after each Servicer
Remittance Date, the Back-up Servicer shall review the information contained in
the Remittance Reports to the extent that such information relates to the [ ].
On the eleventh Business Day after each Servicer Remittance Date, the Back-up
Servicer shall notify the Servicer and the Insurer of any material
inconsistencies relating to the [ ]. The Back-up Servicer shall only review the
information provided by the Servicer in the Remittance Reports and its
obligation to report any inconsistencies shall be limited to those apparent from
the Back-up Servicer's review thereof and those relating to the [ ].
At the request of the Insurer, the Back-up Servicer and the
Servicer shall attempt to reconcile such material inconsistencies and/or to
furnish any such omitted information. Unless the Servicer reasonably believes
that the Back-up Servicer's determinations are correct, the Servicer shall have
no obligation to amend the Remittance Report to reflect the Back-up Servicer's
computations or to include the omitted information; provided notice of such
determination shall be given to the Insurer and the Back-up Servicer by the
Servicer. The Back-up Servicer shall in no event be liable to the Servicer with
respect to any failure of the Back-up Servicer to discover or detect any errors,
inconsistencies, or omissions by the Servicer with respect to the Remittance
Reports except as specifically set forth in this Section 4.02.]
In the case of information furnished pursuant to clauses (1)
through (3) above, the amounts shall be expressed as a dollar amount per Single
Security.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Indenture Trustee, and the Indenture
Trustee shall
40
forward to each Person who at any time during the calendar year was a Holder of
a Note (a) a statement containing the information set forth in clauses (1)
through (3) above, aggregated for such calendar year or applicable portion
thereof during which such person was a Noteholder and (b) such information
contained in the Remittance Reports as required to enable the Holders of the
Notes to prepare their tax returns. Such obligation of the Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer pursuant to any requirements of
the Code as from time to time are in force.
On each Payment Date, the Indenture Trustee shall forward to the
Trust, the Depositor, the Holder of the Certificate, the Insurer and the
Servicer, a copy of the reports forwarded to the Class A Noteholders on such
Payment Date and, if different from the amounts stated in the Remittance Report,
a statement setting forth the amounts, if any, actually distributed with respect
to the Certificate on such Payment Date.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Indenture Trustee, and the Indenture
Trustee shall forward to each Person who at any time during the calendar year
was a Holder of the Certificate a statement setting forth the amount, if any,
actually distributed with respect to the Certificate, as appropriate, aggregated
for such calendar year or applicable portion thereof during which such Person
was a Certificateholder.
Upon request, the Servicer shall furnish to the Indenture
Trustee, and the Indenture Trustee shall forward to each Securityholder, during
the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be reasonable with
respect to the Securityholder, or otherwise with respect to the purposes of this
Agreement, all such reports or information to be provided at the expense of the
Securityholder in accordance with such reasonable and explicit instructions and
directions as the Securityholder may provide. For purposes of this Section 4.02,
the Indenture Trustee's duties are limited to the extent that the Indenture
Trustee receives timely reports as required from the Servicer.
Section 4.03. Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances for each Group to be made by
the Servicer for any Payment Date shall equal, subject to Section
4.03(d), the sum of (i) the aggregate amount of Monthly Payments
allocable to interest (with each interest portion thereof net of the
related Servicing Fee), due during the related Collection Period in
respect of the Mortgage Loans, which Monthly Payments were delinquent
as of the close of business on the related Determination Date and (ii)
with respect to each REO Property, which REO Property was acquired
during or prior to the related Collection Period and as to which REO
Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO
Imputed Interest on such REO Property
41
for the most recently ended calendar month, over the net income from
such REO Property transferred to the Distribution Account pursuant to
Section 3.25 for distribution on such Payment Date. For purposes of
the preceding sentence, the Monthly Payment on each Balloon Mortgage
Loan with a delinquent Balloon Payment is equal to the assumed monthly
interest payment that would have been due on the related Due Date
based on the original principal amortization schedule for such Balloon
Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer Remittance
Date, the Servicer shall remit in immediately available funds to the Indenture
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of Monthly Advances, if any, to be made in respect of the Mortgage Loans
and REO Properties for the related Group and Payment Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of the Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Servicer in discharge of any such Monthly Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Monthly Advances to
be made by the Servicer with respect to the Mortgage Loans and REO Properties.
Any amounts held for future distribution and so used shall be appropriately
reflected in the Servicer's records and replaced by the Servicer by deposit in
the Collection Account on or before any future Servicer Remittance Date to the
extent that the Available Distribution Amount for the related Payment Date
(determined without regard to Monthly Advances to be made on the Servicer
Remittance Date) shall be less than the total amount that would be distributed
to Securityholders pursuant to Section 8.3 of the Indenture on such Payment Date
if such amounts held for future distributions had not been so used to make
Monthly Advances. The Indenture Trustee will provide notice to the Servicer and
the Insurer by telecopy by the close of business on any Servicer Remittance Date
in the event that the amount remitted by the Servicer to the Indenture Trustee
on such date is less than the Monthly Advances required to be made by the
Servicer for the related Payment Date.
(c) The obligation of the Servicer to make such Monthly Advances
is mandatory, notwithstanding any other provision of this Agreement
but subject to (d) below, and, with respect to any Mortgage Loan or
REO Property, shall continue until a Final Recovery Determination in
connection therewith or the removal thereof from the Trust Property
pursuant to any applicable provision of this Agreement, except as
otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no Monthly
Advance or Servicing Advance shall be required to be made hereunder by
the Servicer if such Monthly Advance or Servicing Advance would, if
made, constitute a Nonrecoverable Monthly Advance or Servicing
Advance. The determination by the Servicer that it has made a
Nonrecoverable Monthly Advance or that any proposed Monthly Advance,
if made, would constitute a Nonrecoverable Monthly Advance, shall be
evidenced by an Officers' Certificate of the Servicer delivered to the
Depositor, the Indenture Trustee and the Insurer.
42
Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine as
to each Mortgage Loan and REO Property, the total amount of Realized Losses, if
any, incurred in connection with any Final Recovery Determinations made during
the related Collection Period. Prior to each Determination Date, the Servicer
shall also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Collection Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Collection Period. Such information shall be
evidenced by an Officer's Certificate delivered to the Trust, the Indenture
Trustee and the Insurer by the Servicer prior to the Determination Date
immediately following the end of the Collection Period during which any such
Realized Loss was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Indenture Trustee shall comply with all federal withholding requirements
respecting payments to Noteholders of interest or original issue discount that
the Indenture Trustee reasonably believes are applicable under the Code. The
consent of Noteholders shall not be required for such withholding. In the event
the Indenture Trustee does withhold any amount from interest or original issue
discount payments or advances thereof to any Noteholder pursuant to federal
withholding requirements, the Indenture Trustee shall indicate the amount
withheld to such Noteholders.
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in accordance
herewith only to the extent of the obligations specifically imposed by this
Agreement on and undertaken hereunder by the Depositor and the Servicer,
respectively herein.
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer.
Subject to the following paragraph, each of the Trust, the
Depositor and the Servicer will keep in full effect its existence, rights and
franchises as a trust or corporation, as the case may be, under the laws of the
jurisdiction of its incorporation.
43
The Depositor and the Servicer each will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Securities or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated with
or into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or the Servicer shall be a party, or any Person succeeding
to the business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, 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
(i) the successor or surviving Person to the Servicer shall be qualified to
service mortgage loans on behalf of FNMA or FHLMC, (ii) that the Rating Agencies
ratings and shadow ratings of the Class A Notes in effect immediately prior to
such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof (as evidenced by a letter to such effect from the Rating
Agencies) and (iii) in the case of the Servicer, the Insurer delivers its
written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the
Servicer and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust or the Noteholders 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 Depositor, the Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the case of the Depositor, and willful misfeasance,
bad faith or negligence in the case of the Servicer, in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Depositor, the Servicer and any director, officer, employee or agent of the
Depositor or the Servicer may rely in good faith on any document of any kind
which, prima facie, is properly executed and submitted by any Person respecting
any matters arising hereunder. The Depositor, the Servicer and any director,
officer, employee or agent of the Depositor or the Servicer shall be indemnified
and held harmless by the Trust (to the extent of the Trust Property only)
against any loss, liability or expense incurred in connection with any legal
action relating to this Agreement or the Notes, other than any loss, liability
or expense relating to any specific Mortgage Loan or Mortgage Loans (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the
44
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action unless such action is related to its respective duties under this
Agreement and, in its opinion, does not involve it in any expense or liability;
provided, however, that each of the Depositor and the Servicer may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Noteholders hereunder. In such event, unless the
Depositor or the Servicer acts without the consent of the Insurer prior to an
Insurer Default or without the consent of Holders of Notes entitled to at least
51% of the Voting Rights after an Insurer Default, the legal expenses and costs
of such action and any liability resulting therefrom (except any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the case of the Depositor, and willful misfeasance, bad faith or
negligence in the case of the Servicer, in the performance of duties hereunder
or by reason of reckless disregard of obligations and duties hereunder) shall be
expenses, costs and liabilities of the Trust Property, and the Depositor and the
Servicer shall be entitled to be reimbursed therefor from the Collection Account
as and to the extent provided in Section 3.11, any such right of reimbursement
being prior to the rights of the Noteholders to receive any amount in the
Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Indenture Trustee and the Back-up Servicer. No resignation
of the Servicer shall become effective until the Back-up Servicer or other
successor servicer shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
If, at the time the Servicer is removed or resigned there is no
Back-up Servicer or the Back-up Servicer is unable to act as successor servicer
and the Indenture Trustee does not appoint a different successor servicer, then
the Indenture Trustee shall become the successor servicer.
Upon removal or resignation of the Servicer, the Servicer also
shall promptly (and in any event no later than 10 Business Days subsequent to
such removal
45
or resignation) deliver or cause to be delivered to the Back-up Servicer all the
books and records (including, without limitation, records kept in electronic
form) that the Servicer has maintained for the Mortgage Loans, including all tax
bills, assessment notices, insurance premium notices and all other documents as
well as all original documents then in the Servicer's possession. The Servicer
may retain copies of any such books and records.
Any collections received by the Servicer after removal or
resignation shall be endorsed by it and remitted directly and immediately to the
Back-up Servicer. The Servicer shall be entitled to receive the Servicing Fee
through the day on which it is terminated as Servicer (which may be pro rated
for a partial month).
To the extent that the Servicer, at the time of its removal or
resignation, has therefore expended any amounts as Servicing Advances with
respect to any Mortgage Loan, which Servicing Advances remain unreimbursed as of
such date ("Unrecovered Advances") the Servicer shall thereafter be entitled to
receive from the Back-up Servicer, monthly, such information as may be generated
by the Back-up Servicer as may be reasonably necessary to enable the Servicer to
monitor the recovery of, and collection efforts undertaken with respect to, the
Unrecovered Advances, which information will include details of collection
activities, payment records and trial balances. To the extent that the Back-up
Servicer or other successor servicer receives any amounts which relate to
reimbursement for Unrecovered Advances made by the prior Servicer, such amounts
shall be remitted to the prior Servicer on the related Payment Date. To the
extent that the Servicer, based upon the information supplied by the Back-up
Servicer, believes that any discrepancies exist between actual Unrecovered
Advances received by the Back-up Servicer and the amounts forwarded to the
Servicer as recovered Unrecovered Advances, the Servicer and the Back-up
Servicer shall attempt in good faith to reconcile such discrepancies.
The Back-up Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any succession to become the
successor servicer. The Servicer agrees to cooperate reasonably with the Back-up
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide to the Back-up
Servicer all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Back-up Servicer all amounts which then have been or should have been
deposited in the Collection Account, or which are thereafter received with
respect to the Mortgage Loans. The Back-up Servicer shall not be held liable by
reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer.
The Servicer which is being removed or is resigning shall give
notice to the Mortgagors of the transfer of the servicing to the Back-up
Servicer. Said notice shall be a joint notice of servicing transfer in the form
required by applicable law.
46
Section 6.05. Rights of the Trust, the Depositor and Others in
Respect of the Servicer.
The Servicer shall afford the Trust, the Depositor, the Indenture
Trustee and the Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Servicer in respect of its rights and
obligations hereunder and access to officers of the Servicer responsible for
such obligations. Upon request, the Servicer shall furnish to the Trust, the
Depositor, the Indenture Trustee and the Insurer its most recent financial
statements and such other information relating to its capacity to perform its
obligations under this Agreement it possesses. To the extent such information is
not otherwise available to the public, the Trust, the Depositor, the Indenture
Trustee and the Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Servicer's written consent, except as
required pursuant to this Agreement or to the extent that it is appropriate to
do so (i) in working with legal counsel, auditors, taxing authorities or other
governmental agencies or (ii) pursuant to any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Trust, the Depositor, the Indenture Trustee, the
Insurer or the Trust Property, and in either case, the Trust, the Depositor, the
Insurer or the Indenture Trustee, as the case may be, shall use its best efforts
to assure the confidentiality of any such disseminated non-public information.
The Depositor may, but is not obligated to, enforce the obligations of the
Servicer under this Agreement and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Servicer under this
Agreement or exercise the rights of the Servicer under this Agreement; provided
that the Servicer shall not be relieved of any of its obligations under this
Agreement by virtue of such performance by the Depositor or its designee. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Servicer and is not obligated to supervise the performance
of the Servicer under this Agreement or otherwise.
Section 6.06. Limitation of Liability.
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 trustee of HomeGold Home Equity Loan
Trust 1999-1 under the Trust Agreement dated as of May 1, 1999, with Emergent
Residual Holding Corp., in the exercise of the powers and authority conferred
and vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Trust 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 Trust, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto and by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach
47
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or the other Basic Documents.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one
of the following events:
(i) any failure by the Servicer to remit to the Indenture
Trustee for payment to Noteholders any payment (other than a
Monthly Advance required to be made from its own funds on any
Servicer Remittance Date pursuant to Section 4.03) required to be
made under the terms of the Indenture or this Agreement which
continues unremedied for the later of (x) a period of one
Business Day after the date upon which written notice of such
failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trust, the Depositor, the Insurer or the
Indenture Trustee (in which case notice shall be provided by
telecopy), or to the Servicer, the Trust, the Depositor, the
Insurer and the Indenture Trustee by the Holders of both Classes
of Notes entitled to at least 25% of the Voting Rights or (y)
five days; or
(ii) any failure (other than a failure identified in clause
(vi) below) on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in the Indenture
or this Agreement which continues unremedied for a period of 30
days (or 10 days in the case of a failure to maintain any
insurance policy on any of the Mortgage Loans or Mortgaged
Properties) after the earlier of (I) the date on which written
notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trust, the Depositor, the
Insurer or the Indenture Trustee, or to the Servicer, the
Depositor, the Insurer and the Indenture Trustee by the Holders
of both Classes of Notes entitled to at least 25% of the Voting
Rights and (II) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator or
receiver or liquidate in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceeding, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order
48
shall have remained in force undischarged or unstayed for a
period of 90 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidate in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to it or of or relating to all
or substantially all of its property; or
(v) the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
(vi) any failure of the Servicer to make any Monthly Advance
on any Servicer Remittance Date required to be made from its own
funds pursuant to Section 4.03 or failure to make any payment
required pursuant to Section 3.26 which continues unremedied
until 3:00 p.m. New York time on the Business Day immediately
following the Servicer Remittance Date; or
(vii) any breach of a representation or warranty of the
Servicer relating to such Servicer's authority to enter into, and
its ability to perform its obligations under, this Agreement; or
(viii) the occurrence of a Performance Test Violation (as
defined in the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described
in clauses (i) through (v) and (vii) and (viii) of this Section shall occur,
then, and in each and every such case, so long as such Servicer Event of Default
shall not have been remedied, the Trust, the Depositor, the Insurer or the
Indenture Trustee may, and at the written direction of the Holders of both
Classes of Notes entitled to at least 25% of Voting Rights (with the consent of
the Insurer to the extent there is no Insurer Default), the Indenture Trustee
shall, by notice in writing to the Servicer and the Back-up Servicer (and to the
Trust, the Depositor and the Insurer if given by the Indenture Trustee or to the
Indenture Trustee if given by the Trust, the Depositor or the Insurer),
terminate all of the rights and obligations of the Servicer in its capacity as
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. If a Servicer Event of Default
described in clause (vi) hereof shall occur, the Indenture Trustee shall, by
notice in writing to the Servicer, the Back-up Servicer, the Insurer, the Trust
and the Depositor, terminate all of the rights and obligations of the Servicer
in its capacity as Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof. On or after the receipt by the Servicer and the
Back-up Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Securities (other than as a
Holder of any Security) or the Mortgage Loans or the Policy or otherwise, shall
pass to and be
49
vested in the Back-up Servicer pursuant to and under this Section, and, without
limitation, the Back-up Servicer, is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Servicer, 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 Mortgage Loans and related documents, or
otherwise. The Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the Back-up Servicer with
all documents and records requested by it to enable it to assume the Servicer's
functions under this Agreement, and to cooperate with the Back-up Servicer in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Indenture Trustee for administration by it of all cash amounts which
at the time shall be or should have been credited by the Servicer to the
Collection Account held by or on behalf of the Servicer, the Distribution
Account, the Policy Payments Account or any REO Account or Servicing Account
held by or on behalf of the Servicer or thereafter be received with respect to
the Mortgage Loans or any REO Property serviced by the Servicer (provided,
however, that the Servicer shall continue to be entitled to receive all amounts
accrued or owing to it under this Agreement on or prior to the date of such
termination, whether in respect of Monthly Advances or otherwise, and shall
continue to be entitled to the benefits of Section 6.03 notwithstanding any such
termination). For purposes of this Section 7.01, the Indenture Trustee shall not
be deemed to have knowledge of a Servicer Event of Default unless a Responsible
Officer of the Indenture Trustee assigned to and working in the Indenture
Trustee's Corporate Trust Office has actual knowledge thereof or unless written
notice of any event which is in fact such a Servicer Event of Default is
received by the Indenture Trustee and such notice references the Notes, the
Trust Property or this Agreement.
In the event that the Back-up Servicer becomes the Successor
Servicer, the parties hereby agree that there shall no longer be the requirement
to have a Back-up Servicer.
The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on [ ], which term shall be extendable by the Insurer for successive
terms of three calendar months thereafter, until the termination of the
Servicer's obligations and responsibilities pursuant to Article X. Each such
notice of extension (a "Servicer Extension Notice") shall be delivered by the
Insurer to the Trust, the Indenture Trustee and the Servicer. The Servicer
hereby agrees that, upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound for the duration of the term covered by such
Servicer Extension Notice to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Indenture Trustee
agrees that if as of the fifteenth (15th) day prior to the last day of any term
of the Servicer the Indenture Trustee shall not have received any Servicer
Extension Notice from the Insurer, the Indenture Trustee will within five (5)
days thereafter, give written notice of such non-receipt to the Trust, the
Back-up Servicer, the Insurer and the Servicer. The failure of the Insurer to
deliver a Servicer Extension Notice by the end of a calendar
50
term shall result in the termination of the Servicer and the Back-up Servicer
shall become the Successor Servicer. The foregoing provisions of this paragraph
shall not apply to the Indenture Trustee in the event the Indenture Trustee
succeeds to the rights and obligations of the Servicer and the Indenture Trustee
shall continue in such capacity until the earlier of the termination of this
Agreement pursuant to Article X or the appointment of a successor servicer.
Section 7.02. Back-up Servicer to Act; Appointment of Successor
Servicer.
(a) On and after the time the Servicer receives a notice of
termination or the Servicer's term is not extended pursuant to Section
7.01, the Back-up Servicer shall be the successor in all respects to
the Servicer in its capacity as 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 and
arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement and
its obligation to deposit amounts in respect of losses pursuant to
Section 3.14) by the terms and provisions hereof including, without
limitation, the Servicer's obligations to make Monthly Advances
pursuant to Section 4.03; provided, however, that if the Back-up
Servicer is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture
Trustee shall not be obligated to make Monthly Advances pursuant to
Section 4.03 or to make payments in respect of Prepayment Interest
Shortfalls pursuant to Section 3.26; and provided, further, that any
failure to perform such duties or responsibilities caused by the
Servicer's failure to provide information required by Section 7.01
shall not be considered a default by the Back-up Servicer as successor
to the Servicer hereunder. As compensation therefor, the Back-up
Servicer shall be entitled to the Servicing Fees and all funds
relating to the Mortgage Loans to which the Servicer would have been
entitled if it had continued to act hereunder. Notwithstanding the
above, if the Back-up Servicer is unable to so act or if it is
prohibited by law from making advances regarding delinquent mortgage
loans or if the Insurer or if the Holders of both Classes of Notes
entitled to at least 51% of the Voting Rights so request in writing to
the Indenture Trustee, the Indenture Trustee may promptly appoint,
with the consent of the Insurer, or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing
institution acceptable to each Rating Agency and the Insurer and
having a net worth of not less than $15,000,000 and which is a FNMA
and FHLMC approved Seller/Servicer, as the successor to the Servicer
under this Agreement in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer under this
Agreement. No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of
all of the Servicer's responsibilities, duties and liabilities
hereunder. In connection with such appointment and assumption
described herein, the Indenture Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans
as it and such successor shall agree; provided, however, that no
52
such compensation shall be in excess of that permitted the Servicer as
such hereunder. The Depositor, the Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Servicer under this Agreement, the
Indenture Trustee shall act in such capacity as hereinabove provided.
(b) If the Servicer fails to remit to the Indenture Trustee for
payment to the Noteholders any payment required to be made under the
terms of the Indenture or this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such
Remittance is prohibited by Section 362 of the federal Bankruptcy
Code, the Indenture Trustee shall upon notice of such prohibition,
regardless of whether it has received a notice of termination under
Section 7.01, advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Payment Date. The
Indenture Trustee shall be obligated to make such advance only if (i)
such advance, in the good faith judgment of the Indenture Trustee, can
reasonably be expected to be ultimately recoverable from funds which
are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Indenture Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the
Indenture Trustee or the deposit thereof in the Distribution Account
by the Servicer, a trustee in bankruptcy or a federal bankruptcy
court, the Indenture Trustee may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution
Account; provided, however, that nothing in this Agreement shall be
deemed to affect the Indenture Trustee's rights to recover from the
Servicer's own funds interest at the prime rate (as set forth in the
Wall Street Journal) as of the date of such advance on the amount of
any such advance. If the Indenture Trustee at any time makes an
advance under this subsection which it later determines in its good
faith judgment will not be ultimately recoverable from the Stayed
Funds with respect to which such advance was made, the Indenture
Trustee shall be entitled to reimburse itself for such advance,
without interest, by withdrawing from the Distribution Account, out of
amounts on deposit therein, an amount equal to the portion of such
advance attributable to the Stayed Funds. The Servicer shall pay the
Indenture Trustee, from the Servicer's own funds, interest on any
advance made by the Indenture Trustee pursuant to this paragraph at a
rate equal to the prime rate (as set forth in the Wall Street Journal)
as of the date of such advance.
(c) The Servicer, the Back-up Servicer, the Indenture Trustee and
such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
The Back-up Servicer (or the Indenture Trustee, shall be reimbursed
for Transition Costs, if any, incurred in connection with the
assumption of responsibilities of the successor Servicer, upon receipt
of documentation of such costs and expenses. The Back-up
52
Servicer shall have no claim against the Servicer, the Indenture
Trustee, the Insurer, the Owner Trustee, the Depositor, any
Noteholder, the Trust or any other Party to the Related Documents for
any costs and expenses incurred in effecting such succession in excess
of the amount specified in the definition of "Transition Costs."
Section 7.03. Notification to Noteholders and Trust.
(a) Upon any termination of the Servicer pursuant to Section 7.01
above or any appointment of a successor to the Servicer pursuant to
Section 7.02 above, the Indenture Trustee shall give prompt written
notice thereof to the Trust and to all Noteholders at their respective
addresses appearing in the Note Register.
(b) Not later than the later of 60 days after the occurrence of
any event, which constitutes or which, with notice or lapse of time or
both, would constitute a Servicer Event of Default or five days after
a Responsible Officer of the Indenture Trustee becomes aware of the
occurrence of such an event, the Indenture Trustee shall transmit by
mail to the Trust and all Holders of Notes notice of each such
occurrence, unless such default or Servicer Event of Default shall
have been cured or waived.
Section 7.04. Waiver of Servicer Events of Default.
The Holders of Notes evidencing at least 66% of the aggregate
Note Principal Balance of all Classes of Notes affected by any default or
Servicer Event of Default hereunder, with the written consent of the Insurer,
may waive such default or Servicer Event of Default; provided, however, that a
default or Servicer Event of Default under clause (i) or (vi) of Section 7.01
may be waived only by all of the Holders of the Notes with the written consent
of the Insurer. Upon any such waiver of a default or Servicer Event of Default,
such default or Servicer Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose hereunder. No such waiver shall
extend to any subsequent or other default or Servicer Event of Default or impair
any right consequent thereon except to the extent expressly so waived.
Section 7.05. The Back-up Servicer.
(a) Prior to assuming any of the Servicer's rights and
obligations hereunder the Back-up Servicer shall only be responsible to perform
those duties specifically imposed upon it by the provisions hereof. Such duties
generally relate to the following procedures which would permit the Back-up
Servicer to assume some or all of the Servicer's rights and obligations
hereunder with reasonable dispatch, following notice.
The Back-up Servicer, prior to assuming any of the Servicer's
duties hereunder may not resign hereunder unless it arranges for a successor
Back-up Servicer reasonably acceptable to each Rating Agency, and the Insurer
with not less than 60 day's notice delivered to the Servicer, the Indenture
Trustee and the Depositor. Prior to
53
its becoming successor servicer, the Back-up Servicer shall have only those
duties and obligations imposed by it under this Agreement, and shall have no
obligations or duties under any agreement to which it is not a party, including
but not limited to the various agreements named herein. In its capacity as
successor servicer and as Back-up Servicer, Fairbanks Capital shall in no event
be liable for any obligations of the Unaffiliated Seller or the Servicer to any
party, whether hereunder or under any other agreement, which are not related to
servicing functions, including, without limitation, any repurchase obligations.
The Back-up Servicer agrees to indemnify the Trust, the Indenture
Trustee, the Depositor, each Noteholder, the Servicer and the Unaffiliated
Seller, and any of their respective directors, officers, employees or agents
from, and hold them harmless against, any and all costs, expenses (including
reasonable attorney fees and disbursements), losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, or was imposed upon the Trust, the Indenture Trustee,
the Depositor, the Noteholder, the Servicer, or the Unaffiliated Seller and
their respective directors, officers, employees and agents through the Back-up
Servicer's acts or omissions in violation of this Agreement, except to the
extent such indemnified party's own bad faith, willful misconduct or gross
negligence contributes to the cost, loss, claim, damage or liability.
The Back-up Servicer (including the Back-up Servicer in its
capacity as successor servicer) in addition agrees to indemnify the Servicer
against any losses, claims or damages whenever imposed or suffered resulting
from the performance or non-performance by the Back-up Servicer of its duties
hereunder from the date on which it becomes the successor servicer, other than
any loss, claim or damage resulting from the Servicer's negligence, misconduct,
bad faith or failure to comply with this Agreement.
The Servicer shall have no liability, direct or indirect, to any
party, for the acts or omissions of the Back-up Servicer, whenever such acts or
omissions occur whenever such liability is imposed.
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
Section 8.01. Duties, Responsibilities, Etc. of Indenture
Trustee.
The duties, rights, responsibilities and privileges of the
Indenture Trustee shall be as set forth herein, in the Indenture and in the
other Basic Documents to which the Indenture Trustee is a party and no implied
covenants or obligations on the part of the Indenture Trustee shall be read into
this Agreement, the Indenture or any of the Basic Documents. Without limitation
of the foregoing, it is acknowledged and agreed that the provisions of Sections
6.1 through 6.7 and 6.11 through 6.21 of the Indenture shall apply as if set
forth in full herein.
54
Section 8.02. Replacement of Indenture Trustee; Successor
Indenture Trustee; Appointment of Co- or Separate Indenture Trustee.
Any successor Indenture Trustee pursuant to Section 6.8 or 6.9 of
the Indenture shall succeed to all the rights, duties, responsibilities of the
Indenture Trustee pursuant to this Agreement and any co-trustee or separate
trustee appointed pursuant to Section 6.10 of the Indenture may, with the
consent of the Insurer, act as co-trustee or separate trustee hereunder.
Section 8.03. Representations and Warranties of the Indenture
Trustee.
The Indenture Trustee hereby represents and warrants to the
Servicer, the Depositor and the Insurer, as of the Closing Date, that:
(i) The Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the
laws of the United States.
(ii) The execution and delivery of this Agreement by the
Indenture Trustee, and the performance and compliance with the
terms of this Agreement by the Indenture Trustee, will not
violate the Indenture Trustee's charter or bylaws or constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach
of, any material agreement or other instrument to which it is a
party or which is applicable to it or any of its assets.
(iii) The Indenture Trustee has the full power and authority
to enter into and consummate all transactions contemplated by
this Agreement, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and
delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution
and delivery by the Servicer and the Depositor, constitutes a
valid, legal and binding obligation of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with the
terms hereof, subject to (A) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws affecting
the enforcement of creditors' rights generally, and (B) general
principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law.
(v) The Indenture Trustee is not in violation of, and its
execution and delivery of this Agreement and its performance and
compliance with the terms of this Agreement will not constitute a
violation of, any law, any order or decree of any court or
arbiter, or any order, regulation or demand of any federal, state
or local governmental or regulatory authority, which violation,
in the Indenture Trustee's good faith and reasonable judgment, is
likely to affect materially and adversely either
55
the ability of the Indenture Trustee to perform its obligations
under this Agreement or the financial condition of the Indenture
Trustee.
(vi) No litigation is pending or, to the best of the
Indenture Trustee's knowledge, threatened against the Indenture
Trustee which would prohibit the Indenture Trustee from entering
into this Agreement or, in the Indenture Trustee's good faith
reasonable judgment, is likely to materially and adversely affect
either the ability of the Indenture Trustee to perform its
obligations under this Agreement or the financial condition of
the Indenture Trustee.
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
Section 9.01. Rights of the Insurer to Exercise Rights of Class A
Noteholders.
Each of the Trust, the Depositor, the Servicer and the Indenture
Trustee, and by accepting a Note, each Noteholder, agrees that unless an Insurer
Default has occurred and is continuing, the Insurer shall have the right to
exercise all rights of the Noteholders under this Agreement, the Indenture and
the Basic Documents (including all Voting Rights) (except as provided in clause
(i) of the second paragraph of Section 12.01) without any further consent of the
Noteholders, including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Unaffiliated Seller or the
Originator to repurchase, or substitute for, Mortgage Loans pursuant
to Section 2.05;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as Servicer pursuant to Section
7.01;
(d) the right to direct the actions of the Indenture Trustee
during the continuance of a Servicer Event of Default pursuant to
Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer
Event of Defaults pursuant to Section 7.04; and
(f) the right to remove the Indenture Trustee pursuant to Section
6.8 of the Indenture.
So long as no Insurer Default should have occurred and be
continuing, the consent of the Insurer to any action or matter shall be deemed
to also constitute the consent of the requisite percentage of Noteholders
required by this Agreement or the Indenture in respect of such action or matter.
56
In addition, each Noteholder agrees that, unless an Insurer
Default has occurred and is continuing, the rights specifically set forth above
may be exercised by the Noteholders only with the prior written consent of the
Insurer.
Section 9.02. Indenture Trustee to Act Solely with Consent of the
Insurer.
Unless an Insurer Default has occurred and is continuing, the
Indenture Trustee shall not agree to any amendment pursuant to Section 12.01 or
terminate the Servicer pursuant to Section 7.01, in each case without the prior
written consent of the Insurer (which consent shall not be unreasonably
withheld).
Section 9.03. Trust Property and Accounts Held for Benefit of the
Insurer.
The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the Trust, the
Noteholders and for the benefit of the Insurer, and all references in this
Agreement (including, without limitation, in Sections 3.01 and 3.10) to the
benefit of or actions on behalf of the Trust, the Noteholders shall be deemed to
include the Insurer. Unless an Insurer Default has occurred and is continuing,
the Servicer shall not terminate any Sub-Servicing Agreements without cause
without the prior consent of the Insurer. Unless an Insurer Default has occurred
and is continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Insurer. The
Indenture Trustee and the Servicer shall provide such information as may be
reasonably requested by, and shall otherwise cooperate with all reasonable
requests of the Insurer with respect to the Mortgage Loans or the Notes;
provided that such information is within the control of or reasonably accessible
to such party without undue expense.
Section 9.04. Notices to the Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Noteholders shall also be sent to the Insurer.
Section 9.05. Third-Party Beneficiary.
The Insurer shall be a third-party beneficiary of this Agreement,
entitled to enforce the provisions hereof as if a party hereto, provided,
however, that notwithstanding the foregoing, for so long as an Insurer Default
has occurred and is continuing, the Noteholders shall succeed to the Insurer's
rights hereunder.
Section 9.06. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Insurer may terminate or refuse to renew the term of the Servicer at such time
as permitted
57
under any separate agreements between them so long as no Insurer Default has
occurred and is continuing.
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
Section 10.01. Termination Upon Early Redemption of the Notes or
Liquidation of All Mortgage Loans; Right of Servicer and Insurer to Purchase
Mortgage Loans.
(a) The respective obligations and responsibilities under this
Agreement of the Trust, the Depositor, the Servicer and the Indenture
Trustee (other than the obligations to the Indenture Trustee pursuant
to Section 6.7 of the Indenture and of the Servicer to provide for and
the Indenture Trustee to make payments to Noteholders as contemplated
herein and in the Indenture) shall terminate upon the earlier to occur
of (i) satisfaction and discharge of the indebtedness evidenced by the
Notes pursuant to the Indenture; and (ii) the later of the final
payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or REO Property remaining in the Trust
Property; provided, however, that in no event shall the Trust or any
trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Xxxxxx X.
Xxxxxxx, the late ambassador of the United States to the Court of St.
Xxxxx, living on the date hereof.
(b) [Reserved]
Section 10.02. Sale and Purchase of Mortgage Loans.
(a) Any redemption of a Class of Notes pursuant to Article X of
the Indenture may be funded through the sale of some or all of the
Mortgage Loans and REO Properties remaining in the Trust at a price
equal to not less than (A) the total outstanding balance of the
related Class plus any sums due to the Insurer or (B) the greater of
(x) the aggregate Purchase Price of all such Mortgage Loans in the
related Group, plus the appraised value of each such REO Property in
the related Group, if any, to be sold, such appraisal to be conducted
by an appraiser mutually agreed upon by the Trust, the purchaser and
the Indenture Trustee in their reasonable discretion (and approved by
the Insurer in its reasonable discretion) and (y) the aggregate fair
market value of all of the assets to be sold (as determined by the
Trust, the purchaser, the Insurer (to the extent the Insurer is not
the purchaser) and the Indenture Trustee) as of the close of business
on the third Business Day next preceding the date upon which notice of
any such Note Redemption is furnished to Noteholders.
(b) Within sixty (60) days of receipt of the direction from the
Insurer to redeem such Class of the Notes, the Insurer may purchase
from the Trust some or all of the Mortgage Loans and REO Property in
the related Group included in
58
the Trust Property, as determined by the Insurer, for a purchase price
equal to the greater of (i) the price thereof determined in accordance
with Section 10.02(a) and (ii) the Redemption Price, such price to be
delivered to the Indenture Trustee for deposit into the Distribution
Account in immediately available funds at the time of such purchase.
(c) The Insurer shall have the right to purchase all of the
Mortgage Loans and each REO Property in the related Group remaining in
the Trust at the price specified in Section 10.02(a) if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property
in such Group remaining in the Trust at the time of such election is
equal to or less than 5% of the Original Pool Balance for such Group,
provided that such purchase will not subject the Trust to tax. In the
event of a purchase of all of the Mortgage Loans and REO Property in
such Group remaining in the Trust by the Insurer pursuant to this
Section 10.02(c), the Insurer shall deliver to the Indenture Trustee
for deposit in the Distribution Account an amount in immediately
available funds equal to the purchase price at the time of such
purchase.
(d) The Servicer shall have the right to purchase all of the
Mortgage Loans and REO Property in such Group remaining in the Trust
at the greater of (i) the price specified in Section 10.02(a) and (ii)
the Redemption Price, if the aggregate stated Principal Balance of the
Mortgage Loans and each REO Property remaining in such Group in the
Trust at the time of such election is equal to a less than 10% of the
Original Pool Balance for such Group provided that the purchase price
paid by the Servicer is equal to the greater of (i) or (ii) above on
an after-tax basis. In the event of a purchase of all of the Mortgage
Loans and REO Property in such Group remaining in the Trust by the
Servicer pursuant to this Section 10.02(d), the Servicer shall deliver
to the Indenture Trustee for deposit into the Distribution Account an
amount in immediately available funds equal to the purchase price at
the time of such purchase.
(e) Prior to any proposed sale of any Mortgage Loans as REO
Property in a Group pursuant to Section 10.02(a), 10.02(b) or
10.02(c), the Trust shall give not less than ten business days notice
thereof to the Servicer, specifying the proposed purchase price and
date for the closing of such sale and offering to sell such Mortgage
Loans and/or REO Property to the Servicer at such price on such date.
The Servicer shall have ten days from its receipt of such notice to
accept or reject such offer. The failure to respond in writing within
such ten day period shall constitute rejection of such offer. If the
Servicer accepts such offer, the Trust shall sell, and the Servicer
shall purchase, on the date specified in the notice from the Trust
referred to above, such Mortgage Loans and/or REO Property described
in such notice on the date and at the price specified in such notice.
Upon any such purchase by the Servicer, the Servicer shall deliver to
the Indenture Trustee for deposit in the Distribution Account such
purchase price in immediately available funds.
59
(f) Upon certification to the Indenture Trustee by a Servicing
Officer (a copy of which certification shall be delivered to the
Insurer) of the deposit into the Distribution Account of the purchase
price of any Mortgage Loans and REO Properties sold pursuant to
Section 10.01(a), 10.01(c), 10.01(d) or 10.01(e), the Indenture
Trustee shall promptly release to the purchaser thereof the Mortgage
Files for such Mortgage Loans, and execute all assignments,
endorsements and other instruments necessary to effectuate such
transfer, subject to the requirements of Section 2.8 of the Indenture.
Section 10.03. [Reserved]
ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the Trust, the
Depositor, the Servicer and the Indenture Trustee without the consent of any of
the Noteholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the expectations of Securityholders, (ii) to correct, modify or
supplement any provisions herein, to modify, eliminate or add to any of its
provisions to such extent as shall be necessary to avoid or lessen the risk of
the imposition of any tax on the Trust pursuant to the Code that would be a
claim against the Trust Property, provided that the Indenture Trustee and the
Insurer have received an Opinion of Counsel to the effect that such action is
necessary or desirable to avoid or minimize the risk of the imposition of any
such tax and such action will not, as evidenced by such Opinion of Counsel,
adversely affect in any material respect the interests of any Securityholder,
(iii) to change the timing and/or nature of deposits in the Collection Account,
provided that such change will not, as evidenced by an Opinion of Counsel
delivered to the Indenture Trustee and the Insurer, adversely affect in any
material respect the interests of any Noteholder and that such change will not
adversely affect the then current rating or shadow rating assigned to any Class
A Notes, as evidenced by a letter from each Rating Agency to such effect, (iv)
to add to, modify or eliminate any provisions therein restricting transfers of
certain Securities, which are inserted in response to Code provisions, or (v) to
make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Indenture Trustee and the Insurer, adversely affect in
any material respect the interests of any Noteholder; provided, further, that if
the Person requesting such amendment delivers to the Indenture Trustee and the
Insurer written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to
60
revise or withdraw its then current rating or shadow rating each Class of the
Class A Notes, such amendment will be deemed to not adversely affect in any
material respect the interests of the Noteholders and no such Opinion of Counsel
shall be required.
This Agreement may also be amended from time to time by the
Trust, the Depositor, the Servicer and the Indenture Trustee with the consent of
the Insurer and the Noteholders of both Classes of Notes holding Notes
evidencing at least 66% of the aggregate Note Principal Balance of both Classes
of the Notes for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of both Classes Notes; provided, however,
that no such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, payments received on Mortgage Loans or payments which are
required to be deposited into the Collection Account or remitted to the
Indenture Trustee for deposit into the Distribution Account, (ii) adversely
affect in any material respect the interests of the Holders of any Class of
Notes in a manner, other than as described in (i), without the consent of the
Holders of both Classes of Notes evidencing at least 66% of the Note Principal
Balance of both Classes of the Notes, or (iii) modify the consents required by
the immediately preceding clauses (i) and (ii) without the consent of the
Insurer and the Holders of all Notes then outstanding. Notwithstanding the
foregoing, this Agreement may be amended by the Trust, the Depositor, the
Servicer, where applicable, and the Indenture Trustee provided that such action
is approved by Holders of Notes evidencing 100% of the Note Principal Balance of
each Class that, as evidenced by an Opinion of Counsel, is adversely affected in
any material respect by such action. For purposes of giving any such consent
(other than a consent to an action which would adversely affect in any material
respect the interests of the Noteholders, while the Servicer or any affiliate
thereof is the holder of a Class of Notes evidencing not less than 66% of the
Note Principal Balance of such Notes of the relevant Class or Classes), any such
Notes registered in the name of the Servicer or any affiliate thereof shall be
deemed not to be outstanding.
Any such amendment pursuant to the first paragraph of this
Section 12.01 shall not be deemed to adversely affect in any material respect
the interests of any Noteholder if such change is required by the Insurer, so
long as no Insurer Default has occurred and is continuing, and the Servicer
receives written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to reduce the then current rating or any shadow
rating of the affected Notes.
Promptly after the execution of any such amendment with the
consent of Holders the Indenture Trustee shall furnish a copy of such amendment
to the Trust and each Noteholder, the Rating Agencies and the Insurer.
It shall not be necessary for the consent of Noteholders under
this Section 12.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Indenture Trustee may prescribe.
61
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Indenture
Trustee.
The Indenture Trustee may, but shall not be obligated to enter
into any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the expense of the Trust, but only upon direction of
the Indenture Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Noteholders.
For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. [Reserved]
SECTION 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Trust, c/o Wilmington Trust Company, as Owner Trustee, Xxxxxx
Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000,
Attention: Corporate Trust Administration, (b) in the case of the Depositor, Xxx
Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Asset-Backed Finance Group
(phone number (000) 000-0000), or such other address or telecopy number as may
hereafter be furnished to the Servicer, the Insurer and the Indenture Trustee in
writing by the Depositor, (c) in the case of the Servicer, 0000 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxxxx Xxxxx
62
(telecopy number: (000) 000-0000, or such other address or telecopy number as
may hereafter be furnished to the Indenture Trustee and the Depositor in writing
by the Servicer, (d) in the case of the Indenture Trustee, First Union National
Bank, 000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000,
Attention: Corporate Trust Department (telecopy number 000-000-0000), or such
other address or telecopy number as may hereafter be furnished to the Servicer
and the Depositor in writing by the Indenture Trustee, (e) in the case of the
Insurer, Financial Security Assurance Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attention: Surveillance Department Re: HomeGold Home Equity Loan Trust 1999-1
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Indenture Trustee, the Depositor and the Servicer
in writing by the Insurer, and (f) in the case of the Back-up Servicer,
Fairbanks Capital Corp. [ ], Attention: [ ] (telecopy number [ ]) or such other
address or telecopy number as may hereafter be furnished to the Indenture
Trustee, the Depositor, the Servicer, and the Insurer in writing by the Back-up
Servicer. Any party hereto may change the address, telephone number or
telecopier number by notice to the other parties hereto in accordance with the
terms hereof. In each case in which a notice or other communication to the
Insurer refers to a Servicer Event of Default or a claim under the Policy or
with respect to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED." Any notice required or permitted to be given to a Noteholder
shall be given in the manner provided in Section 12.5 of the Indenture. Any
notice so given to a Noteholder within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice. A copy of any notice required to be telecopied
hereunder also shall be mailed to the appropriate party in the manner set forth
above.
Section 12.06. Severability of Provisions.
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 or of the Notes or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Insurer.
The Indenture Trustee shall use its best efforts promptly to
provide notice to the Rating Agencies and the Insurer with respect to each of
the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that has not
been cured or waived;
63
3. The resignation or termination of the Servicer or the
Indenture Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant to
or as contemplated by Section 2.05;
5. The final payment to the Holders of any Notes;
6. Any change in the location of the Collection Account;
7. Any event that would result in the inability of the
Indenture Trustee to make advances regarding delinquent
Mortgage Loans; and
8. Any Insurer Default that has not been cured.
In addition, the Indenture Trustee shall promptly furnish to each
Rating Agency and the Insurer copies of each report to Noteholders described in
Section 4.02 and the Servicer shall promptly furnish to each Rating Agency
copies of the following:
1. Each annual statement as to compliance described in Section
3.22; and
2. Each annual independent public accountants' servicing report
described in Section 3.23.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Xxxxx'x Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
and to Standard & Poor's Ratings Services, 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans and the other assets constituting the Trust
Property by the Depositor to the Trust as contemplated by this Agreement be, and
be treated for all purposes as, a sale by the Depositor to the Trust of the
Mortgage Loans and the other assets constituting the Trust Property. However, in
the event that, notwithstanding the intent of the parties, the Mortgage Loans
and the other assets constituting the Trust Property are held to continue to be
property of the Depositor then (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the
64
Uniform Commercial Code; (b) the transfer of the Mortgage Loans and the other
assets constituting the Trust Property provided for herein shall be deemed to be
a grant by the Depositor to the Trust of a security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans and the other
assets constituting the Trust Property and all amounts payable on the Mortgage
Loans in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property; (c) the possession by the Trust of Mortgage Loans and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trust for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Trust pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Servicer and the Depositor shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans and the other assets constituting the Trust Property, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and would be maintained as such throughout the
term of this Agreement.
65
IN WITNESS WHEREOF, the Trust, the Depositor, the Servicer and
the Indenture Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized, in each case as of the day and
year first above written.
HOMEGOLD HOME EQUITY LOAN TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:
-----------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By:
-----------------------------------------
Name:
Title:
HOMEGOLD, INC., as Servicer
By:
-----------------------------------------
Name: Xxxxx Xxxxx
Title: Executive Vice President
FAIRBANKS CAPITAL CORP., as Back-up Servicer
By:
-----------------------------------------
Name:
Title:
[Sale and Servicing Agreement]
FIRST UNION NATIONAL BANK, solely in its capacity as Indenture Trustee and not
in its individual capacity
By:
-------------------------------------------
Name: Pablo de la Canal
Title: Assistant Vice President
[Signature Page for Sale and Servicing Agreement]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of May, 1999, before me, a notary public in and
for said State, personally appeared ___________, known to me to be a __________
of Wilmington Trust Company, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary
public in and for said State, personally appeared [ ], known to
me to be a Vice President of Prudential Securities Secured Financing
Corporation, one of the corporations that executed the within instrument, and
also known to me to be the person who executed it on behalf of said corporation,
and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary public in and
for said State, personally appeared Xxxxx Xxxxx, known to me to be a Executive
Vice President of HomeGold, Inc., one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of May, 1999, before me, a notary public in
and for said State, personally appeared Pablo de la Canal, known to me to be an
officer of First Union National Bank, a national banking association that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the [ ] day of March, 1999, before me, a notary public
in and for said State, personally appeared [ ], known to me to be an
officer of Fairbanks Capital Corp. a [ ] corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said banking association, and acknowledged to me that such banking association
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------------
Notary Public
[Seal]
EXHIBIT A
GLOSSARY OF DEFINED TERMS
[See Separate Document]
A-1
EXHIBIT B
[RESERVED]
B-1
EXHIBIT C-1
FORM OF INDENTURE TRUSTEE'S INITIAL CERTIFICATION
__________, 1999
HomeGold Home Equity Loan Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Asset-Backed Finance Group
HomeGold, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Re: Sale and Servicing Agreement, dated as of May 1, 1999, among
HomeGold Home Equity Loan Trust 1999-1, Prudential Securities
Secured Financing Corporation, Fairbanks Capital Corp., HomeGold,
Inc. and First Union National Bank (the "Agreement")
----------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Agreement, we certify that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in the exception
report annexed hereto as not being covered by this certification), (i) the
Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Indenture Trustee's preliminary exceptions in
accordance with Section 2.04 of the Agreement. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
The Indenture Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in
C-1-1
the Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability due authorization,
recordability or genuineness of any of the documents contained in the Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
X-0-0
XXXXXXX X-0
XXXX XX XXXXXXXXX TRUSTEE'S FINAL CERTIFICATION
_________, 1999
HomeGold Home Equity Loan Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Asset-Backed Finance Group
HomeGold, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Re: Sale and Servicing Agreement, dated as of May 1, 1999, among
HomeGold Home Equity Loan Trust 1999-1, Prudential Securities
Secured Financing Corporation, Fairbanks Capital Corp., HomeGold,
Inc., and First Union National Bank (the "Agreement")
-----------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.04 of the Agreement, the
undersigned, as Indenture Trustee, hereby certifies that as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on the attachment hereto), it or a Custodian on its behalf has
received:
(a) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost;
(b) an original recorded Assignment of the Mortgage to the
Indenture Trustee together with the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment
from the originator, or a certified copy of such Assignments in those
instances where the public recording retains the original or where
original has been lost; and
C-2-1
(c) the original lender's title insurance policy.
The Indenture Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any of
the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:
-------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
C-2-2
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
D-1
Exhibit E-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Indenture Trustee/Custodian
Name: First Union National Bank
Address: 000 X. Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000
Indenture Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: Xxx Xxx Xxxx Xxxxx, Xxx Xxxx 00000
Trust
Name: HomeGold Home Equity Loan Trust 1999-1
Address: c/o Wilmington Trust Company, Owner Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Corporate Trust Office
Securities: HomeGold Home Equity Loan Asset Backed Notes,
Series 1999-1.
E-1-1
The undersigned Servicer hereby acknowledges that it has
received from First Union National Bank, as Indenture Trustee for the Holders of
HomeGold Home Equity Loan Asset Backed Notes, Series 1999-1, the documents
referred to below (the "Documents"). All capitalized terms not otherwise in this
Request for Release shall have the meanings given them in the Sale and Servicing
Agreement, dated as of May 1, 1999, among the Indenture Trustee, the Trust, the
Depositor, the Back-up Servicer and the Servicer (the "Sale and Servicing
Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum
of $________, made by ______________, payable to, or endorsed to the
order of, the Indenture Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________
in the County Recorder's Office of the County of _______________, State
of _______________ in book/reel/docket _________________ of official
records at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________
in the County Recorder's Office of the County of _______________, State
of ________________ in book/reel/docket ________________ of official
records at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Indenture Trustee,
recorded on ______ as instrument no. _______ in the County Recorder's
Office of the County of ______________, State of ______________ in
book/reel/docket __________ of official records at page/image
-----------.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Indenture Trustee, solely for
the purposes provided in the Agreement and the Indenture.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other impositions nor shall
the Servicer assert or seek to assert any claims or rights of setoff to
or against the Documents or any proceeds thereof.
E-1-2
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Indenture Trustee
when the need therefor no longer exists, unless the Mortgage Loan
relating to the Documents has been liquidated and the proceeds thereof
have been remitted to the Collection Account and except as expressly
provided in the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Servicer shall at all times be earmarked for the account of the
Indenture Trustee, and the Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
Dated:
HOMEGOLD, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
E-1-3
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICER'S CERTIFICATE AND TRUST RECEIPT
HOMEGOLD HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 1999-1
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE SALE AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SALE AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
E-2
Schedule 1
MORTGAGE LOAN SCHEDULE
