ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
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This is an Assignment, Assumption and Recognition Agreement made this 30th
day of September, 1998, among Salomon Brothers Realty Corp. (the "Seller"),
Wilshire Real Estate Investment Trust Inc. (the "Purchaser") and National
Mortgage Sales Corporation (the "Company").
In consideration of the mutual promises contained herein the parties hereto
agree that the mortgage loans listed on Exhibit One annexed hereto (the
"Mortgage Loans") now interim serviced by the Company for the Seller pursuant to
the Mortgage Loan Purchase and Interim Servicing Agreement (the "Purchase
Agreement"), dated as of September 1, 1998, between the Seller and the Company
shall be subject to the terms of this Agreement.
WARRANTIES
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1. (a) The Company and the Seller warrant and represent that attached
hereto as EXHIBIT TWO is a true, accurate and complete copy of the Purchase
Agreement, which Purchase Agreement is in full force and effect as of the date
hereof and which has not been amended or modified in any respect nor has any
notice of termination been given thereunder.
(b) The Seller warrants and represents that it is the lawful owner of
the Mortgage Loans with the full right to transfer the Mortgage Loans free from
any claim or encumbrance whatsoever.
(c) The Seller hereby warrants and represents to the Purchaser that
no event has occurred from September 29, 1998 with respect to a Mortgage Loan to
the date hereof that would result in any representation and warranty made
pursuant to Subsection 7.02 of the Purchase Agreement being untrue if made as of
the date hereof with respect to the Mortgage Loans (other than any statistical
information with respect to the Mortgage Loans and any changes due to the
receipt of payments on the Mortgage Loans, adjustment of the Mortgage Interest
Rates on the Mortgage Loans and similar changes, which information as reflected
on EXHIBIT ONE hereto is accurate in all material respects as of September 1,
1998). In the event of a breach of the foregoing representation and warranty
which materially and adversely affects the value of any Mortgage Loan or the
Purchaser's interest therein, the Seller shall repurchase such affected Mortgage
Loan at a repurchase price equal to the unpaid principal balance of such
Mortgage Loan plus accrued interest at the net Mortgage Interest Rate from the
paid through date of the Mortgage Loan to the first day of the month following
the month in which such repurchase is effected; provided, that to the extent
that the Company would otherwise be required to repurchase a Mortgage Loan due
to the breach of any of the representations and warranties that are made or
deemed to have been made by the Company as of September 29, 1998, then the
Company (and not the Seller) shall be required to repurchase the affected
Mortgage Loan, and the Purchaser shall have no remedy against the Seller. It is
understood and agreed that the obligations of the Seller set forth in this
Section 1(c) to repurchase an affected Mortgage Loan constitutes the sole remedy
of the Purchaser respecting a breach of the representation and warranty made in
this Section 1(c).
ASSIGNMENT AND ASSUMPTION
-------------------------
2. The Seller hereby assigns to the Purchaser (i) all of its right, title
and interest in and to the Mortgage Loans and (ii) all of its right, title, and
interest in, to, and under the Purchase Agreement to the extent of the Mortgage
Loans, and the Purchaser hereby assumes all of the Seller's obligations under
the Purchase Agreement with respect to the Mortgage Loans from and after the
date hereof, and the parties hereto agree that the Seller shall be relieved and
released of all of its obligations under the Purchase Agreement to the extent of
the Mortgage Loans from and after the date hereof.
RECOGNITION OF THE PURCHASER
----------------------------
3. From and after the date hereof, the Company shall recognize the
Purchaser as the owner of the Mortgage Loans and will interim service the
Mortgage Loans for the Purchaser as if the Purchaser and the Company had entered
into a separate servicing agreement for the servicing of the Mortgage Loans in
the form of the Purchase Agreement, the terms of which are incorporated herein
by reference. It is the intention of the Seller, the Company and the Purchaser
that this Agreement will be a separate and distinct agreement, and the entire
agreement, between the Company and the Purchaser to the extent of the Mortgage
Loans and shall be binding upon and for the benefit of the respective successors
and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SALOMON BROTHERS REALTY CORP.,
Seller
By:____________________________
Name:__________________________
Title:_________________________
WILSHIRE REAL ESTATE INVESTMENT
TRUST, INC.
Purchaser
By:____________________________
Name:__________________________
Title:_________________________
NATIONAL MORTGAGE SALES
CORPORATION
Company
By:____________________________
Name:__________________________
Title:_________________________
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MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT
________________________________
SALOMON BROTHERS REALTY CORP.
Initial Purchaser
________________________________
NATIONAL MORTGAGE SALES CORPORATION
Seller and Interim Servicer
________________________________
Dated as of September 1, 1998
Adjustable Rate Mortgage Loans
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TABLE OF CONTENTS
Page
SECTION 1. Definitions............................................................................. 1
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SECTION 2. Agreement to Purchase................................................................... 12
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SECTION 3. Mortgage Loan Schedule.................................................................. 12
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SECTION 4. Purchase Price.......................................................................... 12
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SECTION 5. Examination of Mortgage Files........................................................... 13
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SECTION 6. Conveyance from Seller to Initial Purchaser............................................. 14
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Subsection 6.01. Conveyance of Mortgage Loans; Possession of Servicing Files.................. 14
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Subsection 6.02. Books and Records............................................................ 15
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Subsection 6.03. Delivery of Mortgage Loan Documents.......................................... 15
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SECTION 7. Representations, Warranties and Covenants of the Seller; Remedies for Breach............ 16
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Subsection 7.01. Representations and Warranties Respecting the Seller......................... 16
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Subsection 7.02. Representations and Warranties Regarding Individual Mortgage Loans........... 18
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Subsection 7.03. Remedies for Breach of Representations and Warranties........................ 24
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Subsection 7.04 Repurchase of Certain Mortgage Loans......................................... 26
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Subsection 7.05 Principal Prepayments in Full................................................ 27
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SECTION 8. Closing................................................................................. 27
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SECTION 9. Closing Documents....................................................................... 28
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SECTION 10. Costs................................................................................... 29
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SECTION 11. Seller's Servicing Obligations.......................................................... 29
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Subsection 11.01 Seller to Act as Servicer.................................................... 29
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Subsection 11.02 Collection of Mortgage Loan Payments......................................... 30
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Subsection 11.03 Realization Upon Defaulted Mortgage Loans.................................... 30
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Subsection 11.04 Establishment of Custodial Accounts; Deposits in Custodial Accounts.......... 32
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Subsection 11.05 Permitted Withdrawals From the Custodial Account............................. 34
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Subsection 11.06 Establishment of Escrow Accounts: Deposits in Escrow Accounts................ 35
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Subsection 11.07 Permitted Withdrawals From Escrow Account.................................... 35
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Subsection 11.08 Payment of Taxes, Insurance and Other Charges................................ 36
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i
Subsection 11.09 Transfer of Accounts.......................................................... 36
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Subsection 11.10 Maintenance of Hazard Insurance............................................... 36
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Subsection 11.11 Maintenance of Mortgage Impairment Insurance Policy........................... 37
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Subsection 11.12 Fidelity Bond; Errors and Omissions Insurance................................. 38
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Subsection 11.13 Title, Management and Disposition of REO Property............................. 38
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Subsection 11.14 Distributions................................................................. 40
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Subsection 11.15 Remittance Reports............................................................ 41
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Subsection 11.16 Statements to the Purchaser................................................... 41
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Subsection 11.17 Real Estate Owned Reports..................................................... 42
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Subsection 11.18 Liquidation Reports........................................................... 42
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Subsection 11.19 Assumption Agreements......................................................... 42
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Subsection 11.20 Satisfaction of Mortgages and Release of Mortgage Files....................... 43
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Subsection 11.21 Servicing Advance Reimbursement............................................... 44
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Subsection 11.22 Servicing Compensation........................................................ 44
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Subsection 11.23 Statement as to Compliance.................................................... 44
--------------------------
Subsection 11.24 Independent Public Accountants' Servicing Report.............................. 45
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Subsection 11.25 Access to Certain Documentation............................................... 45
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Subsection 11.26 Notification of Adjustments................................................... 46
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Subsection 11.27 Sub-Servicing Agreements Between Seller and Sub-Servicers..................... 46
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Subsection 11.28 Successor Sub-Servicers....................................................... 47
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Subsection 11.29 Liability of the Seller....................................................... 47
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Subsection 11.30 No Contractual Relationship Between Sub-Servicers and Purchaser............... 48
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SECTION 12. [Reserved]............................................................................... 48
SECTION 13. The Seller............................................................................... 48
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Subsection 13.01. Additional Indemnification by the Seller...................................... 48
----------------------------------------
Subsection 13.02. Merger or Consolidation of the Seller......................................... 48
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Subsection 13.03. Limitation on Liability of the Seller and Others.............................. 49
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Subsection 13.04. Seller Not to Resign.......................................................... 49
--------------------
Subsection 13.05. No Transfer of Servicing...................................................... 49
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SECTION 14. Default.................................................................................. 50
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Subsection 14.01. Events of Default............................................................. 50
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Subsection 14.02. Waiver of Defaults............................................................ 51
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SECTION 15. Termination.............................................................................. 51
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SECTION 16. Successor to the Seller.................................................................. 52
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SECTION 17. Financial Statements..................................................................... 53
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SECTION 18. Mandatory Delivery; Grant of Security Interest........................................... 53
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ii
SECTION 19. Notices...................................................................... 54
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SECTION 20. Severability Clause.......................................................... 54
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SECTION 21. Counterparts................................................................. 55
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SECTION 22. Governing Law................................................................ 55
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SECTION 23. Intention of the Parties..................................................... 55
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SECTION 24. Successors and Assigns....................................................... 55
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SECTION 25. Waivers...................................................................... 56
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SECTION 26. Exhibits..................................................................... 56
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SECTION 27. Nonsolicitation.............................................................. 56
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SECTION 28. General Interpretive Principles.............................................. 56
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SECTION 29. Reproduction of Documents.................................................... 56
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SECTION 30. Further Agreements........................................................... 57
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iii
EXHIBITS
EXHIBIT 1 FORM OF SELLER'S OFFICER'S CERTIFICATE
EXHIBIT 2 FORM OF OPINION OF COUNSEL TO THE SELLER
EXHIBIT 3 [INTENTIONALLY OMITTED]
EXHIBIT 4 CONTENTS OF EACH MORTGAGE FILE
EXHIBIT 5 FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT 6 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT 7 MORTGAGE LOAN DOCUMENTS
EXHIBIT 8 FORM OF MONTHLY DATA REPORT
SCHEDULE I MORTGAGE LOAN SCHEDULE
iv
MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT
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This is a MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT (the
"Agreement"), dated as of September 1, 1998, by and between Salomon Brothers
Realty Corp., having an office at Seven World Trade Center, New York, New York
10048 (the "Initial Purchaser," and the Initial Purchaser or the Person, if any,
to which the Initial Purchaser has assigned its rights and obligations hereunder
as Purchaser with respect to a Mortgage Loan, and each of their respective
successors and assigns, the "Purchaser") and National Mortgage Sales
Corporation, having an office at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000X, Xxxxxxxxx,
Xxxxxxxx 00000-0000 (the "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, certain pools of 6 month LIBOR
adjustable rate mortgage loans (the "Mortgage Loans") as described herein on a
servicing released basis, and which shall be delivered as whole loans on the
date provided herein (the "Closing Date");
WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or
other security instrument creating a first lien on a residential dwelling
located in the jurisdiction indicated on the Mortgage Loan Schedule, which is to
be annexed hereto on the Closing Date as Schedule I;
----------
WHEREAS, the Purchaser and the Seller wish to prescribe the manner of
the conveyance, interim servicing and control of the Mortgage Loans; and
WHEREAS, following its purchase of the Mortgage Loans from the Seller,
the Purchaser desires to sell some or all of the Mortgage Loans to one or more
purchasers as a whole loan transfer in a whole loan or participation format or a
public or private mortgage-backed securities transaction;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Purchaser and the Seller agree
as follows:
SECTION 1. Definitions. For purposes of this Agreement the following
-----------
capitalized terms shall have the respective meanings set forth below.
Adjustment Date: With respect to each Mortgage Loan, the date set
---------------
forth in the related Mortgage Note on which the Mortgage Interest Rate on the
Mortgage Loan is adjusted in accordance with the terms of the Mortgage Note.
Agreement: This Mortgage Loan Purchase and Interim Servicing
---------
Agreement including all exhibits, schedules, amendments and supplements hereto.
Appraised Value: With respect to any Mortgaged Property, the lesser
---------------
of (i) the value thereof as determined by an appraisal made for the originator
of the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements for appraisers set forth in the NMC
Non-Conforming Program Guide, and (ii) the purchase price paid for the related
Mortgaged Property by the Mortgagor with the proceeds of the Mortgage Loan,
provided, however, in the case of a Refinanced Mortgage Loan, such value of the
Mortgaged Property is based solely upon the value determined by an appraisal
made for the originator of such Refinanced Mortgage Loan at the time of
origination of such Refinanced Mortgage Loan by an appraiser who met the minimum
requirements for appraisers set forth in the NMC Non-Conforming Program Guide.
Each appraisal was performed in accordance with the requirements of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989.
Assignment of Mortgage: An individual assignment of the Mortgage,
----------------------
notice of transfer or equivalent instrument in recordable form, sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located,
when the Purchaser's name is filled in as the assignee, to give record notice of
the sale of the Mortgage to the Purchaser.
Bankruptcy Act: The Bankruptcy Reform Act of 1978, as amended (Title
--------------
11 of the United States Code).
Business Day: Any day other than a Saturday or Sunday, or a day on
------------
which banking and savings and loan institutions in the State of Colorado or the
State of New York are authorized or obligated by law or executive order to be
closed.
Cash-Out Refinancing: A Refinanced Mortgage Loan the proceeds of
--------------------
which were in excess of the principal balance of all existing mortgage loans
secured by the related Mortgaged Property and related closing costs, and were
used to pay off all liens on the related Mortgaged Property and related closing
costs, and, in some cases, other indebtedness of the Mortgagor, and in
connection with which the Mortgagor retains one percent or more of the principal
balance of the Refinanced Mortgage Loan after the pay-off of such liens and
indebtedness.
Closing Date: September 29, 1998.
------------
Closing Documents: The documents required pursuant to Section 9.
-----------------
Code: The Internal Revenue Code of 1986, or any successor statute
----
thereto.
Condemnation Proceeds: All awards, compensation and settlements in
---------------------
respect of a taking of all or part of a Mortgaged Property by exercise of the
power of condemnation or the right of eminent domain.
3
Confirmation: With respect to the Mortgage Loans purchased and sold
------------
on the Closing Date, the letter agreement, dated September 18, 1998, between the
Initial Purchaser and the Seller, setting forth the terms and conditions of such
transaction and describing the Mortgage Loans to be purchased by the Purchaser
on the Closing Date.
Custodial Account: The separate account or accounts, each of which
-----------------
shall be an Eligible Account, created and maintained by the Seller or a Sub-
Servicer pursuant to this Agreement, which shall be entitled
"__________________________, as servicer, in trust for the Purchaser and various
Mortgagors, Adjustable Rate Mortgage Loans".
Cut-off Date: September 1, 1998.
------------
Debt Consolidation Refinancing: A Refinanced Mortgage Loan, the
------------------------------
proceeds of which were used to satisfy the then-existing first mortgage loan and
any subordinated mortgage loan(s) and other liens on the related Mortgaged
Property and to pay related closing costs, and which were used to pay other
indebtedness of the Mortgagor, and in connection with which the Mortgagor
retains either no cash or cash in an amount less than one percent of the initial
principal balance of such Refinanced Mortgage Loan from the proceeds of such
Refinanced Mortgage Loan.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by
---------------------
a Qualified Substitute Mortgage Loan.
Determination Date: With respect to each Distribution Date, the
------------------
fifteenth (15th) day of the calendar month in which such Distribution Date
occurs or, if such fifteenth (15th) day is not a Business Day, the Business Day
immediately preceding such fifteenth (15th) day.
Distribution Date: The eighteenth (18th) day of each month,
-----------------
commencing on the eighteenth (18th) day of the month next following the month in
which the Cut-off Date occurs, or if such eighteenth (18th) day is not a
Business Day, the first Business Day immediately following such eighteenth
(18th) day.
Due Date: With respect to each Distribution Date, the day of the
--------
calendar month in which such Distribution Date occurs, which is the day on which
the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
Due Period: With respect to each Distribution Date, the period
----------
commencing on the second day of the month preceding the month of the
Distribution Date and ending on the first day of the month of the Distribution
Date.
Eligible Account: Either (i) an account or accounts maintained with a
----------------
federal or state chartered depository institution or trust company, the short-
term unsecured debt obligations
4
of which (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the short-term unsecured debt
obligations of such holding company) are rated A-1 by S&P or Prime-1 by Xxxxx'x
(or a comparable rating if another rating agency is specified by the Initial
Purchaser by written notice to the Seller) at the time any amounts are held on
deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity. Eligible Accounts may bear interest.
Escrow Account: The separate trust account or accounts created and
--------------
maintained by the Seller or a Sub-Servicer pursuant to this Agreement which
shall be entitled "__________________________, as servicer, in trust for the
Purchaser and various Mortgagors, Adjustable Rate Mortgage Loans."
Escrow Payments: The amounts constituting ground rents, taxes,
---------------
assessments, water charges, sewer rents, Primary Mortgage Insurance Policy
premiums, fire and hazard insurance premiums and other payments required to be
escrowed by the Mortgagor with the Mortgagee pursuant to the terms of any
Mortgage Note or Mortgage.
Event of Default: Any one of the events enumerated in Subsection
----------------
14.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
-----
thereto.
Final Recovery Determination: With respect to any defaulted Mortgage
----------------------------
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller pursuant to this Agreement), a determination made by the Seller
that all Insurance Proceeds, Liquidation Proceeds and other payments or
recoveries which the Seller, in its reasonable good faith judgment, expects to
be finally recoverable in respect thereof have been so recovered. The Seller
shall maintain records, prepared by a servicing officer of the Seller, of each
Final Recovery Determination.
FNMA: The Federal National Mortgage Association or any successor
----
thereto.
Gross Margin: With respect to any Mortgage Loan, the fixed percentage
------------
amount set forth in the related Mortgage Note and the Mortgage Loan Schedule
that is added to the Index on each Adjustment Date in accordance with the terms
of the related Mortgage Note to determine the new Mortgage Interest Rate for
such Mortgage Loan.
5
HUD: The United States Department of Housing and Urban Development or
---
any successor thereto.
Index: On each Adjustment Date, the applicable index shall be a rate
-----
per annum equal to the average of interbank offered rates for six-month U.S.
dollar deposits in the London Market based on quotations of major banks, as
published by The Wall Street Journal, using the most recent figure available as
-----------------------
of the first Business Day of the month immediately preceding the month in which
each Adjustment Date occurs. If the Index ceases to be available, the Seller
shall choose a new Index based on comparable information.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds of
------------------
insurance policies insuring the Mortgage Loan or the related Mortgaged Property.
Initial Purchaser: Salomon Brothers Realty Corp. or any successor.
-----------------
Interim Servicing Period: With respect to any Mortgage, the period
------------------------
during which the Seller shall service the Mortgage Loans in accordance with the
provisions of this Agreement, commencing on the Closing Date and ending on the
earlier to occur of (i) the close of business on the thirtieth (30th) day
following the Closing Date (or if such day is not a Business Day, the Business
Day immediately following such day), or such later date as specified by the
Purchaser at its sole discretion in a written notice from the Purchaser to the
Seller or (ii) such date as of which the Purchaser and Seller agree to terminate
such period.
Liquidation Event: With respect to any Mortgage Loan or REO Property,
-----------------
either of the following events: (i) a Final Recovery Determination is made as
to such Mortgage Loan or REO Property; or (ii) such Mortgage Loan or REO
Property is removed from this Agreement by reason of its being repurchased, sold
or replaced pursuant to or as contemplated by any provision of this Agreement.
Liquidation Proceeds: Amounts, other than Insurance Proceeds and
--------------------
Condemnation Proceeds, received in connection with the liquidation of a
defaulted Mortgage Loan through trustee's sale, foreclosure sale or otherwise,
other than amounts received following the acquisition of REO Property.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan as of
------------------- ---
any date of determination, the ratio on such date of the outstanding principal
amount of the Mortgage Loan to the Appraised Value of the Mortgaged Property.
Maximum Mortgage Interest Rate: With respect to each Mortgage Loan, a
------------------------------
rate that is set forth on the Mortgage Loan Schedule and in the related Mortgage
Note and is the maximum interest rate to which the Mortgage Interest Rate on
such Mortgage Loan may be increased on any Adjustment Date.
6
Minimum Mortgage Interest Rate: With respect to each Mortgage Loan, a
------------------------------
rate that is set forth on the Mortgage Loan Schedule and in the related Mortgage
Note and is the minimum interest rate to which the Mortgage Interest Rate on
such Mortgage Loan may be decreased on any Adjustment Date.
Monthly Payment: With respect to any Mortgage Loan, the scheduled
---------------
combined payment of principal and interest payable by a Mortgagor under the
related Mortgage Note on each Due Date, which may be changed on any Adjustment
Date as provided in the related Mortgage Note.
Moody's: Xxxxx'x Investors Service, Inc. or its successor in
-------
interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first lien on Mortgaged Property securing the Mortgage Note.
Mortgagee: The mortgagee or beneficiary named in the Mortgage and the
---------
successors and assigns of such mortgagee or beneficiary.
Mortgage File: The items pertaining to a particular Mortgage Loan
-------------
referred to in Exhibit 4 annexed hereto, and any additional documents required
---------
to be added to the Mortgage File pursuant to this Agreement.
Mortgage Interest Rate: With respect to each Mortgage Loan, the
----------------------
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate, (i) as
of any date of determination until the first Adjustment Date following the Cut-
off Date shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Interest Rate in effect immediately following the Cut-off Date and (ii)
as of any date of determination thereafter shall be the rate as adjusted on the
most recent Adjustment Date, to equal the sum of the applicable Index plus the
related Gross Margin rounded, in some cases, to the next highest multiple of
0.125%, and, in other cases, to the nearest multiple of 0.125%; provided that
the Mortgage Interest Rate on such Mortgage Loan on any Adjustment Date shall
never be (a) more than the lesser of (1) the sum of the Mortgage Interest Rate
in effect immediately prior to the Adjustment Date plus the related Periodic
Rate Cap, if any, and (2) the related Maximum Mortgage Interest Rate or, (b)
less than the greater of (1) the remainder of the Mortgage Interest Rate in
effect immediately prior to the Adjustment Date minus the related Periodic Rate
Cap, if any, and (2) the related Minimum Mortgage Interest Rate.
Mortgage Loan: Each mortgage loan sold, assigned and transferred to
-------------
the Purchaser pursuant to this Agreement and identified on the Mortgage Loan
Schedule annexed to this Agreement on such Closing Date, which Mortgage Loan
includes without limitation the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds,
7
Condemnation Proceeds, Insurance Proceeds, REO Disposition proceeds, and all
other rights, benefits, proceeds and obligations arising from or in connection
with such Mortgage Loan.
Mortgage Loan Documents: The documents listed in Exhibit 7 hereto
----------------------- ---------
pertaining to any Mortgage Loan.
Mortgage Loan Schedule: The schedule of Mortgage Loans to be annexed
----------------------
hereto as Schedule I on the Closing Date which shall be delivered not less than
----------
three (3) days prior to the Closing Date in both hard copy and floppy disk, such
schedule setting forth the following information with respect to each Mortgage
Loan: (1) the Seller's Mortgage Loan identifying number; (2) the Mortgagor's
first and last name; (3) the street address of the Mortgaged Property including
the state and zip code; (4) a code indicating whether the Mortgaged Property is
owner-occupied; (5) the type of Residential Dwelling constituting the Mortgaged
Property; (6) the original number of months to maturity; (7) the original date
of the Mortgage; (8) the Loan-to-Value Ratio at origination; (9) the Mortgage
Interest Rate in effect immediately following the Cut-off Date; (10) the date on
which the first Monthly Payment was or is to be due on the Mortgage Loan; (11)
the stated maturity date; (12) the amount of the Monthly Payment at origination;
(13) the amount of the Monthly Payment as of the Cut-off Date; (14) the last Due
Date on which a Monthly Payment was actually applied to the unpaid Stated
Principal Balance; (15) the original principal amount of the Mortgage Loan; (16)
the Stated Principal Balance of the Mortgage Loan as of the close of business on
the Cut-off Date; (17) the first Adjustment Date; (18) the Gross Margin; (19) a
code indicating the purpose of the loan (i.e., purchase financing, Rate/Term
Refinancing, Cash-Out Refinancing, Debt-Consolidation Refinancing); (20) the
Maximum Mortgage Interest Rate under the terms of the Mortgage Note; (21) the
Minimum Mortgage Interest Rate under the terms of the Mortgage Note; (22) the
Mortgage Interest Rate at origination; (23) the Periodic Rate Cap; (24) a code
indicating the documentation style (i.e., full, alternative or reduced); (25) a
code indicating if the Mortgage Loan is subject to a Primary Mortgage Insurance
Policy; (26) the first Adjustment Date immediately following the Cut-off Date;
(27) the Index; (28) the Appraised Value of the Mortgaged Property; (29) the
sale price of the Mortgaged Property, if applicable; (30) the actual unpaid
principal balance of the Mortgage Loan as of the Cut-off Date; (31) the
Servicing Fee; and (32) the combined Loan-to-Value Ratio at origination. With
respect to the Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall
set forth the following information, as of the Cut-off Date: (1) the number of
Mortgage Loans; (2) the current principal balance of the Mortgage Loans; (3) the
weighted average Mortgage Interest Rate of the Mortgage Loans; and (4) the
weighted average remaining term to maturity of the Mortgage Loans.
Mortgage Note: The original executed note or other evidence of the
-------------
Mortgage Loan indebtedness of a Mortgagor.
8
Mortgaged Property: The Mortgagor's real property securing repayment
------------------
of a related Mortgage Note, consisting of a fee simple interest in a single
contiguous parcel of real property improved by a Residential Dwelling.
Mortgagor: The obligor on a Mortgage Note, the owner of the Mortgaged
---------
Property and the grantor or mortgagor named in the related Mortgage and such
grantor's or mortgagor's successor's in title to the Mortgaged Property.
Net Mortgage Rate: With respect to any Mortgage Loan (or the related
-----------------
REO Property), as of any date of determination, a per annum rate of interest
equal to the then applicable Mortgage Interest Rate for such Mortgage Loan minus
the Servicing Fee Rate.
NMC Non-Conforming Program Guide: National Mortgage Corporation's "NMC
--------------------------------
Non-Conforming Program Guide", as in effect on the Closing Date and as
identified to the Initial Purchaser by the Seller in connection with the Initial
Purchaser's examination of Mortgage Files pursuant to Section 5.
Officer's Certificate: A certificate signed by the President or an
---------------------
Executive Vice President or a Vice President, and by the Treasurer or the
Secretary or one of the Assistant Treasurers or Assistant Secretaries of the
Person on behalf of whom such certificate is being delivered.
Opinion of Counsel: A written opinion of counsel, who may be salaried
------------------
counsel for the Person on behalf of whom the opinion is being given, reasonably
acceptable to each Person to whom such opinion is addressed.
Pass-Through Transfer: The sale or transfer of some or all of the
---------------------
Mortgage Loans by the Purchaser to a trust to be formed as part of a publicly
issued or privately placed mortgage-backed securities transaction.
Periodic Rate Cap: With respect to each Mortgage Loan and any
-----------------
Adjustment Date therefor, a number of percentage points per annum that is set
forth in the Mortgage Loan Schedule and in the related Mortgage Note, which is
the maximum amount by which the Mortgage Interest Rate for such Mortgage Loan
may increase (without regard to the Maximum Mortgage Interest Rate) or decrease
(without regard to the Minimum Mortgage Interest Rate) on such Adjustment Date
from the Mortgage Interest Rate in effect immediately prior to such Adjustment
Date.
Person: An individual, corporation, partnership, joint venture,
------
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
9
Preliminary Servicing Period: With respect to any Mortgage Loan, the
----------------------------
period commencing on the Closing Date and ending on the date the Seller enters
into a Reconstitution Agreement which amends or restates the servicing
provisions of this Agreement.
Principal Prepayment: Any payment or other recovery of principal on a
--------------------
Mortgage Loan which is received in advance of its scheduled Due Date, including
any prepayment penalty or premium thereon (which, if such penalty or premium has
been waived by the Seller or an affiliate of the Seller or otherwise not
collected despite still being in effect, shall be paid by the Seller to the
Purchaser), which is not accompanied by an amount of interest representing
scheduled interest due on any date or dates in any month or months subsequent to
the month of prepayment.
Purchase Price: The price paid on the Closing Date by the Purchaser
--------------
to the Seller pursuant to the Confirmation in exchange for the Mortgage Loans
purchased on the Closing Date as calculated as provided in Section 4.
Qualified Substitute Mortgage Loan: A mortgage loan substituted for a
----------------------------------
Deleted Mortgage Loan pursuant to the terms of this Agreement which must, on the
date of such substitution, (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the Stated Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Interest Rate not
less than (and not more than one percentage point in excess of) the Mortgage
Interest Rate of the Deleted Mortgage Loan, (iii) have a Net Mortgage Rate equal
to the Net Mortgage Rate of the Deleted Mortgage Loan, (iv) have a remaining
term to maturity not greater than (and not more than one year less than) that of
the Deleted Mortgage Loan, (v) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (vi) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (vii) conform to each representation and warranty
set forth in Subsection 7.02 of this Agreement and (viii) have a per annum rate
at which the Servicing Fee accrues equal to 0.50% per annum. In the event that
one or more mortgage loans are substituted for one or more Deleted Mortgage
Loans, the amounts described in clause (i) hereof shall be determined on the
basis of aggregate principal balances, the Mortgage Interest Rates described in
clause (ii) hereof shall be determined on the basis of weighted average Mortgage
Interest Rates, the Net Mortgage Rates described in clause (iii) hereof shall be
determined on the basis of weighted average Net Mortgage Rates satisfied as to
each such mortgage loan, the terms described in clause (iv) shall be determined
on the basis of weighted average remaining terms to maturity, the Loan-to-Value
Ratios described in clause (vi) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (vii) hereof must be
satisfied as to each Qualified Substitute Mortgage Loan or in the aggregate, as
the case may be.
10
Rate/Term Refinancing: A Refinanced Mortgage Loan, the proceeds of
---------------------
which were used to satisfy the then-existing first mortgage loan and any
subordinated mortgage loan(s) and other liens on the related Mortgaged Property
and to pay related closing costs, but were not used to pay any other
indebtedness of the Mortgagor, and in connection with which the Mortgagor
retains either no cash or cash in an amount less than one percent of the initial
principal balance of such Refinanced Mortgage Loan from the proceeds of such
Refinanced Mortgage Loan.
Reconstitution Agreement: Any agreement or agreements entered into by
------------------------
the Seller and the Purchaser, with or without any third Persons, on any
Reconstitution Date with respect to a Pass-Through Transfer or Whole Loan
Transfer of one or more Mortgage Loans serviced hereunder.
Reconstitution Date: The date or dates on which any or all of the
-------------------
Mortgage Loans serviced under this Agreement shall be removed from this
Agreement and reconstituted as part of a Whole Loan Transfer or Pass-Through
Transfer pursuant to Section 12 hereof.
Record Date: With respect to each Distribution Date, the last
-----------
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
Refinanced Mortgage Loan: A Mortgage Loan the proceeds of which were
------------------------
not used to purchase the related Mortgaged Property.
REMIC: A "real estate mortgage investment conduit" within the meaning
-----
of Section 860D of the Code.
REO Account: The separate trust account or accounts created and
------------
maintained by the Seller or a Sub-Servicer pursuant to this Agreement which
shall be entitled "____________________, in trust for the Purchaser, as of [date
of acquisition of title], Adjustable Rate Mortgage Loans".
REO Disposition: The final sale by the Seller of any REO Property.
---------------
REO Property: A Mortgaged Property acquired as a result of the
------------
liquidation of a Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan, a price equal to
----------------
(i)(A) prior to the earlier of the Reconstitution Date with respect to the
Mortgage Loan, or twelve (12) months after the date hereof, the product of the
Stated Principal Balance of such Mortgage Loan times the greater of (x) the
Purchase Price percentage as stated in the Confirmation and (y) 100%, and (B)
thereafter, the Stated Principal Balance of such Mortgage Loan, plus (ii)
interest on such Stated Principal Balance at the Mortgage Interest Rate from and
including the last Due Date through which interest has been paid by or on behalf
of the Mortgagor to the first day of the
11
month following the date of repurchase, less amounts received in respect of such
repurchased Mortgage Loan which are being held in the Custodial Account (or by
any successor servicer or other agent of the Purchaser) for distribution in
connection with such Mortgage Loan.
Residential Dwelling: Any one of the following: (i) a detached one-
--------------------
family dwelling, (ii) a detached two- to four-family dwelling, (iii) a one-
family dwelling unit in a condominium project eligible under the NMC Non-
Conforming Program Guide, or (iv) a detached one-family dwelling in a planned
unit development, none of which is a co-operative, a mobile home or a
manufactured home which is not real estate under applicable state law.
Servicing Advances: All customary, reasonable and necessary "out-of-
------------------
pocket" costs and expenses incurred by the Seller in the performance of its
servicing obligations, including, but not limited to, the cost of (i)
preservation, restoration and repair of a Mortgaged Property, (ii) any
enforcement or judicial proceedings with respect to a Mortgage Loan, including
foreclosure actions, (iii) the management and liquidation of REO Property and
(iv) advances of insurance premiums, taxes, assessments and other charges unpaid
by the Mortgagor.
Servicing Fee: With respect to each Mortgage Loan, the amount of the
-------------
annual servicing fee the Purchaser shall pay to the Seller, which shall, for
each month, be equal to one-twelfth of the product of (a) the Servicing Fee Rate
and (b) the unpaid principal balance of the Mortgage Loan. Such fee shall be
payable monthly, computed on the basis of the same principal amount and period
respectively which any related interest payment on a Mortgage Loan is computed.
The obligation of the Purchaser to pay the Servicing Fee is limited to, and
payable solely from, the interest portion (including recoveries with respect to
interest from Liquidation Proceeds and other proceeds, to the extent permitted
by Section 11.05) of related Monthly Payment collected by the Seller, or as
otherwise provided under Section 11.05.
Servicing Fee Rate: The per annum rate at which the Servicing Fee
------------------
accrues, which rate shall be equal to 0.50% per annum.
Servicing File: With respect to each Mortgage Loan, the file retained
--------------
by the Seller consisting of originals of all documents in the Mortgage File
which are not delivered to the Purchaser or its designee and copies of the
Mortgage Loan Documents.
S&P: Standard & Poor's Ratings Services or its successor in interest.
---
Stated Principal Balance: As to each Mortgage Loan as of any date of
------------------------
determination, (i) the principal balance of the Mortgage Loan as of the Cut-off
Date after giving effect to payments of principal due on or before such date,
whether or not collected from the Mortgagor on or before such date, minus (ii)
all amounts previously distributed to the Purchaser with respect to the related
Mortgage Loan representing payments or recoveries of principal.
12
Sub-Servicer: Any mortgage loan servicing institution other than the
------------
Seller which is responsible for the servicing and administration of any Mortgage
Loan or any successor appointed pursuant to any Sub-Servicing Agreement.
Sub-Servicing Agreement: Each agreement providing for the servicing
-----------------------
of any of the Mortgage Loans by a Sub-Servicer.
Sub-Servicing Fee: As to each Mortgage Loan, the monthly fee payable
-----------------
to the Sub-Servicer, paid by the Seller from its Servicing Fee.
Whole Loan Transfer: Any sale or transfer of some or all of the
-------------------
Mortgage Loans by the Purchaser to a third party, which sale or transfer is not
a Pass-Through Transfer.
SECTION 2. Agreement to Purchase. The Seller agrees to sell, and
---------------------
the Initial Purchaser agrees to purchase, Mortgage Loans having an aggregate
principal balance on the Cut-off Date in an amount as set forth in the
Confirmation, or in such other amount as agreed by the Initial Purchaser and the
Seller as evidenced by the actual aggregate principal balance of the Mortgage
Loans accepted by the Initial Purchaser on the Closing Date.
SECTION 3. Mortgage Loan Schedule. The Seller shall deliver the
----------------------
Mortgage Loan Schedule to the Initial Purchaser at least three (3) days prior to
the Closing Date.
SECTION 4. Purchase Price. The Purchase Price for each Mortgage
--------------
Loan listed on the Mortgage Loan Schedule shall be the percentage of par as
stated in the Confirmation (subject to adjustment as provided therein),
multiplied by its Stated Principal Balance as of the Cut-off Date. If so
provided in the Confirmation, portions of the Mortgage Loans shall be priced
separately.
In addition to the Purchase Price as described above, the Initial
Purchaser shall pay to the Seller, at closing, accrued interest on the Stated
Principal Balance of each Mortgage Loan as of the Cut-off Date at its Mortgage
Interest Rate from the Cut-off Date through the day prior to the Closing Date,
both inclusive, less the Servicing Fee Rate, pro rated on the basis of a 30-day
month.
The Purchaser shall own and be entitled to receive with respect to
each Mortgage Loan purchased, (1) all scheduled principal due after the Cut-off
Date, (2) all other recoveries of principal collected after the Cut-off Date
(provided, however, that all scheduled payments of principal due on or before
the Cut-off Date and collected by the Seller after the Cut-off Date shall belong
to the Seller), and (3) all payments of interest on the Mortgage Loans net of
the Servicing Fee (minus that portion of any such interest payment that is
allocable to the period prior to the Cut-off Date). The Stated Principal
Balance of each Mortgage Loan as of the Cut-off Date is
13
determined after application to the reduction of principal of payments of
principal due on or before the Cut-off Date whether or not collected. Therefore,
for the purposes of this Agreement, payments of scheduled principal and interest
prepaid for a Due Date beyond the Cut-off Date shall not be applied to the
principal balance as of the Cut-off Date. Such prepaid amounts (minus the
applicable Servicing Fee) shall be the property of the Purchaser. The Seller
shall deposit any such prepaid amounts into the Custodial Account, which account
is established for the benefit of the Purchaser, for remittance by the Seller to
the Purchaser on the first Distribution Date. All payments of principal and
interest, less the applicable Servicing Fee, due on a Due Date following the
Cut-off Date shall belong to the Purchaser.
In addition to the above, the Seller hereby assigns to the Purchaser,
effective upon the Seller's receipt of the Purchase Price, all of the Seller's
rights (which may be enforced independently from this Agreement) and remedies
(which are in addition to the Purchaser's remedies set forth in this Agreement
and not in lieu thereof) under that certain letter agreement, dated September
29, 1998, between National Mortgage Corporation ("NMC") and the Seller, under
which NMC made certain representations, warranties and covenants to the Seller
with respect to the Mortgage Loans.
SECTION 5. Examination of Mortgage Files. In addition to the rights
-----------------------------
granted to the Initial Purchaser under the Confirmation to underwrite the
Mortgage Loans and review the Mortgage Files prior to the Closing Date, prior to
the Closing Date, the Seller shall (a) deliver to the Purchaser or its designee
in escrow, for examination with respect to each Mortgage Loan to be purchased,
the related Mortgage File, including the Assignment of Mortgage, pertaining to
each Mortgage Loan, or (b) make the related Mortgage File available to the
Initial Purchaser for examination at the Seller's offices or such other location
as shall otherwise be agreed upon by the Initial Purchaser and the Seller. Such
examination may be made by the Initial Purchaser or its designee at any
reasonable time before or after the Closing Date. If the Initial Purchaser
makes such examination prior to the Closing Date and identifies any Mortgage
Loans which do not satisfy the underwriting standards set forth in the NMC Non-
Conforming Program Guide (except to the extent that there are compensating
factors reasonably acceptable to the Initial Purchaser), such Mortgage Loans
may, at the Initial Purchaser's option, be rejected for purchase by the Initial
Purchaser. If the Initial Purchaser makes such examination after the Closing
Date and identifies any Mortgage Loans that do not conform to the NMC Non-
Conforming Program Guide (except to the extent that there are compensating
factors reasonably acceptable to the Initial Purchaser), such Mortgage Loans
shall, if requested by the Initial Purchaser within thirty (30) days after the
Closing Date, be repurchased by the Seller pursuant to Subsection 7.03. If not
purchased by the Initial Purchaser or if repurchased by the Seller, such
Mortgage Loans shall be deleted from the Mortgage Loan Schedule. The Initial
Purchaser may, at its option and without notice to the Seller, purchase all or a
portion of the Mortgage Loans without conducting any partial or complete
examination. The fact that the Initial Purchaser has conducted or has
determined not to conduct any partial or complete examination of the Mortgage
Files shall not affect the Purchaser's (or any of its
14
successors') rights to demand repurchase or other relief or remedy provided for
in this Agreement.
SECTION 6. Conveyance from Seller to Initial Purchaser.
-------------------------------------------
Subsection 6.01. Conveyance of Mortgage Loans; Possession of
-------------------------------------------
Servicing Files.
---------------
The Seller, simultaneously with the payment of the Purchase Price does
hereby sell, transfer, assign, set over and convey to Salomon Brothers Realty
Corp. as the Initial Purchaser under this Agreement, without recourse, but
subject to the terms of this Agreement, all rights, title and interest of the
Seller in and to the Mortgage Loans listed on the Mortgage Loan Schedule
attached hereto, together with the related Mortgage Files and all rights and
obligations arising under the documents contained therein. Pursuant to
Subsection 6.03 of this Agreement, the Seller has delivered to the Initial
Purchaser or its designee the documents for each Mortgage Loan to be purchased
as set forth in Exhibit 7. The contents of each related Servicing File required
to be retained by the Seller to service the Mortgage Loans pursuant to this
Agreement and thus not delivered to the Purchaser are and shall be held in trust
by the Seller for the benefit of the Purchaser as the owner thereof. The
Seller's possession of any portion of each such Servicing File is at the will of
the Purchaser for the sole purpose of facilitating servicing of the related
Mortgage Loan pursuant to this Agreement, and such retention and possession by
the Seller shall be in a custodial capacity only. The ownership of each
Mortgage Note, Mortgage, and the contents of the Mortgage File and Servicing
File is vested in the Purchaser and the ownership of all records and documents
with respect to the related Mortgage Loan prepared by or which come into the
possession of the Seller shall immediately vest in the Purchaser and shall be
retained and maintained, in trust, by the Seller at the will of the Purchaser in
such custodial capacity only. The Servicing File retained by the Seller
pursuant to this Agreement shall be appropriately identified in the Seller's
computer system to clearly reflect the sale of the related Mortgage Loan to the
Purchaser. The Seller shall release from its custody the contents of any
Servicing File retained by it only in accordance with this Agreement, except
when such release is required in connection with a repurchase of any such
Mortgage Loan pursuant to Subsection 7.03.
Subsection 6.02. Books and Records.
-----------------
Record title to each Mortgage and the related Mortgage Note as of the
Closing Date shall be in the name of the Seller, the Initial Purchaser or one or
more designees of the Purchaser, as such designee(s) may be designated by the
Initial Purchaser. Notwithstanding the foregoing, beneficial ownership of each
Mortgage and the related Mortgage Note shall be vested solely in the Purchaser
or the appropriate designee of the Purchaser, as the case may be, upon
15
payment of the Purchase Price. All rights arising out of the Mortgage Loans
including, but not limited to, all funds received by the Seller after the Cut-
off Date on or in connection with a Mortgage Loan as provided in Section 4 shall
be vested on the Closing Date, upon the Purchaser's payment of the Purchase
Price, in the Purchaser or one or more designees of the Purchaser; provided,
however, that all such funds received on or in connection with a Mortgage Loan
as provided in Section 4 shall be received and held by the Seller in trust for
the benefit of the Purchaser or the assignee of the Purchaser, as the case may
be, as the owner of the Mortgage Loans pursuant to the terms of this Agreement.
It is the express intention of the parties that the transactions
contemplated by this Agreement be, and be construed as, a sale of the Mortgage
Loans by the Seller and not a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. Consequently, the
sale of each Mortgage Loan shall be reflected as a sale on the Seller's business
records, tax returns and financial statements.
Subsection 6.03. Delivery of Mortgage Loan Documents.
-----------------------------------
The Seller shall, at least three (3) days prior to the Closing Date,
deliver and release to the Purchaser or its designee those Mortgage Loan
Documents as required by Exhibit 7 hereto with respect to each Mortgage Loan to
---------
be purchased and sold on the Closing Date and set forth on the Mortgage Loan
Schedule delivered with such Mortgage Loan Documents.
The Seller shall forward to the Purchaser or its designee original
documents evidencing an assumption, modification, consolidation or extension of
any Mortgage Loan entered into in accordance with this Agreement within two (2)
weeks of their execution, provided, however, that the Seller shall provide the
Purchaser or its designee with a certified true copy of any such document
submitted for recordation within two (2) weeks of its execution, and shall
provide the original of any document submitted for recordation or a copy of such
document certified by the appropriate public recording office to be a true and
complete copy of the original promptly upon the Seller's receipt of such
original document or such certified copy of an original document from the
applicable public recording office. In the event that the Seller cannot deliver
the original of any document submitted for recordation or a copy of such
document certified by the appropriate public recording office to be a true and
complete copy of the original within 180 days following the Closing Date, the
Seller shall provide the Purchaser with an Officer's Certificate stating that
the Seller has been unable to deliver such document because of a delay caused by
the applicable recording office.
SECTION 7. Representations, Warranties and Covenants of the Seller;
--------------------------------------------------------
Remedies for Breach.
-------------------
16
Subsection 7.01. Representations and Warranties Respecting the Seller.
----------------------------------------------------
The Seller represents, warrants and covenants to the Purchaser as of
the Closing Date and as of such date specifically provided herein:
(i) The Seller is duly organized, validly existing and in good
standing under the laws of the State of Colorado and is and will remain 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 Seller has the full power and authority to hold each
Mortgage Loan, to sell each Mortgage Loan, and to execute, deliver and perform,
and to enter into and consummate, all transactions contemplated by this
Agreement. The Seller 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 by the
Purchaser, constitutes a legal, valid and binding obligation of the Seller,
enforceable against it in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or reorganization;
(iii) The execution and delivery of this Agreement by the Seller and
the performance of and compliance with the terms of this Agreement will not
violate the Seller's articles of incorporation or by-laws or constitute a
default under or result in a breach or acceleration of, any material contract,
agreement or other instrument to which the Seller is a party or which may be
applicable to the Seller or its assets;
(iv) The Seller is not in violation of, and the execution and
delivery of this Agreement by the Seller and its performance and compliance with
the terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction over the Seller or its
assets, which violation might have consequences that would materially and
adversely affect the condition (financial or otherwise) or the operation of the
Seller or its assets or might have consequences that would materially and
adversely affect the performance of its obligations and duties hereunder;
(v) National Mortgage Corporation is an approved seller/servicer for
FNMA and FHLMC in good standing and is a HUD approved mortgagee pursuant to
Section 203 of the National Housing Act. No event has occurred, including but
not limited to a change in insurance coverage, which would make National
Mortgage Corporation unable to comply with FNMA, FHLMC or HUD eligibility
requirements or which would require notification to FNMA, FHLMC or HUD;
17
(vi) The Seller does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
(vii) The Mortgage Note, the Mortgage, the Assignment of Mortgage and
any other Mortgage Loan Documents have been delivered to the Purchaser or its
designee. With respect to each Mortgage Loan, the Seller is in possession of a
complete Mortgage File in compliance with Exhibit 4, except for such documents
---------
as have been delivered to the Purchaser or its designee;
(viii) Immediately prior to the payment of the Purchase Price for
each Mortgage Loan, the Seller was the owner of record of the related Mortgage
and the indebtedness evidenced by the related Mortgage Note and upon the payment
of the Purchase Price by the Purchaser, in the event that the Seller retains
record title, the Seller shall retain such record title to each Mortgage, each
related Mortgage Note and the related Mortgage Files with respect thereto during
the Interim Servicing Period in trust for the Purchaser as the owner thereof and
only for the purpose of servicing and supervising the servicing of each Mortgage
Loan during the Interim Servicing Period;
(ix) There are no actions or proceedings against, or investigations
of, the Seller before any court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to prevent the sale of
the Mortgage Loans or the consummation of the transactions contemplated by this
Agreement or (C) that might prohibit or materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement;
(x) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller 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;
(xi) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Seller, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Seller pursuant to this Agreement are not subject to the bulk transfer or
any similar statutory provisions;
(xii) The information delivered by the Seller to the Purchaser with
respect to the Seller's loan loss, foreclosure and delinquency experience for
the twelve (12) months immediately preceding the Closing Date on adjustable rate
level payment mortgage loans underwritten to the same standards as the Mortgage
Loans and covering mortgaged properties similar to the Mortgaged Properties, is
true and correct in all material respects; and
18
(xiii) Neither this Agreement nor any written statement, report or
other document prepared and furnished or to be prepared and furnished by the
Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading.
Subsection 7.02. Representations and Warranties Regarding Individual
---------------------------------------------------
Mortgage Loans.
--------------
The Seller hereby represents and warrants to the Purchaser that, as to
each Mortgage Loan, as of the Closing Date:
(i) The information set forth in the Mortgage Loan Schedule is
complete, true and correct;
(ii) All payments required to be made prior to the Cut-off Date for
such Mortgage Loan under the terms of the Mortgage Note have been made; the
Seller has not advanced funds, or induced, solicited or knowingly received any
advance of funds from a party other than the owner of the related Mortgaged
Property, directly or indirectly, for the payment of any amount required by the
Mortgage Note or Mortgage;
(iii) There are no delinquent taxes, ground rents, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;
(iv) The terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage, and which have been delivered to the
Purchaser or its designee; the substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the related policy, and is reflected on the Mortgage Loan Schedule. No
instrument of waiver, alteration or modification has been executed, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
the policy, and which assumption agreement has been delivered to the Purchaser
or its designee and the terms of which are reflected in the Mortgage Loan
Schedule;
(v) The Mortgage Note and the Mortgage are not subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of
19
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(vi) All buildings upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located, pursuant to insurance policies conforming to the requirements of
Subsection 11.10. All such insurance policies contain a standard mortgagee
clause naming the loan originator, its successors and assigns as mortgagee and
all premiums thereon have been paid. If the Mortgaged Property is in an area
identified on a Flood Hazard Map or Flood Insurance Rate Map issued by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect, which policy conforms to the requirements of the NMC Non-
Conforming Program Guide. The Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(vii) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, fair housing
or disclosure laws applicable to the origination and servicing of mortgage loans
of a type similar to the Mortgage Loans have been complied with;
(viii) The Mortgage has not been satisfied, canceled, subordinated or
rescinded, in whole or in part, and the Mortgaged Property has not been released
from the lien of the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such satisfaction, cancellation, subordination,
rescission or release;
(ix) The Mortgage is a valid, existing and enforceable first lien on
the Mortgaged Property, including all improvements on the Mortgaged Property
subject only to (a) the lien of current real property taxes and assessments not
yet due and payable, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of recording
being acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the Mortgage Loan and which do not adversely affect the Appraised Value of
the Mortgaged Property, and (c) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement,
chattel mortgage or equivalent document related to and delivered in connection
with the Mortgage Loan establishes and creates a valid, existing and enforceable
first lien and first priority security interest on the property described
therein and the Seller has full right to sell and assign the same to the
20
Purchaser. Except to the extent that the Mortgage Loan Schedule reflects a
difference between the LTV and the combined LTV, the Mortgaged Property was not,
as of the date of origination of the Mortgage Loan, subject to a mortgage, deed
of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage;
(x) The Mortgage Note and the related Mortgage are genuine and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as such enforcement may be limited by (A)
bankruptcy, insolvency or reorganization laws or other similar laws affecting
creditors' rights generally or (B) general principles of equity, whether
considered in a proceeding at law or in equity;
(xi) All parties to the Mortgage Note and the Mortgage had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and
properly executed by such parties. The Mortgagor is a natural person;
(xii) The proceeds of the Mortgage Loan have been fully disbursed to
or for the account of the Mortgagor and there is no obligation for the Mortgagee
to advance additional funds thereunder and any and all requirements as to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage have been paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due to the Mortgagee pursuant to the Mortgage Note or Mortgage;
(xiii) The Seller is the sole legal, beneficial and equitable owner
of the Mortgage Note and the Mortgage (and National Mortgage Corporation is the
sole record owner thereof) and has full right to transfer and sell the Mortgage
Loan to the Purchaser free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest;
(xiv) All parties which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) in compliance with any
and all applicable "doing business" and licensing requirements of the laws of
the state wherein the Mortgaged Property is located;
(xv) The Mortgage Loan is covered by an American Land Title
Association lender's title insurance policy acceptable under the NMC Non-
Conforming Program Guide, issued by a title insurer acceptable under the NMC
Non-Conforming Program Guide and qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring (subject to the exceptions
contained in (ix)(a) and (b) above) the loan originator, its successors and
assigns as to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan and against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment in the Mortgage Interest
21
Rate and Monthly Payment. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress to and from the Mortgaged Property, and
against encroachments by or upon the Mortgaged Property or any interest therein.
The Seller is the sole insured under such lender's title insurance policy, and
such lender's title insurance policy is in full force and effect and will be in
full force and effect upon the consummation of the transactions contemplated by
this Agreement. No claims have been made under such lender's title insurance
policy, and no prior holder of the related Mortgage, including the Seller, has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;
(xvi) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration (other than a payment delinquency of less than thirty (30) days),
and the Seller has not waived any default, breach, violation or event of
acceleration;
(xvii) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage;
(xviii) All improvements which were considered in determining the
Appraised Value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property. Each
appraisal has been performed in accordance with the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989;
(xix) The Mortgage Loan was originated by National Mortgage
Corporation or by a savings and loan association, a savings bank, a commercial
bank or similar institution which is supervised and examined by a federal or
state authority, or by a mortgagee approved as such by the Secretary of HUD;
(xx) Principal payments on the Mortgage Loan commenced no more than
sixty (60) days after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Interest Rate. With respect to
each Mortgage Loan, the Mortgage Note is payable monthly in Monthly Payments
which are changed on each Adjustment Date to an amount which will fully amortize
the Stated Principal Balance of the Mortgage Loan over its remaining term at the
Mortgage Interest Rate. The Mortgage Note does not permit negative
amortization. No Mortgage Loan is convertible to a fixed rate mortgage loan;
(xxi) The origination and collection practices used by the Seller
and the loan originator with respect to each Mortgage Note and Mortgage have
been in all respects legal, proper, prudent and customary in the mortgage
origination and servicing industry. The Mortgage
22
Loan has been serviced by the Seller and any predecessor servicer in accordance
with the terms of the Mortgage Note. With respect to escrow deposits and Escrow
Payments, if any, all such payments are in the possession of, or under the
control of, the Seller or its Sub-Servicer and there exist no deficiencies in
connection therewith for which customary arrangements for repayment thereof have
not been made. No escrow deposits or Escrow Payments or other charges or
payments due the Seller have been capitalized under any Mortgage or the related
Mortgage Note;
(xxii) The Mortgaged Property is free of damage and waste that would
materially adversely affect the value of the Mortgaged Property as security for
the Mortgage Loan or the use of which the premises were intended and there is no
proceeding pending for the total or partial condemnation thereof;
(xxiii) The Mortgage and related Mortgage Note contain customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (a) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (b) otherwise by
judicial foreclosure. The Mortgaged Property has not been subject to any
bankruptcy proceeding or foreclosure proceeding and the Mortgagor has not filed
for protection under applicable bankruptcy laws, in either case since the
origination of the related Mortgage Loan. There is no homestead or other
exemption available to the Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage. The Mortgagor has not notified the Seller and the Seller has no
knowledge of any relief requested or allowed to the Mortgagor under the Soldiers
and Sailors Civil Relief Act of 1940;
(xxiv) The Mortgage Loan was underwritten in accordance with
underwriting standards which are acceptable under the NMC Non-Conforming Program
Guide; and the Mortgage Note and Mortgage are on forms acceptable under the NMC
Non-Conforming Program Guide;
(xxv) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (ix) above;
(xxvi) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser, duly appointed by the Mortgage Loan's
originator, who had no interest, direct or indirect in the Mortgaged Property or
in any loan made on the security thereof, whose compensation is not affected by
the approval or disapproval of the Mortgage Loan and who met the minimum
qualifications of the NMC Non-Conforming Program Guide;
23
(xxvii) In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor;
(xxviii) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Seller, the Mortgagor, or anyone on behalf
of the Mortgagor or (b) paid by any source other than the Mortgagor or contains
any other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature;
(xxix) The Mortgagor has executed a statement to the effect that the
Mortgagor has received all disclosure materials required by applicable law with
respect to the making of adjustable rate mortgage loans and rescission materials
with respect to Refinanced Mortgage Loans, and such statement is and will remain
in the Mortgage File;
(xxx) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;
(xxxi) Except for the credit rating of the related Mortgagor, the
Seller has no knowledge of any circumstances or condition with respect to the
Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's credit
standing that should reasonably be expected to cause the Mortgage Loan to be an
unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value of the Mortgage Loan;
(xxxii) At origination, the Mortgaged Property was lawfully occupied
under applicable law; all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy, have been made or obtained from the
appropriate authorities;
(xxxiii) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Mortgage Loan has taken place on the part
of any person, including without limitation the Mortgagor, any appraiser, any
builder or developer, or any other party involved in the origination of the
Mortgage Loan or in the application of any insurance in relation to such
Mortgage Loan;
(xxxiv) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
24
(xxxv) Any principal advances made to the Mortgagor prior to the
Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable
under the NMC Non-Conforming Program Guide. The consolidated principal amount
does not exceed the original principal amount of the Mortgage Loan;
(xxxvi) No Mortgage Loan has a balloon payment feature;
(xxxvii) Interest on each Mortgage Loan is calculated on the basis of
a 360-day year consisting of twelve 30-day months;
(xxxviii) If the Residential Dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development) such condominium or planned unit development
project meets the applicable Qualified Insurer's eligibility requirements under
the NMC Non-Conforming Program Guide;
(xxxix) The Mortgage Loan was not prepaid in full prior to the
Closing Date; and
(xl) To the Seller's actual knowledge, without independent
investigation, the Mortgaged Property is in material compliance with all
applicable environmental laws pertaining to environmental hazards including,
without limitation, asbestos, and neither the Seller nor, to the Seller's actual
knowledge, without independent investigation, the related Mortgagor, has
received any notice of any violation or potential violation of such law.
Subsection 7.03. Remedies for Breach of Representations and
------------------------------------------
Warranties.
----------
It is understood and agreed that the representations and warranties
set forth in Subsections 7.01 and 7.02 shall survive the sale of the Mortgage
Loans to the Purchaser and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment of Mortgage or the examination or lack of examination of any Mortgage
File. Upon discovery by either the Seller or the Purchaser of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the value of the Mortgage Loans or the interest of the Purchaser (or
which materially and adversely affects the interests of the Purchaser in the
related Mortgage Loan in the case of a representation and warranty relating to a
particular Mortgage Loan), the party discovering such breach shall give prompt
written notice to the other.
25
Within sixty (60) days of the earlier of either discovery by or notice
to the Seller of any breach of a representation or warranty which materially and
adversely affects the value of a Mortgage Loan or the Mortgage Loans, the Seller
shall use its best efforts promptly to cure such breach in all material respects
and, if such breach cannot be cured, the Seller shall, at the Purchaser's
option, repurchase such Mortgage Loan at the Repurchase Price. In the event
that a breach shall involve any representation or warranty set forth in
Subsection 7.01 in a manner that materially and adversely affects the value of a
Mortgage Loan or Mortgage Loans or the interest of the Purchaser in such
Mortgage Loan or Mortgage Loans and such breach cannot be cured within sixty
(60) days of the earlier of either discovery by or notice to the Seller of such
breach, all of the Mortgage Loans shall, at the Purchaser's option, be
repurchased by the Seller at the Repurchase Price. The Seller may, with the
consent of the Purchaser and assuming that the Seller has a Qualified Substitute
Mortgage Loan, rather than repurchase the Mortgage Loan as provided above,
remove such Mortgage Loan and substitute in its place a Qualified Substitute
Mortgage Loan or Loans. If the Seller has no Qualified Substitute Mortgage
Loan, or does not wish to substitute, it shall repurchase the deficient Mortgage
Loan. Any repurchase of a Mortgage Loan(s) pursuant to the foregoing provisions
of this Subsection 7.03 shall occur on a date designated by the Purchaser and
shall be accomplished by deposit in the Custodial Account of the amount of the
Repurchase Price for distribution to the Purchaser on the next scheduled
Distribution Date.
At the time of substitution or repurchase of any deficient Mortgage
Loan, the Purchaser and the Seller shall arrange for the reassignment of the
deficient or repurchased Mortgage Loan to the Seller and the delivery to the
Seller of any documents held by the Purchaser or its designee relating to the
deficient or repurchased Mortgage Loan. In the event the Repurchase Price is
deposited in the Custodial Account, the Seller shall, simultaneously with such
deposit, give written notice to the Purchaser that such deposit has taken place.
Upon such repurchase the Mortgage Loan Schedule shall be amended to reflect the
withdrawal of the repurchased Mortgage Loan from this Agreement.
As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, the Seller shall effect such
substitution by delivering to the Purchaser or its designee for such Qualified
Substitute Mortgage Loan or Loans the Mortgage Loan Documents. The Seller shall
deposit in the Custodial Account the Monthly Payment less the Servicing Fee due
on such Qualified Substitute Mortgage Loan or Loans in the month following the
date of such substitution. Monthly Payments due with respect to Qualified
Substitute Mortgage Loans in the month of substitution will be retained by the
Seller. For the month of substitution, distributions to the Purchaser will
include the Monthly Payment due on such Deleted Mortgage Loan in the month of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received by the Seller in respect of such Deleted Mortgage Loan
from the terms of this Agreement in all respects, and the Seller shall be deemed
to have made with respect to such Qualified Substitute Mortgage Loan or Loans,
as of the date of substitution, the covenants, representations and warranties
set forth in Sections 7.01 and 7.02.
26
For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Seller
will determine the amount (if any) by which the aggregate principal balance of
all such Qualified Substitute Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after application of scheduled principal payments due in the month of
substitution). An amount equal to the product of the amount of such shortfall
multiplied by the Repurchase Price shall be distributed by the Seller in the
month of substitution. Accordingly, on the date of such substitution the Seller
will deposit from its own funds into the Custodial Account an amount equal to
such amount.
In addition to such cure, repurchase and substitution obligation, the
Seller shall indemnify the Purchaser and hold it harmless against any losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of the Seller's representations and warranties contained in this Section
7. It is understood and agreed that the obligations of the Seller set forth in
this Subsection 7.03 to cure or repurchase a defective Mortgage Loan and to
indemnify the Purchaser as provided in this Subsection 7.03 constitute the sole
remedies of the Purchaser respecting a breach of the foregoing representations
and warranties.
Any cause of action against the Seller relating to or arising out of
the breach of any representations and warranties made in Subsections 7.01 or
7.02 shall accrue as to any Mortgage Loan upon (i) discovery of such breach by
the Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by
the Seller to cure such breach or repurchase such Mortgage Loan as specified
above within the applicable cure period, and (iii) demand upon the Seller by the
Purchaser for compliance with the relevant provisions of this Agreement.
Subsection 7.04 Repurchase of Certain Mortgage Loans.
------------------------------------
In the event that a Mortgagor fails to make the first monthly payment
required to be made under the terms of the related Mortgage Note within fifty-
nine (59) days of the Due Date therefor then, in such case, the Seller shall
repurchase the affected Mortgage Loan at the Repurchase Price, which shall be
paid as provided for in Subsection 7.03.
Subsection 7.05 Principal Prepayments in Full.
-----------------------------
In the event that the principal balance due on a Mortgage Loan is paid
in full by the related Mortgagor on or before December 31, 1998, the Seller
shall remit to the Purchaser (to be paid by the Seller out of its own funds
without reimbursement therefor) within two (2)
27
Business Days an amount equal to the product of the Principal Prepayment in full
and the excess, if any, of the Purchase Price percentage as stated in the
Confirmation over 100% (reduced, but not below $0, by the amount of any
prepayment penalty received by the Purchaser with respect to the Mortgage Loan).
SECTION 8. Closing. The closing shall take place on the Closing
-------
Date. At the Purchaser's option, the closing shall be either: by telephone,
confirmed by letter or wire as the parties shall agree, or conducted in person,
at such place as the parties shall agree.
The closing for the Mortgage Loans to be purchased on the Closing Date
shall be subject to each of the following conditions:
(a) all of the representations and warranties of the Seller under
this Agreement shall be true and correct as of the Closing Date
and no event shall have occurred which, with notice or the
passage of time, would constitute a default under this Agreement;
(b) the Initial Purchaser shall have received, or the Initial
Purchaser's attorneys shall have received in escrow, all Closing
Documents as specified in Section 9, in such forms as are agreed
upon and acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required pursuant to the
terms hereof;
(c) the Seller shall have delivered and released to the Purchaser or
its designee all documents required to be so delivered hereunder;
and
(d) all other terms and conditions of this Agreement shall have been
complied with.
Subject to the foregoing conditions, the Initial Purchaser shall pay
to the Seller on the Closing Date the Purchase Price, plus accrued interest
pursuant to Section 4, by wire transfer of immediately available funds to the
account designated by the Seller.
SECTION 9. Closing Documents.
-----------------
On or before the Closing Date, the Seller shall submit to the Initial
Purchaser fully executed originals of the following documents:
1 this Agreement, in four (4) counterparts;
28
2 a Custodial Account Letter Agreement in the form attached as
Exhibit 5 hereto;
---------
3 an Escrow Account Letter Agreement in the form attached as
Exhibit 6 hereto;
---------
4 an Officer's Certificate, in the form of Exhibit 1 hereto,
---------
including all attachments thereto;
5 an Opinion of Counsel of the Seller, in the form of Exhibit 2
---------
hereto;
6 the Confirmation;
7 the Mortgage Loan Schedule, one copy to be attached hereto;
8 the Seller's underwriting guidelines;
9 a letter agreement, dated September 29, 1998, between National
Mortgage Corporation and the Seller under which National Mortgage
Corporation makes certain representations, warranties and
covenants (which shall be identical to those made by the Seller
in Section 7 hereof) to the Seller with respect to the Mortgage
Loans, which shall be acceptable to the Initial Purchaser;
10 a Security Release Certification, in a form acceptable to the
Initial Purchaser, if any of the Mortgage Loans has at any time
been subject to any security interest, pledge or hypothecation
for the benefit of any Person; and
11 a certificate or other evidence of merger or change of name,
signed or stamped by the applicable regulatory authority, if any
of the Mortgage Loans were acquired by the Seller by merger or
acquired or originated by the Seller while conducting business
under a name other than its present name, if applicable.
SECTION 10. Costs. The Initial Purchaser shall pay any commissions
-----
due its salesmen and the legal fees and expenses of its attorneys. All costs
and expenses incurred in connection with the transfer and delivery of the
Mortgage Loans, including without limitation recording fees, fees for title
policy endorsements and continuations, fees for recording Assignments of
Mortgage and the Seller's attorney's fees, shall be paid by the Seller.
SECTION 11. Seller's Servicing Obligations.
------------------------------
29
Subsection 11.01 Seller to Act as Servicer.
-------------------------
The Seller, as independent contract servicer, shall service and
administer the Mortgage Loans in accordance with this Agreement during the
Interim Servicing Period and shall have full power and authority, acting alone
or through Sub-Servicers as provided in Subsection 11.27, to do or cause to be
done any and all things in connection with such servicing and administration
which the Seller may deem necessary or desirable and consistent with the terms
of this Agreement.
Consistent with the terms of this Agreement, the Seller may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Seller's reasonable and prudent determination such waiver,
modification, postponement or indulgence is consistent with the goal of
collecting all amounts due under the related Mortgage Loan; provided, however,
that the Seller shall not permit any modification with respect to any Mortgage
Loan that would change the Mortgage Interest Rate, defer or forgive the payment
thereof or of any principal or interest payments, reduce the outstanding
principal amount (except for actual payments of principal), make additional
advances of additional principal or extend the final maturity date on such
Mortgage Loan. Without limiting the generality of the foregoing, the Seller
shall continue, and is hereby authorized and empowered, to execute and deliver
on behalf of itself, and the Purchaser, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Property. If reasonably required by the Seller, the Purchaser shall
furnish the Seller and any Sub-Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Seller and any Sub-Servicer to
carry out their servicing and administrative duties under this Agreement.
In servicing and administering the Mortgage Loans, the Seller shall
employ procedures, including collection procedures, and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account giving due consideration to accepted mortgage
servicing practices of prudent lending institutions that service mortgage loans
made to borrowers of similar credit quality as the Mortgagors on the Mortgage
Loans and the Purchaser's reliance on the Seller.
Subsection 11.02 Collection of Mortgage Loan Payments.
-------------------------------------
Continuously from the date hereof until the principal and interest on
all Mortgage Loans are paid in full, the Seller shall proceed diligently to
collect all payments due under each Mortgage Loan when the same shall become due
and payable and shall, to the extent such procedures shall be consistent with
this Agreement, follow such collection procedures as it
30
follows with respect to mortgage loans comparable to the Mortgage Loans and held
for its own account. Further, the Seller shall take special care in ascertaining
and estimating annual ground rents, taxes, assessments, water rates, fire and
hazard insurance premiums, mortgage insurance premiums, and all other charges
that, as provided in the Mortgage, will become due and payable to the end that
the installments payable by the Mortgagors will be sufficient to pay such
charges as and when they become due and payable.
Subsection 11.03 Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
(a) The Seller shall use its best efforts, consistent with the
procedures that the Seller would use in servicing loans for its own account, to
foreclose upon or otherwise comparably convert the ownership of those Mortgaged
Properties securing Mortgage Loans that come into and continue in default and as
to which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Subsection 11.01. The Seller shall use its best efforts to
realize upon defaulted Mortgage Loans in such a manner as will maximize the
receipt of principal and interest by the Purchaser, taking into account, among
other things, the timing of foreclosure proceedings. The foregoing is subject
to the provisions that, in any case in which Mortgaged Property shall have
suffered damage, the Seller shall not be required to expend its own funds toward
the restoration of such property in excess of $2,000 unless it shall determine
in its discretion (i) that such restoration will, in the Seller's good faith
judgement, increase the proceeds of liquidation of the related Mortgage Loan to
the Purchaser after reimbursement to itself for such expenses, and (ii) that
such expenses will be recoverable by the Seller through Insurance Proceeds or
Liquidation Proceeds from the related Mortgaged Property, as contemplated in
Subsection 11.05. In the event that any payment due under any Mortgage Loan is
not paid when the same becomes due and payable, or in the event the Mortgagor
fails to perform any other covenant or obligation under the Mortgage Loan and
such failure continues beyond any applicable grace period, the Seller shall take
such action as it shall deem to be in the best interest of the Purchaser. In
the event that any payment due under any Mortgage Loan remains delinquent for a
period of ninety (90) days or more, the Seller shall commence foreclosure
proceedings, provided that prior to commencing foreclosure proceedings, the
Seller shall notify the Purchaser in writing of the Seller's intention to do so,
and the Seller shall not commence foreclosure proceedings if the Purchaser
objects to such action within ten (10) Business Days of receiving such notice.
The Seller shall notify the Purchaser in writing of the commencement of
foreclosure proceedings. In such connection, the Seller shall be responsible
for all costs and expenses incurred by it in any such proceedings; provided,
however, that it shall be entitled to reimbursement thereof from Liquidation
Proceeds or REO Disposition proceeds from the related Mortgaged Property, as
contemplated in Subsection 11.05.
(b) Notwithstanding the foregoing provisions of this Subsection 11.03,
with respect to any Mortgage Loan as to which the Seller has received actual
notice of, or has actual knowledge of, the presence of any toxic or hazardous
substance on the related Mortgaged
31
Property, the Seller shall not 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 Purchaser 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 Seller 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:
(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 Purchaser 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 Purchaser to take such actions with respect
to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Subsection 11.03 shall be advanced by the Seller, subject to the Seller's right
to be reimbursed therefor from the Custodial Account as provided in Subsection
11.05(vii).
If the Seller determines, as described above, that it is in the best
economic interest of the Purchaser 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, clean-up or
remediation of hazardous substances, hazardous materials, hazardous wastes, or
petroleum-based materials affecting any such Mortgaged Property, then the Seller
shall take such action as it deems to be in the best economic interest of the
Purchaser. The cost of any such compliance, containment, cleanup or remediation
shall be advanced by the Seller, subject to the Seller's right to be reimbursed
therefor from the Custodial Account as provided in Subsection 11.05(vii).
(c) 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 Seller
-----
for any related unreimbursed Servicing Advances, pursuant to Subsection
32
11.05(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
Distribution 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 so 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 Seller 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 Seller pursuant to Subsection
11.05(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 part of the amounts to be distributed to the
Purchaser in accordance with Subsection 11.14.
Subsection 11.04 Establishment of Custodial Accounts; Deposits in
------------------------------------------------
Custodial Accounts.
-------------------
The Seller shall segregate and hold or cause the Sub-Servicer to
segregate and hold all funds collected and received pursuant to each Mortgage
Loan separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Custodial Accounts, in the form of time
deposit or demand accounts; provided, however, that collections on the Mortgage
Loans may be held for one Business Day in the general clearing account for
mortgage loan collections prior to being credited to the Custodial Account. The
creation of any Custodial Account shall be evidenced by a Custodial Account
Letter Agreement in the form of Exhibit 6.
---------
The Seller shall deposit in the Custodial Account on a daily basis,
and retain therein the following payments and collections received by it
subsequent to the Cut-off Date, or received by it prior to the Cut-off Date but
allocable to a period subsequent thereto, other than in respect of principal and
interest on the Mortgage Loans due on or before the Cut-off Date:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Subsections 11.10 and 11.11, other than proceeds to be
held in the Escrow Account and applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the Seller's
normal servicing procedures, the loan documents or applicable law;
33
(v) all Condemnation Proceeds affecting any Mortgaged Property
which are not released to the Mortgagor in accordance with the Seller's normal
servicing procedures, the loan documents or applicable law;
(vi) [Reserved]
(vii) all proceeds of any Mortgage Loan repurchased by the Seller in
accordance with Subsections 7.03 and 7.04 and all amounts required to be
deposited by the Seller in connection with shortfalls in principal amount of
Qualified Substitute Mortgage Loans pursuant to Subsection 7.03;
(viii) any amounts required to be deposited by the Seller pursuant to
Subsection 11.11 in connection with the deductible clause in any blanket hazard
insurance policy. Such deposit shall be made from the Seller's own funds,
without reimbursement therefor;
(ix) any amounts required to be deposited by the Seller in
connection with any REO Property pursuant to Subsection 11.13; and
(x) any amounts required to be deposited in the Custodial Account
pursuant to Subsections 11.19 or 11.20.
The foregoing requirements for deposit in the Custodial Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges and
assumption fees, to the extent permitted by Subsection 11.19, need not be
deposited by the Seller in the Custodial Account, and may be retained by the
Seller as additional servicing compensation. Such Custodial Account shall be an
Eligible Account. Any interest or earnings on funds deposited in the Custodial
Account by the depository institution shall accrue to the benefit of the Seller
and the Seller shall be entitled to retain and withdraw such interest from the
Custodial Account pursuant to Subsection 11.05(iv). The Seller shall give
notice to the Purchaser of the location of the Custodial Account when
established and prior to any change thereof.
If the balance on deposit in the Custodial Account exceeds $75,000 as
of the commencement of business on any Business Day and the Custodial Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of Eligible Account, the Seller shall, on or before twelve o'clock noon Eastern
Standard Time on such Business Day, withdraw from the Custodial Account any and
all amounts payable to the Purchaser and remit such amounts to the Purchaser by
wire transfer of immediately available funds. This paragraph shall not be
applicable to a Custodial Account that is an Eligible Account pursuant to clause
(i) or (iii) of the definition of Eligible Account.
Subsection 11.05 Permitted Withdrawals From the Custodial Account.
------------------------------------------------
34
The Seller may, from time to time, withdraw from the Custodial Account for
the following purposes:
(i) to make distributions to the Purchaser in the amounts and in
the manner provided for in Subsection 11.14;
(ii) [Reserved];
(iii) to reimburse itself for unreimbursed Servicing Advances, the
Seller's right to reimburse itself pursuant to this subclause (iii) with respect
to any Mortgage Loan being limited to related Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds, REO Disposition proceeds and such other amounts as
may be collected by the Seller from the Mortgagor or otherwise relating to the
Mortgage Loan, it being understood that, in the case of such reimbursement, the
Seller's right thereto shall be prior to the rights of the Purchaser, except
that, where the Seller is required to repurchase a Mortgage Loan, pursuant to
Subsection 7.03, the Seller's right to such reimbursement shall be subsequent to
the payment to the Purchaser of the Repurchase Price pursuant to Subsection 7.03
and all other amounts required to be paid to the Purchaser with respect to such
Mortgage Loans;
(iv) to pay to itself pursuant to Subsection 11.22 as servicing
compensation (a) any interest earned on funds in the Custodial Account (all such
interest to be withdrawn monthly not later than each Distribution Date), and (b)
the Servicing Fee from that portion of any payment or recovery as to interest on
a particular Mortgage Loan;
(v) to pay to itself with respect to each Mortgage Loan that has
been repurchased pursuant to Subsection 7.03 all amounts received thereon and
not distributed as of the date on which the related Repurchase Price is
determined;
(vi) [Reserved]
(vii) to pay, or to reimburse the Seller for advances in respect of,
expenses incurred in connection with any Mortgage Loan pursuant to Subsection
11.03, but only to the extent of amounts received in respect of the Mortgage
Loans to which such expense is attributable; and
(viii) to clear and terminate the Custodial Account on the termination
of this Agreement.
The Seller shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Custodial Account pursuant to such subclauses (iii), (v), and (vii) above.
35
Subsection 11.06 Establishment of Escrow Accounts: Deposits in Escrow
----------------------------------------------------
Accounts.
--------
The Seller shall segregate and hold or cause the Sub-Servicer to
segregate and hold all funds collected and received pursuant to each Mortgage
Loan which constitute Escrow Payments separate and apart from any of its own
funds and general assets and shall establish and maintain one or more Escrow
Accounts, in the form of time deposit or demand accounts; provided, however,
that collections on the Mortgage Loans (including Escrow Payments) may be held
for one Business Day in the Seller's general clearing account for Mortgage Loan
collections prior to being credited to the appropriate Escrow Account. The
creation of any Escrow Account shall be evidenced by an Escrow Account Letter
Agreement in the form of Exhibit 6.
---------
The Seller or the Sub-Servicer shall deposit in the Escrow Account or
Accounts on a daily basis, and retain therein, (i) all Escrow Payments collected
on account of the Mortgage Loans, for the purpose of effecting timely payment of
any such items as required under the terms of this Agreement, and (ii) all
Insurance Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property. The Seller shall make withdrawals therefrom only to effect
such payments as are required under this Agreement, and for such other purposes
as shall be as set forth or in accordance with Subsection 11.08. The Seller
shall be entitled to retain, as additional servicing compensation, any interest
paid on funds deposited in the Escrow Account by the depository institution
other than interest on escrowed funds required by law to be paid to the
Mortgagor and, to the extent required by law, the Seller shall pay interest on
escrowed funds to the Mortgagor notwithstanding that the Escrow Account is non-
interest bearing or that interest paid thereon is insufficient for such
purposes.
Subsection 11.07 Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account may be made by the Seller or the
Sub-Servicer (i) to effect timely payments of ground rents, taxes, assessments,
water rates, hazard insurance premiums, Primary Mortgage Insurance Policy
premiums, if applicable, and comparable items, (ii) to reimburse the Seller for
any Servicing Advance made by the Seller with respect to a related Mortgage Loan
but only from amounts received on the related Mortgage Loan which represent late
payments or collections of Escrow Payments thereunder, (iii) to refund to the
Mortgagor any funds as may be determined to be overages, (iv) for transfer to
the Custodial Account in accordance with the terms of this Agreement, (v) for
application to the restoration or repair of the Mortgaged Property, (vi) to pay
to the Seller, or to the Mortgagor to the extent required by law, any interest
paid on the funds deposited in the Escrow Account, or (vii) to clear and
terminate the Escrow Account on the termination of this Agreement.
Subsection 11.08 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
36
With respect to each Mortgage Loan, the Seller shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates
and other charges which are or may become a lien upon the Mortgaged Property and
the status of Primary Mortgage Insurance Policy premiums and fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges, including insurance renewal premiums and shall effect
payment thereof prior to the applicable penalty or termination date and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Seller in amounts sufficient for such purposes,
as allowed under the terms of the Mortgage and applicable law. To the extent
that the Mortgage does not provide for Escrow Payments, the Seller shall
determine that any such payments are made by the Mortgagor at the time they
first become due. The Seller assumes full responsibility for the timely payment
of all such bills and shall effect timely payments of all such bills
irrespective of the Mortgagor's faithful performance in the payment of same or
the making of the Escrow Payments and shall make advances from its own funds to
effect such payments.
Subsection 11.09 Transfer of Accounts.
---------------------
The Seller may transfer the Custodial Account or the Escrow Account to
a different depository institution from time to time. Such transfer shall be
made only upon obtaining the consent of the Purchaser, which consent shall not
be unreasonably withheld. In any case, the Custodial Account and Escrow Account
shall be Eligible Accounts.
Subsection 11.10 Maintenance of Hazard Insurance.
-------------------------------
The Seller shall cause to be maintained for each Mortgage Loan fire
and hazard insurance with extended coverage as is customary in the area where
the Mortgaged Property is located in an amount which is at least equal to the
lesser of (i) 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
or (ii) the outstanding principal balance of the Mortgage Loan, or (iii) the
maximum insurable value of the improvements as established by the insurer in
each case in an amount not less than such amount as is necessary to prevent the
Mortgagor and/or the Mortgagee from becoming a co-insurer. If the Mortgaged
Property is in an area identified on a Flood Hazard Boundary Map or Flood
Insurance Rate Map issued by the Flood Emergency Management Agency as having
special flood hazards and flood insurance has been made available, the Seller
will cause to be maintained a flood insurance policy meeting the requirements of
the current guidelines of the Federal Insurance Administration with a generally
acceptable insurance carrier, in an amount representing coverage not less than
the lesser of (i) the outstanding principal balance of the Mortgage Loan or (ii)
the maximum amount of insurance which is available under the National Flood
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as
37
amended. The Seller also shall maintain on any REO Property, fire and hazard
insurance with extended coverage in an amount which is at least equal to the
amount required to be maintained for such REO Property when it was a Mortgage
Loan as provided above, liability insurance and, to the extent required and
available under the National Flood Insurance Act of 1968 and the Flood Disaster
Protection Act of 1973, as amended, flood insurance in an amount as provided
above. Pursuant to Subsection 11.04, any amounts collected by the Seller under
any such policies other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the Mortgaged Property or REO Property,
or released to the Mortgagor in accordance with the Seller's normal servicing
procedures, shall be deposited in the Custodial Account, subject to withdrawal
pursuant to Subsection 11.05. Any cost incurred by the Seller in maintaining any
such insurance shall not, for the purpose of calculating distributions to the
Purchaser, 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 need be
required by the Seller of the Mortgagor or maintained on property acquired in
respect of the Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. All such policies shall be endorsed with standard
mortgagee clauses with loss payable to the Seller, or upon request to the
Purchaser, and shall provide for at least thirty days prior written notice of
any cancellation, reduction in the amount of, or material change in, coverage to
the Seller. The Seller shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Seller shall not accept any such insurance policies from insurance
companies unless such companies currently reflect a General Policy Rating of
B/III or A/II or better in Best's Key Rating Guide and are licensed to do
business in the state wherein the property subject to the policy is located.
Subsection 11.11 Maintenance of Mortgage Impairment Insurance Policy.
---------------------------------------------------
In the event that the Seller shall obtain and maintain a mortgage
impairment or blanket policy issued by an issuer that has a Best rating of A:VI
insuring against hazard losses on all of Mortgaged Properties securing the
Mortgage Loans, then, to the extent such policy provides coverage in an amount
equal to the amount required pursuant to Subsection 11.10 and otherwise complies
with all other requirements of Subsection 11.10, the Seller shall conclusively
be deemed to have satisfied its obligations as set forth in Subsection 11.10, it
being understood and agreed that such policy may contain a deductible clause, in
which case the Seller shall, in the event that there shall not have been
maintained on the related Mortgaged Property or REO Property a policy complying
with Subsection 11.10, and there shall have been one or more losses which would
have been covered by such policy, deposit in the Custodial Account the amount
not otherwise payable under the blanket policy because of such deductible
clause. In connection with its activities as servicer of the Mortgage Loans,
the Seller agrees to prepare and present on behalf of the Purchaser, claims
under any such blanket policy in a timely fashion in accordance
38
with the terms of such policy. Upon request of the Purchaser, the Seller shall
cause to be delivered to the Purchaser a certified true copy of such policy and
a statement from the insurer thereunder that such policy shall in no event be
terminated or materially modified without thirty (30) days prior written notice
to the Purchaser.
Subsection 11.12 Fidelity Bond; Errors and Omissions Insurance.
---------------------------------------------
The Seller shall maintain, at its own expense, a blanket fidelity bond
and an errors and omissions insurance policy, with broad coverage with
responsible companies that meet the requirements of FNMA or FHLMC on all
officers, employees or other persons acting in any capacity with regard to the
Mortgage Loans to handle funds, money, documents and papers relating to the
Mortgage Loans. The fidelity bond and errors and omissions insurance shall be
in the form of the Mortgage Banker's Blanket Bond and shall protect and insure
the Seller against losses, including forgery, theft, embezzlement, fraud, errors
and omissions and negligent acts of such persons. Such fidelity bond shall also
protect and insure the Seller against losses in connection with the failure to
maintain any insurance policies required pursuant to this Agreement. No
provision of this Subsection 11.12 requiring the fidelity bond and errors and
omissions insurance shall diminish or relieve the Seller from its duties and
obligations as set forth in this Agreement. The minimum coverage under any such
bond and insurance policy shall be at least equal to the corresponding amounts
required by FNMA in the FNMA Servicing Guide or by FHLMC in the FHLMC Sellers'
and Servicers' Guide. Upon request of the Purchaser, the Seller shall cause to
be delivered to the Purchaser a certified true copy of the fidelity bond and
insurance policy and a statement from the surety and the insurer that such
fidelity bond or insurance policy shall in no event be terminated or materially
modified without thirty (30) days prior written notice to the Purchaser.
Subsection 11.13 Title, Management and Disposition of REO Property.
-------------------------------------------------
In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the Seller or its Sub-Servicer or such other
person, if any, designated by the Purchaser. Any Person or Persons holding such
title other than the Purchaser shall acknowledge in writing that such title is
being held as nominee for the benefit of the Purchaser.
The Seller shall either itself or through an agent selected by the
Seller, manage, conserve, protect and operate each REO Property (and may
temporarily rent the same) in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in the
same manner that similar property in the same locality as the REO Property is
managed. If a REMIC election is or is to be made with respect to the
arrangement under which the Mortgage Loans and any REO Property are held, the
Seller shall manage, conserve, protect and operate each REO Property in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of
39
the Code or result in the receipt by such REMIC of any "income from non-
permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code or any
"net income from foreclosure property" within the meaning of Section 860G(c)(2)
of the Code. The Seller shall cause each REO Property to be inspected promptly
upon the acquisition of title thereto and shall cause each REO Property to be
inspected at least annually thereafter. The Seller shall make or cause to be
made a written report of each such inspection. Such reports shall be retained in
the Mortgage File and copies thereof shall be forwarded by the Seller to the
Purchaser. The Seller shall use its best efforts to dispose of the REO Property
as soon as possible and shall sell such REO Property in any event within one (1)
year after title has been taken to such REO Property, unless the Seller
determines, and gives appropriate notice to the Purchaser, that a longer period
is necessary for the orderly liquidation of such REO Property. If a period
longer than one (1) year is necessary to sell any REO property, (i) the Seller
shall report monthly to the Purchaser as to the progress being made in selling
such REO Property and (ii) if, with the written consent of the Purchaser, a
purchase money mortgage is taken in connection with such sale, such purchase
money mortgage shall name the Seller as mortgagee, and a separate servicing
agreement between the Seller and the Purchaser shall be entered into with
respect to such purchase money mortgage. Notwithstanding the foregoing, if a
REMIC election is made with respect to the arrangement under which the Mortgage
Loans and the REO Property are held, such REO Property shall be disposed of
within two (2) years or such other period as may be permitted under Section
860G(a)(8) of the Code.
With respect to each REO Property, the Seller shall segregate and hold
all funds collected and received in connection with the operation of the REO
Property separate and apart from its own funds or general assets and shall
establish and maintain a separate REO Account for each REO Property in the form
of a non-interest bearing demand account, unless an Opinion of Counsel is
obtained by the Seller to the effect that the classification as a grantor trust
or REMIC for federal income tax purposes of the arrangement under which the
Mortgage Loans and the REO Property is held will not be adversely affected by
holding such funds in another manner. Each REO Account shall be established
with the Seller or, with the prior consent of the Purchaser, with a commercial
bank, a mutual savings bank or a savings association. The creation of any REO
Account shall be evidenced by a letter agreement substantially in the form of
the Custodial Account Letter Agreement attached as Exhibit 6 hereto. An
---------
original of such letter agreement shall be furnished to any Purchaser upon
request.
The Seller shall deposit or cause to be deposited, on a daily basis in
each REO Account all revenues received with respect to the related REO Property
and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of the REO Property, including the cost of
maintaining any hazard insurance pursuant to Subsection 11.10 hereof and the
fees of any managing agent acting on behalf of the Seller. The Seller shall not
be entitled to retain interest paid or other earnings, if any, on funds
deposited in such REO Account. On or before each Determination Date, the Seller
shall withdraw from each REO Account and
40
deposit into the Custodial Account the net income from the REO Property on
deposit in the REO Account.
The Seller shall furnish to the Purchaser on each Distribution Date,
an operating statement for each REO Property covering the operation of each REO
Property for the previous month. Such operating statement shall be accompanied
by such other information as the Purchaser shall reasonably request.
Each REO Disposition shall be carried out by the Seller at such price
and upon such terms and conditions as the Seller deems to be in the best
interest of the Purchaser only with the prior written consent of the Purchaser.
If as of the date title to any REO Property was acquired by the Purchaser or its
designee there were outstanding unreimbursed Servicing Advances with respect to
the REO Property, the Seller, upon an REO Disposition of such REO Property,
shall be entitled to reimbursement for any related unreimbursed Servicing
Advances from proceeds received in connection with such REO Disposition. The
proceeds from the REO Disposition, net of any payment to the Seller as provided
above, shall be deposited in the REO Account and shall be transferred to the
Custodial Account on the Determination Date in the month following receipt
thereof for distribution on the succeeding Distribution Date in accordance with
Subsection 11.14.
Subsection 11.14 Distributions.
-------------
On each Distribution Date, the Seller shall distribute to the
Purchaser all amounts credited to the Custodial Account as of the close of
business on the preceding Determination Date, net of charges against or
withdrawals from the Custodial Account pursuant to Subsection 11.05, minus any
amounts attributable to Monthly Payments collected but due on a Due Date or
Dates subsequent to the related Due Period.
All distributions made to the Purchaser on each Distribution Date will
be made to the Initial Purchaser or any subsequent Purchaser as most recently
identified to the Seller in writing by the previous Purchaser, and shall be
based on the Mortgage Loans owned and held by the Purchaser, and shall be made
by wire transfer of immediately available funds to the account of the Purchaser
at a bank or other entity having appropriate facilities therefor, if the
Purchaser shall have so notified the Seller or by check mailed to the address of
the Purchaser.
With respect to any remittance received by the Purchaser on or after
the second Business Day following the Business Day on which such payment was
due, the Seller shall pay to the Purchaser interest on any such late payment at
an annual rate equal to the rate of interest as is publicly announced from time
to time at its principal office by The Chase Manhattan Bank, New York, New York,
as its prime lending rate, adjusted as of the date of each change, plus three
percentage points, but in no event greater than the maximum amount permitted by
applicable law. Such interest shall be paid by the Seller to the Purchaser on
the date such late payment is made and shall cover the period commencing with
the day following such second Business Day
41
and ending with the Business Day on which such payment is made, both inclusive.
Such interest shall be remitted along with such late payment. The payment by the
Seller of any such interest shall not be deemed an extension of time for payment
or a waiver of any Event of Default by the Seller.
Subsection 11.15 Remittance Reports.
------------------
The Seller shall furnish to the Purchaser or its designee on each
Distribution Date a computer tape containing, and a hard copy of, the monthly
data, the determination data and remittance report, as further described and set
forth in Exhibit 8, for the Mortgage Loans for the preceding calendar month,
---------
together with such other information with respect to the Mortgage Loans as the
Purchaser may reasonably require to allocate distributions made pursuant to this
Agreement and provide appropriate statements with respect to such distributions.
Subsection 11.16 Statements to the Purchaser.
---------------------------
Not later than fifteen (15) days after each Distribution Date, the
Seller shall forward to the Purchaser or its designee a statement prepared by
the Seller setting forth the status of the Custodial Account as of the close of
business on such Distribution Date and showing, for the period covered by such
statement, the aggregate amount of deposits into and withdrawals from the
Custodial Account of each category of deposit specified in Subsection 11.04 and
each category of withdrawal specified in Subsection 11.05.
In addition, not more than sixty (60) days after the end of each
calendar year, the Seller shall furnish to each Person who was the Purchaser at
any time during such calendar year, (i) as to the aggregate of remittances for
the applicable portion of such year, an annual statement in accordance with the
requirements of applicable federal income tax law, and (ii) a listing of the
principal balances of the Mortgage Loans outstanding at the end of such calendar
year or at the expiration of the Interim Servicing Period if the Seller was
terminated as servicer hereunder during such calendar year.
The Seller shall prepare and file any and all tax returns, information
statements or other filings required to be delivered to any governmental taxing
authority or to any Purchaser pursuant to any applicable law with respect to the
Mortgage Loans and the transactions contemplated hereby. In addition, the
Seller shall provide the Purchaser with such information concerning the Mortgage
Loans (during the period they were serviced by the Seller) as is necessary for
the Purchaser to prepare its federal income tax return as any Purchaser may
reasonably request from time to time.
Subsection 11.17 Real Estate Owned Reports.
-------------------------
42
Together with the statement furnished pursuant to Subsection 11.13,
with respect to any REO Property, the Seller shall furnish to the Purchaser a
statement covering the Seller's efforts in connection with the sale of such REO
Property and any rental of such REO Property incidental to the sale thereof for
the previous month, together with the operating statement. Such statement shall
be accompanied by such other information as the Purchaser shall reasonably
request.
Subsection 11.18 Liquidation Reports.
-------------------
Upon the foreclosure sale of any Mortgaged Property or the acquisition
thereof by the Purchaser pursuant to a deed-in-lieu of foreclosure, the Seller
shall submit to the Purchaser a liquidation report with respect to such
Mortgaged Property.
Subsection 11.19 Assumption Agreements.
---------------------
The Seller shall, to the extent it has knowledge of any conveyance or
prospective conveyance by any Mortgagor of the Mortgaged Property (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 any
"due-on-sale" clause applicable thereto; provided, however, that the Seller
shall not exercise any such rights if prohibited by law from doing so. If the
Seller reasonably believes it is unable under applicable law to enforce such
"due-on-sale" clause, the Seller shall use reasonable efforts to enter into an
assumption agreement with the person to whom the Mortgaged 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. Where an assumption is allowed
pursuant to this Subsection 11.19, the Seller is authorized to enter into a
substitution of liability agreement with the person to whom the Mortgaged
Property has been conveyed or is proposed to be conveyed pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the related Mortgage Note. Any such
substitution of liability agreement shall be in lieu of an assumption agreement.
In connection with any such assumption or substitution of liability,
the Seller shall follow the underwriting practices and procedures included in
the NMC Non-Conforming Program Guide. With respect to an assumption or
substitution of liability, the Mortgage Interest Rate, the amount of the Monthly
Payment, and the final maturity date of such Mortgage Note may not be changed.
The Seller shall notify the Purchaser that any such substitution of liability or
assumption agreement has been completed by forwarding to the Purchaser the
original of any such substitution of liability 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
43
the same extent as all other documents and instruments constituting a part
thereof. Any fee collected by the Seller for entering into an assumption or
substitution of liability agreement in excess of one percent (1%) of the
outstanding principal balance of the Mortgage Loan shall be deposited in the
Custodial Account pursuant to Subsection 11.04.
Notwithstanding the foregoing paragraphs of this Subsection or any
other provision of this Agreement, the Seller 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 any assumption which
the Seller may be restricted by law from preventing, for any reason whatsoever.
For purposes of this Subsection 11.19, 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.
Subsection 11.20 Satisfaction of Mortgages and Release of Mortgage
-------------------------------------------------
Files.
-----
Upon the payment in full of any Mortgage Loan, or the receipt by the
Seller of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Seller will immediately notify the Purchaser by
a certification of a servicing officer of the Seller (a "Servicing Officer"),
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 Custodial Account pursuant to Subsection 11.04 have been or
will be so deposited, and shall request execution of any document necessary to
satisfy the Mortgage Loan and delivery to it of the portion of the Mortgage File
held by the Purchaser or the Purchaser's designee. Upon receipt of such
certification and request, the Purchaser, shall promptly release the related
mortgage documents to the Seller and the Seller shall prepare and process any
satisfaction or release. No expense incurred in connection with any instrument
of satisfaction or deed of reconveyance shall be chargeable to the Custodial
Account or the Purchaser.
In the event the Seller satisfies or releases a Mortgage without
having obtained payment in full of the indebtedness secured by the Mortgage and
without the prior written consent of the Purchaser, the Seller, upon written
demand, shall remit to the Purchaser the then outstanding principal balance of
the related Mortgage Loan by deposit thereof in the Custodial Account. The
Seller shall maintain the fidelity bond insuring the Seller against any loss it
may sustain with respect to any Mortgage Loan not satisfied in accordance with
the procedures set forth herein.
From time to time and as appropriate for the servicing or foreclosure
of the Mortgage Loan, the Purchaser shall, upon request of the Seller and
delivery to the Purchaser of a servicing receipt signed by a Servicing Officer,
release the requested portion of the related Mortgage File held by the Purchaser
to the Seller. Such servicing receipt shall obligate the Seller
44
to return the related Mortgage documents to the Purchaser when the need therefor
by the Seller no longer exists, unless the Mortgage Loan has been liquidated and
the Liquidation Proceeds relating to the Mortgage Loan have been deposited in
the Custodial 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 non-
judicially, and the Seller has delivered to the Purchaser 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, the servicing receipt shall be released by
the Purchaser to the Seller.
Subsection 11.21 Servicing Advance Reimbursement
-------------------------------
The Purchaser shall reimburse the Seller for unreimbursed Servicing
Advances that the Seller actually expended as servicer which the Seller would
have otherwise been entitled to recover upon receipt of collections from the
related Mortgagor pursuant to Section 11.05(iii), but for the termination of the
Interim Servicing Period. The Seller shall deliver to the Purchaser a detailed
statement of such unreimbursed Servicing Advances within fifteen (15) days of
the termination of the Interim Servicing Period, and the Purchaser shall
reimburse the Seller for such unreimbursed Servicing Advances within thirty (30)
days of receipt of such statement.
Subsection 11.22 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Seller shall, subject
to Subsection 11.04(x), be entitled to withdraw from the Custodial Account or to
retain from interest payments on the Mortgage Loans the amounts provided for as
the Seller's Servicing Fee. Additional servicing compensation in the form of
assumption fees, as provided in Subsection 11.19, and late payment charges or
otherwise during the Interim Servicing Period shall be retained by the Seller to
the extent not required to be deposited in the Custodial Account. The Seller
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for.
Subsection 11.23 Statement as to Compliance.
--------------------------
The Seller will deliver to the Purchaser not later than ninety (90)
days following the end of each fiscal year of the Seller, which as of the
Closing Date ends on the last day in December in each calendar year, an
Officer's Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Seller during the preceding year and of performance
under this
45
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Seller has fulfilled all of
its obligations under this 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 such
statement shall be provided by the Purchaser to any Person identified as a
prospective purchaser of the Mortgage Loans.
Subsection 11.24 Independent Public Accountants' Servicing Report.
------------------------------------------------
Not later than ninety (90) days following the end of each fiscal year
of the Seller, the Seller at its expense shall cause a firm of independent
public accountants (which may also render other services to the Seller) which is
a member of the American Institute of Certified Public Accountants to furnish a
statement to the Purchaser or its designee to the effect that such firm has
examined certain documents and records relating to the servicing of the Mortgage
Loans under this Agreement or of mortgage loans under pooling and servicing
agreements (including the Mortgage Loans and this Agreement) substantially
similar one to another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby) and that, on
the basis of such examination conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Attestation
Program for Mortgages serviced for FHLMC, such firm confirms that such servicing
has been conducted in compliance with such pooling and servicing agreements
except for such significant exceptions or errors in records that, in the opinion
of such firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Attestation Program for Mortgages serviced for FHLMC requires it to report.
Copies of such statement shall be provided by the Purchaser to any Person
identified as a prospective purchaser of the Mortgage Loans.
Subsection 11.25 Access to Certain Documentation.
-------------------------------
The Seller 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 the Purchaser access to the documentation regarding
the Mortgage Loans serviced by the Seller 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
Seller. In addition, access to the documentation will be provided to the
Purchaser and any Person identified to the Seller by the Purchaser without
charge, upon reasonable request during normal business hours at the offices of
the Seller.
Subsection 11.26 Notification of Adjustments.
---------------------------
46
On each Adjustment Date, the Seller shall make interest rate
adjustments for each Mortgage Loan in compliance with the requirements of the
related Mortgage and Mortgage Note. The Seller shall execute and deliver the
notices required by each Mortgage and Mortgage Note regarding interest rate
adjustments. The Seller also shall provide timely notification to the Purchaser
of all applicable data and information regarding such interest rate adjustments
and the Seller's methods of implementing such interest rate adjustments. Upon
the discovery by the Seller or the Purchaser that the Seller has failed to
adjust a Mortgage Interest Rate or a Monthly Payment pursuant to the terms of
the related Mortgage Note and Mortgage, the Seller shall immediately deposit in
the Custodial Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor.
Subsection 11.27 Sub-Servicing Agreements Between Seller and Sub-
-----------------------------------------------
Servicers.
---------
(a) The Seller may enter into Sub-Servicing Agreements with Sub-
Servicers for the servicing and administration of the Mortgage Loans; provided
--------
however that nothing in this Agreement shall be deemed to grant any rights in
-------
the Mortgage Loans to any Sub-Servicer following the termination of the Interim
Servicing Period. Subject to Section 16, the Seller and the Sub-Servicers may
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 Purchaser, without the consent of the Purchaser.
(b) As part of its servicing activities hereunder, the Seller, for the
benefit of the Purchaser, shall enforce the obligations of each Sub-Servicer
under the related Sub-Servicing Agreement, 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 defective
documentation or on account of a breach of a representation or warranty, as
described in Subsections 7.01 and 7.02. 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 Seller, in its good
faith business judgment, would require were it the owner of the related Mortgage
Loans. The Seller shall pay the costs of such enforcement at its own expense,
but shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement only to the extent, if any, that such recovery exceeds all
amounts due hereunder 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.
47
(c) As of the Closing Date, the Purchaser agrees that National
Mortgage Corporation is an acceptable Sub-Servicer hereunder.
Subsection 11.28 Successor Sub-Servicers.
-----------------------
The Seller 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. In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Seller
without any act or deed on the part of such Sub-Servicer or the Seller, and the
Seller either shall service directly the related Mortgage Loans or shall enter
into a Sub-Servicing Agreement with a successor Sub-Servicer which qualifies
under Subsection 11.27. If the Seller enters into a Sub-Servicing Agreement
with a successor Sub-Servicer, the Seller shall use reasonable efforts to have
the successor Sub-Servicer assume liability for the representations and
warranties made by the terminated Sub-Servicer in respect of the related
Mortgage Loans, and in the event of any such assumption by the successor Sub-
Servicer, the Seller may, in the exercise of its business judgment, release the
terminated Sub-Servicer from liability for such representations and warranties.
Subsection 11.29 Liability of the Seller.
-----------------------
Notwithstanding any Sub-Servicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Seller and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Seller shall remain obligated and liable to the Initial Purchaser for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the Sub-Servicer for any acts and omissions and to the same
extent and under the same terms and conditions as if the Seller alone were
servicing and administering the Mortgage Loans and any other transactions or
services relating to the Mortgage Loans involving the Sub-Servicer shall be
deemed to be between the Sub-Servicer and the Seller alone and the Purchaser
shall have no obligations, duties or liabilities with respect to the Sub-
Servicer including no obligation, duty or liability of the Purchaser to pay Sub-
Servicer's fees and expenses except pursuant to an assumption of the Seller's
obligations pursuant to Section 16. For purposes of this Agreement, the Seller
shall be deemed to have received payments on Mortgage Loans when the Sub-
Servicer has received such payments. The Seller shall be entitled to enter into
any agreement with a Sub-Servicer for indemnification of the Seller by such Sub-
Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification. The Seller shall pay all fees and expenses of the
Sub-Servicer from its own funds, the Servicing Fee or other amounts permitted to
be retained by or reimbursed to the Seller hereunder.
48
Subsection 11.30 No Contractual Relationship Between Sub-Servicers
-------------------------------------------------
and Purchaser.
-------------
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 and not as an originator shall be deemed to be between
the Sub-Servicer and the Seller alone, and the Initial Purchaser shall not be
deemed a party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Sub-Servicer except as set forth in Section 16.
SECTION 12. [Reserved]
SECTION 13. The Seller.
----------
Subsection 13.01. Additional Indemnification by the Seller.
----------------------------------------
In addition to the indemnification provided in Subsection 7.03, the
Seller shall indemnify the Purchaser and hold the Purchaser harmless against any
and all claims, losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments, and any other costs, fees and
expenses that the Purchaser may sustain in any way related to the failure of the
Seller to perform its obligations under this Agreement including but not limited
to its obligation to service and administer the Mortgage Loans in compliance
with the terms of this Agreement or any Reconstitution Agreement entered into
pursuant to Section 12.
Subsection 13.02. Merger or Consolidation of the Seller.
-------------------------------------
The Seller shall keep in full force and effect its existence, rights
and franchises as a corporation under the laws of the state of its incorporation
except as permitted herein, and shall 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 or any of the Mortgage Loans, and to enable the
Seller to perform its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the Seller,
shall be the successor of the Seller 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, for so
long as the Seller is servicing Mortgage Loans for the Purchaser under this
Agreement, the
49
successor or surviving Person shall be an institution whose deposits are insured
by FDIC or a company whose business is the origination and servicing of mortgage
loans, shall be a FNMA or FHLMC approved seller/servicer and shall satisfy any
requirements of Section 16 with respect to the qualifications of a successor to
the Seller.
Subsection 13.03. Limitation on Liability of the Seller and Others.
------------------------------------------------
Neither the Seller nor any of the officers, employees or agents of the
Seller shall be under any liability to the Purchaser for any action taken or for
refraining from the taking of any action in good faith in connection with the
servicing of the Mortgage Loans pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Seller or
any such person against any breach of warranties or representations made herein,
or failure to perform its obligations in compliance with any standard of care
set forth in this Agreement, or any liability which would otherwise be imposed
by reason of any breach of the terms and conditions of this Agreement. The
Seller and any officer, employee or agent of the Seller may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its obligation to sell or duty to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may involve it in any
expenses or liability; provided, however, that the Seller may, with the consent
of the Purchaser, undertake any such action which it may deem necessary or
desirable in respect to this Agreement and the rights and duties of the parties
hereto. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities for which
the Purchaser shall be liable, the Seller shall be entitled to reimbursement
therefor from the Purchaser upon written demand except when such expenses, costs
and liabilities are subject to the Seller's indemnification under Subsections
7.03 or 13.01.
Subsection 13.04. Seller Not to Resign.
--------------------
The Seller shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Seller and the Purchaser or upon the determination that its servicing duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Seller in which event the Seller may resign as servicer.
Any such determination permitting the resignation of the Seller as servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Purchaser which Opinion of Counsel shall be in form and substance reasonably
acceptable to the Purchaser. No such resignation shall become effective until a
successor shall have assumed the Seller's responsibilities and obligations
hereunder in the manner provided in Section 16.
Subsection 13.05. No Transfer of Servicing.
------------------------
50
With respect to the retention of the Seller to service the Mortgage
Loans during the Interim Servicing Period, the Seller acknowledges that the
Purchaser has acted in reliance upon the Seller's independent status, the
adequacy of its servicing facilities, plant, personnel, records and procedures,
its integrity, reputation and financial standing and the continuance thereof.
Without in any way limiting the generality of this Section, the Seller shall not
either assign this Agreement or the servicing hereunder or delegate its rights
or duties hereunder or any portion thereof, or sell or otherwise dispose of all
or substantially all of its property or assets, without the prior written
approval of the Purchaser, which consent will not be unreasonably withheld.
SECTION 14. Default.
-------
Subsection 14.01. Events of Default.
-----------------
In case one or more of the following Events of Default by the Seller
shall occur and be continuing, that is to say:
(i) any failure by the Seller to remit to the Purchaser any payment
required to be made under the terms of this Agreement which continues unremedied
for a period of three (3) Business Days after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Seller by the Purchaser; or
(ii) failure on the part of the Seller duly to observe or perform in
any material respect any other of the covenants or agreements on the part of the
Seller set forth in this Agreement which continues unremedied for a period of
thirty (30) days (except that such number of days shall be fifteen (15) in the
case of a failure to pay any premium for any insurance policy required to be
maintained under this Agreement) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the Seller
by the Purchaser; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, bankruptcy, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Seller and such
decree or order shall have remained in force undischarged or unstayed for a
period of sixty (60) days; or
(iv) the Seller shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, bankruptcy, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Seller or of or relating to all or substantially all of its property; or
51
(v) the Seller 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) failure by the Seller or the Sub-Servicer to be in compliance
with the "doing business" or licensing laws of any jurisdiction where a
Mortgaged Property is located if such failure has an adverse effect on the value
of the related Mortgage Loans, the enforceability of such Mortgage Loans or the
interests of the Purchaser in such Mortgage Loans; or
(vii) the Sub-Servicer ceases to meet the qualifications of either a
FNMA or FHLMC seller/servicer; or
(viii) the Seller attempts to assign its right to servicing
compensation hereunder or the Seller attempts, without the consent of the
Purchaser, to sell or otherwise dispose of all or substantially all of its
property or assets or to assign this Agreement or the servicing responsibilities
hereunder or to delegate its duties hereunder or any portion thereof;
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Purchaser, by notice in writing to the Seller may, in
addition to whatever rights the Purchaser may have at law or equity to damages,
including injunctive relief and specific performance, terminate all the rights
and obligations of the Seller as servicer under this Agreement. On or after the
receipt by the Seller of such written notice, all authority and power of the
Seller to service the Mortgage Loans under this Agreement shall on the date set
forth in such notice pass to and be vested in the successor appointed pursuant
to Section 16.
Subsection 14.02. Waiver of Defaults.
------------------
The Purchaser may waive any default by the Seller in the performance
of its obligations hereunder and its consequences. Upon any such waiver of a
past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so waived.
SECTION 15. Termination. The respective obligations and
-----------
responsibilities of the Seller, as servicer, shall terminate at the expiration
of the Interim Servicing Period unless terminated on an earlier date at the
option of the Purchaser pursuant to Section 14. Upon written request from the
Purchaser in connection with any such termination, the Seller shall prepare,
execute and deliver, any and all documents and other instruments, place in the
Purchaser's possession all Mortgage Files, and do or accomplish all
52
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, at the
Seller's sole expense. The Seller agrees to cooperate with the Purchaser and
such successor in effecting the termination of the Seller's responsibilities and
rights hereunder as servicer, including, without limitation, the transfer to
such successor for administration by it of all cash amounts which shall at the
time be credited by the Seller to the Custodial Account, REO Account or Escrow
Account or thereafter received with respect to the Mortgage Loans.
SECTION 16. Successor to the Seller. Prior to termination of the
-----------------------
Seller's responsibilities and duties under this Agreement pursuant to Section 14
or 15, the Purchaser shall (i) succeed to and assume all of the Seller's
responsibilities, rights, duties and obligations under this Agreement and the
Sub-Servicing Agreements, or (ii) appoint a successor which shall succeed to all
rights and assume all of the responsibilities, duties and liabilities of the
Seller as servicer under this Agreement and the Sub-Servicing Agreements. In
connection with such appointment and assumption, the Purchaser may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree. In the event that the Seller's
duties, responsibilities and liabilities as servicer under this Agreement should
be terminated pursuant to the aforementioned Sections, the Seller shall
discharge such duties and responsibilities during the period from the date it
acquires knowledge of such termination until the effective date thereof with the
same degree of diligence and prudence which it is obligated to exercise under
this Agreement, and shall take no action whatsoever that might impair or
prejudice the rights or financial condition of the Purchaser or such successor.
The termination of the Seller as servicer pursuant to the aforementioned
Sections shall not become effective until a successor shall be appointed
pursuant to this Section 16 and shall in no event relieve the Seller of the
representations and warranties made pursuant to Subsections 7.01 and 7.02 and
the remedies available to the Purchaser under Subsection 7.03 or 7.04, it being
understood and agreed that the provisions of such Subsections 7.01, 7.02 and
7.03 and 7.04 shall be applicable to the Seller notwithstanding any such
resignation or termination of the Seller, or the termination of this Agreement.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Seller and to the Purchaser an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Seller, with like effect as if originally named as a party to this Agreement,
provided, however, that such successor shall not assume, and Seller shall
indemnify such successor for, any and all liabilities arising out of the
Seller's acts as servicer. Any termination of the Seller as servicer pursuant
to Section 14 or 15 shall not affect any claims that the Purchaser may have
against the Seller arising prior to any such termination or resignation or
remedies with respect to such claims.
53
The Seller shall timely deliver to the successor the funds in the
Custodial Account, REO Account and the Escrow Account and the Mortgage Files and
related documents and statements held by it hereunder and the Seller shall
account for all funds. The Seller shall execute and deliver such instruments
and do such other things all as may reasonably be required to more fully and
definitely vest and confirm in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Seller as servicer. The
successor shall make arrangements as it may deem appropriate to reimburse the
Seller for amounts the Seller actually expended as servicer pursuant to this
Agreement which the successor is entitled to retain hereunder and which would
otherwise have been recovered by the Seller pursuant to this Agreement but for
the appointment of the successor servicer.
SECTION 17. Financial Statements. The Seller understands that in
--------------------
connection with the Purchaser's marketing of the Mortgage Loans, the Purchaser
shall make available to prospective purchasers the Seller's financial statements
for the most recently completed three (3) fiscal years respecting which such
statements are available. The Seller also shall make available any comparable
interim statements to the extent any such statements have been prepared by the
Seller (and are available upon request to members or stockholders of the Seller
or the public at large). The Seller, if it has not already done so, agrees to
furnish promptly to the Purchaser copies of the statements specified above. The
Seller also shall make available information on its servicing performance with
respect to mortgage loans serviced for others, including delinquency ratios
relating to the most recently completed three fiscal years..
The Seller also agrees to allow reasonable access to knowledgeable
financial, accounting, origination and servicing officers of the Seller for the
purpose of answering questions asked by any prospective purchaser regarding
recent developments affecting the Seller, its loan origination or servicing
practices or the financial statements of the Seller.
SECTION 18. Mandatory Delivery; Grant of Security Interest. The sale
----------------------------------------------
and delivery of all of the Mortgage Loans on or before the Closing Date is
mandatory from and after the date of the execution of the Confirmation, it being
specifically understood and agreed that each Mortgage Loan is unique and
identifiable on the date hereof and that an award of money damages would be
insufficient to compensate the Initial Purchaser for the losses and damages
incurred by the Initial Purchaser (including damages to prospective purchasers
of the Mortgage Loans) in the event of the Seller's failure to deliver each of
the related Mortgage Loans or one or more Mortgage Loans otherwise acceptable to
the Purchaser on or before the Closing Date. The Seller hereby grants to the
Initial Purchaser a lien on and a continuing security interest in each Mortgage
Loan and each document and instrument evidencing each such Mortgage Loan to
secure the performance by the Seller of its obligation hereunder, and the Seller
agrees that it holds such Mortgage Loans in custody for the Initial Purchaser
subject to the Initial Purchaser's (i) right to reject any Mortgage Loan under
the terms of this Agreement and the Confirmation, and (ii) obligation to pay the
Purchase Price for the Mortgage Loans. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law
54
or equity and all such rights and remedies may be exercised concurrently,
independently or successively.
SECTION 19. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
mailed, by registered or certified mail, return receipt requested, or, if by
other means, when received by the other party at the address as follows:
(i) if to the Seller:
National Mortgage Sales Corporation
0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000X
Attention: Xx. Xxxxx Xxxxxxxxx and Xx. Xxxxx Xxxxx
(ii) with a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
Plaza Tower One, Suite 1200
0000 Xxxxx Xxxxxxx'x Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
(iii) if to the Purchaser:
Salomon Brothers Realty Corp.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx Xxxxx
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 20. Severability Clause. Any part, provision, representation
-------------------
or warranty of this Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall
be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits
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or renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good-faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic effect of this
Agreement without regard to such invalidity.
SECTION 21. Counterparts. This Agreement may be executed
------------
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument.
SECTION 22. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York without regard to any
conflicts of laws provisions and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with the laws of the State
of New York, except to the extent preempted by Federal law.
SECTION 23. Intention of the Parties. It is the intention of the
------------------------
parties that the Initial Purchaser is purchasing, and the Seller is selling, the
Mortgage Loans and not a debt instrument of the Seller or another security.
Accordingly, the parties hereto each intend to treat the transaction for federal
income tax purposes as a sale by the Seller, and a purchase by the Purchaser, of
the Mortgage Loans. The Initial Purchaser shall have the right to review the
Mortgage Loans and the related Mortgage Loan Files to determine the
characteristics of the Mortgage Loans which shall affect the federal income tax
consequences of owning the Mortgage Loans and the Seller shall cooperate with
all reasonable requests made by the Initial Purchaser in the course of such
review.
SECTION 24. Successors and Assigns. This Agreement shall bind and
----------------------
inure to the benefit of and be enforceable by the Seller and the Purchaser and
the respective successors and assigns of the Seller and the Purchaser. The
Purchaser may assign this Agreement to any Person to whom any Mortgage Loan is
transferred whether pursuant to a sale or financing and to any Person to whom
the servicing or master servicing of any Mortgage Loan is sold or transferred.
Upon any such assignment and written notice thereof to the Seller, the Person to
whom such assignment is made shall succeed to all rights and obligations of the
Purchaser under this Agreement to the extent of the related Mortgage Loan or
Mortgage Loans and this Agreement, to the extent of the related Mortgage Loan or
Loans, shall be deemed to be a separate and distinct Agreement between the
Seller and such Purchaser, and a separate and distinct Agreement between the
Seller and each other Purchaser to the extent of the other related Mortgage Loan
or Loans. This Agreement shall not be assigned, pledged or hypothecated by the
Seller to a third party without the consent of the Purchaser.
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SECTION 25. Waivers. No term or provision of this Agreement may be
-------
waived or modified unless such waiver or modification is in writing and signed
by the party against whom such waiver or modification is sought to be enforced.
SECTION 26. Exhibits. The exhibits to this Agreement are hereby
--------
incorporated and made a part hereof and are an integral part of this Agreement.
SECTION 27. Nonsolicitation. The Seller covenants and agrees that it
---------------
shall not take any action to solicit the refinancing of any Mortgage Loan
following the date hereof or provide information to any other entity to solicit
the refinancing of any Mortgage Loan; provided that, the foregoing shall not
preclude the Seller from engaging in solicitations to the general public by
newspaper, radio, television or other media which are not directed solely toward
the Mortgagors or from refinancing the Mortgage Loan of any Mortgagor who,
without solicitation, contacts the Seller to request the refinancing of the
related Mortgage Loan.
SECTION 28. General Interpretive Principles. For purposes of this
-------------------------------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Agreement;
(d) reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
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SECTION 29. Reproduction of Documents. This Agreement and all
-------------------------
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, (b) documents received by any
party at the closing, and (c) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 30. Further Agreements. The Seller and the Purchaser each
------------------
agree to execute and deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be necessary or
appropriate to effectuate the purposes of this Agreement.
Without limiting the generality of the foregoing, the Seller shall
cooperate with the Purchaser in connection with any Whole Loan Transfer or Pass-
Through Transfer contemplated by the Initial Purchaser pursuant to Section 12
hereof. In such connection, the Seller shall (a) execute any agreement in
accordance with the provisions of Section 12, and (b) provide to the Initial
Purchaser or any prospective purchaser from the Initial Purchaser: (i) any and
all information and appropriate verification of information, whether through
letters of its auditors and counsel or otherwise, as the Initial Purchaser shall
reasonably request; and (ii) such representations, warranties, covenants,
opinions of counsel, letters from auditors, and certificates of public officials
or officers of the Seller as are reasonably believed necessary by the Initial
Purchaser in connection with such transactions. The requirement of the Seller
pursuant to (ii) above shall terminate on the final Reconstitution Date. Prior
to incurring any out-of-pocket expenses pursuant to this paragraph, the Seller
shall notify the Initial Purchaser in writing of the estimated amount of such
expense. The Initial Purchaser shall reimburse the Seller for any such expense
following its receipt of appropriate details thereof.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the date first above written.
SALOMON BROTHERS REALTY CORP.
(Initial Purchaser)
By:_______________________________
Name:_____________________________
Title:____________________________
NATIONAL MORTGAGE SALES CORPORATION
(Seller)
By:_______________________________
Name:_____________________________
Title:____________________________
