EXHIBIT 99.1
EXECUTION COPY
==============================================================================
CWABS, INC.
Depositor
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
CWABS MASTER TRUST
the Trust
BANK ONE, NATIONAL ASSOCIATION
Indenture Trustee
--------------------------------
SALE AND SERVICING AGREEMENT
Dated as of April 25, 2003
--------------------------------
REVOLVING HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 2003-D
==============================================================================
Table of Contents
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions......................................................................1
Section 1.02. Other Terms......................................................................1
Section 1.03. Rules of Construction............................................................1
Section 1.04. Interest Calculations............................................................2
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to Fund
Advances Under Credit Line Agreements............................................3
Section 2.02. Acceptance by Indenture Trustee..................................................8
Section 2.03. Representations and Warranties Regarding the Master Servicer....................10
Section 2.04. Representations and Warranties of the Sponsor Regarding the Mortgage Loans;
Retransfer of Certain Mortgage Loans............................................11
Section 2.05. Covenants of the Depositor......................................................18
Section 2.06. Transfers of Mortgage Loans at Election of Transferor...........................19
Section 2.07. Tax Treatment...................................................................20
Section 2.08. Representations and Warranties of the Depositor.................................20
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. The Master Servicer.............................................................21
Section 3.02. Collection of Certain Mortgage Loan Payments; Establishment of Accounts.........23
Section 3.03. Reserved.
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses...................26
Section 3.05. Assumption and Modification Agreements..........................................26
Section 3.06. Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans.27
Section 3.07. Indenture Trustee to Cooperate..................................................28
Section 3.08. Servicing Compensation; Payment of Certain Expenses by Master Servicer..........29
Section 3.09. Annual Statement as to Compliance...............................................29
Section 3.10. Annual Servicing Report.........................................................29
Section 3.11. Access to Certain Documentation and Information Regarding the Mortgage Loans....30
Section 3.12. Maintenance of Certain Servicing Insurance Policies.............................30
i
Section 3.13. Reports to the Securities and Exchange Commission...............................30
Section 3.14. Tax Treatment...................................................................30
Section 3.15. Information Required by the Internal Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged Property.............................31
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Servicing Certificate...........................................................31
Section 4.02. Acknowledgement and Cooperation.................................................34
Section 4.03. Optional Advances of the Master Servicer........................................34
Section 4.04. Statements to Noteholders.......................................................34
ARTICLE V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01. Liability of the Sponsor, the Master Servicer, and the Depositor................36
Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of,
the Master Servicer or the Depositor............................................36
Section 5.03. Limitation on Liability of the Master Servicer and Others.......................36
Section 5.04. Master Servicer Not to Resign...................................................37
Section 5.05. Delegation of Duties............................................................38
Section 5.06. Indemnification by the Master Servicer..........................................38
ARTICLE VI
SERVICING TERMINATION
Section 6.01. Events of Servicing Termination.................................................38
Section 6.02. Indenture Trustee to Act; Appointment of Successor..............................40
Section 6.03. Notification to Noteholders and the Transferor..................................41
ARTICLE VII
TERMINATION
Section 7.01. Termination.....................................................................42
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.......................................................................43
Section 8.02. Governing Law...................................................................43
Section 8.03. Notices.........................................................................43
Section 8.04. Severability of Provisions......................................................45
Section 8.05. Assignment......................................................................45
ii
Section 8.06. Third-Party Beneficiaries.......................................................45
Section 8.07. Counterparts....................................................................46
Section 8.08. Effect of Headings and Table of Contents........................................46
Section 8.09. Series Trust....................................................................46
EXHIBIT A - MORTGAGE LOAN SCHEDULE...................................................................A-1
EXHIBIT B - FORM OF CREDIT LINE AGREEMENT............................................................B-1
EXHIBIT C - LETTER OF REPRESENTATIONS................................................................C-1
EXHIBIT D - FORM OF REQUEST FOR RELEASE..............................................................D-1
ANNEX 1 DEFINITIONS..........................................................................XXX-1-1
ANNEX 2 ADOPTION ANNEX.......................................................................XXX-2-1
iii
This SALE AND SERVICING AGREEMENT, dated as of April 25, 2003, among
CWABS, INC., as depositor, COUNTRYWIDE HOME LOANS, INC., as sponsor and master
servicer, CWABS MASTER TRUST, and BANK ONE, NATIONAL ASSOCIATION, as Indenture
Trustee,
WITNESSETH THAT:
The parties agree as follows:
Article I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
Unless the context requires a different meaning, capitalized terms are
used in this Agreement as defined in Annex 1.
Section 1.02. Other Terms.
Capitalized terms used in this Agreement that are not otherwise defined
have the meanings given to them in the Indenture. Defined terms that are used
only in one section or only in another definition may be omitted from the list
of defined terms in Annex 1. Defined terms used in this Agreement are
sometimes defined after their first use without a reference such as "(as
hereinafter defined)." Defined terms include, as appropriate, all genders and
the plural as well as the singular.
Section 1.03. Rules of Construction.
Except as otherwise expressly provided in this Agreement or unless the
context otherwise clearly requires:
(a) References to designated articles, sections, subsections, exhibits,
and other subdivisions of this Agreement, such as "Section 3.01(B)," refer to
the designated article, section, subsection, exhibit, or other subdivision of
this Agreement as a whole and to all subdivisions of the designated article,
section, subsection, exhibit, or other subdivision. The words "herein,"
"hereof," "hereto," "hereunder," and other words of similar import refer to
this Agreement as a whole and not to any particular article, section, exhibit,
or other subdivision of this Agreement.
(b) Any term that relates to a document or a statute, rule, or regulation
includes any amendments, modifications, supplements, or any other changes that
may have occurred since the document, statute, rule, or regulation came into
being, including changes that occur after the date of this Agreement.
(c) Any party may execute any of the requirements under this Agreement
either directly or through others, and the right to cause something to be done
rather than doing it directly shall be implicit in every requirement under
this Agreement. Unless a provision is restricted as to time or limited as to
frequency, all provisions under this Agreement are implicitly available and
things may happen from time to time.
1
(d) The term "including" and all its variations mean "including but not
limited to." Except when used in conjunction with the word "either," the word
"or" is always used inclusively (for example, the phrase "A or B" means "A or
B or both," not "either A or B but not both").
(e) A reference to "a thing" or "any of a thing" does not imply the
existence or occurrence of the thing referred to even though not followed by
"if any," and "any of a thing" is any and all of it. A reference to the plural
of anything as to which there could be either one or more than one does not
imply the existence of more than one (for instance, the phrase "the obligors
on a note" means "the obligor or obligors on a note"). "Until something
occurs" does not imply that it must occur, and will not be modified by the
word "unless." The word "due" and the word "payable" are each used in the
sense that the stated time for payment has past. The word indemnify is used to
include its dictionary sense of hold harmless. The word "accrued" is used in
its accounting sense, i.e., an amount paid is no longer accrued. In the
calculation of amounts of things, differences and sums may generally result in
negative numbers, but when the calculation of the excess of one thing over
another results in zero or a negative number, the calculation is disregarded
and an "excess" does not exist. Portions of things may be expressed as
fractions or percentages interchangeably.
(f) All accounting terms used in an accounting context and not otherwise
defined, and accounting terms partly defined in this Agreement, to the extent
not completely defined, shall be construed in accordance with generally
accepted accounting principles in the United States. To the extent that the
definitions of accounting terms in this Agreement are inconsistent with their
meanings under generally accepted accounting principles, the definitions
contained in this Agreement shall control. Capitalized terms used in this
Agreement without definition that are defined in the UCC are used in this
Agreement as defined in the UCC.
(g) In the computation of a period of time from a specified date to a
later specified date or an open-ended period, the word "from" or "beginning"
means "from and including," the word "after" means "from but excluding," the
words "to" or "until" mean "to but excluding," and the word "through" means
"to and including." Likewise, in setting deadlines or other periods, "by"
means "on or before." The words "preceding," "following," and words of similar
import, mean immediately preceding or following. References to a month or a
year refer to calendar months and calendar years.
(h) Any reference to the enforceability of any agreement against a party
means that it is enforceable, subject as to enforcement against the party, to
applicable bankruptcy, insolvency, reorganization, and other similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
Section 1.04. Interest Calculations.
All calculations of interest on the Asset Balance of a Mortgage Loan
under this Agreement are on a daily basis using a 365-day year. All
calculations of interest on the Notes are on the basis of the actual number of
days in an Interest Period and a year of 360 days. The calculation of the
Servicing Fee is on the basis of a 360-day year consisting of twelve 30-day
2
months. All dollar amounts calculated under this Agreement are rounded to the
nearest cent with one-half of one cent being rounded down.
Article II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements.
(a) Concurrently with the execution and delivery of this Agreement, the
Depositor hereby transfers to the Trust without recourse (subject to Sections
2.02 and 2.04) all of its right, title, and interest in
(i) each Mortgage Loan, including its Asset Balance (including all
Additional Balances), the related Mortgage File, all property that
secures the Mortgage Loan, and all collections received on it after the
Cut-off Date (excluding payments due by the Cut-off Date);
(ii) property that secured a Mortgage Loan that is acquired by
foreclosure or deed in lieu of foreclosure;
(iii) the Depositor's rights under the Purchase Agreement;
(iv) the Depositor's rights under the hazard insurance policies;
(v) all rights under any guaranty executed in connection with a
Mortgage Loan;
(vi) all other assets included or to be included in the Trust for
the benefit of the Noteholders and the Credit Enhancer; and
(vii) all proceeds of the foregoing.
This transfer to the Trust is to the Owner Trustee, on behalf of the Trust,
and each reference in this Agreement to this transfer shall be construed
accordingly. In addition, by the Closing Date, the Depositor shall cause the
Credit Enhancer to deliver the Policy to the Indenture Trustee for the benefit
of the Noteholders.
(b) Reserved.
(c) Reserved.
(d) Additional Balances; Future Fundings. Additional Balances shall be
part of the Asset Balance and are hereby transferred to the Trust on the
Closing Date pursuant to this Section 2.01, and therefore are part of the
Trust property. Neither the Owner Trustee nor the Trust nor the Indenture
Trustee assumes the obligation under any Credit Line Agreement that provides
for the funding of future advances to the mortgagor under it, and neither the
Trust nor the Owner Trustee nor the Indenture Trustee may fund these future
advances.
(e) Delayed Delivery. In connection with the transfer under Section
2.01(a) by the Depositor, the Depositor shall effect delivery of the Mortgage
Loan Schedule to the Trust and
3
the Indenture Trustee by the Closing Date and delivery of the Mortgage Files
to the Trust, and the Trust shall deliver them to the Indenture Trustee,
(i) no later than the Closing Date, with respect to no less than 50%
of the Mortgage Loans,
(ii) no later than the twentieth day after the Closing Date, with
respect to no less than 40% of the Mortgage Loans in addition to those
delivered on the Closing Date, and
(iii) within thirty days following the Closing Date, with respect to
the remaining Mortgage Loans.
(f) Substitution and Repurchase. If the Indenture Trustee does not
receive the Mortgage File for any Mortgage Loan as required by Section
2.01(e), that Mortgage Loan shall automatically be retransferred to the
Sponsor, subject to the conditions in Section 2.02(b) (as if that Mortgage
Loan were otherwise subject to these provisions). If a Transfer Deficiency
results, the Sponsor shall substitute an Eligible Substitute Mortgage Loan for
the related Mortgage Loan within five Business Days of notification of the
Transfer Deficiency by the Indenture Trustee or, if unable to effect this
substitution, deposit into the Collection Account the Transfer Deposit Amount
in immediately available funds equal to the Transfer Deficiency (or effect a
combination of substitution and deposit). This substitution or deposit shall
be accomplished in the manner specified in, and have the effect specified in,
Section 2.02(b) (as if the related Mortgage Loan were otherwise subject to
these provisions).
(g) Xxxx Records. The Sponsor hereby confirms to the Owner Trustee and
the Indenture Trustee that it has caused the portions of the Electronic
Ledgers relating to the Mortgage Loans to be clearly and unambiguously marked,
and has made the appropriate entries in its general accounting records, to
indicate that the Mortgage Loans have been transferred to the Trust at the
direction of the Depositor. The Master Servicer hereby confirms to the Owner
Trustee and the Indenture Trustee that it has clearly and unambiguously made
appropriate entries in its general accounting records indicating that those
Mortgage Loans constitute part of the Series 2003-D Subtrust of the Trust and
are serviced by it on behalf of the Trust in accordance with this Agreement.
(h) UCC Filings. The Depositor and the Trust agree (subject to paragraph
(i) below) to effect any actions and execute any documents necessary to
perfect and protect the Trust's, the Indenture Trustee's, the Noteholders',
and the Credit Enhancer's interests in each Cut-off Date Asset Balance and
Additional Balances and their proceeds, including filing all necessary
Continuation Statements for the UCC-1 Financing Statements filed in the State
of Delaware (which shall have been filed by the Closing Date) describing the
Cut-off Date Asset Balances and Additional Balances and naming the Depositor
as debtor and the Trust as secured party or naming the Trust as debtor and the
Indenture Trustee as secured party and any amendments to UCC-1 Financing
Statements required to reflect a change in the UCC or in the name or
organizational structure of the Depositor or the Trust or the filing of any
additional UCC-1
4
Financing Statements due to the change in the state of organization of the
Depositor or the Trust (within 30 days of any event necessitating the filing).
(i) Sponsor Rating Downgrade. If the long term senior unsecured corporate
debt rating of Countrywide Home Loans, Inc. falls below "BBB" by Standard &
Poor's or "Baa2" by Xxxxx'x, as promptly as practicable but in any case within
90 days of the event, the Master Servicer shall, at its expense, either
(x) request that the Indenture Trustee deliver to it the original
Assignment of Mortgage previously delivered to the Indenture Trustee
pursuant to Section 2.01(e) and then record the Assignment of Mortgage in
favor of the Indenture Trustee (which may be a blanket assignment if
permitted by applicable law) in the appropriate real property or other
records.
(y) deliver to the Indenture Trustee an Opinion of Counsel addressed
to the Indenture Trustee and the Credit Enhancer to the effect that
recording is not required to protect the Indenture Trustee's interest in
the related Mortgage Loan or, in case a court should recharacterize the
sale of the Mortgage Loans as a financing, to perfect a first priority
Security Interest in favor of the Indenture Trustee in the related
Mortgage Loan, which Opinion of Counsel also shall be reasonably
acceptable to each of the Rating Agencies (as evidenced in writing) and
the Credit Enhancer, or
(z) cause the MERS(R) System to indicate (and provide evidence to
the Indenture Trustee that it has done so) that the Mortgage Loans have
been assigned by the Trust to the Indenture Trustee in accordance with
this Agreement for the benefit of the Noteholders and the Credit Enhancer
by including (or deleting, in the case of Mortgage Loans that are
repurchased in accordance with this Agreement) in the MERS computer files
(a) the appropriate code that identifies the Indenture Trustee in the
field for identifying the assignee and (b) the appropriate code that has
been assigned to identify the Notes to the MERS(R) System in the field
"Pool Field" identifying the Notes issued in connection with the Mortgage
Loans.
(j) Sale Treatment. Notwithstanding the characterization of the Notes as
debt of the Transferor for federal, state, and local income and franchise tax
purposes, the transfer of the Mortgage Loans is a sale by the Sponsor to the
Depositor and by the Depositor to the Trust of all the Sponsor's and then all
the Depositor's interest in the Mortgage Loans and other property described
above. From the time the Notes are issued until such time as all or a portion
of the Notes are sold to one or more unaffiliated parties, the Sponsor will
report the transfer of the Mortgage Loans and the related Additional Balances
to the Depositor as a transfer of assets in exchange for beneficial interests
in the form of asset-backed securities and servicing rights. If the transfer
were to be characterized as a transfer for security and not as a sale,
however, then the Depositor hereby grants to the Trust a Security Interest in
all of the Depositor's right, title, and interest in the Mortgage Loans
whether existing now or in the future, all monies due or to become due on the
Mortgage Loans, and all their proceeds; and this Agreement shall constitute a
Security Agreement under applicable law.
5
Section 2.02. Acceptance by Indenture Trustee.
(a) On the Closing Date, the Custodian shall execute and deliver to the
Depositor, the Master Servicer, and the Sponsor (with a copy to the Credit
Enhancer) the Initial Certification pursuant to the Custodial Agreement. If
Mortgage Loans have been delivered after the Closing Date pursuant to Section
2.01(e), the Custodian shall execute and deliver to the Depositor, the Master
Servicer, and the Sponsor (with a copy to the Credit Enhancer) a Delay
Delivery Certification pursuant to the Custodial Agreement within the period
specified in the Custodial Agreement. Within 180 days after the Closing Date,
Custodian shall deliver to the Depositor, the Master Servicer, and the Sponsor
(with a copy to the Credit Enhancer) a Final Certification pursuant to the
Custodial Agreement. The Sponsor shall correct any defect noted in the Final
Certification within 90 days of its receipt.
(b) All interest of the Trust in the Mortgage Loan shall be retransferred
without recourse, representation, or warranty to the Sponsor and the Asset
Balance of the Mortgage Loan shall be deducted from the Loan Balance on the
next Business Day after the Transfer Deposit Amount is deposited to the
Collection Account and any other applicable requirements are satisfied if
(i) the time to correct any defect in any Mortgage Loan noted on the
Final Certification has expired,
(ii) the Trust ever incurs any loss on any Mortgage Loan because any
document in its Mortgage File is defective, or
(iii) an Assignment of Mortgage to the Indenture Trustee has not been
recorded in accordance with Section 2.01(i) and the Mortgage Loan
is not registered on the MERS(R) System.
Interest accrued on the Asset Balance of the Mortgage Loan to the end of the
related Collection Period shall be the property of the Trust.
The Indenture Trustee shall determine if reducing the relevant Loan
Balance by the Asset Balance of the retransferred Mortgage Loan would cause a
Transfer Deficiency. If so, the Indenture Trustee shall notify the Sponsor of
the deficiency, and within five Business Days after the retransfer the Sponsor
shall either
(x) substitute an Eligible Substitute Mortgage Loan,
(y) deposit into the Collection Account an amount (the "Transfer
Deposit Amount") in immediately available funds equal to the
Transfer Deficiency, or
(z) do a combination of both (x) and (y) above.
The reduction or substitution and the actual payment of any Transfer Deposit
Amount shall be payment in full for the Mortgage Loan.
The Owner Trustee shall execute any documents of transfer presented by
the Sponsor, without recourse, representation, or warranty, and take any other
actions reasonably requested by the Sponsor to effect the transfer by the
Trust of the Defective Mortgage Loan pursuant to this Section on receipt of
any Eligible Substitute Mortgage Loan or notice from a Servicing Officer to
the effect that the Transfer Deposit Amount for a Defective Mortgage Loan has
been
6
deposited into the Collection Account or, if the Transferor Principal Balance
is not reduced below the greater of the Minimum Transferor Interest and the
Required Transferor Subordinated Amount as a result of the retransfer of a
Defective Mortgage Loan, as promptly as practicable following the transfer.
The sole remedy of the Noteholders, the Transferor, the Owner Trustee, the
Indenture Trustee, and the Credit Enhancer against the Sponsor for the
transfer of a Defective Mortgage Loan to the Trust is the Sponsor's obligation
to accept a transfer of a Defective Mortgage Loan and to either convey an
Eligible Substitute Mortgage Loan or to make a deposit of any Transfer Deposit
Amount into the Collection Account.
Promptly following the transfer of any Defective Mortgage Loan or
Eligible Substitute Mortgage Loan from or to the Trust pursuant to this
Section, the Master Servicer shall amend the Mortgage Loan Schedule, deliver
the amended Mortgage Loan Schedule to the Indenture Trustee, and make
appropriate entries in its general account records to reflect the transfer.
Following the retransfer, the Master Servicer shall appropriately xxxx its
records to indicate that it is no longer servicing the Mortgage Loan on behalf
of the Trust. The Sponsor shall appropriately xxxx its Electronic Ledger and
make appropriate entries in its general account records to reflect the
transfer promptly following the transfer.
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the Sponsor pursuant to this Section that would
cause the Transferor Principal Balance to be less than the greater of the
Minimum Transferor Interest and the Required Transferor Subordinated Amount
shall not occur if either the Sponsor fails to convey an Eligible Substitute
Mortgage Loan or to deposit into the Collection Account any Transfer Deposit
Amount required by this Section with respect to the transfer of the Defective
Mortgage Loan.
(c) The Sponsor shall deliver to the Indenture Trustee any documents
required to be held by the Indenture Trustee in accordance with Section 2.01
with respect to any Eligible Substitute Mortgage Loans. The Master Servicer
shall determine the Transfer Deposit Amount in any Collection Period during
which the Sponsor substitutes Eligible Substitute Mortgage Loans and the
Sponsor shall deposit that amount in the Collection Account at the time of
substitution. All amounts received on the Eligible Substitute Mortgage Loans
during the Collection Period in which the circumstances giving rise to the
substitution occur shall not be a part of the Trust and shall not be deposited
by the Master Servicer in the Collection Account. All amounts received on a
removed Defective Mortgage Loan during the Collection Period in which the
circumstances giving rise to the substitution occur shall be a part of the
Trust for the Series 2003-D Subtrust and shall be deposited by the Master
Servicer in the Collection Account. An Eligible Substitute Mortgage Loan will
be subject to the terms of this Agreement in all respects when transferred to
the Trust, and the Sponsor hereby makes the representations, warranties, and
covenants in Section 2.04 with respect to the Eligible Substitute Mortgage
Loan as of the date of substitution. The procedures applied by the Sponsor in
selecting each Eligible Substitute Mortgage Loan shall not be materially
adverse to the interests of the Indenture Trustee, the Transferor, the
Noteholders, or the Credit Enhancer.
7
(d) The Custodian shall retain possession of each Mortgage File on behalf
of the Indenture Trustee in accordance with the Custodial Agreement. The
Master Servicer shall promptly deliver to the Indenture Trustee the originals
of any other documents constituting the Mortgage File coming into its
possession on their execution or receipt. Any documents to be delivered to the
Indenture Trustee under this Agreement may be delivered to the Custodian
acting on behalf of the Indenture Trustee.
Section 2.03. Representations and Warranties Regarding the Master
Servicer.
The Master Servicer represents and warrants to the Indenture Trustee and
the Credit Enhancer that as of the Closing Date:
(i) The Master Servicer is a New York corporation, validly existing
and in good standing under the laws of the State of New York, and has the
corporate power to own its assets and to transact the business in which
it is currently engaged. The Master Servicer is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the character of its business or any properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the
Master Servicer.
(ii) The Master Servicer has the power and authority to make,
execute, deliver, and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate
action to authorize the execution, delivery, and performance of this
Agreement. When executed and delivered, this Agreement will constitute a
valid and legally binding obligation of the Master Servicer enforceable
in accordance with its terms.
(iii) The Master Servicer is not required to obtain the consent of
any other party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental authority, bureau,
or agency in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement, except for consents,
licenses, approvals or authorizations, or registrations or declarations
that have been obtained or filed, as the case may be, before the Closing
Date.
(iv) The execution, delivery, and performance of this Agreement by
the Master Servicer will not violate any existing law or regulation or
any order or decree of any court applicable to the Master Servicer or the
certificate of incorporation or bylaws of the Master Servicer, or
constitute a material breach of any mortgage, indenture, contract, or
other agreement to which the Master Servicer is a party or by which the
Master Servicer may be bound.
(v) No litigation or administrative proceeding of or before any
court, tribunal, or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer
or any of its properties or with respect to this Agreement, the
Indenture, or the Notes that in the opinion of the Master Servicer
8
has a reasonable likelihood of resulting in a material adverse effect on
the transactions contemplated by the Transaction Documents.
(vi) If any Mortgage Loan has been registered on the MERS(R) System,
the Master Servicer is a member of MERS in good standing.
The representations and warranties in this Section shall survive the transfer
of the Mortgage Loans to the Trust. Upon discovery of a breach of any
representations and warranties that materially and adversely affects the
interests of the Transferor, the Noteholders, or the Credit Enhancer, the
person discovering the breach shall give prompt notice to the other parties
and to the Credit Enhancer. The Master Servicer shall cure in all material
respects any breach of any representation or warranty within 90 days of
becoming aware of it or, with the consent of a Responsible Officer of the
Indenture Trustee, any longer period specified in the consent.
Section 2.04. Representations and Warranties of the Sponsor Regarding the
Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor represents and warrants to the Indenture Trustee, the
Trust, and the Credit Enhancer that as of the Cut-off Date, unless
specifically stated otherwise:
(i) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution) this
Agreement constitutes a valid and legally binding obligation of the
Sponsor, enforceable against the Sponsor in accordance with its terms.
(ii) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), either
(A) the Purchase Agreement constitutes a valid transfer to the
Depositor of all right, title, and interest of the Sponsor in the
Mortgage Loans all collections received on it after the Cut-off Date
(excluding payments due by the Cut-off Date), all proceeds of the
Mortgage Loans, and any funds from time to time deposited in the
Collection Account and all other property specified in Section
2.01(a) or (b), as applicable, and this Agreement constitutes a
valid transfer to the Trust of the foregoing property such that, on
execution of this Agreement, it is owned by the Trust free of all
liens and other encumbrances, and is part of the corpus of the Trust
conveyed to the Trust by the Sponsor, and upon payment for the
Additional Balances, the Purchase Agreement and this Agreement will
constitute a valid transfer to the Trust of all right, title, and
interest of the Sponsor in the Additional Balances, all monies due
or to become due on them, all proceeds of the Additional Balances,
and all other property specified in Section 2.01(a) relating to the
Additional Balances free of all liens and other encumbrances, or
(B) the Purchase Agreement or this Agreement, as appropriate,
constitutes a Grant of a Security Interest to the Owner Trustee on
behalf of the Trust in the property described in clause (A) above
and the Indenture constitutes a Grant of a Security Interest to the
Indenture Trustee in the
9
Collateral. The Indenture Trustee has a first priority perfected
Security Interest in the Collateral, subject to the effect of
Section 9-315 of the UCC with respect to collections on the Mortgage
Loans that are deposited in the Collection Account in accordance
with the next to last paragraph of Section 3.02(b), and if this
Agreement constitutes the Grant of a Security Interest in the
property described in clause (A) above to the Trust, the Trust has a
first priority perfected Security Interest in the property, subject
to the same limitations. This Security Interest is enforceable as
such against creditors of and purchasers from the Trust, the
Depositor, and the Sponsor.
(iii) The Sponsor has not authorized the filing of and is not
aware of any financing statements against the Sponsor that include a
description of collateral covering the Collateral other than any
financing statement (A) relating to the Security Interests granted
to the Depositor, the Trust, or the Indenture Trustee under this
Indenture, (B) that has been terminated, or (C) that names the
Depositor, the Trust, or the Indenture Trustee as secured party.
(iv) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution) and
as of the date any Additional Balance is created, the information in
the Mortgage Loan Schedule for the Mortgage Loans is correct in all
material respects.
(v) The Mortgage Loans have not been assigned or pledged, and
the Sponsor is its sole owner and holder free of any liens, claims,
encumbrances, participation interests, equities, pledges, charges,
or Security Interests of any nature, and has full authority, under
all governmental and regulatory bodies having jurisdiction over the
ownership of the Mortgage Loans, to transfer it pursuant to the
Purchase Agreement.
(vi) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), the
related Mortgage Note and the mortgage for each Mortgage Loan have
not been assigned or pledged, and immediately before the sale of the
Mortgage Loans to the Depositor, the Sponsor was the sole owner and
holder of the Mortgage Loan free of any liens, claims, encumbrances,
participation interests, equities, pledges, charges, or Security
Interests of any nature, and has full authority, under all
governmental and regulatory bodies having jurisdiction over the
ownership of the Mortgage Loans, to transfer it pursuant to the
Purchase Agreement.
(vii) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), the
related mortgage is a valid and subsisting first or second lien on
the property described in it, as shown on the Mortgage Loan Schedule
with respect to each related Mortgage Loan, and as of the Cut-off
Date or date of substitution, as applicable, the related Mortgaged
Property is free of all encumbrances and liens having priority over
the first or second lien, as applicable, of the mortgage except for
liens for
10
(A) real estate taxes and special assessments not yet
delinquent;
(B) any first mortgage loan secured by the Mortgaged
Property and specified on the Mortgage Loan Schedule;
(C) covenants, conditions and restrictions, rights of way,
easements, and other matters of public record as of the date of
recording that are acceptable to mortgage lending institutions
generally; and
(D) other matters to which like properties are commonly
subject that do not materially interfere with the benefits of
the security intended to be provided by the mortgage.
(viii) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
obligor has a valid offset, defense, or counterclaim under any
Credit Line Agreement or mortgage.
(ix) To the best knowledge of the Sponsor, as of the Closing
Date (or, with respect to any Eligible Substitute Mortgage Loan, the
applicable date of substitution), no related Mortgaged Property has
any delinquent recording or other tax or fee or assessment lien
against it.
(x) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
proceeding is pending or, to the best knowledge of the Sponsor,
threatened for the total or partial condemnation of the related
Mortgaged Property, and the property is free of material damage.
(xi) To the best knowledge of the Sponsor, as of the Closing
Date, (or, with respect to any Eligible Substitute Mortgage Loan,
the applicable date of substitution), no mechanics' or similar liens
or claims have been filed for work, labor, or material affecting the
related Mortgaged Property that are, or may be, liens prior or equal
to the lien of the related mortgage, except liens that are fully
insured against by the title insurance policy referred to in clause
(xiv).
(xii) No Minimum Monthly Payment on a Mortgage Loan is more
than 59 days delinquent (measured on a contractual basis) and no
Minimum Monthly Payment on any other Mortgage Loan being transferred
on the relevant date is more than 30 days delinquent (measured on a
contractual basis) and no more than the percentage specified in the
Adoption Annex of the Mortgage Loans being transferred on the
Closing Date (by Cut-off Date Loan Balance) were 30-59 days
delinquent (measured on a contractual basis).
(xiii) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), for
each Mortgage Loan, the related Mortgage File contains each of the
documents specified to be included in them.
(xiv) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), the
related Mortgage Note and the related mortgage at origination (a)
complied in all material respects with applicable
11
state and federal laws, including all applicable predatory and
abusive lending laws, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity, or disclosure laws applicable to the Mortgage Loan, and
the servicing practices used by the Master Servicer with respect to
each Mortgage Loan have been consistent with the practices and the
degree of skill and care the Master Servicer exercises in servicing
for itself loans that it owns that are comparable to the Mortgage
Loans and (b) no Mortgage Loan is classified as (1) a "high cost"
loan under the Home Ownership and Equity Protection Act of 1194 or
(2) a "high cost," "threshold," "covered," "predatory" or similar
loan under any other applicable state, federal or local law that
applies to mortgage loans (or a similar classified loan using
different terminology under a law imposing heightened regulatory
scrutiny or additional legal liability for residential mortgage
loans having high interest rates, points, or fees).
(xv) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution),
either a lender's title insurance policy or binder was issued on the
date of origination of the Mortgage Loan being transferred on the
relevant date and each policy is valid and remains in full force, or
a title search or guaranty of title customary in the relevant
jurisdiction was obtained with respect to a Mortgage Loan as to
which no title insurance policy or binder was issued.
(xvi) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), none
of the Mortgaged Properties is a mobile home or a manufactured
housing unit that is not considered or classified as part of the
real estate under the laws of the jurisdiction in which it is
located.
(xvii) No more than the percentage specified in the Adoption
Annex of the Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal
zip code.
(xviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Combined Loan-to-Value Ratio for each Mortgage
Loan was not in excess of the percentage specified in the Adoption
Annex.
(xix) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
selection procedure reasonably believed by the Sponsor to be adverse
to the interests of the Transferor, the Noteholders, or the Credit
Enhancer was used in selecting the Mortgage Loans.
(xx) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), the
Sponsor has not transferred the Mortgage Loans to the Trust with any
intent to hinder, delay, or defraud any of its creditors.
(xxi) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), the
Minimum Monthly Payment with respect to any Mortgage Loan is not
less than the interest accrued at the applicable
12
Loan Rate on the average daily Asset Balance during the interest
period relating to the date on which the Minimum Monthly Payment is
due.
(xxii) The Mortgage Notes constitute either "instruments" or
"general intangibles" as defined in the UCC.
(xxiii) By the Closing Date (or, within 30 days of the
applicable date of substitution with respect to any Eligible
Substitute Mortgage Loan), the Sponsor will file UCC-1 financing
statements in the proper filing office in the appropriate
jurisdiction to perfect the Security Interest in the Collateral
Granted under this Indenture.
(xxiv) The Mortgage Notes that constitute or evidence the
Collateral do not have any marks or notations indicating that they
have been pledged, assigned, or otherwise transferred to any person
other than the Depositor, the Trust, or the Indenture Trustee. All
financing statements filed or to be filed against the Sponsor in
favor of the Depositor, the Trust, or the Indenture Trustee in
connection with this Agreement, the Purchase Agreement, or the
Indenture describing the Collateral contain a statement to the
following effect: "A purchase of the Mortgage Loans included in the
collateral covered by this financing statement will violate the
rights of the Depositor, the Trust, or the Indenture Trustee."
(xxv) As of the Closing Date, the Sponsor will have received a
written acknowledgement from the Custodian that is acting solely as
agent of the Indenture Trustee.
(xxvi) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), each
Credit Line Agreement and each Mortgage Loan is an enforceable
obligation of the related mortgagor.
(xxvii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Sponsor has not received a notice of default of
any senior mortgage loan related to a Mortgaged Property that has
not been cured by a party other than the Master Servicer.
(xxviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the definition of "prime rate" in each Credit Line
Agreement relating to a Mortgage Loan does not differ materially
from the definition in the form of Credit Line Agreement in Exhibit
B.
(xxix) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-off Date is
approximately the number of months specified in the Adoption Annex.
On each date that the Loan Rates have been adjusted, interest rate
adjustments on the Mortgage Loans were made in compliance with the
related mortgage and Mortgage Note and applicable law. Over the term
of each Mortgage Loan, the Loan Rate may not exceed the related Loan
Rate Cap. The Loan Rate Cap for the Mortgage Loans ranges between
the percentages specified in the Adoption Annex and the weighted
average Loan Rate Cap is approximately the
13
percentage specified in the Adoption Annex. The Gross Margins for
the Mortgage Loans range between the percentages specified in the
Adoption Annex and the weighted average Gross Margin is
approximately the percentage specified in the Adoption Annex as of
the Cut-off Date. The Loan Rates on the Mortgage Loans range between
the percentages specified in the Adoption Annex and the weighted
average Loan Rate on the Mortgage Loans is approximately the
percentage specified in the Adoption Annex. The percentage of the
Mortgage Loans (by credit limit) that were underwritten in
conformity with Xxxxxx Xxx guidelines is approximately the
percentage specified in the Adoption Annex.
(xxx) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), each
Mortgaged Property consists of a single parcel of real property with
a one-to-four unit single family residence erected on it, or an
individual condominium unit, planned unit development unit, or
townhouse.
(xxxi) No more than the percentage specified in the Adoption
Annex (by Cut-off Date Loan Balance) of the Mortgage Loans are
secured by real property improved by individual condominium units,
units in planned unit developments, townhouses or two-to-four family
residences erected on them, and at least the percentage specified in
the Adoption Annex (by Cut-off Date Loan Balance) of the Mortgage
Loans are secured by real property with a detached one-family
residence erected on them.
(xxxii) The Credit Limits on the Mortgage Loans range between
approximately the dollar amounts specified in the Adoption Annex
with an average of approximately the dollar amount specified in the
Adoption Annex. As of the Cut-off Date, no Mortgage Loan had a
principal balance in excess of approximately the dollar amount
specified in the Adoption Annex and the average principal balance of
the Mortgage Loans is equal to approximately the dollar amounts
specified in the Adoption Annex.
(xxxiii) Approximately the percentages specified in the
Adoption Annex of the Mortgage Loans, by aggregate principal balance
as of the Cut-off Date, are first and second liens.
(xxxiv) As of the Closing Date, no more than the percentage
specified in the Adoption Annex of the Mortgage Loans, by aggregate
principal balance, were appraised electronically.
(xxxv) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
default exists under any Mortgage Note or Mortgage Loan and no event
that, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default under any
Mortgage Note or Mortgage Loan has occurred and been waived. As of
the Closing Date (or, with respect to any Eligible Substitute
Mortgage Loan, the applicable date of substitution), no
modifications to the Mortgage Notes and Mortgage Loans have been
made and not disclosed.
14
(xxxvi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), each Mortgage Loan was originated in accordance with
the Sponsor's underwriting guidelines and the Sponsor had no
knowledge of any fact that would have caused a reasonable originator
of mortgage loans to conclude on the date of origination of each
Mortgage Loan that each such Mortgage Loan would not be paid in full
when due.
(xxxvii) To the best knowledge of the Sponsor at the time of
origination of each Mortgage Loan, no improvement located on or
being part of the Mortgaged Property was in violation of any
applicable zoning and subdivision laws or ordinances.
(xxxviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), no Mortgage Loan is secured by a leasehold interest.
(xxxix) Based upon the drawn balances of the Mortgage Loans,
the Mortgage Loans had the characteristics set out in the Adoption
Annex in respect of the following: weighted average Combined
Loan-to-Value Ratio; range of Combined Loan-to-Value Ratios;
percentage of primary residences; weighted average FICO score; range
of FICO scores; Weighted Average Net Loan Rate; range of net Loan
Rates; weighted average original stated term to maturity; range of
original term to maturity; range of remaining term to maturity;
average drawn balance; weighted average utilization ratio;
percentage of the Mortgage Loans which have their respective
Mortgaged Properties located in the top five states, measured by
aggregate drawn balances.
(xl) No Mortgage Loan that was originated prior to January 1,
2003 has been delinquent for greater than 30 days at any time since
April 25, 2002.
(xli) Any Mortgage Loan that has been modified in any manner
has been so modified in accordance with the policies and procedures
of the Servicer and in a manner that was permitted by the Sale and
Servicing Agreement, the Indenture, and any other Transaction
Document.
If the substance of any representation and warranty in this Section made
to the best of the Sponsor's knowledge or as to which the Sponsor has no
knowledge is inaccurate and the inaccuracy materially and adversely affects
the interest of the Trust and the Noteholders in the related Mortgage Loan
then, notwithstanding that the Sponsor did not know the substance of the
representation and warranty was inaccurate at the time the representation or
warranty was made, the inaccuracy shall be a breach of the applicable
representation or warranty.
(b) The representations and warranties in this Section shall survive
delivery of the respective Mortgage Files to the Custodian pursuant to the
Custodial Agreement and the termination of the rights and obligations of the
Master Servicer pursuant to Section 5.04 or 6.02. If the Sponsor, the
Depositor, the Master Servicer, the Credit Enhancer, or a Responsible Officer
of the Indenture Trustee discovers a breach of any of the foregoing
representations and warranties (other than the representation and warranty in
Section 2.04(a)(iv)), without regard to
15
any limitation concerning the knowledge of the Sponsor, that materially and
adversely affects the interests of the Trust, the Indenture Trustee under the
Indenture, the Noteholders, or the Credit Enhancer in the Mortgage Loan, the
party discovering the breach shall give prompt notice to the other parties and
the Credit Enhancer. The Sponsor shall use all reasonable efforts to cure in
all material respects any breach within 90 days of becoming aware of it or
shall, not later than the Business Day before the Payment Date in the month
following the Collection Period in which the cure period expired (or any later
date that the Indenture Trustee and the Credit Enhancer consent to), either
(1) accept a transfer of the Mortgage Loan from the Trust or (2) substitute an
Eligible Substitute Mortgage Loan in accordance with Section 2.02. The cure
for any breach of a representation and warranty relating to the
characteristics of the Mortgage Loans in the aggregate shall be a repurchase
of or substitution for only the Mortgage Loans necessary to cause the
characteristics to comply with the related representation and warranty. Upon
accepting the transfer and making any required deposit into the Collection
Account or substitution of an Eligible Substitute Mortgage Loan, as the case
may be, the Owner Trustee shall execute any documents of transfer presented by
the Sponsor, without recourse, representation, or warranty, and take any other
actions reasonably requested by the Sponsor to effect the transfer by the
Trust of the Mortgage Loans.
The sole remedy of the Noteholders, the Indenture Trustee on behalf of
Noteholders, the Owner Trustee, and the Credit Enhancer against the Sponsor
for the breach of a representation or warranty other than Section 2.04(a)(iv)
is the Sponsor's obligation to accept a transfer of a Mortgage Loan as to
which a breach has occurred and is continuing and to make any required deposit
in the Collection Account or to substitute an Eligible Substitute Mortgage
Loan. If the representation and warranty in Section 2.04(a)(iv) is breached,
the transfer of the affected Mortgage Loans to the Trust shall be void and the
Sponsor shall pay to the Trust the sum of (i) the amount of the related Asset
Balances, plus accrued interest on each Asset Balance at the applicable Loan
Rate to the date of payment and (ii) the amount of any loss suffered by the
Transferor, the Noteholders, or the Credit Enhancer with respect to the
affected Mortgage Loans. The Indenture Trustee may enforce the Sponsor's
obligations under this Section in its own right or as the owner of the Trust's
right to seek enforcement as the assignee of the Trust's rights under this
Agreement pursuant to the Indenture.
The Sponsor shall defend and indemnify the Indenture Trustee, the Owner
Trustee, the Credit Enhancer, and the Noteholders against all reasonable costs
and expenses, and all losses, damages, claims, and liabilities, including
reasonable fees and expenses of counsel and the amount of any settlement
entered into with the consent of the Sponsor (this consent not to be
unreasonably withheld), that may be asserted against or incurred by any of
them as a result of any third-party action arising out of any breach of a
representation and warranty.
Section 2.05. Covenants of the Depositor.
The Depositor covenants that:
(a) Security Interests. Except for the transfer under this Agreement, the
Depositor will not transfer any Mortgage Loan to any other person, or create
or suffer to exist any Lien on any Mortgage Loan or any interest in one,
whether existing now or in the future; the Depositor will
16
notify the Indenture Trustee of the existence of any Lien on any Mortgage Loan
immediately on its discovery; and the Depositor will defend the right, title,
and interest of the Trust in the Mortgage Loans, whether existing now or in
the future, against all claims of third parties claiming through the
Depositor. Nothing in this Section shall prohibit the Depositor from suffering
to exist on any Mortgage Loan any Liens for municipal or other local taxes and
other governmental charges if the taxes or governmental charges are not due at
the time or if the Depositor is contesting their validity in good faith by
appropriate proceedings and has set aside on its books adequate reserves with
respect to them.
(b) Negative Pledge. The Depositor shall not transfer or grant a Security
Interest in the Transferor Certificates except in accordance with Section 4.05
of the Trust Supplement to the Trust Agreement establishing Series 2003-D.
(c) Additional Indebtedness. So long as the Notes are outstanding the
Depositor will not incur any debt other than debt that (i) is non-recourse to
the assets of the Depositor other than the mortgage loans specifically pledged
as security for the debt, (ii) is subordinated in right of payment to the
rights of the Noteholders, or (iii) is assigned a rating by each of the Rating
Agencies that is the same as the then current rating of the Notes.
(d) Downgrading. The Depositor will not engage in any activity that would
result in a downgrading of the Notes without regard to the Policy.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation or state of incorporation without prior
notice to the Rating Agencies, the Indenture Trustee, and the Credit Enhancer.
Section 2.06. Transfers of Mortgage Loans at Election of Transferor.
Subject to the conditions below, the Transferor may require the transfer
of Mortgage Loans from the Trust to the Transferor as of the close of business
on a Payment Date (the "Transfer Date"). In connection with any transfer, the
Transferor Interest shall be reduced by the aggregate Asset Balances as of
their Transfer Date of the Mortgage Loans transferred. On the fifth Business
Day (the "Transfer Notice Date") before the Transfer Date designated in the
notice, the Transferor shall give the Owner Trustee, the Indenture Trustee,
the Master Servicer, and the Credit Enhancer a notice of the proposed transfer
that contains a list of the Mortgage Loans to be transferred. These transfers
of Mortgage Loans shall be permitted if the following conditions are
satisfied:
(i) No Rapid Amortization Event has occurred.
(ii) On the Transfer Date the Transferor Principal Balance (after
giving effect to the removal of the Mortgage Loans proposed to be
transferred) exceeds the greater of the Minimum Transferor Interest and
the Required Transferor Subordinated Amount.
(iii) The transfer of any Mortgage Loans on any Transfer Date during
the Managed Amortization Period shall not, in the reasonable belief of
the Transferor, cause a Rapid Amortization Event to occur or an event
that with notice or lapse of time or both would constitute a Rapid
Amortization Event.
17
(iv) By the Transfer Date, the Transferor shall have delivered to
the Indenture Trustee a revised Mortgage Loan Schedule, reflecting the
proposed transfer and the Transfer Date, and the Master Servicer shall
have marked the Electronic Ledger to show that the Mortgage Loans
transferred to the Transferor are no longer owned by the Trust.
(v) The Transferor shall represent and warrant that the selection
procedures that the Transferor used in selecting the Mortgage Loans to be
removed from the Trust were random.
(vi) In connection with each transfer of Mortgage Loans pursuant to
this Section, each Rating Agency and the Credit Enhancer shall have
received by the related Transfer Notice Date notice of the proposed
transfer of Mortgage Loans and, before the Transfer Date, each Rating
Agency shall have notified the Transferor, the Indenture Trustee, and the
Credit Enhancer that the transfer of Mortgage Loans would not result in a
reduction or withdrawal of its then current rating of the Notes without
regard to the Policy.
(vii) The Transferor shall have delivered to the Owner Trustee, the
Indenture Trustee, and the Credit Enhancer an Officer's Certificate
certifying that the items in subparagraphs (i) through (vi), inclusive,
have been performed or are true, as the case may be. The Owner Trustee
and the Indenture Trustee may conclusively rely on the Officer's
Certificate, shall have no duty to make inquiries with regard to the
matters in it, and shall incur no liability in so relying.
Upon receiving the requisite information from the Transferor, the Master
Servicer shall perform in a timely manner those acts required of it, as
specified above. Upon satisfaction of the above conditions, on the Transfer
Date the Indenture Trustee shall effect delivery to the Transferor the
Mortgage File for each Mortgage Loan being so transferred, and the Indenture
Trustee shall execute and deliver to the Transferor any other documents
prepared by the Transferor reasonably necessary to transfer the Mortgage Loans
to the Transferor. This transfer of the Trust's interest in Mortgage Loans
shall be without recourse, representation, or warranty by the Indenture
Trustee or the Trust to the Transferor.
Section 2.07. Tax Treatment.
The Depositor and the Transferor intend that the Notes will be
indebtedness of the Transferor for federal, state, and local income and
franchise tax purposes and for purposes of any other tax imposed on or
measured by income. The Transferor and the Depositor agree to treat the Notes
for purposes of federal, state, and local income or franchise taxes and any
other tax imposed on or measured by income, as indebtedness of the Transferor
secured by the assets of the Trust and to report the transactions contemplated
by this Agreement on all applicable tax returns in a manner consistent with
this treatment. The Indenture Trustee will prepare and file all tax reports
required under this Agreement on behalf of the Trust.
18
Section 2.08. Representations and Warranties of the Depositor.
The Depositor represents and warrants to the Indenture Trustee on behalf
of the Noteholders and the Credit Enhancer as follows:
(i) This Agreement constitutes a valid and legally binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms.
(ii) Immediately before the sale and assignment by the Depositor to
the Trust of each Mortgage Loan, the Depositor was the sole beneficial
owner of each Mortgage Loan (insofar as the title was conveyed to it by
the Sponsor) subject to no prior lien, claim, participation interest,
mortgage, Security Interest, pledge, charge, or other encumbrance or
other interest of any nature.
(iii) As of the Closing Date, the Depositor has transferred all
right, title, and interest in the Mortgage Loans to the Trust and, as of
each applicable date of substitution, the Depositor has transferred all
right, title, and interest in the Eligible Substitute Mortgage Loan to
the Trust.
(iv) The Depositor has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay, or defraud any of its creditors.
Article III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. The Master Servicer.
The Master Servicer shall service and administer the Mortgage Loans in a
manner consistent with the terms of this Agreement and with general industry
practice and shall have full power and authority, acting alone or through a
subservicer, (i) to execute and deliver, on behalf of the Noteholders, the
Trust, and the Indenture Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan. The Master Servicer shall remain responsible to the parties to
this Agreement and the Credit Enhancer for its obligations under this
Agreement. Any amounts received by any subservicer on a Mortgage Loan shall be
considered to have been received by the Master Servicer whether or not
actually received by it. Without limiting the generality of the foregoing, the
Master Servicer may execute and deliver, on behalf of itself, the Noteholders,
and the Indenture Trustee, or any of them, any instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Properties, in each case to the extent not inconsistent with
this Agreement.
At the request of a Servicing Officer, the Indenture Trustee shall
furnish the Master Servicer with any powers of attorney and other documents
appropriate to enable the Master
19
Servicer to carry out its servicing and administrative duties under this
Agreement. The Master Servicer in this capacity may also consent to the
placing of a lien senior to that of any mortgage on the related Mortgaged
Property, if
(i) the new senior lien secures a mortgage loan that refinances an
existing first mortgage loan and
(ii) either (a) the Loan-to-Value Ratio of the new mortgage loan
(without taking into account any closing costs that may be financed by
the new mortgage loan) is equal to or less than the Loan-to-Value Ratio
of the first mortgage loan to be replaced (for purposes of calculating
the Loan-to-Value Ratio, the Valuation of the Mortgaged Property will be
measured by the lesser of (A) the Valuation of the Mortgaged Property as
of the Cut-off Date and (B) the Valuation of the Mortgaged Property as of
the date of the refinancing referenced in clause (i)) or (b) the Combined
Loan-to-Value Ratio of the new mortgage loan (without taking into account
any closing costs that may be financed by the new mortgage loan) and the
existing Mortgage Loan is equal to less than 70% (for purposes of
calculating the Combined Loan-to-Value Ratio, the Valuation of the
Mortgaged Property will be measured as the lesser of (A) the Valuation of
the Mortgage Loan as of the Cut-off Date and (B) the Valuation of the
Mortgage Loan as of the date of the refinancing referenced in clause (i).
The aggregate Asset Balance of the Mortgage Loans with respect to which the
senior lien may be modified in accordance with clause (ii)(A) may not exceed
10% of the Original Note Principal Balance and clause (ii)(B) may not exceed
40% of the Original Note Principal Balance. The aggregate Asset Balance of all
the Mortgage Loans with respect to which the senior lien may be so modified
may not exceed 100% of the Original Note Principal Balance (this 100% referred
to as the "Increased Senior Lien Limitation").
The Master Servicer may also, without approval from the Rating Agencies
or the Credit Enhancer, increase the Credit Limits on Mortgage Loans if
(i) new appraisals are obtained and the weighted average Combined
Loan-to-Value Ratios of the Mortgage Loans after giving effect to the
increase are less than or equal to the weighted average Combined
Loan-to-Value Ratios of the Mortgage Loans as of the Cut-off Date and
(ii) the increases are consistent with the Master Servicer's
underwriting policies. In addition, the Master Servicer may increase the
Credit Limits on the Mortgage Loans having aggregate Asset Balances of up
to an additional 5.0% of the Original Note Principal Balance, if
(x) the increase in the Credit Limit of a Mortgage Loan does
not cause the Combined Loan-to-Value Ratio of the Mortgage Loan to
exceed 100%,
(y) the increase in the Credit Limit of a Mortgage Loan does
not cause the Combined Loan-to-Value Ratio of the Mortgage Loan to
increase by more than 25% (for example, a Combined Loan-to-Value
Ratio of 50% can be
20
increased to 75%, a Combined Loan-to-Value Ratio of 60% can be
increased to 85%, and so forth), and
(z) the increase is consistent with the Master Servicer's
underwriting policies.
Furthermore, the Master Servicer, without prior approval from the Rating
Agencies or the Credit Enhancer, may solicit mortgagors for a reduction in
Loan Rates. The Master Servicer may only reduce the Loan Rates on up to 10% of
the Mortgage Loans by Original Note Principal Balance. Any solicitations shall
not result in a reduction in the weighted average Gross Margin of the Mortgage
Loans by more than 25 basis points taking into account any prior reductions.
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the mortgagor if the changes (i) do not
materially and adversely affect the interests of Noteholders, the Transferor,
or the Credit Enhancer and (ii) are consistent with prudent and customary
business practice as evidenced by a certificate signed by a Servicing Officer
delivered to the Indenture Trustee and the Credit Enhancer.
In addition, the Master Servicer may solicit mortgagors to change any
other terms of the related Mortgage Loans if the changes (i) do not materially
and adversely affect the interests of the Noteholders, the Transferor, or the
Credit Enhancer and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing Officer delivered
to the Indenture Trustee and the Credit Enhancer. Nothing in this Agreement
shall limit the right of the Master Servicer to solicit mortgagors with
respect to new loans (including mortgage loans) that are not Mortgage Loans.
The Master Servicer may register any Mortgage Loan on the MERS(R) System,
or cause the removal from registration of any Mortgage Loan on the MERS(R)
System, and execute and deliver, on behalf of the Owner Trustee, any
instruments of assignment and other comparable instruments with respect to the
assignment or re-recording of a mortgage in the name of MERS, solely as
nominee for the Owner Trustee and its successors and assigns.
For so long as any Mortgage Loan is registered on the MERS(R) System, the
Master Servicer shall maintain in good standing its membership in MERS and
shall comply in all material respects with the rules and procedures of MERS in
connection with the servicing of the Mortgage Loans that are registered with
MERS. If any Mortgage Loans are registered on the MERS(R) System, the Master
Servicer may cause MERS to execute and deliver an assignment of mortgage in
recordable form to transfer any of the Mortgage Loans registered on the
MERS(R) System from MERS to the Owner Trustee. The Master Servicer shall
promptly notify MERS of any transfer of beneficial ownership or release of any
Security Interest in any MOM Loan.
The relationship of the Master Servicer to the Trust and the Indenture
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner, or agent of
the Trust or the Indenture Trustee.
(b) If the rights and obligations of the Master Servicer are terminated
under this Agreement, any successor to the Master Servicer in its sole
discretion may terminate the
21
existing subservicer arrangements with any subservicer or assume the
terminated Master Servicer's rights under those subservicing arrangements to
the extent permitted by applicable law and the subservicing agreements.
Section 3.02. Collection of Certain Mortgage Loan Payments; Establishment
of Accounts.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the Mortgage Loans, and shall follow the collection
procedures it follows for mortgage loans in its servicing portfolio comparable
to the Mortgage Loans, to the extent consistent with this Agreement.
Consistent with the foregoing, and without limiting the generality of the
foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or any assumption fees or other fees that may be collected in
the ordinary course of servicing the Mortgage Loans and (ii) arrange with a
mortgagor a schedule for the payment of interest due and unpaid if the
arrangement is consistent with the Master Servicer's policies with respect to
the mortgage loans it owns or services. Notwithstanding any arrangement, the
Mortgage Loans will be included in the information regarding delinquent
Mortgage Loans in the Servicing Certificate and monthly statement to
Noteholders pursuant to Section 7.04 of the Indenture.
(b) The Master Servicer shall establish and maintain a trust account (the
"Collection Account") with the title specified in the Adoption Annex. The
Collection Account shall be an Eligible Account. The Master Servicer shall (i)
on the Business Day before each of the first three Payment Dates, deposit in
the Collection Account any shortfall in the amount required to pay the Note
Interest on those Payment Dates resulting solely from the failure of certain
Mortgage Loans to be fully indexed and (ii) on the Business Day before the
first Payment Date, deposit in the Collection Account (A) an amount equal to
the excess of the aggregate amount payable pursuant to Sections 8.03(a)(i) and
(ii) of the Indenture on the first Payment Date over what the aggregate
Investor Interest Collections would be if the Minimum Monthly Payments due
during the first Collection Period were made on each Mortgage Loan and (B) any
amounts representing payments on, and any collections in respect of, the
Mortgage Loans received after the Cut-off Date and before the Closing Date
(exclusive of payments of accrued interest due by the Cut-off Date), and then
the Master Servicer, or the Sponsor, as the case may be, shall deposit or
cause to be deposited within two Business Days following its receipt the
following payments and collections received or made by it (without
duplication):
(1) all collections on the Mortgage Loans;
(2) the amounts deposited to the Collection Account pursuant to
Section 4.03;
(3) Net Liquidation Proceeds net of any related Foreclosure Profit;
(4) Insurance Proceeds; and
(5) any amounts required to be deposited pursuant to Section 7.01.
The Master Servicer may retain from payments of interest on the Mortgage
Loans in each Collection Period, the Servicing Fee for the Collection Period
and any unreimbursed optional advance made by the Master Servicer pursuant to
Section 4.03. No other amounts are to be deposited to the Collection Account,
including amounts representing Foreclosure Profits,
22
fees (including annual fees) or late charge penalties payable by mortgagors,
or amounts received by the Master Servicer for the accounts of mortgagors for
application towards the payment of taxes, insurance premiums, assessments,
excess pay off amounts, and similar items. The Master Servicer shall remit all
Foreclosure Profits to the Sponsor.
The Indenture Trustee shall hold amounts deposited in the Collection
Account as trustee for the Noteholders, the Transferor, and the Credit
Enhancer. In addition, the Master Servicer shall notify the Indenture Trustee
and the Credit Enhancer on each Determination Date of the amount of
collections in the Collection Account allocable to Interest Collections and
Principal Collections for the Mortgage Loans for the related Payment Date.
Following this notification, the Master Servicer may withdraw from the
Collection Account and retain any amounts that constitute income realized from
the investment of the collections.
Amounts on deposit in the Collection Account will be invested in Eligible
Investments maturing no later than the day before the next Payment Date at the
direction of the Master Servicer. All income realized from any investment in
Eligible Investments of funds in the Collection Account is the Master
Servicer's and may be withdrawn from time to time. Any losses incurred on
these investments that reduce principal shall be deposited in the Collection
Account by the Master Servicer out of its own funds immediately as realized.
Section 3.03. Reserved.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses.
The Master Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Master Servicer or the related subservicer as loss
payee under it providing extended coverage in an amount that is at least equal
to the lesser of (i) the maximum insurable value of the improvements securing
the Mortgage Loan from time to time or (ii) the combined principal balance
owing on the Mortgage Loan and any mortgage loan senior to the Mortgage Loan
from time to time. The Master Servicer shall also maintain on property
acquired through foreclosure, or by deed in lieu of foreclosure, hazard
insurance with extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value from time to time of the
improvements that are a part of the property or (ii) the combined principal
balance owing on the Mortgage Loan and any mortgage loan senior to the
Mortgage Loan at the time of the foreclosure or deed in lieu of foreclosure
plus accrued interest and the good-faith estimate of the Master Servicer of
related Liquidation Expenses to be incurred.
Amounts collected by the Master Servicer under these policies shall be
deposited in the Collection Account to the extent called for by Section 3.02.
The hazard insurance to be maintained for the related Mortgage Loan shall
include flood insurance when the Mortgaged Property is located in a federally
designated flood area. The flood insurance shall be in the amount required
under applicable guidelines of the Federal Flood Emergency Act. No other
insurance need be carried on any Mortgaged Properties pursuant to this
Agreement.
Section 3.05. Assumption and Modification Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
mortgagor, the Master Servicer shall exercise its right to accelerate the
maturity of the Mortgage Loan
23
consistent with the then current practice of the Master Servicer and without
regard to the inclusion of the Mortgage Loan in the Trust. If it elects not to
enforce its right to accelerate or if it is prevented from doing so by
applicable law, the Master Servicer (so long as its action conforms with the
underwriting standards generally acceptable in the industry at the time for
new origination) may enter into an assumption and modification agreement with
the person to whom the Mortgaged Property has been or is about to be conveyed,
pursuant to which that person becomes liable under the Credit Line Agreement
and, to the extent permitted by applicable law, the mortgagor remains liable
on it. The Master Servicer shall notify the Indenture Trustee that any
assumption and modification agreement has been completed by delivering to the
Indenture Trustee an Officer's Certificate certifying that the agreement is in
compliance with this Section and by forwarding the original copy of the
assumption and modification agreement to the Indenture Trustee. Any assumption
and modification agreement shall be a part of the related Mortgage File. No
change in the terms of the related Credit Line Agreement may be made by the
Master Servicer in connection with the assumption to the extent that the
change would not be permitted to be made in the original Credit Line Agreement
pursuant to Section 3.01(a). Any fee collected by the Master Servicer for
entering into the assumption and modification agreement will be retained by
the Master Servicer as additional servicing compensation.
Section 3.06. Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans.
The Master Servicer shall foreclose or otherwise comparably convert to
ownership Mortgaged Properties securing defaulted Mortgage Loans when, in the
opinion of the Master Servicer based on normal and usual practices and
procedures, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02. If the Master Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is
affected by hazardous or toxic wastes or substances and that the acquisition
of the Mortgaged Property would not be commercially reasonable, then the
Master Servicer will not cause the Trust to acquire title to the Mortgaged
Property in a foreclosure or similar proceeding. In connection with
foreclosure or other conversion, the Master Servicer shall follow the
practices and procedures it deems appropriate and that are normal and usual in
its general mortgage servicing activities, including advancing funds to
correct a default on a related senior mortgage loan. However, the Master
Servicer shall not be required to expend its own funds in connection with any
foreclosure or towards the correction of any default on a related senior
mortgage loan or restoration of any property unless it determines that the
expenditure will increase Net Liquidation Proceeds.
If title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be issued to the
Indenture Trustee, or to its nominee on behalf of Noteholders. The Master
Servicer shall dispose of the Mortgaged Property as soon as practicable in a
manner that maximizes its Liquidation Proceeds.
The Master Servicer, in its sole discretion, may purchase for its own
account from the Trust any Mortgage Loan that is 151 days or more delinquent.
The price for any Mortgage Loan purchased shall be 100% of its Asset Balance
plus accrued interest on it at the applicable Loan
24
Rate from the date through which interest was last paid by the related
mortgagor to the first day of the month in which the purchase price is to be
distributed to the Noteholders. The purchase price shall be deposited in the
Collection Account. The Master Servicer may only exercise this right on or
before the penultimate day of the calendar month in which the Mortgage Loan
became 151 days delinquent. Any delinquent Mortgage Loan that becomes current
but thereafter again becomes 151 days or more delinquent may be purchased by
the Master Servicer pursuant to this Section. Upon receipt of a certificate
from the Master Servicer in the form of Exhibit D, the Indenture Trustee shall
release to the Master Servicer the related Mortgage File and shall execute and
deliver any instruments of transfer prepared by the Master Servicer, without
recourse, necessary to vest in the purchaser of the Mortgage Loan any Mortgage
Loan released to it and the Master Servicer shall succeed to all the Trust's
interest in the Mortgage Loan and all related security and documents. This
assignment shall be an assignment outright and not for security. The Master
Servicer shall then own the Mortgage Loan, and all security and documents,
free of any further obligation to the Trust, the Owner Trustee, the Indenture
Trustee, the Credit Enhancer, the Transferor, or the Noteholders with respect
to it.
Section 3.07. Indenture Trustee to Cooperate.
By each Payment Date, the Master Servicer will notify the Indenture
Trustee whenever the Asset Balance of any Mortgage Loan has been paid in full
during the preceding Collection Period. A Servicing Officer shall certify that
the Mortgage Loan has been paid in full and that all amounts received in
connection with the payment that are required to be deposited in the
Collection Account pursuant to Section 3.02 have been so deposited or
credited. Upon payment in full pursuant to Section 3.01, the Master Servicer
is authorized to execute an instrument of satisfaction regarding the related
mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the person entitled
to it.
If the mortgage has been registered on the MERS(R) System, the Master
Servicer shall cause the removal of the mortgage from registration on the
MERS(R) System and execute and deliver, on behalf of the Indenture Trustee and
the Noteholders, any instruments of satisfaction or cancellation or of partial
or full release. No expenses incurred in connection with the instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account.
As appropriate for the servicing or foreclosure of any Mortgage Loan, or
in connection with the payment in full of the Asset Balance of any Mortgage
Loan, upon request of the Master Servicer and delivery to the Indenture
Trustee of a Request for Release substantially in the form of Exhibit D signed
by a Servicing Officer, the Indenture Trustee shall release the related
Mortgage File to the Master Servicer and the Indenture Trustee shall execute
any documents provided by the Master Servicer necessary to the prosecution of
any proceedings or the taking of other servicing actions. The Master Servicer
shall return the Mortgage File to the Indenture Trustee when the need for it
by the Master Servicer no longer exists, unless the Mortgage Loan is
liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that specified above, the Request for Release shall be
released by the Indenture Trustee to the Master Servicer.
25
To facilitate the foreclosure of the mortgage securing any Mortgage Loan
that is in default following recordation of the assignments of mortgage in
accordance with this Agreement, if so requested by the Master Servicer, the
Indenture Trustee shall execute an appropriate assignment in the form provided
to the Indenture Trustee by the Master Servicer to assign the Mortgage Loan
for the purpose of collection to the Master Servicer or a subservicer. The
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only. The Master Servicer will then bring all required actions
in its own name and otherwise enforce the terms of the Mortgage Loan and
deposit the Net Liquidation Proceeds, exclusive of Foreclosure Profits, in the
Collection Account. If all delinquent payments due under the Mortgage Loan are
paid by the mortgagor and any other defaults are cured, then the Master
Servicer shall promptly reassign the Mortgage Loan to the Indenture Trustee
and return the related Mortgage File to the place where it was being
maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer.
The Master Servicer may retain the Servicing Fee pursuant to Section 3.02
and 3.03 as compensation for its services in servicing the Mortgage Loans.
Moreover, additional servicing compensation in the form of late payment
charges or other receipts not required to be deposited in the Collection
Account (other than Foreclosure Profits) shall be retained by the Master
Servicer. The Master Servicer must pay all expenses incurred by it in
connection with its activities under this Agreement (including payment of all
other fees and expenses not expressly stated under this Agreement to be for
the account of another person) and shall not be entitled to reimbursement
under this Agreement except as specifically provided in this Agreement.
Liquidation Expenses are reimbursable to the Master Servicer
FIRST, from related Liquidation Proceeds and
SECOND, from the Collection Account pursuant to Section
8.03(a)(viii) of the Indenture.
Section 3.09. Annual Statement as to Compliance.
(a) The Master Servicer will deliver to the Indenture Trustee, the Credit
Enhancer, and the Rating Agencies, by the date in each year specified in the
Adoption Annex, beginning on the date specified in the Adoption Annex, an
Officer's Certificate stating that (i) a review of the activities of the
Master Servicer during the preceding fiscal year (or the applicable shorter
period for the first report) and of its performance under this Agreement has
been made under the officer's supervision and (ii) to the best of the
officer's knowledge, based on the review, the Master Servicer has fulfilled
all of its material obligations under this Agreement throughout the fiscal
year, or, if there has been a default in the fulfillment of those obligations,
specifying each default known to the officer and its nature and status.
(b) Within five Business Days after obtaining knowledge of it, the Master
Servicer shall notify the Indenture Trustee, the Credit Enhancer, and each of
the Rating Agencies of any event that with the giving of notice or the lapse
of time would become an Event of Servicing Termination by delivering an
Officer's Certificate describing the event.
26
Section 3.10. Annual Servicing Report.
By the date in each year specified in the Adoption Annex, beginning on
the date specified in the Adoption Annex, the Master Servicer, at its expense,
shall cause a firm of nationally recognized independent public accountants
(who may also render other services to the Master Servicer) to furnish a
report to the Indenture Trustee, the Credit Enhancer, and each Rating Agency
to the effect that the firm has examined certain documents and records
relating to the servicing of mortgage loans during the most recent fiscal year
then ended under sale and servicing agreements or pooling and servicing
agreements (substantially similar to this Agreement, including this
Agreement), that the examination was conducted substantially in compliance
with the audit guide for audits of non-supervised mortgagees approved by the
Department of Housing and Urban Development for use by independent public
accountants (to the extent that the procedures in the audit guide are
applicable to the servicing obligations in those agreements), and that the
examination has disclosed no items of noncompliance with this Agreement that,
in the opinion of the firm, are material, except for the items of
noncompliance described in the report.
Section 3.11. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Master Servicer shall provide to the Indenture Trustee, the
Credit Enhancer, any Noteholders that are federally insured savings and loan
associations, the Office of Thrift Supervision, successor to the Federal Home
Loan Bank Board, the FDIC, and the supervisory agents and examiners of the
Office of Thrift Supervision access to the documentation regarding the
Mortgage Loans required by applicable regulations of the Office of Thrift
Supervision and the FDIC (acting as operator of the Savings Association
Insurance Fund or the Bank Insurance Fund). The Master Servicer will provide
access without charge but only after reasonable notice and during normal
business hours at the offices of the Master Servicer. Nothing in this Section
shall derogate from the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the mortgagors
and the failure of the Master Servicer to provide access as provided in this
Section as a result of this obligation shall not constitute a breach of this
Section.
(b) The Master Servicer shall supply the information needed to make
required distributions and to furnish required reports to Noteholders and to
make any claim under the Policy, in the form the Indenture Trustee reasonably
requests, to the Indenture Trustee and any Paying Agent by the start of the
Determination Date preceding the related Payment Date.
Section 3.12. Maintenance of Certain Servicing Insurance Policies.
The Master Servicer shall during the term of its service as master
servicer maintain in force (i) policies of insurance covering errors and
omissions in the performance of its obligations as master servicer under this
Agreement and (ii) a fidelity bond covering its officers, employees, or
agents. Each policy and bond together shall comply with the requirements from
time to time of Xxxxxx Xxx for persons performing servicing for mortgage loans
purchased by Xxxxxx Mae.
27
Section 3.13. Reports to the Securities and Exchange Commission.
The Administrator shall, on behalf of the Trust, effect filing with the
Securities and Exchange Commission of any periodic reports required to be
filed under the Securities Exchange Act of 1934 and the rules and regulations
of the Securities and Exchange Commission under it. At the request of the
Administrator, each of the Sponsor, the Master Servicer, the Depositor, the
Indenture Trustee, and the Transferor shall cooperate with the Administrator
in the preparation of these reports and shall provide to the Indenture Trustee
in a timely manner all information or documentation the Indenture Trustee
reasonably requests in connection with the performance of its obligations
under this Section. The Master Servicer shall prepare, execute and deliver all
certificates or other documents required to be delivered by the Issuer
pursuant to the Xxxxxxxx-Xxxxx Act of 2002 or the rules and regulations
promulgated thereunder.
Section 3.14. Tax Treatment.
The Transferor shall treat the Mortgage Loans as its property for all
federal, state, or local tax purposes and shall report all income earned
thereon (including amounts payable as fees to the Master Servicer) as its
income for income tax purposes. The Master Servicer shall prepare all tax
information required by law to be distributed to Noteholders. The Master
Servicer shall not be liable for any liabilities, costs, or expenses of the
Trust, the Noteholders, the Transferor, or the Note Owners arising under any
tax law, including federal, state, or local income and franchise or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect to any tax or arising from a failure to comply with any
tax requirement).
Section 3.15. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver all federal and state
information reports when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under Section
6050J of the Code for reports of foreclosures and abandonments of any
mortgaged property, the Master Servicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) on behalf of the Indenture Trustee acquires an interest in any
Mortgaged Property through foreclosure or other comparable conversion in full
or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to
know that any Mortgaged Property has been abandoned. The reports from the
Master Servicer shall be in form, substance, and timing sufficient to meet the
reporting requirements imposed by Section 6050J of the Code.
Article IV
SERVICING CERTIFICATE
Section 4.01. Servicing Certificate.
Not later than each Determination Date, the Master Servicer shall deliver
(a) to the Indenture Trustee, the data necessary to prepare the items below
and the statement for Noteholders required to be prepared pursuant to Section
4.04 and (b) to the Indenture Trustee,
28
the Owner Trustee, the Sponsor, the Depositor, the Paying Agent, the Credit
Enhancer, and each Rating Agency a Servicing Certificate (in written form or
the form of computer readable media or such other form as may be agreed to by
the Indenture Trustee and the Master Servicer), together with an Officer's
Certificate to the effect that the Servicing Certificate is correct in all
material respects, stating the related Collection Period, Payment Date, the
series number of the Notes, the date of this Agreement, and:
(i) the aggregate amount of collections received on the Mortgage
Loans by the Determination Date for the related Collection Period;
(ii) the aggregate amount of (a) Interest Collections and (b)
Principal Collections for the related Collection Period;
(iii) the Investor Floating Allocation Percentage and the Investor
Fixed Allocation Percentage for the related Collection Period;
(iv) the Investor Interest Collections and Investor Principal
Collections for the related Collection Period;
(v) the Interest Collections that are not Investor Interest
Collections and Transferor Principal Collections for the related
Collection Period;
(vi) the Note Interest and the applicable Note Rate for the Notes
for the related Interest Period;
(vii) the amount of the Note Interest that is not payable to the
Noteholders because of insufficient Investor Interest Collections;
(viii) the Unpaid Investor Interest Shortfall and the amount of
interest on the shortfall at the applicable Note Rate applicable from
time to time (separately stated) to be distributed on the related Payment
Date;
(ix) the remaining Unpaid Investor Interest Shortfall after the
distribution on the related Payment Date;
(x) the amount of any Basis Risk Carryforward in the distribution;
(xi) the amount of the remaining Basis Risk Carryforward after
giving effect to the related distribution;
(xii) the Accelerated Principal Payment Amount and the portion of it
that will be distributed pursuant to Section 8.03(a)(vi) of the
Indenture;
(xiii) the Scheduled Principal Collections Payment Amount,
separately stating its components;
(xiv) the amount of any Transfer Deposit Amount paid by the Sponsor
or the Depositor pursuant to Section 2.02 or 2.04;
(xv) any accrued Servicing Fees for the Mortgage Loans for previous
Collection Periods and the Servicing Fee for the related Collection
Period;
(xvi) the Investor Loss Amount for the related Collection Period;
29
(xvii) the aggregate amount of Investor Loss Reduction Amounts for
previous Payment Dates that have not been previously reimbursed to the
Holders of the Notes pursuant to Section 8.03(a)(iv) of the Indenture;
(xviii) the aggregate Asset Balance of the Mortgage Loans as of the
end of the preceding Collection Period and as of the end of the second
preceding Collection Period;
(xix) [Deleted];
(xx) the Note Principal Balance and loan factor after giving effect
to the distribution on the related Payment Date and to any reduction
because of the Investor Loss Amount;
(xxi) the Transferor Principal Balance and the Available Transferor
Subordinated Amount after giving effect to the distribution on the
Payment Date;
(xxii) the aggregate amount of Additional Balances created on the
Mortgage Loans during the previous Collection Period;
(xxiii) the number and aggregate Asset Balances of Mortgage Loans
(x) as to which the Minimum Monthly Payment is delinquent for 30-59 days,
60-89 days, and 90 or more days, respectively and (y) that have become
REO, in each case as of the end of the preceding Collection Period;
(xxiv) whether a Rapid Amortization Event has occurred since the
prior Determination Date, specifying the Rapid Amortization Event if one
has occurred;
(xxv) whether an Event of Servicing Termination has occurred since
the prior Determination Date, specifying the Event of Servicing
Termination if one has occurred;
(xxvi) the amount to be distributed to the Credit Enhancer pursuant
to Section 8.03(a)(v) and Section 8.03(a)(vii) of the Indenture, stated
separately;
(xxvii) the Guaranteed Principal Payment Amount for the Payment
Date;
(xxviii) the Credit Enhancement Draw Amount for the related Payment
Date;
(xxix) the amount to be distributed to the Transferor pursuant to
Section 8.03(a)(x) of the Indenture;
(xxx) the amount to be paid to the Master Servicer pursuant to
Section 8.03(a)(viii) of the Indenture;
(xxxi) the Maximum Rate for the related Collection Period and the
Weighted Average Net Loan Rate for the Mortgage Loans;
(xxxii) the expected amount of any optional advances pursuant to
Section 4.03 by the Master Servicer included in the distribution on the
related Payment Date and the aggregate expected amount of optional
advances pursuant to Section 4.03 by the Master Servicer outstanding as
of the close of business on the related Payment Date;
(xxxiii) the related Available Subordinated Transferor Amount after
giving effect to the distribution to be made on the related Payment Date;
30
(xxxiv) the number and principal balances of any Mortgage Loans
transferred to the Transferor pursuant to Section 2.06;
(xxxv) the aggregate of all Liquidation Loss Amounts on the Mortgage
Loans since the Cut-off Date and whether a Cumulative Loss Test Violation
has occurred since the prior Determination Date;
(xxxvi) the Rolling Six Month Delinquency Rate, the Spread Rate, the
Excess Spread Percentage, and the Rolling Three Month Excess Spread
Percentage for the Payment Date; and
(xxxvii) in the Servicing Certificates for the first and second
Payment Dates, the number and Cut-off Date Asset Balance of Mortgage
Loans for which the Mortgage Loan File was not delivered to the Indenture
Trustee within 30 days of the Closing Date.
The Indenture Trustee and the Owner Trustee shall conclusively rely upon
the information contained in a Servicing Certificate for purposes of making
distributions pursuant to Section 8.03 of the Indenture or distributions on
the Transferor Certificates, shall have no duty to inquire into this
information and shall have no liability in so relying. The format and content
of the Servicing Certificate may be modified by the mutual agreement of the
Master Servicer, the Indenture Trustee and the Credit Enhancer. The Master
Servicer shall give notice of any changes to the Rating Agencies.
Section 4.02. Acknowledgement and Cooperation.
The Depositor, the Master Servicer, and the Indenture Trustee acknowledge
that without the need for any further action on the part of the Credit
Enhancer, the Depositor, the Master Servicer, the Indenture Trustee, or the
Note Registrar (a) to the extent the Credit Enhancer makes payments, directly
or indirectly, on account of principal of or interest or other amounts on any
Notes to the Holders of the Notes or the Credit Enhancer, as applicable, will
be fully subrogated to the rights of these Holders to receive the principal
and interest from the Trust and (b) the Credit Enhancer shall be paid the
principal and interest or other amounts but only from the sources and in the
manner provided in this Agreement for the payment of the principal and
interest or other amounts. The Indenture Trustee and the Master Servicer shall
cooperate in all respects with any reasonable request by the Credit Enhancer
for action to preserve or enforce the Credit Enhancer's rights or interests
under this Agreement and the Indenture without limiting the rights or
affecting the interests of the Holders as otherwise stated in this Agreement
and the Indenture.
Section 4.03. Optional Advances of the Master Servicer.
The Master Servicer, in its sole discretion, may advance the interest
component of any delinquent Minimum Monthly Payment (or any portion of it) by
depositing the amount into the Collection Account by the related Determination
Date.
Section 4.04. Statements to Noteholders.
Concurrently with each payment to Noteholders, the Master Servicer shall
deliver to the Indenture Trustee the data necessary to prepare a statement
(the "Monthly Statement") for each Payment Date with the following
information:
31
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
(ii) the aggregate amount to be paid to Noteholders;
(iii) the amount of Note Interest in the payment and the Note Rate;
(iv) the amount of any Unpaid Investor Interest Shortfall in the
payment;
(v) the amount of the remaining Unpaid Investor Interest Shortfall
after giving effect to the payment;
(vi) the amount of principal in the payment, separately stating its
components;
(vii) the amount of the reimbursement of previous Investor Loss
Amounts in the payment;
(viii) the amount of the aggregate of unreimbursed Investor Loss
Reduction Amounts after giving effect to the payment;
(ix) the amount of any Basis Risk Carryforward in the payment;
(x) the amount of the remaining Basis Risk Carryforward after giving
effect to the payment;
(xi) the Servicing Fee for the Payment Date;
(xii) the Note Principal Balance and the factor to seven decimal
places obtained by dividing the Note Principal Balance for the Payment
Date by the Original Note Principal Balance after giving effect to the
payment;
(xiii) the Loan Balance as of the end of the preceding Collection
Period;
(xiv) any Credit Enhancement Draw Amount;
(xv) the number and aggregate Asset Balances of Mortgage Loans as to
which the Minimum Monthly Payment is delinquent for 30-59 days, 60-89
days, and 90 or more days, respectively, as of the end of the preceding
Collection Period;
(xvi) the book value (within the meaning of 12 C.F.R. Section 571.13
or comparable provision) of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
(xvii) the amount of any optional advances pursuant to Section 4.03
by the Master Servicer included in the payment on the Payment Date and
the aggregate amount of optional advances pursuant to Section 4.03 by the
Master Servicer outstanding as of the close of business on the Payment
Date;
(xviii) the Note Rate for the Payment Date;
(xix) the number and principal balances of any Mortgage Loans
retransferred to the Transferor pursuant to each of Section 2.04 and
Section 2.06;
32
(xx) the amount of Subordinated Transferor Collections included in
the payment;
(xxi) the amount of Overcollateralization Step-Down Amount included
in the payment;
(xxii) the Available Transferor Subordinated Amount for the Payment
Date; and
(xxiii) for the first Payment Date, the number and Cut-off- Date
Asset Balance of Mortgage Loans for which the Mortgage Loan File was not
delivered to the Indenture Trustee within 30 days of the Closing Date.
The amounts furnished pursuant to clauses (ii), (iii) (for Note
Interest), (iv), (v), (vi), (vii), and (viii) above shall be expressed as a
dollar amount per $1,000 increment of Notes.
If the Monthly Statement is not accessible to any of the Noteholders, the
Master Servicer, the Credit Enhancer, or either Rating Agency on the Indenture
Trustee's internet website, the Indenture Trustee shall forward a hard copy of
it to each Noteholder, the Master Servicer, the Credit Enhancer, and each
Rating Agency immediately after the Indenture Trustee becomes aware that the
Monthly Statement is not accessible to any of them via the Indenture Trustee's
internet website. The address of the Indenture Trustee's internet website
where the Monthly Statement will be accessible is xxxxx://xxx.xxx.xxxxxxx.xxx.
Assistance in using the Indenture Trustee's internet website may be obtained
by calling the Indenture Trustee's customer service desk at (000) 000-0000.
The Indenture Trustee shall notify each Noteholder, the Master Servicer, the
Credit Enhancer, and each Rating Agency in writing of any change in the
address or means of access to the internet website where the Monthly Statement
is accessible.
Within 60 days after the end of each calendar year, the Master Servicer
shall prepare and forward to the Indenture Trustee the information in clauses
(iii) and (vi) above aggregated for the calendar year. This requirement of the
Master Servicer shall be satisfied if substantially comparable information is
provided by the Master Servicer or a Paying Agent pursuant to any requirements
of the Code.
The Indenture Trustee shall prepare (in a manner consistent with the
treatment of the Notes as indebtedness of the Transferor, or as may be
otherwise required by Section 3.14) Internal Revenue Service Form 1099 (or any
successor form) and any other tax forms required to be filed or furnished to
Noteholders for payments by the Indenture Trustee (or the Paying Agent) on the
Notes and shall file and distribute such forms as required by law.
Article V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01. Liability of the Sponsor, the Master Servicer, and the
Depositor.
The Sponsor, the Depositor, and the Master Servicer shall be liable only
for their express agreements under this Agreement.
33
Section 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor.
Any corporation into which the Master Servicer or the Depositor may be
merged or consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Master Servicer or the Depositor is
a party, or any corporation succeeding to the business of the Master Servicer
or the Depositor, shall be the successor of the Master Servicer or the
Depositor, as the case may be, under this Agreement, without the execution or
filing of any paper or any further act on the part of any of the parties to
this Agreement, notwithstanding anything in this Agreement to the contrary.
Section 5.03. Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of its directors, officers,
employees, or agents is liable to the Trust, the Owner Trustee, the
Transferor, or the Noteholders for the Master Servicer's taking any action or
refraining from taking any action in good faith pursuant to this Agreement, or
for errors in judgment. This provision shall not protect the Master Servicer
or any of its directors, officers, employees, or agents against any liability
that would otherwise be imposed for misfeasance, bad faith, or gross
negligence in the performance of the duties of the Master Servicer or for
reckless disregard of the obligations of the Master Servicer. The Master
Servicer and any of its directors, officers, employees, or agents may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any person about anything arising under this Agreement.
The Master Servicer and each of its directors, officers, employees, and
agents shall be indemnified by the Trust and held harmless against any loss,
liability, or expense incurred in connection with any legal action relating to
this Agreement, the Transferor Certificates, or the Notes, other than any
loss, liability, or expense related to any specific Mortgage Loan that is
otherwise not reimbursable pursuant to this Agreement and any loss, liability,
or expense incurred due to its willful misfeasance, bad faith, or gross
negligence in the performance of duties under this Agreement or due to its
reckless disregard of its obligations under this Agreement.
The Master Servicer need not appear in, prosecute, or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability. The Master Servicer may in its sole discretion undertake
any action that it deems appropriate with respect to this Agreement and the
interests of the Noteholders. If so, the reasonable legal expenses and costs
of the action and any resulting liability shall be expenses, costs, and
liabilities of the Trust, and the Master Servicer shall only be entitled to be
reimbursed pursuant to Section 8.03(a)(viii) of the Indenture. The Master
Servicer's right to indemnity or reimbursement pursuant to this Section shall
survive any resignation or termination of the Master Servicer pursuant to
Section 5.04 or 6.01 with respect to any losses, expenses, costs, or
liabilities arising before its resignation or termination (or arising from
events that occurred before its resignation or termination).
34
Section 5.04. Master Servicer Not to Resign.
Subject to Section 5.02, the Master Servicer shall not resign as Master
Servicer under this Agreement except
(i) if the performance of its obligations under this Agreement are
no longer permissible under applicable law or due to applicable law are
in material conflict with any other activities carried on by it or its
subsidiaries or Affiliates that are of a type and nature carried on by
the Master Servicer or its subsidiaries or Affiliates at the date of this
Agreement or
(ii) if
(a) the Master Servicer has proposed a successor Master
Servicer to the Indenture Trustee and the proposed successor Master
Servicer is reasonably acceptable to the Indenture Trustee;
(b) each Rating Agency has delivered a letter to the Indenture
Trustee before the appointment of the successor Master Servicer
stating that the proposed appointment of the successor Master
Servicer as Master Servicer under this Agreement will not result in
the reduction or withdrawal of the then current rating of the Notes
without regard to the Policy; and
(c) the proposed successor Master Servicer is reasonably
acceptable to the Credit Enhancer in its sole discretion, as
evidenced by a letter to the Indenture Trustee.
No resignation by the Master Servicer shall become effective until the
Indenture Trustee or successor Master Servicer designated by the Master
Servicer has assumed the Master Servicer's obligations under this Agreement or
the Indenture Trustee has designated a successor Master Servicer in accordance
with Section 6.02. Any resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02
as obligations that survive the resignation or termination of the Master
Servicer. Any determination permitting the resignation of the Master Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to
that effect delivered to the Indenture Trustee and the Credit Enhancer. The
Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against the Transferor, any Noteholder, or the Credit Enhancer
for any amounts paid by the Master Servicer pursuant to any provision of this
Agreement.
Section 5.05. Delegation of Duties.
In the ordinary course of business, the Master Servicer may delegate any
of its duties under this Agreement at any time to any person who agrees to act
in accordance with standards comparable to those with which the Master
Servicer complies pursuant to Section 3.01, including any of its Affiliates or
any subservicer referred to in Section 3.01. This delegation shall not relieve
the Master Servicer of its obligations under this Agreement and shall not
constitute a resignation within the meaning of Section 5.04.
Section 5.06. Indemnification by the Master Servicer.
The Master Servicer shall indemnify the Trust, the Owner Trustee, and the
Indenture Trustee against any loss, liability, expense, damage, or injury
suffered or sustained due to the Master Servicer's actions or omissions in
servicing or administering the Mortgage Loans that
35
are not in accordance with this Agreement, including any judgment, award,
settlement, reasonable attorneys' fees, and other costs or expenses incurred
in connection with the defense of any actual or threatened action, proceeding,
or claim. This indemnification is not payable from the assets of the Trust.
This indemnity shall run directly to and be enforceable by an injured party
subject to any applicable limitations. The provisions of this Section shall
survive termination of this Agreement or the resignation or removal of the
Indenture Trustee.
Article VI
SERVICING TERMINATION
Section 6.01. Events of Servicing Termination.
If any one of the following events ("Events of Servicing Termination")
shall occur and be continuing:
(i) any failure by the Master Servicer to deposit in the Collection
Account any deposit required to be made under this Agreement that
continues unremedied either beyond the relevant Payment Date or for five
Business Days (or, if the Master Servicer is permitted to remit
collections on a monthly basis pursuant to Section 3.02(b), three
Business Days) after the date when notice of the failure has been given
to the Master Servicer by the Indenture Trustee or to the Master Servicer
and the Indenture Trustee by the Credit Enhancer or Holders of Notes
representing not less than 25% of the Outstanding Amount; or
(ii) failure by the Master Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Master
Servicer in the Notes or in this Agreement that materially and adversely
affects the interests of the Noteholders or the Credit Enhancer and
continues unremedied for a period of 60 days after the date on which
notice of the failure, requiring it to be remedied, and stating that the
notice is a "Notice of Default" under this Agreement, has been given to
the Master Servicer by the Indenture Trustee or to the Master Servicer
and the Indenture Trustee by the Credit Enhancer or the Holders of Notes
representing not less than 25% of the Outstanding Amount; or
(iii) an Insolvency Event occurs with respect to the Master
Servicer;
then, until the Event of Servicing Termination has been remedied by the
Master Servicer, either the Indenture Trustee, the Credit Enhancer, or the
Holders of Notes representing not less than 51% of the Outstanding Amount with
the consent of the Credit Enhancer by notice then given to the Master Servicer
(and to the Indenture Trustee if given by the Credit Enhancer or the Holders
of Notes) may terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. This notice to the Master Servicer
shall also be given to each Rating Agency and the Credit Enhancer.
From the receipt by the Master Servicer of the notice, all the rights and
obligations of the Master Servicer under this Agreement, whether with respect
to the Notes or the Mortgage
36
Loans or otherwise, shall pass to and be vested in the Indenture Trustee
pursuant to this Section; and the Indenture Trustee is authorized to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any documents, and to do anything else appropriate to effect the
purposes of the notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Indenture Trustee in effecting
the termination of the rights and obligations of the Master Servicer under
this Agreement, including the transfer to the Indenture Trustee for the
administration by it of all cash amounts that are held by the Master Servicer
and are to be deposited by it in the Collection Account, or that have been
deposited by the Master Servicer in the Collection Account or are subsequently
received by the Master Servicer with respect to the Mortgage Loans. All
reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Mortgage Files to the successor Master
Servicer and amending this Agreement to reflect the succession as Master
Servicer pursuant to this Section shall be paid by the predecessor Master
Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer) on presentation of reasonable documentation of the
costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 6.01(i) for a period of five or more Business Days or under Section
6.01(ii) for a period of 60 or more days, shall not constitute an Event of
Servicing Termination if the delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and the delay or
failure was caused by an act of God or the public enemy, acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods, or similar causes. The
preceding sentence shall not relieve the Master Servicer from using its best
efforts to perform its obligations in a timely manner in accordance with the
terms of this Agreement, and the Master Servicer shall provide the Indenture
Trustee, the Depositor, the Transferor, the Credit Enhancer, and the
Noteholders with an Officers' Certificate giving prompt notice of its failure
or delay, together with a description of its efforts to perform its
obligations. The Master Servicer shall immediately notify the Indenture
Trustee of any Events of Servicing Termination.
In connection with the termination of the Master Servicer if any mortgage
is registered on the MERS(R) System, then, either (i) the successor Master
Servicer, including the Indenture Trustee if the Indenture Trustee is acting
as successor Master Servicer, shall represent and warrant that it is a member
of MERS in good standing and shall agree to comply in all material respects
with the rules and procedures of MERS in connection with the servicing of the
Mortgage Loans that are registered with MERS, or (ii) the predecessor Master
Servicer shall cooperate with the successor Master Servicer in causing MERS to
execute and deliver an assignment of mortgage in recordable form to transfer
all the mortgages registered on the MERS(R) System from MERS to the Indenture
Trustee and to execute and deliver any other notices and documents appropriate
to effect a transfer of those mortgages or the servicing of the Mortgage Loan
on the MERS(R) System to the successor Master Servicer. The predecessor Master
Servicer shall file the assignment in the appropriate recording office. The
successor Master Servicer shall deliver the assignment to the Indenture
Trustee promptly upon receipt of
37
the original with evidence of recording on it or a copy certified by the
public recording office in which the assignment was recorded.
Section 6.02. Indenture Trustee to Act; Appointment of Successor.
(a) From the time the Master Servicer receives a notice of termination
pursuant to Section 6.01 or resigns pursuant to Section 5.04, the Indenture
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as Master Servicer under this Agreement and the transactions
contemplated by this Agreement and shall be subject to all the obligations of
the Master Servicer under this Agreement except (i) the obligation to
repurchase or substitute for any Mortgage Loan, (ii) with respect to any
representation or warranty of the Master Servicer, or (iii) for any act or
omission of either a predecessor or successor Master Servicer other than the
Indenture Trustee. As its compensation under this Agreement, the Indenture
Trustee shall be entitled to the compensation the Master Servicer would have
been entitled to under this Agreement if no notice of termination had been
given. In addition, the Indenture Trustee will be entitled to compensation
with respect to its expenses in connection with conversion of certain
information, documents, and record keeping, as provided in Section 6.01.
Notwithstanding the above, (i) if the Indenture Trustee is unwilling to
act as successor Master Servicer, or (ii) if the Indenture Trustee is legally
unable to so act, the Indenture Trustee may (in the situation described in
clause (i)) or shall (in the situation described in clause (ii)) appoint, or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution, bank, or other mortgage loan or home equity loan
servicer having a net worth of not less than $15,000,000 as the successor to
the Master Servicer under this Agreement to assume of any obligations of the
Master Servicer under this Agreement. The successor Master Servicer must be
acceptable to the Credit Enhancer in its sole discretion, as evidenced by the
Credit Enhancer's prior consent, as applicable, which consent shall not be
unreasonably withheld. The appointment of the successor Master Servicer must
not result in the qualification, reduction, or withdrawal of the ratings
assigned to the Notes by the Rating Agencies without regard to the Policy.
Pending appointment of a successor to the Master Servicer, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act as Master Servicer. In connection with this appointment and
assumption, the successor shall be entitled to receive compensation out of
payments on Mortgage Loans in an amount equal to the compensation that the
Master Servicer would otherwise have received pursuant to Section 3.08 (or any
lesser compensation the Indenture Trustee and the successor agree to). The
Indenture Trustee and the successor shall take any action, consistent with
this Agreement, necessary to effectuate the succession.
(b) The appointment of a successor Master Servicer shall not affect any
liability of the predecessor Master Servicer that may have arisen under this
Agreement before its termination as Master Servicer (including any deductible
under an insurance policy pursuant to Section 3.04), nor shall any successor
Master Servicer be liable for any acts or omissions of the predecessor Master
Servicer or for any breach by the predecessor Master Servicer of any of its
representations or warranties contained in this Agreement. Except for any
compensation
38
agreement with the Indenture Trustee, any successor Master Servicer shall be
subject to all the terms of this Agreement from the time that it accepts its
appointment to the same extent as if it were originally named as Master
Servicer.
Section 6.03. Notification to Noteholders and the Transferor.
Upon any termination or appointment of a successor to the Master Servicer
pursuant to this Article or Section 5.04, the Indenture Trustee shall give
prompt notice of it to the Noteholders at their respective addresses appearing
in the Note Register, the Transferor, the Credit Enhancer, and each Rating
Agency.
Article VII
TERMINATION
Section 7.01. Termination.
(a) The respective obligations and responsibilities of the Sponsor, the
Master Servicer, the Depositor, the Trust, and the Indenture Trustee created
by this Agreement (other than the obligation of the Master Servicer to send
certain notices) shall terminate on the earlier of
(i) the transfer of all the Mortgage Loans pursuant to Section
7.01(b),
(ii) the termination of the Trust Agreement or the Indenture, and
(iii) the final payment or other liquidation of the last Mortgage
Loan remaining in the Trust or the disposition of all property acquired
in foreclosure or by deed in lieu of foreclosure of any Mortgage Loan.
Upon termination in accordance with this Section, the Indenture Trustee
shall execute any documents and instruments of transfer presented by the
Transferor, in each case without recourse, representation, or warranty, and
take any other actions the Transferor reasonably requests to effect the
transfer of the Mortgage Loans to the Transferor. Notwithstanding the
termination of this Agreement, the Master Servicer shall comply with this
Agreement in winding up activities under this Agreement after termination if
necessary.
(b) With the consent of the Credit Enhancer and after making the required
determination, the Transferor may effect the transfer of all the Mortgage
Loans at their termination purchase price on any Payment Date from the Payment
Date immediately before which the aggregate Note Principal Balance is less
than or equal to 10% of the Original Note Principal Balance. The termination
purchase price is the sum of:
(i) the aggregate Note Principal Balance,
(ii) accrued aggregate Note Interest through the day preceding the
final Payment Date, and
(iii) interest accrued on any aggregate Unpaid Investor Interest
Shortfall, to the extent legally permissible.
The Transferor may effect the transfer of the Mortgage Loans under this
subsection only if the Master Servicer determines that the customary and
reasonable costs and expenses
39
incurred in the performance by the Master Servicer of its servicing
obligations under this Agreement exceed the benefits accruing to the Master
Servicer.
(c) The Transferor must notify the Credit Enhancer, the Trust, and the
Indenture Trustee of any election to effect the transfer of the Mortgage Loans
pursuant to Section 7.01(b) no later than the first day of the month before
the month in which the transfer is to occur. The proceeds from the purchase of
the Mortgage Loans, for purposes of payments on the Notes, shall be considered
to have been received in the Collection Period before the Collection Period in
which the Payment Date on which the purchase takes place occurs.
Article VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.
This Agreement may be amended from time to time by the Sponsor, the
Master Servicer, the Depositor, the Owner Trustee, and the Indenture Trustee,
if the Rating Agency Condition is satisfied (in connection with which the
consent of the Credit Enhancer shall not be unreasonably withheld). However,
no amendment that significantly changes the permitted activities of the Trust
may be promulgated without the consent of a majority of the aggregate
Outstanding Amount of the Notes. For this purpose no Notes owned by the
Sponsor or any of its affiliates may vote, nor shall their Notes be considered
outstanding. This Agreement may also be amended from time to time by the
Sponsor, the Master Servicer, the Depositor, the Owner Trustee, and the
Indenture Trustee, with the consent of the Credit Enhancer (which consent
shall not be unreasonably withheld) and Holders of not less than 66 2/3% of the
aggregate Outstanding Amount of the Notes.
The Indenture Trustee may enter into any amendment of this Agreement as
to which the Rating Agency Condition is satisfied, and when so requested by an
Issuer Request, the Indenture Trustee shall enter into any amendment of this
Agreement
(i) that does not impose further obligations or liabilities on the
Indenture Trustee, and
(ii) as to which either the Rating Agency Condition is satisfied or
Holders of not less than 66 2/3% of the aggregate Outstanding Amount of
Notes and the Credit Enhancer have consented.
Following the execution and delivery of any amendment to this Agreement
or to the Policy to which the Credit Enhancer was required to consent, either
the Transferor, if the Transferor requested the amendment, or the Master
Servicer, if the Master Servicer requested the amendment, shall reimburse the
Credit Enhancer for the reasonable out-of-pocket costs and expenses incurred
by them in connection with the amendment.
Before the execution of the amendment, the party to this Agreement
requesting the amendment shall notify each Rating Agency of the substance of
the amendment. The Indenture
40
Trustee shall deliver fully executed original counterparts of the instruments
effecting the amendment to the Credit Enhancer.
Section 8.02. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PROVISIONS THAT WOULD
RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER STATE.
Section 8.03. Notices.
All notices, demands, instructions, consents, and other communications
required or permitted under this Agreement shall be in writing and signed by
the party giving the same and shall be personally delivered or sent by first
class or express mail (postage prepaid), national overnight courier service,
or by facsimile transmission or other electronic communication device capable
of transmitting or creating a written record (confirmed by first class mail)
and shall be considered to be given for purposes of this Agreement on the day
that the writing is delivered when personally delivered or sent by facsimile
or overnight courier or three Business Days after it was sent to its intended
recipient if sent by first class mail. A facsimile has been delivered when the
sending machine issues an electronic confirmation of transmission. Unless
otherwise specified in a notice sent or delivered in accordance with the
provisions of this Section, notices, demands, instructions, consents, and
other communications in writing shall be given to or made on the respective
parties at their respective addresses indicated below:
if to the Trust at:
CWABS Master Trust
Wilmington Trust Company, as Owner Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust Administration
Telecopy: 000-000-0000
if to the Depositor at:
CWABS, Inc.
0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
Telecopy: (000) 000-0000
41
if to the Master Servicer at
Countrywide Home Loans, Inc.
0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department,
Telecopy: (000) 000-0000
if to the Indenture Trustee at
the Corporate Trust Office
Telecopy: 000-000-0000
if to the Credit Enhancer at
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Research and Risk Management
CWABS, Inc. Series 2003-D
Telecopy: 000-000-0000
if to Xxxxx'x at
Residential Loan Monitoring Group, 4th Floor
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
and
if to Standard & Poor's at
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Whenever a notice or other communication to the Credit Enhancer refers to
an Event of Servicing Termination or with respect to which failure on the part
of the Credit Enhancer to respond would constitute consent or acceptance, then
a copy of the notice or other communication shall also be sent to the
attention of the General Counsel of the Credit Enhancer and shall be marked to
indicate "URGENT MATERIAL ENCLOSED."
Section 8.04. Severability of Provisions.
Any provisions of this Agreement that are held invalid for any reason or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the invalidity or unenforceability without
invalidating the remaining provisions of this Agreement, and the prohibition
or unenforceability in a jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction.
42
Section 8.05. Assignment.
Except as provided in Sections 5.02 and 5.04, this Agreement may not be
assigned by the Depositor or the Master Servicer without the prior consent of
the Credit Enhancer.
Section 8.06. Third-Party Beneficiaries.
This Agreement will be binding on the parties to this Agreement, and
inure to the benefit of the parties to this Agreement, the Noteholders, the
Transferor, the Note Owners, the Owner Trustee, and the Credit Enhancer and
their respective successors and permitted assigns. The Credit Enhancer is a
third party beneficiary of this Agreement. No other person will have any
rights under this Agreement.
Section 8.07. Counterparts.
This Agreement may be executed in any number of copies, and by the
different parties on the same or separate counterparts, each of which shall be
considered to be an original instrument.
Section 8.08. Effect of Headings and Table of Contents.
The Article and Section headings in this Agreement and the Table of
Contents are for convenience only and shall not affect the construction of
this Agreement.
Section 8.09. Series Trust.
The Trust is a series trust pursuant to Sections 3804 and 3806(b)(2) of
the Statutory Trust Statute, and each series shall be a separate series of the
Trust within the meaning of Section 3806(b)(2) of the Statutory Trust Statute.
As such, this Agreement is entered into only with respect to the Series of the
Trust referred to in the Adoption Annex and the debts, liabilities,
obligations, and expenses incurred, contracted for, or otherwise existing with
respect to the Series referred to in the Adoption Annex shall be enforceable
against the assets of the Series referred to in the Adoption Annex only, and
not against the assets of the Trust generally, or the assets of any other
series.
43
IN WITNESS WHEREOF, the Depositor, the Sponsor and Master Servicer, the
Trust, and the Indenture Trustee have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
CWABS, INC.
Depositor
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: Vice President
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
BANK ONE, NATIONAL ASSOCIATION
Indenture Trustee
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
44
CWABS MASTER TRUST
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
45
State of California )
) ss.:
County of Los Angeles )
On the 25th day of April, 2003 before me, a notary public in and for
the State of California, personally appeared Xxxxx Xxxxxxx, known to me who,
being by me duly sworn, did depose and say that he resides at Calabasas,
California; that she is the Vice President of CWABS, Inc. a Delaware
corporation, one of the parties that executed the foregoing instrument; that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Xxxxxx Xxxxxx
-----------------
Notary Public
Xxxxxx X. Xxxxxx
Commission # 1325392
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2005.
46
State of California )
) ss.:
County of Los Angeles )
On the 25th day of April, 2003 before me, a notary public in and for
the State of California, personally appeared Xxxxx Xxxxxxx, known to me who,
being by me duly sworn, did depose and say that he resides at Calabasas,
California; that she is the Vice President of Countrywide Home Loans, Inc., a
New York corporation, one of the parties that executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/ Xxxxxx Xxxxxx
-----------------
Notary Public
Xxxxxx X. Xxxxxx
Commission # 1325392
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2005.
47
State of Illinois )
) ss.:
County of Xxxx )
On the 25th day of April, 2003 before me, a notary public in and for
the State of Illinois, personally appeared Xxxxxxx X. Xxxxxx, known to me who,
being by me duly sworn, did depose and say that she resides at 0000 X. Xxxxx
Xxxxxxx, Xxxxxxx, XX 00000; that she is the Vice President of Bank One,
National Association, a national banking association, one of the parties that
executed the foregoing instrument; that she signed her name thereto by order
of the Board of Directors of said corporation.
/s/ Xxxxxx Xxxxxx Xxxxxx
------------------------
OFFICIAL SEAL
Notary Public, State of Illinois
My Commission Expires: August 9, 2005
48
State of Delaware )
) ss.:
County of New Castle )
On the 25th day of April, 2003 before me, a notary public in and for
the State of Delaware, personally appeared Xxxxx X. Xxxxxxxx, known to me who,
being by me duly sworn, did depose and say that she resides at Wilimington,
Delaware; that she is a Financial Services Officer of Wilmington Trust
Company, not in its individual capacity but in its capacity as Owner Trustee
of CWABS MASTER TRUST, one of the parties that executed the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation.
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------
Notary Public
My Commission Expires Oct. 31, 2006
49
EXHIBIT A
MORTGAGE LOAN SCHEDULE
[Delivered to Indenture Trustee Only]
A-1
EXHIBIT B
FORM OF CREDIT LINE AGREEMENT
B-1
EXHIBIT C
FORM OF LETTER OF REPRESENTATIONS
C-1
EXHIBIT D
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
[DATE]
Bank One, National Association
as Indenture Trustee
1 Bank Xxx Xxxxx
Xxxxx XX0-0000
Xxxxxxx Xxxxxxxx 00000-000
Attn: Corporate Trust Services Division
Re: CWABS, Inc. Revolving Home Equity Loan
Asset Backed Notes, Series 2003-D
---------------------------------
Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Indenture Trustee under the Sale and Servicing Agreement dated as of April
25, 2003, among CWABS, Inc. as Depositor, Countrywide Home Loans, Inc., as
Sponsor and Master Servicer, CWABS Master Trust and you, as Indenture Trustee
(the "Agreement"), we hereby request a release of the Mortgage File held by
you as Indenture Trustee with respect to the following described Mortgage Loan
for the reason indicated below.
Loan No.:
--------
[MIN No.]
-------
Reason for requesting file:
--------------------------
_____________________ 1. Mortgage Loan paid in full. (The Master
Servicer hereby certifies that all
amounts received in connection with the
payment in full of the Mortgage Loan
which are required to be deposited in the
Collection Account pursuant to Section
4.02 of the Agreement have been so
deposited).
_____________________ 2. Retransfer of Mortgage Loan. (The Master
Servicer hereby certifies that the
Transfer Deposit Amount has been
deposited in the Collection Account
pursuant to the Agreement).
_____________________ 3. The Mortgage Loan is being foreclosed.
_____________________ 4. The Mortgage Loan is being re-financed by
another depository institution. (The
Master Servicer hereby certifies that all
amounts received in connection with the
payment in full of the Mortgage Loan
which are required to be deposited in the
Collection Account pursuant to Section
4.02 of the Agreement have been so
deposited).
_____________________ 5. Other (Describe).
The undersigned acknowledges that the above Mortgage File will be held by
the undersigned in accordance with the provisions of the Agreement and will
promptly be returned
D-1
to the Indenture Trustee when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan has been liquidated or retransferred.
Capitalized terms used herein shall have the meanings ascribed to them in
the Agreement.
COUNTRYWIDE HOME LOANS, INC.
By:_______________________________
Name:
Title: Servicing Officer
D-2
ANNEX 1
DEFINITIONS
"Affiliate" of any person means any other person controlling, controlled
by or under common control with the person. For purposes of this definition,
"control" means the power to direct the management and policies of a person,
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Agreement" means this Sale and Servicing Agreement.
"Appraised Value" for any Mortgaged Property means the value established
by any of the following: (i) with respect to Credit Line Agreements with
Credit Limits greater than $100,000, by a full appraisal, (ii) with respect to
Credit Line Agreements with Credit Limits equal to or less than $100,000, by
either a drive by inspection or electronic appraisal of the Mortgaged Property
made to establish compliance with the underwriting criteria then in effect in
connection with the application for the Mortgage Loan secured by the Mortgaged
Property, and (iii) with respect to any Mortgage Loan as to which the Servicer
consents to a new senior lien pursuant to Section 3.01(a), in compliance with
the underwriting criteria then in effect in connection with the application
for the related senior mortgage loan.
"Collection Account" means the custodial account or accounts created and
maintained for the benefit of the Noteholders, the Transferor, and the Credit
Enhancer pursuant to Section 3.02(b).
"Combined Loan-to-Value Ratio" means for any Mortgage Loan as of any
date, the percentage equivalent of the fraction, the numerator of which is the
sum of (i) the Credit Limit and (ii) the outstanding principal balance as of
the date of execution of the related original Credit Line Agreement (or any
subsequent date as of which the outstanding principal balance may be
determined in connection with an increase in the Credit Limit for the Mortgage
Loan) of any mortgage loan or mortgage loans that are senior or equal in
priority to the Mortgage Loan and which is secured by the same Mortgaged
Property and the denominator of which is the Valuation of the related
Mortgaged Property.
"Credit Limit Utilization Rate" for any Mortgage Loan means a fraction
whose numerator is the Cut-off Date Asset Balance for the Mortgage Loan and
whose denominator is the related Credit Limit.
"Cumulative Loss Test Violation" has the meaning given to it in the
Insurance Agreement.
"Cut-off Date Loan Balance" means the Loan Balance calculated as of the
Cut-off Date.
"Defective Mortgage Loan" means a Mortgage Loan subject to retransfer
pursuant to Section 2.02 or 2.04.
"Delay Delivery Certification" has the meaning given to it in the
Custodial Agreement.
Xxx-1-1
"Depositor" means CWABS, Inc., a Delaware corporation, or its successor
in interest.
"Draw" for any Mortgage Loan means an additional borrowing by the
mortgagor after the Cut-off Date, in accordance with the related Mortgage
Note.
"Due Date" for any Mortgage Loan means the fifteenth day of the month.
"Electronic Ledger" means the electronic master record of home equity
credit line mortgage loans maintained by the Master Servicer or by the
Sponsor, as appropriate.
"Eligible Substitute Mortgage Loan" means a Mortgage Loan substituted by
the Sponsor for a Defective Mortgage Loan that must, on the date of the
substitution,
(i) have an outstanding Asset Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage
Loan, an aggregate Asset Balance), not 10% more or 10% less than the
Transfer Deficiency relating to the Defective Mortgage Loan;
(ii) have a Loan Rate not less than the Loan Rate of the Defective
Mortgage Loan and not more than 1.000% in excess of the Loan Rate of the
Defective Mortgage Loan;
(iii) have a Loan Rate based on the same Index with adjustments to
the Loan Rate made on the same Interest Rate Adjustment Date as that of
the Defective Mortgage Loan;
(iv) have a FICO score not less than the FICO score of the Defective
Mortgage Loan and not more than 50 points higher than the Defective
Mortgage Loan;
(v) have a Gross Margin that is not less than the Gross Margin of
the Defective Mortgage Loan and not more than 100 basis points higher
than the Gross Margin for the Defective Mortgage Loan;
(vi) have a mortgage of the same or higher level of priority as the
mortgage relating to the Defective Mortgage Loan at the time the mortgage
was transferred to the Trust;
(vii) have a remaining term to maturity not more than six months
earlier and not more than 60 months later than the remaining term to
maturity of the Defective Mortgage Loan;
(viii) comply with each representation and warranty in Section 2.04
(to be made as of the date of substitution); and
(ix) have an original Combined Loan-to-Value Ratio not greater than
that of the Defective Mortgage Loan.
More than one Eligible Substitute Mortgage Loan may be substituted for a
Defective Mortgage Loan if the Eligible Substitute Mortgage Loans meet the
foregoing attributes in the aggregate and the substitution is approved in
advance by the Credit Enhancer.
"Event of Servicing Termination" has the meaning given to it in Section
6.01.
Xxx-1-2
"Excess Spread Percentage" has the meaning given to it in the Insurance
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation or any successor
to it.
"Foreclosure Profit" on a Liquidated Mortgage Loan means the amount by
which (i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the
related Asset Balance (plus accrued and unpaid interest on it at the
applicable Loan Rate from the date interest was last paid to the end of the
Collection Period during which the Mortgage Loan became a Liquidated Mortgage
Loan) of the Liquidated Mortgage Loan immediately before the final recovery of
its Liquidation Proceeds.
"Gross Margin" for any Mortgage Loan means the percentage shown as the
"Gross Margin" for the Mortgage Loan on Exhibit A to the Sale and Servicing
Agreement.
"Increased Senior Lien Limitation" has the meaning given to it in Section
3.01(a).
"Indenture" means the indenture of even date with this Agreement between
the Trust and the Indenture Trustee.
"Indenture Trustee Fee" means a fee that is separately agreed to between
the Master Servicer and the Indenture Trustee.
"Indenture Trustee Fee Rate" means the per annum rate at which the
Indenture Trustee Fee is calculated.
"Index" for each Interest Rate Adjustment Date for a Mortgage Loan means
the highest "prime rate" as published in the "Money Rates" table of The Wall
Street Journal as of the first business day of the calendar month.
"Insurance Proceeds" means proceeds paid by any insurer (other than the
Credit Enhancer under the Policy) pursuant to any insurance policy covering a
Mortgage Loan net of any amount (i) covering any expenses of the Master
Servicer in connection with obtaining the proceeds, (ii) applied to the
restoration or repair of the related Mortgaged Property, (iii) released to the
mortgagor in accordance with the Master Servicer's normal servicing
procedures, or (iv) required to be paid to any holder of a mortgage senior to
the Mortgage Loan.
"Interest Rate Adjustment Date" for each Mortgage Loan means any date on
which the Loan Rate is adjusted in accordance with the related Credit Line
Agreement.
"Latest Subsequent Closing Date" means the date specified in the Adoption
Annex.
"Lien" means any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority right, or interest or other
Security Agreement or preferential arrangement of any kind or nature
whatsoever, including any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any Financing Statement under the UCC (other
than any Financing Statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing except
that any assignment pursuant to Section 5.02 is not a Lien.
Xxx-1-3
"Lifetime Rate Cap" for each Mortgage Loan whose related Mortgage Note
provides for a lifetime rate cap means the maximum Loan Rate permitted over
the life of the Mortgage Loan under the terms of the related Credit Line
Agreement, as shown on the Mortgage Loan Schedule.
"Liquidated Mortgage Loan" for any Payment Date means any Mortgage Loan
in respect of which the Master Servicer has determined, in accordance with the
servicing procedures specified in this Agreement, as of the end of the related
Collection Period, that all Liquidation Proceeds which it expects to recover
with respect to the disposition of the Mortgage Loan or the related REO have
been recovered.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of
overhead) that are incurred by the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
including legal fees and expenses, any unreimbursed amount expended pursuant
to Section 3.06 (including amounts advanced to correct defaults on any
mortgage loan which is senior to the Mortgage Loan and amounts advanced to
keep current or pay off a mortgage loan that is senior to the Mortgage Loan)
respecting the related Mortgage Loan and any related and unreimbursed
expenditures with respect to real estate property taxes, water or sewer taxes,
condominium association dues, property restoration or preservation or
insurance against casualty, loss or damage.
"Liquidation Loss Amount" means, with respect to any Payment Date and any
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, its unrecovered Asset Balance at the end of the Collection
Period, after giving effect to the Net Liquidation Proceeds applied in
reduction of the Asset Balance. A Liquidation Loss Amount cannot be less than
$0.
"Liquidation Proceeds" means proceeds (including Insurance Proceeds but
not including amounts drawn under the Policy) received in connection with the
liquidation of any Mortgage Loan or related REO, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Rate Cap" for each Mortgage Loan means the lesser of (i) the
Lifetime Rate Cap or (ii) the applicable state usury ceiling.
"Loan-to-Value Ratio" for any date of determination for any mortgage loan
means a fraction whose numerator is the outstanding principal balance of the
mortgage loan as of the date of determination and whose denominator is the
Valuation of the related Mortgaged Property.
"Master Servicer" means Countrywide Home Loans, Inc., a New York
corporation and any successor to it and any successor under this Agreement.
"Minimum Monthly Payment" for any Mortgage Loan and any month means the
minimum amount required to be paid by the related mortgagor in that month.
"Net Liquidation Proceeds" for any Liquidated Mortgage Loan means
Liquidation Proceeds net of Liquidation Expenses.
Xxx-1-4
"Officer's Certificate" means a certificate (i) signed by the Chairman of
the Board, the Vice Chairman of the Board, the President, a Managing Director,
a Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor, the Sponsor, the Transferor, or the Master
Servicer, or (ii), if provided for in this Agreement, signed by a Servicing
Officer.
"Opinion of Counsel" means a written opinion of counsel acceptable to the
Indenture Trustee, who may be in-house counsel for the Depositor, the Sponsor,
the Master Servicer, or the Transferor (except that any opinion pursuant to
Section 5.04 or relating to taxation must be an opinion of independent outside
counsel) and who, in the case of opinions delivered to the Credit Enhancer or
the Rating Agency, is reasonably acceptable to it.
"REO" means a Mortgaged Property that is acquired by the Trust in
foreclosure or by deed in lieu of foreclosure.
"Rolling Six Month Delinquency Rate" has a meaning given to it in the
Insurance Agreement.
"Rolling Three Month Excess Spread Percentage" has the meaning given to
it in the Insurance Agreement.
"Servicing Certificate" means a certificate completed and executed by a
Servicing Officer in accordance with Section 4.01.
"Servicing Officer" means any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Indenture Trustee (with a copy to the Credit Enhancer) by the
Master Servicer on the Closing Date, as the list may be amended from time to
time.
"Sponsor" means Countrywide Home Loans, Inc., a New York corporation and
any successor to it.
"Spread Rate" has the meaning given to it in the Insurance Agreement.
"Transfer Date" has the meaning given to it in Section 2.06.
"Transfer Deficiency" means that the Transferor Principal Balance after a
retransfer of a Mortgage Loan pursuant to Section 2.02(b) would be less than
the greater of the Minimum Transferor Interest and the Required Transferor
Subordinated Amount.
"Transfer Deposit Amount" has the meaning given to it in Section 2.02(b).
"Transfer Document" means a document substantially in the form of Exhibit
E.
"Transfer Notice Date" has the meaning given to it in Section 2.06.
"Valuation" of any Mortgaged Property means the lesser of (i) the
Appraised Value of the Mortgaged Property and (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related Mortgage
Loan, the purchase price of the Mortgaged Property.
Xxx-1-5
The following have the meanings given to them in the Indenture:
Accelerated Principal Payment Amount MOM Loan
Additional Balance Xxxxx'x
Asset Balance Mortgage File
Assignment of Mortgage Mortgage Loan
Available Transferor Subordinated Amount Mortgage Loan Schedule
Basis Risk Carryforward Mortgage Note
Business Day Mortgaged Property
Closing Date Note
Code Note Rate
Collection Period Note Interest
Corporate Trust Office Note Principal Balance
Credit Enhancement Draw Amount Noteholder or Holder
Credit Enhancer Note Owner
Credit Enhancer Default Note Register and Note Registrar
Credit Limit Original Note Principal Balance
Credit Line Agreement Outstanding Amount
Custodial Agreement Paying Agent
Cut-off Date Payment Date
Cut-off Date Asset Balance Policy
Determination Date Principal Collections
Eligible Account Purchase Agreement
Eligible Investments Rapid Amortization Event
Guaranteed Principal Payment Amount Rating Agency
Indenture Trustee Required Transferor Subordinated Amount
Insolvency Event Responsible Officer
Insurance Agreement Scheduled Principal Collections Payment Amount
Interest Collections Servicing Fee
Interest Formula Rate Standard & Poor's
Interest Period Transferor
Investor Fixed Allocation Percentage Transferor Certificates
Investor Floating Allocation Percentage Transferor Interest
Investor Interest Collections Transferor Principal Balance
Investor Loss Amount Transferor Principal Collections
Investor Loss Reduction Amount Trust
Investor Principal Collections Trust Agreement
Loan Balance UCC
Loan Rate Unpaid Investor Interest Shortfall
Managed Amortization Period Weighted Average Net Loan Rate
Maximum Rate
MERS
MERS(R) System
MIN
Minimum Transferor Interest
Xxx-1-6
ANNEX 2
ADOPTION ANNEX
The items referred to in the representations and warranties in
Section 2.04(a) are:
(xii) 0.00% of the Mortgage Loans being transferred on the relevant
date (by Cut-off Date Loan Balance) were 30-59 days delinquent (measured on a
contractual basis).
(xvii) As of the Cut-off Date for the Mortgage Loans no more than
3.00% of the Mortgage Loans, by aggregate principal balance, are secured by
Mortgaged Properties located in one United States postal zip code.
(xviii) The Combined Loan-to-Value Ratio for each Mortgage Loan was
not in excess of 100%.
(xxix) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-off Date for the Mortgage
Loans is approximately 285 months. The Loan Rate Caps for the Mortgage Loans
range between 12.00% and 21.00% and the weighted average Loan Rate Cap is
approximately 17.90%. The Gross Margins for the Mortgage Loans range between
(1.750)% and 6.125% and the weighted average Gross Margin is approximately
1.82% as of the Cut-off Date for the Mortgage Loans. The Loan Rates on the
Mortgage Loans range between 2.50% and 10.38% and the weighted average Loan
Rate on the Mortgage Loans is approximately 4.19%.
(xxxi) No more than 22.86% (by Cut-off Date Loan Balance) of the
Mortgage Loans are secured by real property improved by individual condominium
units, units in planned unit developments, townhouses, or two-to-four family
residences erected on them, and at least 77.14% (by Cut-off Date Loan Balance)
of the Mortgage Loans are secured by real property with a detached one-family
residence erected on them.
(xxxii) The Credit Limits on the Mortgage Loans range between
approximately $7,500 and $1,000,000 with an average of approximately
$41,545.45. As of the Cut-off Date for the Mortgage Loans, no Mortgage Loan
had a principal balance in excess of approximately $1,000,000, and the average
principal balance of the Mortgage Loans is equal to approximately $24,677.21.
(xxxiii) Approximately 7.15% and 92.85% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage Loans, are
first and second liens, respectively.
(xxxiv) As of the Closing Date, no more than 1.56% of the Mortgage
Loans, by aggregate principal balance, were appraised electronically.
(xxxix) As of the Cut-off Date (based upon the drawn balances), the
Mortgage Loans had a weighted average Combined Loan-to-Value Ratio of 81.88%;
a range of Combined Loan-to-Value Ratios between 6.45% and 100.00%; a
percentage of primary residences of 97.53%; a weighted average FICO score of
708; a range of FICO scores between 620 and 861; a
Xxx-2-1
Weighted Average Net Loan Rate of 3.69%; a range of net Loan Rates between
2.00% and 9.88%; a weighted average original stated term to maturity of 298
months; a range of original term to maturity between 120 months and 300
months; a range of remaining term to maturity between 67 months and 300
months; an average drawn balance of $24,677.21; a weighted average utilization
ratio of 88.26%; 49.90% of the Mortgage Loans have their respective Mortgaged
Properties located in the top five states, measured by aggregate drawn
balances.
The amount of initial aggregate principal amount of Notes is
$400,000,000.
The title of the Collection Account is "Bank One, National
Association, as Indenture Trustee, Collection Account in trust for the
registered holders of Revolving Home Equity Loan Asset Backed Notes, Series
2003-D and Financial Guaranty Insurance Company."
The date on which the Master Servicer delivers the Officer's
Certificate in each year is March 31, and the first Officer's Certificate
pursuant to Section 3.09 is March 31, 2004.
The date on which the Master Servicer delivers the annual servicing
report in each year is March 31, and the first annual servicing report
pursuant to Section 3.10 is March 31, 2004.
The Series referred to in Section 8.09 is the Series 2003-D
Subtrust.
Xxx-2-2
