SERVICING AGREEMENT
between
CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
Purchaser
FIRST NATIONWIDE MORTGAGE CORPORATION
Servicer
Dated as of __________, 1997
RESIDENTIAL MORTGAGE LOANS
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.............................................. 1
ARTICLE II
SERVICING
SECTION 2.1 Servicer to Act as Servicer.............................. 7
SECTION 2.2 Liquidation of Mortgage Loans............................ 10
SECTION 2.3 Collection of Mortgage Loan Payments..................... 12
SECTION 2.4 Establishment of and Deposits to
Custodial Account........................................ 12
SECTION 2.5 Permitted Withdrawals From Custodial
Account.................................................. 14
SECTION 2.6 Establishment of and Deposits to
Escrow Account........................................... 16
SECTION 2.7 Permitted Withdrawals From Escrow Account................ 17
SECTION 2.8 Payment of Taxes, Insurance and Other
Charges; Tax Contracts................................... 18
SECTION 2.9 Protection of Accounts................................... 18
SECTION 2.10 Maintenance of Hazard Insurance.......................... 19
SECTION 2.11 Maintenance of Mortgage Impairment
Insurance................................................ 21
SECTION 2.13 Inspections.............................................. 22
SECTION 2.14 Restoration of Mortgaged Property........................ 22
SECTION 2.15 Maintenance of PMI Policy, Claims........................ 23
SECTION 2.16 [Reserved]............................................... 24
SECTION 2.17 Title, Management and Disposition of
REO Property............................................. 24
SECTION 2.18 Permitted Withdrawals with Respect to
REO Property............................................. 26
SECTION 2.19 Real Estate Owned Reports................................ 26
SECTION 2.20 Reports Of Foreclosures and Abandonments................. 27
SECTION 2.21 Notification of Adjustments.............................. 27
SECTION 2.22 Notification of Maturity Date............................ 27
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ARTICLE III
PAYMENTS TO PURCHASER
SECTION 3.1 Remittances.............................................. 28
SECTION 3.2 Statements to Purchaser.................................. 29
SECTION 3.3 Advances by Servicer..................................... 30
ARTICLE IV
GENERAL SERVICING PROCEDURES
SECTION 4.1 Transfers of Mortgaged Property.......................... 30
SECTION 4.2 Satisfaction of Mortgages and Release
of Mortgage Files. ...................................... 32
SECTION 4.3 Servicing Compensation................................... 32
SECTION 4.4 Annual Statement as to Compliance........................ 33
SECTION 4.5 Annual Independent Public
Accountants' Servicing Report............................ 33
SECTION 4.6 Right to Examine Servicer Records........................ 33
ARTICLE V
SERVICER TO COOPERATE
SECTION 5.1 Provision of Information................................. 34
SECTION 5.2 Financial Statements; Servicing Facilities............... 34
ARTICLE VI
TERMINATION
SECTION 6.1 Agency Suspension........................................ 35
SECTION 6.2 Damages.................................................. 35
SECTION 6.3 Termination.............................................. 35
SECTION 6.4 Termination Without Cause................................ 35
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1 Possession of Servicing Files............................ 36
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ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT
SECTION 8.1 Indemnification.......................................... 38
SECTION 8.2 Limitation on Liability of Servicer
and Others............................................... 38
SECTION 8.3 Limitation on Assignment by Servicer..................... 39
SECTION 8.4 Assignment by Purchaser.................................. 40
SECTION 8.5 Merger or Consolidation of the
Servicer................................................. 40
SECTION 8.6 Successor to the Servicer................................ 41
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
SECTION 9.1 Due Organization and Authority........................... 42
SECTION 9.2 No Conflicts............................................. 43
SECTION 9.3 Ability to Perform....................................... 43
SECTION 9.4 No Litigation Pending.................................... 43
SECTION 9.5 No Consent Required...................................... 44
SECTION 9.6 Assistance............................................... 44
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SERVICER
SECTION 10.1 Due Organization and Authority........................... 44
SECTION 10.2 Ordinary Course of Business.............................. 45
SECTION 10.3 No Conflicts............................................. 45
SECTION 10.4 Ability to Service....................................... 45
SECTION 10.5 Ability to Perform....................................... 46
SECTION 10.6 No Litigation Pending.................................... 46
SECTION 10.7 No Consent Required...................................... 46
SECTION 10.8 No Untrue Information.................................... 46
SECTION 10.9 Reasonable Servicing Fee................................. 47
SECTION 10.10 Financial Statements..................................... 47
SECTION 10.11 Conflict of Interest..................................... 47
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ARTICLE XI
DEFAULT
SECTION 11.1 Events of Default........................................ 47
SECTION 11.2 Waiver of Defaults....................................... 49
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 Notices.................................................. 50
SECTION 12.2 Waivers.................................................. 50
SECTION 12.3 Entire Agreement Amendment............................... 51
SECTION 12.4 Execution: Binding Effect................................ 51
SECTION 12.5 Headings................................................. 51
SECTION 12.7 Relationship of Parties.................................. 51
SECTION 12.8 Severability of Provisions............................... 52
SECTION 12.9 Recordation of Assignments of Mortgage................... 52
SECTION 12.10 Exhibits................................................. 52
EXHIBITS
EXHIBIT 1 FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT 2 FORM OF CUSTODIAL ACCOUNT CERTIFICATION
EXHIBIT 3 FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT 4 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT 5 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
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SERVICING AGREEMENT
This Servicing Agreement (the "Servicing Agreement" or the
"Agreement") is entered into as of __________, 1997, by and between FIRST
NATIONWIDE MORTGAGE CORPORATION, a Delaware corporation (the "Servicer"), and
CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION, a Maryland corporation (the
"Purchaser").
WHEREAS, the Purchaser and California Federal Bank, A Federal Savings
Bank (the "Seller") entered into a Mortgage Loan Purchase and Warranties
Agreement dated as of __________, 1997 (the "Purchase Agreement"), pursuant to
which the Purchaser agreed to purchase from the Seller from time to time
certain Mortgage Loans (as defined in the Purchase Agreement) on a servicing
released basis; and
WHEREAS, the Purchaser desires to have the Servicer service the
Mortgage Loans, the Servicer desires to service and administer the Mortgage
Loans on behalf of the Purchaser, and the parties desire to provide the terms
and conditions of such servicing by the Servicer.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and for other good and valuable consideration, the
receipt and the sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Purchase Agreement. The
following terms are defined as follows:
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loan in the jurisdiction where the related Mortgaged Property is located.
"Ancillary Income" means all late charges, assumption fees, escrow
account benefits, reinstatement fees, prepayment penalties, ARM conversion fees
and optional insurance commissions and similar types of fees arising from or in
connection with any Mortgage Loan and collected from the related Mortgagor, to
the extent not otherwise payable to the Mortgagor under applicable law or
pursuant to the terms of the related Mortgage Note.
"Best's" means Best's Key Rating Guide.
"BIF" means The Bank Insurance Fund, or any successor thereto.
"Custodial Account" means the separate account or accounts created and
maintained pursuant to Section 2.4.
"Custodian's File" means, with respect to each Mortgage Loan,
originals of the documents pertaining to such Mortgage Loan set forth in
Section I of Exhibit A to the Purchase Agreement, and any additional documents
required to be included or added to the Custodian's File pursuant to this
Agreement or the Purchase Agreement.
"Condemnation Proceeds" means all awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
"Due Period" means with respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the Remittance
Date and ending on the first day of the month of the Remittance Date.
"Errors and Omissions Insurance Policy" means an errors and omissions
insurance policy to be maintained by the Servicer pursuant to Section 2.12.
"Escrow Account" means the separate account or accounts created and
maintained pursuant to Section 2.6.
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"Escrow Payment" means, with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, flood insurance premiums, earthquake insurance premiums, condominium
charges, and any other payments required to be escrowed by the Mortgagor with
the mortgagee pursuant to the Mortgage or any other document.
"Event of Default" means any one of the conditions or circumstances
enumerated in Section 11.1.
"FDIC" means The Federal Deposit Insurance Corporation, or any
successor thereto.
"Fidelity Bond" means a fidelity bond to be maintained by the Servicer
pursuant to Section 2.12.
"FNMA Guides" means the FNMA Sellers' Guide and the FNMA Servicers'
Guide and all amendments or additions thereto.
"Independent Directors" means the members of the Board of Directors of
the Purchaser who are not current employees or officers of the Purchaser or
current employees, officers or directors of the Seller or any affiliate of the
Seller. In addition, any members of the Board of Directors of the Purchaser
elected by holders of the preferred stock of the Purchaser, including the
Series A Preferred Shares, will be deemed to be "Independent Directors" for
purposes of approving actions requiring the approval of a majority of the
Independent Directors.
"Initial Closing Date" means _________, 1997, or such other date as is
mutually agreed upon by the parties to the Purchase Agreement.
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property to the extent not required to be released to a Mortgagor in
accordance with the terms of the related Mortgage Loan documents.
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"Investor Cut-off Date" means the 15th day (or if such 15th day is not
a Business Day, the first Business Day immediately following) of any month,
beginning with the Investor Cut-off Date on __________, 1997.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of such Mortgage Loan.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.
"Monthly Remittance Advice" means the monthly remittance advice, in
the form of Exhibit A annexed hereto, to be provided to the Purchaser pursuant
to Section 3.2.
"Mortgage File" means, with respect to each Mortgage Loan, the
Custodian's File and the Servicing File.
"Mortgage Impairment Insurance Policy" means a mortgage impairment or
blanket hazard insurance policy as described in Section 2.11.
"Nonrecoverable Advance" means any advance of principal and interest
previously made or proposed to be made in respect of a Mortgage Loan pursuant
to Section 3.3 which, in the good faith judgment of the Servicer, will not or,
in the case of a proposed advance of principal and interest, would not, be
ultimately recoverable from related Insurance Proceeds, Liquidation Proceeds or
otherwise. The determination by the Servicer that it has made a Nonrecoverable
Advance or that any proposed advance of principal and interest, if made, would
constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate delivered to the Purchaser.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant
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Treasurers or Assistant Secretaries of the Servicer, and delivered to the
Purchaser as required by this Agreement.
"OTS" means Office of Thrift Supervision, or any successor thereto.
"PMI Policy" means a policy of primary mortgage guaranty insurance
issued by a Qualified Insurer with respect to a Mortgage Loan.
"Prime Rate" means the prime rate announced to be in effect from time
to time as published as the average rate in The Wall Street Journal (Northeast
edition).
"Principal Prepayment" means any payment or other recovery of
principal on a Mortgage Loan which is received in advance of its scheduled Due
Date, excluding any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.
"Purchase Agreement" means the Mortgage Loan Purchase and Warranties
Agreement between the Purchaser and the Seller dated as of __________, 1997.
"Qualified Depository" means a depository the accounts of which are
insured by the FDIC through the BIF or the SAIF.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided, and approved as an
insurer by FNMA with respect to primary mortgage insurance.
"Remittance Date" means the 20th day (or if such 20th day is not a
Business Day, the first Business Day immediately following) of any month,
beginning with the first Remittance Date on , 1997.
"REO Property" means a Mortgaged Property acquired by the Servicer on
behalf of the Purchaser through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.17.
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"SAIF" means The Savings Association Insurance Fund, or any successor
thereto.
"Seller" means California Federal Bank, A Federal Savings Bank, a
federally chartered savings bank.
"Series A Preferred Shares" means the __% Noncumulative Preferred
Stock, Series A, par value $.01 per share, of the Purchaser.
"Servicer" means First Nationwide Mortgage Corporation, a Delaware
corporation.
"Servicer Employees" has the meaning set forth in Section 2.12.
"Servicing Advances" means all customary, reasonable and necessary
"out of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures, (c) the management and
liquidation of the Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage and (d) compliance with the obligations under
Section 2.8, (except with respect to any expenses incurred in connection with
procuring or transferring Tax Service Contracts, as provided therein).
"Servicing Agreement" means this agreement between the Purchaser and
the Servicer.
"Servicing Fee" means, with respect to each Mortgage Loan, the amount
of the annual fee the Purchaser shall pay to the Servicer, which shall, for a
period of one (1) full month, be equal to one-twelfth of the product of the
Servicing Fee Rate and (2) the Stated Principal Balance of such Mortgage Loan.
Such fee shall be payable monthly, computed on the basis of the same principal
amount and period in respect of which any related interest payment on a
Mortgage Loan is computed and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this
Agreement. The obligation of the Purchaser to pay the Servicing Fee with
respect to any Mortgage Loan is limit-
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ed to, and such Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation Proceeds, to
the extent permitted by Section 4.3) of the related Monthly Payment collected
by the Servicer, or as otherwise provided under Section 4.3.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the
rate specified in any Mortgage Loan Schedule with respect to such Mortgage
Loan.
"Servicing File" means, with respect to each Mortgage Loan, the files
retained by the Servicer consisting of the documents set forth in Section II of
Exhibit A to the Purchase Agreement pertaining to such Mortgage Loan and such
other documents held by the Servicer as is consistent with Accepted Servicing
Practices.
"Tax Service Contract" means a tax service contract with First
American Real Estate Tax Service, Inc., as described in Section 2.8 hereof
"Termination Fee" means the amount paid by the Purchaser to the
Servicer in the event of the Servicer's termination, without cause, as
servicer. Such fee shall equal the percentage amount set forth in Section 6.4
hereof of the then current aggregate unpaid principal balance of the related
Mortgage Loans.
ARTICLE II
SERVICING
SECTION 2.1 Servicer to Act as Servicer. From and after each Closing
Date for any purchase of Mortgage Loans by the Purchaser under the Purchase
Agreement, the Servicer, as an independent contractor, shall service and
administer the Mortgage Loans purchased by the Purchaser on such Closing Date,
and shall have full power and authority, acting alone, to do any and all things
in connection with such servicing and administration which the Servicer may
deem necessary or desirable, consistent with the terms of this Agreement and
with Accepted Servicing Practices. Except as set forth in this Agreement, the
Servicer shall service the Mortgage Loans in strict
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compliance with the servicing provisions related to the [FNMA MBS Program
(Special Servicing Option)] of the FNMA Guides. In the event of any conflict,
inconsistency or discrepancy between any of the servicing provisions of this
Agreement and any of the servicing provisions of the FNMA Guides, the
provisions of this Agreement shall control and be binding upon the Purchaser
and the Servicer.
Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse to
the Purchaser, provided, however, that unless the Servicer has obtained the
prior written consent of the Purchaser, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, defer or forgive the payment of principal or interest, reduce or
increase the outstanding principal balance (except for actual payments of
principal) or change the final maturity date on such Mortgage Loan. In the
event of any such modification which permits the deferral of interest or
principal payments on any Mortgage Loan, the Servicer shall, on the Business
Day immediately preceding the Remittance Date in any month in which any such
principal or interest payment has been deferred, deposit in the Custodial
Account from its own funds, in accordance with Section 2.4, the difference
between (a) such month's principal payment and one (1) month's interest at the
Mortgage Interest Rate on the unpaid principal balance of such Mortgage Loan
and (b) the amount paid by the Mortgagor. The Servicer shall be entitled to
reimbursement for such advances to the same extent as for all other advances
made pursuant to Section 2.5. Without limiting the generality of the foregoing,
the Servicer shall continue, and is hereby authorized and empowered, to execute
and deliver on behalf of itself and the Purchaser, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. If reasonably required by the Servicer,
the Purchaser shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable
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the Servicer to carry out its servicing and administrative duties under this
Agreement.
In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures (including collection procedures) and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account, giving due consideration to Accepted
Servicing Practices where such practices do not conflict with the requirements
of this Agreement, the FNMA Guides and the Purchaser's reliance on the
Servicer.
The Servicer shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Servicer
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Servicer shall be under no obligation to deal
with any Person with respect to this Agreement or the Mortgage Loans unless the
Servicer has been notified of such transfers as provided in this Section 2.1.
The Purchaser may sell and transfer, in whole or in part, any Mortgage Loan,
provided that no such sale and transfer shall be binding upon the Servicer
unless such transferee shall agree in writing in the form of the Assignment and
Assumption Agreement attached to the Purchase Agreement as Exhibit I, to be
bound by the terms of this Agreement and the Purchase Agreement, and an
executed copy of the same shall have been delivered to the Servicer. Upon
receipt thereof, the Servicer shall xxxx its books and records to reflect the
ownership of Mortgage Loans by such assignee, and the previous Purchaser shall
be released from its obligations hereunder with respect to the Mortgage Loans
so sold or transferred. The Servicer shall be required to remit all amounts
required to be remitted to the Purchaser hereunder to said transferee
commencing with the first Remittance Date falling after receipt of said copy of
the related Assignment and Assumption Agreement provided that the Servicer
receives said copy no later than five (5) Business Days immediately prior to
the first day of the month of the related Remittance Date. This Agreement shall
be binding upon and inure to the benefit of the Purchaser and the Servicer and
their permitted successors, assignees and designees.
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The Mortgage File retained by the Servicer pursuant to this Agreement
shall be appropriately marked and identified in the Servicer's computer system
to clearly reflect the sale of the related Mortgage Loan to the Purchaser. The
Servicer shall release from its custody the contents of any Mortgage File
retained by it only in accordance with this Agreement, or when such release is
required in connection with a repurchase of any such Mortgage Loan pursuant to
Section 8.3 of the Purchase Agreement.
The Servicer represents and warrants that it has, and covenants to
maintain, an internal quality control program that verifies, on a regular
basis, the existence and accuracy of the legal documents, credit documents,
property appraisals and underwriting decisions. The program must be capable of
evaluating and monitoring the overall quality of its loan production and
servicing activities. The program must ensure that the Mortgage Loans are
serviced in accordance with prudent mortgage banking practices and accounting
principles; guard against dishonest, fraudulent, or negligent acts; and guard
against errors and omissions by officers, employees, or other authorized
persons.
SECTION 2.2 Liquidation of Mortgage Loans. In the event that any
payment due under any Mortgage Loan and not postponed pursuant to Section 2.1
is not paid when the same becomes due and payable, or in the event the
Mortgagor fails to perform any other covenant or obligation under the Mortgage
Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such action as (1) the Servicer would take under similar
circumstances with respect to a similar mortgage loan held for its own account
for investment, (2) shall be consistent with Accepted Servicing Practices, (3)
the Servicer shall determine prudently to be in the best interest of Purchaser,
and (4) is consistent with any related PMI Policy. In the event that any
payment due under any Mortgage Loan is not postponed pursuant to Section 2.1
and remains delinquent for a period of ninety (90) days or more or any other
default continues for a period ninety (90) days or more beyond the expiration
of any grace or cure period (or such other period as is required by law in the
jurisdiction where the related Mortgaged Property is located), the Servicer
shall commence foreclosure proceedings in accordance with
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the FNMA Guides. In such connection, the Servicer shall from its own funds make
all necessary and proper Servicing Advances, provided, however, that the
Servicer shall not be required to expend its own funds in connection with any
foreclosure or towards the restoration or preservation of any Mortgaged
Property, unless it shall determine (a) that such preservation, restoration
and/or foreclosure will increase the proceeds of liquidation of the Mortgage
Loan to Purchaser after reimbursement to itself for such expenses and (b) that
such expenses will be recoverable by it either through Liquidation Proceeds (in
respect of which it shall have priority for purposes of withdrawals from the
Custodial Account pursuant to Section 2.5) or through Insurance Proceeds (in
respect of which it shall have similar priority).
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure, in the event the Servicer has reasonable cause
to believe that a Mortgaged Property is contaminated by hazardous or toxic
substances or wastes, or if the Purchaser otherwise requests an environmental
inspection or review of such Mortgaged Property to be conducted by a qualified
inspector, the Servicer shall cause the Mortgaged Property to be so inspected
at the expense of the Purchaser. Upon completion of the inspection, the
Servicer shall promptly provide the Purchaser with a written report of the
environmental inspection.
After reviewing the environmental inspection report, the Purchaser
shall determine how the Servicer shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental inspection report indicates that
the Mortgaged Property is contaminated by hazardous or toxic substances or
wastes and (b) the Purchaser directs the Servicer to proceed with foreclosure
or acceptance of a deed in lieu of foreclosure, the Servicer shall be
reimbursed for all reasonable costs associated with such foreclosure or
acceptance of a deed in lieu of foreclosure and any related environmental clean
up costs, as applicable, from the related Liquidation Proceeds, or if the
Liquidation Proceeds are insufficient to fully reimburse the Servicer, the
Servicer shall be entitled to be reimbursed from amounts in the Custodial
Account pursuant to Section 2.5 hereof and to the extent amounts in the
Custodial Account are insufficient to fully reimburse the Servicer, the
Servicer shall
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be entitled to be reimbursed by the Purchaser for such deficiencies (upon
presentation of evidence of such deficiency). In the event the Purchaser
directs the Servicer not to proceed with foreclosure or acceptance of a deed in
lieu of foreclosure, the Servicer shall be reimbursed for all Servicing
Advances made with respect to the related Mortgaged Property from the Custodial
Account pursuant to Section 2.5 hereof.
SECTION 2.3 Collection of Mortgage Loan Payments. Continuously from
the applicable Closing Date, the Servicer shall proceed diligently to collect
all payments due under each Mortgage Loan when the same shall become due and
payable and shall take special care in ascertaining and estimating Escrow
Payments and all other charges that will become due and payable with respect to
such Mortgage Loan and the related Mortgaged Property, to the end that the
installments payable by the Mortgagor will be sufficient to pay such charges as
and when they become due and payable.
SECTION 2.4 Establishment of and Deposits to Custodial Account. The
Servicer shall segregate and hold all funds collected and received pursuant to
the Mortgage Loans separate and apart from any of its own funds and general
assets and shall establish and maintain one or more Custodial Accounts, in the
form of time deposit or demand accounts, titled "First Nationwide Mortgage
Corporation, as trustee and custodian for Purchaser of Residential Mortgage
Loans, and various Mortgagors". The Custodial Account shall be established with
a Qualified Depository acceptable to the Purchaser. Any funds deposited in the
Custodial Account shall at all times be fully insured to the full extent
permitted under applicable law. Funds deposited in the Custodial Account may be
drawn on by the Servicer in accordance with Section 2.5. The creation of any
Custodial Account shall be evidenced by a certification in the form of Exhibit
2 hereto, in the case of an account established with the Servicer, or by a
letter agreement in the form of Exhibit 3 hereto, in the case of an account
held by a depository other than the Servicer. A copy of such certification or
letter agreement shall be furnished to the Purchaser and, upon request, to any
subsequent Purchaser.
The Servicer shall deposit in the Custodial Account within one
Business Day of receipt, and retain
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therein, the following collections received by the Servicer and payments made
by the Servicer after any Cutoff Date, other than payments of principal and
interest due on or before such Cut-off Date, or received by the Servicer prior
to such Cut-off Date but allocable to a period subsequent thereto:
(i) all payments on account of principal on the Mortgage
Loans, including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage;
(iii) all Liquidation Proceeds and any amount received with
respect to REO Property;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 2.10 (other than proceeds to be held in the
Escrow Account and applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with Section 2.14) and
Section 2.11;
(v) all Condemnation Proceeds which are not applied to the
restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with Section 2.14;
(vi) any amount required to be deposited in the Custodial
Account pursuant to Section 2.1, 2.9, 2.15, 2.17, 3.1, 3.3 or 4.2;
(vii) any amounts payable in connection with the repurchase of
any Mortgage Loan pursuant to Section 8.3 of the Purchase Agreement; and
(viii) any amounts required to be deposited by the Servicer
pursuant to Section 2.11 in connection with the deductible clause in any
blanket hazard insurance policy.
The foregoing requirements for deposit into the Custodial Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, Ancillary Income need not be deposited by the
Servicer into the Custodial Account. Any interest paid
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on funds deposited in the Custodial Account by the depository institution shall
accrue to the benefit of the Servicer and the Servicer shall be entitled to
retain and withdraw such interest from the Custodial Account pursuant to
Section 2.5.
SECTION 2.5 Permitted Withdrawals From Custodial Account. Subject to
Section 2.17 hereof, the Servicer shall, from time to time, withdraw funds from
the Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the
manner provided for in Section 3.1;
(ii) to pay to itself the Servicing Fee;
(iii) to reimburse itself for advances of the Servicer's funds
made pursuant to Section 3.3, the Servicer's right to reimburse itself
pursuant to this subclause (iii) being limited to amounts received on the
related Mortgage Loan which represent late payments of principal and/or
interest in respect of which any such advance was made, it being understood
that, in the case of any such reimbursement, the Servicer's right thereto
shall be prior to the rights of Purchaser, except that, where the Seller or
the Servicer is required to repurchase a Mortgage Loan pursuant to Section
8.3 of the Purchase Agreement or Section 4.2 of this Agreement,
respectively, the Servicer's right to such reimbursement shall be
subsequent to the payment to the Purchaser of the Repurchase Price pursuant
to such sections and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
(iv) to reimburse itself for unreimbursed Servicing Advances
(except to the extent reimbursed pursuant to Section 2.7), any accrued but
unpaid Servicing Fees and for unreimbursed advances of Servicer funds made
pursuant to Sections 2.15 or 2.17, the Servicer's right to reimburse itself
pursuant to this subclause (iv) with respect to any Mortgage Loan being
limited to related Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer from
the Mortgagor or otherwise relating to
14
the Mortgage Loan, it being understood that, in the case of any such
reimbursement, the Servicer's right thereto shall be prior to the rights of
the Purchaser except that, where the Seller or the Servicer is required to
repurchase a Mortgage Loan pursuant to Section 8.3 of the Purchase
Agreement or Section 4.2 of this Agreement, respectively, the Servicer's
right to such reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections and all other
amounts required to be paid to the Purchaser with respect to such Mortgage
Loan;
(v) to pay itself any interest earned on funds deposited in
the Custodial Account (all such interest to be withdrawn monthly not later
than each Remittance Date);
(vi) to retain a fee for any sale of REO Property equal to 1%
of the aggregate proceeds obtained in the sale of such REO Property, in
accordance with Section 2.17 of this Agreement;
(vii) to reimburse itself for any unreimbursed Monthly Advance
or Servicing Advance which is determined to be nonrecoverable after the
making of such advance, provided that the Servicer has furnished to the
Purchaser a certificate signed by two officers of the Servicer evidencing
the determination by the Servicer, in its reasonable opinion, that such
unreimbursed advance is nonrecoverable by the Servicer from Liquidation
Proceeds, Insurance Proceeds, Condemnation Proceeds or otherwise with
respect to a particular Mortgage Loan;
(viii) to pay to itself, with respect to each Mortgage Loan that
has been repurchased pursuant to Section 8.3 of the Purchase Agreement or
Section 4.2 of this Agreement, all amounts received thereon and not
distributed as of the date on which the related Repurchase Price is
determined (except to the extent that such amounts constitute part of the
Repurchase Price to be remitted to the Purchaser as contemplated by Section
8.3 of the Purchase Agreement); and
15
(ix) to clear and terminate the Custodial Account upon the
termination of this Agreement.
In the event that the Custodial Account is interest bearing, on each
Remittance Date, the Servicer shall withdraw all funds from the Custodial
Account except for those amounts which, pursuant to Section 3.1, the Servicer
is not obligated to remit on such Remittance Date. The Servicer may use such
withdrawn funds only for the purposes described in this Section 2.5.
SECTION 2.6 Establishment of and Deposits to Escrow Account. The
Servicer shall segregate and hold all funds collected and received pursuant to
a Mortgage Loan constituting Escrow Payments separate and apart from any of its
own funds and general assets and shall establish and maintain one or more
Escrow Accounts, in the form of time deposit or demand accounts. The Escrow
Account or Accounts shall be established with a Qualified Depositary, in a
manner which shall provide maximum available insurance thereunder. Funds
deposited in the Escrow Accounts may be drawn on by the Servicer in accordance
with Section 2.7. The creation of any Escrow Account shall be evidenced by a
certification in the form of Exhibit 4 hereto, in the case of an account
established with the Servicer, or by a letter agreement in the form of Exhibit
5 hereto, in the case of an account held by a depository other than the
Servicer. A copy of such certification shall be furnished to the Purchaser and,
upon request, to any subsequent Purchaser.
The Servicer shall deposit in the Escrow Account or Accounts within
one Business Day of receipt, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such items as
required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or
Condemnation Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property.
The Servicer shall make withdrawals from the Escrow Account only to
effect such payments as are re-
16
quired under this Agreement, as set forth in Section 2.7. The Servicer shall be
entitled to retain any interest paid on funds deposited in the Escrow Account
by the depository institution, other than interest on escrowed funds required
by law to be paid to the Mortgagor. To the extent required by law, the Servicer
shall pay from its own funds interest on escrowed funds to the Mortgagor
notwithstanding that the Escrow Account may be noninterest bearing or that
interest paid thereon is insufficient for such purposes.
SECTION 2.7 Permitted Withdrawals From Escrow Account. Withdrawals
from each Escrow Account may be made by the Servicer only:
(i) to effect timely payments of ground rents, taxes,
assessments, water rates, mortgage insurance premiums, condominium charges,
fire and hazard insurance premiums, flood insurance premiums, earthquake
insurance premiums or other items constituting Escrow Payments for the
related Mortgage;
(ii) to reimburse the Servicer for any Servicing Advance made
by the Servicer pursuant to Section 2.9 (except with respect to any
expenses incurred in procuring or transferring Tax Service Contracts) with
respect to a related Mortgage Loan, but only from amounts received on the
related Mortgage Loan which represent late collections of Escrow Payments
thereunder;
(iii) to refund to the related Mortgagor any funds found to be
in excess of the amounts required under the terms of the related Mortgage
Loan or applicable federal or state law or judicial or administrative
ruling;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in accordance with the
terms of the related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the related
Mortgaged Property in accordance with the procedures outlined in Section
2.14;
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(vi) to pay to the Servicer, or any Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow
Account; and
(vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
SECTION 2.8 Payment of Taxes, Insurance and Other Charges; Tax
Contracts. With respect to each Mortgage Loan, the Servicer shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates, sewer rents, and other charges, as applicable, which are or may
become a lien upon the Mortgaged Property and the status of PMI Policy premiums
and fire, hazard and other insurance coverage and shall obtain, from time to
time, all bills for the payment of such charges (including renewal premiums)
and shall effect payment thereof prior to the applicable penalty or termination
date, employing for such purpose deposits of the Mortgagor in the Escrow
Account which shall have been estimated and accumulated by the Servicer in
amounts sufficient for such purposes, as allowed under the terms of the
Mortgage. To the extent that a Mortgage does not provide for Escrow Payments,
the Servicer shall determine that any such payments relating to taxes or
maintaining insurance policies are made by the Mortgagor at the time they first
become due. The Servicer assumes full responsibility for the timely payment of
all such bills to the extent it has or should have notice of such bills and
shall effect timely payment of all such charges irrespective of each
Mortgagor's faithful performance in the payment of same or the making of the
Escrow Payments, and the Servicer shall make advances from its own funds to
effect such payments, such advances to be reimbursable to the same extent as
Servicing Advances.
The Servicer shall ensure that each of the Mortgage Loans shall be
covered by a Tax Service Contract which shall be assigned to the Purchaser or
the Purchaser's designee at the Servicer's expense in the event that the
Servicer is terminated as servicer of the related Mortgage Loan(s) hereunder.
To the extent that a Mortgage Loan does not have a Tax Service Contract, the
Purchaser shall procure a Tax Service Contract for such Mortgage Loan and the
Servicer shall reimburse the Pur-
18
chaser upon request for reasonable expenses incurred in connection therewith.
SECTION 2.9 Protection of Accounts. The Servicer may transfer the
Custodial Account or the Escrow Account to a different Qualified Depository
from time to time. Such transfer shall be made only upon obtaining the consent
of the Purchaser, which consent shall not be withheld unreasonably.
The Servicer shall bear any expenses, losses or damages sustained by
the Purchaser which may result from the fact that the Custodial Account and/or
the Escrow Account are not demand deposit accounts.
SECTION 2.10 Maintenance of Hazard Insurance. The Servicer shall cause
to be maintained for each Mortgage Loan hazard insurance such that all
buildings upon the Mortgaged Property are insured by a generally acceptable
insurer rated A:VI or better in the current Best's against loss by fire,
hazards of extended coverage and such other hazards as are required to be
insured pursuant to the FNMA Guides, in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of
the Mortgage Loan and (b) an amount such that the proceeds thereof shall be
sufficient to prevent the Mortgagor or the loss payee from becoming a
co-insurer.
If required by the Flood Disaster Protection Act of 1973, as amended,
each Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
in effect with a generally acceptable insurance carrier rated A:VI or better in
Best's in an amount representing coverage not less than the lesser of (i) the
outstanding principal balance of the related Mortgage Loan and (ii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. If at any time during the term of the Mortgage Loan, the
Servicer determines in accordance with applicable law and pursuant to the FNMA
Guides that a Mortgaged Property is located in a special flood hazard area and
is not covered by flood insurance or is covered in an amount less than the
amount required by the Flood Disaster Protection Act of 1973, as amended, the
Servicer
19
shall notify the related Mortgagor that the Mortgagor must obtain such flood
insurance coverage, and if said Mortgagor fails to obtain the required flood
insurance coverage within forty five (45) days after such notification, the
Servicer shall immediately purchase the required flood insurance on the
Mortgagor's behalf.
If a Mortgage is secured by a unit in a condominium project, the
Servicer shall verify that the coverage required of the owner's association,
including hazard, flood, liability, and fidelity coverage, is being maintained
in accordance with then current FNMA requirements, provided, however, that in
the alternative, the Servicer may elect to maintain single-interest (blanket)
coverage, at its own expense, in lieu of tracking insurance with respect to
individual condominium units.
The Servicer shall cause to be maintained on each Mortgaged Property
such other or additional insurance as may be required pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance, or pursuant to the requirements of any
primary mortgage guaranty insurer.
All policies required hereunder shall name the Servicer and its
successors and assigns as mortgagee and shall be endorsed with non-contributory
standard mortgagee clauses which shall provide for at least thirty (30) days'
prior written notice of any cancellation, reduction in amount or material
change in coverage.
The Servicer shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Servicer shall not accept any such insurance policies from insurance
companies unless such companies are rated A:VI or better in Best's and are
licensed to do business in the jurisdiction in which the Mortgaged Property is
located. The Servicer shall determine that such policies provide sufficient
risk coverage and amounts as required pursuant to the FNMA Guides, that they
insure the property owner, and that they properly describe the property
address. To the extent reasonably possible the Servicer shall furnish to the
Mortgagor a formal notice of expiration of any such insurance in sufficient
time for the Mortgagor to arrange for renewal coverage by the expira-
20
tion date, provided, however, that in the event that no such notice is
furnished by the Servicer, the Servicer shall ensure that replacement insurance
policies are in place in the required coverage and the Servicer shall be solely
liable for any losses in the event such coverage is not provided.
Pursuant to Section 2.4, any amounts collected by the Servicer under
any such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Servicer's normal servicing procedures as
specified in Section 2.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 2.5.
SECTION 2.11 Maintenance of Mortgage Impairment Insurance. In the
event that the Servicer or any subservicer of the Mortgage Loans shall obtain
and maintain a blanket policy insuring against losses arising from fire and
hazards covered under extended coverage on all of the Mortgage Loans, then, to
the extent such policy provides coverage in an amount equal to the amount
required pursuant to Section 2.10 and otherwise complies with all other
requirements of Section 2.10, it shall conclusively be deemed to have satisfied
its obligations as set forth in Section 2.10. Any amounts collected by the
Servicer under any such policy relating to a Mortgage Loan shall be deposited
in the Custodial Account subject to withdrawal pursuant to Section 2.5. Such
policy may contain a deductible clause, in which case, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 2.10, and there shall have been a loss which would have
been covered by such policy, the Servicer shall deposit in the Custodial
Account at the time of such loss the amount not otherwise payable under the
blanket policy because of such deductible clause, such amount to be deposited
from the Servicer's funds, without reimbursement therefor. Upon request of the
Purchaser, the Servicer shall cause to be delivered to the Purchaser a
certified true copy of such policy and a statement from the insurer thereunder
that such policy shall in no event be terminated or materially modified without
thirty days' prior written notice to the Purchaser.
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SECTION 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance. The Servicer shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("Servicer Employees"). Any such Fidelity Bond
and Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Servicer Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Servicer against
losses in connection with the release or satisfaction of a Mortgage Loan
without having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 2.12 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. The minimum coverage
under any such Fidelity Bond and Errors and Omissions Insurance Policy shall be
at least equal to the corresponding amounts required by FNMA in the FNMA
Mortgage-Backed Securities Selling and Servicing Guide. Upon the request of the
Purchaser, the Servicer shall cause to be delivered to the Purchaser a
certified true copy of such Fidelity Bond and Errors and Omissions Insurance
Policy and a statement from the surety and the insurer that such Fidelity, Bond
and Errors and Omissions Insurance Policy shall in no event be terminated or
materially modified without thirty (30) days' prior written notice to the
Purchaser. In the event that the surety or insurer charges the Servicer a fee
for providing such evidence, the Purchaser shall reimburse the Servicer for the
reasonable expense incurred by the Servicer in furnishing such evidence.
SECTION 2.13 Inspections. The Servicer shall inspect the Mortgaged
Property as often as deemed necessary by the Servicer to assure itself that the
value of the Mortgaged Property is being preserved. In addition, if any
Mortgage Loan is more than sixty (60) days delinquent, the Servicer immediately
shall inspect the Mortgaged Property and shall conduct subsequent inspections
in accordance with Accepted Servicing Practices or as may
22
be required by the primary mortgage guaranty insurer. The Servicer shall keep a
written report of each such inspection.
SECTION 2.14 Restoration of Mortgaged Property. The Servicer need not
obtain the approval of the Purchaser prior to releasing any Insurance Proceeds
or Condemnation Proceeds to the Mortgagor to be applied to the restoration or
repair of the Mortgaged Property if such release is in accordance with Accepted
Servicing Practices and the terms of this Agreement. At a minimum, the Servicer
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:
(i) the Servicer shall receive satisfactory independent
verification of completion of repairs and issuance of any required
approvals with respect thereto;
(ii) the Servicer shall take all steps necessary to preserve the
priority of the lien of the Mortgage, including, but not limited to
requiring waivers with respect to mechanics' and materialmen's liens;
(iii) the Servicer shall verify that the Mortgage Loan is not in
default; and
(iv) pending repairs or restoration, the Servicer shall place
the Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
If the Purchaser is named as an additional mortgagee, the Servicer is
hereby empowered to endorse any loss draft issued in respect of such a claim in
the name of the Purchaser.
SECTION 2.15 Maintenance of PMI Policy, Claims. The Servicer will
maintain or cause the related Mortgagor to maintain, in accordance with the
FNMA Guides, each PMI Policy to the extent such policy is in effect with
respect to a Mortgage Loan at the time of the sale of such Mortgage Loan to the
Purchaser, such policy to be maintained until such time as it may be released
in accordance with the FNMA Guides.
23
In connection with its activities as servicer, the Servicer agrees to
prepare and present, on behalf of itself and the Purchaser, claims to the
insurer under any PMI Policy in a timely fashion in accordance with the terms
of such PMI Policy and, in this regard, to take such action as shall be
necessary to permit recovery under any PMI Policy with respect to a defaulted
Mortgage Loan. Pursuant to Section 2.4, any amounts collected by the Servicer
under any PMI Policy shall be deposited in the Custodial Account, subject to
withdrawal pursuant to Section 2.5.
SECTION 2.16 [Reserved]
SECTION 2.17 Title, Management and Disposition of REO Property. In the
event that title to any Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or certificate of sale shall be taken in
the name of the Purchaser, or in the event the Purchaser is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be consistent with an
Opinion of Counsel obtained by the Servicer from any attorney duly licensed to
practice law in the state where the REO Property is located. The Person or
Persons holding such title other than the Purchaser shall acknowledge in
writing that such title is being held as nominee for the Purchaser.
The Servicer shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition and
sale. The Servicer, either itself or through an agent selected by the Servicer
and reasonably acceptable to the Purchaser, shall manage, conserve, protect and
operate the REO Property in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in the
same manner that similar property in the same locality as the REO Property is
managed. The Servicer shall attempt to sell the same (and may temporarily rent
the same for a period not greater than one (1) year, except as otherwise
provided below) on such terms and conditions as the Servicer deems to be in the
best interest of the Purchaser. The Servicer shall use
24
its best efforts to dispose of the REO Property as soon as practicable.
The Servicer shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements which are a part of such property,
liability insurance and, to the extent required and available under the Flood
Disaster Protection Act of 1973, as amended, flood insurance in the amount
required above.
The disposition of REO Property shall be carried out by the Servicer
at such price, and upon such terms and conditions, as the Servicer deems to be
in the best interests of the Purchaser. The proceeds of sale of the REO
Property shall be promptly deposited in the Custodial Account. As soon as
practicable thereafter the expenses of such sale shall be paid, the Servicer
shall retain a fee equal to 1% of the aggregate proceeds of the sale of such
REO Property pursuant to Section 2.5(vi), and the Servicer shall reimburse
itself pursuant to Section 2.5(iii) or 2.5(iv) hereof, as applicable, for any
related unreimbursed Servicing Advances, unpaid Servicing Fees and unreimbursed
advances made pursuant to this Section 2.17, and on the Remittance Date
immediately following the Due Period in which such sale proceeds are received
the net cash proceeds of such sale remaining in the Custodial Account shall be
distributed to the Purchaser; provided that such distribution shall, in any
event, be made within ninety (90) days from and after the closing of the sale
of such REO Property.
In addition to the Servicer's obligations set forth in this Section
2.17, the Servicer shall deliver written notice to the Purchaser whenever title
to any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure together with a copy of a broker's price opinion on the related
Mortgaged Property obtained by the Servicer on or prior to the date of such
acquisition. Notwithstanding anything to the contrary contained herein, the
Purchaser may, at the Purchaser's sole option, terminate the Servicer as
servicer of any such REO Property without payment of any Termination Fee with
respect thereto, provided that (i) the Purchaser gives the Servicer notice of
such termination within ten (10) Business Days of receipt of said written
notice from the
25
Servicer which termination shall be effective no more than thirty (30) days
from and after the date of said notice from the Purchaser and (ii) the Servicer
shall on the date said termination takes effect be reimbursed by Purchaser for
any unreimbursed advances of the Servicer's funds made pursuant to Section 3.2
and any unreimbursed Servicing Advances in each case relating to the Mortgage
Loan underlying such REO Property. In the event of any such termination, the
provisions of Section 8.6 hereof shall apply to said termination and the
transfer of servicing responsibilities with respect to such REO Property to the
Purchaser or its designee.
With respect to each REO Property, the Servicer shall deposit all
funds collected and received in connection in the operation of the REO Property
in the Custodial Account. The Servicer shall cause to be deposited on a daily
basis upon the receipt thereof in the Custodial Account all revenues received
with respect to the conservation and disposition of the related REO Property.
SECTION 2.18 Permitted Withdrawals with Respect to REO Property. For
so long as the Servicer is acting as servicer of any Mortgage Loan relating to
any REO Property, the Servicer shall withdraw funds on deposit in the Custodial
Account with respect to each related REO Property necessary, for the proper
operation, management and maintenance of the REO Property, including the cost
of maintaining any hazard insurance pursuant to Section 2.10 and the fees of
any managing agent acting on behalf of the Servicer. The Servicer shall make
monthly distributions on each Remittance Date to the Purchaser of the net cash
flow from the REO Property (which shall equal the revenues from such REO
Property net of the expenses described in Section 2.17 and of any reserves
reasonably required from time to time to be maintained to satisfy anticipated
liabilities for such expenses).
SECTION 2.19 Real Estate Owned Reports. For so long as the Servicer is
acting as servicer of any Mortgage Loan relating to any REO Property, the
Servicer shall furnish to the Purchaser on or before the 15th day of each month
a statement with respect to any REO Property covering the operation of such REO
Property for the previous month, the Servicer's efforts in connection with the
sale of such REO Property, any rental of such REO Property incidental to the
sale thereof for the previous
26
month and a liquidation report with respect to any Mortgaged Property for which
foreclosure sale was closed in the previous month or which was acquired by the
Purchaser in the previous month pursuant to a deed in lieu of foreclosure. That
statement shall be accompanied by such other information as the Purchaser shall
reasonably request.
SECTION 2.20 Reports Of Foreclosures and Abandonments. For so long as
the Servicer is acting as servicer of any Mortgage Loan relating to any REO
Property, following the foreclosure sale or abandonment of any Mortgaged
Property, the Servicer shall report such foreclosure or abandonment as required
pursuant to Section 6050J of the Code.
SECTION 2.21 Notification of Adjustments. With respect to each
Adjustable Rate Mortgage Loan, the Servicer shall adjust the Mortgage Interest
Rate on the related Interest Rate Adjustment Date and shall adjust the Monthly
Payment accordingly in compliance with the requirements of applicable law and
the related Mortgage and Mortgage Note. If, pursuant to the terms of the
Mortgage Note, another index is selected for determining the Mortgage Interest
Rate, the same index will be used with respect to each Mortgage Note which
requires a new index to be selected, provided that such selection does not
conflict with the terms of the related Mortgage Note. The Servicer shall
execute and deliver any and all necessary notices required under applicable law
and the terms of the related Mortgage Note and Mortgage regarding the Mortgage
Interest Rate and the Monthly Payment adjustments. The Servicer shall promptly
upon written request therefor, deliver to the Purchaser such notifications and
any additional applicable data regarding such adjustments and the methods used
to calculate implement such adjustments. Upon the discovery by the Servicer or
the Purchaser that the Servicer has failed to adjust a Mortgage Interest Rate
or a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage, the Servicer shall immediately deposit in the Custodial Account from
its own funds the amount of any interest loss caused the Purchaser thereby.
SECTION 2.22 Notification of Maturity Date. With respect to each
Mortgage Loan that is a fixed-rate Mortgage Loan, the Purchaser shall execute
and deliver to
27
the Mortgagor any and all necessary notices required under applicable law and
the terms of the related Mortgage Note and Mortgage regarding the maturity
date.
ARTICLE III
PAYMENTS TO PURCHASER
SECTION 3.1 Remittances. On each Remittance Date the Servicer shall
remit by wire transfer of immediately available funds to the Purchaser (a) all
amounts deposited in the Custodial Account as of the close of business on the
Investor Cut-off Date, except Principal Prepayments received on or after the
first day of the month in which the Remittance Date occurs which shall be
remitted to the Purchaser on the next following Remittance Date, plus (b) an
amount representing compensating interest (up to a maximum amount equal to the
aggregate Servicing Fee for the Mortgage Loans held by the Purchaser with
respect to such Mortgage Loans) which, when added to all amounts allocable to
interest received in connection with such Principal Prepayment equals thirty
(30) days' interest at the Mortgage Interest Rate net of the Servicing Fee Rate
on the amount of principal so prepaid (net of charges against or withdrawals
from the Custodial Account pursuant to Section 2.5), plus (c) all amounts, if
any, which the Servicer is obligated to distribute pursuant to Section 3.3 and
minus (d) any amounts attributable to Monthly Payments collected but due on a
Due Date or Dates subsequent to the first day of the month of the Remittance
Date, which amounts shall be remitted on the Remittance Date next succeeding
the Due Period for such amounts.
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Servicer shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one (1) percentage point, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the Servicer on the date such late payment is made and shall cover
the period commencing with and including the day following such second Business
Day and ending with the Business Day on
28
which such payment is made, exclusive of such Business Day; provided, however,
that in the event that the Servicer remits such amounts after 11:00 A.M. (New
York City time) on any day, such period shall include such day. Such interest
shall be remitted along with the distribution payable on the next succeeding
Remittance Date. The payment by the Servicer of any such interest shall not be
deemed an extension of time for payment or a waiver of any Event of Default by
the Servicer.
[The Servicer shall have the right to market products and services to
the Mortgagors and to retain any fees and other income associated therewith and
shall have no obligation to remit any of such income to the Purchaser.]
SECTION 3.2 Statements to Purchaser. Not later than the twentieth day
of each month, the Servicer shall furnish to the Purchaser or its designee a
listing of the outstanding Mortgage Loans, including with respect to each
Mortgage Loan: the Mortgage Loan number, the actual balance, the actual
paid-through dates and the Mortgage Interest Rate and principal and interest
payment, and with respect to Adjustable Rate Mortgage Loans, the next Interest
Rate Adjustment Date, Payment Adjustment Date, the Mortgage Interest Rate and
the principal and interest payment effective as of the next Interest Rate
Adjustment Date (if available), and shall furnish to the Purchaser manually a
Monthly Remittance Advice, with a trial balance report attached thereto, in the
form of Exhibit 1 annexed hereto as to the preceding remittance and the period
ending on the preceding Investor Cut-off Date.
In addition, not more than ninety (90) days after the end of each
calendar year, the Servicer shall furnish to each Person who was a Purchaser at
any time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.
Such obligation of the Servicer shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by
the Servicer pursuant to any requirements of the Code as from time to time are
in force.
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The Servicer shall prepare and file, with respect to each Mortgage
Loan, any and all tax returns, information statements or other filings required
to be delivered to any governmental taxing authority or to the Purchaser
pursuant to any applicable law with respect to the Mortgage Loans and the
transactions contemplated hereby. In addition, the Servicer shall provide the
Purchaser with such information concerning the Mortgage Loans as is necessary
for the Purchaser to prepare its federal income tax return as the Purchaser may
reasonably request from time to time.
SECTION 3.3 Advances by Servicer. On the Business Day immediately
preceding each Remittance Date, the Servicer shall deposit in the Custodial
Account from its own funds an amount equal to all Monthly Payments which were
due on the Mortgage Loans during the applicable Due Period and which were
delinquent at the close of business on the immediately preceding Investor
Cut-off Date or which were deferred pursuant to Section 2.1, provided that the
Servicer shall only be required to make such advances with respect to a
Mortgage Loan until such advances are, in the Servicer's good faith
determination as evidenced by an Officer's Certificate of the Servicer
delivered to the Purchaser on the Business Day next following the Investor
Cut-off Date on or prior to which said determination is or was made, deemed to
be a Nonrecoverable Advance. The Servicer's obligation to make such advances as
to any Mortgage Loan will continue through the earlier of (i) the disposition
of such Mortgage Loan and (ii) the date of foreclosure sale with respect to
such Mortgage Loan. Except as otherwise provided herein, the Servicer shall be
entitled to first priority reimbursement pursuant to Section 2.5 hereof for
principal and interest advances and for servicing advances from recoveries from
the related mortgagor or from all Liquidation Proceeds and other payments or
recoveries (including Insurance Proceeds and Condemnation Proceeds) with
respect to the related Mortgage Loan.
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ARTICLE IV
GENERAL SERVICING PROCEDURES
SECTION 4.1 Transfers of Mortgaged Property. The Servicer shall be
required to enforce any "due-on-sale" provision contained in any Mortgage or
Mortgage Note and to deny assumption by the person to whom the Mortgaged
Property has been or is about to be sold whether by absolute conveyance or by
contract of sale, whether or not the Mortgagor remains liable on the Mortgage
and the Mortgage Note. When the Mortgaged Property has been conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance, exercise its rights to accelerate the maturity of such Mortgage
Loan under the "due-on-sale" clause applicable thereto, provided, however, that
the Servicer shall not exercise such rights if prohibited by law from doing so
or if the exercise of such rights would impair or threaten to impair any
recovery under the related PMI Policy, if any.
If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, the Servicer, in the Purchaser's name,
shall, to the extent permitted by applicable law, enter into (i) an assumption
and modification agreement with the person to whom such Mortgaged Property has
been conveyed, pursuant to which such person becomes liable under the Mortgage
Note and the original Mortgagor remains liable thereon or (ii) in the event the
Servicer is unable under applicable law to require that the original Mortgagor
remain liable under the Mortgage Note and the Servicer has the prior consent of
the primary mortgagee guaranty insurer, a substitution of liability agreement
with the purchaser of the Mortgaged Property pursuant to which the original
Mortgagor is released from liability and the purchaser of the Mortgaged
Property is substituted as Mortgagor and becomes liable under the Mortgage
Note. In connection with any such assumption, neither the Mortgage Interest
Rate borne by the related Mortgage Note, the term of the Mortgage Loan nor the
outstanding principal amount of the Mortgage Loan shall be changed.
To the extent that any Mortgage Loan is assumable, the Servicer shall
inquire diligently into the creditworthiness of the proposed transferee, and
shall
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use the underwriting criteria for approving the credit of the proposed
transferee which are used by FNMA with respect to underwriting mortgage loans
of the same type as the Mortgage Loans. If the credit of the proposed
transferee does not meet such underwriting criteria, the Servicer diligently
shall, to the extent permitted by the Mortgage or the Mortgage Note and by
applicable law, accelerate the maturity of the Mortgage Loan.
SECTION 4.2 Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes, the Servicer shall notify the Purchaser in the Monthly
Remittance Advice as provided in Section 3.2, and may request the release of
any Mortgage Loan Documents from the Purchaser in accordance with this Section
4.2 hereof. The Servicer shall obtain discharge of the related Mortgage Loan as
of record within any related time limit required by applicable law.
If the Servicer satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Servicer otherwise prejudice any rights the Purchaser may have under the
mortgage instruments, upon written demand of the Purchaser, the Servicer shall
repurchase the related Mortgage Loan at the Repurchase Price by deposit thereof
in the Custodial Account within two (2) Business Days of receipt of such demand
by the Purchaser. Upon such repurchase, all funds maintained in the Escrow
Account with respect to such repurchased Mortgage Loan shall be transferred to
the Servicer. The Servicer shall maintain the Fidelity Bond and Errors and
Omissions Insurance Policy as provided for in Section 2.12 insuring the
Servicer against any loss it may sustain with respect to any Mortgage Loan not
satisfied in accordance with the procedures set forth herein.
SECTION 4.3 Servicing Compensation. As consideration for servicing the
Mortgage Loans hereunder, the Servicer shall withdraw the Servicing Fee with
respect to each Mortgage Loan from the Custodial Account pursuant to Section
2.5 hereof. Such Servicing Fee shall be payable monthly, computed on the basis
of the same principal amount and period in respect of which any
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related interest payment on a Mortgage Loan is computed. The Servicing Fee
shall be pro-rated when servicing is for less than one month. The obligation of
the Purchaser to pay, and the Servicer's right to withdraw, the Servicing Fee
is limited to, and the Servicing Fee is payable solely from, the interest
portion (including recoveries with respect to interest from Liquidation
Proceeds, to the extent permitted by Section 2.5) of such Monthly Payment
collected by the Servicer, or as otherwise provided under Section 2.5.
Additional servicing compensation in the form of Ancillary Income
shall be retained by the Servicer. The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.
SECTION 4.4 Annual Statement as to Compliance. The Servicer shall
deliver to the Purchaser, on or before March 31 each year beginning March 31,
1998, an Officer's Certificate, stating that (i) a review of the activities of
the Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (ii) the Servicer
has complied in all material respects with the provisions of Article II and
Article IV, and (iii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year or part thereof, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Servicer to cure such default.
SECTION 4.5 Annual Independent Public Accountants' Servicing Report.
On or before March 31 each year beginning March 31, 1998, the Servicer at its
expense shall cause a firm of independent public accountants (who may also
render other services to the Servicer or any affiliate thereof) which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Purchaser to the effect that such firm has, with respect to
the servicing operations of the Servicer, examined such operations in
accordance with the requirements of the Uniform Single Attestation Program
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for Mortgage Bankers and stating such firm's conclusions relating thereto.
SECTION 4.6 Right to Examine Servicer Records. The Purchaser, upon
reasonable notice, shall have the right to examine and audit any and all of the
books, records, or other information of the Servicer, whether held by the
Servicer or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or at such other times
as may be reasonable under applicable circumstances, upon reasonable advance
notice.
ARTICLE V
SERVICER TO COOPERATE
SECTION 5.1 Provision of Information. During the term of this
Agreement, the Servicer shall furnish to the Purchaser such periodic, special,
or other reports or information, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Purchaser or the
purposes of this Agreement. All such reports or information shall be provided
by and in accordance with all reasonable instructions and directions which the
Purchaser may give.
The Servicer shall execute and deliver all such instruments and take
all such action as the Purchaser may reasonably request from time to time, in
order to effectuate the purposes and to carry out the terms of this Agreement.
SECTION 5.2 Financial Statements; Servicing Facilities. In connection
with any proposed disposition of Mortgage Loans, the Purchaser may make
available to a prospective purchaser audited financial statements of the
Servicer for the most recently completed two (2) fiscal years for which such
statements are available. If it has not already done so, the Servicer shall
furnish promptly to the Purchaser or a prospective purchaser copies of the
statements specified above, provided, however, that prior to furnishing such
statements or information to any prospective purchaser, the Servicer may
require such prospective purchaser to execute a confidentiality agreement in
form reasonably satisfactory to it.
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The Servicer shall (and shall cause any subservicer hereunder to) make
available to the Purchaser or any prospective Purchaser a knowledgeable
financial or accounting officer for the purpose of answering questions with
respect to recent developments affecting the Servicer or the financial
statements of the Servicer (or such subservicer or the financial statements of
such subservicer), and to permit any prospective purchaser to inspect the
Servicer's (or such subservicer's) servicing facilities for the purpose of
satisfying such prospective purchaser that the Servicer has the ability to
service the Mortgage Loans as provided in this Agreement.
ARTICLE VI
TERMINATION
SECTION 6.1 Agency Suspension. Should the Servicer or any subservicer
of the Mortgage Loans at any time during the term of this Agreement have its
right to service temporarily or permanently suspended by FNMA or FHLMC or
otherwise cease to be an approved seller/servicer of conventional residential
mortgage loans for FNMA or FHLMC, then the Purchaser may immediately terminate
this Agreement and accelerate performance of the provisions of the Purchase
Agreement to require immediate transfer of the Servicing Rights.
SECTION 6.2 Damages. The Purchaser shall have the right at any time to
seek and recover from the Servicer any damages or losses suffered by it as a
result of any failure by the Servicer to observe or perform any duties,
obligations, covenants or agreements herein contained, or as a result of a
party's failure to remain an approved FNMA mortgage servicer.
SECTION 6.3 Termination. The respective obligations and
responsibilities of the Servicer shall terminate upon: (i) the later of the
final payment or other liquidation (or any advance with respect thereto) of the
last Mortgage Loan serviced by the Servicer or the disposition of all REO
Property serviced by the Servicer and the remittance of all funds due
hereunder; or (ii) by mutual consent of the Servicer and the Purchaser in
writing, unless earlier terminated pursuant to this Agreement.
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SECTION 6.4 Termination Without Cause. The Purchaser may, at its sole
option, upon not less than thirty (30) days' prior written notice to the
Servicer terminate any rights the Servicer may have hereunder with respect to
any or all of the Mortgage Loans, without cause, provided that the Servicer
shall have an additional period of not more than sixty (60) days from and after
the date of said notice from the Purchaser within which to effect the related
transfer of servicing, and provided further that as long as any Series A
Preferred Shares remain outstanding, the Purchaser shall not terminate, or
elect not to renew, any rights the Servicer may have hereunder with respect to
any or all of the Mortgage Loans without the approval of a majority of the
Independent Directors. Any such notice of termination shall be in writing and
delivered to the Servicer as provided in Section 12.1 of this Agreement. In the
event of such termination, the Servicer shall be entitled to a Termination Fee,
equal to 2.0% of the then current aggregate unpaid principal balance of the
related Mortgage Loans, provided, however, that the successor servicer is not
an Affiliate of the Servicer.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1 Possession of Mortgage Files. The contents of each
Mortgage File are and shall be held in trust by the Servicer for the benefit of
the Purchaser as the owner thereof. The possession of the Mortgage File by the
Servicer is at the will of the Purchaser for the sole purpose of servicing the
related Mortgage Loan, pursuant to this Agreement, and such retention and pos-
session by the Servicer is in its capacity as Servicer only and at the election
of the Purchaser. The Servicer shall release its custody of the contents of any
Mortgage File only in accordance with written instructions from the Purchaser
or other termination of the Servicer with respect to the related Mortgage
Loans, unless such release is required as incidental to the Servicer's
servicing of the Mortgage Loans pursuant to this Agreement, or is in connection
with a repurchase of any Mortgage Loan pursuant to Section 8.3 of the Purchase
Agreement or Section 4.2 of this Agreement.
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The Servicer shall be responsible for maintaining, and shall maintain,
a complete set of books and records for each Mortgage Loan which shall be
marked clearly to reflect the ownership of each Mortgage Loan by the Purchaser.
In particular, the Servicer shall maintain in its possession, available for
inspection by the Purchaser or its designee during normal business hours, and
shall deliver to the Purchaser or its designee upon reasonable notice, evidence
of compliance with all federal, state and local laws, rules and regulations,
and requirements of FNMA, including but not limited to documentation as to the
method used in determining the applicability of the provisions of the Flood
Disaster Protection Act of 1973, as amended, to the Mortgaged Property,
documentation evidencing insurance coverage and eligibility of any condominium
project for approval by FNMA and periodic inspection reports as required by
Section 2.13 and the FNMA Guides.
To the extent that original documents are not required for purposes of
realization of Liquidation Proceeds or Insurance Proceeds, documents maintained
by the Servicer may be in the form of optical disk image so long as the
Servicer complies with the requirements of the FNMA Guides.
The Servicer shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Servicer
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Servicer shall be under no obligation to deal
with any person with respect to this Agreement or the Mortgage Loans unless the
books and records show such person as the owner of the Mortgage Loan. The
Purchaser may, subject to the terms of this Agreement, sell or transfer one or
more of the Mortgage Loans. The Purchaser also shall advise the Servicer of the
transfer. Upon receipt of notice of the transfer, the Servicer shall xxxx its
books and records to reflect the ownership of the Mortgage Loans of such
assignee, and shall release the Purchaser from its obligations hereunder with
respect to the Mortgage Loans sold or transferred.
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ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT
SECTION 8.1 Indemnification. The Servicer agrees to indemnify and hold
the Purchaser harmless from any liability, claim, loss or damage (including,
without limitation, any reasonable legal fees, judgments or expenses relating
to such liability, claim, loss or damage) to the Purchaser directly or
indirectly resulting from the Servicer's failure to observe and perform any or
all of Servicer's duties, obligations, covenants, agreements, warranties or
representations contained in this Agreement or in the Purchase Agreement or the
Servicer's failure to comply with all applicable requirements with respect to
the transfer of servicing rights as set forth herein.
The Servicer shall notify the Purchaser as soon as reasonably possible
if a claim is made by a third party with respect to this Agreement.
SECTION 8.2 Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Purchaser for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Agreement or pursuant to the express written instructions of Purchaser, or for
errors in judgment, provided, however, that this provision shall not protect
the Servicer or any such person against any breach of warranties or
representations made herein, or failure to perform its obligations in material
compliance with any standard of care set forth in this Agreement, or any
liability which would otherwise be imposed by reason of any breach of the terms
and conditions of this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person with respect to
any matter arising hereunder. The Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
duties to service the Mortgage Loans in accordance with this Agreement and
which in its opinion may involve it in any expense or liability, provided,
however, that the Servicer may, with the prior written consent of the
38
Purchaser, undertake any such action which it may deem necessary or desirable
in respect to this Agreement and the rights and duties of the parties hereto.
In such event, the Servicer shall be entitled to reimbursement from the
Purchaser of the reasonable legal expenses and costs of such action.
SECTION 8.3 Limitation on Assignment by Servicer. Servicer shall not
(i) assign this Agreement or the servicing hereunder or (ii) delegate any
substantial part of its rights or duties hereunder without the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld or
conditioned provided that (a) any delegation of such rights or duties shall not
release the Servicer from its obligations hereunder and the Servicer shall
remain responsible hereunder for all acts and omissions of any delegee as if
such acts or omissions were those of the Servicer and (b) any such assignee or
designee shall satisfy the requirements for a successor or surviving Person set
forth in Section 8.5 and Section 8.6 hereof, and provided further, that, so
long as any Series A Preferred Shares remain outstanding, Purchaser's consent
to any assignment or delegation of all or a portion of the Servicer's
obligations hereunder to a third party not affiliated with the Seller shall
only be valid if given with the approval of a majority of the Independent
Directors. The Servicer shall notify the Purchaser in writing at least 30 days
prior to selling or otherwise disposing of all or substantially all of its
assets and receipt of such notice shall entitle the Purchaser to terminate this
Agreement except as set forth in Section 8.5 hereof.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Servicer and the Purchaser or
upon the determination that its duties hereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the Servicer. Any
such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Purchaser.
No such resignation shall become effective until a successor shall have assumed
the Servicer's responsibilities and obligations hereunder in the manner
provided in Section 8.6.
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Without in any way limiting the generality of this Section 8.3, in the
event that the Servicer shall assign this Agreement or the servicing
responsibilities hereunder or delegate its duties hereunder or any portion
thereof without (i) satisfying the requirements set forth herein or (ii) the
prior written consent of the Purchaser, then the Purchaser shall have the right
to terminate this Agreement as set forth in Section 6.4, without any payment of
any penalty or damages and without any liability whatsoever to the Servicer
(other than with respect to accrued but unpaid Servicing Fees and Servicing
Advances remaining unpaid) or any third party.
SECTION 8.4 Assignment by Purchaser. The Purchaser shall have the
right, without the consent of the Servicer, to assign, in whole or in part, its
interest under this Agreement with respect to some or all the Mortgage Loans,
and designate any person to exercise any rights of the Purchaser hereunder, by
executing an Assignment and Assumption Agreement substantially in the form of
Exhibit G to the Purchase Agreement, and the assignee or designee shall accede
to the rights and obligations hereunder of the Purchaser with respect to such
Mortgage Loans. All references to the Purchaser in this Agreement shall be
deemed to include assignee or designee. Notwithstanding the foregoing, at any
one time there shall not be more than fifteen (15) separate Purchasers under
this Agreement.
SECTION 8.5 Merger or Consolidation of the Servicer. The Servicer will
keep in full effect its existence, rights and franchises as a corporation under
the laws of the State of Delaware except as permitted herein, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of this Agreement, or any of the Mortgage Loans
and to perform its duties under this Agreement.
Any person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
40
parties hereto, anything herein to the contrary notwithstanding; provided,
however, that the successor or surviving Person shall be an institution whose
deposits are insured by FDIC or a company whose business includes the
origination and servicing of mortgage loans, shall be qualified to service
mortgage loans on behalf of FNMA or FHLMC and shall satisfy the requirements of
Section 8.6 with respect to the qualifications of a successor to the Servicer.
SECTION 8.6 Successor to the Servicer. Prior to termination of
Servicer's responsibilities and duties under this Agreement pursuant to
Sections 2.17, 6.4, 8.3 or 11.1, the Purchaser shall (i) succeed to and assume
all of the Servicer's responsibilities, rights, duties and obligations under
this Agreement, or (ii) appoint a successor having a tangible net worth of not
less than $30,000,000 and which shall succeed to all rights and assume all of
the responsibilities, duties and liabilities of the Servicer under this
Agreement prior to the termination of Servicer's responsibilities, duties and
liabilities under this Agreement. Any successor to the Servicer shall be a
FNMA- or FHLMC-approved servicer in good standing. In connection with such
appointment and assumption, the Purchaser may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree. In the event that the Servicer's duties,
responsibilities and liabilities under this Agreement should be terminated
pursuant to the aforementioned sections, the Servicer shall discharge such
duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the same
degree of diligence and prudence which it is obligated to exercise under this
Agreement, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The resignation or removal
of Servicer pursuant to the afore-mentioned Sections shall not become effective
until a successor shall be appointed pursuant to Article X hereof this Section
and shall in no event relieve the Servicer of the representations, warranties
and covenants made pursuant to and the remedies available to the Purchaser with
respect thereto, it being understood and agreed that the provisions of such
Article X shall be applicable to the Servicer notwithstanding any such
resignation or
41
termination of the Servicer, or the termination of this Agreement.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Servicer and to the Purchaser, an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement pursuant to Section 2.17, 6.4, 8.3 or 11.1
shall not affect any claims that the Purchaser may have against the Servicer
arising prior to any such termination or resignation.
The Servicer shall timely deliver to the successor the funds in the
Custodial Account and the Escrow Account and the Mortgage Files and related
documents and statements held by it hereunder and the Servicer shall account
for all funds. The Servicer shall execute and deliver such instruments and do
such other things all as may reasonably be required to more fully and
definitely vest and confirm in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer. The successor
shall make arrangements as it may deem appropriate to reimburse the Servicer
for amounts the Servicer actually expended pursuant to this Agreement which the
successor is entitled to retain hereunder and which would otherwise have been
recovered by the Servicer pursuant to this Agreement but for the appointment of
the successor servicer.
Upon a successor's acceptance of appointment as such, the Servicer
shall notify by mail the Purchaser of such appointment.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As of each Closing Date, the Purchaser warrants and represents to, and
covenants and agrees with, the Servicer as follows:
SECTION 9.1 Due Organization and Authority. The Purchaser is a
corporation duly organized, validly
42
existing and in good standing under the laws of the state of Maryland. The
Purchaser has the full corporate power and authority to execute and deliver
this Agreement and to perform in accordance herewith; the execution, delivery
and performance of this Agreement by the Purchaser and the consummation of the
transactions contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of the
Purchaser, and all requisite corporate action has been taken by the Purchaser
to make this Agreement valid and binding upon the Purchaser in accordance with
its terms.
SECTION 9.2 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions
of this Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Purchaser's charter or by-laws or any
legal restriction or any agreement or instrument to which the Purchaser is now
a party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which the Purchaser or its
property is subject.
SECTION 9.3 Ability to Perform. The Purchaser does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant made by it in this Agreement.
SECTION 9.4 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Purchaser, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Purchaser, or in
any material impairment of the right or ability of the Purchaser to carry on
its business substantially as now conducted, or which would draw into question
the validity of this Agreement or of any action taken or to be taken in
connection with the obligations of the Purchaser contemplated herein.
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SECTION 9.5 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Purchaser or, or compliance by the
Purchaser with, this Agreement as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 9.6 Assistance. To the extent reasonably possible, the
Purchaser shall cooperate with and assist the Servicer as requested by the
Servicer, in carrying out Servicer's covenants, agreements, duties and
responsibilities under the Purchase Agreement and in connection therewith shall
execute and deliver such papers, documents and instruments as may be necessary
and appropriate in furtherance thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SERVICER
As of each Closing Date, the Servicer warrants and represents to, and
covenants and agrees with, the Purchaser as follows:
SECTION 10.1 Due Organization and Authority. The Servicer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has full power and authority to conduct its
business as now being conducted and is licensed, qualified and in good standing
in each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the type
conducted by the Servicer, and in any event the Servicer is in compliance with
the laws of any such state to the extent necessary to ensure the enforceabili-
ty of the related Mortgage Loan in accordance with the terms of this Agreement;
the Servicer has the full corporate power and authority to execute and deliver
this Agreement and to perform in accordance herewith; the execution, delivery
and performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized;
this Agreement evidenc-
44
es the valid, legal, binding and enforceable obligation of the Servicer subject
to bankruptcy laws and other similar laws of general application affecting
rights of creditors and subject to the application of the rules of equity,
including those respecting the availability of specific performance, none of
which will materially interfere with the realization of the benefits provided
thereunder, regardless of whether such enforcement is sought in a proceeding in
equity or at law; and all requisite corporate action has been taken by the
Servicer to make this Agreement valid and binding upon the Servicer in
accordance with its terms.
SECTION 10.2 Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Servicer.
SECTION 10.3 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions
of this Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Servicer's charter of by-laws or any
legal restriction or any agreement or instrument to which the Servicer is now a
party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which the Servicer or its
property is subject, or impair the ability of the Purchaser to realize on the
Mortgage Loans, impair the value of the Mortgage Loans, or impair the ability
of the Purchaser to realize the full amount of any mortgage insurance benefit
accruing pursuant to this Agreement.
SECTION 10.4 Ability to Service. The Servicer is an approved
seller/servicer of conventional residential mortgage loans for FNMA, with the
facilities, procedures, and experienced personnel necessary for the sound
servicing of mortgage loans of the same type as the Mortgage Loans. The
Servicer is duly qualified, licensed, registered and otherwise authorized under
all applicable federal, state and local laws, and regulations, if applicable,
meets the minimum capital requirements set forth by the OTS or the FDIC, and is
in good standing to enforce, originate, sell mortgage loans to, and service
mortgage loans in the jurisdiction wherein
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the Mortgaged Properties are located for FNMA, and no event has occurred,
including but not limited to a change in insurance coverage, which would make
the Servicer unable to comply with FNMA eligibility requirements or which would
require notification to FNMA.
SECTION 10.5 Ability to Perform. The Servicer does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement.
SECTION 10.6 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Servicer, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Servicer, or in
any material impairment of the right or ability of the Servicer to carry on its
business substantially as now conducted, or which would draw into question the
validity of this Agreement or the Mortgage Loans or of any action taken or to
be taken in connection with the obligations of the Servicer contemplated
herein, or which would be likely to impair materially the ability of the
Servicer to perform under the terms of this Agreement.
SECTION 10.7 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of or compliance by the
Servicer with this Agreement or the servicing of the Mortgage Loans as
evidenced by the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained.
SECTION 10.8 No Untrue Information. Neither this Agreement nor any
statement, tape, diskette, form, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of fact or omits to state a
fact necessary to make the statements contained therein not misleading.
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SECTION 10.9 Reasonable Servicing Fee. The Servicer acknowledges and
agrees that the Servicing Fee represents reasonable compensation for performing
such services and that the entire Servicing Fee shall be treated by the
Servicer, for accounting and tax purposes, as compensation for the servicing
and administration of the Mortgage Loans pursuant to this Agreement.
SECTION 10.10 Financial Statements. The Servicer has delivered to the
Purchaser financial statements as to its last two complete fiscal years. All
such financial statements fairly present the pertinent results of operations
and changes in financial position for each of such periods and the financial
position at the end of each such period of the Servicer and its subsidiaries
and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as set
forth in the notes thereto. There has been no change in the business,
operations, financial condition, properties or assets of the Servicer since the
date of the Servicer's financial statements that would have a material adverse
effect on its ability to perform its obligations under this Agreement.
SECTION 10.11 Conflict of Interest. The Servicer agrees that it shall
service the Mortgage Loans hereunder solely with a view toward the interests of
the Purchaser, and without regard to the interests of the Seller or its other
affiliates.
ARTICLE XI
DEFAULT
SECTION 11.1 Events of Default. The following shall constitute an
Event of Default under this Agreement on the part of the Servicer:
(a) any failure by the Servicer to remit to the Purchaser any payment
required to be made under the terms of this Agreement which continues
unremedied for a period of five (5) Business Days after the date upon which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Purchaser; or
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(b) the failure by the Servicer duly to observe or perform in any
material respect any other of the covenants or agreements on the part of the
Servicer set forth in this Agreement which continues unremedied for a period of
thirty (30) days (except that such number of days shall be fifteen (15) in the
case of a failure to pay any premium for any insurance policy required to be
maintained under this Agreement) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Purchaser; or
(c) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for
a period of sixty (60) days; or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, bankruptcy, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
the Servicer or of or relating to all or substantially all of its obligations;
or
(e) the Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(f) the Servicer ceases to meet the qualifications of a FNMA or FHLMC
seller/servicer which continues unremedied for a period of thirty (30) days
after the date of such cessation; or
(g) the Servicer, without the consent of the Purchaser, attempts to
assign this Agreement or the servicing responsibilities hereunder or to
delegate any substantial part of its duties hereunder or any portion thereof;
or
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(h) the Servicer fails to maintain its license to do business or
service residential mortgage loans in any jurisdiction where the Mortgaged
Properties are located and such failure results in a material adverse effect on
the Mortgage Loans, the servicing of the Mortgage Loans, or the Purchaser's
rights with respect to the Mortgage Loans.
In each and every such case, so long as an Event of Default shall not
have been remedied, in addition to whatsoever rights the Purchaser may have at
law or equity to damages, including injunctive relief and specific performance,
the Purchaser, by notice in writing to the Servicer, may terminate without
compensation or reimbursement (other than Servicing Fees previously earned but
remaining unpaid and Servicing Advances remaining unreimbursed) all the rights
and obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof.
Upon receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the successor
appointed pursuant to Section 8.6. Upon written request from the Purchaser, the
Servicer shall prepare, execute and deliver any and all documents and other
instruments reasonably requested by the Purchaser, place in such successor's
possession all Mortgage Files (to the extent not properly delivered to the
Purchaser by the Servicer previously), and do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise, at the Servicer's sole
expense. The Servicer agrees to reasonably cooperate with the Purchaser and
such successor in effecting the termination of the Servicer's responsibilities
and rights hereunder, including, without limitation, the transfer to such
successor for administration by it of all cash amounts which shall at the time
be credited by the Servicer to the Custodial Account or Escrow Account or
thereafter received with respect to the Mortgage Loans.
SECTION 11.2 Waiver of Defaults. The Purchaser may waive any default
by the Servicer in the
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performance of its obligations hereunder and its consequences. Upon any such
waiver of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 Notices. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given upon the
delivery or mailing thereof, as the case may be, sent by registered or
certified mail, return receipt requested.
(a) If to Purchaser to:
California Federal Preferred
Capital Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention:
(b) If to Servicer to:
First Nationwide Mortgage
Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention:
SECTION 12.2 Waivers. Either the Servicer or the Purchaser may upon
consent of all parties, by written notice to the others:
(a) Waive compliance with any of the terms, conditions or covenants
required to be complied with by the others hereunder; and
50
(b) Waive or modify performance of any of the obligations of the
others hereunder.
The waiver by any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other subsequent breach.
SECTION 12.3 Entire Agreement Amendment. This Agreement and the
Purchaser Agreement constitute the entire agreement between the parties with
respect to servicing of the Mortgage Loans. This Agreement may be amended and
any provision hereof waived, but, only in writing signed by the party against
whom such enforcement is sought.
SECTION 12.4 Execution: Binding Effect. This Agreement may be executed
in one or more counterparts and by the different parties hereto on a separate
counter-parts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement. Subject to Sections 8.3 and 8.4, this Agreement shall inure to the
benefit of and be binding upon the Servicer and the Purchaser and their
respective successors and assigns.
SECTION 12.5 Headings. Headings of the Articles and Sections in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.
SECTION 12.6 Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations, rights
and remedies hereunder shall be determined in accordance with the substantive
laws of the State of California (without regard to conflicts of laws
principles), except to the extent preempted by Federal law.
SECTION 12.7 Relationship of Parties. Nothing herein contained shall
be deemed or construed to create a partnership or joint venture between the
parties. The duties and responsibilities of the Servicer shall be rendered by
it as an independent contractor and not as an agent of the Purchaser. The
Servicer shall have full control of all of its acts, doings, proceedings,
relating to or requisite in connection with the discharge of its duties and
responsibilities under this Agreement.
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SECTION 12.8 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
SECTION 12.9 Recordation of Assignments of Mortgage. The Servicer and
the Purchaser shall execute a blanket assignment of the Mortgages underlying
each Mortgage Loan (other than Co-op Loans) sold to the Purchaser pursuant to
the Purchase Agreement. Upon the written request of the Purchaser (whether due
to the proposed sale of any Mortgage Loan by the Purchaser or otherwise) or to
the extent deemed necessary by the Servicer in connection with servicing a
Mortgage Loan pursuant to the terms hereof, the Servicer shall promptly execute
individual Assignments of Mortgages and such Assignments of Mortgages shall be
recorded in all appropriate public offices for real property records in all the
counties or other comparable jurisdictions in which any or all of the related
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Purchaser
or the Purchaser's designee, but in any event, at the Servicer's expense for a
single recordation relating to each such Assignment of Mortgage in the event
recordation is either necessary under applicable law or requested by the
Purchaser at its sole option.
SECTION 12.10 Exhibits. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are integral parts of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date and year first above written.
CALIFORNIA FEDERAL PREFERRED
CAPITAL CORPORATION
(the Purchaser)
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
FIRST NATIONWIDE MORTGAGE
CORPORATION
(the Servicer)
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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