EXHIBIT 99.1
-------------------------------------------------------------------------------
CWABS, INC.
Depositor
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
CWABS REVOLVING HOME EQUITY LOAN TRUST,
SERIES 2004-M
the Trust
JPMORGAN CHASE BANK
Indenture Trustee
--------------------------------
SALE AND SERVICING AGREEMENT
Dated as of September 29, 2004
--------------------------------
REVOLVING HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 2004-M
-------------------------------------------------------------------------------
Table of Contents
Page
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. ............................................................................1
Section 1.02. Other Terms. . ..........................................................................1
Section 1.03. Rules of Construction. ..................................................................1
Section 1.04. Interest Calculations. ..................................................................2
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to Fund Advances Under Credit Line
Agreements. ..............................................................3
Section 2.02. Acceptance by Indenture Trustee. ........................................................6
Section 2.03. Representations, Warranties, and Covenants Regarding the Master Servicer. ...............8
Section 2.04. Representations and Warranties of the Sponsor Regarding the Mortgage Loans; Retransfer of
Certain Mortgage Loans. ..................................................9
Section 2.05. Covenants of the Depositor. ............................................................20
Section 2.06. Transfers of Mortgage Loans at Election of Transferor. .................................21
Section 2.07. Tax Treatment. .........................................................................22
Section 2.08. Representations and Warranties of the Depositor. .......................................22
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. The Master Servicer. ...................................................................23
Section 3.02. Collection of Certain Mortgage Loan Payments; Establishment of Accounts. ...............26
Section 3.03. Deposits to Payment Account. ...........................................................27
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses. .........................28
Section 3.05. Assumption and Modification Agreements. ................................................28
Section 3.06. Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans. .......29
Section 3.07. Indenture Trustee to Cooperate. ........................................................30
Section 3.08. Servicing Compensation; Payment of Certain Expenses by Master Servicer. ................31
Section 3.09. Annual Statement as to Compliance. .....................................................31
Section 3.10. Annual Servicing Report. ...............................................................32
Section 3.11. Access to Certain Documentation and Information Regarding the Mortgage Loans. ..........32
Section 3.12. Maintenance of Certain Servicing Insurance Policies. ...................................33
Section 3.13. Reports to the Securities and Exchange Commission. .....................................33
i
Section 3.14. Tax Treatment. .........................................................................33
Section 3.15. Information Required by the Internal Revenue Service Generally and Reports of Foreclosures
and Abandonments of Mortgaged Property. .................................33
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Servicing Certificate. .................................................................34
Section 4.02. Acknowledgement and Cooperation. .......................................................36
Section 4.03. Optional Advances of the Master Servicer. ..............................................37
Section 4.04. Statements to Noteholders. .............................................................37
ARTICLE V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01. Liability of the Sponsor, the Master Servicer, and the Depositor. ......................39
Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of, the Master Servicer or the
Depositor. ..............................................................39
Section 5.03. Limitation on Liability of the Master Servicer and Others. .............................39
Section 5.04. Master Servicer Not to Resign. .........................................................39
Section 5.05. Delegation of Duties. ..................................................................41
Section 5.06. Indemnification by the Master Servicer. ................................................41
ARTICLE VI
SERVICING TERMINATION
Section 6.01. Events of Servicing Termination. .......................................................41
Section 6.02. Indenture Trustee to Act; Appointment of Successor. ....................................43
Section 6.03. Notification to Noteholders and the Transferor. ........................................44
ARTICLE VII
TERMINATION
Section 7.01. Termination. .........................................................................45
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment. .............................................................................46
Section 8.02. Governing Law. .........................................................................46
Section 8.03. Notices. ..............................................................................46
Section 8.04. Severability of Provisions. ............................................................48
Section 8.05. Assignment. . ..........................................................................48
Section 8.06. Third-Party Beneficiaries. .............................................................48
Section 8.07. Counterparts. . ........................................................................48
Section 8.08. Effect of Headings and Table of Contents. ..............................................49
ii
EXHIBIT A - MORTGAGE LOAN SCHEDULE...................................................................A-1
EXHIBIT B - FORM OF CREDIT LINE AGREEMENT............................................................B-1
EXHIBIT C - LETTER OF REPRESENTATIONS................................................................C-1
EXHIBIT D - FORM OF REQUEST FOR RELEASE..............................................................D-1
EXHIBIT E - STANDARD & POOR'S GLOSSARY...............................................................E-1
ANNEX 1 DEFINITIONS.......................................................................XXX-1-1
ANNEX 2 ADOPTION ANNEX....................................................................XXX-2-1
iii
This SALE AND SERVICING AGREEMENT, dated as of September 29, 2004,
among CWABS, INC., as depositor, COUNTRYWIDE HOME LOANS, INC., as sponsor and
master servicer, CWABS REVOLVING HOME EQUITY LOAN TRUST, SERIES 2004-M, and
JPMORGAN CHASE BANK, as Indenture Trustee,
WITNESSETH THAT:
The parties agree as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
Unless the context requires a different meaning, capitalized terms
are used in this Agreement as defined in Annex 1.
Section 1.02. Other Terms.
Capitalized terms used in this Agreement that are not otherwise
defined have the meanings given to them in the Indenture. Defined terms that
are used only in one section or only in another definition may be omitted from
the list of defined terms in Annex 1. Defined terms used in this Agreement are
sometimes defined after their first use without a reference such as "(as
hereinafter defined)." Defined terms include, as appropriate, all genders and
the plural as well as the singular.
Section 1.03. Rules of Construction.
Except as otherwise expressly provided in this Agreement or unless
the context otherwise clearly requires:
(a) References to designated articles, sections, subsections,
exhibits, and other subdivisions of this Agreement, such as "Section 3.01(B),"
refer to the designated article, section, subsection, exhibit, or other
subdivision of this Agreement as a whole and to all subdivisions of the
designated article, section, subsection, exhibit, or other subdivision. The
words "herein," "hereof," "hereto," "hereunder," and other words of similar
import refer to this Agreement as a whole and not to any particular article,
section, exhibit, or other subdivision of this Agreement.
(b) Any term that relates to a document or a statute, rule, or
regulation includes any amendments, modifications, supplements, or any other
changes that may have occurred since the document, statute, rule, or
regulation came into being, including changes that occur after the date of
this Agreement.
(c) Any party may execute any of the requirements under this
Agreement either directly or through others, and the right to cause something
to be done rather than doing it directly shall be implicit in every
requirement under this Agreement. Unless a provision is
1
restricted as to time or limited as to frequency, all provisions under this
Agreement are implicitly available and things may happen from time to time.
(d) The term "including" and all its variations mean "including but
not limited to." Except when used in conjunction with the word "either," the
word "or" is always used inclusively (for example, the phrase "A or B" means
"A or B or both," not "either A or B but not both").
(e) A reference to "a thing" or "any of a thing" does not imply the
existence or occurrence of the thing referred to even though not followed by
"if any," and "any of a thing" is any and all of it. A reference to the plural
of anything as to which there could be either one or more than one does not
imply the existence of more than one (for instance, the phrase "the obligors
on a note" means "the obligor or obligors on a note"). "Until something
occurs" does not imply that it must occur, and will not be modified by the
word "unless." The word "due" and the word "payable" are each used in the
sense that the stated time for payment has past. The word indemnify is used to
include its dictionary sense of hold harmless. The word "accrued" is used in
its accounting sense, i.e., an amount paid is no longer accrued. In the
calculation of amounts of things, differences and sums may generally result in
negative numbers, but when the calculation of the excess of one thing over
another results in zero or a negative number, the calculation is disregarded
and an "excess" does not exist. Portions of things may be expressed as
fractions or percentages interchangeably.
(f) All accounting terms used in an accounting context and not
otherwise defined, and accounting terms partly defined in this Agreement, to
the extent not completely defined, shall be construed in accordance with
generally accepted accounting principles in the United States. To the extent
that the definitions of accounting terms in this Agreement are inconsistent
with their meanings under generally accepted accounting principles, the
definitions contained in this Agreement shall control. Capitalized terms used
in this Agreement without definition that are defined in the UCC are used in
this Agreement as defined in the UCC.
(g) In the computation of a period of time from a specified date to a
later specified date or an open-ended period, the word "from" or "beginning"
means "from and including," the word "after" means "from but excluding," the
words "to" or "until" mean "to but excluding," and the word "through" means
"to and including." Likewise, in setting deadlines or other periods, "by"
means "on or before." The words "preceding," "following," and words of similar
import, mean immediately preceding or following. References to a month or a
year refer to calendar months and calendar years.
(h) Any reference to the enforceability of any agreement against a
party means that it is enforceable, subject as to enforcement against the
party, to applicable bankruptcy, insolvency, reorganization, and other similar
laws of general applicability relating to or affecting creditors' rights and
to general equity principles.
Section 1.04. Interest Calculations.
All calculations of interest on the Asset Balance of a Mortgage Loan
under this Agreement are on a daily basis using a 365-day year. All
calculations of interest on the Notes
2
are on the basis of the actual number of days in an Interest Period and a year
of 360 days. The calculation of the Servicing Fee is on the basis of a 360-day
year consisting of twelve 30-day months. All dollar amounts calculated under
this Agreement are rounded to the nearest cent with one-half of one cent being
rounded down.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation
to Fund Advances Under Credit Line Agreements.
(a) Concurrently with the execution and delivery of this Agreement,
the Depositor hereby transfers to the Trust without recourse (subject to
Sections 2.02 and 2.04) all of its right, title, and interest in
(i) each Mortgage Loan, including its Asset Balance
(including all Additional Balances), the related Mortgage File, all
property that secures the Mortgage Loan, and all collections received
on it after the Cut-off Date (excluding payments due by the Cut-off
Date);
(ii) property that secured a Mortgage Loan that is acquired
by foreclosure or deed in lieu of foreclosure;
(iii) the Depositor's rights under the Purchase Agreement;
(iv) the Depositor's rights under the hazard insurance
policies;
(v) all rights under any guaranty executed in connection
with a Mortgage Loan;
(vi) all other assets included or to be included in the
Trust for the benefit of the Noteholders and the Credit Enhancer; and
(vii) all proceeds of the foregoing.
This transfer to the Trust is to the Owner Trustee, on behalf of the Trust,
and each reference in this Agreement to this transfer shall be construed
accordingly. In addition, by the Closing Date, the Depositor shall cause the
Credit Enhancer to deliver the Policy to the Indenture Trustee for the benefit
of the Noteholders.
(b) Reserved.
(c) Additional Balances; Future Fundings. Additional Balances shall
be part of the Asset Balance and are hereby transferred to the Trust on the
Closing Date pursuant to this Section 2.01, and therefore are part of the
Trust property. Neither the Owner Trustee nor the Trust nor the Indenture
Trustee assumes the obligation under any Credit Line Agreement that provides
for the funding of future advances to the mortgagor under it, and neither the
Trust nor the Owner Trustee nor the Indenture Trustee may fund these future
advances.
3
(d) Delayed Delivery. In connection with the transfer under Section
2.01(a) by the Depositor, the Depositor shall effect delivery of the Mortgage
Loan Schedule to the Trust and the Indenture Trustee by the Closing Date and
delivery of the Mortgage Files to the Trust, and the Trust shall deliver them
to the Indenture Trustee,
(i) no later than the Closing Date, with respect to no less
than 50% of the Mortgage Loans in each Loan Group,
(ii) no later than the twentieth day after the Closing Date,
with respect to no less than 40% of the Mortgage Loans in each Loan
Group in addition to those delivered on the Closing Date, and
(iii) within thirty days following the Closing Date, with
respect to the remaining Mortgage Loans.
(e) Substitution and Repurchase. If the Indenture Trustee does not
receive the Mortgage File for any Mortgage Loan as required by Section
2.01(e), that Mortgage Loan shall automatically be retransferred to the
Sponsor, subject to the conditions in Section 2.02(b) (as if that Mortgage
Loan were otherwise subject to these provisions). If a Transfer Deficiency
results, the Sponsor shall substitute an Eligible Substitute Mortgage Loan for
the related Mortgage Loan within five Business Days of notification of the
Transfer Deficiency by the Indenture Trustee or, if unable to effect this
substitution, deposit into the Collection Account the Transfer Deposit Amount
in immediately available funds equal to the Transfer Deficiency (or effect a
combination of substitution and deposit). This substitution or deposit shall
be accomplished in the manner specified in, and have the effect specified in,
Section 2.02(b) (as if the related Mortgage Loan were otherwise subject to
these provisions).
(f) Mark Records. The Sponsor hereby confirms to the Owner Trustee
and the Indenture Trustee that it has caused the portions of the Electronic
Ledgers relating to the Mortgage Loans to be clearly and unambiguously marked,
and has made the appropriate entries in its general accounting records, to
indicate that the Mortgage Loans have been transferred to the Trust at the
direction of the Depositor. The Master Servicer hereby confirms to the Owner
Trustee and the Indenture Trustee that it has clearly and unambiguously made
appropriate entries in its general accounting records indicating that those
Mortgage Loans constitute part of the Trust and are serviced by it on behalf
of the Trust in accordance with this Agreement.
(g) UCC Filings. The Depositor and the Trust agree (subject to
paragraph (i) below) to effect any actions and execute any documents necessary
to perfect and protect the Trust's, the Indenture Trustee's, the Noteholders',
and the Credit Enhancer's interests in each Cut-off Date Asset Balance and
Additional Balances and their proceeds, including filing all necessary
Continuation Statements for the UCC-1 Financing Statements filed in the State
of Delaware (which shall have been filed by the Closing Date) describing the
Cut-off Date Asset Balances and Additional Balances and naming the Depositor
as debtor and the Trust as secured party or naming the Trust as debtor and the
Indenture Trustee as secured party and any amendments to UCC-1 Financing
Statements required to reflect a change in the UCC or in the name or
organizational structure of the Depositor or the Trust or the filing of any
additional UCC-1
4
Financing Statements due to the change in the state of organization of the
Depositor or the Trust (within 30 days of any event necessitating the filing).
(h) Sponsor Rating Downgrade. If the long term senior unsecured
corporate debt rating of Countrywide Home Loans, Inc. falls below "BBB" by
Standard & Poor's or "Baa2" by Xxxxx'x, as promptly as practicable but in any
case within 90 days of the event, the Master Servicer shall, at its expense,
either
(x) request that the Indenture Trustee deliver to it the
original Assignment of Mortgage previously delivered to the Indenture
Trustee pursuant to Section 2.01(e) and then record the Assignment of
Mortgage in favor of the Indenture Trustee (which may be a blanket
assignment if permitted by applicable law) in the appropriate real
property or other records.
(y) deliver to the Indenture Trustee an Opinion of Counsel
addressed to the Indenture Trustee and the Credit Enhancer to the
effect that recording is not required to protect the Indenture
Trustee's interest in the related Mortgage Loan or, in case a court
should recharacterize the sale of the Mortgage Loans as a financing,
to perfect a first priority Security Interest in favor of the
Indenture Trustee in the related Mortgage Loan, which Opinion of
Counsel also shall be reasonably acceptable to each of the Rating
Agencies (as evidenced in writing) and the Credit Enhancer, or
(z) cause the MERS(R) System to indicate (and provide
evidence to the Indenture Trustee that it has done so) that the
Mortgage Loans have been assigned by the Trust to the Indenture
Trustee in accordance with this Agreement for the benefit of the
Noteholders and the Credit Enhancer by including (or deleting, in the
case of Mortgage Loans that are repurchased in accordance with this
Agreement) in the MERS computer files (a) the appropriate code that
identifies the Indenture Trustee in the field for identifying the
assignee and (b) the appropriate code that has been assigned to
identify the Notes to the MERS(R) System in the field "Pool Field"
identifying the Notes issued in connection with the Mortgage Loans.
(i) Sale Treatment. Notwithstanding the characterization of the Notes
as debt of the Transferor for federal, state, and local income and franchise
tax purposes, the transfer of the Mortgage Loans is a sale by the Sponsor to
the Depositor and by the Depositor to the Trust of all the Sponsor's and then
all the Depositor's interest in the Mortgage Loans and other property
described above. From the time the Notes are issued until such time as all or
a portion of the Notes are sold to one or more unaffiliated parties, the
Sponsor will report the transfer of the Mortgage Loans and the related
Additional Balances to the Depositor as a transfer of assets in exchange for
beneficial interests in the form of asset-backed securities and servicing
rights. If the transfer were to be characterized as a transfer for security
and not as a sale, however, then the Depositor hereby grants to the Trust a
Security Interest in all of the Depositor's right, title, and interest in the
Mortgage Loans whether existing now or in the future, all monies due or to
become due on the Mortgage Loans, and all their proceeds; and this Agreement
shall constitute a Security Agreement under applicable law.
5
Section 2.02. Acceptance by Indenture Trustee.
(a) On the Closing Date, the Custodian shall execute and deliver to
the Depositor, the Master Servicer, and the Sponsor (with a copy to the Credit
Enhancer) the Initial Certification pursuant to the Custodial Agreement. If
Mortgage Loans have been delivered after the Closing Date pursuant to Section
2.01(e), the Custodian shall execute and deliver to the Depositor, the Master
Servicer, and the Sponsor (with a copy to the Credit Enhancer) a Delay
Delivery Certification pursuant to the Custodial Agreement within the period
specified in the Custodial Agreement. Within 180 days after the Closing Date,
Custodian shall deliver to the Depositor, the Master Servicer, and the Sponsor
(with a copy to the Credit Enhancer) a Final Certification pursuant to the
Custodial Agreement. The Sponsor shall correct any defect noted in the Final
Certification within 90 days of its receipt.
(b) All interest of the Trust in the Mortgage Loan shall be
retransferred without recourse, representation, or warranty to the Sponsor and
the Asset Balance of the Mortgage Loan shall be deducted from the Loan Group
Balance of the related Loan Group on the next Business Day after the Transfer
Deposit Amount is deposited to the Collection Account and any other applicable
requirements are satisfied if
(i) the time to correct any defect in any Mortgage Loan noted on the
Final Certification has expired,
(ii) the Trust ever incurs any loss on any Mortgage Loan because any
document in its Mortgage File is defective, or
(iii) an Assignment of Mortgage to the Indenture Trustee has not been
recorded in accordance with Section 2.01(i) and the Mortgage Loan is not
registered on the MERS(R) System.
Interest accrued on the Asset Balance of the Mortgage Loan to the end of the
related Collection Period shall be the property of the Trust.
The Indenture Trustee shall determine if reducing the relevant Loan
Group Balance by the Asset Balance of the retransferred Mortgage Loan would
cause a Transfer Deficiency for the related Loan Group. If so, the Indenture
Trustee shall notify the Sponsor of the deficiency, and within five Business
Days after the retransfer the Sponsor shall either
(x) substitute an Eligible Substitute Mortgage Loan,
(y) deposit into the Collection Account an amount (the
"Transfer Deposit Amount") in immediately available funds equal to
the Transfer Deficiency, or
(z) do a combination of both (x) and (y) above.
The reduction or substitution and the actual payment of any Transfer Deposit
Amount shall be payment in full for the Mortgage Loan.
The Owner Trustee shall execute any documents of transfer presented
by the Sponsor, without recourse, representation, or warranty, and take any
other actions reasonably requested by the Sponsor to effect the transfer by
the Trust of the Defective Mortgage Loan pursuant to
6
this Section on receipt of any Eligible Substitute Mortgage Loan or notice
from a Servicing Officer to the effect that the Transfer Deposit Amount for a
Defective Mortgage Loan has been deposited into the Collection Account or, if
the related Transferor Interest is not reduced below the greater of the
related Minimum Transferor Interest and the related Required Transferor
Subordinated Amount as a result of the retransfer of a Defective Mortgage
Loan, as promptly as practicable following the transfer. The sole remedy of
the Noteholders, the Transferor, the Owner Trustee, the Indenture Trustee, and
the Credit Enhancer against the Sponsor for the transfer of a Defective
Mortgage Loan to the Trust is the Sponsor's obligation to accept a transfer of
a Defective Mortgage Loan and to either convey an Eligible Substitute Mortgage
Loan or to make a deposit of any Transfer Deposit Amount into the Collection
Account.
Promptly following the transfer of any Defective Mortgage Loan or
Eligible Substitute Mortgage Loan from or to the Trust pursuant to this
Section, the Master Servicer shall amend the Mortgage Loan Schedule, deliver
the amended Mortgage Loan Schedule to the Indenture Trustee, and make
appropriate entries in its general account records to reflect the transfer.
Following the retransfer, the Master Servicer shall appropriately mark its
records to indicate that it is no longer servicing the Mortgage Loan on behalf
of the Trust. The Sponsor shall appropriately mark its Electronic Ledger and
make appropriate entries in its general account records to reflect the
transfer promptly following the transfer.
Notwithstanding any other provision of this Section, a retransfer of
a Defective Mortgage Loan to the Sponsor pursuant to this Section that would
cause the Transferor Interest for the related Loan Group to be less than the
greater of the Minimum Transferor Interest for the related Loan Group and the
Required Transferor Subordinated Amount for the related Loan Group shall not
occur if either the Sponsor fails to convey an Eligible Substitute Mortgage
Loan or to deposit into the Collection Account any Transfer Deposit Amount
required by this Section with respect to the transfer of the Defective
Mortgage Loan.
(c) The Sponsor shall deliver to the Indenture Trustee any documents
required to be held by the Indenture Trustee in accordance with Section 2.01
with respect to any Eligible Substitute Mortgage Loans. The Master Servicer
shall determine the Transfer Deposit Amount in any Collection Period during
which the Sponsor substitutes Eligible Substitute Mortgage Loans and the
Sponsor shall deposit that amount in the Collection Account at the time of
substitution. All amounts received on the Eligible Substitute Mortgage Loans
during the Collection Period in which the circumstances giving rise to the
substitution occur shall not be a part of the Trust and shall not be deposited
by the Master Servicer in the Collection Account. All amounts received on a
removed Defective Mortgage Loan during the Collection Period in which the
circumstances giving rise to the substitution occur shall be a part of the
Trust and shall be deposited by the Master Servicer in the Collection Account.
An Eligible Substitute Mortgage Loan will be subject to the terms of this
Agreement in all respects when transferred to the Trust, and the Sponsor
hereby makes the representations, warranties, and covenants in Section 2.04
with respect to the Eligible Substitute Mortgage Loan as of the date of
substitution. The procedures applied by the Sponsor in selecting each Eligible
Substitute Mortgage Loan
7
shall not be materially adverse to the interests of the Indenture Trustee, the
Transferor, the Noteholders, or the Credit Enhancer.
(d) The Custodian shall retain possession of each Mortgage File on
behalf of the Indenture Trustee in accordance with the Custodial Agreement.
The Master Servicer shall promptly deliver to the Indenture Trustee the
originals of any other documents constituting the Mortgage File coming into
its possession on their execution or receipt. Any documents to be delivered to
the Indenture Trustee under this Agreement may be delivered to the Custodian
acting on behalf of the Indenture Trustee.
Section 2.03. Representations and Warranties Regarding the Master
Servicer.
The Master Servicer represents and warrants to the Indenture Trustee
and the Credit Enhancer that as of the Closing Date:
(i) The Master Servicer is a New York corporation, validly
existing and in good standing under the laws of the State of New
York, and has the corporate power to own its assets and to transact
the business in which it is currently engaged. The Master Servicer is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of its business
or any properties owned or leased by it requires such qualification
and in which the failure so to qualify would have a material adverse
effect on the business, properties, assets, or condition (financial
or other) of the Master Servicer.
(ii) The Master Servicer has the power and authority to
make, execute, deliver, and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery, and
performance of this Agreement. When executed and delivered, this
Agreement will constitute a valid and legally binding obligation of
the Master Servicer enforceable in accordance with its terms.
(iii) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau, or agency in connection with the
execution, delivery, performance, validity, or enforceability of this
Agreement, except for consents, licenses, approvals or
authorizations, or registrations or declarations that have been
obtained or filed, as the case may be, before the Closing Date.
(iv) The execution, delivery, and performance of this
Agreement by the Master Servicer will not violate any existing law or
regulation or any order or decree of any court applicable to the
Master Servicer or the certificate of incorporation or bylaws of the
Master Servicer, or constitute a material breach of any mortgage,
indenture, contract, or other agreement to which the Master Servicer
is a party or by which the Master Servicer may be bound.
(v) No litigation or administrative proceeding of or before
any court, tribunal, or governmental body is currently pending, or to
the knowledge of the Master Servicer threatened, against the Master
Servicer or any of its properties or with respect
8
to this Agreement, the Indenture, or the Notes that in the opinion of
the Master Servicer has a reasonable likelihood of resulting in a
material adverse effect on the transactions contemplated by the
Transaction Documents.
(vi) If any Mortgage Loan has been registered on the MERS(R)
System, the Master Servicer is a member of MERS in good standing.
The Master Servicer covenants that it will fully furnish, in
accordance with the Fair Credit Reporting Act and its implementing
regulations, accurate and complete information (i.e., favorable and
unfavorable) on its credit files for the related Mortgagor for each Mortgage
Loan to Equifax, Experian, and Trans Union Credit Information Company on a
monthly basis.
The representations, warranties, and covenants in this Section shall
survive the transfer of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representation, warrant, or covenant that materially and
adversely affects the interests of the Transferor, the Noteholders, or the
Credit Enhancer, the person discovering the breach shall give prompt notice to
the other parties and to the Credit Enhancer. The Master Servicer shall cure
in all material respects any breach of any representation, warranty, or
covenant within 90 days of becoming aware of it or, with the consent of a
Responsible Officer of the Indenture Trustee, any longer period specified in
the consent.
Section 2.04. Representations and Warranties of the Sponsor
Regarding the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor represents and warrants to the Indenture Trustee, the
Trust, and the Credit Enhancer that as of the Cut-off Date, unless
specifically stated otherwise:
(i) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution) this
Agreement constitutes a valid and legally binding obligation of the
Sponsor, enforceable against the Sponsor in accordance with its
terms.
(ii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), either
(A) the Purchase Agreement constitutes a valid
transfer to the Depositor of all right, title, and interest
of the Sponsor in the Mortgage Loans, all collections
received thereon after the Cut-off Date (excluding payments
due by the Cut-off Date), all proceeds of the Mortgage
Loans, and any funds from time to time deposited in the
Collection Account and in the Payment Account and all other
property specified in Section 2.01(a) or (b), as applicable,
and this Agreement constitutes a valid transfer to the Trust
of the foregoing property such that, on execution of this
Agreement, it is owned by the Trust free of all liens and
other encumbrances, and is part of the corpus of the Trust
conveyed to the Trust by the Sponsor, and upon payment for
the Additional Balances, the Purchase Agreement and this
Agreement will constitute a valid transfer to the Trust of
all right, title, and interest of the Sponsor in the
Additional
9
Balances, all monies due or to become due on them, all
proceeds of the Additional Balances, and all other property
specified in Section 2.01(a) relating to the Additional
Balances free of all liens and other encumbrances, or
(B) the Purchase Agreement or this Agreement, as
appropriate, constitutes a Grant of a Security Interest to
the Owner Trustee on behalf of the Trust in the property
described in clause (A) above and the Indenture constitutes
a Grant of a Security Interest to the Indenture Trustee in
the Collateral. The Indenture Trustee has a first priority
perfected Security Interest in the Collateral, subject to
the effect of Section 9-315 of the UCC with respect to
collections on the Mortgage Loans that are deposited in the
Collection Account in accordance with the next to last
paragraph of Section 3.02(b), and if this Agreement
constitutes the Grant of a Security Interest in the property
described in clause (A) above to the Trust, the Trust has a
first priority perfected Security Interest in the property,
subject to the same limitations. This Security Interest is
enforceable as such against creditors of and purchasers from
the Trust, the Depositor, and the Sponsor.
(iii) The Sponsor has not authorized the filing of and is
not aware of any financing statements against the Sponsor that
include a description of collateral covering the Collateral other
than any financing statement (A) relating to the Security Interests
granted to the Depositor, the Trust, or the Indenture Trustee under
the Indenture, (B) that has been terminated, or (C) that names the
Depositor, the Trust, or the Indenture Trustee as secured party.
(iv) As of the Closing Date, the information in the Mortgage
Loan Schedule for the Mortgage Loans is correct in all material
respects. As of the applicable date of substitution for an Eligible
Substitute Mortgage Loan, the information with respect to the
Eligible Substitute Mortgage Loan in the Mortgage Loan Schedule is
correct in all material respects. As of the date any Additional
Balance is created, the information as to the Mortgage Loan
identification number and the Additional Balance of that Mortgage
Loan reported for inclusion in the Mortgage Loan Schedule is correct
in all material respects.
(v) The Mortgage Loans have not been assigned or pledged,
and the Sponsor is their sole owner and holder free of any liens,
claims, encumbrances, participation interests, equities, pledges,
charges, or Security Interests of any nature, and has full authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the Mortgage Loans, to transfer them pursuant to the
Purchase Agreement.
(vi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the related Mortgage Note and the mortgage for each
Mortgage Loan have not been assigned or pledged, and immediately
before the sale of the Mortgage Loans to the Depositor, the Sponsor
was the sole owner and holder of the Mortgage Loan free of any liens,
claims, encumbrances, participation interests, equities, pledges,
charges, or Security Interests of any nature, and has full
10
authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the Mortgage Loans, to transfer it
pursuant to the Purchase Agreement.
(vii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the related mortgage is a valid and subsisting first
or second lien on the property described in it, as shown on the
Mortgage Loan Schedule of the Mortgage Loans, and as of the Cut-off
Date or date of substitution, as applicable, the related Mortgaged
Property is free of all encumbrances and liens having priority over
the first or second lien, as applicable, of the mortgage except for
liens for
(A) real estate taxes and special assessments not
yet delinquent;
(B) any first mortgage loan secured by the
Mortgaged Property and specified on the Mortgage Loan
Schedule;
(C) covenants, conditions and restrictions, rights
of way, easements, and other matters of public record as of
the date of recording that are acceptable to mortgage
lending institutions generally; and
(D) other matters to which like properties are
commonly subject that do not materially interfere with the
benefits of the security intended to be provided by the
mortgage.
(viii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), no obligor has a valid offset, defense, or
counterclaim under any Credit Line Agreement or mortgage.
(ix) To the best knowledge of the Sponsor, as of the Closing
Date (or, with respect to any Eligible Substitute Mortgage Loan, the
applicable date of substitution), no related Mortgaged Property has
any delinquent recording or other tax or fee or assessment lien
against it.
(x) As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
proceeding is pending or, to the best knowledge of the Sponsor,
threatened for the total or partial condemnation of the related
Mortgaged Property, and the property is free of material damage and
is in good repair.
(xi) To the best knowledge of the Sponsor, as of the Closing
Date (or, with respect to any Eligible Substitute Mortgage Loan, the
applicable date of substitution), no mechanics' or similar liens or
claims have been filed for work, labor, or material affecting the
related Mortgaged Property that are, or may be, liens prior or equal
to the lien of the related mortgage, except liens that are fully
insured against by the title insurance policy referred to in clause
(xv).
(xii) No Minimum Monthly Payment on a Mortgage Loan being
transferred on the Closing Date is more than 59 days delinquent
(measured on a contractual basis) and no Minimum Monthly Payment on
any other Mortgage Loan subsequently being
11
transferred is more than 30 days delinquent (measured on a
contractual basis) on the relevant transfer date and for each Loan
Group no more than the applicable percentage of the Mortgage Loans in
that Loan Group specified in the Adoption Annex being transferred on
the Closing Date (by Cut-off Date Loan Balance) were 30-59 days
delinquent (measured on a contractual basis).
(xiii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), for each Mortgage Loan, the related Mortgage File
contains each of the documents specified to be included in it.
(xiv) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the related Mortgage Note and the related mortgage at
origination (a) complied in all material respects with applicable
state and federal laws, including all applicable predatory and
abusive lending laws, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, or
disclosure laws applicable to the Mortgage Loan, and the servicing
practices used by the Master Servicer with respect to each Mortgage
Loan have been consistent with the practices and the degree of skill
and care the Master Servicer exercises in servicing for itself loans
that it owns that are comparable to the Mortgage Loans; (b) no
Mortgage Loan is classified as (1) a "high cost" loan under the Home
Ownership and Equity Protection Act of 1994 or (2) a "high cost,"
"threshold," "covered," "predatory," or similar loan under any other
applicable state, federal, or local law that applies to mortgage
loans (or a similar classified loan using different terminology under
a law imposing heightened regulatory scrutiny or additional legal
liability for residential mortgage loans having high interest rates,
points, or fees); and (c) no Mortgage Loan is a High Cost Loan or
Covered Loan, as applicable, and no Mortgage Loan originated on or
after October 1, 2002 through March 6, 2003 is governed by the
Georgia Fair Lending Act; with respect to the foregoing subsection
(c), "High Cost Loan" and "Covered Loan" have the meaning assigned to
them in the Standard & Poor's LEVELS(R) Glossary attached as Exhibit
E (the "Glossary") where (x) a "High Cost Loan" is each loan
identified in the column "Category under applicable anti-predatory
lending law" of the table entitled "Standard & Poor's High Cost Loan
Categorization" in the Glossary as each such loan is defined in the
applicable anti-predatory lending law of the State or jurisdiction
specified in such table and (y) "Covered Loan" is each loan
identified in the column "Category under applicable anti-predatory
lending law" of the table entitled "Standard & Poor's Covered Loan
Categorization" in the Glossary as each such loan is defined in the
applicable anti-predatory lending law of the State of jurisdiction
specified in such table.
(xv) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), either a lender's title insurance policy or binder was
issued or a guaranty of title customary in the relevant jurisdiction
was obtained, on the date of origination of the Mortgage Loan being
transferred on the relevant date and each policy is valid and remains
in full force.
12
(xvi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as
part of the real estate under the laws of the jurisdiction in which
it is located.
(xvii) No more than the percentage specified in the Adoption
Annex of the Mortgage Loans in each Loan Group, by aggregate
principal balance of the related Mortgage Loans, are secured by
Mortgaged Properties located in one United States postal zip code.
(xviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Combined Loan-to-Value Ratio for each Mortgage
Loan in each Loan Group was not in excess of the percentage specified
in the Adoption Annex.
(xix) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), no selection procedure reasonably believed by the
Sponsor to be adverse to the interests of the Transferor, the
Noteholders, or the Credit Enhancer was used in selecting the
Mortgage Loans.
(xx) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Sponsor has not transferred the Mortgage Loans to
the Trust with any intent to hinder, delay, or defraud any of its
creditors.
(xxi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Minimum Monthly Payment with respect to any
Mortgage Loan is not less than the interest accrued at the applicable
Loan Rate on the average daily Asset Balance during the interest
period relating to the date on which the Minimum Monthly Payment is
due.
(xxii) The Mortgage Notes constitute either "instruments" or
"general intangibles" as defined in the UCC. (xxiii) By the Closing
Date (or, within 30 days of the applicable date of substitution with
respect to any Eligible Substitute Mortgage Loan), the Sponsor will
file UCC-1 financing statements in the proper filing office in the
appropriate jurisdiction to perfect the Security Interest in the
Collateral Granted under the Indenture.
(xxiv) The Mortgage Notes that constitute or evidence the
Collateral do not have any marks or notations indicating that they
have been pledged, assigned, or otherwise transferred to any person
other than the Depositor, the Trust, or the Indenture Trustee. All
financing statements filed or to be filed against the Sponsor in
favor of the Depositor, the Trust, or the Indenture Trustee in
connection with this Agreement, the Purchase Agreement, or the
Indenture describing the Collateral contain a statement to the
following effect: "A purchase of the Mortgage Loans included in the
collateral
13
covered by this financing statement will violate the rights of the
Depositor, the Trust, or the Indenture Trustee."
(xxv) As of the Closing Date, the Sponsor will have received
a written acknowledgement from the Custodian that is acting solely as
agent of the Indenture Trustee.
(xxvi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), each Credit Line Agreement and each Mortgage Loan is
an enforceable obligation of the related mortgagor.
(xxvii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), the Sponsor has not received a notice of default of
any senior mortgage loan related to a Mortgaged Property that has not
been cured by a party other than the Master Servicer.
(xxviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution) , the definition of "prime rate" in each Credit Line
Agreement relating to a Mortgage Loan does not differ materially from
the definition in the form of Credit Line Agreement in Exhibit B.
(xxix) The weighted average remaining term to maturity of
the Mortgage Loans in each Loan Group on a contractual basis as of
the Cut-off Date is approximately the number of months specified for
that Loan Group in the Adoption Annex. On each date that the Loan
Rates have been adjusted, interest rate adjustments on the Mortgage
Loans were made in compliance with the related mortgage and Mortgage
Note and applicable law. Over the term of each Mortgage Loan, the
Loan Rate may not exceed the related Loan Rate Cap. The Loan Rate Cap
for the Mortgage Loans ranges between the percentages specified in
the Adoption Annex for that Loan Group and the weighted average Loan
Rate Cap is approximately the percentage specified in the Adoption
Annex for that Loan Group. The Gross Margins for the Mortgage Loans
in each Loan Group range between the percentages specified in the
Adoption Annex for that Loan Group and the weighted average Gross
Margin is approximately the percentage specified in the Adoption
Annex for that Loan Group as of the Cut-off Date. The Loan Rates on
the Mortgage Loans in each Loan Group range between the percentages
specified in the Adoption Annex for that Loan Group and the weighted
average Loan Rate on the Mortgage Loans is approximately the
percentage specified in the Adoption Annex for that Loan Group. All
of the Mortgage Loans in the Loan Group specified in the Adoption
Annex were underwritten in conformity with Xxxxxx Xxx or Freddie Mac
maximum principal balance (by credit limit) guidelines.
(xxx) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), each Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
on it, or an individual condominium unit, planned unit development
unit, or townhouse.
14
(xxxi) No more than the percentage specified in the Adoption
Annex (by Cut-off Date Loan Balance) for each Loan Group of the
Mortgage Loans in the related Loan Group are secured by real property
improved by individual condominium units, units in planned unit
developments, townhouses or two-to-four family residences erected on
them, and at least the percentage specified in the Adoption Annex (by
Cut-off Date Loan Balance) for each Loan Group of the Mortgage Loans
in the related Loan Group are secured by real property with a
detached one-family residence erected on them;
(xxxii) The Credit Limits on the Mortgage Loans in each Loan
Group range between approximately the dollar amounts specified in the
Adoption Annex for that Loan Group with an average of approximately
the dollar amount specified in the Adoption Annex for that Loan
Group. As of the Cut-off Date, no Mortgage Loan in either Loan Group
had a principal balance in excess of approximately the dollar amount
specified in the Adoption Annex for that Loan Group and the average
principal balance of the Mortgage Loans in each Loan Group is equal
to approximately the dollar amounts specified in the Adoption Annex
for that Loan Group.
(xxxiii) Approximately the percentages specified in the
Adoption Annex of the Mortgage Loans, by aggregate principal balance
as of the Cut-off Date, are secured by first and second liens.
(xxxiv) As of the Closing Date, no more than the percentage
specified in the Adoption Annex for each Loan Group of the Mortgage
Loans in the related Loan Group, by aggregate principal balance, were
appraised electronically.
(xxxv) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), no default exists under any Mortgage Note or Mortgage
Loan and no event that, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a
default under any Mortgage Note or Mortgage Loan has occurred and
been waived. As of the Closing Date (or, with respect to any Eligible
Substitute Mortgage Loan, the applicable date of substitution), no
modifications to the Mortgage Notes and Mortgage Loans have been made
and not disclosed.
(xxxvi) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), each Mortgage Loan was originated in accordance with
the Sponsor's underwriting guidelines and the Sponsor had no
knowledge of any fact that would have caused a reasonable originator
of mortgage loans to conclude on the date of origination of each
Mortgage Loan that each such Mortgage Loan would not be paid in full
when due.
(xxxvii) To the best knowledge of the Sponsor at the time of
origination of each Mortgage Loan, no improvement located on or being
part of the Mortgaged Property was in violation of any applicable
zoning and subdivision laws or ordinances.
(xxxviii) As of the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, the applicable date of
substitution), any leasehold estate securing a
15
Mortgage Loan has a term of not less than five years in excess of the
term of the related Mortgage Loan.
(xxxix) Based on the drawn balances of the Mortgage Loans,
the Mortgage Loans had the characteristics set out in the Adoption
Annex for each Loan Group in respect of the following: weighted
average Combined Loan-to-Value Ratio; range of Combined Loan-to-Value
Ratios; percentage of primary residences; weighted average FICO
score; range of FICO scores; Weighted Average Net Loan Rate; range of
net Loan Rates; weighted average original stated term to maturity;
range of original term to maturity; range of remaining term to
maturity; average drawn balance; weighted average utilization ratio;
percentage of the Mortgage Loans which have their respective
Mortgaged Properties located in the top five states, measured by
aggregate drawn balances.
(xl) Any Mortgage Loan that has been modified in any manner
has been so modified in accordance with the policies and procedures
of the Master Servicer and in a manner that was permitted by the Sale
and Servicing Agreement, the Indenture, and any other Transaction
Document.
(xli) Each Mortgage Loan was originated (within the meaning
of Section 3(a)(41) of the Securities Exchange Act of 1934) by an
entity that satisfied at the time of origination the requirements of
Section 3(a)(41) of the Securities Exchange Act of 1934.
(xlii) At the time each Mortgage Loan was originated, the
Sponsor is an approved seller of conventional mortgage loans for
Xxxxxx Xxx and Freddie Mac and is a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Sections 203
and 211 of the National Housing Act.
(xliii) A lender's policy of title insurance together with a
condominium endorsement and extended coverage endorsement, if
applicable, in an amount at least equal to the principal balance of
the related Mortgage Loan as of the Cut-off Date or a commitment
(binder) to issue the same was effective on the date of the
origination of each Mortgage Loan, each such policy is valid and
remains in full force, and each such policy was issued by a title
insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located and acceptable to Xxxxxx Xxx and
Freddie Mac and is in a form acceptable to Xxxxxx Xxx and Freddie
Mac, which policy insures the Sponsor and successor owners of
indebtedness secured by the insured Mortgage, as to the first
priority lien, of the Mortgage subject to the exceptions in paragraph
(vii) above.
(xliv) At the Cut-off Date, the improvements on each
Mortgaged Property are covered by a valid and existing hazard
insurance policy with a generally acceptable carrier that provides
for fire and extended coverage and coverage for such other hazards as
are customary in the area where the Mortgaged Property is located in
an amount that is at least equal to the lesser of (i) the maximum
insurable value of the improvements securing the Mortgage Loan or
(ii) the greater of (a) the outstanding principal balance
16
of the Mortgage Loan and (b) an amount such that the proceeds of the
policy will be sufficient to prevent the Mortgagor or the mortgagee
from becoming a co-insurer. If the Mortgaged Property is a
condominium unit, it is included under the coverage afforded by a
blanket policy for the condominium unit. All such individual
insurance policies and all flood policies referred to in item (xlv)
below contain a standard mortgagee clause naming the Sponsor or the
original mortgagee, and its successors in interest, as mortgagee, and
the Sponsor has received no notice that any premiums due and payable
thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance, including flood insurance,
at the Mortgagor's expense, and upon the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such
insurance at the Mortgagor's expense and to seek reimbursement
therefor from the Mortgagor.
(xlv) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form
meeting the requirements of the current guidelines of the Flood
Insurance Administration is in effect with respect to the Mortgaged
Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the original
outstanding principal balance of the Mortgage Loan, (B) the minimum
amount required to compensate for damage or loss on a replacement
cost basis, or (C) the maximum amount of insurance that is available
under the Flood Disaster Protection Act of 1973.
(xlvi) Each Mortgage Note and the related Mortgage are
genuine, and each is the valid and legally binding obligation of its
maker, enforceable in accordance with its terms and under applicable
law, except that (a) its enforceability may be limited by bankruptcy,
insolvency, moratorium, receivership, and other similar laws relating
to creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. To the best of
the Sponsor's knowledge, all parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the
Mortgage and each Mortgage Note and Mortgage have been duly and
properly executed by such parties.
(xlvii) No Mortgage Loan has a shared appreciation feature,
or other contingent interest feature. (xlviii) To the best of the
Sponsor's knowledge, all of the improvements that were included for
the purpose of determining the appraised value of the Mortgaged
Property lie wholly within the boundaries and building restriction
lines of the Mortgaged Property, and no improvements on adjoining
properties encroach on the Mortgaged Property.
(xlix) To the best of the Sponsor's knowledge, all
inspections, licenses, and certificates required to be made or issued
with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including
17
certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities, unless their
lack would not have a material adverse effect on the value of the
Mortgaged Property, and the Mortgaged Property is lawfully occupied
under applicable law.
(l) Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of its holder adequate
for the realization against the Mortgaged Property of the benefits of
the security intended to be provided by it, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise by judicial foreclosure.
(li) Before the approval of the Mortgage Loan application,
an appraisal of the related Mortgaged Property was obtained from a
qualified appraiser, duly appointed by the Sponsor, who had no
interest, direct or indirect, in the Mortgaged Property or in any
loan secured by the Mortgaged Property, and whose compensation is not
affected by the approval or disapproval of the Mortgage Loan.
(lii) Except for (A) payments in the nature of escrow
payments, and (B) interest accruing from the date of the Mortgage
Note or date of disbursement of the Mortgage proceeds, whichever is
later, to the day that precedes by one month the Due Period of the
first installment of principal and interest and taxes and insurance
payments, the Sponsor has not advanced funds, or induced, solicited,
or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount
required by the Mortgage.
(liii) As of the Closing Date, no foreclosure proceedings
are pending against the Mortgaged Property and the Mortgage Loan is
not subject to any pending bankruptcy or insolvency proceeding.
(liv) There is no homestead exemption available and
enforceable that materially interferes with the right to sell the
related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage.
(lv) No Mortgage Loan is covered by the Home Ownership and
Equity Protection Act of 1994. (lvi) No Mortgage Loan originated on
or after October 1, 2002 and before March 7, 2003 is secured by
Mortgaged Property located in the State of Georgia.
(lvii) No proceeds from any Mortgage Loan were used to
finance single-premium credit insurance policies.
(lviii) No subprime Mortgage Loan originated on or after
October 1, 2002 will impose a prepayment premium after the third
anniversary of the Mortgage Loan. No subprime Mortgage Loan
originated before October 1, 2002, and no non-subprime Mortgage Loan,
will impose a prepayment penalty after the fifth anniversary of the
Mortgage Loan.
18
(lix) The servicer for each Mortgage Loan has fully
furnished, in accordance with the Fair Credit Reporting Act and its
implementing regulations, accurate and complete information (i.e.,
favorable and unfavorable) on its borrower credit files to Equifax,
Experian, and Trans Union Credit Information Company, on a monthly
basis.
(lx) The Mortgage Loans, individually and in the aggregate,
conform in all material respects to their descriptions in the
Prospectus Supplement.
(lxi) As of the Closing Date, no Mortgaged Property has been
damaged by the hurricanes that struck the southeastern United States
in August and September of 2004 in a manner that materially affects
the value of the Mortgaged Property. Any damage to a Mortgaged
Property occurring after the Closing Date as a result of the
hurricanes referred to in the preceding sentence or any other
hurricane, tornado, or casualty shall not result in a breach of this
representation and warranty.
If the substance of any representation and warranty in this Section
made to the best of the Sponsor's knowledge or as to which the Sponsor has no
knowledge is inaccurate and the inaccuracy materially and adversely affects
the interest of the Trust, the Noteholders or the Credit Enhancer in the
related Mortgage Loan then, notwithstanding that the Sponsor did not know the
substance of the representation and warranty was inaccurate at the time the
representation or warranty was made, the inaccuracy shall be a breach of the
applicable representation or warranty.
(b) The representations and warranties in this Section shall survive
delivery of the respective Mortgage Files to the Custodian pursuant to the
Custodial Agreement and the termination of the rights and obligations of the
Master Servicer pursuant to Section 5.04 or 6.02. If the Sponsor, the
Depositor, the Master Servicer, the Credit Enhancer, or a Responsible Officer
of the Indenture Trustee discovers a breach of any of the foregoing
representations and warranties, without regard to any limitation concerning
the knowledge of the Sponsor, that materially and adversely affects the
interests of the Trust, the Indenture Trustee under the Indenture, the
Noteholders, or the Credit Enhancer in the Mortgage Loan, the party
discovering the breach shall give prompt notice to the other parties and the
Credit Enhancer.
The Sponsor shall use all reasonable efforts to cure in all material
respects any breach (other than a breach of the representation and warranty in
Section 2.04(a)(v)) within 90 days of becoming aware of it or shall, not later
than the Business Day before the Payment Date in the month following the
Collection Period in which the cure period expired (or any later date that the
Indenture Trustee and the Credit Enhancer consent to), either (1) accept a
transfer of the Mortgage Loan from the Trust or (2) substitute an Eligible
Substitute Mortgage Loan in accordance with Section 2.02. The cure for any
breach of a representation and warranty relating to the characteristics of the
Mortgage Loans in the related Loan Group in the aggregate shall be a
repurchase of or substitution for only the Mortgage Loans necessary to cause
the characteristics to comply with the related representation and warranty.
Upon accepting the transfer and making any required deposit into the
Collection Account or substitution of an Eligible Substitute Mortgage Loan, as
the case may be, the Owner Trustee shall execute any documents of transfer
presented by the Sponsor, without recourse, representation, or warranty,
19
and take any other actions reasonably requested by the Sponsor to effect the
transfer by the Trust of the Mortgage Loans.
The sole remedy of the Noteholders, the Indenture Trustee on behalf
of Noteholders, the Owner Trustee, and the Credit Enhancer against the Sponsor
for the breach of a representation or warranty other than Section 2.04(a)(v)
is the Sponsor's obligation to accept a transfer of a Mortgage Loan as to
which a breach has occurred and is continuing and to make any required deposit
in the Collection Account or to substitute an Eligible Substitute Mortgage
Loan. If the representation and warranty in Section 2.04(a)(v) is breached,
the transfer of the affected Mortgage Loans to the Trust shall be void and the
Sponsor shall pay to the Trust the sum of (i) the amount of the related Asset
Balances, plus accrued interest on each Asset Balance at the applicable Loan
Rate to the date of payment and (ii) the amount of any loss or expense
incurred by the Transferor, the Noteholders, the Trust, or the Credit Enhancer
with respect to the affected Mortgage Loans. The Indenture Trustee may enforce
the Sponsor's obligations under this Section in its own right or as the owner
of the Trust's right to seek enforcement as the assignee of the Trust's rights
under this Agreement pursuant to the Indenture.
The Sponsor shall defend and indemnify the Indenture Trustee, the
Owner Trustee, the Credit Enhancer, and the Noteholders against all reasonable
costs and expenses, and all losses, damages, claims, and liabilities,
including reasonable fees and expenses of counsel and the amount of any
settlement entered into with the consent of the Sponsor (this consent not to
be unreasonably withheld), that may be asserted against or incurred by any of
them as a result of any third-party action arising out of any breach of a
representation and warranty.
Section 2.05. Covenants of the Depositor.
The Depositor covenants that:
(a) Security Interests. Except for the transfer under this Agreement,
the Depositor will not transfer any Mortgage Loan to any other person, or
create or suffer to exist any Lien on any Mortgage Loan or any interest in
one, whether existing now or in the future; the Depositor will notify the
Indenture Trustee of the existence of any Lien on any Mortgage Loan
immediately on its discovery; and the Depositor will defend the right, title,
and interest of the Trust in the Mortgage Loans, whether existing now or in
the future, against all claims of third parties claiming through the
Depositor. Nothing in this Section shall prohibit the Depositor from suffering
to exist on any Mortgage Loan any Liens for municipal or other local taxes and
other governmental charges if the taxes or governmental charges are not due at
the time or if the Depositor is contesting their validity in good faith by
appropriate proceedings and has set aside on its books adequate reserves with
respect to them.
(b) Negative Pledge. The Depositor shall not transfer or grant a
Security Interest in the Transferor Certificates except in accordance with
Section 3.10 of the Trust Agreement.
(c) Additional Indebtedness. So long as the Notes are outstanding the
Depositor will not incur any debt other than debt that (i) is non-recourse to
the assets of the Depositor other than the mortgage loans specifically pledged
as security for the debt, (ii) is subordinated in right
20
of payment to the rights of the Noteholders, or (iii) is assigned a rating by
each of the Rating Agencies that is the same as the then current rating of the
Notes.
(d) Downgrading. The Depositor will not engage in any activity that
would result in a downgrading of the Notes without regard to the Policy.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation or state of incorporation without prior
notice to the Rating Agencies, the Indenture Trustee, and the Credit Enhancer.
Section 2.06. Transfers of Mortgage Loans at Election of
Transferor.
Subject to the conditions below, the Transferor may require the
transfer of Mortgage Loans in a Loan Group from the Trust to the Transferor as
of the close of business on a Payment Date (the "Transfer Date"). In
connection with any transfer, the related Transferor Interest shall be reduced
by the aggregate Asset Balances as of their Transfer Date of the Mortgage
Loans transferred. On the fifth Business Day (the "Transfer Notice Date")
before the Transfer Date designated in the notice, the Transferor shall give
the Owner Trustee, the Indenture Trustee, the Master Servicer, and the Credit
Enhancer a notice of the proposed transfer that contains a list of the
Mortgage Loans to be transferred. These transfers of Mortgage Loans shall be
permitted if the following conditions are satisfied:
(i) No Rapid Amortization Event has occurred.
(ii) On the Transfer Date the Transferor Interest with
respect to the related Loan Group (after giving effect to the removal
of the Mortgage Loans proposed to be transferred) exceeds the greater
of the related Minimum Transferor Interest and the related Required
Transferor Subordinated Amount.
(iii) The transfer of any Mortgage Loans from either Loan
Group on any Transfer Date during the Managed Amortization Period
shall not, in the reasonable belief of the Transferor, cause a Rapid
Amortization Event to occur or an event that with notice or lapse of
time or both would constitute a Rapid Amortization Event.
(iv) By the Transfer Date, the Transferor shall have
delivered to the Indenture Trustee a revised Mortgage Loan Schedule,
reflecting the proposed transfer and the Transfer Date, and the
Master Servicer shall have marked the Electronic Ledger to show that
the Mortgage Loans transferred to the Transferor are no longer owned
by the Trust.
(v) The Transferor shall represent and warrant that the
Mortgage Loans to be removed from the Trust were selected randomly.
(vi) In connection with each transfer of Mortgage Loans
pursuant to this Section, each Rating Agency and the Credit Enhancer
shall have received by the related Transfer Notice Date notice of the
proposed transfer of Mortgage Loans and, before the Transfer Date,
each Rating Agency shall have notified the Transferor, the Indenture
Trustee, and the Credit Enhancer that the transfer of Mortgage Loans
would not result
21
in a reduction or withdrawal of its then current rating of the Notes
without regard to the Policy.
(vii) The Transferor shall have delivered to the Owner
Trustee, the Indenture Trustee, and the Credit Enhancer an Officer's
Certificate certifying that the items in subparagraphs (i) through
(vi), inclusive, have been performed or are true, as the case may be.
The Owner Trustee and the Indenture Trustee may conclusively rely on
the Officer's Certificate, shall have no duty to make inquiries with
regard to the matters in it, and shall incur no liability in so
relying.
Upon receiving the requisite information from the Transferor, the
Master Servicer shall perform in a timely manner those acts required of it, as
specified above. Upon satisfaction of the above conditions, on the Transfer
Date the Indenture Trustee shall effect delivery to the Transferor the
Mortgage File for each Mortgage Loan being so transferred, and the Indenture
Trustee shall execute and deliver to the Transferor any other documents
prepared by the Transferor reasonably necessary to transfer the Mortgage Loans
to the Transferor. This transfer of the Trust's interest in Mortgage Loans
shall be without recourse, representation, or warranty by the Indenture
Trustee or the Trust to the Transferor.
Section 2.07. Tax Treatment.
The Depositor and the Transferor intend that the Notes will be
indebtedness of the Transferor for federal, state, and local income and
franchise tax purposes and for purposes of any other tax imposed on or
measured by income. The Transferor and the Depositor agree to treat the Notes
for purposes of federal, state, and local income or franchise taxes and any
other tax imposed on or measured by income, as indebtedness of the Transferor
secured by the assets of the Trust and to report the transactions contemplated
by this Agreement on all applicable tax returns in a manner consistent with
this treatment. The Administrator pursuant to the Administration Agreement
will prepare and file all tax reports required under this Agreement on behalf
of the Trust.
Section 2.08. Representations and Warranties of the Depositor.
The Depositor represents and warrants to the Indenture Trustee on
behalf of the Noteholders and the Credit Enhancer as follows:
(i) This Agreement constitutes a valid and legally binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms.
(ii) Immediately before the sale and assignment by the
Depositor to the Trust of each Mortgage Loan, the Depositor was the
sole beneficial owner of each Mortgage Loan (insofar as the title was
conveyed to it by the Sponsor) subject to no prior lien, claim,
participation interest, mortgage, Security Interest, pledge, charge,
or other encumbrance or other interest of any nature.
(iii) As of the Closing Date, the Depositor has transferred
all right, title, and interest in the Mortgage Loans to the Trust
and, as of each applicable date of substitution, the Depositor has
transferred all right, title, and interest in the Eligible Substitute
Mortgage Loan to the Trust.
22
(iv) The Depositor has not transferred the Mortgage Loans to
the Trust with any intent to hinder, delay, or defraud any of its
creditors.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. The Master Servicer.
The Master Servicer shall service and administer the Mortgage Loans
in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through a subservicer, (i) to execute and deliver, on behalf of the
Noteholders, the Trust, and the Indenture Trustee, customary consents or
waivers and other instruments and documents, (ii) to consent to transfers of
any Mortgaged Property and assumptions of the Mortgage Notes and related
Mortgages (but only in the manner provided in this Agreement), (iii) to
collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) to
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan. The Master Servicer shall remain
responsible to the parties to this Agreement and the Credit Enhancer for its
obligations under this Agreement. Any amounts received by any subservicer on a
Mortgage Loan shall be considered to have been received by the Master Servicer
whether or not actually received by it. Without limiting the generality of the
foregoing, the Master Servicer may execute and deliver, on behalf of itself,
the Noteholders, and the Indenture Trustee, or any of them, any instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties, in each case to the extent not
inconsistent with this Agreement.
At the request of a Servicing Officer, the Indenture Trustee shall
furnish the Master Servicer with any powers of attorney and other documents
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties under this Agreement. The Master Servicer in this
capacity may also consent to the placing of a lien senior to that of any
mortgage on the related Mortgaged Property, if
(i) the new senior lien secures a mortgage loan that
refinances an existing first mortgage loan and
(ii) either
(a) the Loan-to-Value Ratio of the new mortgage
loan (without taking into account any closing costs that may
be financed by the new mortgage loan) is equal to or less
than the Loan-to-Value Ratio of the first mortgage loan to
be replaced (for purposes of calculating the Loan-to-Value
Ratio, the Valuation of the Mortgaged Property will be
measured by the lesser of (A) the Valuation of the Mortgaged
Property as of the Cut-off Date and (B) the Valuation of the
Mortgaged Property as of the date of the refinancing
referenced in clause (i)) or
23
(b) the Combined Loan-to-Value Ratio of the new
mortgage loan (without taking into account any closing costs
that may be financed by the new mortgage loan) and the
existing Mortgage Loan is equal to less than 70% (for
purposes of calculating the Combined Loan-to-Value Ratio,
the Valuation of the Mortgaged Property will be measured as
the lesser of (A) the Valuation of the Mortgage Loan as of
the Cut-off Date and (B) the Valuation of the Mortgage Loan
as of the date of the refinancing referenced in clause (i).
The aggregate Asset Balance of the Mortgage Loans with respect to which the
senior lien may be modified in accordance with clause (ii)(A) may not exceed
10% of the Original Note Principal Balance and clause (ii)(B) may not exceed
40% of the Original Note Principal Balance. The aggregate Asset Balance of all
the Mortgage Loans with respect to which the senior lien may be so modified
may not exceed 100% of the Original Note Principal Balance (this 100% referred
to as the "Increased Senior Lien Limitation").
The Master Servicer may also, without approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on Mortgage Loans
if
(i) new appraisals are obtained and the weighted average
Combined Loan-to-Value Ratios of the Mortgage Loans after giving
effect to the increase are less than or equal to the weighted average
Combined Loan-to-Value Ratios of the Mortgage Loans as of the Cut-off
Date and
(ii) the increases are consistent with the Master Servicer's
underwriting policies. In addition, the Master Servicer may increase
the Credit Limits on the Mortgage Loans having aggregate Asset
Balances of up to an additional 5.0% of the Original Note Principal
Balance, if
(w) the increase does not cause the Combined
Loan-to-Value Ratio of the Mortgage Loans in the related
Loan Group to exceed 80%,
(x) the increase in the Credit Limit of a Mortgage
Loan does not cause the Combined Loan-to-Value Ratio of the
Mortgage Loan to exceed 100%,
(y) the increase in the Credit Limit of a Mortgage
Loan does not cause the Combined Loan-to-Value Ratio of the
Mortgage Loan to increase by more than 25% (for example, a
Combined Loan-to-Value Ratio of 50% can be increased to 75%,
a Combined Loan-to-Value Ratio of 60% can be increased to
85%, and so forth), and
(z) the increase is consistent with the Master
Servicer's underwriting policies.
Furthermore, the Originator, without prior approval from the Rating
Agencies or the Credit Enhancer, may solicit mortgagors for a reduction in
Loan Rates. Loan Rates of Mortgage Loans in a Loan Group having Asset Balances
at the time of the proposed modification that aggregate over time not more
than 5.0% of the related Original Note Principal Balance may be subject to
reduction. If a mortgagor notifies the Originator or the Master Servicer that
it wants a
24
reduction in Loan Rate, the Originator shall purchase the Mortgage Loan from
the Trust Fund as described below. Effective immediately on the same Business
Day on which the Originator delivers the Purchase Price for the relevant
Mortgage Loan to the Master Servicer, all interest of the Trust in the
relevant Mortgage Loan shall automatically be transferred and assigned to the
Originator and all benefits and burdens of ownership of the relevant Mortgage
Loan, including the right to accrued interest on it from the date of purchase
and the risk of default on the Mortgage Loan, shall pass to the Originator.
The Master Servicer shall promptly deliver to the Indenture Trustee a
certification signed by a Servicing Officer to the effect that all of the
requirements for a purchase of a Mortgage Loan in connection with a request by
a mortgagor for a reduction in Loan Rate have been satisfied with respect to
the relevant Mortgage Loan. The Originator shall deliver the Purchase Price
for the relevant Mortgage Loan to the Master Servicer promptly after a
mortgagor notifies the Originator or the Master Servicer that it wants a
reduction in Loan Rate, and the Master Servicer shall deposit it in the
Collection Account pursuant to Section 3.02 within one Business Day. Upon
receipt by the Indenture Trustee of written notification of the deposit signed
by a Servicing Officer, the Indenture Trustee shall release to the Originator
the related Mortgage File and shall execute and deliver any instruments of
transfer or assignment delivered to it for execution and reasonably acceptable
to it, in each case without recourse, representation, or warranty, necessary
to release the Mortgage Loan from the lien of this Indenture and vest in the
Originator the Mortgage Loan previously transferred and assigned pursuant to
this provision. The certification and written notification of the deposit each
from a Servicing Officer may be delivered to the Indenture Trustee
electronically, and to the extent the transmission originates on its face from
a Servicing Officer, need not be manually signed.
In addition, the Master Servicer may agree to changes in the terms of
a Mortgage Loan at the request of the mortgagor if the changes (i) do not
materially and adversely affect the interests of Noteholders, the Transferor,
or the Credit Enhancer and (ii) are consistent with prudent and customary
business practice as evidenced by a certificate signed by a Servicing Officer
delivered to the Indenture Trustee and the Credit Enhancer.
In addition, the Master Servicer may solicit mortgagors to change any
other terms of the related Mortgage Loans if the changes (i) do not materially
and adversely affect the interests of the Noteholders, the Transferor, or the
Credit Enhancer and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing Officer delivered
to the Indenture Trustee and the Credit Enhancer. Nothing in this Agreement
shall limit the right of the Master Servicer to solicit mortgagors with
respect to new loans (including mortgage loans) that are not Mortgage Loans.
The Master Servicer may register any Mortgage Loan on the MERS(R)
System, or cause the removal from registration of any Mortgage Loan on the
MERS(R) System, and execute and deliver, on behalf of the Owner Trustee, any
instruments of assignment and other comparable instruments with respect to the
assignment or re-recording of a mortgage in the name of MERS, solely as
nominee for the Owner Trustee and its successors and assigns.
25
For so long as any Mortgage Loan is registered on the MERS(R) System,
the Master Servicer shall maintain in good standing its membership in MERS and
shall comply in all material respects with the rules and procedures of MERS in
connection with the servicing of the Mortgage Loans that are registered with
MERS. If any Mortgage Loans are registered on the MERS(R) System, the Master
Servicer may cause MERS to execute and deliver an assignment of mortgage in
recordable form to transfer any of the Mortgage Loans registered on the
MERS(R) System from MERS to the Owner Trustee. The Master Servicer shall
promptly notify MERS of any transfer of beneficial ownership or release of any
Security Interest in any MOM Loan.
The relationship of the Master Servicer to the Trust and the
Indenture Trustee under this Agreement is intended by the parties to be that
of an independent contractor and not that of a joint venturer, partner, or
agent of the Trust or the Indenture Trustee.
(b) If the rights and obligations of the Master Servicer are
terminated under this Agreement, any successor to the Master Servicer in its
sole discretion may terminate the existing subservicer arrangements with any
subservicer or assume the terminated Master Servicer's rights under those
subservicing arrangements to the extent permitted by applicable law and the
subservicing agreements.
Section 3.02. Collection of Certain Mortgage Loan Payments;
Establishment of Accounts.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the Mortgage Loans, and shall follow the collection
procedures it follows for mortgage loans in its servicing portfolio comparable
to the Mortgage Loans, to the extent consistent with this Agreement.
Consistent with the foregoing, and without limiting the generality of the
foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or any assumption fees or other fees that may be collected in
the ordinary course of servicing the Mortgage Loans and (ii) arrange with a
mortgagor a schedule for the payment of interest due and unpaid if the
arrangement is consistent with the Master Servicer's policies with respect to
the mortgage loans it owns or services. Notwithstanding any arrangement, the
Mortgage Loans will be included in the information regarding delinquent
Mortgage Loans in the Servicing Certificate and monthly statement to
Noteholders pursuant to Section 7.04 of the Indenture.
(b) The Master Servicer shall establish and maintain a trust account
(the "Collection Account") with the title specified in the Adoption Annex. The
Collection Account shall be an Eligible Account. The Master Servicer or the
Sponsor, as the case may be, shall deposit or cause to be deposited within two
Business Days following its receipt the following payments and collections
received or made by it (without duplication):
(1) all collections on the Mortgage Loans;
(2) the amounts deposited to the Collection Account
pursuant to Section 4.03;
(3) Net Liquidation Proceeds net of any related
Foreclosure Profit;
(4) Insurance Proceeds; and
(5) any amounts required to be deposited pursuant
to Section 7.01.
26
No other amounts are to be deposited to the Collection Account,
including amounts representing Foreclosure Profits, fees (including annual
fees) or late charge penalties payable by mortgagors, or amounts received by
the Master Servicer for the accounts of mortgagors for application towards the
payment of taxes, insurance premiums, assessments, excess pay off amounts, and
similar items. The Master Servicer shall remit all Foreclosure Profits to the
Sponsor. The Master Servicer may retain, from payments of interest on the
Mortgage Loans in each Loan Group in each Collection Period, the related
Servicing Fee for the Collection Period and any unreimbursed optional advance
with respect to the related Loan Group made by the Master Servicer pursuant to
Section 4.03.
On the Business Day before each Payment Date to the extent on deposit
in the Collection Account, the Master Servicer shall withdraw from the
Collection Account and remit to the Indenture Trustee, the amount to be
applied on the next Payment Date by the Indenture Trustee pursuant to Section
8.03 of the Indenture, and the Indenture Trustee will deposit that amount in
the Payment Account pursuant to the Indenture.
The Indenture Trustee shall hold amounts deposited in the Payment
Account as trustee for the Noteholders, the Transferor, and the Credit
Enhancer. In addition, the Master Servicer shall notify the Indenture Trustee
and the Credit Enhancer on each Determination Date of the amount of
collections in the Collection Account to be transferred to the Payment Account
and their allocation to Interest Collections and Principal Collections for the
Mortgage Loans in each Loan Group for the related Payment Date. Following this
notification, the Master Servicer may withdraw from the Collection Account and
retain any amounts that constitute income realized from the investment of the
collections. The Master Servicer will be entitled to receive, as additional
servicing compensation, income earned on the collections in the Payment
Account.
Amounts on deposit in the Collection Account will be invested in
Eligible Investments maturing no later than the day before the next Payment
Date at the direction of the Master Servicer. All income realized from any
investment in Eligible Investments of funds in the Collection Account shall be
the property of the Master Servicer and may be withdrawn from time to time
from the Collection Account. Any losses incurred on these investments that
reduce their principal amount shall be deposited in the Collection Account by
the Master Servicer out of its own funds immediately as realized.
Section 3.03. Deposits to Payment Account.
The Master Servicer shall
(i) on the Business Day before each of the first three
Payment Dates, deposit in the Payment Account any shortfall in the
amount required to pay the Note Interest on those Payment Dates for
each Class of Notes resulting solely from the failure of certain
Mortgage Loans to be fully indexed and
(ii) on the Business Day before the first Payment Date,
deposit in the Payment Account
(A) an amount for each Loan Group equal to the
excess of the aggregate amount payable pursuant to Sections
8.03(a)(i) and (ii) of the
27
Indenture for that Loan Group on the first Payment Date over
what the aggregate Investor Interest Collections for that
Loan Group would be if the Minimum Monthly Payments on the
related Mortgage Loans due during the first Collection
Period were made on each Mortgage Loan and
(B) for each Loan Group any amounts representing
payments on, and any collections in respect of, the Mortgage
Loans in each Loan Group received after the Cut-off Date and
before the Closing Date (exclusive of payments of accrued
interest due by the Cut-off Date).
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses.
The Master Servicer shall cause to be maintained for each Mortgage
Loan hazard insurance naming the Master Servicer or the related subservicer as
loss payee under it providing extended coverage in an amount that is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing the Mortgage Loan from time to time or (ii) the combined principal
balance owing on the Mortgage Loan and any mortgage loan senior to the
Mortgage Loan from time to time. The Master Servicer shall also maintain on
property acquired through foreclosure, or by deed in lieu of foreclosure,
hazard insurance with extended coverage in an amount which is at least equal
to the lesser of (i) the maximum insurable value from time to time of the
improvements that are a part of the property or (ii) the combined principal
balance owing on the Mortgage Loan and any mortgage loan senior to the
Mortgage Loan at the time of the foreclosure or deed in lieu of foreclosure
plus accrued interest and the good-faith estimate of the Master Servicer of
related Liquidation Expenses to be incurred.
Amounts collected by the Master Servicer under these policies shall
be deposited in the Collection Account to the extent called for by Section
3.02. The hazard insurance to be maintained for the related Mortgage Loan
shall include flood insurance when the Mortgaged Property is located in a
federally designated flood area. The flood insurance shall be in the amount
required under applicable guidelines of the Federal Flood Emergency Act. No
other insurance need be carried on any Mortgaged Properties pursuant to this
Agreement.
Section 3.05. Assumption and Modification Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
mortgagor, the Master Servicer shall exercise its right to accelerate the
maturity of the Mortgage Loan consistent with the then current practice of the
Master Servicer and without regard to the inclusion of the Mortgage Loan in
the Trust. If it elects not to enforce its right to accelerate or if it is
prevented from doing so by applicable law, the Master Servicer (so long as its
action conforms with the underwriting standards generally acceptable in the
industry at the time for new origination) may enter into an assumption and
modification agreement with the person to whom the Mortgaged Property has been
or is about to be conveyed, pursuant to which that person becomes liable under
the Credit Line Agreement and, to the extent permitted by applicable law, the
mortgagor remains liable on it. The Master Servicer shall notify the Indenture
Trustee that any assumption and modification agreement has been completed by
delivering to the Indenture Trustee an Officer's Certificate certifying that
the agreement is in compliance with this Section and by forwarding the
original copy of the assumption and
28
modification agreement to the Indenture Trustee. Any assumption and
modification agreement shall be a part of the related Mortgage File. No change
in the terms of the related Credit Line Agreement may be made by the Master
Servicer in connection with the assumption to the extent that the change would
not be permitted to be made in the original Credit Line Agreement pursuant to
Section 3.01(a). Any fee collected by the Master Servicer for entering into
the assumption and modification agreement will be retained by the Master
Servicer as additional servicing compensation.
Section 3.06. Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans.
The Master Servicer shall foreclose or otherwise comparably convert
to ownership Mortgaged Properties securing defaulted Mortgage Loans when, in
the opinion of the Master Servicer based on normal and usual practices and
procedures, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02. If the Master Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is
affected by hazardous or toxic wastes or substances and that the acquisition
of the Mortgaged Property would not be commercially reasonable, then the
Master Servicer will not cause the Trust to acquire title to the Mortgaged
Property in a foreclosure or similar proceeding. In connection with
foreclosure or other conversion, the Master Servicer shall follow the
practices and procedures it deems appropriate and that are normal and usual in
its general mortgage servicing activities, including advancing funds to
correct a default on a related senior mortgage loan. However, the Master
Servicer shall not be required to expend its own funds in connection with any
foreclosure or towards the correction of any default on a related senior
mortgage loan or restoration of any property unless it determines that the
expenditure will increase Net Liquidation Proceeds.
If title to any Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or certificate of sale shall be issued
to the Indenture Trustee, or to its nominee on behalf of Noteholders. The
Master Servicer shall dispose of the Mortgaged Property as soon as practicable
in a manner that maximizes its Liquidation Proceeds.
The Master Servicer, in its sole discretion, may purchase for its own
account from the Trust any Mortgage Loan that is 151 days or more delinquent.
The price for any Mortgage Loan purchased shall be 100% of its Asset Balance
plus accrued interest on it at the applicable Loan Rate from the date through
which interest was last paid by the related mortgagor to the first day of the
month in which the purchase price is to be distributed to the Noteholders. The
purchase price shall be deposited in the Collection Account. The Master
Servicer may only exercise this right on or before the penultimate day of the
calendar month in which the Mortgage Loan became 151 days delinquent. Any
delinquent Mortgage Loan that becomes current but thereafter again becomes 151
days or more delinquent may be purchased by the Master Servicer pursuant to
this Section.
Upon receipt of a certificate from the Master Servicer in the form of
Exhibit D, the Indenture Trustee shall release to the Master Servicer the
related Mortgage File and shall execute and deliver any instruments of
transfer prepared by the Master Servicer, without
29
recourse, necessary to vest in the purchaser of the Mortgage Loan any Mortgage
Loan released to it and the Master Servicer shall succeed to all the Trust's
interest in the Mortgage Loan and all related security and documents. This
assignment shall be an assignment outright and not for security. The Master
Servicer shall then own the Mortgage Loan, and all security and documents,
free of any further obligation to the Trust, the Owner Trustee, the Indenture
Trustee, the Credit Enhancer, the Transferor, or the Noteholders with respect
to it. The certification by the Master Servicer may be delivered to the
Indenture Trustee electronically, and if it is, its form may differ from
Exhibit D so long as it contains the information required by Exhibit D (that
is, the relevant loan number, at least one of the five reasons for requesting
file as found in Exhibit D, and the acknowledgment that the Mortgage File will
be held in accordance with the Sale and Servicing Agreement and will promptly
be returned to the Indenture Trustee when the need for it by the Master
Servicer no longer exists unless the Mortgage Loan has been liquidated or
retransferred), and to the extent the transmission originates on its face from
a Servicing Officer, need not be manually signed.
Section 3.07. Indenture Trustee to Cooperate.
By each Payment Date, the Master Servicer will notify the Indenture
Trustee whenever the Asset Balance of any Mortgage Loan has been paid in full
during the preceding Collection Period. A Servicing Officer shall certify that
the Mortgage Loan has been paid in full and that all amounts received in
connection with the payment that are required to be deposited in the
Collection Account pursuant to Section 3.02 have been so deposited or
credited. Upon payment in full pursuant to Section 3.01, the Master Servicer
is authorized to execute an instrument of satisfaction regarding the related
mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the person entitled
to it.
If the mortgage has been registered on the MERS(R) System, the Master
Servicer shall cause the removal of the mortgage from registration on the
MERS(R) System and execute and deliver, on behalf of the Indenture Trustee and
the Noteholders, any instruments of satisfaction or cancellation or of partial
or full release. No expenses incurred in connection with the instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account or the Payment Account.
As appropriate for the servicing or foreclosure of any Mortgage Loan,
or in connection with the payment in full of the Asset Balance of any Mortgage
Loan, upon request of the Master Servicer and delivery to the Indenture
Trustee of a Request for Release substantially in the form of Exhibit D signed
by a Servicing Officer, the Indenture Trustee shall release the related
Mortgage File to the Master Servicer and the Indenture Trustee shall execute
any documents provided by the Master Servicer necessary to the prosecution of
any proceedings or the taking of other servicing actions. The Request for
Release by a Servicing Officer may be delivered to the Indenture Trustee
electronically, and if it is, its form may differ from Exhibit D so long as it
contains the information required by Exhibit D (that is, the relevant loan
number, at least one of the five reasons for requesting file as found in
Exhibit D, and the acknowledgment that the Mortgage File will be held in
accordance with the Sale and Servicing Agreement and will promptly be returned
to the Indenture Trustee when the need for it by the Master Servicer no
30
longer exists unless the Mortgage Loan has been liquidated or retransferred),
and to the extent the transmission originates on its face from a Servicing
Officer, need not be manually signed. The Master Servicer shall return the
Mortgage File to the Indenture Trustee when the need for it by the Master
Servicer no longer exists, unless the Mortgage Loan is liquidated, in which
case, upon receipt of a certificate of a Servicing Officer similar to that
specified above, the Request for Release shall be released by the Indenture
Trustee to the Master Servicer.
To facilitate the foreclosure of the mortgage securing any Mortgage
Loan that is in default following recordation of the assignments of mortgage
in accordance with this Agreement, if so requested by the Master Servicer, the
Indenture Trustee shall execute an appropriate assignment in the form provided
to the Indenture Trustee by the Master Servicer to assign the Mortgage Loan
for the purpose of collection to the Master Servicer or a subservicer. The
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only. The Master Servicer will then bring all required actions
in its own name and otherwise enforce the terms of the Mortgage Loan and
deposit the Net Liquidation Proceeds, exclusive of Foreclosure Profits, in the
Collection Account. If all delinquent payments due under the Mortgage Loan are
paid by the mortgagor and any other defaults are cured, then the Master
Servicer shall promptly reassign the Mortgage Loan to the Indenture Trustee
and return the related Mortgage File to the place where it was being
maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses
by Master Servicer.
The Master Servicer may retain the Servicing Fee pursuant to Section
3.02 as compensation for its services in servicing the Mortgage Loans.
Moreover, additional servicing compensation in the form of late payment
charges or other receipts not required to be deposited in the Collection
Account (other than Foreclosure Profits) shall be retained by the Master
Servicer. The Master Servicer must pay all expenses incurred by it in
connection with its activities under this Agreement (including payment of all
other fees and expenses not expressly stated under this Agreement to be for
the account of another person) and shall not be entitled to reimbursement
under this Agreement except as specifically provided in this Agreement.
Liquidation Expenses are reimbursable to the Master Servicer
FIRST, from related Liquidation Proceeds and
SECOND, from the Payment Account from funds attributable to the
related Loan Group pursuant to Section 8.03(a)(x) of the Indenture.
Section 3.09. Annual Statement as to Compliance.
(a) The Master Servicer will deliver to the Indenture Trustee, the
Credit Enhancer, and the Rating Agencies, by the date in each year specified
in the Adoption Annex, beginning on the date specified in the Adoption Annex,
an Officer's Certificate stating that (i) a review of the activities of the
Master Servicer during the preceding fiscal year (or the applicable shorter
period for the first report) and of its performance under this Agreement has
been made under the officer's supervision and (ii) to the best of the
officer's knowledge, based on the review, the Master Servicer has fulfilled
all of its material obligations under this Agreement throughout
31
the fiscal year, or, if there has been a default in the fulfillment of those
obligations, specifying each default known to the officer and its nature and
status.
(b) Within five Business Days after obtaining knowledge of it, the
Master Servicer shall notify the Indenture Trustee, the Credit Enhancer, and
each of the Rating Agencies of any event that with the giving of notice or the
lapse of time would become an Event of Servicing Termination by delivering an
Officer's Certificate describing the event.
Section 3.10. Annual Servicing Report.
By the date in each year specified in the Adoption Annex, beginning
on the date specified in the Adoption Annex, the Master Servicer, at its
expense, shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Master Servicer) to
furnish a report to the Indenture Trustee, the Credit Enhancer, and each
Rating Agency to the effect that the firm has examined certain documents and
records relating to the servicing of mortgage loans during the most recent
fiscal year then ended under sale and servicing agreements or pooling and
servicing agreements (substantially similar to this Agreement, including this
Agreement), that the examination was conducted substantially in compliance
with the audit guide for audits of non-supervised mortgagees approved by the
Department of Housing and Urban Development for use by independent public
accountants (to the extent that the procedures in the audit guide are
applicable to the servicing obligations in those agreements), and that the
examination has disclosed no items of noncompliance with this Agreement that,
in the opinion of the firm, are material, except for the items of
noncompliance described in the report.
Section 3.11. Access to Certain Documentation and Information
Regarding the Mortgage Loans.
(a) The Master Servicer shall provide to the Indenture Trustee, the
Credit Enhancer, any Noteholders or Note Owners that are federally insured
savings and loan associations, the Office of Thrift Supervision, successor to
the Federal Home Loan Bank Board, the FDIC, and the supervisory agents and
examiners of the Office of Thrift Supervision access to the documentation
regarding the Mortgage Loans required by applicable regulations of the Office
of Thrift Supervision and the FDIC (acting as operator of the Savings
Association Insurance Fund or the Bank Insurance Fund). The Master Servicer
will provide access without charge but only after reasonable notice and during
normal business hours at the offices of the Master Servicer. Nothing in this
Section shall derogate from the obligation of the Master Servicer to observe
any applicable law prohibiting disclosure of information regarding the
mortgagors and the failure of the Master Servicer to provide access as
provided in this Section as a result of this obligation shall not constitute a
breach of this Section.
(b) The Master Servicer shall supply the information needed to make
required distributions and to furnish required reports to Noteholders and to
make any claim under the Policy, in the form the Indenture Trustee reasonably
requests, to the Indenture Trustee and any Paying Agent by the start of the
Determination Date preceding the related Payment Date.
32
Section 3.12. Maintenance of Certain Servicing Insurance Policies.
The Master Servicer shall during the term of its service as master
servicer maintain in force (i) policies of insurance covering errors and
omissions in the performance of its obligations as master servicer under this
Agreement and (ii) a fidelity bond covering its officers, employees, or
agents. Each policy and bond together shall comply with the requirements from
time to time of Xxxxxx Xxx for persons performing servicing for mortgage loans
purchased by Xxxxxx Xxx.
Section 3.13. Reports to the Securities and Exchange Commission.
The Administrator shall, on behalf of the Trust, effect filing with
the Securities and Exchange Commission of any periodic reports required to be
filed under the Securities Exchange Act of 1934 and the rules and regulations
of the Securities and Exchange Commission under it. At the request of the
Administrator, each of the Sponsor, the Master Servicer, the Depositor, the
Indenture Trustee, and the Transferor shall cooperate with the Administrator
in the preparation of these reports and shall provide to the Indenture Trustee
in a timely manner all information or documentation the Indenture Trustee
reasonably requests in connection with the performance of its obligations
under this Section. The Master Servicer shall prepare, execute and deliver all
certificates or other documents required to be delivered by the Issuer
pursuant to the Xxxxxxxx-Xxxxx Act of 2002 or the rules and regulations
promulgated thereunder.
Section 3.14. Tax Treatment.
The Transferor shall treat the Mortgage Loans as its property for all
federal, state, or local tax purposes and shall report all income earned
thereon (including amounts payable as fees to the Master Servicer) as its
income for income tax purposes. The Master Servicer shall prepare all tax
information required by law to be distributed to Noteholders. The Master
Servicer shall not be liable for any liabilities, costs, or expenses of the
Trust, the Noteholders, the Transferor, or the Note Owners arising under any
tax law, including federal, state, or local income and franchise or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect to any tax or arising from a failure to comply with any
tax requirement).
Section 3.15. Information Required by the Internal Revenue
Service Generally and Reports of Foreclosures and Abandonments of Mortgaged
Property.
The Master Servicer shall prepare and deliver all federal and state
information reports when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under Section
6050J of the Code for reports of foreclosures and abandonments of any
mortgaged property, the Master Servicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) on behalf of the Indenture Trustee acquires an interest in any
Mortgaged Property through foreclosure or other comparable conversion in full
or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to
know that any Mortgaged Property has been abandoned. The reports from the
Master Servicer shall be in form, substance, and timing sufficient to meet the
reporting requirements imposed by Section 6050J of the Code.
33
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Servicing Certificate.
Not later than each Determination Date, the Master Servicer shall
deliver (a) to the Indenture Trustee, the data necessary to prepare the items
below and the statement for Noteholders required to be prepared pursuant to
Section 4.04 and (b) to the Indenture Trustee, the Owner Trustee, the Sponsor,
the Depositor, the Paying Agent, the Credit Enhancer, and each Rating Agency a
Servicing Certificate (in written form or the form of computer readable media
or such other form as may be agreed to by the Indenture Trustee and the Master
Servicer), together with an Officer's Certificate to the effect that the
Servicing Certificate is correct in all material respects, stating the related
Collection Period, Payment Date, the series number of the Notes, the date of
this Agreement, and:
(i) the aggregate amount of collections received on the
Mortgage Loans in each Loan Group by the Determination Date for the
related Collection Period;
(ii) the aggregate amount of (a) Interest Collections for
each Loan Group for the related Collection Period and (b) Principal
Collections for each Loan Group for the related Collection Period;
(iii) the Investor Floating Allocation Percentage and the
Investor Fixed Allocation Percentage for each Loan Group for the
related Collection Period;
(iv) the Investor Interest Collections and Investor
Principal Collections for each Loan Group for the related Collection
Period;
(v) the Interest Collections that are not Investor Interest
Collections and Transferor Principal Collections for each Loan Group
for the related Collection Period;
(vi) the Note Interest and the applicable Note Rate for each
Class of Notes for the related Interest Period;
(vii) the amount of the Note Interest that is not payable to
the Holders of each Class of Notes because of insufficient Investor
Interest Collections for the related Loan Group;
(viii) the Unpaid Investor Interest Shortfall for each Class
of Notes and the amount of interest on the shortfall at the
applicable Note Rate for each Class of Notes applicable from time to
time (separately stated) to be distributed on the related Payment
Date;
(ix) the remaining Unpaid Investor Interest Shortfall for
each Class of Notes after the distribution on the related Payment
Date;
(x) the amount of any Basis Risk Carryforward for each Class
of Notes in the distribution;
(xi) the amount of the remaining Basis Risk Carryforward for
each Class of Notes after giving effect to the related distribution;
34
(xii) the Accelerated Principal Payment Amount and the
portion of it that will be distributed pursuant to Section
8.03(a)(vii) of the Indenture for each Loan Group;
(xiii) the Scheduled Principal Collections Payment Amount
for each Loan Group, separately stating its components;
(xiv) the amount of any Transfer Deposit Amount for each Loan
Group paid by the Sponsor or the Depositor pursuant to Section 2.02
or 2.04;
(xv) any accrued Servicing Fees for the Mortgage Loans in
each Loan Group for previous Collection Periods and the Servicing Fee
for the related Collection Period;
(xvi) the Investor Loss Amount for each Loan Group for the
related Collection Period;
(xvii) the aggregate amount of Investor Loss Reduction
Amounts for previous Payment Dates that have not been previously
reimbursed to the Holders of each Class of Notes pursuant to Section
8.03(a)(iv) of the Indenture;
(xviii) the aggregate Asset Balance of the Mortgage Loans in
each Loan Group as of the end of the preceding Collection Period and
as of the end of the second preceding Collection Period;
(xix) [Deleted];
(xx) the Note Principal Balance for each Class of Notes and
loan factor after giving effect to the distribution on each Class of
Notes on the related Payment Date and to any reduction because of the
related Investor Loss Amount;
(xxi) the Transferor Interest and the Available Transferor
Subordinated Amount for each Loan Group after giving effect to the
distribution on the Payment Date;
(xxii) the aggregate amount of Additional Balances created
on the Mortgage Loans in each Loan Group during the previous
Collection Period;
(xxiii) for each Loan Group, the number and aggregate Asset
Balances of Mortgage Loans (x) as to which the Minimum Monthly
Payment is delinquent for 30-59 days, 60-89 days, and 90 or more
days, respectively and (y) that have become REO, in each case as of
the end of the preceding Collection Period;
(xxiv) whether a Rapid Amortization Event has occurred since
the prior Determination Date, specifying the Rapid Amortization Event
if one has occurred;
(xxv) whether an Event of Servicing Termination has occurred
since the prior Determination Date, specifying the Event of Servicing
Termination if one has occurred;
(xxvi) the amount to be distributed to the Credit Enhancer
pursuant to Section 8.03(a)(vi) and Section 8.03(a)(ix) of the
Indenture, stated separately;
(xxvii) the Guaranteed Principal Payment Amount for each
Class of Notes for the Payment Date;
35
(xxviii) the Credit Enhancement Draw Amount for each Class
of Notes for the related Payment Date;
(xxix) the amount to be distributed on the Mortgage Loans in
each Loan Group to the Transferor pursuant to Section 8.03(a)(xii) of
the Indenture;
(xxx) the amount to be paid to the Master Servicer pursuant
to Section 8.03(a)(x) of the Indenture;
(xxxi) the Maximum Rate for the related Collection Period and
the Weighted Average Net Loan Rate for the Mortgage Loans in each
Loan Group;
(xxxii) the expected amount of any optional advances
pursuant to Section 4.03 by the Master Servicer on the Mortgage Loans
in each Loan Group included in the distribution on the related
Payment Date and the aggregate expected amount of optional advances
pursuant to Section 4.03 by the Master Servicer outstanding on the
Mortgage Loans in each Loan Group as of the close of business on the
related Payment Date;
(xxxiii) the number and principal balances of any Mortgage
Loans in each Loan Group transferred to the Transferor pursuant to
Section 2.06; and
(xxxiv) in the Servicing Certificates for the first and
second Payment Dates, the number and Cut-off Date Asset Balance of
Mortgage Loans for each Loan Group for which the Mortgage Loan File
was not delivered to the Indenture Trustee within 30 days of the
Closing Date.
The Indenture Trustee and the Owner Trustee shall conclusively rely
on the information contained in a Servicing Certificate for purposes of making
distributions pursuant to Section 8.03 of the Indenture or distributions on
the Transferor Certificates, shall have no duty to inquire into this
information and shall have no liability in so relying. The format and content
of the Servicing Certificate may be modified by the mutual agreement of the
Master Servicer, the Indenture Trustee and the Credit Enhancer. The Master
Servicer shall give notice of any changes to the Rating Agencies.
Section 4.02. Acknowledgement and Cooperation.
The Depositor, the Master Servicer, and the Indenture Trustee
acknowledge that without the need for any further action on the part of the
Credit Enhancer, the Depositor, the Master Servicer, the Indenture Trustee, or
the Note Registrar (a) to the extent the Credit Enhancer makes payments,
directly or indirectly, on account of principal of or interest or other
amounts on any Notes to the Holders of the Notes or the Credit Enhancer, as
applicable, will be fully subrogated to the rights of these Holders to receive
the principal and interest from the Trust and (b) the Credit Enhancer shall be
paid the principal and interest or other amounts but only from the sources and
in the manner provided in this Agreement for the payment of the principal and
interest or other amounts. The Indenture Trustee and the Master Servicer shall
cooperate in all respects with any reasonable request by the Credit Enhancer
for action to preserve or enforce the Credit Enhancer's rights or interests
under this Agreement and the Indenture without limiting the rights or
affecting the interests of the Holders as otherwise stated in this Agreement
and the Indenture.
36
Section 4.03. Optional Advances of the Master Servicer.
The Master Servicer, in its sole discretion, may advance the interest
component of any delinquent Minimum Monthly Payment (or any portion of it) by
depositing the amount into the Collection Account by the related Determination
Date.
Section 4.04. Statements to Noteholders.
Concurrently with each payment to Noteholders, the Master Servicer
shall deliver to the Indenture Trustee the data necessary to prepare a
statement (the "Monthly Statement") for each Payment Date with the following
information with respect to each Loan Group:
(i) the related Investor Floating Allocation Percentage for
the preceding Collection Period;
(ii) the aggregate amount to be paid to the related Class of
Noteholders;
(iii) the amount of Note Interest in the payment related to
each Class of Notes and the applicable Note Rate;
(iv) the amount of any related Unpaid Investor Interest
Shortfall in the payment;
(v) the amount of the remaining related Unpaid Investor
Interest Shortfall after giving effect to the payment;
(vi) the amount of principal in the payment, separately
stating its components;
(vii) the amount of the reimbursement of previous related
Investor Loss Amounts in the payment;
(viii) the amount of the aggregate of unreimbursed related
Investor Loss Reduction Amounts after giving effect to the payment;
(ix) the amount of any related Basis Risk Carryforward in
the payment;
(x) the amount of the remaining related Basis Risk
Carryforward after giving effect to the payment;
(xi) the Servicing Fee for the Payment Date;
(xii) the Note Principal Balance of the related Class of
Notes and the factor to seven decimal places obtained by dividing the
Note Principal Balance of the related Class of Notes for the Payment
Date by the Original Note Principal Balance of the related Class of
Notes after giving effect to the payment;
(xiii) the Loan Group Balance as of the end of the preceding
Collection Period;
(xiv) any Credit Enhancement Draw Amount for the related
Class of Notes;
(xv) the number and aggregate Asset Balances of Mortgage
Loans in the related Loan Group as to which the Minimum Monthly
Payment is delinquent for 30-59
37
days, 60-89 days, and 90 or more days, respectively, as of the end of
the preceding Collection Period;
(xvi) the book value (within the meaning of 12 C.F.R. ss.
571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure for the related
Loan Group;
(xvii) the amount of any optional advances on the Mortgage
Loans in the related Loan Group pursuant to Section 4.03 by the
Master Servicer included in the payment on the Payment Date and the
aggregate amount of optional advances pursuant to Section 4.03 on
Mortgage Loans in the related Loan Group by the Master Servicer
outstanding as of the close of business on the Payment Date;
(xviii) the Note Rate for the related Class of Notes for the
Payment Date;
(xix) the number and principal balances of any Mortgage
Loans in that Loan Group retransferred to the Transferor pursuant to
each of Section 2.04 and Section 2.06;
(xx) the amount of Subordinated Transferor Collections for
the Mortgage Loans in that Loan Group included in the payment;
(xxi) the amount of Overcollateralization Step-Down Amount
for that Loan Group included in the payment;
(xxii) the Available Transferor Subordinated Amount for that
Loan Group and the Payment Date; and
(xxiii) for the first Payment Date, the number and Cut-off
Date Asset Balance of Mortgage Loans in that Loan Group for which the
Mortgage Loan File was not delivered to the Indenture Trustee within
30 days of the Closing Date.
The amounts furnished pursuant to clauses (ii), (iii) (for Note
Interest), (iv), (v), (vi), (vii), and (viii) above shall be expressed as a
dollar amount per $1,000 increment of Notes.
If the Monthly Statement is not accessible to any of the Noteholders,
the Master Servicer, the Credit Enhancer, or either Rating Agency on the
Indenture Trustee's internet website, the Indenture Trustee shall forward a
hard copy of it to each Noteholder, the Master Servicer, the Credit Enhancer,
and each Rating Agency immediately after the Indenture Trustee becomes aware
that the Monthly Statement is not accessible to any of them via the Indenture
Trustee's internet website. The address of the Indenture Trustee's internet
website where the Monthly Statement will be accessible is
xxxxx://xxx.xxxxxxxx.xxx/xxx. Assistance in using the Indenture Trustee's
internet website may be obtained by calling the Indenture Trustee's customer
service desk at (000) 000-0000. The Indenture Trustee shall notify each
Noteholder, the Master Servicer, the Credit Enhancer, and each Rating Agency
in writing of any change in the address or means of access to the internet
website where the Monthly Statement is accessible.
Within 60 days after the end of each calendar year, the Master
Servicer shall prepare and forward to the Indenture Trustee the information in
clauses (iii) and (vi) above aggregated
38
for the calendar year. This requirement of the Master Servicer shall be
satisfied if substantially comparable information is provided by the Master
Servicer or a Paying Agent pursuant to any requirements of the Code.
The Indenture Trustee shall prepare (in a manner consistent with the
treatment of the Notes as indebtedness of the Transferor, or as may be
otherwise required by Section 3.14) Internal Revenue Service Form 1099 (or any
successor form) and any other tax forms required to be filed or furnished to
Noteholders for payments by the Indenture Trustee (or the Paying Agent) on the
Notes and shall file and distribute such forms as required by law.
ARTICLE V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01. Liability of the Sponsor, the Master Servicer, and
the Depositor.
The Sponsor, the Depositor, and the Master Servicer shall be liable
only for their express agreements under this Agreement.
Section 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor.
Any corporation into which the Master Servicer or the Depositor may
be merged or consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Master Servicer or the Depositor is
a party, or any corporation succeeding to the business of the Master Servicer
or the Depositor, shall be the successor of the Master Servicer or the
Depositor, as the case may be, under this Agreement, without the execution or
filing of any paper or any further act on the part of any of the parties to
this Agreement, notwithstanding anything in this Agreement to the contrary.
Section 5.03. Limitation on Liability of the Master Servicer and
Others.
Neither the Master Servicer nor any of its directors, officers,
employees, or agents is liable to the Trust, the Owner Trustee, the
Transferor, or the Noteholders for the Master Servicer's taking any action or
refraining from taking any action in good faith pursuant to this Agreement, or
for errors in judgment. This provision shall not protect the Master Servicer
or any of its directors, officers, employees, or agents against any liability
that would otherwise be imposed for misfeasance, bad faith, or gross
negligence in the performance of the duties of the Master Servicer or for
reckless disregard of the obligations of the Master Servicer. The Master
Servicer and any of its directors, officers, employees, or agents may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any person about anything arising under this Agreement.
The Master Servicer and each of its directors, officers, employees,
and agents shall be indemnified by the Trust (but only from funds available
from the applicable Loan Group) and held harmless against any loss, liability,
or expense incurred in connection with any legal action relating to this
Agreement, the Transferor Certificates, or the Notes, other than any loss,
liability, or expense related to any specific Mortgage Loan that is otherwise
not reimbursable
39
pursuant to this Agreement and any loss, liability, or expense incurred due to
its willful misfeasance, bad faith, or gross negligence in the performance of
duties under this Agreement or due to its reckless disregard of its
obligations under this Agreement.
The Master Servicer need not appear in, prosecute, or defend any
legal action that is not incidental to its duties to service the Mortgage
Loans in accordance with this Agreement, and that in its opinion may involve
it in any expense or liability. The Master Servicer may in its sole discretion
undertake any action that it deems appropriate with respect to this Agreement
and the interests of the Noteholders. If so, the reasonable legal expenses and
costs of the action and any resulting liability shall be expenses, costs, and
liabilities of the Trust, and the Master Servicer shall only be entitled to be
reimbursed pursuant to Section 8.03(a)(x) of the Indenture (but only from
funds available from the applicable Loan Group). The Master Servicer's right
to indemnity or reimbursement pursuant to this Section shall survive any
resignation or termination of the Master Servicer pursuant to Section 5.04 or
6.01 with respect to any losses, expenses, costs, or liabilities arising
before its resignation or termination (or arising from events that occurred
before its resignation or termination).
Section 5.04. Master Servicer Not to Resign.
Subject to Section 5.02, the Master Servicer shall not resign as
Master Servicer under this Agreement except
(i) if the performance of its obligations under this
Agreement are no longer permissible under applicable law or due to
applicable law are in material conflict with any other activities
carried on by it or its subsidiaries or Affiliates that are of a type
and nature carried on by the Master Servicer or its subsidiaries or
Affiliates at the date of this Agreement or
(ii) if
(a) the Master Servicer has proposed a successor
Master Servicer to the Indenture Trustee and the proposed
successor Master Servicer is reasonably acceptable to the
Indenture Trustee;
(b) each Rating Agency has delivered a letter to
the Indenture Trustee before the appointment of the
successor Master Xxxxxxxx stating that the proposed
appointment of the successor Master Servicer as Master
Servicer under this Agreement will not result in the
reduction or withdrawal of the then current rating of the
Notes without regard to the Policy; and
(c) the proposed successor Master Xxxxxxxx is
reasonably acceptable to the Credit Enhancer in its sole
discretion, as evidenced by a letter to the Indenture
Trustee.
No resignation by the Master Servicer shall become effective until
the Indenture Trustee or successor Master Servicer designated by the Master
Servicer has assumed the Master Servicer's obligations under this Agreement or
the Indenture Trustee has designated a successor Master Servicer in accordance
with Section 6.02. Any resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02
as
40
obligations that survive the resignation or termination of the Master
Servicer. Any determination permitting the resignation of the Master Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to
that effect delivered to the Indenture Trustee and the Credit Enhancer. The
Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against the Transferor, any Noteholder, or the Credit Enhancer
for any amounts paid by the Master Servicer pursuant to any provision of this
Agreement.
Section 5.05. Delegation of Duties.
In the ordinary course of business, the Master Servicer may delegate
any of its duties under this Agreement at any time to any person who agrees to
act in accordance with standards comparable to those with which the Master
Servicer complies pursuant to Section 3.01, including any of its Affiliates or
any subservicer referred to in Section 3.01. This delegation shall not relieve
the Master Servicer of its obligations under this Agreement and shall not
constitute a resignation within the meaning of Section 5.04.
Section 5.06. Indemnification by the Master Servicer.
The Master Servicer shall indemnify the Trust, the Owner Trustee, and
the Indenture Trustee against any loss, liability, expense, damage, or injury
suffered or sustained due to the Master Servicer's actions or omissions in
servicing or administering the Mortgage Loans that are not in accordance with
this Agreement, including any judgment, award, settlement, reasonable
attorneys' fees, and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding, or claim. This
indemnification is not payable from the assets of the Trust. This indemnity
shall run directly to and be enforceable by an injured party subject to any
applicable limitations.
The Indenture Trustee and any director, officer, employee or agent of
the Indenture Trustee shall be indemnified by the Master Servicer and held
harmless against any loss, liability or expense (i) incurred in connection
with any legal action relating to this Agreement, the Indenture, the Custodial
Agreement, the Administration Agreement, the Notes, or the Transferor
Certificates, or in connection with the performance of any of the Indenture
Trustee's duties thereunder, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of any of the Indenture Trustee's duties under this Agreement, the
Indenture or the Custodial Agreement or by reason of reckless disregard of the
Indenture Trustee's obligations and duties hereunder.
The indemnity provisions of this Section shall survive the
termination of this Agreement or the resignation or removal of the Indenture
Trustee hereunder.
ARTICLE VI
SERVICING TERMINATION
Section 6.01. Events of Servicing Termination.
If any one of the following events ("Events of Servicing
Termination") shall occur and be continuing:
41
(i) any failure by the Master Servicer to deposit in the
Collection Account any deposit required to be made under this
Agreement or to remit to the Indenture Trustee amounts required to be
deposited to the Payment Account that continues unremedied either
beyond the relevant Payment Date or for five Business Days (or, if
the Master Servicer is permitted to remit collections on a monthly
basis pursuant to Section 3.02(b), three Business Days) after the
date when notice of the failure has been given to the Master Servicer
by the Indenture Trustee or to the Master Servicer and the Indenture
Trustee by the Credit Enhancer or Holders of Notes representing not
less than 25% of the Outstanding Amount of both Classes of Notes; or
(ii) failure by the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Master Servicer in the Notes or in this Agreement that materially
and adversely affects the interests of the Noteholders or the Credit
Enhancer and continues unremedied for a period of 60 days after the
date on which notice of the failure, requiring it to be remedied, and
stating that the notice is a "Notice of Default" under this
Agreement, has been given to the Master Servicer by the Indenture
Trustee or to the Master Servicer and the Indenture Trustee by the
Credit Enhancer or the Holders of Notes representing not less than
25% of the Outstanding Amount of both Classes of Notes; or
(iii) an Insolvency Event occurs with respect to the Master
Servicer;
then, until the Event of Servicing Termination has been remedied by the Master
Servicer, either the Indenture Trustee (with the consent of the Credit
Enhancer), the Credit Enhancer, or the Holders of Notes representing not less
than 51% of the Outstanding Amount of both Classes of Notes with the consent
of the Credit Enhancer by notice then given to the Master Servicer (and to the
Indenture Trustee if given by the Credit Enhancer or the Holders of Notes) may
terminate all of the rights and obligations of the Master Servicer as servicer
under this Agreement. This notice to the Master Servicer shall also be given
to each Rating Agency and the Credit Enhancer.
From the receipt by the Master Servicer of the notice, all the rights
and obligations of the Master Servicer under this Agreement, whether with
respect to the Notes or the Mortgage Loans or otherwise, shall pass to and be
vested in the Indenture Trustee pursuant to this Section; and the Indenture
Trustee is authorized to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any documents, and to do anything
else appropriate to effect the purposes of the notice of termination, whether
to complete the transfer and endorsement of each Mortgage Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Indenture Trustee in effecting the termination of the rights and obligations
of the Master Servicer under this Agreement, including the transfer to the
Indenture Trustee for the administration by it of all cash amounts that are
held by the Master Servicer and are to be deposited by it in the Collection
Account, or that have been deposited by the Master Servicer in the Collection
Account or are subsequently received by the Master Servicer with respect to
the Mortgage Loans. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Mortgage Files to the
successor Master Servicer and amending
42
this Agreement to reflect the succession as Master Servicer pursuant to this
Section shall be paid by the predecessor Master Servicer (or if the
predecessor Master Servicer is the Indenture Trustee, the initial Master
Servicer) on presentation of reasonable documentation of the costs and
expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(i) for a period of five or more Business Days or under
Section 6.01(ii) for a period of 60 or more days, shall not constitute an
Event of Servicing Termination if the delay or failure could not be prevented
by the exercise of reasonable diligence by the Master Servicer and the delay
or failure was caused by an act of God or the public enemy, acts of declared
or undeclared war, public disorder, rebellion or sabotage, epidemics,
landslides, lightning, fire, hurricanes, earthquakes, floods, or similar
causes. The preceding sentence shall not relieve the Master Servicer from
using its best efforts to perform its obligations in a timely manner in
accordance with the terms of this Agreement, and the Master Servicer shall
provide the Indenture Trustee, the Depositor, the Transferor, the Credit
Enhancer, and the Noteholders with an Officers' Certificate giving prompt
notice of its failure or delay, together with a description of its efforts to
perform its obligations. The Master Servicer shall immediately notify the
Indenture Trustee of any Events of Servicing Termination.
In connection with the termination of the Master Servicer if any
mortgage is registered on the MERS(R) System, then, either (i) the successor
Master Servicer, including the Indenture Trustee if the Indenture Trustee is
acting as successor Master Servicer, shall represent and warrant that it is a
member of MERS in good standing and shall agree to comply in all material
respects with the rules and procedures of MERS in connection with the
servicing of the Mortgage Loans that are registered with MERS, or (ii) the
predecessor Master Servicer shall cooperate with the successor Master Servicer
in causing MERS to execute and deliver an assignment of mortgage in recordable
form to transfer all the mortgages registered on the MERS(R) System from MERS
to the Indenture Trustee and to execute and deliver any other notices and
documents appropriate to effect a transfer of those mortgages or the servicing
of the Mortgage Loan on the MERS(R) System to the successor Master Servicer.
The predecessor Master Servicer shall file the assignment in the appropriate
recording office. The successor Master Xxxxxxxx shall deliver the assignment
to the Indenture Trustee promptly upon receipt of the original with evidence
of recording on it or a copy certified by the public recording office in which
the assignment was recorded.
Section 6.02. Indenture Trustee to Act; Appointment of Successor.
(a) From the time the Master Servicer receives a notice of
termination pursuant to Section 6.01 or resigns pursuant to Section 5.04, the
Indenture Trustee shall be the successor in all respects to the Master
Servicer in its capacity as Master Servicer under this Agreement and the
transactions contemplated by this Agreement and shall be subject to all the
obligations of the Master Servicer under this Agreement except (i) the
obligation to repurchase or substitute for any Mortgage Loan, (ii) with
respect to any representation or warranty of the Master Servicer, or (iii) for
any act or omission of either a predecessor or successor Master Servicer other
than the Indenture Trustee. As its compensation under this Agreement, the
Indenture
43
Trustee shall be entitled to the compensation the Master Servicer would have
been entitled to under this Agreement if no notice of termination had been
given. In addition, the Indenture Trustee will be entitled to compensation
with respect to its expenses in connection with conversion of certain
information, documents, and record keeping, as provided in Section 6.01.
Notwithstanding the above, (i) if the Indenture Trustee is unwilling
to act as successor Master Servicer, or (ii) if the Indenture Trustee is
legally unable to so act, the Indenture Trustee may (in the situation
described in clause (i)) or shall (in the situation described in clause (ii))
appoint, or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank, or other mortgage loan
or home equity loan servicer having a net worth of not less than $15,000,000
as the successor to the Master Servicer under this Agreement to assume of any
obligations of the Master Servicer under this Agreement. The successor Master
Servicer must be acceptable to the Credit Enhancer in its sole discretion, as
evidenced by the Credit Enhancer's prior consent, as applicable, which consent
shall not be unreasonably withheld. The appointment of the successor Master
Servicer must not result in the qualification, reduction, or withdrawal of the
ratings assigned to the Notes by the Rating Agencies without regard to the
Policy.
Pending appointment of a successor to the Master Servicer, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act as Master Servicer. In connection with this appointment and
assumption, the successor shall be entitled to receive compensation out of
payments on Mortgage Loans in an amount equal to the compensation that the
Master Servicer would otherwise have received pursuant to Section 3.08 (or any
lesser compensation the Indenture Trustee and the successor agree to). The
Indenture Trustee and the successor shall take any action, consistent with
this Agreement, necessary to effectuate the succession.
(b) The appointment of a successor Master Servicer shall not affect
any liability of the predecessor Master Servicer that may have arisen under
this Agreement before its termination as Master Servicer (including any
deductible under an insurance policy pursuant to Section 3.04), nor shall any
successor Master Servicer be liable for any acts or omissions of the
predecessor Master Servicer or for any breach by the predecessor Master
Servicer of any of its representations or warranties contained in this
Agreement. Except for any compensation agreement with the Indenture Trustee,
any successor Master Servicer shall be subject to all the terms of this
Agreement from the time that it accepts its appointment to the same extent as
if it were originally named as Master Servicer.
Section 6.03. Notification to Noteholders and the Transferor.
Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article or Section 5.04, the Indenture Trustee shall
give prompt notice of it to the Noteholders at their respective addresses
appearing in the Note Register, the Transferor, the Credit Enhancer, and each
Rating Agency.
44
ARTICLE VII
TERMINATION
Section 7.01. Termination.
(a) The respective obligations and responsibilities of the Sponsor,
the Master Servicer, the Depositor, the Trust, and the Indenture Trustee
created by this Agreement (other than the obligation of the Master Servicer to
send certain notices) shall terminate on the earlier of
(i) the transfer of all the Mortgage Loans pursuant to
Section 7.01(b),
(ii) the termination of the Trust Agreement or the
Indenture, and
(iii) the final payment or other liquidation of the last
Mortgage Loan remaining in the Trust or the disposition of all
property acquired in foreclosure or by deed in lieu of foreclosure of
any Mortgage Loan.
Upon termination in accordance with this Section, the Indenture
Trustee shall execute any documents and instruments of transfer presented by
the Transferor, in each case without recourse, representation, or warranty,
and take any other actions the Transferor reasonably requests to effect the
transfer of the Mortgage Loans to the Transferor. Notwithstanding the
termination of this Agreement, the Master Servicer shall comply with this
Agreement in winding up activities under this Agreement after termination if
necessary.
(b) With the consent of the Credit Enhancer the Transferor may effect
the transfer of all the Mortgage Loans at their termination purchase price on
any Payment Date from the Payment Date immediately before which the aggregate
Note Principal Balance is less than or equal to 10% of the Original Note
Principal Balance and require the Issuer to redeem the Notes pursuant to
Section 10.01 of the Indenture with the proceeds. The termination purchase
price is the sum of:
(i) the aggregate Note Principal Balance for both Classes of
Notes,
(ii) accrued aggregate Note Interest through the day
preceding the final Payment Date, and
(iii) interest accrued on any aggregate Unpaid Investor
Interest Shortfall, to the extent legally permissible.
(c) The Transferor must notify the Issuer, the Credit Enhancer, the
Trust, and the Indenture Trustee of any election to effect the transfer of the
Mortgage Loans pursuant to Section 7.01(b) no later than the first day of the
month before the month in which the transfer is to occur. The proceeds from
the purchase of the Mortgage Loans, for purposes of payments on the Notes,
shall be considered to have been received in the Collection Period before the
Collection Period in which the Payment Date on which the purchase takes place
occurs.
45
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.
This Agreement may be amended from time to time by the Sponsor, the
Master Servicer, the Depositor, the Owner Trustee, and the Indenture Trustee,
if the Rating Agency Condition is satisfied (in connection with which the
consent of the Credit Enhancer shall not be unreasonably withheld). However,
no amendment that significantly changes the permitted activities of the Trust
may be promulgated without the consent of a majority of the aggregate
Outstanding Amount of both Classes of Notes. For this purpose no Notes owned
by the Sponsor or any of its affiliates may vote, nor shall their Notes be
considered outstanding. This Agreement may also be amended from time to time
by the Sponsor, the Master Servicer, the Depositor, the Owner Trustee, and the
Indenture Trustee, with the consent of the Credit Enhancer (which consent
shall not be unreasonably withheld) and Holders of not less than 662/3% of the
aggregate Outstanding Amount of both Classes of Notes.
The Indenture Trustee may enter into any amendment of this Agreement
as to which the Rating Agency Condition is satisfied, and when so requested by
an Issuer Request, the Indenture Trustee shall enter into any amendment of
this Agreement
(i) that does not impose further obligations or liabilities
on the Indenture Trustee, and
(ii) as to which either the Rating Agency Condition is
satisfied or Holders of not less than 66 2/3% of the aggregate
Outstanding Amount of both Classes of Notes and the Credit Enhancer
have consented.
Following the execution and delivery of any amendment to this
Agreement or to the Policy to which the Credit Enhancer was required to
consent, either the Transferor, if the Transferor requested the amendment, or
the Master Servicer, if the Master Servicer requested the amendment, shall
reimburse the Credit Enhancer for the reasonable out-of-pocket costs and
expenses incurred by them in connection with the amendment.
Before the execution of the amendment, the party to this Agreement
requesting the amendment shall notify each Rating Agency of the substance of
the amendment. The Indenture Trustee shall deliver fully executed original
counterparts of the instruments effecting the amendment to the Credit
Enhancer.
Section 8.02. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PROVISIONS THAT
WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER STATE.
Section 8.03. Notices.
All notices, demands, instructions, consents, and other
communications required or permitted under this Agreement shall be in writing
and signed by the party giving the same and
46
shall be personally delivered or sent by first class or express mail (postage
prepaid), national overnight courier service, or by facsimile transmission or
other electronic communication device capable of transmitting or creating a
written record (confirmed by first class mail) and shall be considered to be
given for purposes of this Agreement on the day that the writing is delivered
when personally delivered or sent by facsimile or overnight courier or three
Business Days after it was sent to its intended recipient if sent by first
class mail. A facsimile has been delivered when the sending machine issues an
electronic confirmation of transmission. Unless otherwise specified in a
notice sent or delivered in accordance with the provisions of this Section,
notices, demands, instructions, consents, and other communications in writing
shall be given to or made on the respective parties at their respective
addresses indicated below:
if to the Trust at:
CWABS Revolving Home Equity Loan Trust, Series 2004-M
Wilmington Trust Company, as Owner Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust Administration
Telecopy: 000-000-0000
if to the Depositor at:
CWABS, Inc.
0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
Telecopy: (000) 000-0000
if to the Master Servicer at:
Countrywide Home Loans, Inc.
0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department,
Telecopy: (000) 000-0000
if to the Indenture Trustee at:
the Corporate Trust Office
Telecopy: 000-000-0000
47
if to the Credit Enhancer at:
Ambac Assurance Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Consumer Asset Backed Securities Group
Telecopy: 000-000-0000
Confirmation: 000-000-0000
if to Xxxxx'x at:
Residential Loan Monitoring Group, 4th Floor
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
and if to Standard & Poor's at:
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Whenever a notice or other communication to the Credit Enhancer
refers to an Event of Servicing Termination or with respect to which failure
on the part of the Credit Enhancer to respond would constitute consent or
acceptance, then a copy of the notice or other communication shall also be
sent to the attention of the General Counsel of the Credit Enhancer and shall
be marked to indicate "URGENT MATERIAL ENCLOSED."
Section 8.04. Severability of Provisions.
Any provisions of this Agreement that are held invalid for any reason
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the invalidity or unenforceability without
invalidating the remaining provisions of this Agreement, and the prohibition
or unenforceability in a jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction.
Section 8.05. Assignment.
Except as provided in Sections 5.02 and 5.04, this Agreement may not
be assigned by the Depositor or the Master Servicer without the prior consent
of the Credit Enhancer.
Section 8.06. Third-Party Beneficiaries.
This Agreement will be binding on the parties to this Agreement, and
inure to the benefit of the parties to this Agreement, the Noteholders, the
Transferor, the Note Owners, the Owner Trustee, and the Credit Enhancer and
their respective successors and permitted assigns. The Credit Enhancer is a
third party beneficiary of this Agreement. No other person will have any
rights under this Agreement.
Section 8.07. Counterparts.
This Agreement may be executed in any number of copies, and by the
different parties on the same or separate counterparts, each of which shall be
considered to be an original instrument.
48
Section 8.08. Effect of Headings and Table of Contents.
The Article and Section headings in this Agreement and the Table of
Contents are for convenience only and shall not affect the construction of
this Agreement.
49
IN WITNESS WHEREOF, the Depositor, the Sponsor and Master Servicer,
the Trust, and the Indenture Trustee have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
CWABS, INC.
Depositor
By: /s/ Xxxx Xxxxxxx, Xx.
----------------------------------
Name: Xxxx Xxxxxxx, Xx.
Title: Vice President
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
By: /s/ Xxxx Xxxxxxx, Xx.
----------------------------------
Name: Xxxx Xxxxxxx, Xx.
Title: Senior Vice President
JPMORGAN CHASE BANK
Indenture Trustee
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Officer
50
CWABS REVOLVING HOME EQUITY LOAN
TRUST, SERIES 2004-M
By: WILMINGTON TRUST COMPANY, not in
its individual capacity
but solely as Owner Trustee
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Assistant Vice President
51
State of CALIFORNIA )
) ss.:
County of LOS ANGELES )
On the 29th day of September, 2004 before me, a notary public in and
for the State of California, personally appeared Xxxx Xxxxxxx, Xx., known to
me who, being by me duly sworn, did depose and say that he resides at
Calabasas, California; that he is the Vice President of CWABS, Inc. a Delaware
corporation, one of the parties that executed the foregoing instrument; that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Xxxxxx X. Xxxxxx
---------------------------
Notary Public
Xxxxxx X. Xxxxxx
Commission # 1325392
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2005.
52
State of CALIFORNIA )
) ss.:
County of LOS ANGELES )
On the 29th day of September, 2004 before me, a notary public in and
for the State of California, personally appeared Xxxx Xxxxxxx, Xx., known to
me who, being by me duly sworn, did depose and say that he resides at
Calabasas, California; that he is the Senior Vice President of Countrywide
Home Loans, Inc., a New York corporation, one of the parties that executed the
foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Xxxxxx X. Xxxxxx
--------------------
Notary Public
Xxxxxx X. Xxxxxx
Commission # 1325392
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2005.
53
State of ILLINOIS )
) ss.:
County of COOK )
On the 29th day of September, 2004 before me, a notary public in and
for the State of Illinois, personally appeared Xxxxxx X. Xxxxxxx, known to me
who, being by me duly sworn, did depose and say that she resides at Batavia,
Illinois; that he is the Authorized Officer of JPMorgan Chase Bank, a New York
corporation, one of the parties that executed the foregoing instrument; that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Xxxxx Xxxxxxx
----------------------
OFFICIAL SEAL
Notary Public, State of Illinois
My Commission Expires: March 3, 2007
-------------
54
State of DELAWARE )
) ss.:
County of NEW CASTLE )
On the 29th day of September, 2004 before me, a notary public in and for the
State of Delaware, personally appeared Xxxxxxxx X. Xxxxx, known to me who,
being by me duly sworn, did depose and say that she resides at Wilmington,
Delaware; that she is the Assistant Vice President of Wilmington Trust
Company, not in its individual capacity but in its capacity as Owner Trustee
of CWABS REVOLVING HOME EQUITY LOAN TRUST, SERIES 2004-M, one of the parties
that executed the foregoing instrument; that she signed her name thereto by
order of the Board of Directors of said corporation.
/s/ Xxxxxxx Xxxxxx Xxxxxxxxx
----------------------------
Notary Public
My Commission Expires May 17, 2006
55
EXHIBIT A
MORTGAGE LOAN SCHEDULE
[Delivered to Indenture Trustee Only]
A-1
EXHIBIT B
FORM OF CREDIT LINE AGREEMENT
B-1
EXHIBIT C
FORM OF LETTER OF REPRESENTATIONS
C-2
EXHIBIT D
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
[DATE]
JPMorgan Chase Bank
as Indenture Trustee
0 Xxx Xxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Institutional Trust Services, Countrywide HEL CWABS 2004-M
Attn: Corporate Trust Services Division
Re: CWABS, Inc. Revolving Home Equity Loan
Asset Backed Notes, Series 2004-M
---------------------------------
Gentlemen:
In connection with the administration of the Mortgage Loans held by
you as Indenture Trustee under the Sale and Servicing Agreement, dated as of
September 29, 2004, among CWABS, Inc. as Depositor, Countrywide Home Loans,
Inc., as Sponsor and Master Servicer, CWABS Revolving Home Equity Loan Trust,
Series 2004-M and you, as Indenture Trustee (the "Agreement"), we hereby
request a release of the Mortgage File held by you as Indenture Trustee with
respect to the following described Mortgage Loan for the reason indicated
below.
Loan No.:
[MIN No.]
Reason for requesting file:
______________________ 1. Mortgage Loan paid in full. (The Master
Servicer hereby certifies that all
amounts received in connection with the
payment in full of the Mortgage Loan
which are required to be deposited in the
Collection Account pursuant to Section
3.02 of the Agreement have been so
deposited).
______________________ 2. Retransfer of Mortgage Loan. (The Master
Servicer hereby certifies that the
Transfer Deposit Amount has been
deposited in the Collection Account
pursuant to the Agreement).
______________________ 3. The Mortgage Loan is being foreclosed.
______________________ 4. The Mortgage Loan is being re-financed by
another depository institution. (The
Master Servicer hereby certifies that all
amounts received in connection with the
payment in full of the Mortgage Loan
which are required to be deposited in the
Collection Account pursuant to Section
3.02 of the Agreement have been so
deposited).
______________________ 5. Other (Describe).
The undersigned acknowledges that the above Mortgage File will be
held by the undersigned in accordance with the provisions of the Agreement and
will promptly be returned
C-1
to the Indenture Trustee when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan has been liquidated or retransferred.
Capitalized terms used herein shall have the meanings ascribed to
them in the Agreement.
COUNTRYWIDE HOME LOANS, INC.
By:_______________________________
Name:
Title: Servicing Officer
C-2
EXHIBIT E
STANDARD & POOR'S GLOSSARY
Standard & Poor's Predatory Lending Categorization
Standard & Poor's has categorized loans governed by anti-predatory lending
laws in the jurisdictions listed below into three categories based on a
combination of factors that include (a) the risk exposure associated with the
assignee liability and (b) the tests and thresholds set forth in those laws.
Note that certain loans classified by the relevant statute as Covered are
included in Standard & Poor's High Cost Loan category because they included
thresholds and tests that are typical of what is generally considered High
Cost by the industry.
---------------------------------------------------------------------------------------------------------
Standard & Poor's High-Cost Loan Categorization
---------------------------------------------------------------------------------------------------------
State/jurisdiction Category under applicable anti-predatory lending law
---------------------------------------------------------------------------------------------------------
Arkansas High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Cleveland Heights, Ohio Covered Loan
---------------------------------------------------------------------------------------------------------
Colorado Covered Loan
---------------------------------------------------------------------------------------------------------
Connecticut High Cost Home Loan
---------------------------------------------------------------------------------------------------------
District of Columbia Covered Loan
---------------------------------------------------------------------------------------------------------
Florida High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002 - March 6, 2003) High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Georgia as amended (March 7, 2003 - current) High Cost Home Loan
---------------------------------------------------------------------------------------------------------
HOEPA Section 32 High Cost Loan
---------------------------------------------------------------------------------------------------------
Illinois High Risk Home Loan
---------------------------------------------------------------------------------------------------------
Kansas High Loan-to-Value Consumer Loans and High APR
Consumer Loans
---------------------------------------------------------------------------------------------------------
Kentucky High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Los Angeles, Calif. High Cost Refinance Home Loan
---------------------------------------------------------------------------------------------------------
Maine High Rate High Fee mortgage
---------------------------------------------------------------------------------------------------------
Massachusetts High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Nevada Home Loan
---------------------------------------------------------------------------------------------------------
New Jersey High Cost Home Loan
---------------------------------------------------------------------------------------------------------
New York High Cost Home Loan
---------------------------------------------------------------------------------------------------------
New Mexico High Cost Home Loan
---------------------------------------------------------------------------------------------------------
North Carolina High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Oakland, Calif. High Cost Home Loan
---------------------------------------------------------------------------------------------------------
Ohio Covered Loan
---------------------------------------------------------------------------------------------------------
Oklahoma Subsection 10 Mortgage
---------------------------------------------------------------------------------------------------------
South Carolina High Cost Home Loan
---------------------------------------------------------------------------------------------------------
West Virginia West Virginia Mortgage Loan Act Loan
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Standard & Poor's Covered Loan Categorization
---------------------------------------------------------------------------------------------------------
State/jurisdiction Category under applicable anti-predatory lending
law
---------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002 - March 6, 2003) Covered Loan
---------------------------------------------------------------------------------------------------------
New Jersey Covered Home Loan
---------------------------------------------------------------------------------------------------------
E-1
---------------------------------------------------------------------------------------------------------
Standard & Poor's Home Loan Categorization
---------------------------------------------------------------------------------------------------------
State/jurisdiction Category under applicable anti-predatory lending law
---------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002- March 6, 2003) Home Loan
---------------------------------------------------------------------------------------------------------
New Jersey Home Loan
---------------------------------------------------------------------------------------------------------
New Mexico Home Loan
---------------------------------------------------------------------------------------------------------
North Carolina Consumer Home Loan
---------------------------------------------------------------------------------------------------------
Oakland, Calif. Home Loan
---------------------------------------------------------------------------------------------------------
South Carolina Consumer Home Loan
---------------------------------------------------------------------------------------------------------
E-2
ANNEX 1
DEFINITIONS
"Affiliate" of any person means any other person controlling,
controlled by or under common control with the person. For purposes of this
definition, "control" means the power to direct the management and policies of
a person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise and "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"Agreement" means this Sale and Servicing Agreement.
"Appraised Value" for any Mortgaged Property means the value
established by any of the following: (i) with respect to Credit Line
Agreements with Credit Limits greater than $100,000, by a full appraisal, (ii)
with respect to Credit Line Agreements with Credit Limits equal to or less
than $100,000, by either a drive by inspection or electronic appraisal of the
Mortgaged Property made to establish compliance with the underwriting criteria
then in effect in connection with the application for the Mortgage Loan
secured by the Mortgaged Property, and (iii) with respect to any Mortgage Loan
as to which the Servicer consents to a new senior lien pursuant to Section
3.01(a), in compliance with the underwriting criteria then in effect in
connection with the application for the related senior mortgage loan.
"Collection Account" means the Eligible Account or Eligible Accounts
created and maintained for the benefit of the Noteholders, the Transferor, and
the Credit Enhancer pursuant to Section 3.02(b).
"Combined Loan-to-Value Ratio" means for any Mortgage Loan as of any
date, the percentage equivalent of the fraction, the numerator of which is the
sum of (i) the Credit Limit and (ii) the outstanding principal balance as of
the date of execution of the related original Credit Line Agreement (or any
subsequent date as of which the outstanding principal balance may be
determined in connection with an increase in the Credit Limit for the Mortgage
Loan) of any mortgage loan or mortgage loans that are senior or equal in
priority to the Mortgage Loan and which is secured by the same Mortgaged
Property and the denominator of which is the Valuation of the related
Mortgaged Property.
"Credit Limit Utilization Rate" for any Mortgage Loan means a
fraction whose numerator is the Cut-off Date Asset Balance for the Mortgage
Loan and whose denominator is the related Credit Limit.
"Cut-off Date Loan Balance" means the Loan Balance calculated as of
the Cut-off Date.
"Defective Mortgage Loan" means a Mortgage Loan subject to retransfer
pursuant to Section 2.02 or 2.04.
"Delay Delivery Certification" has the meaning given to it in the
Custodial Agreement.
"Depositor" means CWABS, Inc., a Delaware corporation, or its
successor in interest.
Xxx-1-1
"Draw" for any Mortgage Loan means an additional borrowing by the
mortgagor after the Cut-off Date, in accordance with the related Mortgage
Note.
"Due Date" for any Mortgage Loan means the fifteenth day of the
month.
"Electronic Ledger" means the electronic master record of home equity
credit line mortgage loans maintained by the Master Servicer or by the
Sponsor, as appropriate.
"Eligible Substitute Mortgage Loan" means a Mortgage Loan substituted
by the Sponsor for a Defective Mortgage Loan that must, on the date of the
substitution,
(i) have an outstanding Asset Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage
Loan, an aggregate Asset Balance), not 10% more or 10% less than the
Transfer Deficiency relating to the Defective Mortgage Loan;
(ii) have a Loan Rate not less than the Loan Rate of the
Defective Mortgage Loan and not more than 1.000% in excess of the
Loan Rate of the Defective Mortgage Loan;
(iii) have a Loan Rate based on the same Index with
adjustments to the Loan Rate made on the same Interest Rate
Adjustment Date as that of the Defective Mortgage Loan;
(iv) have a FICO score not less than the FICO score of the
Defective Mortgage Loan and not more than 50 points higher than the
Defective Mortgage Loan;
(v) have a Gross Margin that is not less than the Gross
Margin of the Defective Mortgage Loan and not more than 100 basis
points higher than the Gross Margin for the Defective Mortgage Loan;
(vi) have a mortgage of the same or higher level of priority
as the mortgage relating to the Defective Mortgage Loan at the time
the mortgage was transferred to the Trust;
(vii) have a remaining term to maturity not more than six
months earlier than the remaining term to maturity of the Defective
Mortgage Loan, not later than the maturity date of the related Notes,
and not more than 60 months later than the remaining term to maturity
of the Defective Mortgage Loan;
(viii) comply with each representation and warranty in
Section 2.04 (to be made as of the date of substitution); and
(ix) have an original Combined Loan-to-Value Ratio not
greater than that of the Defective Mortgage Loan.
More than one Eligible Substitute Mortgage Loan may be substituted for a
Defective Mortgage Loan if the Eligible Substitute Mortgage Loans meet the
foregoing attributes in the aggregate and the substitution is approved in
advance by the Credit Enhancer.
"Event of Servicing Termination" has the meaning given to it in
Section 6.01.
Xxx-1-2
"Excess Spread Percentage" has the meaning given to it in the
Insurance Agreement.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor to it.
"Foreclosure Profit" on a Liquidated Mortgage Loan means the amount
by which (i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the
related Asset Balance (plus accrued and unpaid interest on it at the
applicable Loan Rate from the date interest was last paid to the end of the
Collection Period during which the Mortgage Loan became a Liquidated Mortgage
Loan) of the Liquidated Mortgage Loan immediately before the final recovery of
its Liquidation Proceeds.
"Gross Margin" for any Mortgage Loan means the percentage shown as
the "Gross Margin" for the Mortgage Loan on Exhibit A to the Sale and
Servicing Agreement.
"Increased Senior Lien Limitation" has the meaning given to it in
Section 3.01(a).
"Indenture" means the indenture of even date with this Agreement
between the Trust and the Indenture Trustee.
"Indenture Trustee Fee" means a fee that is separately agreed to
between the Master Servicer and the Indenture Trustee.
"Indenture Trustee Fee Rate" means the per annum rate at which the
Indenture Trustee Fee is calculated.
"Index" for each Interest Rate Adjustment Date for a Mortgage Loan
means the highest "prime rate" as published in the "Money Rates" table of The
Wall Street Journal as of the first business day of the calendar month.
"Insurance Proceeds" means proceeds paid by any insurer (other than
the Credit Enhancer under the Policy) pursuant to any insurance policy
covering a Mortgage Loan net of any amount (i) covering any expenses of the
Master Servicer in connection with obtaining the proceeds, (ii) applied to the
restoration or repair of the related Mortgaged Property, (iii) released to the
mortgagor in accordance with the Master Servicer's normal servicing
procedures, or (iv) required to be paid to any holder of a mortgage senior to
the Mortgage Loan.
"Interest Rate Adjustment Date" for each Mortgage Loan means any date
on which the Loan Rate is adjusted in accordance with the related Credit Line
Agreement.
"Lien" means any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority right, or interest or other
Security Agreement or preferential arrangement of any kind or nature
whatsoever, including any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any Financing Statement under the UCC (other
than any Financing Statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing except
that any assignment pursuant to Section 5.02 is not a Lien.
"Lifetime Rate Cap" for each Mortgage Loan whose related Mortgage
Note provides for a lifetime rate cap means the maximum Loan Rate permitted
over the life of the Mortgage
Xxx-1-3
Loan under the terms of the related Credit Line Agreement, as shown on the
Mortgage Loan Schedule.
"Liquidated Mortgage Loan" for any Payment Date means any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance
with the servicing procedures specified in this Agreement, as of the end of
the related Collection Period, that all Liquidation Proceeds which it expects
to recover with respect to the disposition of the Mortgage Loan or the related
REO have been recovered.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of
overhead) that are incurred by the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
including legal fees and expenses, any unreimbursed amount expended pursuant
to Section 3.06 (including amounts advanced to correct defaults on any
mortgage loan which is senior to the Mortgage Loan and amounts advanced to
keep current or pay off a mortgage loan that is senior to the Mortgage Loan)
respecting the related Mortgage Loan and any related and unreimbursed
expenditures with respect to real estate property taxes, water or sewer taxes,
condominium association dues, property restoration or preservation or
insurance against casualty, loss or damage.
"Liquidation Proceeds" means proceeds (including Insurance Proceeds
but not including amounts drawn under the Policy) received in connection with
the liquidation of any Mortgage Loan or related REO, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Rate Cap" for each Mortgage Loan means the lesser of (i) the
Lifetime Rate Cap or (ii) the applicable state usury ceiling.
"Loan-to-Value Ratio" for any date of determination for any mortgage
loan means a fraction whose numerator is the outstanding principal balance of
the mortgage loan as of the date of determination and whose denominator is the
Valuation of the related Mortgaged Property.
"Master Servicer" means Countrywide Home Loans, Inc., a New York
corporation and any successor to it and any successor under this Agreement.
"Minimum Monthly Payment" for any Mortgage Loan and any month means
the minimum amount required to be paid by the related mortgagor in that month.
"Net Liquidation Proceeds" for any Liquidated Mortgage Loan means
Liquidation Proceeds net of Liquidation Expenses.
"Officer's Certificate" means a certificate (i) signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a
Managing Director, a Vice President (however denominated), an Assistant Vice
President, the Treasurer, the Secretary, or one of the Assistant Treasurers or
Assistant Secretaries of the Depositor, the Sponsor, the Transferor, or the
Master Servicer, or (ii), if provided for in this Agreement, signed by a
Servicing Officer.
"Opinion of Counsel" means a written opinion of counsel acceptable to
the Indenture Trustee, who may be in-house counsel for the Depositor, the
Sponsor, the Master Servicer, or the Transferor (except that any opinion
pursuant to Section 5.04 or relating to taxation must be
Xxx-1-4
an opinion of independent outside counsel) and who, in the case of opinions
delivered to the Credit Enhancer or the Rating Agency, is reasonably
acceptable to it.
"Purchase Price" with respect to any Mortgage Loan required to be
purchased by a Seller pursuant to Section 2.03 or 2.04 or purchased at the
option of the Master Servicer pursuant to Section 3.01 or 3.06 means an amount
equal to the sum of
(i) 100% of the unpaid principal balance of the Mortgage
Loan on the date of such purchase,
(ii) accrued interest on the Mortgage Loan at the applicable
Mortgage Rate (or at the applicable Adjusted Mortgage Rate if (x) the
purchaser is the Master Servicer or (y) if the purchaser is
Countrywide and Countrywide is an affiliate of the Master Servicer)
from the date through which interest was last paid by the Mortgagor
to the Due Date in the month in which the Purchase Price is to be
distributed to Noteholders, and
(iii) in the case of any Mortgage Loan required to be
purchased by a Seller because of, or that arises out of, a violation
of any predatory or abusive lending law with respect to the related
Mortgage Loan, any costs and damages incurred by the Trust Fund
relating to such violation of any predatory or abusive lending law
with respect to the related Mortgage Loan.
"REO" means a Mortgaged Property that is acquired by the Trust in
foreclosure or by deed in lieu of foreclosure.
"Servicing Certificate" means a certificate completed and executed by
a Servicing Officer in accordance with Section 4.01.
"Servicing Officer" means any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Indenture Trustee (with a copy to the Credit Enhancer) by the
Master Servicer on the Closing Date, as the list may be amended from time to
time.
"Sponsor" means Countrywide Home Loans, Inc., a New York corporation
and any successor to it.
"Spread Rate" has the meaning given to it in the Insurance Agreement.
"Transfer Date" has the meaning given to it in Section 2.06.
"Transfer Deficiency" means that the Transferor Interest for each
Loan Group after a retransfer of a Mortgage Loan in the related Loan Group
pursuant to Section 2.02(b) would be less than the sum of (i) the greater of
the related Minimum Transferor Interest and the related Required Transferor
Subordinated Amount and (ii) in the case of any Mortgage Loan required to be
purchased by a Seller because of, or that arises out of, a violation of any
predatory or abusive lending law with respect to the related Mortgage Loan,
any costs and damages incurred
Xxx-1-5
by the Trust Fund relating to such violation of any predatory or abusive
lending law with respect to the related Mortgage Loan.
"Transfer Deposit Amount" has the meaning given to it in Section
2.02(b).
"Transfer Notice Date" has the meaning given to it in Section 2.06.
"Valuation" of any Mortgaged Property means the lesser of (i) the
Appraised Value of the Mortgaged Property and (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related Mortgage
Loan, the purchase price of the Mortgaged Property.
Xxx-1-6
The following have the meanings given to them in the Indenture:
Accelerated Principal Payment Amount Minimum Transferor Interest
Additional Balance MOM Loan
Asset Balance Moody's
Assignment of Mortgage Mortgage File
Available Transferor Subordinated Amount Mortgage Loan
Basis Risk Carryforward Mortgage Loan Schedule
Business Day Mortgage Note
Closing Date Mortgaged Property
Code Note
Collection Period Note Rate
Corporate Trust Office Note Interest
Credit Enhancement Draw Amount Note Principal Balance
Credit Enhancer Noteholder or Holder
Credit Enhancer Default Note Owner
Credit Limit Note Register and Note Registrar
Credit Line Agreement Original Note Principal Balance
Custodial Agreement Outstanding Amount
Cut-off Date Paying Agent
Cut-off Date Asset Balance Payment Date
Determination Date Policy
Eligible Account Principal Collections
Eligible Investments Purchase Agreement
Guaranteed Principal Payment Amount Rapid Amortization Event
Indenture Trustee Rating Agency
Insolvency Event Required Transferor Subordinated
Amount
Insurance Agreement Responsible Officer
Interest Collections Scheduled Principal Collections
Payment Amount
Interest Formula Rate Servicing Fee
Interest Period Standard & Poor's
Investor Fixed Allocation Percentage Transferor
Investor Floating Allocation Percentage Transferor Certificates
Investor Interest Collections Transferor Interest
Investor Loss Amount Transferor Principal Collections
Investor Loss Reduction Amount Trust
Investor Principal Collections Trust Agreement
Loan Group UCC
Loan Group Balance Unpaid Investor Interest Shortfall
Loan Rate Weighted Average Net Loan Rate
Managed Amortization Period
Maximum Rate
MERS
MERS(R) System
MIN
Xxx-1-7
ANNEX 2
ADOPTION ANNEX
The items referred to in the representations and warranties in
Section 2.04(a) are:
(xii) 0.90% and 1.40% of the Mortgage Loans in Loan Group 1 and Loan
Group 2, respectively, being transferred on the relevant date (by Cut-off Date
Loan Balance) were 30-59 days delinquent (measured on a contractual basis).
(xvii) As of the Cut-off Date no more than 3.00% and 3.00% of the
Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, by aggregate
principal balance, are secured by Mortgaged Properties located in one United
States postal zip code.
(xviii) The Combined Loan-to-Value Ratio for each Mortgage Loan was
not in excess of 100%.
(xxix) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-off Date is approximately
297 and 297 months with respect to the Mortgage Loans in Loan Group 1 and Loan
Group 2, respectively. The Loan Rate Caps for the Mortgage Loans range between
6.00% and 21.00% and 6.00% and 21.00% with respect to the Mortgage Loans in
Loan Group 1 and Loan Group 2, respectively, and the weighted average Loan
Rate Cap is approximately 17.989% and 18.01%, with respect to the Mortgage
Loans in Loan Group 1 and Loan Group 2, respectively. The Gross Margins for
the Mortgage Loans range between -0.25% and 7.750% and -0.990% and 8.750% with
respect to the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively,
and the weighted average Gross Margin is approximately 2.507% and 2.163% as of
the Cut-off Date for the Mortgage Loans in Loan Group 1 and Loan Group 2,
respectively. The Loan Rates on the Mortgage Loans range between 3.00% and
12.250% and 1.25% and 13.25% with respect to the Mortgage Loans in Loan Group
1 and Loan Group 2, respectively, and the weighted average Loan Rate on the
Mortgage Loans is approximately 6.902% and 6.577% with respect to the Mortgage
Loans in Loan Group1 and Loan Group 2, respectively. As of the Cut-off Date,
100% and 6.67% of the Mortgage Loans in Loan Group 1 and Loan Group 2,
respectively, by aggregate principal balance, have original principal balances
(by credit limit) that conform to Xxxxxx Xxx or Freddie Mac guidelines.
(xxxi) No more than 27.74% and 43.91% (by Cut-off Date Loan Balance)
of the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, are
secured by real property improved by individual condominium units, units in
planned unit developments, townhouses, or two-to-four family residences
erected on them, and at least 72.26% and 56.09% (by Cut-off Date Loan Balance)
of the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, are
secured by real property with a detached one-family residence erected on them.
Xxx-2-1
(xxxii) The Credit Limits on the Mortgage Loans range between
approximately $7,500 and $165,000 and $7,500 and $2,000,000 with an average of
approximately $37,155 and $100,470 with respect to the Mortgage Loans in Loan
Group 1 and Loan Group 2, respectively. As of the Cut-off Date, no Mortgage
Loan had a principal balance in excess of approximately $155,000 and
$2,000,000 and the average principal balance of the Mortgage Loans is equal to
approximately $33,201 and $85,033 with respect to the Mortgage Loans in Loan
Group 1 and Loan Group 2, respectively.
(xxxiii) Approximately 0% and 100% of the Mortgage Loans of each Loan
Group, by aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
(xxxiv) As of the Closing Date, no more than 23.88% and 6.90% of the
Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, by aggregate
principal balance, were appraised electronically.
(xxxix) As of the Cut-off Date (based upon the drawn balances), the
Mortgage Loans had a weighted average Combined Loan-to-Value Ratio of 89.23%
and 86.59%; a range of Combined Loan-to-Value Ratios between 6.84% and 100%
and 13.56% and 100%; a percentage of primary residences of 95.66% and 94.76%;
a weighted average FICO score of 704 and 710; a range of FICO scores between
492 and 842 and 511 and 834; a Weighted Average Net Loan Rate of 6.402% and
6.077%; a range of net Loan Rates between 2.50% and 11.75% and 0.75% and
8.25%; a weighted average original stated term to maturity of 300 and 300
months; a range of original term to maturity between 120 and 360 months and
120 and 360 months; a range of remaining term to maturity between 108 and 352
months and 108 and 352 months; an average drawn balance of $33,201 and
$100,470; a weighted average utilization ratio of 91.51% and 88.43%; and
41.33% and 73.01% of the Mortgage Loans have their respective Mortgaged
Properties located in the top five states, measured by aggregate drawn
balances, all with respect to the Mortgage Loans in Loan Group 1 and Loan
Group 2, respectively.
The initial aggregate principal amount of the Notes is
$1,015,229,000, the initial aggregate principal amount of the Class 1-A Notes
is $505,029,000, and the initial aggregate principal amount of the Class 2-A
Notes is $510,200,000.
The title of the Collection Account is "JPMorgan Chase Bank, as
Indenture Trustee, Collection Account in trust for the registered holders of
Revolving Home Equity Loan Asset Backed Notes, Series 2004-M and Ambac
Assurance Corporation."
The date on which the Master Servicer delivers the Officer's
Certificate in each year is March 31, and the first Officer's Certificate
pursuant to Section 3.09 is March 31, 2005.
The date on which the Master Servicer delivers the annual servicing
report in each year is March 15, and the first annual servicing report
pursuant to Section 3.10 is March 15, 2005.
Xxx-2-2
