EXHIBIT 4.3
================================================================================
▇▇▇▇▇▇ LOAN SERVICING LP,
as Servicer
SALOMON MORTGAGE LOAN TRUST, SERIES 2001-CB4,
as Issuer
and
U.S. BANK NATIONAL ASSOCIATION
as Indenture Trustee
----------------------
SERVICING AGREEMENT
Dated as of December 14, 2001
----------------------
C-BASS Mortgage Loan Asset-Backed Notes, Series 2001-CB4
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01. Definitions............................................................................1
Section 1.02. Other Definitional Provisions..........................................................1
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding the Servicer..................................3
Section 2.02. Representations and Warranties of the Issuer...........................................5
Section 2.03. Repurchase or Substitution of Mortgage Loans...........................................5
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. Servicer to Act as Servicer............................................................6
Section 3.02. Collection of Certain Mortgage Loan Payments...........................................8
Section 3.03. Realization Upon Defaulted Mortgage Loans..............................................8
Section 3.04. Collection Account....................................................................10
Section 3.05. Permitted Withdrawals from the Collection Account.....................................11
Section 3.06. Establishment of Escrow Accounts; Deposits in Escrow Accounts.........................12
Section 3.07. Permitted Withdrawals From Escrow Account.............................................13
Section 3.08. Payment of Taxes, Insurance and Other Charges; Collections
Thereunder............................................................................13
Section 3.09. Transfer of Accounts..................................................................14
Section 3.10. Maintenance of Hazard Insurance.......................................................15
Section 3.11. Maintenance of Mortgage Impairment Insurance Policy...................................15
Section 3.12. Fidelity Bond, Errors and Omissions Insurance.........................................16
Section 3.13. Title, Management and Disposition of REO Property.....................................16
Section 3.14. Due-on-Sale Clauses; Assumption and Substitution Agreements...........................19
Section 3.15. Notification of Adjustments...........................................................20
Section 3.16. Optional and Mandatory Purchases of Mortgage Loans by Servicer........................20
Section 3.17. Indenture Trustee to Cooperate; Release of Files......................................21
Section 3.18. Servicing Compensation................................................................22
Section 3.19. Annual Statement as to Compliance.....................................................23
Section 3.20. Annual Independent Certified Public Accountants' Reports..............................23
Section 3.21. Access to Certain Documentation and Information Regarding the
Mortgage Loans........................................................................24
Section 3.22. Reserved..............................................................................24
Section 3.23. Obligations of the Servicer in Respect of Compensating Interest.......................24
i
Section 3.24. Obligations of the Servicer in Respect of Mortgage Rates and
Monthly Payments......................................................................25
Section 3.25. Investment of Funds in the Collection Account.........................................25
Section 3.26. Liability of Servicer; Indemnification................................................26
Section 3.27. Reports of Foreclosure and Abandonment of Mortgaged Properties........................27
ARTICLE V
The Servicer
Section 5.01. Liability of the Servicer.............................................................30
Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of,
the Servicer..........................................................................30
Section 5.03. Limitation on Liability of the Servicer and Others....................................30
Section 5.04. Servicer Not to Resign................................................................31
Section 5.05. Delegation of Duties..................................................................31
ARTICLE VI
Default
Section 6.01. Servicer Events of Termination........................................................34
Section 6.02. Indenture Trustee to Act; Appointment of Successor....................................36
Section 6.03. Waiver of Defaults....................................................................37
Section 6.04. Notification to Noteholders...........................................................37
Section 6.05. Survivability of Servicer Liabilities.................................................37
ARTICLE VII
Miscellaneous Provisions
Section 7.01. Amendment.............................................................................38
Section 7.02. Governing Law; Jurisdiction...........................................................38
Section 7.03. Notices...............................................................................38
Section 7.04. Severability of Provisions............................................................39
Section 7.05. Article and Section References........................................................39
Section 7.06. Notice to the Rating Agencies.........................................................39
Section 7.07. Further Assurances....................................................................40
Section 7.08. Benefits of Servicing Agreement.......................................................40
Section 7.09. Benefits of Servicing Agreement.......................................................40
EXHIBIT A Form of Request for Release of Documents
EXHIBIT B Ineligible Foreclosure Property Loan Schedule
ii
This is a Servicing Agreement, dated as of December 14, 2001, among
▇▇▇▇▇▇ Loan Servicing LP (the "Servicer"), Salomon Mortgage Loan Trust 2001-CB4
(the "Issuer") and U.S. Bank National Association (the "Indenture Trustee").
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, the Servicer is engaged in the business of servicing
mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee
certain mortgage loans, identified on Schedule 1 hereto (the "Mortgage Loans")
in connection with the issuance of the C-BASS Mortgage Loan Asset-Backed Notes,
Series 2001-CB4 (the "Notes");
WHEREAS, the Issuer desires to contract with the Servicer for
the servicing responsibilities associated with such Mortgage Loans; and;
WHEREAS, the Issuer, the Servicer and the Indenture Trustee
desire to execute this Agreement to define each party's rights, duties and
obligations relating to the servicing of the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions.
For all purposes of this Servicing Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions contained in Appendix A to the Indenture dated
December 14, 2001 (the "Indenture"), between Salomon Mortgage Loan Trust, Series
2001-CB4, as issuer, and U.S. Bank National Association, as indenture trustee,
which is incorporated by reference herein. All other capitalized terms used
herein shall have the meanings specified herein.
Section 1.02. Other Definitional Provisions.
(a) All terms defined in this Servicing Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate
or other document made or delivered pursuant hereto or thereto, accounting terms
not defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Servicing Agreement shall refer to this
Servicing Agreement as a whole and not to any particular provision of this
Servicing Agreement; Section and Exhibit references contained in this Servicing
Agreement are references to Sections and Exhibits in or to this Servicing
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
2
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding the
Servicer.
The Servicer represents and warrants to the Issuer and for the
benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, as of the
Cut-off Date:
(i) The Servicer is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation and
has all licenses necessary to ensure the enforceability or validity of
each Mortgage Loan and to carry on its business as now being conducted,
except for such licenses, certificates and permits the absence of
which, individually or in the aggregate, would not have a material
adverse effect on the ability of the Servicer to conduct its business
as it is presently conducted; the Servicer has the power and authority
to execute and deliver this Servicing Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Servicing Agreement (including all instruments of transfer to be
delivered pursuant to this Servicing Agreement) by the Servicer and the
consummation of the transactions contemplated hereby have been duly and
validly authorized; this Servicing Agreement evidences the valid,
binding and enforceable obligation of the Servicer, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally;
and all requisite corporate action has been taken by the Servicer to
make this Servicing Agreement valid and binding upon the Servicer in
accordance with its terms;
(ii) The consummation of the transactions contemplated by this
Servicing Agreement are in the ordinary course of business of the
Servicer and will not result in the breach of any term or provision of
the certificate of formation or the partnership agreement of the
Servicer or result in the breach of any term or provision of, or
conflict with or constitute a default under or result in the
acceleration of any obligation under, any agreement, indenture or loan
or credit agreement or other instrument to which the Servicer or its
property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Servicer or its
property is subject;
(iii) The Servicer is an approved seller/servicer of
conventional mortgage loans for FNMA, and is an FHA Approved Mortgagee
in good standing to service mortgages, is a VA Approved Lender and has
not been suspended as a mortgagee or servicer by the FHA or VA and has
the facilities, procedures and experienced personnel necessary for the
sound servicing of mortgage loans of the same type as the Mortgage
Loans. The Servicer is, and shall remain for as long as it is servicing
the Mortgage Loans hereunder, in good standing as a FHA Approved
Mortgagee and a VA Approved Lender and to service mortgage loans for
HUD, FNMA or FHLMC, and no event has occurred, including but not
limited to a change in insurance coverage, which would make the
Servicer unable to comply with HUD,
3
FNMA, FHLMC, FHA or VA eligibility requirements or which would require
notification to any of HUD, FNMA, FHLMC, FHA or VA;
(iv) This Servicing Agreement, and all documents and
instruments contemplated hereby which are executed and delivered by the
Servicer, constitute and will constitute valid, legal and binding
obligations of the Servicer, enforceable in accordance with their
respective terms, except as the enforcement thereof may be limited by
applicable bankruptcy laws and general principles of equity;
(v) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
contained in this Servicing Agreement;
(vi) There is no action, suit, proceeding or investigation
pending or, to its knowledge, threatened against the Servicer that,
either individually or in the aggregate, may result in any material
adverse change in the business, operations, financial condition,
properties or assets of the Servicer, or in any material impairment of
the right or ability of the Servicer to carry on its business
substantially as now conducted, or in any material liability on the
part of the Servicer, or that would draw into question the validity or
enforceability of this Servicing Agreement or of any action taken or to
be taken in connection with the obligations of the Servicer
contemplated herein, or that would be likely to impair materially the
ability of the Servicer to perform under the terms of this Servicing
Agreement;
(vii) No consent, approval or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of or compliance by the Servicer with this
Servicing Agreement or the consummation of the transactions
contemplated by this Servicing Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained;
and
(viii) Neither this Servicing Agreement nor any information,
certificate of an officer, statement furnished in writing or report
delivered to the Indenture Trustee by the Servicer in connection with
the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in this Section 2.01 which materially and
adversely affects the interests of the Noteholders in any Mortgage Loan, the
Servicer shall cure such breach in all material respects.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.01 shall survive delivery
of the Mortgage Files to the Indenture Trustee and shall inure to the benefit of
the Indenture Trustee, the Issuer, the Depositor and the Noteholders. Upon
discovery by any of the Issuer, the Depositor, the Servicer, the Seller or the
Indenture Trustee of a
4
breach of any of the foregoing representations, warranties and covenants which
materially and adversely affects the value of any Mortgage Loan or the interests
therein of the Noteholders, the party discovering such breach shall give prompt
written notice (but in no event later than two Business Days following such
discovery) to the other parties hereto.
Section 2.02. Representations and Warranties of the Issuer.
The Issuer hereby represents and warrants to the Servicer and for the benefit of
the Indenture Trustee, as pledgee of the Mortgage Loans, as of the Cut-off Date:
(i) The Issuer is a business trust duly formed and in good
standing under the laws of the State of Delaware and has full power,
authority and legal right to execute and deliver this Servicing
Agreement and to perform its obligations under this Servicing
Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Servicing Agreement;
and
(ii) The execution and delivery by the Issuer of this
Servicing Agreement and the performance by the Issuer of its
obligations under this Servicing Agreement will not violate any
provision of any law or regulation governing the Issuer or any order,
writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Issuer or any of its assets. Such
execution, delivery, authentication and performance will not conflict
with, or result in a breach or violation of, any mortgage, deed of
trust, lease or other agreement or instrument to which the Issuer is
bound.
Section 2.03. Repurchase or Substitution of Mortgage Loans.
For any month in which the Seller (pursuant to the terms of
the Mortgage Loan Purchase Agreement) substitutes one or more Eligible
Substitute Mortgage Loans for one or more Defective Mortgage Loans, the Servicer
will determine the amount (the "Substitution Adjustment Amount"), if any, by
which the aggregate Purchase Price of all such Defective Mortgage Loans exceeds
the aggregate, as to each such Eligible Substitute Mortgage Loan, of the
principal balance thereof as of the date of substitution, together with one
month's interest on such principal balance at the applicable Net Mortgage Rate.
On the date of such substitution, the Seller will deliver or cause to be
delivered to the Servicer for deposit in the Collection Account an amount equal
to the Substitution Adjustment Amount, if any, and the Indenture Trustee, upon
receipt of the related Eligible Substitute Mortgage Loan or Loans and
certification by the Servicer of such deposit, shall release to the Seller the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Seller shall
deliver to it and as shall be necessary to vest therein any Defective Mortgage
Loan released pursuant hereto.
5
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. Servicer to Act as Servicer.
The Servicer, as independent contract servicer, shall service
and administer the Mortgage Loans in accordance with this Servicing Agreement
and the normal and usual standards of practice of prudent mortgage servicers,
and shall have full power and authority, acting alone, to do or cause to be done
any and all things in connection with such servicing and administration which
the Servicer may deem necessary or desirable and consistent with the terms of
this Servicing Agreement including, in the case of FHA Loans and VA Loans,
taking all actions that a mortgagee is permitted or required to take by the FHA
or the VA, as the case may be (the "Servicing Standards").
Consistent with the terms of this Servicing Agreement, the
Servicer may waive, modify or vary any term of any Mortgage Loan or consent to
the postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Noteholders; provided, however, that the Servicer
shall not make future advances and, unless the Mortgagor is in default with
respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable, the Servicer shall not permit any modification
with respect to any Mortgage Loan that would (i) change the Mortgage Rate, defer
or forgive the payment thereof of any principal or interest payments, reduce the
outstanding principal amount (except for actual payments of principal) or extend
the final maturity date with respect to such Mortgage Loan, (ii) in the case of
FHA Loans and VA Loans, affect the FHA Insurance Contract or VA Guaranty
Agreement, as the case may be, with respect to such Mortgage Loan, (iii) affect
adversely the status of any REMIC under the Indenture as a REMIC or (iv) cause
any REMIC under the Indenture to be subject to a tax on "prohibited
transactions" or "contributions" pursuant to the REMIC Provisions.
Notwithstanding the foregoing, the Servicer shall not permit any modification
with respect to any Group I Mortgage Loan that would both (x) effect an exchange
or reissuance of such Group I Mortgage Loan under Section 1.860G-2(b) of the
Treasury Regulations and (y) cause any REMIC under the Indenture constituting
part of the Trust Estate to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions" after the
Startup Day under the REMIC Provisions. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
to execute and deliver on behalf of itself, and the Indenture Trustee, all
instruments of satisfaction or cancellation, or of partial or full release,
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the Mortgaged Property. The Servicer shall make all
required Servicing Advances and shall service and administer the Mortgage Loans
in accordance with Applicable Regulations, and shall provide to the Mortgagor
any reports required to be provided to them thereby. If reasonably required by
the Servicer, the Indenture Trustee shall furnish the Servicer
6
with any powers of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties under
this Servicing Agreement.
In servicing and administering FHA Loans and VA Loans, the
Servicer shall comply strictly with the National Housing Act, the FHA
Regulations, the Servicemen's Readjustment Act and the VA Regulations and
administrative guidelines issued thereunder or pursuant thereto (insofar as the
same apply to any Mortgage Loan) and, to the extent permitted hereunder,
promptly discharge all of the obligations of the mortgagee thereunder and under
each Mortgage including the timely giving of notices, the essence hereof being
that the full benefits of each FHA Insurance Contract and VA Guaranty Agreement
inure to the Indenture Trustee, on behalf of the Noteholders.
In servicing and administering the Mortgage Loans, the
Servicer shall employ procedures including collection procedures and exercise
the same care that it customarily employs and exercises in servicing and
administering mortgage loans for its own account giving due consideration to
accepted mortgage servicing practices of prudent lending institutions, the FHA
Insurance Contracts and the VA Guaranty Agreements, where applicable, and the
Noteholders' reliance on the Servicer. The Servicer shall give prompt notice to
the Indenture Trustee of any action, of which the Servicer has actual knowledge,
to (i) assert a claim against the Trust Estate or (ii) assert jurisdiction over
the Trust Estate.
Notwithstanding anything in this Servicing Agreement to the
contrary, in the event of a Principal Prepayment in full of a Mortgage Loan, the
Servicer may not waive any prepayment penalty or portion thereof required by the
terms of the related Mortgage Note unless (i) the Servicer determines that such
waiver would maximize recovery of Liquidation Proceeds for such Mortgage Loan,
taking into account the value of such prepayment penalty, or (ii) (A) the
enforceability thereof is limited (1) by bankruptcy, insolvency, moratorium,
receivership, or other similar law relating to creditors' rights generally or
(2) due to acceleration in connection with a foreclosure or other involuntary
payment, or (B) the enforceability is otherwise limited or prohibited by
applicable law. In the event of a Principal Prepayment in full with respect to
any Mortgage Loan, the Servicer shall deliver to the Indenture Trustee an
Officer's Certificate no later than the third Business Day following the
immediately succeeding Determination Date with a copy to the Class IX Noteholder
and the Class IN Noteholder (in the case of a Group I Mortgage Loan) or the
Class IIX Noteholder and the Class IIN Noteholder (in the case of a Group II
Mortgage Loan). If the Servicer has waived or does not collect all or a portion
of a prepayment penalty relating to a Principal Prepayment in full due to any
action or omission of the Servicer, other than as provided above, the Servicer
shall, within 90 days of the date on which the Principal Prepayment in full is
remitted to the Indenture Trustee, deliver to the Indenture Trustee the amount
of such prepayment penalty (or such portion thereof as had been waived for
deposit) into the Payment Account for payment in accordance with the terms of
the Indenture.
With respect to each Mortgage Loan which is the subject of a
Principal Prepayment in full, the Indenture Trustee shall verify whether such
Mortgage Loan was identified on the Mortgage Loan Schedule as being subject to a
prepayment penalty and, if such Mortgage Loan is so identified, whether the
amount of the prepayment penalty remitted by the Servicer (including any
7
amounts to be remitted by the Servicer pursuant to the last sentence of the
preceding paragraph), if any, is consistent with the amount of the prepayment
penalty set forth in the Mortgage Loan Schedule. In the event that the Indenture
Trustee determines that a prepayment penalty received with respect to a
Principal Prepayment in full is inconsistent with the prepayment penalty set
forth in the Mortgage Loan Schedule for the related Mortgage Loan and such
inconsistency results in the receipt of a reduced prepayment penalty, the
Indenture Trustee shall provide notice to the Seller of such inconsistency.
Within 90 days of receipt of such notice, the Seller shall remit to the
Indenture Trustee for deposit in the Payment Account an amount equal to the
difference between the amount of the prepayment penalties received by the
Indenture Trustee and the amount of the prepayment penalties determined in
accordance with the description thereof set forth in the Mortgage Loan Schedule
for the related Mortgage Loans.
The Indenture Trustee shall prepare and deliver to the Issuer,
the Depositor and the owner of the Class IN Notes, Class IX Notes, Class IIN
Notes and Class IIX Notes, on a monthly basis, a statement setting forth the
amounts due and received with respect to prepayment penalties.
Section 3.02. Collection of Certain Mortgage Loan Payments.
Continuously from the date hereof until the principal and
interest on all Mortgage Loans are paid in full, the Servicer will diligently
collect all payments due under each Mortgage Loan when the same shall become due
and payable and shall, to the extent such procedures shall be consistent with
this Servicing Agreement and the terms and provisions of any related Primary
Insurance Policy and Applicable Regulations, follow such collection procedures
as it follows with respect to mortgage loans comparable to the Mortgage Loans
and held for its own account. Further, the Servicer will take special care in
ascertaining and estimating annual ground rents, taxes, assessments, water
rates, fire and hazard insurance premiums, mortgage insurance premiums, and all
other charges that, as provided in the Mortgage, will become due and payable to
that end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
Section 3.03. Realization Upon Defaulted Mortgage Loans.
In the event that any payment due under any Conventional
Mortgage Loan is not paid when the same becomes due and payable, or in the event
the Mortgagor fails to perform any other covenant or obligation under the
Mortgage Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such action as it shall deem to be in the best interest of
the Noteholders. In the event that any payment due under any FHA Loan becomes
delinquent, the Servicer shall take all such actions as are in the best
interests of the Noteholders and permitted under any applicable FHA loss
mitigation proceedings, including, but not limited to, requesting the FHA to
accept an assignment of such FHA Loan, and, upon the Servicer's determination
that foreclosure is in the best interest of the Noteholders, commencing
foreclosure proceedings. With respect to each VA Loan, the Servicer shall
diligently seek to mitigate losses by utilizing all remedies available in the VA
Regulations. With respect to any defaulted Mortgage Loan, the Servicer shall
have the right
8
to review the status of the related forbearance plan and, subject to the second
paragraph of Section 3.01, may modify such forbearance plan.
In connection with a foreclosure or other conversion, the
Servicer shall exercise such rights and powers vested in it hereunder and use
the same degree of care and skill in its exercise as prudent mortgage servicers
would exercise or use under the circumstances in the conduct of their own
affairs and consistent with Applicable Regulations and the servicing standards
set forth in the FNMA Guide, including, without limitation, advancing funds for
the payment of taxes and insurance premiums with respect to first lien Mortgage
Loans.
Notwithstanding the foregoing provisions of this Section 3.03,
with respect to any Mortgage Loan as to which the Servicer has received actual
notice of, or has actual knowledge of, the presence of any toxic or hazardous
substance on the related Mortgaged Property, the Servicer shall not either (i)
obtain title to such Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property if, as a result of any such action, the
Trust Estate would be considered to hold title to, to be a
mortgagee-in-possession of, or to be an owner or operator of such Mortgaged
Property within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, or any
comparable law, unless the Servicer has also previously determined, based on its
reasonable judgment and a prudent report prepared by a Person who regularly
conducts environmental audits using customary industry standards, that:
A. such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it
would be in the best economic interest of the
Noteholders to take such actions as are necessary to
bring the Mortgaged Property into compliance
therewith; and
B. there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal
of any hazardous substances, hazardous materials,
hazardous wastes, or petroleum-based materials for
which investigation, testing, monitoring,
containment, clean-up or remediation could be
required under any federal, state or local law or
regulation, or that if any such materials are present
for which such action could be required, that it
would be in the best economic interest of the
Noteholders to take such actions with respect to the
affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.03 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.05(b).
If the Servicer determines, as described above, that it is in
the best economic interest of the Noteholders to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
9
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Noteholders. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.05(b).
Section 3.04. Collection Account.
(a) The Servicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets and shall establish and maintain one or more
Collection Accounts. Each Collection Account shall be an Eligible Account.
The Servicer shall deposit in the Collection Account on a
daily basis within two Business Days of receipt, and retain therein, the
following payments and collections received or made by it after the Cut-Off Date
with respect to the Mortgage Loans:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Rate less the Servicing Fee Rate;
(iii) all proceeds from a cash liquidation;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 3.10, other than proceeds to be held in
the Escrow Account and applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the
Servicer's normal servicing procedures, the loan documents or
applicable law;
(v) all Condemnation Proceeds affecting any Mortgaged Property
which are not released to the Mortgagor in accordance with the
Servicer's normal servicing procedures, the loan documents or
applicable law; and
(vi) any amounts required to be deposited by the Servicer in
connection with any REO Property pursuant to Section 3.13.
Any interest paid on funds deposited in the Collection
Account, subject to Section 3.25, shall accrue to the benefit of the Servicer
and the Servicer shall be entitled to retain and withdraw such interest from the
Collection Account pursuant to Section 3.05(e). The foregoing requirements for
deposit from the Collection Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, payments in the
nature of late payment charges, prepayment charges that are not prepayment
penalties, and assumption fees need not be deposited by the Servicer in the
Collection Account.
10
(b) On behalf of the Trust Estate, the Servicer shall deliver
to the Indenture Trustee in immediately available funds for deposit in the
Payment Account by the close of business New York time on the Servicer
Remittance Date, that portion of the Available Funds (calculated without regard
to the references in the definition thereof to amounts that may be deposited to
the Payment Account from a different source as provided herein) then on deposit
in the Collection Account.
(c) Funds in the Collection Account may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.25. The Servicer shall give notice to the Indenture Trustee of the location of
the Collection Account maintained by it when established and prior to any change
thereof.
(d) In the event the Servicer shall deliver to the Indenture
Trustee for deposit in the Payment Account any amount not required to be
deposited therein, it may at any time request that the Indenture Trustee
withdraw such amount from the Payment Account and remit to the Servicer any such
amount, any provision herein to the contrary notwithstanding. In addition, the
Servicer shall deliver to the Indenture Trustee from time to time for deposit,
and the Indenture Trustee shall so deposit, in the Payment Account in respect of
the Mortgage Loans:
(i) any Advances, as required pursuant to Section 4.01;
(ii) any Stayed Funds, as soon as permitted by the federal
bankruptcy court having jurisdiction in such matters;
(iii) any prepayment penalties and premiums or amounts in
connection with the waiver of such prepayment penalties or premiums, in
each case required to be deposited pursuant to Section 3.01;
(iv) any amounts required to be deposited in the Payment
Account pursuant to Sections 2.03, 3.04, 3.15, 3.16, 3.23, 3.28 or
4.01; and
(v) any amounts required to be deposited by the Servicer
pursuant to Section 3.11 in connection with the deductible clause in
any blanket hazard insurance policy, such deposit being made from the
Servicer's own funds, without reimbursement therefor.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall notify the Servicer of such receipt and
deposit such funds in the Payment Account, subject to withdrawal thereof as
permitted hereunder.
Section 3.05. Permitted Withdrawals from the Collection
Account.
The Servicer may, from time to time, withdraw from the
Collection Account for the following purposes:
11
(a) to remit to the Indenture Trustee for deposit in the
Payment Account the amounts required to be so remitted pursuant to Section
3.04(b) or permitted to be so remitted pursuant to the first sentence of Section
3.04(d);
(b) to reimburse itself for Advances and Servicing Advances;
provided that the Servicer's right to reimburse itself pursuant to this
subclause (b) is limited to amounts received on the related Mortgage Loan which
represent payments of (i) principal and/or interest respecting which any such
Advance was made or (ii) Condemnation Proceeds, Insurance Proceeds or
Liquidation Proceeds respecting which any such Servicing Advance was made;
(c) to reimburse itself for unreimbursed Servicing Advances,
any unpaid Servicing Fees and for unreimbursed Advances to the extent that such
amounts are deemed to be Nonrecoverable Advances, and to reimburse itself for
such amounts to the extent that such amounts are nonrecoverable from the
disposition of REO Property pursuant to Section 3.03 or Section 3.13 hereof;
(d) to reimburse itself for any amounts paid pursuant to
Section 3.03 (and not otherwise previously reimbursed);
(e) to pay to itself as servicing compensation (a) any
interest earned on funds in the Collection Account (all such interest to be
withdrawn monthly not later than each Servicer Remittance Date) and (b) the
Servicing Fee from that portion of any payment or recovery as to interest to a
particular Mortgage Loan to the extent not retained pursuant to Section
3.04(a)(ii);
(f) to reimburse itself for any amounts paid pursuant to
Section 6.03 (and not otherwise previously reimbursed); and
(g) to clear and terminate the Collection Account upon the
termination of this Servicing Agreement.
The foregoing requirements for withdrawal from the Collection
Account shall be exclusive. In the event the Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.
Section 3.06. Establishment of Escrow Accounts; Deposits in
Escrow Accounts.
The Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan which constitute Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Escrow Accounts, in the form of time deposit
or demand accounts. A copy of any letter agreement related to such accounts
shall be furnished to the Indenture Trustee upon request. The Escrow Account
shall be an Eligible Account.
12
The Servicer shall deposit in the Escrow Account or Accounts
on a daily basis within two Business Days of receipt, and retain therein, (i)
all Escrow Payments collected on account of the Mortgage Loans, for the purpose
of effecting timely payment of any such items as required under the terms of
this Servicing Agreement, and (ii) all Insurance Proceeds which are to be
applied to the restoration or repair of any Mortgaged Property. The Servicer
shall make withdrawals therefrom only to effect such payments as are required
under this Servicing Agreement, and for such other purposes as shall be set
forth in, or in accordance with, Section 3.07. The Servicer shall be entitled to
retain any interest paid on funds deposited in the Escrow Account by the
depository institution other than interest on escrowed funds required by law to
be paid to the Mortgagor and, to the extent required by the related Mortgage
Loan or Applicable Regulations, the Servicer shall pay interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account is non-interest
bearing or that interest paid thereon is insufficient for such purposes.
Section 3.07. Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account may be made by the
Servicer (i) to effect timely payments of ground rents, taxes, assessments,
water rates, fire, flood and hazard insurance premiums, Primary Insurance Policy
premiums, if applicable, and comparable items, (ii) to reimburse the Servicer
for any Servicing Advance made by the Servicer with respect to a related
Mortgage Loan but only from amounts received on the related Mortgage Loan which
represent late payments or Late Collections of Escrow Payments thereunder, (iii)
to refund to the Mortgagor any funds as may be determined to be overages, (iv)
for transfer to the Collection Account in accordance with the terms of this
Servicing Agreement, (v) for application to restoration or repair of the
Mortgaged Property, (vi) to pay to the Servicer, or to the Mortgagor to the
extent required by the related Mortgage Loan or Applicable Regulations, any
interest paid on the funds deposited in the Escrow Account, (vii) to clear and
terminate the Escrow Account on the termination of this Servicing Agreement,
(viii) to transfer to the Collection Account any insurance proceeds, or (ix) in
the case of FHA Loans and VA Loans, for transfer to the Collection Account, fire
and hazard insurance proceeds and Escrow Payments with respect to any Mortgage
Loan where the FHA or VA, as the case may be, has directed application of such
funds as a credit against the proceeds of the FHA Insurance Contract or the VA
Guaranty Agreement. As part of its servicing duties, the Servicer shall pay to
the Mortgagor interest on funds in the Escrow Account, to the extent required by
the related Mortgage Loan or Applicable Regulations, and to the extent that
interest earned on funds in the Escrow Account is insufficient, shall pay such
interest from its own funds, without any reimbursement therefor.
In the event the Servicer shall deposit in the Escrow Account
any amount not required to be deposited therein, it may at any time withdraw
such amount from the Escrow Account, any provision herein to the contrary
notwithstanding.
Section 3.08. Payment of Taxes, Insurance and Other Charges;
Collections Thereunder.
13
With respect to each first lien Mortgage Loan, the Servicer
shall maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of Primary Insurance Policy premiums and
fire, flood and hazard insurance coverage and shall obtain, from time to time,
all bills for the payment of such charges (including renewal premiums) and shall
effect payment thereof prior to the applicable penalty or termination date and
at a time appropriate for securing maximum discounts allowable, employing for
such purpose deposits of the Mortgagor in the Escrow Account which shall have
been estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage or Applicable Regulations.
To the extent that the Mortgage does not provide for Escrow Payments, the
Servicer shall determine that any such payments are made by the Mortgagor at the
time they first become due. The Servicer assumes full responsibility for the
timely payment of all such bills and shall effect timely payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make Servicing Advances from
its own funds to effect such payments.
The Servicer, on behalf of the Indenture Trustee, as
mortgagee, will maintain in full force and effect (to the extent a Mortgage Loan
has a Primary Insurance Policy) a Primary Insurance Policy issued by a Qualified
Insurer with respect to each Mortgage Loan for which such coverage is required.
Such coverage will be maintained until the Combined Loan-to-Value Ratio of the
related Mortgage Loan is reduced to 80% or less. The Servicer will not cancel or
refuse to renew any Primary Insurance Policy in effect on the Closing Date that
is required to be kept in force under this Servicing Agreement unless a
replacement Primary Insurance Policy for such canceled or non-renewed policy is
obtained from and maintained with a Qualified Insurer. The Servicer shall not
take any action which would result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions of the Servicer, would
have been covered thereunder. In connection with any assumption or substitution
agreement entered into or to be entered into pursuant to Section 3.14, the
Servicer shall promptly notify the insurer under the related Primary Insurance
Policy, if any, of such assumption or substitution of liability in accordance
with the terms of such policy and shall take all actions which may be required
by such insurer as a condition to the continuation of coverage under the Primary
Insurance Policy. If such Primary Insurance Policy is terminated as a result of
such assumption or substitution of liability, the Servicer shall obtain a
replacement Primary Insurance Policy as provided above.
In connection with its activities as servicer, the Servicer
agrees to prepare and present, on behalf of itself and the Indenture Trustee,
claims to the insurer under any Primary Insurance Policy in a timely fashion in
accordance with the terms of such policies and, in this regard, to take such
action as shall be necessary to permit recovery under any Primary Insurance
Policy respecting a defaulted Mortgage Loan. Pursuant to Section 3.04, any
amounts collected by the Servicer under any Primary Insurance Policy shall be
deposited in the Collection Account, subject to withdrawal pursuant to Section
3.05.
Section 3.09. Transfer of Accounts.
14
The Servicer may transfer the Collection Account or the Escrow
Account to a different depository institution from time to time. Upon such
transfer, the Servicer shall deliver to the Indenture Trustee, the Issuer and
the Depositor, a certification or letter agreement, as the case may be, as
required pursuant to Sections 3.04 and 3.06.
Section 3.10. Maintenance of Hazard Insurance.
The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the amount necessary to fully compensate for any
damage or loss to the improvements which are a part of such property on a
replacement cost basis, (ii) the Principal Balance of the Mortgage Loan, in each
case in an amount not less than such amount as is necessary to prevent the
Mortgagor and/or the Mortgagee from becoming a co-insurer or (iii) the amount
required under applicable HUD/FHA regulations. If the Mortgaged Property is in
an area identified in the Federal Register by the Flood Emergency Management
Agency as having special flood hazards and flood insurance has been made
available, the Servicer will cause to be maintained a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (i) the Principal Balance of
the Mortgage Loan, (ii) the maximum insurable value of the improvements securing
such Mortgage Loan or (iii) the maximum amount of insurance which is available
under the Flood Disaster Protection Act of 1973, as amended. The Servicer shall
also maintain on the REO Property for the benefit of the Noteholders, (x) fire
and hazard insurance with extended coverage in an amount which is at least equal
to the replacement cost of the improvements which are a part of such property,
(y) public liability insurance and, (z) to the extent required and available
under the Flood Disaster Protection Act of 1973, as amended, flood insurance in
an amount as provided above. Any amounts collected by the Servicer under any
such policies other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the Mortgaged Property or REO Property,
or released to the Mortgagor in accordance with the Servicer's normal servicing
procedures, shall be deposited in the Collection Account, subject to withdrawal
pursuant to Section 3.05. It is understood and agreed that no earthquake or
other additional insurance is required to be maintained by the Servicer or the
Mortgagor or maintained on property acquired in respect of the Mortgage Loan,
other than pursuant to such Applicable Regulations as shall at any time be in
force and as shall require such additional insurance. All such policies shall be
endorsed with standard mortgagee clauses with loss payable to the Servicer and
shall provide for at least thirty days prior written notice of any cancellation,
reduction in the amount of or material change in coverage to the Servicer. The
Servicer shall not interfere with the Mortgagor's freedom of choice in selecting
either his insurance carrier or agent; provided, however, that the Servicer
shall not accept any such insurance policies from insurance companies unless
such companies currently reflect a general policy rating of B:VI or better in
Best's Key Rating Guide and are licensed to do business in the state wherein the
property subject to the policy is located.
Section 3.11. Maintenance of Mortgage Impairment Insurance
Policy.
15
In the event that the Servicer shall obtain and maintain a
blanket policy issued by an insurer that has a general policy rating of B:VI or
better in Best's Key Rating Guide insuring against hazard losses on all of the
Mortgage Loans, then, to the extent such policy provides coverage in an amount
equal to the amount required pursuant to Section 3.10 and otherwise complies
with all other requirements of Section 3.10, it shall conclusively be deemed to
have satisfied its obligations as set forth in Section 3.10, it being understood
and agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with Section 3.10,
and there shall have been a loss which would have been covered by such policy,
deliver to the Indenture Trustee for deposit in the Payment Account the amount
not otherwise payable under the blanket policy because of such deductible
clause, which amount shall not be reimbursable to the Servicer from the Trust
Estate. In connection with its activities as servicer of the Mortgage Loans, the
Servicer agrees to prepare and present, on behalf of the Indenture Trustee,
claims under any such blanket policy in a timely fashion in accordance with the
terms of such policy. Upon request of the Indenture Trustee, the Servicer shall
cause to be delivered to the Indenture Trustee a certified true copy of such
policy and a statement from the insurer thereunder that such policy shall in no
event be terminated or materially modified without thirty days prior written
notice to the Indenture Trustee.
Section 3.12. Fidelity Bond, Errors and Omissions Insurance.
The Servicer shall maintain, at its own expense, a blanket
fidelity bond (the "Fidelity Bond") and an errors and omissions insurance
policy, with broad coverage with financially responsible companies on all
officers, employees or other persons acting in any capacity with regard to the
Mortgage Loans to handle funds, money, documents and papers relating to the
Mortgage Loans. The Fidelity Bond and errors and omissions insurance shall be in
the form of the Mortgage Banker's Blanket Bond and shall protect and insure the
Servicer against losses, including forgery, theft, embezzlement, fraud, errors
and omissions and negligent acts of such persons. Such Fidelity Bond shall also
protect and insure the Servicer against losses in connection with the failure to
maintain any insurance policies required pursuant to this Servicing Agreement
and the release or satisfaction of a Mortgage Loan without having obtained
payment in full of the indebtedness secured thereby. No provision of this
Section 3.12 requiring the Fidelity Bond and errors and omissions insurance
shall diminish or relieve the Servicer from its duties and obligations as set
forth in this Servicing Agreement. The minimum coverage under any such bond and
insurance policy shall be at least equal to the corresponding amounts required
by FNMA in the FNMA MBS Selling and Servicing Guide or by FHLMC in the FHLMC
Servicer's Guide. Upon request of the Indenture Trustee, the Servicer shall
cause to be delivered to the Indenture Trustee a certified true copy of the
Fidelity Bond and errors and omissions insurance policy and a statement from the
surety and the insurer that such Fidelity Bond and errors and omissions
insurance policy shall in no event be terminated or materially modified without
thirty days' prior written notice to the Indenture Trustee.
Section 3.13. Title, Management and Disposition of REO
Property.
(a) In the event that title to a Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be taken (pursuant to a limited power
16
of attorney to be provided by the Indenture Trustee to the Servicer) in the name
of the Indenture Trustee, on behalf of the Noteholders, or in the event the
Indenture Trustee is not authorized or permitted to hold title to real property
in the state where the REO Property is located, or would be adversely affected
under the "doing business" or tax laws of such state by so holding title, the
deed or certificate of sale shall be taken in the name of such Person or Persons
as shall be consistent with an Opinion of Counsel obtained by the Servicer from
an attorney duly licensed to practice law in the state where the REO Property is
located. Any Person or Persons holding such title other than the Indenture
Trustee shall acknowledge in writing that such title is being held as nominee
for the benefit of the Indenture Trustee.
(b) In the event that the Trust Estate acquires any REO
Property as aforesaid or otherwise in connection with a default or imminent
default on a Group I Mortgage Loan, the Servicer shall dispose of such REO
Property before the end of the third calendar year beginning after the year of
its acquisition by the Trust Estate for purposes of Section 860G(a)(8) of the
Code or, at the expense of the Trust Estate, request from the Internal Revenue
Service, more than 60 days before the day on which the above-mentioned grace
period would otherwise expire, an extension of the above-mentioned grace period,
unless the Servicer obtains an Opinion of Counsel, addressed to the Servicer and
the Indenture Trustee, to the effect that the holding by the Trust Estate of
such REO Property subsequent to such period will not: (i) result in the
imposition of any tax on "prohibited transactions" as defined in Section 860F of
the Code; or (ii) cause any REMIC constituting any part of the Trust Estate to
fail to qualify as a REMIC at any time that any Notes are outstanding, in which
case the Trust Estate may continue to hold such REO Property (subject to any
conditions contained in such Opinion of Counsel). The Servicer shall be entitled
to be reimbursed from the Collection Account for any costs incurred in obtaining
such Opinion of Counsel, as provided in Section 3.05.
Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding any other provisions of this
Servicing Agreement, no REO Property related to a Group I Mortgage Loan acquired
by the Trust Estate shall be rented (or allowed to continue to be rented) or
otherwise used by or on behalf of the Trust Estate in such a manner or pursuant
to any terms that would: (i) cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code; or
(ii) subject any REMIC constituting part of the Trust Estate to the imposition
of any federal income taxes on the income earned from such REO Property,
including any taxes imposed by reason of Sections 860F or 860G(c) of the Code,
unless the Servicer has agreed to indemnify and hold harmless the Trust Estate
with respect to the imposition of any such taxes.
The Servicer shall manage, conserve, protect and operate each
REO Property related to a Group I Mortgage Loan for the Noteholders and the
Trust Estate solely for the purpose of its prompt disposition and sale in a
manner which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the related REMIC of any "income from non-permitted assets" within
the meaning of Section 860F(a)(2)(B) of the Code, or any "net income from
foreclosure property" which is subject to taxation under the REMIC Provisions.
The Servicer shall cause each REO Property to be inspected promptly upon the
acquisition of title thereto and shall cause each REO Property to be
17
inspected at least annually thereafter. The Servicer shall make or cause to be
made a written report of each such inspection. Such reports shall be retained in
the Mortgage Servicing File and copies thereof shall be forwarded by the
Servicer to the Indenture Trustee upon request. The Servicer shall attempt to
sell the same (and may temporarily rent the same) on such terms and conditions
as the Servicer deems to be in the best interest of the Noteholders and the
Trust Estate.
With respect to each REO Property, the Servicer shall
segregate and hold all funds collected and received in connection with the
operation of the REO Property separate and apart from its own funds or general
assets and shall establish and maintain with respect to all REO Property an REO
Account or Accounts in the form of a time deposit or demand account, unless an
Opinion of Counsel is obtained by the Servicer to the effect that the
classification as a REMIC for federal income tax purposes of the arrangement
under which the Mortgage Loans and the REO Property is held will not be
adversely affected by holding such funds in another manner. Such REO Account
shall be established with the Servicer or with a commercial bank, a mutual
savings bank or a savings and loan association. The creation of any REO Account
shall be evidenced by a letter agreement, in the case of an account held by a
depository. In either case, an original of such certification or letter
agreement shall be furnished to the Indenture Trustee upon request.
The Servicer shall deposit or cause to be deposited, on a
daily basis, within two Business Days of receipt, in each REO Account, all
revenues received with respect to the related REO Property and shall withdraw
therefrom funds necessary for the proper operation, management and maintenance
of the REO Property, including the cost of maintaining any hazard insurance
pursuant to Section 3.10 hereof and the fees of any managing agent acting on
behalf of the Servicer. The Servicer shall have the right to earn interest, if
any, on funds deposited in such REO Account. On or before each Determination
Date, the Servicer shall withdraw from each REO Account and deposit into the
Collection Account the net receipts from the REO Property on deposit in the REO
Account and retain any interest.
The Servicer shall furnish to the Indenture Trustee, on each
Servicer Remittance Date, an operating statement for each REO Property covering
the operation of each REO Property for the previous month. Such operating
statement shall be accompanied by such other information as the Indenture
Trustee shall reasonably request.
The Servicer shall use its best efforts to dispose of the REO
Property as promptly as is practically consistent with protecting the
Noteholders' interests.
Each REO Disposition shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer deems to be in the
best interest of the Noteholders. If as of the date title to any REO Property
was acquired by the Servicer there were outstanding unreimbursed Servicing
Advances with respect to the REO Property, the Servicer, upon an REO Disposition
of such REO Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from proceeds received in connection with such
REO Disposition. The proceeds from the REO Disposition, net of any payment to
the Servicer as provided above, shall be deposited in the REO Account and shall
be transferred to the Collection Account on the
18
Determination Date in the month following receipt thereof for payment on the
succeeding Servicer Remittance Date in accordance with the Indenture.
Any REO Disposition of an REO Property related to a Group I
Mortgage Loan shall be for cash only (unless changes in the REMIC Provisions
made subsequent to the Startup Day allow a sale for other consideration and an
Opinion of Counsel is obtained by the Servicer to the effect that such sale
shall not cause any REMIC constituting part of the Trust Estate to fail to
qualify as a REMIC).
The Servicer shall not complete, or allow to be completed, a
foreclosure or accept a deed in lieu of a foreclosure with respect to any
Ineligible Foreclosure Property Loan if it would cause the Indenture Trustee to
hold REO Property from Ineligible Foreclosure Property Loans with an aggregate
value in excess of 0.75% of the aggregate outstanding Principal Balance of the
Mortgage Loans as of the end of the prior Collection Period. If the Value of REO
Property from Ineligible Foreclosure Property Loans equals or exceeds 1% of the
outstanding Principal Balance of the Mortgage Loans as of the end of any
Collection Period, the Seller shall purchase at the Purchase Price on or prior
to the related Payment Date sufficient REO Property from Ineligible Foreclosure
Property Loans to cause the Indenture Trustee to hold REO Property from
Ineligible Foreclosure Property Loans with a Value of less than 1% of the
outstanding Principal Balance of the Mortgage Loans and such proceeds shall be
treated as received during the related Prepayment Period. If the Seller shall
fail to purchase any REO Property as described in the preceding sentences, the
Servicer shall sell such REO Property as soon as reasonably practicable and in a
commercially reasonable manner. For purposes of this paragraph the "Value" of
REO Property from a Ineligible Foreclosure Property Loan shall be treated as
equal to the Principal Balance of the related Ineligible Foreclosure Property
Loan plus interest that had accrued on such Mortgage Loan as of the date of
acquisition of the REO Property by the Indenture Trustee. The Indenture Trustee
shall reconvey a Mortgage Loan so purchased in the same manner and under the
same terms as specified in Section 2.03.
Section 3.14. Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Mortgaged Property has been or is about to be conveyed
by the Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Mortgage Note; provided, however, that the Servicer
shall not exercise any such right if the "due-on-sale" clause, in the reasonable
belief of the Servicer, is not enforceable under applicable law. An Opinion of
Counsel at the expense of the Servicer (which expense shall constitute a
Servicing Advance) delivered to the Indenture Trustee, the Issuer and the
Depositor to the foregoing effect shall conclusively establish the
reasonableness of such belief. In such event, the Servicer shall make reasonable
efforts to enter into an assumption and modification agreement with the Person
to whom such property has been or is about to be conveyed, pursuant to which
such Person becomes liable under the Mortgage Note and, unless prohibited by
applicable law or the Mortgage, the Mortgagor remains liable thereon. If the
foregoing is not permitted under applicable law, the Servicer is authorized to
enter into a substitution of liability agreement with such Person, pursuant to
which the original Mortgagor is released from liability and
19
such Person is substituted as Mortgagor and becomes liable under the Note. The
Mortgage Loan, as assumed, shall conform in all respects to the requirements,
representations and warranties of this Servicing Agreement. The Servicer shall
notify the Indenture Trustee that any such assumption or substitution agreement
has been completed by forwarding to the Indenture Trustee (or the Custodian, as
the case may be) the original copy of such assumption or substitution agreement
(indicating the Mortgage File to which it relates) which copy shall be added by
the Indenture Trustee (or the Custodian, as the case may be) to the related
Mortgage File and which shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Servicer shall be responsible for recording any
such assumption or substitution agreements. In connection with any such
assumption or substitution agreement, the Monthly Payment on the related
Mortgage Loan shall not be changed but shall remain as in effect immediately
prior to the assumption or substitution, the stated maturity or outstanding
principal amount of such Mortgage Loan shall not be changed nor shall any
required monthly payments of principal or interest be deferred or forgiven. Any
fee collected by the Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision
of this Servicing Agreement, the Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any assumption which the
Servicer may be restricted by law from preventing, for any reason whatsoever.
Section 3.15. Notification of Adjustments.
On each Adjustment Date, the Servicer shall make Mortgage Rate
adjustments for each adjustable-rate Mortgage Loan in compliance with the
requirements of the related Mortgage and Mortgage Note and Applicable
Regulations. The Servicer shall execute and deliver the notices required by each
Mortgage and Mortgage Note and Applicable Regulations regarding Mortgage Rate
adjustments. The Servicer also shall provide timely notification to the
Indenture Trustee of all applicable data and information regarding such Mortgage
Rate adjustments and the Servicer's methods of implementing such Mortgage Rate
adjustments. Upon the discovery by the Servicer or the Indenture Trustee that
the Servicer has failed to adjust or has incorrectly adjusted a Mortgage Rate or
a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage, the Servicer shall deliver to the Indenture Trustee for deposit in the
Payment Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor; provided, however, the Servicer shall be
held harmless with respect to any Mortgage Rate adjustments made by any servicer
prior to the Servicer.
Section 3.16. Optional and Mandatory Purchases of Mortgage
Loans by Servicer.
On or after March 31, 2002, as to any Mortgage Loan which is
Delinquent in payment by 120 days or more or any REO Property, the Servicer may,
at its option, purchase such Mortgage Loan from the Issuer at the Purchase Price
for such Mortgage Loan provided that the Servicer may exercise the purchase
right during the period commencing on the first day of the calendar quarter
20
succeeding the calendar quarter in which the Initial Delinquency Date occurred
and ending on the last Business Day of such calendar quarter. The "Initial
Delinquency Date" of a Mortgage Loan shall mean the date on which the Mortgage
Loan first became 120 days Delinquent or, in the event such loan is a
Re-Performing Mortgage Loan which is Delinquent 120 days or more as of the
Cut-Off Date, the date on which the such Re-Performing Mortgage Loan first
becomes an additional 30 days or ore Delinquent.
If the Servicer does not exercise the purchase right with
respect to a Mortgage Loan during the period specified in the preceding
paragraph, such Mortgage Loan shall thereafter again become eligible for
purchase pursuant to the preceding paragraph only after the Mortgage Loan ceases
to be 120 days or more Delinquent and thereafter becomes 120 day Delinquent
again.
Prior to repurchase pursuant to this Section 3.16, the
Servicer shall be required to continue to make monthly advances pursuant to
Section 4.01. The Servicer (or an affiliate of the Servicer) shall not use any
procedure in selecting Mortgage Loans to be repurchased which is materially
adverse to the interests of the Noteholders. Any such repurchase of a Mortgage
Loan or REO Property pursuant to this Section 3.16 shall be accomplished by
delivery to the Indenture Trustee for deposit in the Payment Account of the
amount of the purchase price. The Indenture Trustee shall immediately effectuate
the conveyance of such delinquent Mortgage Loan or REO Property to the Servicer
(or an affiliate of the Servicer) to the extent necessary, including the prompt
delivery of all documentation to the Servicer (or an affiliate of the Servicer).
Furthermore, the Servicer may, at its option, write-off a second lien or third
lien Mortgage Loan which becomes 180 or more days delinquent.
Notwithstanding anything in this Section 3.16, the rights of
the Seller to repurchase a Mortgage Loan or REO Property which becomes 120 or
more days delinquent shall be set forth in the Mortgage Loan Purchase Agreement.
Section 3.17. Indenture Trustee to Cooperate; Release of
Files.
(a) Upon the payment in full of any Mortgage Loan (including
any liquidation of such Mortgage Loan through foreclosure or otherwise, or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes), the Servicer shall deliver to the
Indenture Trustee (or the Custodian as the case may be) two executed copies of a
completed "Request for Release" substantially in the form of Exhibit A. Upon
receipt of such Request for Release of Documents, the Indenture Trustee (or the
Custodian as the case may be) shall promptly release the related Mortgage File,
in trust to (i) the Servicer, or (ii) such other party identified in the related
Request for Release. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Servicer shall
direct the Indenture Trustee in writing to execute an instrument of satisfaction
(or assignment of Mortgage without recourse) regarding the Mortgaged Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall
21
be chargeable to the Collection Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Servicer may prepare and
submit to the Indenture Trustee a satisfaction (or assignment without recourse,
if requested by the Person or Persons entitled thereto) in form for execution by
the Indenture Trustee with all requisite information completed by the Servicer;
in such event, the Indenture Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related Mortgage File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any insurance
policy relating to a Mortgage Loan, the Indenture Trustee shall (except in the
case of the payment or liquidation pursuant to which the related Mortgage File
is released to an escrow agent or an employee, agent or attorney of the
Indenture Trustee), upon written request of the Servicer and delivery to the
Indenture Trustee (or the Custodian, as the case may be) of two executed copies
of a "Request for Release" substantially in the form of Exhibit A signed by a
Servicing Officer, release the related Mortgage File to the Servicer and shall
execute such documents as shall be necessary to the prosecution of any such
proceedings, including, without limitation, an assignment without recourse of
the related Mortgage to the Servicer. Such receipt shall obligate the Servicer
to return the Mortgage File to the Indenture Trustee (or the Custodian, as the
case may be) when the need therefor by the Servicer no longer exists unless the
Mortgage Loan shall be liquidated, in which case, upon receipt of a Request for
Release evidencing such liquidation, the receipt shall be released by the
Indenture Trustee (or the Custodian, as the case may be) to the Servicer.
(c) Subject to Section 3.01, the Servicer shall have the right
to accept applications of Mortgagors for consent to (i) partial releases of
Mortgages, (ii) alterations, (iii) removal, demolition or division of properties
subject to Mortgages and (iv) second mortgage subordination agreements. No
application for approval shall be considered by the Servicer unless: (w) it has
received an Opinion of Counsel, addressed to the Indenture Trustee (which
opinion shall not be an expense of the Indenture Trustee or the Trust Estate)
that such sale, disposition, substitution, acquisition or contribution will not
affect adversely the status of any REMIC constituting part of the Trust Estate
as a REMIC or cause any REMIC constituting part of the Trust Estate to be
subject to a tax on "prohibited transactions" or "contributions" pursuant to the
REMIC Provisions; (x) the provisions of the related Mortgage Note and Mortgage
have been complied with; (y) the Combined Loan-to-Value Ratio and debt-to-income
ratio after any release does not exceed the maximum Combined Loan-to-Value Ratio
and debt-to-income ratio established in accordance with the underwriting
standards of the Mortgage Loans; and (z) the lien priority of the related
Mortgage is not affected. Upon receipt by the Indenture Trustee of a Servicing
Officer's certificate setting forth the action proposed to be taken in respect
of a particular Mortgage Loan and certifying that the criteria set forth in the
immediately preceding sentence have been satisfied, the Indenture Trustee shall
execute and deliver to the Servicer the consent or partial release so requested
by the Servicer. A proposed form of consent or partial release, as the case may
be, shall accompany any Servicing Officer's certificate delivered by the
Servicer pursuant to this paragraph.
Section 3.18. Servicing Compensation.
22
As compensation for its activities hereunder, the Servicer
shall be entitled to retain the amount of the Servicing Fee with respect to each
Mortgage Loan (including REO Properties). The Servicer shall be entitled to
retain additional servicing compensation in the form of release fees, bad check
charges, assumption fees, modification or extension fees, late payment charges,
or any other service-related fees, Insurance Proceeds and Liquidation Proceeds
not required to be deposited in the Collection Account and similar items, to the
extent collected from Mortgagors. Additionally, the Servicer shall be entitled
to the Special Servicing Fee, payable in accordance with the Indenture.
Section 3.19. Annual Statement as to Compliance.
(a) The Servicer, at its own expense, will deliver to the
Indenture Trustee, the Issuer and the Depositor, not later than 90 days
following the end of the fiscal year of the Servicer which as of the Startup Day
ends on the last day of December, commencing in 2001, a Servicing Officer's
certificate stating, as to each signer thereof, that (i) a review of the
activities of the Servicer during such preceding fiscal year (or such shorter
period in the case of the first such report) and of performance under this
Servicing Agreement has been made under such officers' supervision, and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Servicing Agreement for such year, or,
if there has been a default in the fulfillment of all such obligations,
specifying each such default known to such officers and the nature and status
thereof including the steps being taken by the Servicer to remedy such default.
(b) Delivery of such reports, information and documents to the
Indenture Trustee is for informational purposes only and the Indenture Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable, from information contained therein, including
the Servicer's compliance with any of its covenants hereunder (as to which the
Indenture Trustee is entitled to rely exclusively on Officers' Certificates).
Section 3.20. Annual Independent Certified Public Accountants'
Reports.
(a) Not later than 90 days following the end of each fiscal
year of the Servicer commencing in 2001, the Servicer, at its expense, shall
cause a nationally recognized firm of independent certified public accountants
to furnish to the Indenture Trustee, the Issuer and the Depositor a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in either the Uniform Single Attestation Program for
Mortgage Bankers established by the Mortgage Bankers Association of America or
the Audit Program for Mortgages serviced by FHLMC, with respect to the servicing
of residential mortgage loans during the most recently completed fiscal year and
(ii) on the basis of an examination conducted by such firm in accordance with
standards established by the American Institute of Certified Public Accountants,
such representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate. Immediately upon
receipt of such report, the Servicer shall furnish a copy of such report to the
Indenture Trustee, the Issuer, the Depositor and each Rating Agency. Copies of
such statement shall be provided by the
23
Indenture Trustee to any Noteholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Indenture
Trustee.
(b) Delivery of such reports, information and documents to the
Indenture Trustee is for informational purposes only and the Indenture Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable, from information contained therein, including
the Servicer's compliance with any of its covenants hereunder (as to which the
Indenture Trustee is entitled to rely exclusively on Officers' Certificates).
(c) The Indenture Trustee shall, on behalf of the Trust
Estate, prepare, sign and file with the Securities and Exchange Commission any
and all reports, statements and information respecting the Trust Estate which
the Depositor determines are required to be filed with the Securities and
Exchange Commission pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, each such report, statement and information to
be filed on or prior to the required filing date for such report, statement or
information. Upon the request of the Indenture Trustee, each of the Servicer and
the Issuer shall cooperate with the Indenture Trustee in the preparation of any
such report and shall provide to the Indenture Trustee in a timely manner all
such information or documentation as the Indenture Trustee may reasonably
request in connection with the performance of its duties and obligations under
this Section.
Section 3.21. Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Servicer shall provide to the Indenture Trustee,
Noteholders that are federally insured savings and loan associations, the Office
of Thrift Supervision, the FDIC and the supervisory agents and examiners of each
of the foregoing (which, in the case of supervisory agents and examiners, may be
required by applicable state and federal regulations) access to the
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer designated by it.
Section 3.22. Reserved.
Section 3.23. Obligations of the Servicer in Respect of
Compensating Interest.
Not later than the close of business on each Servicer
Remittance Date, the Servicer shall deliver to the Indenture Trustee for deposit
in the Payment Account an amount ("Compensating Interest") equal to the lesser
of (A) the aggregate of the Prepayment Interest Shortfalls on the Actuarial
Mortgage Loans for the related Payment Date resulting from Principal Prepayments
on the Actuarial Mortgage Loans during the related Prepayment Period and (B) 50%
of its aggregate Servicing Fee received in the related Collection Period. The
Servicer shall apply Compensating Interest to offset any Prepayment Interest
Shortfalls on the Actuarial Mortgage Loans. The Servicer shall not have the
right to reimbursement for any amounts remitted to the Indenture Trustee in
respect of Compensating Interest. Such amounts so remitted shall be included in
the Available Funds and distributed therewith on the next Payment Date. The
Servicer shall not be obligated to
24
pay Compensating Interest with respect to Prepayment Interest Shortfalls on
Simple Interest Mortgage Loans or Relief Act Interest Shortfalls.
Section 3.24. Obligations of the Servicer in Respect of
Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Principal Balances that were
made by the Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Servicing Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Indenture Trustee
for deposit in the Payment Account from its own funds the amount of any such
shortfall and shall indemnify and hold harmless the Trust Estate, the Indenture
Trustee, the Issuer, the Depositor and any successor servicer in respect of any
such liability. Such indemnities shall survive the termination or discharge of
this Servicing Agreement.
Section 3.25. Investment of Funds in the Collection Account.
(a) The Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.25, an
"Investment Account"), to invest the funds in such Investment Account in one or
more Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Servicing Agreement, if a Person other than the
Indenture Trustee is the obligor thereon, and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Servicing Agreement, if the Indenture Trustee is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Servicer (in its capacity as such) or in the name of a nominee of the Indenture
Trustee. The Indenture Trustee shall be entitled to sole possession (except with
respect to investment direction of funds held in the Collection Account) over
each such investment and the income thereon, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Indenture Trustee or its agent, together with any document of transfer necessary
to transfer title to such investment to the Indenture Trustee or its nominee. In
the event amounts on deposit in an Investment Account are at any time invested
in a Permitted Investment payable on demand, the Indenture Trustee shall at the
direction of the Servicer:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an amount equal
to the lesser of (1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Indenture Trustee that
such Permitted Investment would not
25
constitute a Permitted Investment in respect of funds thereafter on
deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
in the Collection Account shall be for the benefit of the Servicer. The Servicer
shall deposit in the Collection Account the amount of any loss incurred in
respect of any such Permitted Investment made with funds in such account
immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Servicing
Agreement, if any default occurs in the making of a payment due under any
Permitted Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Indenture Trustee may and, subject to
Section 8.01 and Section 8.02(a)(v), upon the request of the Holders of Notes
representing more than 50% of the Voting Rights allocated to any Class of Notes,
shall take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings.
The Indenture Trustee shall not in any way be held liable by
reason of any insufficiency in any Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Investment included therein
(except to the extent that the Indenture Trustee is the obligor and has
defaulted thereon).
Section 3.26. Liability of Servicer; Indemnification.
(a) Subject to clause (b) below and Section 5.03, the Servicer
(except the Indenture Trustee if it is required to succeed the Servicer
hereunder) indemnifies and holds the Indenture Trustee, the Issuer, the Owner
Trustee, the Seller, the Depositor and each Noteholder harmless against any and
all claims, losses, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and any other costs, fees and expenses that the
Indenture Trustee, the Issuer, the Depositor and any Noteholder may sustain in
any way related to the failure of the Servicer to perform its duties and service
the Mortgage Loans in compliance with the Servicing Standards. The Servicer
shall immediately notify the Indenture Trustee, the Issuer, the Owner Trustee,
the Depositor and each Noteholder if a claim is made that may result in such
claims, losses, penalties, fines, forfeitures, legal fees or related costs,
judgments, or any other costs, fees and expenses, and the Servicer shall assume
(with the consent of the Indenture Trustee) the defense of any such claim and
pay all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Servicer, the Indenture Trustee, the Issuer, the Depositor and/or
Noteholder in respect of such claim. The provisions of this Section 3.26 shall
survive the termination of this Servicing Agreement and the payment of the
outstanding Note.
(b) Neither the Issuer nor the Servicer, nor any of the
directors, officers, employees or agents of the Issuer or the Servicer shall be
under any liability to the Trust Estate or the Noteholders for any action taken,
or for refraining from the taking of any action, in good faith pursuant to this
Servicing Agreement, or for errors in judgment; provided, however, that this
26
provision shall not protect the Issuer or the Servicer or any such Person
against any breach of warranties or representations made herein, or against any
specific liability imposed on the Servicer for a breach of the Servicing
Standard, or against any liability which would otherwise be imposed by reason of
its respective willful misfeasance, bad faith, fraud or negligence in the
performance of its duties or by reasons of negligent disregard of its respective
obligations or duties hereunder.
The Issuer, the Servicer and any director, officer, employee
or agent of the Issuer or the Servicer, may rely in good faith on any document
of any kind which, PRIMA FACIE, is properly executed and submitted by any
appropriate Person with respect to any matters arising hereunder. The Issuer,
the Servicer, and any director, officer, employee or agent of the Issuer or the
Servicer shall be indemnified and held harmless by the Trust Estate against any
loss, liability or expense incurred in connection with any legal action relating
to this Servicing Agreement or the Notes, other than any loss, liability or
expense incurred in connection with any legal action incurred by reason of its
respective misfeasance, bad faith, fraud or negligence, a breach of a
representation or warranty hereunder or (in the case of the Servicer) a breach
of the Servicing Standard in the performance of its respective duties or by
reason of negligent disregard of its respective obligations or duties hereunder.
Neither the Issuer nor the Servicer shall be under any obligation to appear in,
prosecute or defend any legal action unless such action is related to its
respective duties under this Servicing Agreement and in its opinion does not
expose it to any expense or liability; provided, however, that the Issuer or the
Servicer may in its discretion undertake any action related to its obligations
hereunder which it may deem necessary or desirable with respect to this
Servicing Agreement and the rights and duties of the parties hereto and the
interests of the Noteholders hereunder.
Section 3.27. Reports of Foreclosure and Abandonment of
Mortgaged Properties.
On or before the last day of February of each year beginning
in 2002, the Servicer shall file the reports of foreclosure and abandonment of
any Mortgaged Property required by Section 6050J of the Code with the Internal
Revenue Service and provide an Officer's Certificate certifying its compliance
with this Section 3.27 to the Indenture Trustee. The reports from the Servicer
shall be in form and substance sufficient to meet the reporting requirements
imposed by such Section 6050J.
27
ARTICLE IV
Advances
Section 4.01. Remittance Reports; Advances.
(a) On the second Business Day following each Determination
Date but in no event less than four Business Days prior to the related Payment
Date, the Servicer shall deliver to the Indenture Trustee by telecopy (or by
such other means as the Servicer and the Indenture Trustee may agree from time
to time) a Remittance Report with respect to the related Payment Date. On the
same date, the Servicer shall forward to the Indenture Trustee by overnight mail
a computer readable magnetic tape or diskette or in such other medium as may be
agreed between the Servicer and the Indenture Trustee containing the information
set forth in such Remittance Report with respect to the related Payment Date.
Not later than the close of business New York time on the fourth Business Day
prior to the related Payment Date, the Servicer shall deliver or cause to be
delivered to the Indenture Trustee in addition to the information provided on
the Remittance Report, such other information reasonably available to it with
respect to the Mortgage Loans as the Indenture Trustee may reasonably request or
order in order for the Indenture Trustee to perform the calculations necessary
to make the payments contemplated by the Indenture and to prepare the statements
to Noteholders contemplated by the Indenture. The Indenture Trustee shall not be
responsible to recompute, recalculate or verify any information provided to it
by the Servicer.
(b) The amount of Advances to be made by the Servicer for any
Payment Date shall equal, subject to Section 4.01(d), the aggregate amount of
Monthly Payments (net of the related Servicing Fee), due during the related
Collection Period in respect of the first lien Actuarial Mortgage Loans, which
Monthly Payments were delinquent on a contractual basis as of the close of
business on the related Determination Date. For purposes of the preceding
sentence, the Monthly Payment on each Balloon Mortgage Loan with a delinquent
Balloon Payment is equal to the assumed monthly payment that would have been due
on the related Due Date based on the original principal amortization schedule
for the such Balloon Mortgage Loan. The Servicer shall not be obligated to make
any Advance with respect to Simple Interest Mortgage Loans, REO Properties or
second or third lien Actuarial Mortgage Loans.
On or before the close of business New York time on the
Servicer Remittance Date, the Servicer shall remit in immediately available
funds to the Indenture Trustee for deposit in the Payment Account an amount
equal to the aggregate amount of Advances, if any, to be made in respect of the
Mortgage Loans for the related Payment Date either (i) from its own funds or
(ii) from the Collection Account, to the extent of funds held therein for future
payment (in which case it will cause to be made an appropriate entry in the
records of the Collection Account that amounts held for future payment have
been, as permitted by this Section 4.01, used by the Servicer in discharge of
any such Advance) or (iii) in the form of any combination of (i) and (ii)
aggregating the total amount of Advances to be made by the Servicer with respect
to the Mortgage Loans. Any amounts held for future payment and so used shall be
appropriately reflected in the Servicer's records and replaced by the Servicer
by deposit in the Collection Account on or before any future Servicer Remittance
28
Date to the extent that the Available Funds for the related Payment Date
(determined without regard to Advances to be made on the Servicer Remittance
Date) shall be less than the total amount that would be distributed to the
Classes of Noteholders pursuant to the Indenture on such Payment Date if such
amounts held for future payments had not been so used to make Advances. The
Indenture Trustee will provide notice to the Servicer by telecopy by the close
of business on any Servicer Remittance Date in the event that the amount
remitted by the Servicer to the Indenture Trustee on such date is less than the
Advances required to be made by the Servicer for the related Payment Date, as
set forth in the related Remittance Report.
(c) The obligation of the Servicer to make such Advances is
mandatory, notwithstanding any other provision of this Servicing Agreement but
subject to (d) below, and, with respect to any Mortgage Loan, shall continue
until the earlier of such time as the Trust Estate acquires title to the related
Mortgaged Property or such Mortgage Loan is paid in full by the Mortgagor or
disposed of by the Trust Estate, or until the recovery of all Liquidation
Proceeds thereon.
(d) Notwithstanding anything herein to the contrary, no
Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such Advance would, if made, constitute a Nonrecoverable Advance.
The determination by the Servicer that it has made a Nonrecoverable Advance or
that any proposed Advance, if made, would constitute a Nonrecoverable Advance,
shall be evidenced by an Officers' Certificate of the Servicer delivered to the
Issuer, the Depositor and the Indenture Trustee.
29
ARTICLE V
The Servicer
Section 5.01. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed upon and undertaken by the
Servicer herein.
Section 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer.
Any entity into which the Servicer may be merged or
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any corporation
succeeding to the business of the Servicer, shall be the successor of the
Servicer hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor Servicer shall satisfy
all the requirements of Section 6.02 with respect to the qualifications of a
successor Servicer.
Section 5.03. Limitation on Liability of the Servicer and
Others.
Neither the Servicer nor any of the directors or officers or
employees or agents of the Servicer shall be under any liability to the Issuer,
the Indenture Trustee, the Trust Estate or the Noteholders for any action taken
or for refraining from the taking of any action by the Servicer in good faith
pursuant to this Servicing Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such Person
against any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties of the
Servicer or by reason of its reckless disregard of its obligations and duties of
the Servicer hereunder; provided, further, that this provision shall not be
construed to entitle the Servicer to indemnity in the event that amounts
advanced by the Servicer to retire any senior lien exceed Liquidation Proceeds
(in excess of related liquidation expenses) realized with respect to the related
Mortgage Loan. The Servicer and any director or officer or employee or agent of
the Servicer may rely in good faith on any document of any kind PRIMA FACIE
properly executed and submitted by any Person respecting any matters arising
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer shall be indemnified from the Trust Estate and held harmless against
any loss, liability or expense incurred in connection with any legal action
relating to this Servicing Agreement or the Notes, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Servicing Agreement) and any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of its reckless disregard of
obligations and duties hereunder. The Servicer may undertake any such action
which it may deem necessary or desirable in respect of this Servicing Agreement,
and the rights and duties of the parties hereto and the interests of the
Noteholders
30
hereunder. In such event, the reasonable legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust Estate and the Servicer shall be entitled to be reimbursed therefor
only pursuant to Section 3.05. The Servicer's right to indemnity or
reimbursement pursuant to this Section shall survive any resignation or
termination of the Servicer pursuant to Section 5.04 or 6.01 with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination (or arising from events that occurred prior to such resignation or
termination). This paragraph shall apply to the Servicer solely in its capacity
as Servicer hereunder and in no other capacities.
Section 5.04. Servicer Not to Resign.
Subject to the provisions of Section 6.01 and Section 5.02,
the Servicer shall not resign from the obligations and duties hereby imposed on
it except (i) upon determination that the performance of its obligations or
duties hereunder are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it or its subsidiaries or Affiliates, the other activities of the Servicer
so causing such a conflict being of a type and nature carried on by the Servicer
or its subsidiaries or Affiliates at the date of this Servicing Agreement or
(ii) upon satisfaction of the following conditions: (a) the Servicer has
proposed a successor servicer to the Indenture Trustee and the Issuer in writing
and such proposed successor servicer is reasonably acceptable to the Indenture
Trustee and the Issuer; and (b) each Rating Agency shall have delivered a letter
to the Indenture Trustee and the Issuer prior to the appointment of the
successor servicer stating that the proposed appointment of such successor
servicer as Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Notes or the ratings that are in effect;
provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the
Indenture Trustee shall have assumed the Servicer's responsibilities and
obligations hereunder or the Indenture Trustee shall have designated a successor
servicer in accordance with Section 6.02. Any such resignation shall not relieve
the Servicer of responsibility for any of the obligations specified in Sections
6.01 and 6.02 as obligations that survive the resignation or termination of the
Servicer. Any such determination permitting the resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Indenture Trustee and the Issuer. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Indenture Trustee.
Section 5.05. Delegation of Duties.
In the ordinary course of business, the Servicer at any time
may delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those set forth in Section 3.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 5.04. The
Servicer shall provide the Indenture Trustee, the Issuer and the Rating Agencies
with 60 days prior written notice prior to the delegation of any of its duties
to any Person other than any of the Servicer's Affiliates or their respective
successors and assigns.
31
The Indenture Trustee and the Issuer hereby specifically (i)
consent to the pledge and assignment by the Servicer of all the Servicer's
right, title and interest in, to and under this Servicing Agreement to the
Servicing Rights Pledgee, for the benefit of certain lenders, and (ii) provided
that no Servicer Event of Termination exists, agree that upon delivery to the
Indenture Trustee and the Issuer by the Servicing Rights Pledgee of a letter
signed by the Servicer whereunder the Servicer shall resign as Servicer under
this Servicing Agreement, the Indenture Trustee shall appoint the Servicing
Rights Pledgee or its designee as successor Servicer, provided that at the time
of such appointment, the Servicing Rights Pledgee or such designee meets the
requirements of a successor Servicer pursuant to Section 6.02(a) and agrees to
be subject to the terms of this Servicing Agreement. If, pursuant to any
provision hereof, the duties of the Servicer are transferred to a successor, the
entire amount of the Servicing Fee and other compensation payable to the
Servicer pursuant hereto shall thereafter be payable to such successor.
Section 5.06. Optional Redemption of the Notes.
(a) The Servicer (or an affiliate of the Servicer) may, at its
option, purchase the Mortgage Loans in either Loan Group and redeem the Notes
and the IX/N Interest or IIX/N Interest, as applicable, on the next succeeding
Payment Date upon which the aggregate current Principal Balance of the Group I
Mortgage Loans or Group II Mortgage Loans, as applicable, is less than 10% of
the aggregate Principal Balance of the Group I Mortgage Loans or Group II
Mortgage Loans, as applicable, as of the Cut-Off Date by purchasing all of the
outstanding (i) Mortgage Loans in the related Loan Group at a price equal to the
sum of the outstanding Principal Balance of the related Mortgage Loans and
except to the extent previously advanced by the Servicer, accrued and unpaid
interest thereon at the weighted average of the Mortgage Rates through the end
of the Collection Period preceding the final Payment Date plus unreimbursed
Servicing Advances, Advances and any unpaid Servicing Fees and Special Servicing
Fees allocable to such Mortgage Loans and (ii) REO Properties in the related
Loan Group at a price equal to their fair market value as determined in good
faith by the Servicer (the "Redemption Price").
The Redemption Price for the Group II Notes must be sufficient
to equal the sum of (a) 100% of the aggregate Note Balance then outstanding, (b)
the aggregate of any Group II Allocated Realized Loss Amount on the Group II
Notes remaining unpaid immediately prior to such Payment Date, (c) the aggregate
of the Accrued Note Interest on the Group II Notes for such Payment Date, (d)
the aggregate of any LIBOR Carryover Amounts on the Group II Notes for such
Payment Date and (e) the aggregate of any Interest Carry Forward Amounts for
such Payment Date. The Servicer will not be permitted to terminate the Mortgage
Loans in Loan Group II unless the redemption price set forth in the previous
sentence is paid to the Holders of the Group II Notes.
In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deliver to the Indenture Trustee for deposit in
the Payment Account all amounts then on deposit in the Collection Account (less
amounts permitted to be withdrawn by the Servicer pursuant to Section 3.07),
which deposit shall be deemed to have occurred immediately following such
purchase.
32
Any such purchase shall be accomplished by delivery to the
Indenture Trustee for deposit into the Payment Account as part of Available
Funds on the Determination Date before such Payment Date of the Termination
Price.
(b) In order to exercise the foregoing options, the Servicer
shall, not less than 15 days prior to the proposed Payment Date on which such
redemption is to be made, deposit the aggregate redemption price specified in
(a) above or the aggregate redemption price for the partial redemption specified
in (b) above with the Indenture Trustee (and the Indenture Trustee shall deposit
such funds in the Payment Account), and shall provide written notice of its
exercise of such option to the Indenture Trustee and the Owner Trustee.
33
ARTICLE VI
Default
Section 6.01. Servicer Events of Termination.
(a) If any one of the following events ("Servicer Events of
Termination") shall occur and be continuing:
(i) (A) The failure by the Servicer to make any Advance; or
(B) any other failure by the Servicer to deposit in the Collection
Account or Payment Account any deposit required to be made under the
terms of this Servicing Agreement which continues unremedied for a
period of one Business Day after the date upon which written notice of
such failure shall have been given to the Servicer by the Indenture
Trustee or by any Holder of a Note evidencing at least 25% of the
Voting Rights; or
(ii) The failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days, or the failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Servicing Agreement, which failure
continues unremedied for a period of 30 days, after the date (A) on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Indenture
Trustee or by any Holder of a Note evidencing at least 25% of the
Voting Rights or (B) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or
(iv) The Servicer shall voluntarily go into liquidation,
consent to the appointment of a conservator or receiver or liquidator
or similar person in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property;
or a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall
have remained in force undischarged, unbonded or unstayed for a period
of 60 days; or the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
34
statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(v) The aggregate amount of cumulative Realized Losses
incurred since the Cut-Off Date through the last day of the related
Collection Period divided by the initial Pool Balance exceeds the
applicable percentages set forth below with respect to such Payment
Date:
PAYMENT DATE OCCURRING IN PERCENTAGE
------------------------- ----------
December 2001 through November 2005 3.00%
December 2005 through November 2006 3.75%
December 2006 through November 2007 4.25%
December 2007 and thereafter 4.75%
(b) Then, and in each and every such case, so long as a
Servicer Event of Termination shall not have been remedied within the applicable
grace period, (x) with respect solely to clause (i)(A) above, if such Advance is
not made by 2:00 P.M., New York time, on the Business Day immediately following
the Servicer Remittance Date, the Indenture Trustee may terminate all of the
rights and obligations of the Servicer under this Servicing Agreement and the
Indenture Trustee, or a successor servicer appointed in accordance with Section
6.02, shall immediately make such Advance and assume, pursuant to Section 6.02,
the duties of a successor Servicer and (y) in the case of (i)(B), (ii), (iii),
(iv) and (v) above, the Indenture Trustee shall, at the direction of the Holders
of each Class of Notes evidencing Percentage Interests aggregating not less than
51%, by notice then given in writing to the Servicer (and to the Indenture
Trustee if given by Holders of Notes), terminate all of the rights and
obligations of the Servicer as servicer under this Servicing Agreement. Any such
notice to the Servicer shall also be given to each Rating Agency, the Issuer,
the Depositor and the Seller. On or after the receipt by the Servicer (and by
the Indenture Trustee if such notice is given by the Holders) of such written
notice, all authority and power of the Servicer under this Servicing 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 and under this Section;
and, without limitation, the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and Related Documents or otherwise. The
Servicer agrees to cooperate with the Indenture Trustee (or the applicable
successor Servicer) in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the delivery to
the Indenture Trustee of all documents and records requested by it to enable it
to assume the Servicer's functions under this Servicing Agreement within ten
Business Days subsequent to such notice, the transfer within one Business Day
subsequent to such notice to the Indenture Trustee (or the applicable successor
Servicer) for the administration by it of all cash amounts that shall at the
time be held by the Servicer and to be deposited by it in the Collection
Account, the Payment Account, the Excess Reserve Fund Account, any REO Account
or any Escrow Account or that have been deposited by the Servicer in such
accounts or thereafter received by the Servicer with respect to the Mortgage
Loans or any REO
35
Property received by the Servicer. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the servicing to the
successor Servicer and amending this Servicing Agreement to reflect such
succession as Servicer pursuant to this Section shall be paid by the predecessor
Servicer (or if the predecessor Servicer is the Indenture Trustee, the initial
Servicer) upon presentation of reasonable documentation of such costs and
expenses.
Section 6.02. Indenture Trustee to Act; Appointment of
Successor.
(a) Within 90 days of the time the Servicer (and the Indenture
Trustee, if notice is sent by the Holders) receives a notice of termination
pursuant to Section 6.01 or 5.04, the Indenture Trustee (or such other successor
Servicer as is approved in accordance with this Servicing Agreement) shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Servicing Agreement and the transactions set forth or provided for herein
and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof
arising on and after its succession. As compensation therefor, the Indenture
Trustee (or such other successor Servicer) shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Servicer or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee shall
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 $50,000,000 as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided,
that the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the Notes or
the ratings that are in effect by the Rating Agencies as evidenced by a letter
to such effect from the Rating Agencies. Pending appointment of a successor to
the Servicer hereunder, unless the Indenture Trustee is prohibited by law from
so acting, the Indenture Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the compensation which the Servicer would otherwise have
received pursuant to Section 3.18 (or such other compensation as the Indenture
Trustee and such successor shall agree, not to exceed the Servicing Fee). The
successor servicer shall be entitled to withdraw from the Collection Account all
costs and expenses associated with the transfer of the servicing to the
successor servicer. The appointment of a successor servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Servicing
Agreement prior to its termination as Servicer to pay any deductible under an
insurance policy pursuant to Section 3.12 or to indemnify the Indenture Trustee
and other Persons pursuant to Section 3.26, nor shall any successor Servicer be
liable for any acts or omissions of the predecessor Servicer or for any breach
by such Servicer of any of its representations or warranties contained herein or
in any related document or agreement. The Indenture Trustee and such successor
shall take such action, consistent with this Servicing Agreement, as shall be
necessary to effectuate any such succession.
In the event of a Servicer Event of Termination,
notwithstanding anything to the contrary above, the Indenture Trustee and the
Issuer hereby agree that upon delivery to the Indenture
36
Trustee by the Servicing Rights Pledgee of a letter signed by the Servicer
within ten Business Days of when notification of such event shall have been
provided to the Indenture Trustee, whereunder the Servicer shall resign as
Servicer under this Servicing Agreement, the Indenture Trustee shall appoint the
Servicing Rights Pledgee or its designee as successor Servicer (provided that at
the time of such appointment the Servicing Rights Pledgee or such designee meets
the requirements of a successor Servicer set forth above) and the Servicing
Rights Pledgee agrees to be subject to the terms of this Servicing Agreement.
(b) Any successor, including the Indenture Trustee, to the
Servicer as servicer shall during the term of its service as servicer continue
to service and administer the Mortgage Loans for the benefit of Noteholders, and
maintain in force a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Servicer hereunder and a
Fidelity Bond in respect of its officers, employees and agents to the same
extent as the Servicer is so required pursuant to Section 3.12.
Section 6.03. Waiver of Defaults.
The Majority Noteholders may, on behalf of all Noteholders,
waive any events permitting removal of the Servicer as servicer pursuant to this
Article VI; provided, however, that the Majority Noteholders may not waive a
default in making a required payment on a Note without the consent of the Holder
of such Note. Upon any waiver of a past default, such default shall cease to
exist and any Servicer Event of Termination arising therefrom shall be deemed to
have been remedied for every purpose of this Servicing Agreement. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived. Notice of any such waiver
shall be given by the Indenture Trustee to the Rating Agencies.
Section 6.04. Notification to Noteholders.
(a) Upon any termination or appointment of a successor the
Servicer pursuant to this Article VI or Section 5.04, the Indenture Trustee
shall give prompt written notice thereof to the Noteholders at their respective
addresses appearing in the Note Register and each Rating Agency.
(b) No later than 60 days after the occurrence of any event
which constitutes or which, with notice or a lapse of time or both, would
constitute a Servicer Event of Termination for five Business Days after a
Responsible Officer of the Indenture Trustee becomes aware of the occurrence of
such an event, the Indenture Trustee shall transmit by mail to all Noteholders
notice of such occurrence unless such default or Servicer Event of Termination
shall have been waived or cured. Such notice shall be given to the Rating
Agencies promptly after any such occurrence.
Section 6.05. Survivability of Servicer Liabilities.
Notwithstanding anything herein to the contrary, upon
termination of the Servicer hereunder, any liabilities of the Servicer which
accrued prior to such termination shall survive such termination.
37
ARTICLE VII
Miscellaneous Provisions
Section 7.01. Amendment.
This Servicing Agreement may be amended from time to time by
the Issuer, the Indenture Trustee and the Servicer; provided that any amendment
be accompanied by a letter from the Rating Agencies to the effect that the
amendment will not result in the downgrading or withdrawal of the ratings then
assigned to the Notes.
Section 7.02. Governing Law; Jurisdiction.
This Servicing Agreement shall be construed in accordance with
the laws of the State of New York, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws. With
respect to any claim arising out of this Servicing Agreement, each party
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of
Manhattan in The City of New York, and each party irrevocably waives any
objection which it may have at any time to the laying of venue of any suit,
action or proceeding arising out of or relating hereto brought in any such
courts, irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such party, provided that service of process has been made by
any lawful means.
Section 7.03. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service,
to (a) in the case of the Indenture Trustee, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Structured Finance/SBMSVII 2001-CB4 (telecopy
number (▇▇▇) ▇▇▇-▇▇▇▇), or such other address as may hereafter be furnished to
the Issuer and the Servicer in writing by the Indenture Trustee, (b) in the case
of the Servicer, ▇▇▇▇▇▇ Loan Servicing LP, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or such other address as may be
furnished to the Issuer and the Indenture Trustee in writing by the Servicer and
(c) in the case of the Issuer (or the Owner Trustee on behalf of the Issuer),
c/o Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Administration (telecopy
number (▇▇▇) ▇▇▇-▇▇▇▇). Any notice required or permitted to be mailed to a
Noteholder shall be given by first class mail, postage prepaid, at the address
of such Holder as shown in the Note Register. Notice of any Servicer Event of
Termination shall be given by telecopy and by certified mail. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have duly been given when mailed, whether or not the
Noteholder
38
receives such notice. A copy of any notice required to be telecopied hereunder
shall also be mailed to the appropriate party in the manner set forth above.
Section 7.04. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Servicing Agreement shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Servicing Agreement and shall in no way affect the validity or enforceability of
the other provisions of this Servicing Agreement or of the Notes or the rights
of the Holders thereof.
Section 7.05. Article and Section References.
All article and Section references used in this Servicing
Agreement, unless otherwise provided, are to articles and Sections in this
Servicing Agreement.
Section 7.06. Notice to the Rating Agencies.
(a) Each of the Indenture Trustee, the Issuer and the Servicer
shall be obligated to use its best reasonable efforts promptly to provide notice
to the Rating Agencies with respect to each of the following of which a
Responsible Officer of the Indenture Trustee or Servicer, as the case may be,
has actual knowledge:
(i) any material change or amendment to this Servicing
Agreement;
(ii) the occurrence of any Servicer Event of Termination that
has not been cured or waived;
(iii) the resignation or termination of the Servicer;
(iv) any change in the location of any Account; and
(vi) if the Indenture Trustee is acting as successor Servicer
pursuant to Section 6.02 hereof, any event that would result in the
inability of the Indenture Trustee to make Advances.
(vii) In addition, the Servicer shall promptly furnish to each
Rating Agency copies of the following:
(A) each annual statement as to compliance described in
Section 3.19 hereof;
(B) each annual independent public accountants' servicing
report described in Section 3.20 hereof; and
39
(C) each notice delivered pursuant to Section 6.01(a) hereof
which relates to the fact that the Servicer has not made an Advance.
Any such notice pursuant to this Section 7.06 shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service to
Fitch, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇; Standard & Poor's Ratings Services, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇; and ▇▇▇▇▇'▇ Investors Services, Inc., ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇.
Section 7.07. Further Assurances.
Notwithstanding any other provision of this Servicing
Agreement, the Indenture Trustee shall not have any obligation to consent to any
amendment or modification of this Servicing Agreement unless it have been
provided reasonable security or indemnity against its out-of-pocket expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.
Section 7.08. Benefits of Servicing Agreement.
Nothing in this Servicing Agreement or in the Notes, expressed
or implied, shall give to any Person, other than the Noteholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Servicing Agreement.
Section 7.09. Benefits of Servicing Agreement.
It is expressly understood and agreed by the parties hereto
that (a) this Servicing Agreement is executed and delivered by Wilmington Trust
Company, not individually or personally but solely as Owner Trustee of Salomon
Mortgage Loan Trust, Series 2001-CB4, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of Salomon Mortgage Loan
Trust, Series 2001-CB4 is made and intended not as personal represenations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose of binding only the Issuer, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Servicing Agreement or any other related
documents.
40
IN WITNESS WHEREOF, the Servicer, the Indenture Trustee and
the Issuer have caused this Servicing Agreement to be duly executed by their
respective officers or representatives all as of the day and year first above
written.
▇▇▇▇▇▇ LOAN SERVICING LP,
as Servicer
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
SALOMON MORTGAGE LOAN TRUST, SERIES 2001-CB4
as Issuer
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Financial Services Officer
U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
EXHIBIT A
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
To: The Bank of New York
[Address]
Re: Servicing Agreement, dated as of December 14, 2001,
among U.S. Bank National Association, as Indenture
Trustee, ▇▇▇▇▇▇ Loan Servicing LP, as Servicer, and
Salomon Mortgage Loan Trust, Series 2001-CB4, as
Issuer
In connection with the administration of the Mortgage Loans
held by you as the Custodian on behalf of the Indenture Trustee, we request the
release, and acknowledge receipt, of the (Custodial File/[specify documents])
for the Mortgage Loan described below, for the reason indicated.
Mortgagor's Name Address & Zip Code:
-----------------------------------
Mortgage Loan Number:
--------------------
Reason for Requesting Documents (check one)
-------------------------------
_____ 1. Mortgage Loan Paid in Full. (The Servicer hereby certifies that
all amounts received in connection therewith have been credited
to the account of the Indenture Trustee.)
_____ 2. Mortgage Loan Liquidated By (The Servicer hereb certifies that
all proceeds of foreclosure, insurance, condemnation or other
liquidation have been finally received and credited to the
account of the Indenture Trustee.)
_____ 3. Mortgage Loan in Foreclosure
_____ 4. Other (explain)______________________________________________
If box 1 or 2 above is checked, and if all or part of the
Custodial File was previously released to us, please release to us our previous
request and receipt on file with you, as well as any additional documents in
your possession relating to the specified Mortgage Loan.
If box 3 or 4 above is checked, upon our return of all of the
above documents to you as the Custodian, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
▇▇▇▇▇▇ LOAN SERVICING LP,
as Servicer
By:________________________
Name:
Title:
Date:______________________
Acknowledgment of Documents returned to the Custodian:
THE BANK OF NEW YORK,
as Custodian
By:________________________
Name:
Title:
Date:______________________
EXHIBIT B
INELIGIBLE FORECLOSURE PROPERTY LOAN SCHEDULE
