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RESIDENTIAL FUNDING CORPORATION,
as Master Servicer
HOME LOAN TRUST 2006-HI1,
as Issuer
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
______________________
SERVICING AGREEMENT
Dated as of March 29, 2006
______________________
Home Loans
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...............................................................1
Section 1.01. Definitions.......................................................1
Section 1.02. Other Definitional Provisions.....................................1
Section 1.03. Interest Calculations.............................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES............................................2
Section 2.01. Representations and Warranties Regarding the Master Servicer......2
Section 2.02. Representations and Warranties of the Issuer......................3
Section 2.03. Enforcement of Representations and Warranties.....................4
ARTICLE III ADMINISTRATION AND SERVICING OF HOME LOANS................................5
Section 3.01. The Master Servicer...............................................5
Section 3.02. Collection of Certain Home Loan Payments..........................8
Section 3.03. Withdrawals from the Custodial Account...........................11
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses....12
Section 3.05. Modification Agreements; Release or Substitution of Lien.........13
Section 3.06. Trust Estate; Related Documents..................................14
Section 3.07. Realization Upon Defaulted Home Loans; Loss Mitigation...........15
Section 3.08. Issuer and Indenture Trustee to Cooperate........................17
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
Master Servicer..................................................18
Section 3.10. Annual Statement as to Compliance................................18
Section 3.11. Annual Independent Public Accountants' Servicing Report..........19
Section 3.12. Access to Certain Documentation and Information Regarding
the Home Loans...................................................19
Section 3.13. Maintenance of Certain Servicing Insurance Policies..............19
Section 3.14. Information Required by the Internal Revenue Service and
Reports of Foreclosures and Abandonments of Mortgaged
Property.........................................................20
Section 3.15. Optional Repurchase of Defaulted Home Loans......................20
Section 3.16. Limited Home Loan Repurchase Right...............................20
ARTICLE IV SERVICING CERTIFICATE....................................................20
Section 4.01. Statements to Securityholders....................................20
Section 4.02. Tax Reporting....................................................24
Section 4.03. Calculation of Adjusted Issue Price..............................24
Section 4.04. Exchange Act Reporting...........................................24
ARTICLE V PAYMENT ACCOUNT..........................................................25
Section 5.01. Payment Account..................................................25
ARTICLE VI THE MASTER SERVICER......................................................26
Section 6.01. Liability of the Master Servicer.................................26
Section 6.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Master Servicer..........................................26
Section 6.03. Limitation on Liability of the Master Servicer and Others........27
Section 6.04. Master Servicer Not to Resign....................................27
Section 6.05. Delegation of Duties.............................................28
Section 6.06. Master Servicer to Pay Indenture Trustee's and Owner
Trustee's Fees and Expenses; Indemnification.....................28
ARTICLE VII DEFAULT..................................................................29
Section 7.01. Servicing Default................................................29
Section 7.02. Indenture Trustee to Act; Appointment of Successor...............31
Section 7.03. Notification to Securityholders..................................33
ARTICLE VIII MISCELLANEOUS PROVISIONS.................................................33
Section 8.01. Amendment........................................................33
Section 8.02. GOVERNING LAW....................................................33
Section 8.03. Notices..........................................................33
Section 8.04. Severability of Provisions.......................................34
Section 8.05. Third-Party Beneficiaries........................................34
Section 8.06. Counterparts.....................................................34
Section 8.07. Effect of Headings and Table of Contents.........................34
Section 8.08. Termination Upon Purchase by the Master Servicer or
Liquidation of All Home Loans; Partial Redemption................34
Section 8.09. Certain Matters Affecting the Indenture Trustee..................35
Section 8.10. Owner Trustee Not Liable for Related Documents...................35
ARTICLE IX COMPLIANCE WITH REGULATION AB............................................36
Section 9.01. Intent of the Parties; Reasonableness............................36
Section 9.02. Additional Representations and Warranties of the Indenture
Trustee..........................................................36
Section 9.03. Information to Be Provided by the Indenture Trustee..............37
Section 9.04. Report on Assessment of Compliance and Attestation...............37
Section 9.05. Indemnification; Remedies........................................37
EXHIBIT A - HOME LOANS...................................................................A-1
EXHIBIT B - POWER OF ATTORNEY............................................................B-1
EXHIBIT C - FORM OF REQUEST FOR RELEASE .................................................C-1
EXHIBIT D - FORM OF FORM 10-K CERTIFICATE ...............................................D-1
EXHIBIT E - FORM OF BACK-UP CERTIFICATION TO FORM 10-K CERTIFICATE ......................E-1
EXHIBIT F - SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE ..............F-1
This is a Servicing Agreement, dated as of March 29, 2006 (the "Servicing
Agreement"), among Residential Funding Corporation (the "Master Servicer"), the Home Loan
Trust 2006-HI1 (the "Issuer") and JPMorgan Chase Bank, National Association (the "Indenture
Trustee").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of the Home Loan Purchase Agreement, Residential
Funding Corporation (in its capacity as Seller) will sell to the Depositor the Home Loans
together with the Related Documents on the Closing Date;
WHEREAS, the Depositor will sell the Home Loans and all of its rights under the Home
Loan Purchase Agreement to the Issuer, together with the Related Documents on the Closing
Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer will issue and
transfer to or at the direction of the Depositor, the Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue and transfer
to or at the direction of the Depositor, the Notes; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the Master Servicer will
service the Home Loans directly or through one or more Subservicers;
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 March 29, 2006 (the "Indenture"),
between Home Loan Trust 2006-HI1, as issuer and JPMorgan Chase 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.
Section 1.03... Interest Calculations. All calculations of interest hereunder that are made
in respect of the Loan Balance of a Home Loan shall be made in accordance with the Mortgage
Note. All calculations of interest on the Securities (other than the Class A-1 Notes) shall
be made on the basis of a 30-day month and a year assumed to consist of 360 days.
Calculation of interest on the Class A-1 Notes shall be made on the basis of the actual
number of days in the applicable Interest Accrual Period and a year assumed to consist of
360 days. The calculation of the Servicing Fee shall be made on the basis of a 30-day month
and a year assumed to consist of 360 days. All dollar amounts calculated hereunder shall be
rounded to the nearest xxxxx with one-half of one xxxxx being rounded up.
ARTICLE II.....
REPRESENTATIONS AND WARRANTIES
Section 2.01... Representations and Warranties Regarding the Master Servicer. The Master
Servicer represents and warrants to the Issuer and for the benefit of the Indenture Trustee,
as pledgee of the Home Loans, as of the Cut-off Date:
(i) The Master Servicer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power to own
its assets and to transact the business in which it is currently engaged. The Master
Servicer is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business transacted by it
or properties owned or leased by it requires such qualification and in which the
failure to so qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make, execute, deliver and perform
this Servicing Agreement and all of the transactions contemplated under this
Servicing Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Servicing Agreement. When executed and
delivered, this Servicing Agreement will constitute the legal, valid and binding
obligation of the Master Servicer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and by the availability of
equitable remedies;
(iii) The Master Servicer is not required to obtain the consent of any other Person or any
consent, license, approval or authorization from, or registration or declaration
with, any governmental authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this Servicing Agreement, except
for such consent, license, approval or authorization, or registration or declaration,
as shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and the performance of the
transactions contemplated hereby by the Master Servicer will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which the Master Servicer is
a party or by which the Master Servicer may be bound;
(v) No litigation or administrative proceeding of or before any court, tribunal or
governmental body is currently pending, or to the knowledge of the Master Servicer
threatened, against the Master Servicer or any of its properties or with respect to
this Servicing Agreement or the Securities which in the opinion of the Master
Servicer has a reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Servicing Agreement; and
(vi) The Master Servicer is a member of MERS in good standing, and will comply in all
material respects with the rules and procedures of MERS in connection with the
servicing of the Home Loans that are registered with MERS.
The foregoing representations and warranties shall survive any termination of the
Master Servicer hereunder.
Section 2.02. Representations and Warranties of the Issuer. The Issuer hereby represents
and warrants to the Master Servicer and for the benefit of the Indenture Trustee, as pledgee
of the Home Loans, as of the Cut-off Date:
(i) The Issuer is a statutory 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 require the authorization, consent or
approval of, the giving of notice to, the filing or registration with, or the taking
of any other action with respect to, any governmental authority or agency regulating
the activities of statutory trusts. 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. Enforcement of Representations and Warranties. The Master Servicer, on
behalf of and subject to the direction of the Indenture Trustee, as pledgee of the Home
Loans, or the Issuer, shall enforce the representations and warranties of the Seller
pursuant to the Home Loan Purchase Agreement. Upon the discovery by the Seller, the
Depositor, the Master Servicer, the Indenture Trustee, the Issuer, or any Custodian of a
breach of any of the representations and warranties made in the Home Loan Purchase Agreement
or of the existence of a Repurchase Event, in respect of any Home Loan which materially and
adversely affects the interests of the Securityholders, the party discovering such breach or
existence shall give prompt written notice to the other parties. The Master Servicer shall
promptly notify the Seller of such breach or existence and request that, pursuant to the
terms of the Home Loan Purchase Agreement, the Seller either (i) cure such breach or
Repurchase Event in all material respects within 45 days (with respect to a breach of the
representations and warranties contained in Section 3.1(a) of the Home Loan Purchase
Agreement or Repurchase Event) or 90 days (with respect to a breach of the representations
and warranties contained in Section 3.1(b) of the Home Loan Purchase Agreement) from the
date the Seller was notified of such breach or Repurchase Event or (ii) purchase such Home
Loan from the Issuer at the price and in the manner set forth in Section 3.1(c) of the Home
Loan Purchase Agreement; provided that the Seller shall, subject to compliance with all the
conditions set forth in the Home Loan Purchase Agreement, have the option to substitute an
Eligible Substitute Loan or Loans for such Home Loan. In the event that the Seller elects
to substitute one or more Eligible Substitute Loans pursuant to Section 3.1(c) of the Home
Loan Purchase Agreement, the Seller shall deliver to the Issuer with respect to such
Eligible Substitute Loans, the original Mortgage Note, the Mortgage, and such other
documents and agreements as are required by the Home Loan Purchase Agreement. Payments due
with respect to Eligible Substitute Loans in the month of substitution shall not be
transferred to the Issuer and will be retained by the Master Servicer and remitted by the
Master Servicer to the Seller on the next succeeding Payment Date provided a payment at
least equal to the applicable Monthly Payment has been received by the Issuer for such month
in respect of the Home Loan to be removed. The Master Servicer shall amend or cause to be
amended the Home Loan Schedule to reflect the removal of such Home Loan and the substitution
of the Eligible Substitute Loans and the Master Servicer shall promptly deliver the amended
Home Loan Schedule to the Owner Trustee and the Indenture Trustee.
It is understood and agreed that the obligation of the Seller to cure such breach or
purchase or substitute for such Home Loan as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such breach available to the Issuer
and the Indenture Trustee, as pledgee of the Home Loans, against the Seller. In connection
with the purchase of or substitution for any such Home Loan by the Seller, the Issuer shall
assign to the Seller all of its right, title and interest in respect of the Home Loan
Purchase Agreement applicable to such Home Loan. Upon receipt of the Repurchase Price, or
upon completion of such substitution, the Master Servicer shall notify the Custodian and
then the Custodian shall deliver the Mortgage Files to the Master Servicer, together with
all relevant endorsements and assignments prepared by the Master Servicer which the
Indenture Trustee shall execute.
ARTICLE III
ADMINISTRATION AND SERVICING
OF HOME LOANS
Section 3.01. The Master Servicer. (a) The Master Servicer shall service and administer
the Home Loans in accordance with the terms of this Servicing Agreement, following such
procedures as it would employ in its good faith business judgment and which are normal and
usual in its general mortgage servicing activities, and shall have full power and authority,
acting alone or through a Subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being understood,
however, that the Master Servicer shall at all times remain responsible to the Issuer and
the Indenture Trustee for the performance of its duties and obligations hereunder in
accordance with the terms hereof. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the Issuer and the
Indenture Trustee, as pledgee of the Home Loans, to execute and deliver, on behalf of
itself, the Issuer, the Indenture Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, or of consent to
modification in connection with a proposed conveyance, or of assignment of any Mortgage and
Mortgage Note in connection with the repurchase of a Home Loan and all other comparable
instruments with respect to the Home Loans and with respect to the Mortgaged Properties, or
with respect to the modification or re-recording of a Mortgage for the purpose of correcting
the Mortgage, the subordination of the lien of the Mortgage in favor of a public utility
company or government agency or unit with powers of eminent domain, the taking of a deed in
lieu of foreclosure, the commencement, prosecution or completion of judicial or non-judicial
foreclosure, the acquisition of any property acquired by foreclosure or deed in lieu of
foreclosure, or the management, marketing and conveyance of any property acquired by
foreclosure or deed in lieu of foreclosure. The Issuer, the Indenture Trustee and the
Custodian, as applicable, shall furnish the Master Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Master Servicer to carry out its
servicing and administrative duties hereunder. In addition, the Master Servicer may, at its
own discretion and on behalf of the Indenture Trustee, obtain credit information in the form
of a Credit Score from a credit repository. On the Closing Date, the Indenture Trustee
shall deliver to the Master Servicer a limited power of attorney substantially in the form
of Exhibit B hereto. The Master Servicer further is authorized and empowered by the Issuer
and the Indenture Trustee, on behalf of the Noteholders and the Indenture Trustee, in its
own name or in the name of the Subservicer, when the Master Servicer or the Subservicer, as
the case may be, believes it is appropriate in its best judgment to register any Home Loan
on the MERS(R)System, or cause the removal from the registration of any Home Loan on the
MERS(R)System, to execute and deliver, on behalf of the Indenture Trustee and the Noteholders
or any of them, any and all instruments of assignment and other comparable instruments with
respect to such assignment or re-recording of a Mortgage in the name of MERS, solely as
nominee for the Indenture Trustee and its successors and assigns. Any expenses incurred in
connection with the actions described in the preceding sentence shall be borne by the Master
Servicer in accordance with Section 3.09, with no right of reimbursement; provided, that if,
as a result of MERS discontinuing or becoming unable to continue operations in connection
with the MERS(R)System, it becomes necessary to remove any Home Loan from registration on the
MERS(R)System and to arrange for the assignment of the related Mortgages to the Indenture
Trustee, then any related expenses shall be reimbursable to the Master Servicer as set forth
in Section 3.03(ii).
If the Mortgage relating to a Home Loan did not have a lien senior to the Home Loan
on the related Mortgaged Property as of the Cut-off Date, then the Master Servicer, in such
capacity, may not consent to the placing of a lien senior to that of the Mortgage on the
related Mortgaged Property. If the Mortgage relating to a Home Loan had a lien senior to
the Home Loan on the related Mortgaged Property as of the Cut-off Date, then the Master
Servicer, in such capacity, may consent to the refinancing of the prior senior lien,
provided that the following requirements are met:
(i) (A) the Mortgagor's debt-to-income ratio resulting from such refinancing is
less than the original debt-to-income ratio as set forth on the Mortgage Loan
Schedule; provided, however, that in no instance shall the resulting Combined
Loan-to-Value Ratio of such Home Loan be higher than that permitted by the Program
Guide; or
(B) the resulting Combined Loan-to-Value Ratio of such Home Loan is no higher than the
Combined Loan-to-Value Ratio prior to such refinancing; provided, however, if such
refinanced mortgage loan is a "rate and term" mortgage loan (meaning, the Mortgagor
does not receive any cash from the refinancing), the Combined Loan-to-Value Ratio may
increase to the extent of either (a) the reasonable closing costs of such refinancing
or (b) any decrease in the value of the related Mortgaged Property, if the Mortgagor
is in good standing as defined by the Program Guide;
(ii) the interest rate, or, in the case of an adjustable rate existing senior lien, the
maximum interest rate, for the loan evidencing the refinanced senior lien is no more
than 2.0% higher than the interest rate or the maximum interest rate, as the case may
be, on the loan evidencing the existing senior lien immediately prior to the date of
such refinancing; provided, however (a) if the loan evidencing the existing senior
lien prior to the date of refinancing has an adjustable rate and the loan evidencing
the refinanced senior lien has a fixed rate, then the current interest rate on the
loan evidencing the refinanced senior lien may be up to 2.0% higher than the
then-current loan rate of the loan evidencing the existing senior lien and (b) if the
loan evidencing the existing senior lien prior to the date of refinancing has a fixed
rate and the loan evidencing the refinanced senior lien has an adjustable rate, then
the maximum interest rate on the loan evidencing the refinanced senior lien shall be
less than or equal to (x) the interest rate on the loan evidencing the existing
senior lien prior to the date of refinancing plus (y) 2.0%; and
(iii) the loan evidencing the refinanced senior lien is not subject to negative
amortization.
The relationship of the Master Servicer (and of any successor to the Master Servicer
as servicer under this Servicing Agreement) to the Issuer under this Servicing Agreement is
intended by the parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
(b) The Master Servicer may continue in effect Subservicing Agreements entered into by
Residential Funding and Subservicers prior to the execution and delivery of this Servicing
Agreement, and may enter into Subservicing Agreements with Subservicers for the servicing
and administration of certain of the Home Loans. Each Subservicer of a Home Loan shall be
entitled to receive and retain, as provided in the related Subservicing Agreement and in
Section 3.02, the related Subservicing Fee from payments of interest received on such Home
Loan after payment of all amounts required to be remitted to the Master Servicer in respect
of such Home Loan. For any Home Loan not subject to a Subservicing Agreement, the Master
Servicer shall be entitled to receive and retain an amount equal to the Subservicing Fee
from payments of interest. References in this Servicing Agreement to actions taken or to be
taken by the Master Servicer in servicing the Home Loans include actions taken or to be
taken by a Subservicer on behalf of the Master Servicer. Each Subservicing Agreement will
be upon such terms and conditions as are not inconsistent with this Servicing Agreement and
as the Master Servicer and the Subservicer have agreed. With the approval of the Master
Servicer, a Subservicer may delegate its servicing obligations to third-party servicers, but
such Subservicers will remain obligated under the related Subservicing Agreements. The
Master Servicer and the Subservicer may enter into amendments to the related Subservicing
Agreements; provided, however, that any such amendments shall not cause the Home Loans to
be serviced in a manner that would be materially inconsistent with the standards set forth
in this Servicing Agreement. The Master Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions thereof and without any
limitation by virtue of this Servicing Agreement; provided, however, that in the event of
termination of any Subservicing Agreement by the Master Servicer or the Subservicer, the
Master Servicer shall either act as servicer of the related Home Loan or enter into a
Subservicing Agreement with a successor Subservicer which will be bound by the terms of the
related Subservicing Agreement. The Master Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Master Servicer and nothing
contained in this Servicing Agreement shall be deemed to limit or modify such
indemnification. The Program Guide and any other Subservicing Agreement entered into
between the Master Servicer and any Subservicer shall require the Subservicer to accurately
and fully report its borrower credit files to each of the Credit Repositories in a timely
manner.
In the event that the rights, duties and obligations of the Master Servicer are
terminated hereunder, any successor to the Master Servicer in its sole discretion may, to
the extent permitted by applicable law, terminate the existing Subservicing Agreement with
any Subservicer in accordance with the terms of the applicable Subservicing Agreement or
assume the terminated Master Servicer's rights and obligations under such subservicing
arrangements which termination or assumption will not violate the terms of such arrangements.
As part of its servicing activities hereunder, the Master Servicer, for the benefit
of the Securityholders, shall use reasonable efforts to enforce the obligations of each
Subservicer under the related Subservicing Agreement, to the extent that the non-performance
of any such obligation would have a material adverse effect on a Home Loan. Such
enforcement, including, without limitation, the legal prosecution of claims, termination of
Subservicing Agreements and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Master Servicer would employ in
its good faith business judgment and which are normal and usual in its general mortgage
servicing activities. The Master Servicer shall pay the costs of such enforcement at its
own expense, and shall be reimbursed therefor only (i) from a general recovery resulting
from such enforcement to the extent, if any, that such recovery exceeds all amounts due in
respect of the related Home Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
Section 3.02. Collection of Certain Home Loan Payments. (a) The Master Servicer shall
make reasonable efforts to collect all payments called for under the terms and provisions of
the Home Loans, and shall, to the extent such procedures shall be consistent with this
Servicing Agreement and generally consistent with any related insurance policy, follow such
collection procedures as it would employ in its good faith business judgment and which are
normal and usual in its general mortgage servicing activities. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master Servicer may in
its discretion waive any late payment charge, prepayment charge or penalty interest or other
fees which may be collected in the ordinary course of servicing such Home Loan. The Master
Servicer may also extend the Due Date for payment due on a Home Loan in accordance with the
Program Guide, provided, however, that the Master Servicer shall first determine that any
such waiver or extension will not impair the coverage of any related insurance policy or
materially adversely affect the lien of the related Mortgage (except as described below) or
the interests of the Securityholders. Notwithstanding anything in this Section to the
contrary, the Master Servicer or any Subservicer shall not enforce any prepayment charge to
the extent that such enforcement would violate any applicable law. Consistent with the
terms of this Servicing Agreement, the Master Servicer may also:
(i) waive, modify or vary any term of any Home Loan;
(ii) consent to the postponement of strict compliance with any such term or in any manner
grant indulgence to any Mortgagor;
(iii) arrange with a Mortgagor a schedule for the payment of principal and interest due and
unpaid;
(iv) forgive any portion of the amounts contractually owed under the Home Loan;
(v) capitalize past due amounts owed under the Home Loan by adding any amounts in
arrearage to the existing principal balance of the Home Loan (a "Capitalization
Workout") of which will result in an increased Monthly Payment amount, provided that:
(A) the amount added to the existing principal balance of the Home Loan (the
"Capitalized Amount") shall be no greater than five times the Mortgagor's current
Monthly Payment amount; and (B) the Master Servicer shall not enter into a
Capitalization Workout unless the Combined Loan-to-Value Ratio of the Home Loan prior
to the Capitalization Workout equals or exceeds 80% and the Mortgagor has qualified
for the Capitalization Workout under the Master Servicer's servicing guidelines;
(vi) reset the Due Date for the Home Loan, or any combination of the foregoing;
if in the Master Servicer's determination such waiver, modification, postponement or
indulgence, arrangement or other action referred to above is not materially adverse to the
interests of the Securityholders and is generally consistent with the Master Servicer's
policies with respect to mortgage loans similar to those in the Home Loan Pool (meaning,
mortgage loans used for home improvement or debt consolidation); provided, however, that the
Master Servicer may not modify or permit any Subservicer to modify any Home Loan (including
without limitation any modification that would change the Loan Rate, forgive the payment of
any principal or interest (unless in connection with the liquidation of the related Home
Loan) or extend the final maturity date of such Home Loan) unless such Home Loan is in
default or, in the judgment of the Master Servicer, such default is reasonably foreseeable.
The general terms of any waiver, modification, forgiveness, postponement or indulgence with
respect to any of the Home Loans will be included in the Servicing Certificate, and such
Home Loans will not be considered "delinquent" for the purposes of the Basic Documents so
long as the Mortgagor complies with the terms of such waiver, modification, forgiveness,
postponement or indulgence.
(b) The Master Servicer shall establish a Custodial Account, which shall be an Eligible
Account in which the Master Servicer shall deposit or cause to be deposited any amounts
representing payments and collections in respect of the Home Loans received by it subsequent
to the Cut-off Date (other than in respect of the payments referred to in the following
paragraph) within one Business Day following receipt thereof (or otherwise on or prior to
the Closing Date), including the following payments and collections received or made by it
(without duplication):
(i) all payments of principal or interest on the Home Loans received by the Master
Servicer from the respective Subservicer, net of any portion of the interest thereof
retained by the Subservicer as Subservicing Fees;
(ii) the aggregate Repurchase Price of the Home Loans purchased by the Master Servicer
pursuant to Section 3.15 or by the Limited Repurchase Price Holder pursuant to
Section 3.16;
(iii) Net Liquidation Proceeds net of any related Foreclosure Profit;
(iv) all proceeds of any Home Loans repurchased by the Seller pursuant to the Home Loan
Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited
in connection with the substitution of an Eligible Substitute Loan pursuant to the
Home Loan Purchase Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds, resulting from any insurance
policy maintained on a Mortgaged Property; and
(vi) amounts required to be paid by the Master Servicer pursuant to Sections 3.04 and 8.08
and any prepayments or collections constituting prepayment charges.
provided, however, that with respect to each Collection Period, the Master Servicer shall be
permitted to retain from payments in respect of interest on the Home Loans, the Master
Servicing Fee for such Collection Period. The foregoing requirements respecting deposits to
the Custodial Account are exclusive, it being understood that, without limiting the
generality of the foregoing, the Master Servicer need not deposit in the Custodial Account
amounts representing Foreclosure Profits, fees (including annual fees) or late charge
penalties payable by Mortgagors (such amounts to be retained as additional servicing
compensation in accordance with Section 3.09 hereof), or amounts received by the Master
Servicer for the accounts of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. In the event any amount not required to
be deposited in the Custodial Account is so deposited, the Master Servicer may at any time
withdraw such amount from the Custodial Account, any provision herein to the contrary
notwithstanding. The Custodial Account may contain funds that belong to one or more trust
funds created for the notes or certificates of other series and may contain other funds
respecting payments on other mortgage loans belonging to the Master Servicer or serviced or
master serviced by it on behalf of others. Notwithstanding such commingling of funds, the
Master Servicer shall keep records that accurately reflect the funds on deposit in the
Custodial Account that have been identified by it as being attributable to the Home Loans
and shall hold all collections in the Custodial Account to the extent they represent
collections on the Home Loans for the benefit of the Trust, the Securityholders and the
Indenture Trustee, as their interests may appear. The Master Servicer shall retain all
Foreclosure Profits as additional servicing compensation.
The Master Servicer may cause the institution maintaining the Custodial Account to
invest any funds in the Custodial Account in Permitted Investments (including obligations of
the Master Servicer or any of its Affiliates, if such obligations otherwise qualify as
Permitted Investments), which investments shall mature not later than the Business Day
preceding the next succeeding Payment Date and which investments shall not be sold or
disposed of prior to maturity. Except as provided above, all income and gain realized from
any such investment shall inure to the benefit of the Master Servicer and shall be subject
to its withdrawal or order from time to time. The amount of any losses incurred in respect
of the principal amount of any such investments shall be deposited in the Custodial Account
by the Master Servicer out of its own funds immediately as realized.
(c) The Master Servicer shall require each Subservicer to hold all funds constituting
collections on the Home Loans, pending remittance thereof to the Master Servicer, in one or
more accounts meeting the requirements of an Eligible Account, and invested in Permitted
Investments.
Section 3.03. Withdrawals from the Custodial Account. The Master Servicer shall, from
time to time as provided herein, make withdrawals from the Custodial Account of amounts on
deposit therein pursuant to Section 3.02 that are attributable to the Home Loans for the
following purposes:
(i) to remit to the Paying Agent for deposit in the Payment Account, on the Business Day
prior to each Payment Date, an amount equal to the Interest Collections and Principal
Collections required to be distributed on such Payment Date and any payments or
collections constituting prepayment charges received during the related Prepayment
Period;
(ii) to the extent deposited to the Custodial Account, to reimburse itself or the related
Subservicer for previously unreimbursed expenses, made pursuant to Section 3.01,
incurred in maintaining individual insurance policies pursuant to Section 3.04, or
Liquidation Expenses, paid pursuant to Section 3.07 or otherwise reimbursable
pursuant to the terms of this Servicing Agreement (to the extent not payable pursuant
to Section 3.09), such withdrawal right being limited to amounts received on
particular Home Loans (other than any Repurchase Price in respect thereof) which
represent late recoveries of the payments for which such advances were made, or from
related Net Liquidation Proceeds or the proceeds of the purchase of such Home Loan;
(iii) to pay to itself out of each payment received on account of interest on a Home Loan
as contemplated by Section 3.09, an amount equal to the related Master Servicing Fee
(to the extent not retained pursuant to Section 3.02), and to pay to any Subservicer
any Subservicing Fees not previously withheld by the Subservicer;
(iv) to the extent deposited in the Custodial Account to pay to itself as additional
servicing compensation any interest or investment income earned on funds deposited in
the Custodial Account and Payment Account that it is entitled to withdraw pursuant to
Sections 3.02(b) and 5.01;
(v) to the extent deposited in the Custodial Account, to pay to itself as additional
servicing compensation any Foreclosure Profits;
(vi) to pay to itself or the Seller, with respect to any Home Loan or property acquired in
respect thereof that has been purchased or otherwise transferred to the Seller, the
Master Servicer, the Limited Repurchase Right Holder or other entity, all amounts
received thereon and not required to be distributed to Securityholders as of the date
on which the related Purchase Price or Repurchase Price is determined;
(vii) to clear and terminate the Custodial Account upon the termination of this Agreement;
and
(viii) to withdraw any other amount deposited in the Custodial Account that was not required
to be deposited therein pursuant to Section 3.02.
Since, in connection with withdrawals pursuant to clauses (ii), (iii), (v) and (vi),
the Master Servicer's entitlement thereto is limited to collections or other recoveries on
the related Home Loan, the Master Servicer shall keep and maintain separate accounting, on a
Home Loan by Home Loan basis, for the purpose of justifying any withdrawal from the
Custodial Account pursuant to such clauses. Notwithstanding any other provision of this
Servicing Agreement, the Master Servicer shall be entitled to reimburse itself for any
previously unreimbursed expenses incurred pursuant to Section 3.07 or otherwise reimbursable
pursuant to the terms of this Servicing Agreement that the Master Servicer determines to be
otherwise nonrecoverable (except with respect to any Home Loan as to which the Repurchase
Price has been paid), by withdrawal from the Custodial Account of amounts on deposit therein
attributable to the Home Loans on any Business Day prior to the Payment Date succeeding the
date of such determination.
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses. The Master
Servicer shall cause to be maintained for each Home Loan hazard insurance naming the Master
Servicer or related Subservicer as loss payee thereunder providing extended coverage in an
amount which is at least equal to at least 100% of the insurable value of the improvements
(guaranteed replacement) or the sum of the unpaid principal balance of the first mortgage
loan and the Home Loan amount. The Master Servicer shall also cause to be maintained on
property acquired upon foreclosure, or deed in lieu of foreclosure, of any Home Loan, fire
insurance with extended coverage in an amount which is at least equal to the amount
necessary to avoid the application of any co-insurance clause contained in the related
hazard insurance policy. Amounts collected by the Master Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the related Mortgaged
Property or property thus acquired or amounts released to the Mortgagor in accordance with
the Master Servicer's normal servicing procedures) shall be deposited in the Custodial
Account to the extent called for by Section 3.02. In cases in which any Mortgaged Property
is located at any time during the life of a Home Loan in a federally designated flood area,
the hazard insurance to be maintained for the related Home Loan shall include flood
insurance (to the extent available). All such flood insurance shall be in amounts equal to
the lesser of (i) the amount required to compensate for any loss or damage to the related
Mortgaged Property on a replacement cost basis and (ii) the maximum amount of such insurance
available for such Mortgaged Property under the national flood insurance program (assuming
that the area in which such Mortgaged Property is located is participating in such
program). The Master Servicer shall be under no obligation to require that any Mortgagor
maintain earthquake or other additional insurance and shall be under no obligation itself to
maintain any such additional insurance on property acquired in respect of a Home Loan, other
than pursuant to such applicable laws and regulations as shall at any time be in force and
as shall require such additional insurance. If the Master Servicer shall obtain and
maintain a blanket policy consistent with its general mortgage servicing activities insuring
against hazard losses on all of the Home Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section 3.04, it being
understood and agreed that such blanket policy may contain a deductible clause, in which
case the Master Servicer shall, in the event that there shall not have been maintained on
the related Mortgaged Property a policy complying with the first sentence of this Section
3.04 and there shall have been a loss which would have been covered by such policy, deposit
in the Custodial Account the amount not otherwise payable under the blanket policy because
of such deductible clause. Any such deposit by the Master Servicer shall be made on the
last Business Day of the Collection Period in the month in which payments under any such
policy would have been deposited in the Custodial Account. In connection with its
activities as servicer of the Home Loans, the Master Servicer agrees to present, on behalf
of itself, the Issuer and the Indenture Trustee, claims under any such blanket policy.
Section 3.05. Modification Agreements; Release or Substitution of Lien. (a) The Master
Servicer or the related Subservicer, as the case may be, shall be entitled to (A) execute
assumption agreements, modification agreements, substitution agreements, and instruments of
satisfaction or cancellation or of partial or full release or discharge, or any other
document contemplated by this Servicing Agreement and other comparable instruments with
respect to the Home Loans and with respect to the Mortgaged Properties subject to the
Mortgages (and the Issuer and the Indenture Trustee each shall promptly execute any such
documents on request of the Master Servicer) and (B) approve the granting of an easement
thereon in favor of another Person, any alteration or demolition of the related Mortgaged
Properties or other similar matters, in each case if it has determined, exercising its good
faith business judgment in the same manner as it would if it were the owner of the related
Home Loans, that the security for, and the timely and full collectability of, such Home
Loans would not be adversely affected thereby. A partial release pursuant to this Section
3.05 shall be permitted only if the Combined Loan-to-Value Ratio for such Home Loan after
such partial release does not exceed the Combined Loan-to-Value Ratio for such Home Loan as
of the Cut-off Date. Any fee collected by the Master Servicer or the related Subservicer
for processing such request will be retained by the Master Servicer or such Subservicer as
additional servicing compensation.
(b) The Master Servicer may enter into an agreement with a Mortgagor to release the lien
on the Mortgaged Property relating to a Home Loan (the "Existing Lien"), if at the time of
such agreement the Home Loan is current in payment of principal and interest, under any of
the following circumstances:
(i) in any case in which, simultaneously with the release of the Existing Lien, the
Mortgagor executes and delivers to the Master Servicer a Mortgage on a substitute
Mortgaged Property, provided that the Combined Loan-to-Value Ratio of the Home Loan
(calculated based on the Appraised Value of the substitute Mortgaged Property) is not
greater than the Combined Loan-to-Value Ratio prior to releasing the Existing Lien;
(ii) in any case in which, simultaneously with the release of the Existing Lien, the
Mortgagor executes and delivers to the Master Servicer a Mortgage on a substitute
Mortgaged Property, provided that: (A) the Combined Loan-to-Value Ratio of the Home
Loan (calculated based on the Appraised Value of the substitute Mortgaged Property)
is not greater than the lesser of (1) 125% and (2) 105% of the Combined Loan-to-Value
Ratio prior to releasing the Existing Lien; and (B) the Master Servicer determines
that at least two appropriate compensating factors are present (compensating factors
may include, without limitation, an increase in the Mortgagor's monthly cash flow
after debt service, the Mortgagor's debt-to-income ratio has not increased since
origination, or an increase in the Mortgagor's credit score); or
(iii) in any case in which, at the time of release of the Existing Lien, the Mortgagor does
not provide the Master Servicer with a Mortgage on a substitute Mortgaged Property
(any Home Loan that becomes and remains unsecured in accordance with this subsection,
an "Unsecured Loan"), provided that: (A) the Mortgagor, in addition to being current
in payment of principal and interest on the related Home Loan, is current in payment
of principal and interest on any loan senior to the Home Loan; (B) the Mortgagor's
Credit Score, as determined by the Master Servicer at the time of the request for
release of lien, is not less than 640; (C) the Mortgagor makes a cash contribution in
reduction of the outstanding principal balance of the Home Loan, which may include
any net proceeds from the sale of the original Mortgaged Property, of not less than
20% of the unpaid principal balance of the Home Loan; and (D) the Mortgagor signs a
reaffirmation agreement acknowledging that they must continue to pay in accordance
with the terms of the original Mortgage Note;
(iv) If the above conditions (iii)(A) through (iii)(D) are not met, the Master Servicer
may still enter into an agreement to release the Existing Lien, provided that:
(A) the Master Servicer shall not permit the release of an Existing Lien under this
clause (iv) as to more than 200 Home Loans in any calendar year; (B) at no time shall
the aggregate Principal Balance of Unsecured Loans exceed 5% of the then Pool
Balance; (C) the Mortgagor agrees to an automatic debit payment plan; and (D) the
Master Servicer shall provide notice to each Rating Agency that has requested notice
of such releases.
In connection with any Unsecured Loan, the Master Servicer may require the Mortgagor
to enter into an agreement under which: (i) the Loan Rate may be increased effective until
a substitute Mortgage meeting the criteria under (i) or (ii) above is provided; or (ii) any
other provision may be made which the Master Servicer considers to be appropriate.
Thereafter, the Master Servicer shall determine in its discretion whether to accept any
proposed Mortgage on any substitute Mortgaged Property as security for the Home Loan, and
the Master Servicer may require the Mortgagor to agree to any further conditions which the
Master Servicer considers appropriate in connection with such substitution, which may
include a reduction of the Loan Rate (but not below the Loan Rate in effect at the Closing
Date). Any Home Loan as to which a Mortgage on a substitute Mortgaged Property is provided
in accordance with the preceding sentence shall no longer be deemed to be an Unsecured Loan.
Section 3.06. Trust Estate; Related Documents. (a) When required by the provisions of
this Servicing Agreement, the Issuer or the Indenture Trustee shall execute instruments to
release property from the terms of the Trust Agreement, Indenture or Custodial Agreement, as
applicable, or convey the Issuer's or the Indenture Trustee's interest in the same, in a
manner and under circumstances which are not inconsistent with the provisions of this
Servicing Agreement. No party relying upon an instrument executed by the Issuer or the
Indenture Trustee as provided in this Section 3.06 shall be bound to ascertain the Issuer's
or the Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
(b) If from time to time the Master Servicer shall deliver to the Custodian copies of any
written assurance, assumption agreement or substitution agreement or other similar agreement
pursuant to Section 3.05, the Custodian shall check that each of such documents purports to
be an original executed copy (or a copy of the original executed document if the original
executed copy has been submitted for recording and has not yet been returned) and, if so,
shall file such documents, and upon receipt of the original executed copy from the
applicable recording office or receipt of a copy thereof certified by the applicable
recording office shall file such originals or certified copies with the Related Documents.
If any such documents submitted by the Master Servicer do not meet the above qualifications,
such documents shall promptly be returned by the Custodian to the Master Servicer pursuant
to the related Custodial Agreement, with a direction to the Master Servicer to forward the
correct documentation.
(c) Upon receipt of a Request for Release from the Master Servicer substantially in the
form of Exhibit C, to the effect that a Home Loan has been the subject of a final payment or
a prepayment in full and the related Home Loan has been terminated or that substantially all
Liquidation Proceeds which have been determined by the Master Servicer in its reasonable
judgment to be finally recoverable have been recovered, and upon deposit to the Custodial
Account of such final monthly payment, prepayment in full together with accrued and unpaid
interest to the date of such payment with respect to such Home Loan or, if applicable, Net
Liquidation Proceeds, the Custodian shall promptly release the Related Documents to the
Master Servicer pursuant to the related Custodial Agreement, which the Indenture Trustee
shall execute, along with such documents as the Master Servicer or the related Mortgagor may
request to evidence satisfaction and discharge of such Home Loan, upon request of the Master
Servicer. If from time to time and as appropriate for the servicing or foreclosure of any
Home Loan, the Master Servicer requests the Custodian to release the Related Documents and
delivers to the Custodian a trust receipt reasonably satisfactory to the Custodian and
signed by a Responsible Officer of the Master Servicer, the Custodian shall release the
Related Documents to the Master Servicer pursuant to the related Custodial Agreement. If
such Home Loans shall be liquidated and the Custodian receives a certificate from the Master
Servicer as provided above, then, upon request of the Master Servicer, the Custodian shall
release the trust receipt to the Master Servicer pursuant to the related Custodial Agreement.
Section 3.07. Realization Upon Defaulted Home Loans; Loss Mitigation. With respect to
such of the Home Loans as come into and continue in default, the Master Servicer shall
decide whether to (i) foreclose upon the Mortgaged Properties securing such Home Loans, (ii)
write off the unpaid principal balance of the Home Loans as bad debt, (iii) take a deed in
lieu of foreclosure, (iv) accept a short sale (a payoff of the Home Loan for an amount less
than the total amount contractually owed in order to facilitate a sale of the Mortgaged
Property by the Mortgagor) or permit a short refinancing (a payoff of the Home Loan for an
amount less than the total amount contractually owed in order to facilitate refinancing
transactions by the Mortgagor not involving a sale of the Mortgaged Property), (v) arrange
for a repayment plan, (vi) agree to a modification in accordance with this Servicing
Agreement, or (vii) take an unsecured note, in connection with a negotiated release of the
lien of the Mortgage in order to facilitate a settlement with the Mortgagor; in each case
subject to the rights of any related first lien holder; provided that in connection with the
foregoing if the Master Servicer has actual knowledge that any Mortgaged Property is
affected by hazardous or toxic wastes or substances and that the acquisition of such
Mortgaged Property would not be commercially reasonable, then the Master Servicer shall not
cause the Issuer or the Indenture Trustee to acquire title to such Mortgaged Property in a
foreclosure or similar proceeding. In connection with such decision, the Master Servicer
shall follow such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default if deemed to be appropriate by
the Master Servicer) and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general mortgage servicing activities and as shall be required or
permitted by the Program Guide; provided that the Master Servicer shall not be liable in any
respect hereunder if the Master Servicer is acting in connection with any such foreclosure
or attempted foreclosure which is not completed or other conversion in a manner that is
consistent with the provisions of this Servicing Agreement. The foregoing is subject to the
proviso that the Master Servicer shall not be required to expend its own funds in connection
with any foreclosure or attempted foreclosure which is not completed or towards the
correction of any default on a related senior mortgage loan or restoration of any property
unless it shall determine that such expenditure will increase Net Liquidation Proceeds. In
the event of a determination by the Master Servicer that any such expenditure previously
made pursuant to this Section 3.07 will not be reimbursable from Net Liquidation Proceeds,
the Master Servicer shall be entitled to reimbursement of its funds so expended pursuant to
Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Home Loan may be deemed
to be finally liquidated if substantially all amounts expected by the Master Servicer to be
received in connection with the related defaulted Home Loan have been received; provided,
however, the Master Servicer shall treat any Home Loan that is 180 days or more delinquent
as having been finally liquidated. Any subsequent collections with respect to any such Home
Loan shall be deposited to the Custodial Account. For purposes of determining the amount of
any Liquidation Proceeds or Insurance Proceeds, or other unscheduled collections, the Master
Servicer may take into account minimal amounts of additional receipts expected to be
received or any estimated additional liquidation expenses expected to be incurred in
connection with the related defaulted Home Loan.
In the event that title to any Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or certificate of sale shall be issued to the
Indenture Trustee, who shall hold the same on behalf of the Issuer in accordance with
Section 3.13 of the Indenture. Notwithstanding any such acquisition of title and
cancellation of the related Home Loan, such Mortgaged Property shall (except as otherwise
expressly provided herein) be considered to be an outstanding Home Loan held as an asset of
the Issuer until such time as such property shall be sold.
Any proceeds from the purchase or repurchase that occurs prior to the Home Loan
becoming a Liquidated Home Loan of any Home Loan pursuant to the terms of this Servicing
Agreement (including without limitation Sections 2.03, 3.15 and 3.16) will be applied in the
following order of priority: first, to the Master Servicer or the related Subservicer, all
Servicing Fees payable therefrom to the Payment Date on which such amounts are to be
deposited in the Payment Account; second, as Interest Collections, accrued and unpaid
interest on the related Home Loan, at the Net Loan Rate to the Payment Date on which such
amounts are to be deposited in the Payment Account; and third, as Principal Collections, as
a recovery of principal on the Home Loan.
Liquidation Proceeds with respect to a Liquidated Home Loan will be applied in the
following order of priority: first, to reimburse the Master Servicer or the related
Subservicer in accordance with this Section 3.07 for any Liquidation Expenses; second, to
the Master Servicer or the related Subservicer, all unpaid Servicing Fees through the date
of receipt of the final Liquidation Proceeds; third, as Principal Collections, as a recovery
of principal on the Home Loan, up to an amount equal to the Loan Balance of the related Home
Loan immediately prior to the date it became a Liquidated Home Loan; fourth, as Interest
Collections, accrued and unpaid interest on the related Home Loan at the Net Loan Rate
through the date of receipt of the final Liquidation Proceeds; and fifth, to Foreclosure
Profits.
Proceeds and other recoveries from a Home Loan after it becomes a Liquidated Home
Loan will be applied in the following order of priority: first, to reimburse the Master
Servicer or the related Subservicer in accordance with this Section 3.07 for any expenses
previously unreimbursed from Liquidation Proceeds or otherwise; second, to the Master
Servicer or the related Subservicer, all unpaid Servicing Fees payable thereto through the
date of receipt of the proceeds previously unreimbursed from Liquidation Proceeds or
otherwise; third, as Interest Collections, up to an amount equal to the sum of (a) the Loan
Balance of the related Home Loan immediately prior to the date it became a Liquidated Home
Loan, less any Net Liquidation Proceeds previously received with respect to such Home Loan
and applied as a recovery of principal, and (b) accrued and unpaid interest on the related
Home Loan at the Net Loan Rate through the date it became a Liquidation Home Loan; and
fourth, to Foreclosure Profits.
Section 3.08. Issuer and Indenture Trustee to Cooperate. On or before each Payment Date,
the Master Servicer will notify the Indenture Trustee or the Custodian, with a copy to the
Issuer, of the termination of or the payment in full and the termination of any Home Loan
during the preceding Collection Period. Upon receipt of payment in full, the Master
Servicer is authorized to execute, pursuant to the authorization contained in Section 3.01,
if the assignments of Mortgage have been recorded if required under the Home Loan Purchase
Agreement, an instrument of satisfaction regarding the related Mortgage, which instrument of
satisfaction shall be recorded by the Master Servicer if required by applicable law and be
delivered to the Person entitled thereto, and to cause the removal from the registration on
the MERS(R)System of such Mortgage, if applicable. It is understood and agreed that any
expenses incurred in connection with such instrument of satisfaction or transfer shall be
reimbursed from amounts deposited in the Custodial Account. From time to time and as
appropriate for the servicing or foreclosure of any Home Loan, the Indenture Trustee or the
Custodian shall, upon request of the Master Servicer and delivery to the Indenture Trustee
or Custodian, with a copy to the Issuer, of a Request for Release, signed by a Servicing
Officer, release or cause to be released the related Mortgage File to the Master Servicer
and the Issuer or Indenture Trustee shall promptly execute such documents, in the forms
provided by the Master Servicer, as shall be necessary for the prosecution of any such
proceedings or the taking of other servicing actions. Such trust receipt shall obligate the
Master Servicer to return the Mortgage File to the Indenture Trustee or the Custodian (as
specified in such receipt) when the need therefor by the Master Servicer no longer exists
unless the Home Loan shall be liquidated, in which case, upon receipt of a certificate of a
Servicing Officer similar to that hereinabove specified, the trust receipt shall be released
to the Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any Home Loan that is
in default following recordation of the related Assignment of Mortgage in accordance with
the provisions of the Home Loan Purchase Agreement, the Indenture Trustee or the Issuer
shall, if so requested in writing by the Master Servicer, promptly execute an appropriate
assignment in the form provided by the Master Servicer to assign such Home Loan for the
purpose of collection to the Master Servicer (any such assignment shall unambiguously
indicate that the assignment is for the purpose of collection only), and, upon such
assignment, such assignee for collection will thereupon bring all required actions in its
own name and otherwise enforce the terms of the Home Loan and deposit or credit the Net
Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect thereto in the
Custodial Account. In the event that all delinquent payments due under any such Home Loan
are paid by the Mortgagor and any other defaults are cured, then the assignee for collection
shall promptly reassign such Home Loan to the Indenture Trustee and return all Related
Documents to the place where the related Mortgage File was being maintained.
In connection with the Issuer's obligation to cooperate as provided in this Section
3.08 and all other provisions of this Servicing Agreement requiring the Issuer to authorize
or permit any actions to be taken with respect to the Home Loans, the Indenture Trustee, as
pledgee of the Home Loans and as assignee of record of the Home Loans on behalf of the
Issuer pursuant to Section 3.13 of the Indenture, expressly agrees, on behalf of the Issuer,
to take all such actions on behalf of the Issuer and to promptly execute and return all
instruments reasonably required by the Master Servicer in connection therewith; provided
that if the Master Servicer shall request a signature of the Indenture Trustee, on behalf of
the Issuer, the Master Servicer shall deliver to the Indenture Trustee an Officer's
Certificate stating that such signature is necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties under this Servicing
Agreement.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master Servicer. The
Master Servicer shall be entitled to receive the Master Servicing Fee in accordance with
Sections 3.02 and 3.03 as compensation for its services in connection with servicing the
Home Loans. Moreover, additional servicing compensation in the form of late payment
charges, investment income on amounts in the Custodial Account or the Payment Account and
other receipts not required to be deposited in the Custodial Account as specified in Section
3.02 shall be retained by the Master Servicer. The Master Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder (including payment
of all other fees and expenses not expressly stated hereunder to be for the account of the
Securityholders, including, without limitation, the fees and expenses of the Owner Trustee,
Indenture Trustee and any Custodian) and shall not be entitled to reimbursement therefor.
Section 3.10. Annual Statement as to Compliance. (a) The Master Servicer will deliver to
the Depositor and the Indenture Trustee on or before the earlier of (a) March 31 of each
year or (b) with respect to any calendar year during which the Depositor's annual report on
Form 10-K is required to be filed in accordance with the Exchange Act and the rules and
regulations of the Commission, the date on which the annual report on Form 10-K is required
to be filed in accordance with the Exchange Act and the rules and regulations of the
Commission, a servicer compliance certificate, signed by an authorized officer of the Master
Servicer, as described in Item 1123 of Regulation AB, to the effect that:
(i) A review of the Master Servicer's activities during the reporting period and of its
performance under this Servicing Agreement has been made under such officer's
supervision.
(ii) To the best of such officer's knowledge, based on such review, the Master Servicer
has fulfilled all of its obligations under this Servicing Agreement in all materials
respects throughout the reporting period or, if there has been a failure to fulfill
any such obligation in any material respect, specifying each such failure known to
such officer and the nature and status thereof.
The Master Servicer shall use commercially reasonable efforts to obtain from all
other parties participating in the servicing function any additional certifications required
under Item 1123 of Regulation AB to the extent required to be included in a Report on Form
10-K; provided, however, that a failure to obtain such certifications shall not be a breach
of the Master Servicer's duties hereunder if any such party fails to deliver such a
certification.
(b) The Master Servicer shall deliver to the Issuer and the Indenture Trustee, promptly
after having obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time or both, would become a Servicing Default.
Section 3.11. Annual Independent Public Accountants' Servicing Report. On or before the
earlier of (a) March 31 of each year or (b) with respect to any calendar year during which
the Depositor's annual report on Form 10-K is required to be filed in accordance with the
Exchange Act and the rules and regulations of the Commission, the date on which the annual
report is required to be filed in accordance with the Exchange Act and the rules and
regulations of the Commission, the Master Servicer at its expense shall cause a firm of
independent public accountants, which shall be members of the American Institute of
Certified Public Accountants, to furnish a report to the Depositor and the Indenture Trustee
the attestation required under Item 1122(b) of Regulation AB. In rendering such statement,
such firm may rely, as to matters relating to the direct servicing of home loans by
Subservicers, upon comparable statements for examinations conducted by independent public
accountants substantially in accordance with standards established by the American Institute
of Certified Public Accountants (rendered within one year of such statement) with respect to
such Subservicers.
Section 3.12. Access to Certain Documentation and Information Regarding the Home Loans.
Whenever required by statute or regulation, the Master Servicer shall provide to any
Securityholder upon reasonable request (or a regulator for a Securityholder) or the
Indenture Trustee, reasonable access to the documentation regarding the Home Loans such
access shall be afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Master Servicer. Nothing in this Section 3.12 shall
derogate from the obligation of the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure of the Master
Servicer to provide access as provided in this Section 3.12 as a result of such obligation
shall not constitute a breach of this Section 3.12.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The Master Servicer
shall during the term of its service as servicer maintain in force (i) a policy or policies
of insurance covering errors and omissions in the performance of its obligations as master
servicer hereunder and (ii) a fidelity bond in respect of its officers, employees or
agents. Each such policy or policies and fidelity bond shall be at least equal to the
coverage that would be required by FNMA or FHLMC, whichever is greater, for Persons
performing servicing for loans similar to the Home Loans purchased by such entity.
Section 3.14. Information Required by the Internal Revenue Service and Reports of
Foreclosures and Abandonments of Mortgaged Property. The Master Servicer shall prepare and
deliver all federal and state information reports when and as required by all applicable
state and federal income tax laws. In particular, with respect to the requirement under
Section 6050J of the Code to the effect that the Master Servicer or Subservicer shall make
reports of foreclosures and abandonments of any mortgaged property for each year beginning
in 2006, the Master Servicer or Subservicer shall file reports relating to each instance
occurring during the previous calendar year in which the Master Servicer (i) on behalf of
the Issuer, acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Home Loan, or (ii) knows or has
reason to know that any Mortgaged Property has been abandoned. The reports from the Master
Servicer or Subservicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Section 6050J and Section 6050H (reports relating to mortgage
interest received) of the Code.
Section 3.15. Optional Repurchase of Defaulted Home Loans. Notwithstanding any provision
in Section 3.07 to the contrary, the Master Servicer, at its option and in its sole
discretion, may repurchase any Home Loan delinquent in payment for a period of 90 days or
longer for a price equal to the Repurchase Price.
Section 3.16. Limited Home Loan Repurchase Right. The Limited Repurchase Right Holder
will have the irrevocable option at any time to purchase any of the Home Loans at the
Repurchase Price, up to a maximum of five Home Loans. In the event that this option is
exercised as to any five Home Loans in the aggregate, this option will thereupon terminate.
If at any time the Limited Repurchase Right Holder makes a payment to the Custodial Account
covering the amount of the Repurchase Price for such a Home Loan, and the Limited Repurchase
Right Holder provides to the Indenture Trustee a certification signed by a Servicing Officer
stating that the amount of such payment has been deposited in the Custodial Account, then,
at the request of the Limited Repurchase Right Holder, the Indenture Trustee shall execute
the assignment of such Home Loan, without recourse, to the Limited Repurchase Right Holder
which shall succeed to all the Indenture Trustee's right, title and interest in and to such
Home Loan, and all security and documents relative thereto. Such assignment shall be an
assignment outright and not for security. The Limited Repurchase Right Holder will
thereupon own such Mortgage, and all such security and documents, free of any further
obligation to the Indenture Trustee with respect thereto.
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Statements to Securityholders. (a) With respect to each Payment Date, on
the Business Day following the related Determination Date, the Master Servicer shall forward
to the Indenture Trustee and the Indenture Trustee pursuant to Section 3.26 of the Indenture
shall forward or cause to be forwarded by mail or otherwise make available electronically at
xxx.xxxxxxxx.xxx/xxx to each Certificateholder, Noteholder, the Depositor, the Owner
Trustee, the Certificate Paying Agent and each Rating Agency, a statement setting forth the
following information (the "Servicing Certificate") as to the Notes and Certificates, to the
extent applicable:
(i) the applicable Record Date, Determination Date and Payment Date;
(ii) the aggregate amount of payments received with respect to the Home Loans, including
prepayment amounts;
(iii) the Servicing Fee and Subservicing Fee payable to the Master Servicer and the
Subservicer;
(iv) the amount of any other fees or expenses paid, and the identity of the party
receiving such fees or expenses;
(v) the aggregate amount of (a) Interest Collections, (b) Principal Collections and (c)
Substitution Adjustment Amounts for such Collection Period;
(vi) (a) the amount of such distribution to the Securityholders of such Class applied to
reduce the Note Balance or Certificate Principal Balance thereof, and (b) the
aggregate amount included therein representing Principal Prepayments;
(vii) the amount of such distribution to Holders of such Class of Securities allocable to
interest;
(viii) if the distribution to the Holders of such Class of Securities is less than the full
amount that would be distributable to such Holders if there were sufficient funds
available therefor, the amount of the shortfall;
(ix) the aggregate Note Balance or Certificate Principal Balance of each Class of
Securities, the Senior Enhancement Percentage and each of the related Subordination
Percentages, before and after giving effect to the amounts distributed on such
Payment Date, separately identifying any reduction thereof due to Liquidation Loss
Amounts other than pursuant to an actual distribution of principal;
(x) the Note Rate for each Class of Notes for such Payment Date, separately identifying
LIBOR for such Payment Date, if applicable.
(xi) the weighted average remaining term to maturity of the Home Loans after giving effect
to the amounts distributed on such Payment Date;
(xii) the weighted average Loan Rates of the Home Loans after giving effect to the amounts
distributed on such Payment Date;
(xiii) the percentage of the outstanding principal balances of the Senior Notes after giving
effect to the distributions on that Payment Date;
(xiv) the number and Pool Balance of the Home Loans after giving effect to the distribution
of principal on such Payment Date and the number of Home Loans at the beginning and
end of the preceding Collection Period;
(xv) on the basis of the most recent reports furnished to it by Sub-Servicers, the number
and aggregate Loan Balances of Home Loans (a) as to which the Monthly Payment is
Delinquent 30-59 days, 60-89 days and 90 or more days, respectively, (b) that are
foreclosed, (c) that have become REO and (d) that have been finally liquidated due to
being 180 days or more delinquent, in each case as of the end of the related
Collection Period; provided, however, that such information will not be provided on
the statements relating to the first Payment Date;
(xvi) the aggregate Liquidation Loss Amounts with respect to the related Collection Period,
the amount of any Liquidation Loss Payment Amounts with respect to the Notes, and the
aggregate of the Liquidation Loss Amounts from all Collection Periods to date
expressed as dollars and as a percentage of the aggregate Cut-off Date Loan Balance;
(xvii) any material modifications, extensions or waivers to the terms of the Home Loans
during the Collection Period or that have cumulatively become material over time;
(xviii) any material breaches of Home Loan representations or warranties or covenants in the
Home Loan Purchase Agreement.
(xix) the related subordinate Principal Payment Amount;
(xx) the number, aggregate principal balance and book value of any REO properties;
(xxi) the aggregate accrued interest remaining unpaid, if any, for each Class of
Securities, after giving effect to the distribution made on such Payment Date;
(xxii) (a) the number and principal amount of release agreements pursuant to Section
3.05(b)(iv) entered into during the calendar year and since the Closing Date, stated
separately, for the Home Loans and, the aggregate outstanding principal amount of
such release agreements expressed as a percentage of the Pool Balance with
information provided separately with respect to all Unsecured Loans and (b) the
number and principal amount of Capitalization Workouts pursuant to Section 3.02(a)(v)
entered into since the Closing Date;
(xxiii) the aggregate amount recovered during the related Collection Period consisting of all
subsequent recoveries on any Home Loan that was 180 days or more delinquent;
(xxiv) the related Senior Enhancement Percentage for such Payment Date;
(xxv) the aggregate amount of any recoveries on previously foreclosed loans from Sellers
due to a breach of a representation or warranty assigned to the Trustee;
(xxvi) the amount, if any, to be paid by a Derivative Counterparty under a Derivative
Contract;
(xxvii) whether or not a Trigger Event has occurred; and
(xxviii) the Outstanding Reserve Amount and the Reserve Amount Target immediately
following such Payment Date.
In the case of information furnished pursuant to clauses (vi) and (vii) above, the
amounts shall be expressed as an aggregate dollar amount per Note or Certificate, as
applicable, with a $1,000 denomination.
(b) In addition, with respect to each Payment Date, on the Business Day following the
related Determination Date, the Master Servicer shall forward to the Rating Agencies the
following information for each Capitalization Workout entered into during the related
Collection Period:
(i) the original Home Loan amount;
(ii) the Home Loan amount after the Capitalization Workout;
(iii) the original Monthly Payment amount;
(iv) the Monthly Payment amount after the Capitalization Workout;
(v) the Capitalized Amount as defined in Section 3.02(a)(v) herein;
(vi) the Combined Loan-to-Value Ratio prior to the Capitalization Workout;
(vii) the Combined Loan-to-Value Ratio after the Capitalization Workout; and
(viii) if an appraisal was used in determining the Combined Loan-to-Value Ratio referred to
in (vii) above, the type and date of appraisal.
The Master Servicer shall also forward to the Indenture Trustee any other information
reasonably requested by the Indenture Trustee necessary to make distributions pursuant to
Section 3.05 of the Indenture. Prior to the close of business on the Business Day next
succeeding each Determination Date, the Master Servicer shall furnish a written statement to
the Certificate Paying Agent and the Indenture Trustee setting forth the aggregate amounts
required to be withdrawn from the Custodial Account and deposited into the Payment Account
on the Business Day preceding the related Payment Date pursuant to Section 3.03. The
determination by the Master Servicer of such amounts shall, in the absence of obvious error,
be presumptively deemed to be correct for all purposes hereunder and the Owner Trustee and
Indenture Trustee shall be protected in relying upon the same without any independent check
or verification. In addition, upon the Issuer's written request, the Master Servicer shall
promptly furnish information reasonably requested by the Issuer that is reasonably available
to the Master Servicer to enable the Issuer to perform its federal and state income tax
reporting obligations.
Section 4.02. Tax Reporting. So long as 100% of the Certificates are owned by the same
person, then no separate federal and state income tax returns and information returns or
reports will be filed with respect to the Issuer, and the Issuer will be treated as an
entity disregarded from the 100% Certificateholder.
Section 4.03. Calculation of Adjusted Issue Price. The Master Servicer shall calculate
the Adjusted Issue Price for purposes of calculating the Termination Price.
Section 4.04. Exchange Act Reporting.
(a) The Master Servicer shall, on behalf of the Depositor and in respect of the Trust
Estate, sign and cause to be filed with the Commission any periodic reports required to be
filed under the provisions of the Exchange Act, and the rules and regulations of the
Commission thereunder including, without limitation, reports on Form 10-K, Form 10-D and
Form 8-K. In connection with the preparation and filing of such periodic reports, the
Indenture Trustee shall timely provide to the Master Servicer (I) a list of Securityholders
as shown on the Register as of the end of each calendar year, (II) copies of all pleadings,
other legal process and any other documents relating to any claims, charges or complaints
involving the Indenture Trustee, as trustee hereunder, or the Trust Estate that are received
by the Indenture Trustee, (III) notice of all matters that, to the actual knowledge of a
Responsible Officer of the Indenture Trustee, have been submitted to a vote of the
Securityholders, other than those matters that have been submitted to a vote of the
Securityholders at the request of the Depositor or the Master Servicer, and (IV) notice of
any failure of the Indenture Trustee to make any distribution to the Securityholders as
required pursuant to this Agreement. Neither the Master Servicer nor the Indenture Trustee
shall have any liability with respect to the Master Servicer's failure to properly prepare
or file such periodic reports resulting from or relating to the Master Servicer's inability
or failure to obtain any information not resulting from the Master Servicer's own negligence
or willful misconduct
(b) Any Form 10-K filed with the Commission in connection with this Section 4.04 shall
include:
(i) A certification, signed by the senior officer in charge of the servicing functions of
the Master Servicer, in the form attached as Exhibit D hereto or such other form as
may be required or permitted by the Commission (the "Form 10-K Certification"), in
compliance with Rules 13a-14 and 15d-14 under the Exchange Act and any additional
directives of the Commission.
(ii) A report regarding its assessment of compliance during the preceding calendar year
with all applicable servicing criteria set forth in relevant Commission regulations
with respect to mortgage-backed securities transactions taken as a whole involving
the Master Servicer that are backed by the same types of assets as those backing the
certificates, as well as similar reports on assessment of compliance received from
other parties participating in the servicing function as required by relevant
Commission regulations, as described in Item 1122(a) of Regulation AB. The Master
Servicer shall obtain from all other parties participating in the servicing function
any required certifications.
(iii) With respect to each assessment report described immediately above, a report by a
registered public accounting firm that attests to, and reports on, the assessment
made by the asserting party, as set forth in relevant Commission regulations, as
described in Regulation 1122(b) of Regulation AB and Section 3.11.
(iv) The servicer compliance certificate required to be delivered pursuant Section 3.10.
(c) In connection with the Form 10-K Certification, the Indenture Trustee shall provide
the Master Servicer with a back-up certification substantially in the form attached hereto
as Exhibit E.
(d) This Section 4.04 may be amended in accordance with this Servicing Agreement without
the consent of the Securityholders.
(e) The Indenture Trustee shall make available on the Indenture Trustee's internet
website each of the reports filed with the Commission by or on behalf of the Depositor under
the Exchange Act, as soon as reasonably practicable upon delivery of such reports to the
Indenture Trustee.
ARTICLE V
PAYMENT ACCOUNT
Section 5.01. Payment Account. The Indenture Trustee shall establish and maintain a
Payment Account entitled "JPMorgan Chase Bank, National Association, as Indenture Trustee,
for the benefit of the Securityholders and the Certificate Paying Agent pursuant to the
Indenture, dated as of March 29, 2006, between Home Loan Trust 2006-HI1 and JPMorgan Chase
Bank, National Association". The Payment Account shall be an Eligible Account. On each
Payment Date, amounts on deposit in the Payment Account will be distributed by the Indenture
Trustee in accordance with Section 3.05 of the Indenture. The Indenture Trustee shall, upon
written request from the Master Servicer, invest or cause the institution maintaining the
Payment Account to invest the funds in the Payment Account in Permitted Investments
designated in the name of the Indenture Trustee, which shall mature not later than the
Business Day next preceding the Payment Date next following the date of such investment
(except that (i) any investment in the institution with which the Payment Account is
maintained or a fund for which such institution serves as custodian may mature on such
Payment Date and (ii) any other investment may mature on such Payment Date if the Indenture
Trustee shall advance funds on such Payment Date to the Payment Account in the amount
payable on such investment on such Payment Date, pending receipt thereof to the extent
necessary to make distributions on the Securities) and shall not be sold or disposed of
prior to maturity. All income and gain realized from any such investment shall be for the
benefit of the Master Servicer and shall be subject to its withdrawal or order from time to
time. The amount of any losses incurred in respect of any such investments shall be
deposited in the Payment Account by the Master Servicer out of its own funds immediately as
realized.
ARTICLE VI
THE MASTER SERVICER
Section 6.01. Liability of the Master Servicer. The Master Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Master Servicer herein.
Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of, the Master
Servicer. Any corporation into which the Master Servicer may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any corporation succeeding
to the business of the Master Servicer, shall be the successor of the Master 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.
The Master Servicer may assign its rights and delegate its duties and obligations
under this Servicing Agreement; provided that the Person accepting such assignment or
delegation shall be a Person which is qualified to service Home Loans is reasonably
satisfactory to the Indenture Trustee (as pledgee of the Home Loans) and the Issuer, is
willing to service the Home Loans and executes and delivers to the Indenture Trustee and the
Issuer an agreement in form and substance reasonably satisfactory to the Indenture Trustee
and the Issuer, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or observed by the
Master Servicer under this Servicing Agreement; provided further that each Rating Agency's
rating of the Securities in effect immediately prior to such assignment and delegation will
not be qualified, reduced, or withdrawn as a result of such assignment and delegation (as
evidenced by a letter to such effect from each Rating Agency), and provided further that the
Owner Trustee receives an Opinion of Counsel to the effect that such assignment or
delegation shall not cause the Owner Trust to be treated as a corporation for federal or
state income tax purposes.
Section 6.03. Limitation on Liability of the Master Servicer and Others. Neither the
Master Servicer nor any of the directors or officers or employees or agents of the Master
Servicer shall be under any liability to the Issuer, the Owner Trustee, the Indenture
Trustee or the Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Servicing Agreement, provided, however, that this
provision shall not protect the Master 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 its duties hereunder or by reason of its reckless disregard
of its obligations and duties hereunder. The Master Servicer and any director or officer or
employee or agent of the Master 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 Master Servicer and any director or officer or employee or agent of the
Master Servicer shall be indemnified by the Issuer and held harmless against any loss,
liability or expense incurred in connection with any legal action relating to this Servicing
Agreement or the Securities, including any amount paid to the Owner Trustee or the Indenture
Trustee pursuant to Section 6.06(b), other than any loss, liability or expense incurred by
reason of its willful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder or by reason of its reckless disregard of its obligations and duties
hereunder. The Master Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its duties to service the Home Loans in
accordance with this Servicing Agreement, and which in its opinion may involve it in any
expense or liability; provided, however, that the Master Servicer may in its sole discretion
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 Securityholders. 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
Issuer, and the Master Servicer shall be entitled to be reimbursed therefor. The Master
Servicer's right to indemnity or reimbursement pursuant to this Section 6.03 shall survive
any resignation or termination of the Master Servicer pursuant to Section 6.04 or 7.01 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).
Section 6.04. Master Servicer Not to Resign. Subject to the provisions of Section 6.02,
the Master 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 Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at the date of
this Servicing Agreement or (ii) upon satisfaction of the following conditions: (a) the
Master Servicer shall have proposed a successor servicer to the Issuer and the Indenture
Trustee in writing and such proposed successor servicer is reasonably acceptable to the
Issuer and the Indenture Trustee; and (b) each Rating Agency shall have delivered a letter
to the Issuer and the Indenture Trustee prior to the appointment of the successor servicer
stating that the proposed appointment of such successor servicer as Master Servicer
hereunder will not result in the reduction or withdrawal of the then current rating of the
Securities, provided, however, that no such resignation by the Master Servicer shall become
effective until such successor servicer or, in the case of (i) above, the Indenture Trustee,
as pledgee of the Home Loans, shall have assumed the Master Servicer's responsibilities and
obligations hereunder or the Indenture Trustee, as pledgee of the Home Loans, shall have
designated a successor servicer in accordance with Section 7.02. Any such resignation shall
not relieve the Master Servicer of responsibility for any of the obligations specified in
Sections 7.01 and 7.02 as obligations that survive the resignation or termination of the
Master Servicer. Any such determination permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee.
Section 6.05. Delegation of Duties. In the ordinary course of business, the Master
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 with which the Master Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Master Servicer of its liabilities and responsibilities with respect
to such duties and shall not constitute a resignation within the meaning of Section 6.04.
Section 6.06. Master Servicer to Pay Indenture Trustee's and Owner Trustee's Fees and
Expenses; Indemnification. (a) The Master Servicer covenants and agrees to pay to the
Owner Trustee, the Indenture Trustee and any co-trustee of the Indenture Trustee or the
Owner Trustee from time to time, and the Owner Trustee, the Indenture Trustee and any such
co-trustee shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust) for all
services rendered by each of them in the execution of the trusts created under the Trust
Agreement and the Indenture and in the exercise and performance of any of the powers and
duties under the Trust Agreement or the Indenture, as the case may be, of the Owner Trustee,
the Indenture Trustee and any co-trustee, and the Master Servicer will pay or reimburse the
Indenture Trustee and any co-trustee upon request for all reasonable expenses, disbursements
and advances incurred or made by the Indenture Trustee or any co-trustee in accordance with
any of the provisions of this Servicing Agreement or the Indenture except any such expense,
disbursement or advance as may arise from its negligence, willful misfeasance or bad faith.
(b) The Master Servicer agrees to indemnify the Indenture Trustee and the Owner Trustee
for, and to hold the Indenture Trustee and the Owner Trustee, as the case may be, harmless
against, any loss, liability or expense incurred without negligence, bad faith or willful
misconduct on the part of the Indenture Trustee or the Owner Trustee, as the case may be,
arising out of, or in connection with, the acceptance and administration of the Issuer and
the assets thereof, including the costs and expenses (including reasonable legal fees and
expenses) of defending the Indenture Trustee or the Owner Trustee, as the case may be,
against any claim in connection with the exercise or performance of any of its powers or
duties under any Basic Document (including, without limitation, any claim against the
Indenture Trustee or the Owner Trustee alleging a violation of the Homeownership and Equity
Protection Act of 1994, as amended), provided that:
(i) with respect to any such claim, the Indenture Trustee or Owner Trustee, as the case
may be, shall have given the Master Servicer written notice thereof promptly after
the Indenture Trustee or Owner Trustee, as the case may be, shall have actual
knowledge thereof;
(ii) while maintaining control over its own defense, the Issuer, the Indenture Trustee or
Owner Trustee, as the case may be, shall cooperate and consult fully with the Master
Servicer in preparing such defense; and
(iii) notwithstanding anything in this Servicing Agreement to the contrary, the Master
Servicer shall not be liable for settlement of any claim by the Indenture Trustee or
the Owner Trustee, as the case may be, entered into without the prior consent of the
Master Servicer.
No termination of this Servicing Agreement shall affect the obligations created by this
Section 6.06 of the Master Servicer to indemnify the Indenture Trustee and the Owner Trustee
under the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the Master Servicer in
this Section 6.06(b) shall not be available (a) for any loss, liability or expense of the
Indenture Trustee or the Owner Trustee, including the costs and expenses of defending itself
against any claim, incurred in connection with any actions taken by the Indenture Trustee or
the Owner Trustee at the direction of the Noteholders or Certificateholders, as the case may
be, pursuant to the terms of this Servicing Agreement or (b) where indemnification by the
Indenture Trustee is required pursuant to Section 9.05(a).
ARTICLE VII
DEFAULT
Section 7.01. Servicing Default. If any one of the following events ("Servicing Default")
shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the Custodial Account or to remit to
the Paying Agent for deposit in the Payment Account any deposit required to be made
under the terms of this Servicing Agreement which continues unremedied for a period
of five Business Days after the date upon which written notice of such failure shall
have been given to the Master Servicer by the Issuer or the Indenture Trustee; or
(ii) Failure on the part of the Master Servicer duly to observe or perform in any material
respect any other covenants or agreements of the Master Servicer set forth in the
Securities or in this Servicing Agreement, which failure, in each case, materially
and adversely affects the interests of Securityholders and which continues unremedied
for a period of 45 days after the date on which written notice of such failure,
requiring the same to be remedied, and stating that such notice is a "Notice of
Default" hereunder, shall have been given to the Master Servicer by the Issuer or the
Indenture Trustee; or
(iii) The entry against the Master 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 undischarged or unstayed and in effect for a period of 60
consecutive days; or
(iv) The Master Servicer shall voluntarily go into liquidation, consent to the appointment
of a conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings of
or relating to the Master Servicer or of or relating to all or substantially all of
its property, or a decree or order of a court, 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 Master Servicer and such decree
or order shall have remained in force undischarged, unbonded or unstayed for a period
of 60 days; or the Master Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations.
Then, and in every such case, so long as a Servicing Default shall not have been remedied by
the Master Servicer, either the Issuer or the Indenture Trustee, by notice then given in
writing to the Master Servicer may terminate all of the rights and obligations of the Master
Servicer as servicer under this Servicing Agreement other than its right to receive
servicing compensation and expenses for servicing the Home Loans hereunder during any period
prior to the date of such termination and the Issuer or the Indenture Trustee. Any such
notice to the Master Servicer shall also be given to each Rating Agency and the Issuer. On
or after the receipt by the Master Servicer of such written notice, all authority and power
of the Master Servicer under this Servicing Agreement, whether with respect to the
Securities or the Home Loans or otherwise, shall pass to and be vested in the Indenture
Trustee as successor Master Servicer, pursuant to and under this Section 7.01; and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver,
on behalf of the Master 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 Home Loan and related documents, or otherwise. The Master
Servicer agrees to cooperate with the Indenture Trustee in effecting the termination of the
responsibilities and rights of the Master Servicer hereunder, including, without limitation,
the transfer to the Indenture Trustee for the administration by it of all cash amounts
relating to the Home Loans that shall at the time be held by the Master Servicer and to be
deposited by it in the Custodial Account, or that have been deposited by the Master Servicer
in the Custodial Account or thereafter received by the Master Servicer with respect to the
Home Loans. All reasonable costs and expenses (including, but not limited to, attorneys'
fees) incurred in connection with amending this Servicing Agreement to reflect such
succession as Master Servicer pursuant to this Section 7.01 shall be paid by the predecessor
Master Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the initial
Master Servicer) upon presentation of reasonable documentation of such costs and expenses.
Notwithstanding any termination of the activities of the Master Servicer hereunder,
the Master Servicer shall be entitled to receive, out of any late collection of a payment on
a Home Loan which was due prior to the notice terminating the Master Servicer's rights and
obligations hereunder and received after such notice, that portion to which the Master
Servicer would have been entitled pursuant to Sections 3.03 and 3.09 as well as its Master
Servicing Fee in respect thereof, and any other amounts payable to the Master Servicer
hereunder the entitlement to which arose prior to the termination of its activities
hereunder.
Notwithstanding the foregoing, a delay in or failure of performance under Section
7.01(i) or under Section 7.01(ii) after the applicable grace periods specified in such
Sections, shall not constitute a Servicing Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve the Master
Servicer from using reasonable efforts to perform its respective obligations in a timely
manner in accordance with the terms of this Servicing Agreement and the Master Servicer
shall provide the Indenture Trustee and the Securityholders with notice of such failure or
delay by it, together with a description of its efforts to so perform its obligations. The
Master Servicer shall immediately notify the Indenture Trustee and the Issuer in writing of
any Servicing Default.
Section 7.02. Indenture Trustee to Act; Appointment of Successor. (a) On and after the
time the Master Servicer receives a notice of termination pursuant to Section 7.01 or sends
a notice pursuant to Section 6.04, the Indenture Trustee shall be the successor in all
respects to the Master 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 Master Servicer by
the terms and provisions hereof. Nothing in this Servicing Agreement or in the Trust
Agreement shall be construed to permit or require the Indenture Trustee to (i) succeed to
the responsibilities, duties and liabilities of the initial Master Servicer in its capacity
as Seller under the Home Loan Purchase Agreement, (ii) be responsible or accountable for any
act or omission of the Master Servicer prior to the issuance of a notice of termination
hereunder, (iii) require or obligate the Indenture Trustee, in its capacity as successor
Master Servicer, to purchase, repurchase or substitute any Home Loan, (iv) fund any losses
on any Permitted Investment directed by any other Master Servicer or (v) be responsible for
the representations and warranties of the Master Servicer. As compensation therefor, the
Indenture Trustee shall be entitled to such compensation as the Master 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 Master Servicer, or
(ii) if the Indenture Trustee is legally unable so to act, the Indenture Trustee may (in the
situation described in clause (i)) or shall (in the situation described in clause (ii))
appoint or petition a court of competent jurisdiction to appoint any established housing and
home finance institution, bank or other mortgage loan or home equity loan servicer having a
net worth of not less than $10,000,000 as the successor to the Master Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or liabilities of the
Master Servicer hereunder; provided that the appointment of any such successor Master
Servicer will not result in the qualification, reduction or withdrawal of the ratings
assigned to the Securities by the Rating Agencies. Pending appointment of a successor to
the Master Servicer hereunder, unless the Indenture Trustee is prohibited by law from so
acting, the Indenture Trustee shall act in such capacity as herein above provided. In
connection with such appointment and assumption, the successor Master Servicer shall be
entitled to receive compensation out of payments on Home Loans in an amount equal to the
compensation which the Master Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Indenture Trustee and such successor shall
agree). The appointment of a successor Master Servicer shall not affect any liability of
the predecessor Master Servicer which may have arisen under this Servicing Agreement prior
to its termination as Master Servicer (including, without limitation, the obligation to
purchase Home Loans pursuant to Section 3.01, to pay any deductible under an insurance
policy pursuant to Section 3.04 or to indemnify the Indenture Trustee pursuant to Section
6.06), nor shall any successor Master Servicer be liable for any acts or omissions of the
predecessor Master Servicer or for any breach by such Master 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.
(b) Any successor, including the Indenture Trustee, to the Master Servicer as servicer
shall during the term of its service as servicer (i) continue to service and administer the
Home Loans for the benefit of the Securityholders, and (ii) maintain in force a policy or
policies of insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to Section 3.13.
(c) Any successor Master Servicer, including the Indenture Trustee, shall not be deemed
in default or to have breached its duties hereunder if the predecessor Master Servicer shall
fail to deliver any required deposit to the Custodial Account or otherwise cooperate with
any required servicing transfer or succession hereunder.
(d) In connection with the termination or resignation of the Master Servicer hereunder,
either (i) the successor Master Servicer, including the Indenture Trustee if the Indenture
Trustee is acting as successor Master Servicer, shall represent and warrant that it is a
member of MERS in good standing and shall agree to comply in all material respects with the
rules and procedures of MERS in connection with the servicing of the Home Loans that are
registered with MERS, in which case the predecessor Master Servicer shall cooperate with the
successor Master Servicer in causing MERS to revise its records to reflect the transfer of
servicing to the successor Master Servicer as necessary under MERS' rules and regulations,
or (ii) the predecessor Master Servicer shall cooperate with the successor Master Servicer
in causing MERS to execute and deliver an assignment of Mortgage in recordable form to
transfer the Mortgage from MERS to the Indenture Trustee and to execute and deliver such
other notices, documents and other instruments as may be necessary or desirable to effect a
transfer of such Home Loan or servicing of such Home Loan on the MERS System to the
successor Master Servicer. The predecessor Master Servicer shall file or cause to be filed
any such assignment in the appropriate recording office. The predecessor Master Servicer
shall bear any and all fees of MERS, costs of preparing any assignments of Mortgage, and
fees and costs of filing any assignments of Mortgage that may be required under this
subsection (d). The successor Master Servicer shall cause such assignment to be delivered
to the Indenture Trustee or the Custodian promptly upon receipt of the original with
evidence of recording thereon or a copy certified by the public recording office in which
such assignment was recorded.
Section 7.03. Notification to Securityholders. Upon any termination of or appointment of
a successor to the Master Servicer pursuant to this Article VII or Section 6.04, the
Indenture Trustee shall give prompt written notice thereof to the Securityholders, the
Issuer and each Rating Agency.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment. This Servicing Agreement may be amended from time to time by the
parties hereto, provided that any amendment be accompanied by a letter from the Rating
Agencies that the amendment will not result in the downgrading or withdrawal of the rating
then assigned to the Securities and the consent of the Indenture Trustee. Promptly after
the execution by the Master Servicer, the Issuer and the Indenture Trustee of any amendment
of this Servicing Agreement pursuant to this Section 8.01, the Indenture Trustee shall
provide the Custodian with written copies thereof. Any failure of the Indenture Trustee to
mail such notice, or any defect therein, shall not, however, in any way impair or affect the
validity of any such amendment.
Section 8.02. GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS
(OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
Section 8.03. Notices. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at or mailed by
certified mail, return receipt requested, to (a) in the case of the Master Servicer, 0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Addition
Director - Bond Administration, (b) in the case of Xxxxx'x, Home Mortgage Loan Monitoring
Group, 00 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, (c) in the case of Standard &
Poor's, 00 Xxxxx Xxxxxx - 41st Floor, New York, New York 10041, Attention: Residential
Mortgage Surveillance Group, (d) in the case of the Owner Trustee, Wilmington Trust Company,
Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention:
Corporate Trust Administration, (e) in the case of the Issuer, to Home Loan Trust 2006-HI1,
c/o Owner Trustee, Wilmington Trust Company, Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate Trust Administration, (f) in the case
of the Indenture Trustee, JPMorgan Chase Bank, National Association, 0 Xxx Xxxx Xxxxx, 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Worldwide Securities Services/Global Debt Home
Loan Trust 2006-HI1, (g) in the case of the Underwriters to Bear, Xxxxxxx & Co. Inc., at
Bear, Xxxxxxx & Co. Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: General
Counsel and (h) Residential Funding Securities Corporation, at Residential Funding
Securities Corporation, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000,
Attention: General Counsel; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. Any notice required or
permitted to be mailed to a Securityholder shall be given by first class mail, postage
prepaid, at the address of such Securityholder as shown in the Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be conclusively presumed
to have been duly given, whether or not the Securityholder receives such notice. Any notice
or other document required to be delivered or mailed by the Indenture Trustee to any Rating
Agency shall be given on a reasonable efforts basis and only as a matter of courtesy and
accommodation and the Indenture Trustee shall have no liability for failure to delivery such
notice or document to any Rating Agency.
Section 8.04. Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Servicing Agreement shall be for any reason
whatsoever 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 Securities or the rights of the
Securityholders thereof.
Section 8.05. Third-Party Beneficiaries. This Servicing Agreement shall inure to the
benefit of and be binding upon the parties hereto, the Securityholders, the Owner Trustee
and their respective successors and permitted assigns. Except as otherwise provided in this
Servicing Agreement, no other Person shall have any right or obligation hereunder.
Section 8.06. Counterparts. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 8.07. Effect of Headings and Table of Contents. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect the
construction hereof.
Section 8.08. Termination Upon Purchase by the Master Servicer or Liquidation of All Home
Loans; Partial Redemption. (a) The respective obligations and responsibilities of the
Master Servicer, the Issuer and the Indenture Trustee created hereby shall terminate upon
the last action required to be taken by the Issuer pursuant to the Trust Agreement and by
the Indenture Trustee pursuant to the Indenture following the earlier of:
(i) the date on or before which the Indenture or Trust Agreement is terminated, or
(ii) the purchase by the Master Servicer from the Issuer of all Home Loans and all
property acquired in respect of any Home Loan at a price equal to the Termination
Price.
The right of the Master Servicer to purchase the assets of the Issuer pursuant to clause
(ii) above on any Payment Date is conditioned upon the Pool Balance (after applying payments
received in the related Collection Period) as of such Payment Date being less than ten
percent of the aggregate of the Cut-off Date Loan Balances of the Home Loans. If such right
is exercised by the Master Servicer, the Master Servicer shall deposit the Termination Price
calculated pursuant to clause (ii) above with the Indenture Trustee pursuant to Section 4.10
of the Indenture and, upon the receipt of such deposit, the Indenture Trustee or Custodian
shall release to the Master Servicer, the files pertaining to the Home Loans being purchased.
(b) The Master Servicer, at its expense, shall prepare and deliver to the Indenture
Trustee for execution, at the time the Home Loans are to be released to the Master Servicer,
appropriate documents assigning each such Home Loan from the Indenture Trustee or the Issuer
to the Master Servicer or the appropriate party.
(c) The Master Servicer shall give the Indenture Trustee not less than seven Business
Days' prior written notice of the Payment Date on which the Master Servicer anticipates that
the final distribution will be made to Noteholders. Notice of any termination, specifying
the anticipated Final Scheduled Payment Date or other Payment Date (which shall be a date
that would otherwise be a Payment Date) upon which the Noteholders may surrender their Notes
to the Indenture Trustee (if so required by the terms hereof) for payment of the final
distribution and cancellation, shall be given promptly by the Master Servicer to the
Indenture Trustee specifying:
(i) the anticipated Final Scheduled Payment Date or other Payment Date upon which final
payment of the Notes is anticipated to be made upon presentation and surrender of
Notes at the office or agency of the Indenture Trustee therein designated; and
(ii) the amount of any such final payment, if known.
Section 8.09. Certain Matters Affecting the Indenture Trustee. For all purposes of this
Servicing Agreement, in the performance of any of its duties or in the exercise of any of
its powers hereunder, the Indenture Trustee shall be subject to and entitled to the benefits
of Article VI of the Indenture.
Section 8.10. Owner Trustee Not Liable for Related Documents. The recitals contained
herein shall be taken as the statements of the Depositor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no representations as
to the validity or sufficiency of this Servicing Agreement, of any Basic Document or of the
Certificates (other than the signatures of the Owner Trustee on the Certificates) or the
Notes, or of any Related Documents, or of MERS or the MERS(R)System. The Owner Trustee shall
at no time have any responsibility or liability with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to Certificateholders
under the Trust Agreement or the Noteholders under the Indenture, including, the compliance
by the Depositor or the Seller with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or representation,
or any action of the Certificate Paying Agent, the Certificate Registrar or the Indenture
Trustee taken in the name of the Owner Trustee.
ARTICLE IX
COMPLIANCE WITH REGULATION AB
Section 9.01. Intent of the Parties; Reasonableness.
The Depositor, the Indenture Trustee and the Master Servicer acknowledge and agree
that the purpose of this Article IX is to facilitate compliance by the Depositor with the
provisions of Regulation AB and related rules and regulations of the Commission. The
Depositor shall not exercise its right to request delivery of information or other
performance under these provisions other than in good faith, or for purposes other than
compliance with the Securities Act, the Exchange Act and the rules and regulations of the
Commission under the Securities Act and the Exchange Act. Each of the Master Servicer and
the Indenture Trustee acknowledges that interpretations of the requirements of Regulation AB
may change over time, whether due to interpretive guidance provided by the Commission or its
staff, consensus among participants in the mortgage-backed securities markets, advice of
counsel, or otherwise, and agrees to comply with reasonable requests made by the Depositor
in good faith for delivery of information under these provisions on the basis of evolving
interpretations of Regulation AB. Each of the Master Servicer and the Indenture Trustee
shall cooperate reasonably with the Depositor to deliver to the Depositor (including any of
its assignees or designees), any and all disclosure, statements, reports, certifications,
records and any other information necessary in the reasonable good faith determination of
the Depositor to permit the Depositor to comply with the provisions of Regulation AB.
Section 9.02. Additional Representations and Warranties of the Indenture Trustee.
(a) The Indenture Trustee shall be deemed to represent and warrant to the Depositor as of
the date hereof and on each date on which information is provided to the Depositor under
Sections 9.01, 9.02(b) or 9.03 that, except as disclosed in writing to the Depositor prior
to such date: (i) it is not aware and has not received notice that any default, early
amortization or other performance triggering event has occurred as to any other
Securitization Transaction due to any default of the Indenture Trustee; (ii) there are no
aspects of its financial condition that could have a material adverse effect on the
performance by it of its trustee obligations under this Servicing Agreement or any other
Securitization Transaction as to which it is the trustee; (iii) there are no material legal
or governmental proceedings pending (or known to be contemplated) against it that would be
material to Noteholders; (iv) there are no affiliations, relationships or transactions (as
described in Item 1119(b) of Regulation AB) relating to the Indenture Trustee with respect
to the Depositor or any sponsor, issuing entity, servicer, trustee, originator, significant
obligor, enhancement or support provider or other material transaction party (as each of
such terms are used in Regulation AB) relating to the Securitization Transaction
contemplated by this Servicing Agreement, as identified by the Depositor to the Indenture
Trustee in writing as of the Closing Date (each, a "Transaction Party") that are outside the
ordinary course of business or on terms other than would be obtained in an arm's length
transaction with an unrelated third party, apart from the Securitization Transaction, and
that are material to the investors' understanding of the Notes; and (v) the Indenture
Trustee is not an affiliate (as contemplated by Item 1119(a) of Regulation AB) of any
Transaction Party. The Depositor shall notify the Indenture Trustee of any change in the
identity of a Transaction Party after the Closing Date.
(b) If so requested by the Depositor on any date following the Closing Date, the
Indenture Trustee shall, within five Business Days following such request, confirm in
writing the accuracy of the representations and warranties set forth in paragraph (a) of
this Section or, if any such representation and warranty is not accurate as of the date of
such confirmation, provide the pertinent facts, in writing, to the requesting the
Depositor. Any such request from the Depositor shall not be given more than once each
calendar quarter, unless the Depositor shall have a reasonable basis for questioning the
accuracy of any of the representations and warranties.
Section 9.03. Information to Be Provided by the Indenture Trustee.
For so long as the Notes are outstanding, for the purpose of satisfying the
Depositor's reporting obligation under the Exchange Act with respect to any class of Notes,
the Indenture Trustee shall provide to the Depositor a written description of (a) any
litigation or governmental proceedings pending against the Indenture Trustee as of the last
day of each calendar month that would be material to Noteholders, and (b) any affiliations
or relationships (as described in Item 1119 of Regulation AB) that develop following the
Closing Date between the Indenture Trustee and any Transaction Party of the type described
in Section 9.02(a)(iv) or 9.02(a)(v) as of the last day of each calendar year. Any
descriptions required with respect to legal proceedings, as well as updates to previously
provided descriptions, under this Section 9.03 shall be given no later than five Business
Days prior to the Determination Date following the month in which the relevant event occurs,
and any notices and descriptions required with respect to affiliations, as well as updates
to previously provided descriptions, under this Section 9.03 shall be given no later than
January 31 of the calendar year following the year in which the relevant event occurs. As
of the related Payment Date with respect to each Report on Form 10-D with respect to the
Notes filed by or on behalf of the Depositor, and as of March 15 preceding the date each
Report on Form 10-K with respect to the Notes is filed, the Indenture Trustee shall be
deemed to represent and warrant that any information previously provided by the Indenture
Trustee under this Article IX is materially correct and does not have any material omissions
unless the Indenture Trustee has provided an update to such information. The Depositor will
allow the Indenture Trustee to review any disclosure relating to material litigation against
the Indenture Trustee prior to filing such disclosure with the Commission to the extent the
Depositor changes the information provided by the Indenture Trustee.
Section 9.04. Report on Assessment of Compliance and Attestation.
On or before March 15 of each calendar year, the Indenture Trustee shall:
(a) deliver to the Depositor a report (in form and substance reasonably satisfactory to
the Depositor) regarding the Indenture Trustee's assessment of compliance with the
applicable Servicing Criteria during the immediately preceding calendar year, as required
under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such
report shall be signed by an authorized officer of the Indenture Trustee, and shall address
each of the Servicing Criteria specified on Exhibit F hereto; and
(b) deliver to the Depositor a report of a registered public accounting firm satisfying
the requirements of Rule 2-01 of Regulation S-X under the Securities Act and the Exchange
Act that attests to, and reports on, the assessment of compliance made by the Indenture
Trustee and delivered pursuant to the preceding paragraph. Such attestation shall be in
accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and
the Exchange Act.
Section 9.05. Indemnification; Remedies.
(a) The Indenture Trustee shall indemnify the Depositor, each affiliate of the Depositor,
the Master Servicer and each affiliate of the Master Servicer, and the respective present
and former directors, officers, employees and agents of each of the foregoing, and shall
hold each of them harmless from and against any losses, damages, penalties, fines,
forfeitures, legal fees and expenses and related costs, judgments, and any other costs, fees
and expenses that any of them may sustain arising out of or based upon:
(i) (A) any untrue statement of a material fact contained or alleged to be contained in
any information, report, certification, accountants' attestation or other material
provided under this Article IX by or on behalf of the Indenture Trustee
(collectively, the "Indenture Trustee Information"), or (B) the omission or alleged
omission to state in the Indenture Trustee Information a material fact required to be
stated in the Indenture Trustee Information or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading; or
(ii) any failure by the Indenture Trustee to deliver any information, report,
certification, or other material when and as required under this Article IX, other
than a failure by the Indenture Trustee to deliver an accountants' attestation.
(b) In the case of any failure of performance described in clause (ii) of Section
9.05(a), as well as a failure to deliver an accountants' attestation, the Indenture Trustee
shall (i) promptly reimburse the Depositor for all costs reasonably incurred by the
Depositor in order to obtain the information, report, certification, accountants'
attestation or other material not delivered by the Indenture Trustee as required and (ii)
cooperate with the Depositor to mitigate any damages that may result from such failure.
(c) The Depositor and the Master Servicer shall indemnify the Indenture Trustee, each
affiliate of the Indenture Trustee and the respective present and former directors,
officers, employees and agents of the Indenture Trustee, and shall hold each of them
harmless from and against any losses, damages, penalties, fines, forfeitures, legal fees and
expenses and related costs, judgments, and any other costs, fees and expenses that any of
them may sustain arising out of or based upon (i) any untrue statement of a material fact
contained or alleged to be contained in any information provided under this Servicing
Agreement by or on behalf of the Depositor or Master Servicer for inclusion in any report
filed with Commission under the Exchange Act (collectively, the "RFC Information"), or (ii)
the omission or alleged omission to state in the RFC Information a material fact required to
be stated in the RFC Information or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) Notwithstanding any provision in this Section 9.05 to the contrary, the parties agree
that none of the Indenture Trustee, the Depositor or the Master Servicer shall be liable to
the other for any consequential or punitive damages whatsoever, whether in contract, tort
(including negligence and strict liability), or any other legal or equitable principle;
provided, however, that such limitation shall not be applicable with respect to third party
claims made against a party.
IN WITNESS WHEREOF, the Master 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.
RESIDENTIAL FUNDING CORPORATION,
as Master Servicer
By: /s/ Xxxxxxx Xxxxxxxx
Name: Xxxxxxx Xxxxxxxx
Title: Associate
HOME LOAN TRUST 2006-HI1
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By: /s/ Xxxxxxx X. Xxxxx
Name: _Michele X. Xxxxx
Title: _Financial Services Officer
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
as Indenture Trustee
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Assistant Vice President
Acknowledged and Agreed
solely with respect to Article IX:
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
By: /s/ Xxx Xxxxxxxx
Name: Xxx Xxxxxxxx
Title: Vice President
EXHIBIT A
HOME LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
EXHIBIT B
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PREMISES:
That JPMorgan Chase Bank, National Association, as Indenture Trustee (the "Trustee"), under
the Indenture (the "Indenture") among ________________________________________ and the
Indenture Trustee, a national banking association organized and existing under the laws of
the State of New York, and having its principal office located at 4 New York Plaza, in the
City of New York in the State of New York, hath made, constituted and appointed, and does by
these presents make, constitute and appoint Residential Funding Corporation, a corporation
organized and existing under the laws of the State of Delaware, its true and lawful
Attorney-in-Fact, with full power and authority to sign, execute, acknowledge, deliver, file
for record, and record any instrument on its behalf and to perform such other act or acts as
may be customarily and reasonably necessary and appropriate to effectuate the following
enumerated transactions in respect of any of the mortgages or deeds of trust (the
"Mortgages" and the "Deeds of Trust", respectively) creating a trust or second lien or an
estate in fee simple interest in real property securing a Home Loan and promissory notes
secured thereby (the "Mortgage Notes") for which the undersigned is acting as Indenture
Trustee for various Securityholders (whether the undersigned is named therein as mortgagee
or beneficiary or has become mortgagee by virtue of Endorsement of the Mortgage Note secured
by any such Mortgage or Deed of Trust) and for which Residential Funding Corporation is
acting as master servicer pursuant to a Servicing Agreement, dated as of March 29, 2006 (the
"Servicing Agreement"). This appointment shall apply only to transactions which the Trustee
is authorized to enter into under the Indenture, but in no event shall apply to any
transactions other than the following enumerated transactions only:
1. The modification or re-recording of a Mortgage or Deed of Trust, where said
modification or re-recording is for the purpose of correcting the Mortgage or
Deed of Trust to conform same to the original intent of the parties thereto or
to correct title errors discovered after such title insurance was issued and
said modification or re-recording, in either instance, does not adversely
affect the lien of the Mortgage or Deed of Trust as insured.
2. The subordination of the lien of a Mortgage or Deed of Trust to an easement in
favor of a public utility company or a government agency or unit with powers
of eminent domain; this section shall include, without limitation, the
execution of partial satisfactions/releases, partial reconveyances or the
execution of requests to trustees to accomplish same.
3. With respect to a Mortgage or Deed of Trust, the foreclosure, the taking of a
deed in lieu of foreclosure, or the completion of judicial or non-judicial
foreclosure or termination, cancellation or rescission of any such
foreclosure, including, without limitation, any and all of the following acts:
a. The substitution of trustee(s) serving under a Deed of Trust, in
accordance with state law and the Deed of Trust;
b. Statements of breach or non-performance;
c. Notices of default;
d. Cancellations/rescissions of notices of default and/or notices of sale;
e. The taking of a deed in lieu of foreclosure; and
f. Such other documents and actions as may be necessary under the terms of
the Mortgage, Deed of Trust or state law to expeditiously complete said
transactions.
4. The conveyance of the properties to the mortgage insurer, or the closing of
the title to the property to be acquired as real estate owned, or conveyance
of title to real estate owned.
5. The completion of loan assumption agreements.
6. The full satisfaction/release of a Mortgage or Deed of Trust or full
reconveyance upon payment and discharge of all sums secured thereby,
including, without limitation, cancellation of the related Mortgage Note.
7. The assignment of any Mortgage or Deed of Trust and the related Mortgage Note,
in connection with the repurchase of the Home Loan secured and evidenced
thereby pursuant to the requirements of a Residential Funding Corporation
Seller Contract, or the removal of any Mortgage from the MERS(R)System or the
re-recording of such Mortgage in the name of MERS.
8. The full assignment of a Mortgage or Deed of Trust upon payment and discharge
of all sums secured thereby in conjunction with the refinancing thereof,
including, without limitation, the endorsement of the related Mortgage Note.
9. The modification or re-recording of a Mortgage or Deed of Trust, where said
modification or re-recording is for the purpose of any modification pursuant
to Section 3.01 of the Servicing Agreement.
10. The subordination of the lien of a Mortgage or Deed of Trust, where said
subordination is in connection with any modification pursuant to Section 3.01
of the Servicing Agreement, and the execution of partial
satisfactions/releases in connection with such same Section 3.01.
The undersigned gives said Attorney-in-Fact full power and authority to execute such
instruments and to do and perform all and every act and thing necessary and proper to carry
into effect the power or powers granted by or under this Limited Power of Attorney as fully
as the undersigned might or could do, and hereby does ratify and confirm to all that said
Attorney-in-Fact shall lawfully do or cause to be done by authority hereof.
Capitalized terms used herein that are not otherwise defined shall have the meanings
ascribed thereto in Appendix A to the Indenture.
Third parties without actual notice may rely upon the exercise of the power granted under
this Limited Power of Attorney; and may be satisfied that this Limited Power of Attorney
shall continue in full force and effect has not been revoked unless an instrument of
revocation has been made in writing by the undersigned.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Indenture Trustee under the Servicing
Agreement and the Indenture
Name: Name:
Title: Title:
STATE OF _____________ )
______________ SS.
COUNTY OF ____________ )
On this __ day of _______________, 2006, before me the undersigned, Notary Public of
said State, personally appeared _______________________________ personally known to me to be
duly authorized officers of JPMorgan Chase Bank, National Association that executed the
within instrument and personally known to me to be the persons who executed the within
instrument on behalf of JPMorgan Chase Bank, National Association therein named, and
acknowledged to me such JPMorgan Chase Bank, National Association executed the within
instrument pursuant to its by-laws.
WITNESS my hand and official seal.
_______________________________
Notary Public in and for the
State of ___________________
After recording, please mail to:
_____________________________
_____________________________
_____________________________
Attn: ________________________
EXHIBIT C
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: _______REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Home Loans, we request the release of the
Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) ..Home Loan Prepaid in Full
Home Loan Repurchased
"We hereby certify that all amounts received or to be received in connection with such
payments which are required to be deposited have been or will be so deposited as provided in
the Servicing Agreement."
_____________________________________
Residential Funding Corporation
Authorized Signature
******************************************************************************
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check off documents
being enclosed with a copy of this form. You should retain this form for your files in
accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other: ___________________________
_________________
Name
_________________
Title
_________________
Date
EXHIBIT D
FORM OF FORM 10-K CERTIFICATE
I, [identify the certifying individual], certify that:
1. I have reviewed this report on Form 10-K and all reports on Form 10-D required to be
filed in respect of the period covered by this report on Form 10-K of the trust (the
Exchange Act periodic reports) pursuant to the Servicing Agreement dated March 29, 2006 (the
"Agreement") among Residential Funding Corporation (the "Master Servicer"), Home Loan Trust
2006-HI1 (the "Issuer") and JPMorgan Chase Bank, National Association (the "Indenture
Trustee") and acknowledged and agreed to by Residential Funding Mortgage Securities II, Inc.
2. Based on my knowledge, Exchange Act periodic reports, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, all of the distribution, servicing and other information
required to be provided under Form 10-D for the period covered by this report is included in
the Exchange Act periodic reports;
4. I am responsible for reviewing the activities performed by the Master Servicer and
based on my knowledge and the compliance review conducted in preparing the servicer
compliance statement required in this report under Item 1123 of Regulation AB and except as
disclosed in the Exchange Act periodic reports, the Master Servicer has fulfilled its
obligations under the Agreement; and
5._____All of the reports on assessment of compliance with servicing criteria for
asset-backed securities and their related attestation reports on assessment of compliance
with servicing criteria for asset-backed securities required to be included in this report
in accordance with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have
been included as an exhibit to this report, except as otherwise disclosed in this report.
Any material instances of noncompliance described in such reports have been disclosed in
this report on Form 10-K.
In giving the certifications above, I have reasonably relied on the information
provided to me by the following unaffiliated parties: [the Indenture Trustee].
Date:____________
_________________________________*
[Signature]
Name:
Title:
* - to be signed by the senior officer in charge of the servicing functions of the Master
Servicer
EXHIBIT E
[FORM OF BACK-UP CERTIFICATION TO FORM 10-K CERTIFICATE]
The undersigned, a Responsible Officer of [_________] (the "Indenture Trustee")
certifies that:
(a) The Indenture Trustee has performed all of the duties
specifically required to be performed by it pursuant to the provisions of the
Servicing Agreement dated as of March 29, 2006 (the "Agreement") by and among
Residential Funding Corporation, as Master Servicer, Home Loan Trust 2006-HI1, as
Issuer and the Indenture Trustee in accordance with the standards set forth therein.
(b) Based on my knowledge, the list of Securityholders as shown on
the Register as of the end of each calendar year that is provided by the Indenture
Trustee pursuant to the Agreement is accurate as of the last day of the 20[__]
calendar year.
Capitalized terms used and not defined herein shall have the meanings given such terms in
the Agreement.
IN WITNESS WHEREOF, I have duly executed this certificate as of _________, 20__.]
Name:
Title:
EXHIBIT F
SERVICING CRITERIA
SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE
The assessment of compliance to be delivered by the Indenture Trustee shall address, at a
minimum, the criteria identified as below as "Applicable Servicing Criteria":
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APPLICABLE SERVICING
SERVICING CRITERIA CRITERIA
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REFERENCE CRITERIA
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GENERAL SERVICING CONSIDERATIONS
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1122(d)(1)(i) Policies and procedures are instituted to monitor any
performance or other triggers and events of default in
accordance with the transaction agreements.
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1122(d)(1)(ii) If any material servicing activities are outsourced to
third parties, policies and procedures are instituted to
monitor the third party's performance and compliance
with such servicing activities.
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1122(d)(1)(iii) Any requirements in the transaction agreements to
maintain a back-up servicer for the pool assets are
maintained.
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1122(d)(1)(iv) A fidelity bond and errors and omissions policy is in
effect on the party participating in the servicing
function throughout the reporting period in the amount
of coverage required by and otherwise in accordance with
the terms of the transaction agreements.
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CASH COLLECTION AND ADMINISTRATION
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1122(d)(2)(i) Payments on pool assets are deposited into the |X| (as to accounts
appropriate custodial bank accounts and related bank
clearing accounts no more than two business days
following receipt, or such other number of days
specified in the transaction agreements. held by Trustee)
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1122(d)(2)(ii) Disbursements made via wire transfer on behalf of an |X| (as to investors
obligor or to an investor are made only by authorized only)
personnel.
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1122(d)(2)(iii) Advances of funds or guarantees regarding collections,
cash flows or distributions, and any interest or other
fees charged for such advances, are made, reviewed and
approved as specified in the transaction agreements.
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1122(d)(2)(iv) The related accounts for the transaction, such as cash
reserve accounts or accounts established as a form of
overcollateralization, are separately maintained (e.g., |X| (as to accounts
with respect to commingling of cash) as set forth in the held by Trustee)
transaction agreements.
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1122(d)(2)(v) Each custodial account is maintained at a federally
insured depository institution as set forth in the
transaction agreements. For purposes of this criterion,
"federally insured depository institution" with respect
to a foreign financial institution means a foreign
financial institution that meets the requirements of
Rule 13k-1(b)(1) of the Securities Exchange Act.
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1122(d)(2)(vi) Unissued checks are safeguarded so as to prevent
unauthorized access.
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1122(d)(2)(vii) Reconciliations are prepared on a monthly basis for all
asset-backed securities related bank accounts, including
custodial accounts and related bank clearing accounts.
These reconciliations are (A) mathematically accurate;
(B) prepared within 30 calendar days after the bank
statement cutoff date, or such other number of days
specified in the transaction agreements; (C) reviewed
and approved by someone other than the person who
prepared the reconciliation; and (D) contain
explanations for reconciling items. These reconciling
items are resolved within 90 calendar days of their
original identification, or such other number of days
specified in the transaction agreements.
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INVESTOR REMITTANCES AND REPORTING
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1122(d)(3)(i) Reports to investors, including those to be filed with
the Commission, are maintained in accordance with the
transaction agreements and applicable Commission
requirements. Specifically, such reports (A) are
prepared in accordance with timeframes and other terms
set forth in the transaction agreements; (B) provide
information calculated in accordance with the terms
specified in the transaction agreements; (C) are filed
with the Commission as required by its rules and
regulations; and (D) agree with investors' or the
trustee's records as to the total unpaid principal
balance and number of pool assets serviced by the
servicer.
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1122(d)(3)(ii) Amounts due to investors are allocated and remitted in |X|
accordance with timeframes, distribution priority and
other terms set forth in the transaction agreements.
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1122(d)(3)(iii) Disbursements made to an investor are posted within two
business days to the servicer's investor records, or
such other number of days specified in the transaction |X|
agreements.
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1122(d)(3)(iv) Amounts remitted to investors per the investor reports
agree with cancelled checks, or other form of payment, |X|
or custodial bank statements.
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POOL ASSET ADMINISTRATION
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1122(d)(4)(i) Collateral or security on pool assets is maintained as
required by the transaction agreements or related asset
pool documents.
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1122(d)(4)(ii) Pool assets and related documents are safeguarded as
required by the transaction agreements.
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1122(d)(4)(iii) Any additions, removals or substitutions to the asset
pool are made, reviewed and approved in accordance with
any conditions or requirements in the transaction
agreements.
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1122(d)(4)(iv) Payments on pool assets, including any payoffs, made in
accordance with the related pool assets documents are
posted to the servicer's obligor records maintained no
more than two business days after receipt, or such other
number of days specified in the transaction agreements,
and allocated to principal, interest or other items
(e.g., escrow) in accordance with the related pool asset
documents.
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1122(d)(4)(v) The servicer's records regarding the pool asset agree
with the servicer's records with respect to an obligor's
unpaid principal balance.
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1122(d)(4)(vi) Changes with respect to the terms or status of an
obligor's pool asset (e.g., loan modifications or
re-agings) are made, reviewed and approved by authorized
personnel in accordance with the transaction agreements
and related pool asset documents.
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1122(d)(4)(vii) Loss mitigation or recovery actions (e.g., forbearance
plans, modifications and deeds in lieu of foreclosure,
foreclosures and repossessions, as applicable) are
initiated, conducted and concluded in accordance with
the timeframes or other requirements established by the
transaction agreements.
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1122(d)(4)(viii) Records documenting collection efforts are maintained
during the period a pool asset is delinquent in
accordance with the transaction agreements. Such records
are maintained on at least a monthly basis, or such
other period specified in the transaction agreements,
and describe the entity's activities in monitoring
delinquent pool assets including, for example, phone
calls, letters and payment rescheduling plans in cases
where delinquency is deemed temporary (e.g., illness or
unemployment).
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1122(d)(4)(ix) Adjustments to interest rates or rates of return for
pool assets with variable rates are computed based on
the related pool asset documents.
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1122(d)(4)(x) Regarding any funds held in trust for an obligor (such
as escrow accounts): (A) such funds are analyzed, in
accordance with the obligor's pool asset documents, on
at least an annual basis, or such other period specified
in the transaction agreements; (B) interest on such
funds is paid, or credited, to obligors in accordance
with applicable pool asset documents and state laws; and
(C) such funds are returned to the obligor within 30
calendar days of full repayment of the related pool
asset, or such other number of days specified in the
transaction agreements.
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1122(d)(4)(xi) Payments made on behalf of an obligor (such as tax or
insurance payments) are made on or before the related
penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments, provided
that such support has been received by the servicer at
least 30 calendar days prior to these dates, or such
other number of days specified in the transaction
agreements.
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1122(d)(4)(xii) Any late payment penalties in connection with any
payment to be made on behalf of an obligor are paid from
the servicer's funds and not charged to the obligor,
unless the late payment was due to the obligor's error
or omission.
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1122(d)(4)(xiii) Disbursements made on behalf of an obligor are posted
within two business days to the obligor's records
maintained by the servicer, or such other number of days
specified in the transaction agreements.
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1122(d)(4)(xiv) Delinquencies, charge-offs and uncollectible accounts
are recognized and recorded in accordance with the
transaction agreements.
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1122(d)(4)(xv) Any external enhancement or other support, identified in
Item 1114(a)(1) through (3) or Item 1115 of Regulation
AB, is maintained as set forth in the transaction |X|
agreements.
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