Exhibit 10.1(A)
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| Execution Copy |
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BANK OF AMERICA, NATIONAL ASSOCIATION
Purchaser
and
ACCREDITED HOME LENDERS, INC.
Company
FLOW SALE AND INTERIM SERVICING AGREEMENT
Dated as of September 1, 2006
Fixed and Adjustable-Rate Mortgage Loans
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................1
ARTICLE II AGREEMENT TO PURCHASE; CONVEYANCE OF MORTGAGE
LOANS; PURCHASE PRICE; POSSESSION OF MORTGAGE FILES; MAINTENANCE
OF SERVICING FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
DELIVERY OF DOCUMENTS; CLOSING CONDITIONS.....................................17
Section 2.01. Agreement to Purchase; Conveyance of Mortgage Loans;
Purchase Price; Possession of Mortgage Files;
Maintenance of Servicing Files...........................17
Section 2.02. Books and Records; Transfers of Mortgage Loans...........18
Section 2.03. Custodial Agreement; Delivery of Documents...............19
Section 2.04. Quality Control Procedures...............................21
Section 2.05. Closing Conditions.......................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES REMEDIES AND BREACH................23
Section 3.01. Company Representations and Warranties...................23
Section 3.02. Representations and Warranties Regarding Individual
Mortgage Loans...........................................27
Section 3.03. Repurchase...............................................48
Section 3.04. Payment Default; Exercise of Rescission Right............51
Section 3.05. Premium Recapture........................................51
ARTICLE IV ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
DURING THE INTERIM SERVICING PERIOD...........................................52
Section 4.01. Company to Act as Servicer...............................52
Section 4.02. Liquidation of Mortgage Loans............................53
Section 4.03. Collection of Mortgage Loan Payments.....................54
Section 4.04. Establishment of and Deposits to Custodial Account.......54
Section 4.05. Permitted Withdrawals From Custodial Account.............56
Section 4.06. Establishment of and Deposits to Escrow Account..........57
Section 4.07. Permitted Withdrawals From Escrow Account................57
Section 4.08. Payment of Taxes, Insurance and Other Charges............58
Section 4.09. Transfer of Accounts.....................................58
Section 4.10. Maintenance of Hazard Insurance..........................59
Section 4.11. Maintenance of Mortgage Impairment Insurance.............60
Section 4.12. Maintenance of Fidelity Bond and Errors and Omissions
Insurance................................................61
Section 4.13. Inspections..............................................61
Section 4.14. Restoration of Mortgaged Property........................61
Section 4.15. Maintenance of PMI Policy; Claims........................62
Section 4.16. Title, Management and Disposition of REO Property........62
Section 4.17. Real Estate Owned Reports................................64
Section 4.18. Liquidation Reports......................................64
Section 4.19. Reports of Foreclosures and Abandonments of Mortgaged
Property.................................................64
Section 4.20. Notification of Adjustments..............................64
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Section 4.21. Prepayment Premiums......................................65
Section 4.22. Credit Reporting; Gramm Xxxxx Xxxxxx Act.................65
Section 4.23. Disaster Recovery/Business Continuity Plan...............65
ARTICLE V PAYMENTS TO PURCHASER...............................................66
Section 5.01. Remittances..............................................66
Section 5.02. Statements to Purchaser..................................66
ARTICLE VI GENERAL SERVICING PROCEDURES.......................................66
Section 6.01. Transfers of Mortgaged Property..........................66
Section 6.02. Satisfaction of Mortgages and Release of Mortgage Files..67
Section 6.03. Servicing Compensation...................................68
Section 6.04. Annual Statement as to Compliance........................68
Section 6.05. Right to Examine Company Records.........................68
Section 6.06. Compliance with REMIC Provisions.........................68
ARTICLE VII TRANSFER OF SERVICING.............................................69
Section 7.01. Assumption of Responsibilities at Servicing Transfer
Date.....................................................69
ARTICLE VIII COMPANY TO COOPERATE.............................................72
Section 8.01. Provision of Information.................................72
Section 8.02. Financial Statements.....................................73
ARTICLE IX THE COMPANY........................................................73
Section 9.01. Indemnification; Third Party Claims......................73
Section 9.02. Merger or Consolidation of the Company...................73
Section 9.03. Limitation on Liability of Company and Others............74
Section 9.04. Limitation on Resignation and Assignment by Company......74
ARTICLE X PASS-THROUGH TRANSFERS, WHOLE LOAN TRANSFERS AND
AGENCY TRANSFERS; COMPLIANCE WITH REGULATION AB...............................75
Section 10.01. Intent of the Parties; Reasonableness....................75
Section 10.02. Additional Representations and Warranties of the Company.75
Section 10.03. Reconstitutions..........................................76
Section 10.04. Indemnification; Remedies................................80
ARTICLE XI MISCELLANEOUS PROVISIONS...........................................81
Section 11.01. Amendment................................................81
Section 11.02. Governing Law............................................81
Section 11.03. Arbitration..............................................81
Section 11.04. Notices..................................................81
Section 11.05. Severability of Provisions...............................82
Section 11.06. Relationship of Parties..................................82
Section 11.07. Successors and Assigns; Assignment of Agreement..........83
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Section 11.08. Recordation of Assignments of Mortgage...................83
Section 11.09. Solicitation of Mortgagor................................83
Section 11.10. Further Agreements.......................................84
Section 11.11. Confidential Information.................................84
Section 11.12. Counterparts.............................................85
Section 11.13. Exhibits.................................................85
Section 11.14. General Interpretive Principles..........................85
Section 11.15. Reproduction of Documents................................86
Section 11.16. Exhibits.................................................86
Section 11.17. Purchase Price and Terms Letter..........................86
Section 11.18. Servicing Provisions.....................................86
EXHIBITS
Exhibit A Contents of each Mortgage File
Exhibit B [Reserved]
Exhibit C Form of Assignment, Assumption and Recognition Agreement
Exhibit D Underwriting Guidelines
Exhibit E Form of Opinion of Counsel
Exhibit F Form of Memorandum of Sale
Exhibit G Description of Material Litigation
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FLOW SALE AND INTERIM SERVICING AGREEMENT
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This is a Flow Sale and Interim Servicing Agreement (the "Agreement") for
adjustable and fixed rate residential first and second lien mortgage loans,
dated and effective as of September 1, 2006, and is executed between Bank of
America, National Association, as purchaser (the "Purchaser"), and Accredited
Home Lenders, Inc., as seller and interim servicer (the "Company").
W I T N E S S E T H
WHEREAS, the Purchaser has agreed to purchase from time to time from the
Company and the Company has agreed to sell from time to time to the Purchaser
first and second lien adjustable and fixed rate mortgage loans, together with
the servicing rights associated with such Mortgage Loans; and
WHEREAS, the Mortgage Loans will be sold by the Company and purchased by
the Purchaser as pools or groups of whole loans, servicing released (each, a
"Mortgage Loan Package") on the various Closing Dates as provided herein;
WHEREAS, each of the Mortgage Loans as of the related Closing Date will be
secured by a mortgage, deed of trust or other security instrument creating a
first or second lien on a residential dwelling located in the jurisdiction
indicated on the related Mortgage Loan Schedule for the related Mortgage Loan
Package, which will be annexed to a Memorandum of Sale (as defined herein) on
the related Closing Date;
WHEREAS, the Purchaser and the Company wish to prescribe the manner of
purchase of the Mortgage Loans and the conveyance, interim servicing and control
of the Mortgage Loans; and
WHEREAS, following any purchase of the Mortgage Loans from the Company, the
Purchaser may desire to sell some or all of the Mortgage Loans to one or more
purchasers as a Whole Loan Transfer, Agency Transfer or a Pass-Through Transfer.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the Purchaser and the Company agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
40/30 Mortgage Loan: A Mortgage Loan which has an original term to maturity
of not more than thirty years from commencement of amortization, with a balloon
payment in year thirty based upon a forty year amortization schedule.
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50/30 Mortgage Loan: A Mortgage Loan which has an original term to maturity
of not more than thirty years from commencement of amortization, with a balloon
payment in year thirty based upon a fifty year amortization schedule.
Accepted Servicing Practices: With respect to any Mortgage Loan, procedures
(including collection procedures) that comply with applicable federal, state and
local law, and that the Company customarily employs and exercises in servicing
and administering mortgage loans for its own account and that are in accordance
with the accepted mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as the Mortgage Loans
in the jurisdiction where the related Mortgaged Property is located.
Adjustable-Rate Mortgage Loan: A Mortgage Loan that contains a provision
pursuant to which the Mortgage Interest Rate is adjusted periodically.
Adjustment Date: As to each Adjustable-Rate Mortgage Loan, the date on
which the Mortgage Interest Rate is adjusted in accordance with the terms of the
related Mortgage Note and Mortgage.
Agency Transfer: The sale or transfer by the Purchaser of some or all of
the Mortgage Loans to Xxxxxx Mae or Xxxxxxx Mac.
Agreement: This Flow Sale and Interim Servicing Agreement and all
amendments hereof and supplements hereto.
ALTA: The American Land Title Association or any successor thereto.
Appraisal: A written appraisal of a Mortgaged Property made by a Qualified
Appraiser, which appraisal must be written, in form and substance, to Xxxxxx Xxx
and Xxxxxxx Mac standards, and satisfy the requirements of Title XI of the
Financial Institution, Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, in effect as of the date of the appraisal.
Appraised Value: With respect to any Mortgaged Property, the lesser of (i)
the value set forth on the Appraisal made in connection with the origination of
the related Mortgage Loan as the value of such Mortgaged Property, or (ii) the
purchase price paid for such Mortgaged Property provided, however, that in the
case of a refinanced Mortgage Loan which refinanced a mortgage loan more than
twelve (12) months seasoned, such value shall be based solely on the Appraisal
made in connection with the origination of such Mortgage Loan.
Assignment, Assumption and Recognition Agreement: An agreement
substantially in the form of Exhibit C attached hereto.
Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect the
sale of the Mortgage to the Purchaser.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking or savings and loan institutions in the State of New York or the
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state in which the Company's servicing operations are located are authorized or
obligated by law or executive order to be closed.
Closing Date: With respect to a Mortgage Loan Package, the date or dates,
set forth in the related Memorandum of Sale, on which the Purchaser will
purchase and the Company will sell the Mortgage Loans identified therein.
Code: The Internal Revenue Code of 1986, as it may be amended from time to
time or any successor statute thereto, and applicable U.S. Department of the
Treasury regulations issued pursuant thereto.
Combined Loan-to-Value Ratio or CLTV: With respect to any Second Lien
Mortgage Loan and as of any date of determination, the fraction, expressed as a
percentage, the numerator of which is the sum of the original principal balance
of such Second Lien Mortgage Loan and the outstanding principal balance, as of
the date of origination of the Second Lien Mortgage Loan, of any related
mortgage loan which is senior in priority to such Second Lien Mortgage Loan, and
the denominator of which is the Appraised Value of the Mortgaged Property as of
the origination date.
Commission: The United States Securities and Exchange Commission or any
successor thereto.
Company: Accredited Home Lenders, Inc., or its successor in interest or
assigns, or any successor to the Company under this Agreement appointed as
herein provided.
Company Employees: As defined in Section 4.12.
Condemnation Proceeds: All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary, partial or entire, by exercise of the
power of eminent domain or condemnation, to the extent not required to be
released to a Mortgagor in accordance with the terms of the related Mortgage
Loan Documents.
Consumer Personal Information: Any information, including, but not limited
to, all personal information about a Mortgagor that is disclosed to the Company
or the Purchaser, as applicable, by or on behalf of a Mortgagor.
Covered Loan: A Mortgage Loan categorized as "Covered" pursuant to Appendix
E of Standard & Poor's Glossary.
Custodial Account: The separate account or accounts created and maintained
pursuant to Section 4.04.
Custodial Agreement: The agreement between the Purchaser and the Custodian
governing the retention of the originals of each Mortgage Note, Mortgage,
Assignment of Mortgage and other Mortgage Loan Documents.
Custodian: The custodian under the Custodial Agreement, or its successor in
interest or assigns, or any successor to the Custodian under the Custodial
Agreement as provided therein.
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Cut-off Date: With respect to each Mortgage Loan, as agreed to and
specified in the related Purchase Price and Terms Letter and set forth in the
related Memorandum of Sale.
Deleted Mortgage Loan: A Mortgage Loan which is repurchased by the Company
in accordance with the terms of this Agreement and which is, in the case of a
substitution pursuant to Section 3.03, replaced or to be replaced with a
Qualified Substitute Mortgage Loan.
Depositor: The depositor, as such term is defined in Regulation AB, with
respect to any Pass-Through Transfer.
Determination Date: With respect to any Remittance Date, the 3rd day of the
calendar month in which such Remittance Date occurs, or if such 3rd day is not a
Business Day, the immediately preceding Business Day.
Due Date: The day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace, as specified in the related
Mortgage Note.
Errors and Omissions Insurance Policy: An errors and omissions insurance
policy to be maintained by the Company pursuant to Section 4.12.
Escrow Account: The separate account or accounts created and maintained
pursuant to Section 4.06.
Escrow Payments: With respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, if applicable, fire and hazard
insurance premiums, condominium charges, and any other payments required to be
escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any
other related document.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Xxxxxx Xxx: The entity also known as Federal National Mortgage Association
(FNMA), or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the Company pursuant to
Section 4.12.
First Lien: With respect to each Mortgaged Property, the lien on the
mortgage, deed of trust or other instrument securing a Mortgage Note which
creates a first lien on the Mortgaged Property.
Fixed-Rate Mortgage Loan: A Mortgage Loan that has a constant annual rate
at which interest accrues in accordance with the provisions of the related
Mortgage Note.
Xxxxxxx Mac: The entity formally known as the Federal Home Loan Mortgage
Corporation (FHLMC), or any successor thereto.
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GAAP: Generally accepted accounting principles, consistently applied.
Gross Margin: With respect to each Adjustable-Rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note which is added to the
Index in order to determine the related Mortgage Interest Rate, as set forth in
the related Mortgage Loan Schedule.
High Cost Loan: A Mortgage Loan (a) covered by HOEPA, (b) a "high cost
home," "threshold," "covered," (excluding New Jersey "Covered Home Loans" as
that term was defined in clause (1) of the definition of that term in the New
Jersey Home Ownership Security Act of 2002 during the period between November
26, 2003 and July 7, 2004), "high risk home," "predatory" or similar loan under
any other applicable state, federal or local law (or a similarly classified loan
using different terminology under a law imposing heightened regulatory scrutiny
or additional legal liability for residential mortgage loans having high
interest rates, points and/or fees) or (c) categorized as High Cost pursuant to
Appendix E of Standard & Poor's Glossary. For avoidance of doubt, the parties
agree that this definition shall apply to any law regardless of whether such law
is presently, or in the future becomes, the subject of judicial review or
litigation.
HOEPA: The Home Ownership and Equity Protection Act of 1994, as amended.
Home Loan: A Mortgage Loan categorized as "Home Loan" pursuant to Appendix
E of Standard & Poor's Glossary.
HUD: The United States Department of Housing and Urban Development or any
successor thereto.
Index: With respect to any Adjustable-Rate Mortgage Loan, the index
identified on the related Mortgage Loan Schedule and set forth in the related
Mortgage Note for the purpose of calculating the interest therein.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged Property,
including proceeds of any PMI Policy, if applicable.
Interest Only Mortgage Loan: A Mortgage Loan which only requires payments
of interest for a period of time specified in the related Mortgage Note.
Interim Funder: With respect to each MERS Designated Mortgage Loan, the
Person named on the MERS System as the interim funder pursuant to the MERS
Procedures Manual.
Interim Servicing Fee: With respect to each Mortgage Loan, the amount of
the fee the Purchaser shall pay to the Company for servicing the Mortgage Loans
in accordance with the terms of this Agreement during the Interim Servicing
Period, which shall be equal to one-twelfth of the product of (a) 0.50% and (b)
the outstanding principal balance of such Mortgage Loan as of the 2nd day of the
month preceding the month in which such Interim Servicing Fee is paid. Such fee
shall be payable monthly (a pro rata Interim Servicing Fee shall be paid for any
partial month within the Interim Servicing Period).
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Interim Servicing Period: With respect to each Mortgage Loan Package, the
period of time from and including the related Closing Date to but not including
the related Servicing Transfer Date.
Investor: With respect to each MERS Designated Mortgage Loan, the Person
named on the MERS System as the investor pursuant to the MERS Procedures Manual.
Late Collections: With respect to any Mortgage Loan, all amounts received
with respect to such Mortgage Loan, whether as late payments of Monthly Payments
or as Insurance Proceeds, Liquidation Proceeds, Condemnation Proceeds or
otherwise, which represent late payments or collections of Monthly Payments not
previously recovered.
Liquidation Proceeds: Cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage
Loan, trustee's sale, foreclosure sale or otherwise, or the sale of the related
Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan and as of any
date of determination, the fraction, expressed as a percentage, the numerator of
which is the principal balance of the related Mortgage Loan at such date and the
denominator of which is the Appraised Value of the related Mortgaged Property.
Manufactured Home: A single family residential unit that is constructed in
a factory in sections in accordance with the Federal Manufactured Home
Construction and Safety Standards adopted on July 15, 1976, by HUD ("HUD Code"),
as amended in 2000, which preempts state and local building codes. Each unit is
identified by the presence of a HUD Plate/Compliance Certificate label. The
sections are then transported to the site and joined together and affixed to a
pre-built permanent foundation (which satisfies the manufacturer's requirements
and all state, county, and local building codes and regulations). The
manufactured home is built on a non-removable, permanent frame chassis that
supports the complete unit of walls, floors, and roof. The underneath part of
the home may have running gear (wheels, axles, and brakes) that enable it to be
transported to the permanent site. The wheels and hitch are removed prior to
anchoring the unit to the permanent foundation. The manufactured home must be
classified as real estate and taxed accordingly. The permanent foundation may be
on land owned by the mortgager or may be on leased land.
Market Change Event: (a) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (b) a general
moratorium on commercial banking activities declared by either Federal or New
York State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; or (c) the
outbreak or escalation of hostilities involving the United States, an act of
terrorism or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in clause (c) in the commercially
reasonable judgment of the Purchaser or the Company makes it impracticable or
inadvisable to proceed with the transactions as contemplated in this Agreement
on the terms and in the manner contemplated in this Agreement.
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Material Adverse Change: (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Company; (b) a material impairment of the
ability of the Company to perform under this Agreement or any related
agreements; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability of this Agreement against the Company.
Memorandum of Sale: With respect to each Mortgage Loan and Mortgage Loan
Package, the memorandum of sale, substantially in the form of Exhibit E attached
hereto, confirming the sale by Company and the purchase by Purchaser of the
Mortgage Loan Package on the related Closing Date.
MERS: Mortgage Electronic Registration Systems, Inc., its successors and
assigns.
MERS Designated Mortgage Loan: A Mortgage Loan for which (a) the Company
has designated or will designate MERS as, and has taken or will take such action
as is necessary to cause MERS to be, the mortgagee of record, as nominee for the
Company, in accordance with MERS Procedures Manual and (b) the Company has
designated or will designate the Purchaser as the Investor on the MERS System.
MERS Procedures Manual: The MERS Procedures Manual, as it may be amended,
supplemented or otherwise modified from time to time.
MERS Report: The report from the MERS System listing MERS Designated
Mortgage Loans and other information.
MERS System: MERS mortgage electronic registry system, as more particularly
described in the MERS Procedures Manual.
Monthly Payment: The scheduled monthly payment of principal and/or interest
on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing a
Mortgage Note, which creates a first or second lien on an unsubordinated estate
in fee simple or leasehold estate in real property securing the Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage Loan referred
to in Exhibit A annexed hereto, and any additional documents required to be
added to the Mortgage File pursuant to this Agreement.
Mortgage Impairment Insurance Policy: A mortgage impairment or blanket
hazard insurance policy as described in Section 4.11.
Mortgage Interest Rate: The annual rate of interest borne on a Mortgage
Note in accordance with the provisions of the Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject of this
Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on the Mortgage Loan Schedule annexed to the related Memorandum
of Sale, which Mortgage Loan includes without limitation the Mortgage File, the
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Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds, REO Disposition Proceeds and all other rights,
benefits, proceeds and obligations arising from or in connection with such
Mortgage Loan.
Mortgage Loan Documents: The documents referred to in Exhibit A as items 1
through 9.
Mortgage Loan Package: The pool or group of whole loans purchased on a
Closing Date, as described in the Mortgage Loan Schedule annexed to the related
Memorandum of Sale.
Mortgage Loan Schedule: With respect to each Mortgage Loan Package, the
schedule of Mortgage Loans annexed to the related Memorandum of Sale (and
delivered in electronic format to the Purchaser), such schedule setting forth
the following information with respect to each Mortgage Loan in the related
Mortgage Loan Package as of the related Cut-off Date:
(i) the Company's Mortgage Loan number;
(ii) the full xxxxxx xxxxxxx, xxxx, xxxxx and zip code of the
Mortgaged Property;
(iii) a code indicating whether the Mortgaged Property is a single
family residence, two-family residence, three-family residence, four-family
residence, PUD or condominium;
(iv) the current Mortgage Interest Rate;
(v) the current Monthly Payment;
(vi) the original term to maturity;
(vii) the scheduled maturity date;
(viii) the principal balance of the Mortgage Loan as of the Cut-off
Date after deduction of payments of principal due on or before the Cut-off
Date whether or not collected;
(ix) with respect to each First Lien Mortgage Loan, the Loan-to-Value
Ratio;
(x) a code indicating the credit score of the Mortgagor obtained at
the time of origination and the source thereof;
(xi) other applicable third party credit scores and the sources
thereof, if applicable;
(xii) a code indicating the credit grade and specific
loan/underwriting program of each Mortgage Loan as assigned by the Company;
(xiii) a code indicating the name of the issuer of the PMI Policy, if
any, and the certificate number and percentage coverage, if applicable;
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(xiv) the Appraised Value;
(xv) the date on which the first Monthly Payment was due and the next
applicable Due Date;
(xvi) the last payment date on which a payment was applied;
(xvii) the documentation level (full, alternative, limited);
(xviii) loan purpose (e.g., purchase financing, rate/term refinancing,
cash-out refinancing);
(xix) a code indicating whether the Mortgaged Property is
owner-occupied or investor property;
(xx) a code indicating the product type (e.g., 2/28, 3/27, 15-year
fixed, Interest Only Mortgage Loan, etc.);
(xxi) a code indicating whether the Mortgage Loan is subject to a
Prepayment Premium;
(xxii) the term of any Prepayment Premium;
(xxiii) the type and amount of any Prepayment Premium;
(xxiv) the Mortgagor's debt to income ratio;
(xxv) with respect to each Adjustable-Rate Mortgage Loan, the Gross
Margin;
(xxvi) with respect to each Adjustable-Rate Mortgage Loan, the next
Adjustment Date;
(xxvii) with respect to each Adjustable-Rate Mortgage Loan, the
lifetime maximum Mortgage Interest Rate;
(xxviii) with respect to each Adjustable-Rate Mortgage Loan, the
lifetime minimum Mortgage Interest Rate;
(xxix) with respect to each Adjustable-Rate Mortgage Loan, the initial
Periodic Interest Rate Cap;
(xxx) with respect to each Adjustable-Rate Mortgage Loan, the Periodic
Interest Rate Cap (other than the initial Periodic Interest Rate Cap);
(xxxi) with respect to each Adjustable-Rate Mortgage Loan, the Index;
(xxxii) with respect to each Adjustable-Rate Mortgage Loan, a code
indicating whether the Mortgage Loan is convertible;
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(xxxiii) a code indicating whether the Mortgage Loan is an Adjustable
Rate Mortgage Loan or a Fixed Rate Mortgage Loan;
(xxxiv) a code indicating whether the Mortgage Loan is a balloon loan;
(xxxv) a code indicating whether the Mortgage Loan is secured by a
ground lease;
(xxxvi) a code indicating whether the Mortgage Loan is a Second Lien
Mortgage Loan;
(xxxvii) a code indicating whether the Mortgage Loan is an Interest
Only Mortgage Loan;
(xxxviii) with respect to each Interest Only Mortgage Loan, the term
of the related interest only period;
(xxxix) the name of the Originator or broker of the Mortgage Loan;
(xl) if the Mortgage Loan is a Second Lien Mortgage Loan and the
Company or an affiliate of the Company is the Originator of the related
first lien, the principal balance of the related first lien at the time of
the origination of the first lien;
(xli) with respect to each Second Lien Mortgage Loan, the CLTV;
(xlii) a code indicating whether there is a "piggyback" or a "silent
second" mortgage loan secured by the related Mortgaged Property;
(xliii) a code indicating whether the Mortgage Loan is a 40/30
Mortgage Loan; and
(xliv) a code indicating whether the Mortgage Loan is a 50/30 Mortgage
Loan, if applicable.
With respect to the Mortgage Loans in the aggregate in the related Mortgage
Loan Package, the respective Mortgage Loan Schedule shall set forth the
following information, as of the related Cut-off Date:
(1) the number of Mortgage Loans;
(2) the current aggregate outstanding principal balance of the
Mortgage Loans;
(3) the current weighted average Mortgage Interest Rate of the
Mortgage Loans; and
(4) the weighted average months to maturity of the Mortgage Loans.
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Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment of the debt
evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
Negative Amortization: A gradual increase in the mortgage debt that occurs
when the monthly fixed installment is not sufficient for full application to
both principal and interest. The interest shortage is added to the unpaid
principal balance to create "negative" amortization.
OCC: The Office of the Comptroller of the Currency.
Officer's Certificate: A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board, the President, a Senior Vice President, a First
Vice President, a Vice President or an Assistant Vice President and by the
Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Company, and delivered to the Purchaser as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an employee of
the Company, reasonably acceptable to the Purchaser.
Originator: With respect to any Mortgage Loan, the entity that (i) took the
Mortgagor's loan application, (ii) processed the Mortgagor's loan application,
or (iii) closed and/or funded such Mortgage Loan.
Pass-Through Transfer: A transaction involving either (i) a sale or other
transfer of some or all of the Mortgage Loans directly or indirectly to an
issuing entity in connection with an issuance of publicly offered or privately
placed, rated or unrated mortgage-backed securities or (ii) an issuance of
publicly offered or privately placed, rated or unrated securities, the payments
on which are determined primarily by reference to one or more portfolios of
residential mortgage loans consisting, in whole or in part, of some or all of
the Mortgage Loans.
Periodic Interest Rate Cap: As to each Adjustable-Rate Mortgage Loan, the
maximum increase or decrease in the Mortgage Interest Rate on any Adjustment
Date pursuant to the terms of the Mortgage Note.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof.
PMI Policy: A policy of primary mortgage guaranty insurance issued by a
Qualified Insurer, if applicable.
Prepayment Premium: With respect to a Prepayment Premium Loan, the
prepayment charge or penalty interest required to be paid by the Mortgagor in
connection with a prepayment of the related Mortgage Loan, as provided in the
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related Mortgage Note or Mortgage, and as specified on the related Mortgage Loan
Schedule.
Prepayment Premium Loan: Each Mortgage Loan identified on the related
Mortgage Loan Schedule with respect to which the Mortgagor must pay a Prepayment
Premium in connection with a Principal Prepayment.
Prime Rate: The prime rate announced to be in effect from time to time, as
published as the average rate in The Wall Street Journal.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan which is received in advance of its scheduled Due Date, including
any Prepayment Premium thereon and which is not accompanied by an amount of
interest representing scheduled interest due on any date or dates in any month
or months subsequent to the month of prepayment.
PUD: As defined in Section 3.02(j).
Purchase Price: The price specified in the related Memorandum of Sale and
paid on the Closing Date by the Purchaser to the Company for the Mortgage Loans
included in one or more Mortgage Loan Packages, as calculated and adjusted as
set forth in the related Purchase Price and Terms Letter.
Purchase Price and Terms Letter: The letter agreement between the Company
and the Purchaser entered into on or prior to the related Closing Date relating
to the sale of one or more Mortgage Loan Packages.
Purchaser: Bank of America, National Association, or its successor in
interest or any successor to or assignee of the Purchaser under this Agreement
as herein provided.
Qualified Appraiser: An appraiser, duly appointed by the Company, who had
no interest, direct or indirect, in the Mortgaged Property or in any loan made
on the security thereof, who met the minimum requirements of Xxxxxx Xxx and
Xxxxxxx Mac and whose compensation was not affected by the approval or
disapproval of the Mortgage Loan, and such appraiser and the appraisal made by
such appraiser both satisfied the requirements of Title XI of the Financial
Institution Reform, Recovery, and Enforcement Act and the regulations
promulgated thereunder all as in effect on the date the Mortgage Loan was
originated.
Qualified Correspondent: Any Person from which the Company purchased
Mortgage Loans, provided that the following conditions are satisfied: (i) such
Mortgage Loans were originated pursuant to an agreement between the Company and
such Person that contemplated that such Person would underwrite mortgage loans
from time to time, for sale to the Company, in accordance with underwriting
guidelines designated by the Company ("Designated Guidelines") or guidelines
that do not vary materially from such Designated Guidelines; (ii) such Mortgage
Loans were in fact underwritten as described in clause (i) above and were
acquired by the Company within 180 days after origination; (iii) either (x) the
Designated Guidelines were, at the time such Mortgage Loans were originated,
used by the Company in origination of mortgage loans of the same type as the
Mortgage Loans for the Company's own account or (y) the Designated Guidelines
were, at the time such Mortgage Loans were underwritten, designated by the
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Company on a consistent basis for use by lenders in originating mortgage loans
to be purchased by the Company; and (iv) the Company employed, at the time such
Mortgage Loans were acquired by the Company, pre-purchase or post-purchase
quality assurance procedures (which may involve, among other things, review of a
sample of mortgage loans purchased during a particular time period or through
particular channels) designed to ensure that Persons from which it purchased
mortgage loans properly applied the underwriting criteria designated by the
Company.
Qualified Depository: Either (i) an account or accounts the deposits in
which are insured by the FDIC to the limits established by such corporation,
provided that any such deposits not so insured shall be maintained in an account
at a depository institution or trust company whose commercial paper or other
short term debt obligations (or, in the case of a depository institution or
trust company which is the principal subsidiary of a holding company, the
commercial paper or other short term debt obligations of such holding company)
have been rated by each Rating Agency in its highest short-term rating category,
or (ii) a segregated trust account or accounts (which shall be a "special
deposit account") maintained with any federal or state chartered depository
institution or trust company, acting in its fiduciary capacity.
Qualified Insurer: A mortgage guaranty insurance company duly authorized
and licensed where required by law to transact mortgage guaranty insurance
business and approved as an insurer by Xxxxxx Mae or Xxxxxxx Mac.
Qualified Substitute Mortgage Loan: A mortgage loan eligible to be
substituted by the Company for a Deleted Mortgage Loan pursuant to the terms of
this Agreement which must, on the date of such substitution, be approved by the
Purchaser and (i) have an outstanding principal balance, after application of
all scheduled payments of principal and interest due during or prior to the
month of substitution, not in excess of, and not more than 5.00% less than, the
Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Mortgage
Interest Rate, with respect to a Fixed-Rate Mortgage Loan, not less than the
Mortgage Interest Rate of the Deleted Mortgage Loan and not more than 2.00% in
excess of the Mortgage Interest Rate of such Deleted Mortgage Loan; (iii) have
the same Due Date as the Deleted Mortgage Loan; (iv) if an Adjustable-Rate
Mortgage Loan, have a maximum Mortgage Interest Rate not less than the maximum
Mortgage Interest Rate for the Deleted Mortgage Loan; (v) if an Adjustable-Rate
Mortgage Loan, have a minimum Mortgage Interest Rate not less than the minimum
Mortgage Interest Rate of the Deleted Mortgage Loan; (vi) if an Adjustable-Rate
Mortgage Loan, have a Gross Margin not less than that of the Deleted Mortgage
Loan; (vii) if an Adjustable-Rate Mortgage Loan, have the same Index as the
Deleted Mortgage Loan; (viii) if an Adjustable-Rate Mortgage Loan, have a next
Adjustment Date not more than two (2) months later than the next Adjustment Date
on the Deleted Mortgage Loan, a Qualified Substitute Mortgage Loan must have all
Adjustment Dates occurring during the same Interest Accrual Period during which
Adjustment Dates occur with respect to the Deleted Mortgage Loan; (ix) have a
remaining term to maturity not greater than and not more than one (1) year less
than that of the Deleted Mortgage Loan; (x) be current as of the date of
substitution; (xi) have a LTV as of the date of substitution not greater than
that of the LTV of the Deleted Mortgage Loan as of such date; (xii) have a
Company credit grade not lower in quality than that of the Deleted Mortgage
Loan; (xiii) have been underwritten or reunderwritten in accordance with the
same underwriting criteria and guidelines as the Deleted Mortgage Loan, (xiv)
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have the same lien status as the Deleted Mortgage Loan; (xv) comply with each
representation and warranty set forth in Sections 3.01 and 3.02; (xvi) be of the
same type as the Deleted Mortgage Loan; (xvii) have a FICO score not less than
that of the Deleted Mortgage Loan; and (xviii) have a Prepayment Premium with a
term and an amount at least equal to the Prepayment Premium of the Deleted
Mortgage Loan.
Rating Agency: Each of Fitch Ratings, Xxxxx'x Investors Service, Inc., and
Standard & Poor's, a division of The XxXxxx-Xxxx Companies, Inc., or any
successor thereto, as applicable.
Reconstitution: Any Pass-Through Transfer or Whole Loan Sale.
Reconstitution Agreement: The agreement or agreements entered into by the
Company and the Purchaser and/or certain third parties in connection with a
Reconstitution with respect to any or all Mortgage Loans subject to this
Agreement.
Reconstitution Date: The date on which any or all of the Mortgage Loans
purchased by the Purchaser under this Agreement are reconstituted as part of an
Agency Transfer, Pass-Through Transfer or Whole Loan Transfer pursuant to
Section 10.03 hereof. The Reconstitution Date shall be such date which the
Purchaser and the subsequent purchaser or transferee of the related Mortgage
Loans shall designate. On such date, except as provided in this Agreement, the
Mortgage Loans transferred shall cease to be covered by this Agreement and the
Company's servicing responsibilities shall cease under this Agreement with
respect to the related transferred Mortgage Loans.
Regulation AB: Subpart 229.1100 - Asset Backed Securities (Regulation AB),
17 C.F.R. ss.ss.229.1100-229.1123, as such may be amended from time to time, and
subject to such clarification and interpretation as have been provided by the
Commission in the adopting release (Asset-Backed Securities, Securities Act
Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff
of the Commission, or as may be provided by the Commission or its staff from
time to time.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law relating to a
REMIC, which appear at Section 860A through 860G of Subchapter M of Chapter 1,
Subtitle A of the Code, and related provisions, and regulations, rulings or
pronouncements promulgated thereunder, as the foregoing may be in effect from
time to time.
Remittance Date: The 5th day (or if such 5th day is not a Business Day, the
first Business Day immediately following such 5th day) of any month, beginning
with the month following the related Closing Date.
REO Disposition: The final sale by the Company of any REO Property.
REO Disposition Proceeds: All amounts received with respect to an REO
Disposition pursuant to Section 4.16.
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REO Property: A Mortgaged Property acquired by the Company on behalf of the
Purchaser through foreclosure or by deed in lieu of foreclosure, as described in
Section 4.16.
Repurchase Price: With respect to any Mortgage Loan for which discovery of
or notice of breach occurs within three (3) months after the Closing Date a
price equal to (i) the Stated Principal Balance of the Mortgage Loan as of the
date on which such repurchase takes place multiplied by the purchase price
percentage set forth in the related Memorandum of Sale, plus (ii) interest on
such Stated Principal Balance at the Mortgage Interest Rate from the date on
which interest has last been paid and distributed to the Purchaser through the
date of repurchase, plus (iii) any reasonable and customary out-of-pocket costs
and expenses incurred by the Purchaser in connection with the enforcement of the
Company's repurchase obligation under Section 3.03, plus (iv) any and all
damages, fees, costs and expenses (including reasonable attorney fees) incurred
by or on behalf of the Purchaser arising out of or in connection with any
violation with respect to such Mortgage Loan of any applicable predatory or
abusive-lending law, less (v) amounts received or advanced in respect of such
repurchased Mortgage Loan that are being held in the Custodial Account for
distribution in the month of repurchase. With respect to any Mortgage Loan for
which discovery of or notice of breach occurs more than three (3) months after
the related Closing Date but on or before twelve (12) months after the related
Closing Date, a price equal to (i) an amount equal to product of (a) the excess
of the purchase price percentage set forth in the related Memorandum of Sale
over 100% times (b) the Stated Principal Balance of the Mortgage Loan as of the
date on which such repurchase takes place times (c) a fraction, the numerator of
which is nine (9) minus the number of 30-day periods that have elapsed since the
termination of such three month period and the denominator of which is nine (9),
plus (ii) interest on such Stated Principal Balance at the Mortgage Interest
Rate from the date on which interest has last been paid and distributed to the
Purchaser through the date of repurchase, plus (iii) any reasonable and
customary out-of-pocket costs and expenses incurred by the Purchaser in
connection with the enforcement of the Company's repurchase obligation under
Section 3.03, plus (iv) any and all damages, fees, costs and expenses (including
reasonable attorney fees) incurred by or on behalf of the Purchaser arising out
of or in connection with any violation with respect to such Mortgage Loan of any
applicable predatory or abusive-lending law, less (v) amounts received or
advanced in respect of such repurchased Mortgage Loan that are being held in the
Custodial Account for distribution in the month of repurchase. With respect to
any Mortgage Loan for which discovery of or notice of breach occurs more than
twelve (12) months after the related Closing Date, a price equal to (i) the
Stated Principal Balance of the Mortgage Loan as of the date on which such
repurchase takes place plus (ii) interest on such Stated Principal Balance at
the Mortgage Interest Rate from the date on which interest has last been paid
and distributed to the Purchaser through the date of repurchase, plus (iii) any
reasonable and customary out-of-pocket costs and expenses incurred by the
Purchaser in connection with the enforcement of the Company's repurchase
obligation under Section 3.03, plus (iv) any and all damages, fees, costs and
expenses (including reasonable attorney fees) incurred by or on behalf of the
Purchaser arising out of or in connection with any violation with respect to
such Mortgage Loan of any applicable predatory or abusive-lending law, less (v)
amounts received or advanced in respect of such repurchased Mortgage Loan that
are being held in the Custodial Account for distribution in the month of
repurchase.
RESPA: The Real Estate Settlement Procedures Act, as amended.
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Second Lien Mortgage Loan: A Mortgage Loan secured by a second priority
lien on the related Mortgaged Property.
Securities Act: The Securities Act of 1933, as amended.
Servicing Advances: All customary, reasonable and necessary "out of pocket"
costs and expenses (including reasonable attorneys' fees and disbursements)
incurred in the performance by the Company of its servicing obligations,
including, but not limited to, the cost of (a) the preservation, restoration and
protection of the Mortgaged Property, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of any
REO Property and (d) compliance with the obligations under Section 4.08.
Servicing File: With respect to each Mortgage Loan, the file retained by
the Company consisting of originals of all documents in the Mortgage File which
are not delivered to the Custodian and copies of the Mortgage Loan Documents
listed in the Custodial Agreement the originals of which are delivered to the
Custodian pursuant to Section 2.03.
Servicing Officer: Any officer of the Company involved in or responsible
for the administration and servicing of the Mortgage Loans whose name appears on
a list of servicing officers furnished by the Company to the Purchaser upon
request, as such list may from time to time be amended.
Servicing Transfer Date: The date on which the responsibility for the
servicing of the Mortgage Loans included in a Mortgage Loan Package transfers
from Company to the Purchaser or the Purchaser's designee, which date shall be
set forth in the related Purchase Price and Terms Letter or such other date
mutually agreed to by the Company and the Purchaser.
Standard & Poor's Glossary: The Standard & Poor's LEVELS(R) Glossary, as
may be in effect from time to time. Stated Principal Balance: As to each
Mortgage Loan and any date of determination, (i) the principal balance of the
Mortgage Loan at the related Cut-off Date after giving effect to payments of
principal received on or before such date, minus (ii) all amounts previously
distributed to the Purchaser with respect to the related Mortgage Loan
representing payments or recoveries of principal.
Static Pool Information: Static pool information as described in Item
1105(a)(1)-(3) and 1105(c) of Regulation AB.
Subservicing Agreement: Any subservicing agreement between the Company and
any Subservicer relating to servicing and/or administration of some or all of
the Mortgage Loans included in a Mortgage Loan Package.
Successor Servicer: With respect to any Mortgage Loan, the Person to whom
the Company initially transfers servicing of such Mortgage Loan on the related
Servicing Transfer Date and, if different, any affiliated party of such Person
that acquires the related servicing rights.
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Third-Party Originator: Each Person, other than a Qualified Correspondent,
that originated the Mortgage Loans acquired by the Company.
Underwriting Guidelines: The underwriting guidelines of the Company in
effect at the time the Mortgage Loan was originated, attached hereto as Exhibit
D as may be updated and incorporated into Exhibit D from time to time by
providing such updates to the Purchaser.
Whole Loan Transfer: Any sale or transfer of some or all of the Mortgage
Loans other than a Pass-Through Transfer.
ARTICLE II
AGREEMENT TO PURCHASE; CONVEYANCE OF MORTGAGE LOANS;
PURCHASE PRICE; POSSESSION OF MORTGAGE FILES; MAINTENANCE OF
SERVICING FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
DELIVERY OF DOCUMENTS; CLOSING CONDITIONS
Section 2.01. Agreement to Purchase; Conveyance of Mortgage Loans; Purchase
-------------------------------------------------------------
Price; Possession of Mortgage Files; Maintenance of Servicing Files.
--------------------------------------------------------------------
(A) Agreement to Purchase; Conveyance of Mortgage Loans
In exchange for the payment of the Purchase Price on the related Closing
Date, the Company agrees to sell and the Purchaser agrees to purchase, without
recourse, but subject to the terms of this Agreement, on a servicing released
basis, all of the right, title and interest of the Company in and to the
Mortgage Loans in a Mortgage Loan Package having an aggregate unpaid principal
balance on the related Cut-off Date in an amount as set forth in the related
Memorandum of Sale. The Company shall deliver the Mortgage Loan Schedule for the
Mortgage Loan Package to be purchased on the related Closing Date to the
Purchaser at least three (3) Business Days prior to such Closing Date or as soon
thereafter following the date on which the list of Mortgage Loans to be included
in the Mortgage Loan Package has been finalized. Pursuant to Section 2.03, the
Company will deliver the related Mortgage Loan Documents to the Custodian.
(B) Purchase Price
The Purchase Price for each Mortgage Loan Package shall be the percentage
of par as stated in or as otherwise calculated pursuant to the related Purchase
Price and Terms Letter (subject to adjustment as provided therein), plus accrued
interest on the aggregate unpaid principal balance of the Mortgage Loans in the
Mortgage Loan Package at the related Mortgage Interest Rate from the date
through which interest on the related Mortgage Loan has last been paid through
the day prior to the related Closing Date inclusive, all as set forth more
specifically in the related Memorandum of Sale; provided, however, with respect
to those Mortgage Loans for which interest has been paid through a date beyond
the related Cut-off Date, such accrued interest owing to the Company shall be
reduced by the amount of interest accruing on the unpaid principal balance of
each such Mortgage Loan at a rate equal to the Mortgage Interest Rate of such
Mortgage Loan, from the related Closing Date to the day prior to the date
through which interest is paid for such Mortgage Loan, inclusive. The initial
principal amount of the Mortgage Loans shall be the unpaid principal balance of
17
the Mortgage Loans, so computed as of the related Cut-off Date, after
application of payments of principal on or before the related Cut-off Date to
the extent such payments were actually received. Subject to satisfaction of the
closing conditions set forth in Section 2.05, such payments shall be made to the
account designated by the Company by wire transfer of immediately available
funds as early as reasonably possible on the related Closing Date. The final
Purchase Price and Purchase Price percentage shall be set forth on the related
Memorandum of Sale.
The Purchaser shall be entitled to (1) all principal collected on the
Mortgage Loans after the related Cut-off Date, (2) all payments of interest on
the Mortgage Loans at the Mortgage Interest Rate received after the related
Cut-off Date, net of any Interim Servicing Fee due to the Company, and (3) all
Prepayment Premiums received or paid after the related Cut-off Date.
(C) Possession of Mortgage Files; Maintenance of Servicing Files
The contents of each Servicing File are and shall be held in trust by the
Company for the benefit of the Purchaser as the owner thereof. The Company shall
take all necessary steps to ensure that the documents required to be included in
the Servicing File are complete and shall maintain the Servicing File as
required by this Agreement, Accepted Servicing Practices and applicable law.
Possession of each Servicing File by the Company is at the will of the Purchaser
for the sole purpose of servicing the related Mortgage Loan during the Interim
Servicing Period, and such retention and possession by the Company is in a
custodial capacity only. Upon the Company's receipt of the Purchase Price for
the Mortgage Loans the ownership of each Mortgage Note, the related Mortgage and
the related Mortgage File and Servicing File shall vest immediately in the
Purchaser, and the ownership of all records and documents with respect to the
related Mortgage Loan prepared by or which come into the possession of the
Company, other than the Company's copy file maintained for regulatory and
archival purposes, shall vest immediately in the Purchaser and shall be retained
and maintained by the Company, in trust, at the will of the Purchaser and only
in such custodial capacity. The Company shall release its custody of the
contents of any Servicing File only in accordance with written instructions from
the Purchaser, unless such release is required as incidental to the Company's
servicing of the Mortgage Loans or is in connection with the transfer of
servicing pursuant to Section 7.01 or a repurchase of any Mortgage Loan pursuant
to Section 3.03 or 6.02. Complete Servicing Files for the Mortgage Loans shall
be delivered to the Purchaser or its designee on or before the related Servicing
Transfer Date.
Section 2.02. Books and Records; Transfers of Mortgage Loans.
----------------------------------------------
From and after the Company's receipt of the Purchase Price for the Mortgage
Loans to the Purchaser, all rights arising out of the Mortgage Loans, including,
but not limited to, all funds received on or in connection with the Mortgage
Loans, shall be received and held by the Company in trust for the benefit of the
Purchaser as owner of the Mortgage Loans, and to the extent the Company retains
record title to the related Mortgages, it shall be for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage
Loans during the Interim Servicing Period.
18
The sale of each Mortgage Loan shall be reflected on the Company's balance
sheet and other financial statements, tax returns and business records as a sale
of assets by the Company. The Company shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Mortgage Loan which
shall be marked clearly to reflect the ownership of each Mortgage Loan by the
Purchaser. In particular, the Company shall maintain in its possession,
available for inspection by the Purchaser, or its designee, upon reasonable
advance notice, evidence of compliance with all federal, state and local laws,
rules and regulations, including but not limited to documentation as to the
method used in determining the applicability of the provisions of the Flood
Disaster Protection Act of 1973, as amended, to the Mortgaged Property,
documentation evidencing insurance coverage and periodic inspection reports as
required by Section 4.13. To the extent that original documents are not required
for purposes of realization of Liquidation Proceeds or Insurance Proceeds,
documents maintained by the Company may be in the form of microfilm or
microfiche or such other reliable means of recreating original documents,
including but not limited to, optical imagery techniques.
The Company shall maintain with respect to each Mortgage Loan and shall
make available for inspection by the Purchaser or its designee the related
Servicing File during the time the Purchaser retains ownership of a Mortgage
Loan and thereafter in accordance with applicable laws and regulations.
For the purposes of this Agreement, the Company shall be under no
obligation to deal with any person with respect to this Agreement or the
Mortgage Loans unless the books and records show such person as the owner of the
Mortgage Loan. The Purchaser may, subject to the terms of this Agreement,
including Section 10.03, sell and transfer one or more of the Mortgage Loans;
provided, however, that in no event shall anyone other than the Purchaser named
herein have the status of "Purchaser" hereunder with respect to any Mortgage
Loan Package. The Purchaser also shall advise the Company of the transfer. Upon
receipt of notice of the transfer, the Company shall xxxx its books and records
to reflect the ownership of the Mortgage Loans of such assignee, and shall
release the previous Purchaser from its obligations hereunder with respect to
the Mortgage Loans sold or transferred. If the Company receives written
notification of a transfer less than five (5) Business Days before a
Determination Date, the Company's duties to remit and report as required by
Article V shall begin with the next calendar month following such Determination
Date.
Section 2.03. Custodial Agreement; Delivery of Documents.
------------------------------------------
Pursuant to the related Custodial Agreement, the Company will, with respect
to each Mortgage Loan, deliver and release the Mortgage Loan Documents to the
Custodian at least five (5) Business Days prior to the related Closing Date. In
addition, in connection with the assignment of any MERS Designated Mortgage
Loan, the Company agrees that on or prior to each Closing Date it will cause, at
its own expense, the MERS System to indicate that the related Mortgage Loans
have been assigned by the Company to the Purchaser in accordance with this
Agreement by entering in the MERS System the information required by the MERS
System to identify the Purchaser as owner of such Mortgage Loans. The Company
further agrees that it will not alter the information referenced in this
paragraph with respect to any Mortgage Loan during the term of this Agreement
unless and until such Mortgage Loan is repurchased in accordance with the terms
of this Agreement.
19
The Custodian shall be required to certify its receipt of the Mortgage Loan
Documents required to be delivered pursuant to the Custodial Agreement prior to
the related Closing Date, as evidenced by the initial certification of the
Custodian in the form annexed to the Custodial Agreement. If requested by the
Company, the Company shall be responsible for recording the Assignments of
Mortgage, if necessary, in accordance with Accepted Servicing Practices and this
Agreement. The Purchaser shall be responsible for the initial and on-going fees
and expenses of the Custodian.
All recording fees and other costs associated with the recording of
Assignments of Mortgage and other relevant documents to the Purchaser or its
designee will be borne by the Company for Mortgage Loans that are not registered
under the MERS System. For Mortgage Loans not registered under the MERS System,
if the Purchaser requests that the related Assignments of Mortgage be recorded,
the Company shall cause such Assignments of Mortgage which were delivered in
blank to be completed and to be recorded. The Company shall be required to
deliver such Assignments of Mortgage for recording within thirty (30) days of
the date on which the Company is notified that recording will be required
pursuant to this Section 2.03. The Company shall furnish the Custodian with a
copy of each Assignment of Mortgage submitted for recording. In the event that
any such Assignment is lost or returned unrecorded because of a defect therein,
the Company shall promptly have a substitute Assignment of Mortgage prepared or
have such defect cured, as the case may be, and thereafter cause such Assignment
of Mortgage to be recorded.
Except as otherwise provided in this Section 2.03 and in Section 3.03, upon
discovery or receipt of notice of any materially defective document required to
be included in a Mortgage File, or that a document required to be in a Mortgage
File is missing, the Company shall have ninety (90) days (except as provided
below with respect to recorded documents) to cure such defect or deliver such
missing document to the Custodian. Any document required to be included in a
Mortgage File that is not executed as required or does not materially comply
with all legal requirements shall be deemed to be materially defective. If the
Company does not cure such defect or deliver such missing document within such
time period, the Company shall, at the Purchaser's request, either repurchase or
substitute for such Mortgage Loan in accordance with Section 3.03.
The Company shall forward to the Custodian original documents evidencing an
assumption, modification, consolidation or extension of any Mortgage Loan
entered into in accordance with Section 4.01 or 6.01 within one week of their
execution; provided, however, that the Company shall provide the Custodian with
a certified true copy of any such document submitted for recordation within ten
(10) days of its execution, and shall provide the original of any document
submitted for recordation or a copy of such document certified by the
appropriate public recording office to be a true and complete copy of the
original within the timeframes set forth below in this Section 2.03.
If the original or a copy certified by the appropriate recording office of
any document submitted for recordation to the appropriate public recording
office is not so delivered to the Custodian with 150 days following the related
Closing Date, and if the Company does not cure such failure within thirty (30)
days after receipt of written notification of such failure from the Purchaser,
20
the related Mortgage Loan shall, upon the request of the Purchaser, be
repurchased by the Company at a price and in the manner specified in Section
3.03.
In the event the public recording office is delayed in returning any
original document, the Company shall deliver to the Custodian within 180 days of
its submission for recordation, a copy of such document and an Officer's
Certificate, which shall (i) identify the recorded document; (ii) state that the
recorded document has not been delivered to the Custodian due solely to a delay
by the public recording office, (iii) state the amount of time generally
required by the applicable recording office to record and return a document
submitted for recordation, and (iv) specify the date the applicable recorded
document will be delivered to the Custodian. The Company will be required to
deliver the document to the Custodian by the date specified in (iv) above. An
extension of the date specified in (iv) above may be requested from the
Purchaser, which consent shall not be unreasonably withheld. However, if the
Company cannot deliver such original or clerk-certified copy of any document
submitted for recordation to the appropriate public recording office within the
specified time for any reason, within thirty (30) days after receipt of written
notification of such failure from the Purchaser, the Company shall, at the
Purchaser's option, indemnify the Purchaser for expenses related to such failure
or repurchase the related Mortgage Loan at the price and in the manner specified
in Section 3.03.
In addition to any rights granted to the Purchaser hereunder to underwrite
the Mortgage Loans and review the Mortgage Loan Documents prior to the Closing
Date, the Purchaser shall be entitled to conduct a due diligence review of the
Mortgage Files in accordance with the timetable and any additional terms and
conditions set forth in the related Purchase Price and Terms Letter. Such
underwriting by the Purchaser or its designee shall not impair or diminish the
rights of the Purchaser or any of its successors under this Agreement with
respect to a breach of the representations and warranties contained in this
Agreement. The fact that the Purchaser or its designee has conducted or has
failed to conduct any partial or complete examination of the Mortgage Files
shall not affect the Purchaser's or any of its successors' rights to demand
repurchase or other relief or remedy provided for in this Agreement; provided,
however, with respect to any Mortgage Loan listed on the Schedule of Overturned
Event Level 3 Mortgage Loans attached to the related Purchase Price and Terms
Letter, the Company shall not be obligated to repurchase such Mortgage Loan
solely due to the breach of the first clause of the Company's representation in
Section 3.02(jj).
Section 2.04. Quality Control Procedures.
--------------------------
The Company shall have an internal quality control program that verifies,
on a regular basis, the existence and accuracy of the legal documents, credit
documents, property appraisals, and underwriting decisions. The program shall
include evaluating and monitoring the overall quality of the Company's
underwriting, originating, administering and servicing activities of the Company
in accordance with industry standards. The Company shall make available upon the
reasonable request of the Purchaser information regarding its quality control
program.
Section 2.05. Closing Conditions.
------------------
The closing for the purchase and sale of each Mortgage Loan Package shall
take place on the respective Closing Date. The closing shall be either: by
21
telephone or electronic mail, confirmed by letter or wire as the parties shall
agree; or conducted in person, at such place as the parties may agree.
The closing for each Mortgage Loan Package shall be subject to the
satisfaction of each of the following conditions:
(a) the Company shall have delivered to the Purchaser and the Custodian the
related Mortgage Loan Schedule and an electronic data file containing
information on a loan-level basis as of the related Cut-off Date;
(b) all of the representations and warranties of the Company under this
Agreement shall be true and correct as of the related Closing Date (or, with
respect to Section 3.02, such other date specified therein) in all material
respects and no default shall have occurred hereunder which, with notice or the
passage of time or both, would constitute a default hereunder;
(c) the Purchaser and its counsel shall have received an opinion from the
Company's counsel, substantially in the form of Exhibit E attached hereto (with
respect to the initial closing only);
(d) the Purchaser shall have received from the Custodian an initial
certification with respect to its receipt of the Mortgage Loan Documents for the
related Mortgage Loans;
(e) the Purchaser shall have received originals of the related Memorandum
of Sale, the related Purchase Price and Terms Letter and a funding memorandum
setting forth the Purchase Price(s), and the accrued interest thereon, for the
related Mortgage Loan Package, in each case executed on behalf of the Company;
(f) the Purchaser shall have received a certification or other evidence
satisfactory to the Purchaser of the release of any liens, pledge or security
interest on the Mortgage Loans;
(g) no Material Adverse Change or Market Change Event shall have occurred
since the date of the Purchase Price and Terms Letter; and
(h) all other terms and conditions of this Agreement, the related
Memorandum of Sale and the related Purchase Price and Terms Letter to be
satisfied by the Company shall have been complied with in all material respects.
Upon satisfaction of the foregoing conditions, the Purchaser shall pay to
the Company on such Closing Date the Purchase Price for the related Mortgage
Loan Package, including accrued interest pursuant to Section 2.01 of this
Agreement.
22
ARTICLE III
REPRESENTATIONS AND WARRANTIES REMEDIES AND BREACH
Section 3.01. Company Representations and Warranties.
--------------------------------------
The Company hereby represents and warrants to the Purchaser and to the
Successor Servicer that, as of the related Closing Date:
(a) Due Organization and Authority.
------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all
licenses necessary to carry on its business as now being conducted and
is licensed, qualified and in good standing in each state where a
Mortgaged Property is located if the laws of such state require
licensing or qualification in order to conduct business of the type
conducted by the Company, and in any event the Company is in
compliance with the laws of any such state to the extent necessary to
ensure the enforceability of the related Mortgage Loan (subject to
bankruptcy laws and general principles of equity) and the servicing of
such Mortgage Loan in accordance with the terms of this Agreement; the
Company has the full corporate power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by
the Company and the consummation of the transactions contemplated
hereby have been duly and validly authorized; this Agreement evidences
the valid, binding and enforceable obligation of the Company, subject
to bankruptcy laws and general principles of equity; and all requisite
corporate action has been taken by the Company to make this Agreement
valid and binding upon the Company in accordance with its terms;
(b) Ordinary Course of Business.
---------------------------
The consummation of the transactions contemplated by this Agreement
are in the ordinary course of business of the Company, which is in the
business of selling and servicing loans, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the Company
pursuant to this Agreement are not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction;
(c) No Conflicts.
------------
23
Neither the execution and delivery of this Agreement, the acquisition
of the Mortgage Loans by the Company, the sale of the Mortgage Loans
to the Purchaser or the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of this
Agreement will conflict with or result in a breach of any of the
articles of incorporation or by-laws of the Company or any legal
restriction or any agreement or instrument to which the Company is now
a party or by which it is bound, or constitute a default or result in
the violation of any law, rule, regulation, order, judgment or decree
to which the Company or its property is subject, or impair the ability
of the Purchaser to realize on the Mortgage Loans, or impair the value
of the Mortgage Loans;
(d) Ability to Service.
------------------
The Company is a seller/servicer of conventional residential mortgage
loans, with the facilities, procedures, and experienced personnel
necessary for the sound servicing of mortgage loans of the same type
as the Mortgage Loans. The Company is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act;
(e) Reasonable Servicing Fee; Fair Consideration.
--------------------------------------------
The Company acknowledges and agrees that the Interim Servicing Fee
represents reasonable compensation for performing such services and
that the entire Interim Servicing Fee shall be treated by the Company,
for accounting and tax purposes, as compensation for the servicing and
administration of the Mortgage Loans pursuant to this Agreement. The
consideration received by the Company upon the sale of the Mortgage
Loans under this Agreement shall constitute fair consideration and
reasonably equivalent value for the Mortgage Loans;
(f) Ability to Perform; Solvency.
----------------------------
The Company does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in
this Agreement. The Company is solvent and the sale of the Mortgage
Loans will not cause the Company to become insolvent. The sale of the
Mortgage Loans is not undertaken to hinder, delay or defraud any of
the Company's creditors;
(g) No Litigation Pending.
---------------------
There is no action, suit, proceeding or investigation pending or to
its knowledge threatened against the Company which, either in any one
instance or in the aggregate, (i) except as disclosed on Exhibit G,
24
may result in any Material Adverse Change in the business, operations,
financial condition, properties or assets of the Company, taken as a
whole, or in any material impairment of the right or ability of the
Company to carry on its business substantially as now conducted, or in
any material liability on the part of the Company, or which would be
likely to impair materially the ability of the Company to perform
under the terms of this Agreement; or (ii) would draw into question
the validity of this Agreement or the Mortgage Loans or of any action
taken or to be contemplated herein;
(h) No Consent Required.
-------------------
No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Company of or compliance by the Company with
this Agreement or the sale of a Mortgage Loan Package as evidenced by
the consummation of the transactions contemplated by this Agreement,
or if required, such consent, approval, authorization or order has
been obtained prior to the related Closing Date;
(i) Selection Process.
-----------------
The Mortgage Loans in each Mortgage Loan Package will be selected from
among the outstanding fixed and adjustable rate one- to four-family
first and second lien mortgage loans in the Company's portfolio as to
which the representations and warranties set forth in Section 3.02
could be made and such selection will not intentionally be made in a
manner so as to affect adversely the interests of the Purchaser.
Unless otherwise agreed by the Purchaser, no Mortgage Loan has been
excluded from any prior sale of mortgage loans by the Company to the
Purchaser or any other third party mortgage loan purchaser for reasons
relating to noncompliance with Underwriting Guidelines or applicable
law;
(j) No Untrue Information.
---------------------
None of this Agreement, the information set forth in the Mortgage Loan
Schedule and the information contained in the related electronic data
file delivered to the Purchaser by the Company, nor any statement,
report or other document furnished or to be furnished by or on behalf
of the Company pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of
material fact or omits to state a material fact necessary to make the
statements contained therein not misleading;
25
(k) Sale Treatment.
--------------
The Company has determined that the disposition of the Mortgage Loans
pursuant to this Agreement will be afforded sale treatment for
accounting and tax purposes;
(l) No Material Change.
------------------
There has been no Material Adverse Change in the business, operations,
financial condition or assets of the Company since the date of the
Company's most recent financial statements;
(m) No Brokers' Fees.
----------------
The Company has not dealt with any broker, investment banker, agent or
other Person that may be entitled to any commission or compensation in
the connection with the sale of the Mortgage Loans;
(n) MERS.
----
The Company is in good standing, and will comply in all material
respects with the rules and procedures of MERS in connection with the
servicing of the MERS Designated Mortgage Loans. On or within five (5)
Business Days following the related Closing Date, the Company will
take such steps as are necessary to cause the MERS System to reflect
the Purchaser as the Investor with respect to each MERS Designated
Mortgage Loan and no Person as Interim Funder for each MERS Designated
Mortgage Loan; and
(o) Financial Statements.
--------------------
The Company has delivered, or made available, to the Purchaser
financial statements as requested by the Purchaser. All such financial
statements fairly present the pertinent results of operations and
changes in financial position for each of such periods and the
financial position at the end of each such period of the Company and
its subsidiaries and have been prepared in accordance with GAAP
consistently applied throughout the periods involved. There has been
no change in the business, operations, financial condition, properties
or assets of the Company since the date of the Company's financial
statements that would have a material adverse effect on its ability to
perform its obligations under this Agreement.
26
Section 3.02. Representations and Warranties Regarding Individual Mortgage
------------------------------------------------------------
Loans.
-----
As to each Mortgage Loan, the Company hereby represents and warrants to the
Purchaser and to the Successor Servicer that as of the related Closing Date:
(a) Mortgage Loans as Described.
---------------------------
The information set forth in the Mortgage Loan Schedule annexed to the
related Memorandum of Sale and the information contained on the
related electronic data file delivered to the Purchaser is complete,
true and correct;
(b) Payments Current.
----------------
No payment required to be made under any Mortgage Loan will be thirty
(30) days or more delinquent on the related Closing Date. No payment
under any Mortgage Loan has been thirty (30) days or more delinquent
since origination of such Mortgage Loan;
(c) No Outstanding Charges.
----------------------
All taxes, governmental assessments, insurance premiums, leasehold
payments, ground rents, water, sewer and municipal charges, which
previously became due and owing have been paid, or an escrow of funds
has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet
due and payable. The Company has not advanced funds, or induced, or
solicited directly or indirectly, the payment of any amount required
under the Mortgage Loan, except for (i) payments in the nature of
escrow payments and (ii) interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage Loan proceeds,
whichever is later, to the day which precedes by one month the Due
Date of the first installment of principal and interest;
(d) Original Terms Unmodified.
-------------------------
The terms of the Mortgage Note and Mortgage have not been impaired,
waived, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interests of the Purchaser and maintain the lien priority of the
Mortgage and which has been delivered to the Custodian. The substance
of any such waiver, alteration or modification has been approved by
the issuer of any related PMI Policy and the title insurer, to the
extent required by the policy, and its terms are reflected on the
Mortgage Loan Schedule. No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement approved by
27
the issuer of any related PMI Policy and the title insurer, to the
extent required by the policy, and which assumption agreement is part
of the Mortgage File delivered to the Custodian and the terms of which
are reflected on the related Mortgage Loan Schedule;
(e) No Defenses.
-----------
The Mortgage Note and the Mortgage are not subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(f) No Satisfaction of Mortgage.
---------------------------
The Mortgage has not been satisfied, canceled, subordinated or
rescinded, in whole or in part, and the Mortgaged Property has not
been released from the lien of the Mortgage, in whole or in part, nor
has any instrument been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission;
(g) Validity of Mortgage Documents.
------------------------------
The Mortgage Note and the Mortgage and related documents are genuine,
and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms, subject to
bankruptcy laws and general principles of equity. All parties to the
Mortgage Note and the Mortgage had legal capacity to enter into the
Mortgage Loan and to execute and deliver the Mortgage Note and the
Mortgage, and the Mortgage Note and the Mortgage have been duly and
properly executed by such parties;
(h) No Fraud.
--------
No error, omission, misrepresentation, negligence, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part
of the Company in connection with the origination of the Mortgage Loan
or on the part of the Mortgagor, any appraiser, any builder or any
developer, or any other party involved in the solicitation, servicing
or origination of the Mortgage Loan or in the application for any
insurance in relation to such Mortgage Loan or in connection with the
sale of such Mortgage Loan to the Purchaser, and there are no
circumstances existing with respect to the Mortgage Loan which would
28
permit the primary mortgage guaranty insurer, if any, to deny coverage
under any insurance policy;
(i) Location and Type of Mortgaged Property.
---------------------------------------
The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of a contiguous parcel of real
property with a detached single family residence erected thereon, or a
two- to four-family dwelling, or an individual condominium unit in a
condominium project, or an individual unit in a planned unit
development ("PUD") or a townhouse, or a manufactured home. None of
the Mortgaged Properties are Manufactured Homes, cooperative units,
log homes, mobile homes or geodesic domes. As of the respective
appraisal date for each Mortgaged Property, no portion of the
Mortgaged Property was being used for commercial or mixed-use purposes
and, to the Company's knowledge, since the date of such Appraisal, no
portion of the Mortgaged Property has been used for commercial
purposes or mixed-use purposes; provided, that Mortgaged Properties
which contain a home office shall not be considered as being used for
commercial purposes or mixed-use purposes as long as the Mortgaged
Property has not been altered for commercial purposes and is not
storing any chemicals or raw materials other than those commonly used
for home office, homeowner repair, maintenance and/or household
purposes. No Mortgage Loan finances builder inventory. If the
Mortgaged Property is next to another Mortgaged Property, such "row
houses" do not, in the aggregate for all the Mortgage Loans in the
Mortgage Loan Package, represent more than 1.0% of the aggregate
principal balance of the Mortgage Loan Package;
(j) Valid First or Second Lien.
--------------------------
The Mortgage is a valid, subsisting, enforceable (subject to
bankruptcy laws and general principles of equity) and perfected first
and second lien and first or second priority security interest on the
Mortgaged Property, including all buildings on the Mortgaged Property
and all installations and mechanical, electrical, plumbing, heating
and air conditioning systems located in or annexed to such buildings,
and all additions, alterations and replacements made at any time with
respect to the foregoing. The lien of the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet
due and payable;
29
(2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of
recording acceptable to mortgage lending institutions generally
and specifically referred to in the lender's title insurance
policy delivered to the Originator of the Mortgage Loan and (i)
referred to or otherwise considered in the Appraisal made for the
Originator of the Mortgage Loan and (ii) which do not adversely
affect the Appraised Value of the Mortgaged Property set forth in
such Appraisal;
(3) other matters to which like properties are commonly subject which
do not individually or in the aggregate, materially interfere
with the benefits of the security intended to be provided by the
Mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property; and
(4) with respect to each Second Lien Mortgage Loan, a prior mortgage
lien on the Mortgaged Property.
The Mortgage Note and the Mortgage have not been assigned or pledged,
other than to lenders whose liens will be released prior to the
Closing Date or simultaneously with Purchaser's payment of the
Purchase Price hereunder, on the related Closing Date, pursuant to a
duly executed security release reasonably acceptable to the Purchaser.
Any security agreement, chattel mortgage or equivalent document
related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable (subject
to bankruptcy laws and general principles of equity) (A) first lien
and first priority security interest with respect to each First Lien
Mortgage Loan, or (B) second lien and second priority security
interest with respect to each Second Lien Mortgage Loan, in each case,
on the property described therein and the Company has full right to
sell and assign the same to the Purchaser;
(k) Full Disbursement of Proceeds.
-----------------------------
The proceeds of the Mortgage Loan have been fully disbursed to or for
the account of the Mortgagor, and there is no requirement for future
advances thereunder. All costs, fees and expenses incurred in making
or closing the Mortgage Loan and the recording of the Mortgage were
paid, and the Mortgagor is not entitled to any refund of any amounts
paid or due under the Mortgage Note or Mortgage;
30
(l) Consolidation of Future Advances.
--------------------------------
Any future advances made prior to the related Cut-off Date have been
consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the
Mortgage Loan Schedule. The lien of the Mortgage securing the
consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the
policy insuring the mortgagee's consolidated interest or by other
title evidence acceptable to Xxxxxx Xxx or Xxxxxxx Mac; the
consolidated principal amount does not exceed the original principal
amount of the Mortgage Loan; the Company shall not make future
advances after the related Cut-off Date;
(m) Ownership.
---------
The Company, or MERS as nominee for the Company, is the sole owner of
record and holder of the Mortgage Loan, and the Company has good and
marketable title thereto and has full right and authority to transfer
and sell the Mortgage Loan to the Purchaser. Upon receipt of the
Purchase Price, the Company is transferring the Mortgage Loan free and
clear of any and all encumbrances, liens, pledges, equities,
participation interests, claims, agreements with other parties to sell
or otherwise transfer the Mortgage Loan, charges or security interests
of any nature encumbering such Mortgage Loan;
(n) Origination/Doing Business.
--------------------------
The Mortgage Loan was originated by a savings and loan association, a
savings bank, a commercial bank, a credit union, an insurance company,
or similar institution that is supervised and examined by a federal or
state authority or by a mortgagee approved by the Secretary of Housing
and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act. All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest,
were) (1) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property
is located, and (2) either (A) organized under the laws of such state,
(B) qualified to do business in such state or exempt from such
qualification, (C) federal savings and loan associations or national
banks having principal offices in such state, or (D) not doing
business in such state;
31
(o) LTV; PMI Policy.
---------------
No Mortgage Loan has a LTV greater than 100%. If such Mortgage Loan is
indicated on the Mortgage Loan Schedule as being covered by a PMI
Policy, all provisions of such PMI Policy have been and are being
complied with, such policy is in full force and effect, and all
premiums due thereunder have been paid. The insurer under any such PMI
Policy is a Qualified Insurer that has a claims paying ability
acceptable to Xxxxxx Mae or Xxxxxxx Mac. Any Mortgage Loan subject to
a PMI Policy obligates the Mortgagor thereunder to maintain the PMI
Policy and to pay all premiums and charges in connection therewith.
Any such premium is not payable from any portion of the Mortgage
Interest Rate;
(p) Title Insurance.
---------------
The Mortgage Loan is covered by an ALTA lender's title insurance
policy acceptable to Xxxxxx Xxx or Xxxxxxx Mac or other generally
acceptable form of policy of insurance acceptable to Xxxxxx Mae or
Xxxxxxx Mac, issued by a title insurer acceptable to Xxxxxx Mae or
Xxxxxxx Mac and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Company, its successors
and assigns, as to the first or second priority lien of the Mortgage
in the original principal amount of the Mortgage Loan, subject only to
the exceptions contained in clauses (1), (2) and (3) of Paragraph (j)
of this Section 3.02, and, with respect to each Second Lien Mortgage
Loan, clause (4) of Paragraph (k) of this Section 3.02, and against
any loss by reason of the invalidity or unenforceability of the lien
resulting from the provisions of the Mortgage providing for adjustment
to the Mortgage Interest Rate and Monthly Payment. Additionally, such
lender's title insurance policy affirmatively insures ingress and
egress, and against encroachments by or upon the Mortgaged Property or
any interest therein. Where required by state law or regulation, the
Mortgagor has been given the opportunity to choose the carrier of such
lender's title insurance policy. The Company, its successors and
assigns are the sole insureds of such lender's title insurance policy,
and such lender's title insurance policy is valid and remains in full
force and effect and will be in full force and effect upon the
consummation of the purchase of the Mortgage Loans as contemplated by
this Agreement. No claims have been made under such lender's title
insurance policy, and no prior holder of the Mortgage, including the
Company, has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy. In connection with
the issuance of such lender's title insurance policy, no unlawful fee,
32
commission, kickback or other unlawful compensation or value of any
kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful items
have been received, retained or realized by the Company;
(q) No Defaults.
-----------
Except for one Monthly Payment not more than thirty (30) days
delinquent, there is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no
event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration, and neither the Company
nor its predecessors have waived any default, breach, violation or
event of acceleration. With respect to each Second Lien Mortgage Loan,
(i) the prior mortgage is in full force and effect, (ii) there is no
default, breach, violation or event of acceleration existing under
such prior mortgage or the related mortgage note, (iii) no event
which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default, breach,
violation or event of acceleration thereunder, and either (A) the
prior mortgage contains a provision which allows or (B) applicable law
requires, the mortgagee under the Second Lien Mortgage Loan to receive
notice of, and affords such mortgagee an opportunity to cure any
default under the prior mortgage;
(r) No Mechanics' Liens.
-------------------
Except as insured by the related title insurance referenced in
Paragraph (P) above, there are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no
rights are outstanding that under the law could give rise to such
liens) affecting the related Mortgaged Property which are or may be
liens prior to, or equal or coordinate with, the lien of the related
Mortgage;
(s) Location of Improvements; No Encroachments.
------------------------------------------
Except as insured against by the title insurance policy referenced in
Paragraph (q) above, all improvements which were considered in
determining the Appraised Value of the Mortgaged Property lay wholly
within the boundaries and building restriction lines of the Mortgaged
Property and no improvements on adjoining properties encroach upon the
Mortgaged Property. No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation;
33
(t) Payment Terms.
-------------
Except with respect to the Interest Only Mortgage Loans, principal
payments commenced or will commence no more than sixty (60) days after
the funds were disbursed to the Mortgagor in connection with the
Mortgage Loan. The Mortgage Loans have an original term to maturity of
not more than thirty (30) years, with interest payable in arrears on
the Due Date set forth on the related Mortgage Loan Schedule. As to
each Adjustable Rate Mortgage Loan on each applicable Adjustment Date,
the Mortgage Interest Rate will be adjusted to equal the sum of the
Index plus the applicable Gross Margin, rounded up or down to the
nearest or next highest multiple of 0.125% indicated by the Mortgage
Note; provided that the Mortgage Interest Rate will not increase or
decrease by more than the Periodic Interest Rate Cap on any Adjustment
Date, and will in no event exceed the maximum Mortgage Interest Rate
or be lower than the minimum Mortgage Interest Rate listed on the
Mortgage Loan Schedule for such Mortgage Loan. As to each Adjustable
Rate Mortgage Loan which is not an Interest Only Mortgage Loan, a
40/30 Mortgage Loan or a 50/30 Mortgage Loan, each Mortgage Note
requires a monthly payment which is sufficient to fully amortize the
outstanding principal balance as of the first day of such period over
the then remaining term of such Mortgage Note and to pay interest at
the related Mortgage Interest Rate. With respect to each 40/30
Mortgage Loan, other than a 40/30 Mortgage Loan that is also an
Interest Only Mortgage Loan during the related interest-only period,
the Mortgage Note matures (i.e., is due in full) thirty (30) years
after the first payment date and is payable in equal monthly
installments of principal and interest, with interest calculated and
payable in arrears, sufficient to amortize the Mortgage Loan fully
over a forty (40) year period from commencement of amortization with
respect to such 40/30 Mortgage Loan; provided, however, the final
monthly installment due under the terms of such Mortgage Note on the
related stated maturity date is sufficient to reduce the then
outstanding principal balance to zero (0). With respect to each 50/30
Mortgage Loan, other than a 50/30 Mortgage Loan that is also an
Interest Only Mortgage Loan during the related interest-only period,
the Mortgage Note matures (i.e., is due in full) thirty (30) years
after the first payment date and is payable in equal monthly
installments of principal and interest, with interest calculated and
payable in arrears, sufficient to amortize the Mortgage Loan fully
over a fifty (50) year period from commencement of amortization with
respect to such 50/30 Mortgage Loan; provided, however, the final
monthly installment due under the terms of such Mortgage Note on the
related stated maturity date is sufficient to reduce the then
outstanding principal balance to zero (0). As to each Adjustable Rate
34
Mortgage Loan that is not a 40/30 Mortgage Loan or a 50/30 Mortgage
Loan, if the related Mortgage Interest Rate changes on an Adjustment
Date (or with respect to an Interest Only Mortgage Loan, on an
Adjustment Date following the related interest-only period), the then
outstanding principal balance will be reamortized over the remaining
life of such Mortgage Loan. No Mortgage Loan contains terms or
provisions which would result in Negative Amortization. Unless
otherwise provided for on the electronic tape or the Mortgage Loan
Schedule provided by the Company to the Purchaser, the interest-only
period of each Interest Only Mortgage Loan shall equal sixty (60)
months;
(u) Customary Provisions.
--------------------
The Mortgage and related Mortgage Note contain customary and
enforceable (subject to bankruptcy laws and general principles of
equity) provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including,
(i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's
sale or the right to foreclose the Mortgage;
(v) Occupancy of the Mortgaged Property.
-----------------------------------
As of the date of origination, the Mortgaged Property was capable of
being lawfully occupied under applicable law and to the Company's
knowledge, the Mortgaged Property is, if occupied, lawfully occupied
as of the Closing Date;
(w) No Additional Collateral.
------------------------
The Mortgage Note is not and has not been secured by any collateral,
pledged account or other security except the lien of the corresponding
Mortgage and the security interest of any applicable security
agreement or chattel mortgage referred to in Paragraph (k) above;
(x) Deeds of Trust.
--------------
In the event the Mortgage constitutes a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and
35
no fees or expenses are or will become payable by the Mortgagee to the
trustee under the deed of trust, except in connection with a trustee's
sale after default by the Mortgagor;
(y) Acceptable Investment.
---------------------
The Company has no knowledge of any circumstances or conditions with
respect to the Mortgage Loan, the Mortgaged Property, the Mortgagor or
the Mortgagor's credit standing, other than the non-prime nature
thereof, that can reasonably be expected to cause private
institutional investors to regard the Mortgage Loan as an unacceptable
investment, cause the Mortgage Loan to become delinquent, or adversely
affect the value or marketability of the Mortgage Loan;
(z) Transfer of Mortgage Loans.
--------------------------
With respect to each Mortgage that is not recorded in the name of MERS
or its designee, the Assignment of Mortgage, upon the insertion of the
name of the assignee and recording information, is in recordable form
and is acceptable for recording under the laws of the jurisdiction in
which the related Mortgaged Property is located;
(aa) Mortgaged Property Undamaged.
----------------------------
The Mortgaged Property is in good repair and undamaged by waste, fire,
earthquake or earth movement, windstorm, hurricane, flood, tornado or
other casualty so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended;
(bb) Servicing and Collection Practices; Escrow Deposits.
---------------------------------------------------
The origination, servicing and collection practices used with respect
to the Mortgage Loan have been in accordance with Accepted Servicing
Practices, any applicable laws, rules and regulations and in
accordance with the terms of the Mortgage Note, Mortgage and other
loan documents, whether such origination and servicing was done by the
Company, its affiliates, or any third party which originated the
Mortgage Loan on behalf of, or sold the Mortgage Loan to, any of them,
or any servicing agent of any of the foregoing. The Company has
reported the Mortgagor credit files, if any, to the three credit
repositories in a timely manner. With respect to escrow deposits and
Escrow Payments, all such payments are in the possession of the
Company and there exist no deficiencies in connection therewith for
which customary arrangements for repayment thereof have not been made.
36
All Escrow Payments have been collected in full compliance with state
and federal law. No escrow deposits or Escrow Payments or other
charges or payments have been capitalized under the Mortgage Note;
(cc) No Condemnation.
---------------
There is no proceeding pending or to the Company's knowledge
threatened for the total or partial condemnation of the related
Mortgaged Property;
(dd) The Appraisal.
-------------
The Mortgage Loan Documents contain an Appraisal of the related
Mortgaged Property, by a Qualified Appraiser and the Appraisal and
appraiser both satisfy the requirements of Xxxxxx Xxx or Xxxxxxx Mac;
(ee) Insurance.
---------
All buildings on the Mortgaged Property are insured by an insurer
generally acceptable to Xxxxxx Mae or Xxxxxxx Mac against loss by fire
and such hazards as are covered under a standard extended coverage
endorsement and such other hazards as are customary in the area where
the Mortgaged Property is located pursuant to insurance policies
conforming to Accepted Servicing Practices and the requirements of
Section 4.10, in an amount which is not less than the lesser of 100%
of the insurable value of the Mortgaged Property and the outstanding
principal balance of the Mortgage Loan, but in no event less than the
minimum amount necessary to fully compensate for any damage or loss on
a replacement cost basis. If the Mortgaged Property is a condominium
unit, it is included under the coverage afforded by a blanket policy
for the project. If the improvements on the Mortgaged Property are in
an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, then a flood
insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration is in effect with a generally
acceptable insurance carrier and such policy conforms to the
requirements of Xxxxxx Mae or Xxxxxxx Mac. Such flood insurance policy
is in an amount representing coverage not less than the least of (A)
the outstanding principal balance of the Mortgage Loan, (B) the full
insurable value of the related Mortgaged Property and (C) the maximum
amount of insurance which was available under the Flood Disaster
Protection Act of 1973, as amended. All individual insurance policies
contain a standard mortgagee clause naming the Company and its
successors and assigns as mortgagee, and all premiums currently due
thereon have been paid. The Mortgage obligates the Mortgagor
37
thereunder to maintain a hazard insurance policy at the Mortgagor's
cost and expense, and on the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain such insurance at
such Mortgagor's cost and expense, and to seek reimbursement therefor
from the Mortgagor. Each such insurance policy is the valid and
binding obligation of the insurer, is in full force and effect, and
will be in full force and effect and inure to the benefit of the
Purchaser upon the consummation of the transactions as contemplated by
this Agreement. The Company has not acted or failed to act so as to
impair the coverage of any such insurance policy or the validity,
binding effect and enforceability thereof. No Mortgage Loan is covered
by a force placed insurance policy or policies;
(ff) No Impairment of Insurance Coverage.
-----------------------------------
No action, inaction, or event has occurred and no state of fact exists
or has existed that has resulted or will result in the exclusion from,
denial of, or defense to coverage under any applicable hazard
insurance policy, PMI Policy or bankruptcy bond, irrespective of the
cause of such failure of coverage. In connection with the placement of
any such insurance, no commission, fee, or other compensation has been
or will be received by the Company or any designee of the Company or
any corporation in which the Company or any officer, director, or
employee had a financial interest at the time of placement of such
insurance;
(gg) Servicemembers Civil Relief Act.
-------------------------------
The Mortgagor has not notified the Company, and the Company has no
knowledge of any relief requested by or allowed to the Mortgagor under
the Servicemembers Civil Relief Act or any similar state or local
laws;
(hh) Balloon Payments, Graduated Payments or Contingent Interests.
------------------------------------------------------------
With respect to any Mortgage Loan which is identified on the Mortgage
Loan Schedule as a balloon mortgage loan (each, a "Balloon Mortgage
Loan"), the Mortgage Note is payable in Monthly Payments based on a
thirty (30), forty (40) or fifty (50) year amortization schedule with
a final Monthly Payment substantially greater than the preceding
Monthly Payment which is sufficient to amortize the remaining
principal balance of the Balloon Mortgage Loan and such final Monthly
Payment shall not be due prior to 360 months following the origination
of the Balloon Mortgage Loan. The Mortgage Loan is not a graduated
38
payment mortgage loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature;
(ii) No Construction Loans.
---------------------
No Mortgage Loan was made in connection with (i) the construction or
rehabilitation of a Mortgaged Property or (ii) facilitating the
trade-in or exchange of a Mortgaged Property other than a
construction-to-permanent loan which has converted to a permanent
Mortgage Loan;
(jj) Underwriting.
------------
Each Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines, which Underwriting Guidelines satisfy the
standards of prudent non-prime mortgage lenders in the secondary
market (including approved variances in connection with compensating
factors permitted thereunder); and the Mortgage Note, the Mortgage and
all other documents contained in the related Mortgage Files are on
Xxxxxx Xxx or Xxxxxxx Mac uniform instruments or are on forms
acceptable to Xxxxxx Mae or Xxxxxxx Mac or to prudent mortgage lenders
that regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market
that invest in mortgage loans such as the Mortgage Loans;
(kk) No Bankruptcy.
-------------
No Mortgagor was a debtor in any state or federal bankruptcy or
insolvency proceeding at the time the Mortgage Loan was originated
(i.e., the date the Mortgage Loan was funded) and, to the best of the
Company's knowledge, following the date of origination of the Mortgage
Loan, the Mortgagor with respect to the Mortgage Loan was not a debtor
in any state or federal bankruptcy or insolvency proceeding, and the
Mortgaged Property has not been subject to any bankruptcy or
foreclosure proceedings;
(ll) Delivery of Mortgage Files.
--------------------------
The Mortgage Note, the Mortgage, the Assignment of Mortgage, if
necessary, and any other documents required to be delivered with
respect to each Mortgage Loan pursuant to the Custodial Agreement,
shall be delivered to the Custodian all in compliance with the terms
of this Agreement. The Company is in possession of a complete Mortgage
File for each Mortgage Loan in compliance with Exhibit A, except for
such documents the originals of which have been delivered to the
Custodian, and all documents required to be included in the Mortgage
File shall be complete in all material respects, executed as required
39
and in compliance with applicable law. With respect to each Mortgage
Loan for which a lost note affidavit has been delivered to the
Custodian in place of the original Mortgage Note, the related Mortgage
Note is no longer in existence, and, if such Mortgage Loan is
subsequently in default, the enforcement of such Mortgage Loan or of
the related Mortgage by or on behalf of the Purchaser will not be
affected by the absence of the original Mortgage Note;
(mm) No Buydowns.
-----------
No Mortgage Loan contains provisions pursuant to which Monthly
Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Company, the Mortgagor or anyone
on behalf of the Mortgagor, (b) paid by any source other than the
Mortgagor or (c) contains any other similar provisions which may
constitute a "buydown" provision;
(nn) Interest Calculation.
--------------------
Interest on each Mortgage Loan is calculated on the basis of a 360-day
year consisting of twelve 30-day months. No Mortgage Loan provides for
interest payable on a simple interest basis. No Mortgage Loan provides
for an increase in the related Mortgage Interest Rate upon the
occurrence of a default under the terms of the related Mortgage Note;
(oo) No Violation of Environmental Laws.
----------------------------------
The Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or
federal environmental law, rule or regulation. There is no pending
action or proceeding directly involving any Mortgaged Property of
which the Company is aware in which compliance with any environmental
law, rule or regulation is an issue; and to the best of the Company's
knowledge, nothing further remains to be done to satisfy in full all
requirements of each such law, rule or regulation constituting a
prerequisite to use and enjoyment of said property;
(pp) Texas Refinance Mortgage Loans.
------------------------------
Each Mortgage Loan originated in the state of Texas pursuant to
Article XVI, Section 50(a)(6) of the Texas Constitution (a "Texas
Refinance Loan") has been originated in compliance with the provisions
of Article XVI, Section 50(a)(6) of the Texas Constitution, Texas
Civil Statutes and the Texas Finance Code;
40
(qq) Conversion to Fixed Interest Rate.
---------------------------------
No Adjustable-Rate Mortgage Loan contains a provision permitting or
requiring conversion to a fixed interest rate Mortgage Loan;
(rr) The Mortgagor.
-------------
The Mortgagor is one or more natural persons and/or trustees for an
Illinois land trust or a trustee under a "living trust" and such
"living trust" is acceptable to Xxxxxx Xxx or Xxxxxxx Mac. In the
event the Mortgagor is a trustee of a "living trust," such trustee is
a natural person and is an obligor under the Mortgage Note in his or
her individual capacity;
(ss) No High Cost Loans.
------------------
No Mortgage Loan is classified as a "high cost" mortgage loan under
the Home Ownership and Equity Protection Act of 1994, as amended, nor
is any Mortgage Loan a "high cost home," "covered," "high risk home"
or "predatory" loan under any applicable state, federal or local law
(or a similarly classified loan using different terminology under a
comparable and applicable law imposing heightened regulatory scrutiny
or additional legal liability for residential mortgage loans having
high interest rates, points and/or fees). No Mortgage Loan is a High
Cost Loan or Covered Loan, as applicable (as such terms are defined in
the then-current version of Standard & Poor's LEVELS(R) Glossary;
(tt) Qualified Mortgages.
-------------------
Each Mortgage Loan would be a "qualified mortgage" within Section
860G(a)(3) of the Code if transferred to a REMIC in exchange for
regular or residual interests in the REMIC;
(uu) No Litigation Pending.
---------------------
There is no action, suit, proceeding or investigation pending, or to
the Company's knowledge threatened, that is related to the Mortgage
Loan and likely to affect materially and adversely the servicing of
such Mortgage Loan;
(vv) FICO Scores.
-----------
Each Mortgagor has a minimum FICO score of 500;
(ww) Compliance with Applicable Laws.
-------------------------------
41
Each Mortgage Loan complied in all material respects with applicable
local, state, and federal laws, including, but not limited to, all
applicable predatory, abusive and fair lending laws. All requirements
of any applicable federal, state or local law including, without
limitation, all applicable predatory and abusive lending, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection (including Uniform Consumer Credit Code laws, where
applicable), fair credit reporting, unfair collection practices, equal
credit opportunity or fair housing and disclosure laws (including,
without limitation, any provisions relating to Prepayment Premiums)
applicable to the solicitation, origination, servicing and collection
of the Mortgage Loan have been complied with, the Mortgagor received
all disclosure materials required by applicable law with respect to
the making of mortgage loans of the same type as the Mortgage Loan
and, if the Mortgage Loan is a refinanced Mortgage Loan, rescission
materials required by applicable laws, and the Company shall maintain
in its possession, available for the Purchaser's inspection upon
reasonable request, evidence of compliance with all such requirements.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including, but
not limited to, certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities;
(xx) Due on Sale.
-----------
The Mortgage contains an enforceable provision, to the extent not
prohibited by applicable law as of the date of such Mortgage, for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee
thereunder;
(yy) Adjustments.
-----------
All of the terms of the related Mortgage Note pertaining to interest
adjustments, payment adjustments and adjustments of the outstanding
principal balance, if any, are enforceable (subject to bankruptcy laws
and general principles of equity) and such adjustments on such
Mortgage Loan have been made properly and in accordance with the
provisions of such Mortgage Loan;
(zz) Leaseholds.
----------
42
If the Mortgage Loan is secured by a long-term residential lease, (i)
the lessor under the lease holds a fee simple interest in the land;
(ii) the terms of such lease expressly permit the mortgaging of the
leasehold estate and the acquisition by the holder of the Mortgage of
the rights of the lessee upon foreclosure or assignment in lieu of
foreclosure or provide the holder of the Mortgage with substantially
similar protections; (iii) the terms of such lease do not (A) allow
the termination thereof upon the lessee's default without the holder
of the Mortgage being entitled to receive written notice of, and
opportunity to cure, such default, (B) allow the termination of the
lease in the event of damage or destruction as long as the Mortgage is
in existence, (C) prohibit the holder of the Mortgage from being
insured (or receiving proceeds of insurance) under the hazard
insurance policy or policies relating to the Mortgaged Property, (D)
permit any increase in the rent other than pre-established increases
set forth in the lease, (E) the original term of such lease is not
less than the term of the related Mortgage, (F) the term of such lease
does not terminate earlier than five (5) years after the maturity date
of the Mortgage Note, and (G) the Mortgaged Property is located in a
jurisdiction in which the use of leasehold estates in transferring
ownership in residential properties is a widely accepted practice;
(aaa) Compliance with Anti-Money Laundering Laws.
------------------------------------------
The Company has complied with all applicable and anti-money laundering
laws and regulations, including without limitation the USA Patriot Act
of 2001 (collectively, the "Anti-Money Laundering Laws"); no Mortgage
Loan is subject to nullification pursuant to Executive Order 13224
(the "Executive Order") or the regulations promulgated by the Office
of Foreign Assets Control of the United States Department of the
Treasury (the "OFAC Regulations") or in violation of the Executive
Order or the OFAC Regulations, and no Mortgagor is subject to the
provisions of such Executive Order or the OFAC Regulations nor listed
as a "blocked person" for purposes of the OFAC Regulations;
(bbb) No Servicer Termination Fees.
----------------------------
Each agreement with a servicer of the Mortgage Loan, if any, provides
for the termination of the servicing rights relating to the Mortgage
Loan on the related Servicing Transfer Date, without the payment of
any termination fee or other expense by the Purchaser;
(ccc) Consent.
-------
43
Either (a) no consent for the Second Lien Mortgage Loan is required by
the holder of the related first lien or (b) such consent has been
obtained and is contained in the Mortgage File;
(ddd) CLTV.
----
No Second Lien Mortgage Loan has a CLTV in excess of 100%;
(eee) Prepayment Premiums.
-------------------
All information on the Mortgage Loan Schedule and electronic data file
delivered to the Purchaser regarding the Prepayment Premium is
complete and accurate in all material respects and each Prepayment
Premium is permissible and enforceable in accordance with its terms
under applicable law (subject to bankruptcy laws and general
principles of equity). Prepayment Premiums on the Mortgage Loans are
applicable to prepayments resulting from both refinancings and sales
of the related Mortgaged Properties and the terms of such Prepayment
Premiums do not provide for a waiver or release (i.e., "holidays")
during the term of the Prepayment Premium. No Mortgage Loan provides
for the payment of a Prepayment Premium beyond the five-year term
following the origination of the Mortgage Loan. With respect to any
Mortgage Loan that contains a provision permitting imposition of a
premium upon a prepayment prior to maturity: (i) a mortgage loan
without such a premium was available to the borrower at an interest
rate and/or fee structure higher than that of the Mortgage, (ii) prior
to the loan's funding, the borrower had the option of obtaining the
Mortgage Loan without a requirement for payment of such a premium and
(iii) the prepayment premium is disclosed to the borrower in the loan
documents pursuant to applicable state and federal law. All
information on the Mortgage Loan Schedule and electronic data file
delivered to the Purchaser includes all necessary documentation to
determine the amount of the Prepayment Premium to be collected;
(fff) Refinanced Mortgage Loans.
-------------------------
No Mortgage Loan is refinanced from a subsidized mortgage loan that
contained terms favorable to the related Mortgagor;
(ggg) No "Flipped" Loans.
------------------
Each Mortgage Loan that is a refinance of an existing mortgage loan
provides the related borrower with a tangible net benefit, to the
extent required by applicable law;
(hhh) Insurance Products; Single Premium Credit Life Insurance.
--------------------------------------------------------
44
No Mortgagor was required to purchase any credit life, credit
disability, credit unemployment, credit property, accident or health
insurance product as a condition of obtaining the extension of credit.
No Mortgagor obtained a prepaid single-premium credit life, credit
disability, credit unemployment or credit property insurance policy in
connection with the origination of the Mortgage Loan. No Mortgagor
obtained an accident or health insurance policy in connection with the
origination of the Mortgage Loan. None of the proceeds of the Mortgage
Loan were used to purchase or finance single-premium credit insurance
policies as part of the origination of, or as a condition to the
closing, such Mortgage Loan;
(iii) Tax Service Contracts; Flood Certification Contract.
---------------------------------------------------
Each Mortgage Loan is covered by a paid in full, life of loan, tax
service contract and a paid in full, life of loan, flood certification
contract and each of these contracts is assignable to the Purchaser
and its assigns;
(jjj) Credit Information.
------------------
As to each consumer report (as defined in the Fair Credit Reporting
Act, Public Law 91-508) or other credit information furnished by the
Company to the Purchaser, the Company has full right and authority and
is not precluded by law or contract from furnishing such information
to the Purchaser;
(kkk) High Cost Home Loans.
--------------------
No Mortgage Loan is a "High-Cost Home Loan" as defined in the Georgia
Fair Lending Act, as amended (the "Georgia Act"). No Mortgage Loan
subject to the Georgia Act and secured by owner occupied real property
or an owner occupied manufactured home located in the State of Georgia
was originated (or modified) on or after October 1, 2002 through and
including March 6, 2003. No Mortgage Loan is a "High-Cost Home Loan"
as defined in New York Banking Law 6-1 effective April 1, 2003. No
Mortgage Loan is a "High-Cost Home Loan" as defined in the Arkansas
Home Loan Protection Act effective July 16, 2003 (Act 1340 of 2003).
No Mortgage Loan is a "High-Cost Home Loan" as defined in the Kentucky
high-cost home loan statute effective June 24, 2003 (Ky. Rev. Stat.
Section 360.100). No Mortgage Loan is a "High-Cost Home Loan" as
defined in the New Jersey Home Ownership Act effective November 27,
2003 (N.J.S.A. 46:10B-22 et seq.). No Mortgage Loan is a "High-Cost
Home Loan" as defined in the New Mexico Home Loan Protection Act
effective January 1, 2004 (N.M. Stat. Xxx. xx.xx. 58-21A-1 et seq.).
No Mortgage Loan is a "High-Risk Home Loan" as defined in the Illinois
45
High-Risk Home Loan Act effective January 1, 2004 (815 Ill. Comp.
Stat. 137/1 et seq.). No Mortgage Loan is a "High-Cost Home Mortgage
Loan" as defined in the Massachusetts Predatory Home Loan Practices
Act, effective November 6, 2004 (Mass. Xxx. Laws Ch. 183C). No
Mortgage Loan is a "High Cost Home Loan" as defined in the Indiana
Home Loan Practices Act, effective January 1, 2005. No Mortgage Loan
is a "High Cost Home Loan" as defined in the Maine Truth in Lending
statute effective September 13, 2003 (Me. Rev. State. tit. 9-A, xx.xx.
8-101 et seq.);
(lll) Credit Reporting.
----------------
The Company for each Mortgage Loan has fully furnished, in accordance
with the Fair Credit Reporting Act and its implementing regulations,
accurate and complete information (i.e. favorable and unfavorable) on
its borrower credit files to Equifax, Experian and Trans Union Credit
Information Company (three of the credit repositories), on a monthly
basis;
(mmm) Higher Cost Credit Products.
---------------------------
No borrower was encouraged or required to select a Mortgage Loan
product offered by the Mortgage Loan's originator which is a higher
cost product designed for less creditworthy borrowers, unless at the
time of the Mortgage Loan's origination, such borrower did not qualify
taking into account credit history and debt to income ratios for a
lower cost credit product then offered by the Mortgage Loan's
originator or any affiliate of the Mortgage Loan's originator. No
Mortgagor was encouraged or required to select a mortgage loan product
offered by the originator of the Mortgage Loan which is a higher cost
product designed for less creditworthy borrowers, taking into account
such facts as, without limitation, the mortgage loan's requirements
and the borrower's credit history, income, assets and liabilities. If,
at the time of loan application, the Mortgagor may have qualified for
a lower cost credit product then offered by any mortgage lending
affiliate of the Originator, the Originator referred the Mortgagor's
application to such affiliate for underwriting consideration;
(nnn) Underwriting Methodology.
------------------------
The methodology used in underwriting the extension of credit for each
Mortgage Loan employs, in part, objective mathematical principles
which relate the Mortgagor's income, assets (if applicable for the
46
product type) and liabilities to the proposed payment and such
underwriting methodology does not rely on the extent of the
Mortgagor's equity in the collateral as the principal determining
factor in approving such credit extension. Such underwriting
methodology is designed to confirm that at the time of origination
(application/approval) the Mortgagor had a reasonable ability to make
timely payments on the Mortgage Loan, relying on the Mortgagor's
representation of the Mortgagor's income in the case of loan programs
which did not require verification of the Mortgagor's income;
(ooo) Disclosure of Fees.
------------------
All fees and charges (including finance charges) and whether or not
financed, assessed, collected or to be collected in connection with
the origination and servicing of each Mortgage Loan have been
disclosed in writing to the Mortgagor in accordance with applicable
state and federal law and regulation. All points and fees related to
each Mortgage Loan were disclosed in writing to the Mortgagor in
accordance with applicable state and federal law;
(ppp) No Mandatory Arbitration Provisions.
-----------------------------------
With respect to each Mortgage Loan originated on or after August 1,
2004, neither the related Mortgage nor the related Mortgage Note
requires the Mortgagor to submit to arbitration to resolve any dispute
arising out of or relating in any way to the mortgage loan
transaction;
(qqq) Debt-to-Income Ratio.
--------------------
Except as set forth on the Mortgage Loan Schedule, no Mortgagor under
any Mortgage Loan had a debt-to-income ratio at the time of
origination of such Mortgage Loan in excess of 55%;
(rrr) No Breach or Default on Refinancings.
------------------------------------
No Mortgagor was encouraged or required by the Company or to the best
of the Company's knowledge, any third party, to breach any agreement
or default on any mortgage loan in connection with the origination of
a Mortgage Loan in order to refinance a previously-originated mortgage
loan;
(sss) Advance-Paid Periodic Payments.
------------------------------
No Mortgage Loan contains a provision requiring more than two monthly
or other scheduled periodic payments by the Mortgagor on the Mortgage
47
Loan to be paid in advance from the proceeds of the Mortgage Loan;
(ttt) Home Improvement Contractor Payments.
------------------------------------
No payments to a home improvement contractor from the proceeds of a
Mortgage Loan have been made other than by an instrument payable to
(i) the Mortgagor, (ii) the Mortgagor and the home improvement
contractor or (ii) through an independent third party escrow agent;
and
(uuu) Short Maturity Balloon Mortgage Loans.
-------------------------------------
Except as set forth on the Mortgage Loan Schedule, no Balloon Mortgage
Loan has an original stated maturity of less than seven (7) years; and
(vvv) Anti-Predatory Lending Pilot Program.
------------------------------------
Each Mortgage Loan secured by property located within the Xxxx County,
Illinois anti-predatory lending Pilot Program area (i.e., ZIP Codes
60620, 60621, 60623, 60628, 60629, 60632, 60636, 60638, 60643 and
60652) complies with the recording requirements outlined in Illinois
House Xxxx 4050 and Senate Xxxx 304 effective September 1, 2006, to
the extent applicable.
Section 3.03. Repurchase.
----------
It is understood and agreed that the representations and warranties set
forth in Sections 3.01 and 3.02 shall survive the sale of the Mortgage Loans to
the Purchaser and the delivery of the Mortgage Loan Documents to the Custodian
and shall inure to the benefit of the Purchaser and any Successor Servicer
hereunder, notwithstanding any restrictive or qualified endorsement on any
Mortgage Note or Assignment of Mortgage or the examination or failure to examine
any Mortgage File. Upon discovery by the Company, the Purchaser or the Successor
Servicer of any materially defective or missing document required to be included
in a Mortgage File ("Defective Document") or a breach of any of the foregoing
representations and warranties that materially and adversely affects the value
of a Mortgage Loan or the interest of the Purchaser therein (or that materially
and adversely affects the interests of Purchaser in the related Mortgage Loan in
the case of a representation and warranty relating to a particular Mortgage
Loan), the party discovering such Defective Document or a breach shall give
prompt written notice to the other. Any such breach or Defective Document that
causes a Mortgage Loan not to be a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code shall be deemed to materially and adversely
affect the interests of the Purchaser.
Within ninety (90) days of the earlier of either discovery by or notice to
the Company of any Defective Document or a breach of a representation or
warranty which materially and adversely affects the value of a Mortgage Loan or
the interest of the Purchaser therein, the Company shall use its best efforts
promptly to cure such breach in all material respects and, if such Defective
48
Document or breach cannot be cured, the Company shall, at the Purchaser's
option, repurchase such Mortgage Loan at the Repurchase Price. However, if the
breach or Defective Document shall involve a representation or warranty set
forth in Section 3.02 and the Company discovers or receives notice of any such
breach within ninety (90) days of the Closing Date, the Company may, if the
breach or Defective Document cannot be cured, and provided that the Company has
a Qualified Substitute Mortgage Loan, rather than repurchase the Mortgage Loan
as provided above, remove such Mortgage Loan (a "Deleted Mortgage Loan") and
substitute in its place a Qualified Substitute Mortgage Loan or Loans, provided
that any such substitution shall be effected not later than one hundred twenty
(120) days after the related Closing Date. Notwithstanding any of the foregoing,
if a breach or Defective Document would cause the Mortgage Loan to be other than
a "qualified mortgage," as defined in Section 860(G)(a)(3) of the Code, any such
repurchase or substitution must occur within sixty (60) days from the date the
breach or Defective Document was discovered unless such breach is cured during
such period. In addition, for purposes of this Section 3.03, any document
required to be included in a Mortgage File that is not executed as required or
does not materially comply with all legal requirements shall be deemed to
materially and adversely affect the interests of the Purchaser. Notwithstanding
anything to the contrary herein, within ninety (90) days of the earlier of
either discovery by or notice to the Company of any breach of the
representations or warranties set forth in clause (ss), the first sentence of
clause (ww), the third and fourth sentences of clause (eee), clause (hhh),
clause (kkk), clause (lll), the second sentence of clause (mmm), clause (nnn)
and clause (ppp) of Section 3.02, the Company shall repurchase such Mortgage
Loan at the Repurchase Price. Notwithstanding anything contained herein to the
contrary, with respect to any breach alleged under this Agreement, the Purchaser
acknowledges and agrees that: (i) the repurchase request must be made by the
Purchaser in a prompt and timely manner and must contain sufficient information
to enable the Company to evaluate the request and (ii) the Purchaser shall use
reasonable efforts to notify the Company of any known breach of a representation
and warranty and require the Company to repurchase such Mortgage Loan prior to
foreclosure procedures commencing on such Mortgage Loan.
If the Company has no Qualified Substitute Mortgage Loan, it shall
repurchase the deficient Mortgage Loan within ninety (90) days after the written
notice of the breach or Defective Document. Any repurchase of a Mortgage Loan or
Loans pursuant to the foregoing provisions of this Section 3.03 shall be
accomplished by deposit in the Custodial Account or, following the related
Servicing Transfer Date, to such other account as the Purchaser shall identify
to the Company, of the amount of the Repurchase Price for distribution to the
Purchaser on the next scheduled Remittance Date, after deducting therefrom any
amount received in respect of such repurchased Mortgage Loan or Loans and being
held in the Custodial Account for future distribution.
Upon Purchaser's receipt of the Repurchase Price or deposit into the
Custodial Account as set forth above, the Purchaser shall (i) promptly release
its interest in the repurchased Mortgage Loan and the related servicing rights
to the Company, free and clear of any lien, charge, modification or encumbrance
suffered or incurred by the Purchaser and (ii) promptly, but in no event later
than twenty (20) days after payment of the Repurchase Price deliver or cause to
be delivered to the Company any documents held by the Purchaser, its Custodian,
servicer or other designee relating to the repurchased Mortgage Loan, including,
without limitation, the related Mortgage File previously delivered by the
Company to the Purchaser or its designee. In the event of a repurchase or
49
substitution, the Company shall, simultaneously with such reassignment, give
written notice to the Purchaser that such repurchase or substitution has taken
place, and each party shall amend its copy of the related Mortgage Loan Schedule
to reflect the withdrawal of the Deleted Mortgage Loan from this Agreement, and,
in the case of substitution, identify a Qualified Substitute Mortgage Loan and
amend the related Mortgage Loan Schedule to reflect the addition of such
Qualified Substitute Mortgage Loan to this Agreement. In connection with any
such substitution, the Company shall be deemed to have made as to such Qualified
Substitute Mortgage Loan the representations and warranties set forth in
Sections 3.01 and 3.02 except that all such representations and warranties set
forth in this Agreement shall be deemed made as of the date of such
substitution. The Company shall effect such substitution by delivering to the
Custodian for such Qualified Substitute Mortgage Loan the documents required by
Section 2.03, with the Mortgage Note endorsed as required by Section 2.03. No
substitution will be made in any calendar month after the Determination Date for
such month. The Company shall deposit in the Custodial Account or, following the
related Servicing Transfer Date, in such other account as the Purchaser shall
identify to the Company, the Monthly Payment less the Interim Servicing Fee due
on such Qualified Substitute Mortgage Loan or Loans in the month following the
date of such substitution. Monthly Payments due with respect to Qualified
Substitute Mortgage Loans in the month of substitution shall be retained by the
Company. With respect to any Deleted Mortgage Loan, distributions to the
Purchaser shall include the Monthly Payment due on any Deleted Mortgage Loan in
the month of substitution, and the Company shall thereafter be entitled to
retain all amounts subsequently received by the Company in respect of such
Deleted Mortgage Loan.
For any month in which the Company substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the amount (if
any) by which the aggregate principal balance of all such Qualified Substitute
Mortgage Loans as of the date of substitution is less than the aggregate Stated
Principal Balance of all such Deleted Mortgage Loans (after application of the
principal portion of the Monthly Payments due in the month of substitution) (the
"Substitution Adjustment Amount") shall be deposited into the Custodial Account
or, following the related Servicing Transfer Date, into such other account as
the Purchaser shall identify to the Company, by the Company on or before the
Remittance Date in the month succeeding the calendar month during which the
related Mortgage Loan is required to be purchased or replaced hereunder.
In addition to such repurchase or substitution obligation, the Company
shall indemnify the Purchaser and the Successor Servicer and hold each of them
harmless against any losses, damages, penalties, fines, forfeitures, reasonable
and necessary legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, (i) a breach of the representations and
warranties of the Company contained in this Agreement or any agreement entered
into in connection with a Reconstitution pursuant to Section 10.03 and (ii) the
litigation or other legal proceedings disclosed in Exhibit G and any litigation
or other legal proceedings related to or that arise therefrom. It is understood
and agreed that the obligations of the Company set forth in this Section 3.03 to
cure, substitute for or repurchase a Deleted Mortgage Loan and to indemnify the
Purchaser and Successor Servicer as provided in this Section 3.03 constitute the
sole remedies of the Purchaser and Successor Servicer respecting a breach of the
foregoing representations and warranties.
50
Upon the request of the Purchaser, the Company hereby agrees to execute a
recognition agreement, in form and substance acceptable to the Company,
recognizing the servicer designated by the Purchaser therein as the Successor
Servicer.
Any cause of action against the Company relating to or arising out of the
breach of any representations and warranties made in Sections 3.01 and 3.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser the Successor Servicer or notice thereof by the Company to the
Purchaser, (ii) failure by the Company to cure such breach or repurchase such
Mortgage Loan as specified above, and (iii) demand upon the Company by the
Purchaser for or the Successor Servicer compliance with this Agreement.
Section 3.04. Payment Default; Exercise of Rescission Right.
---------------------------------------------
If the related Mortgagor is thirty (30) days or more delinquent with
respect to any Monthly Payment due on the Mortgage Loan through and including
the first Monthly Payment due after the related Closing Date and such
delinquency has not been cured by such Mortgagor within forty-five (45) days
following the Due Date relating to such Monthly Payment, the Company, at the
Purchaser's option, shall repurchase such Mortgage Loan from the Purchaser
within thirty (30) days of the Purchaser's request at the Repurchase Price;
provided, however, that the Purchaser must request that the Company repurchase
such Mortgage Loan within one hundred twenty (120) days of the Closing Date. Any
such request shall include the payment history and collection comments for such
Mortgage Loan. In the event a Mortgagor exercises any right of rescission it may
have with respect to the related Mortgage Loan that arises as a result of an act
or omission prior to the related Closing Date, the Company shall repurchase such
Mortgage Loan at the related Repurchase Price within thirty (30) days of
receiving notice of such Mortgagor's exercise of rescission of the Mortgage
Loan.
Section 3.05. Premium Recapture.
-----------------
If any Mortgage Loan prepays in full within the first three (3) months
following the related Closing Date, then (i) with respect to any such Mortgage
Loan that does not provide for a Prepayment Premium, the Company will pay to the
Purchaser an amount equal to the premium paid by the Purchaser in excess of par,
as set forth in the related Memorandum of Sale, and (ii) with respect to any
such Mortgage Loan that provides for a Prepayment Premium, the Company shall pay
to the Purchaser (in addition to the Prepayment Premium if the Company is
servicing the Mortgage Loan at the time of such prepayment) the amount, if any,
by which the purchase price premium paid by the Purchaser in excess of par, as
set forth in the related Memorandum of Sale, exceeds the amount of such
Prepayment Premium, provided such Prepayment Premium is legally enforceable, and
if the Company is then the servicer, paid by the Company to the Purchaser;
provided, however, that the Purchaser must request that the Company pay the
premium recapture amount described in this Section 3.05 within ninety (90) days
of the date of prepayment. The Company shall pay the amounts payable under
clauses (i) and (ii) above, for the benefit of the Purchaser or any assignee of
the Purchaser, by depositing such amount into the Custodial Account maintained
by the Servicer or the similar account maintained by any Successor Servicer at
the time that the amount prepaid on such Mortgage Loan is required to be
deposited into such account or, following the related Servicing Transfer Date,
within thirty (30) days following receipt of written demand and appropriate
supporting documentation.
51
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS DURING THE
INTERIM SERVICING PERIOD
Section 4.01. Company to Act as Servicer.
--------------------------
(a) The Mortgage Loans are being sold by the Company to the Purchaser on a
servicing released basis. During the related Interim Servicing Period, the
Company, as an independent contractor, shall service and administer the Mortgage
Loans on behalf of the Purchaser and shall have full power and authority, acting
alone or through Subservicers or third-party vendors as permitted by this
Agreement, to do any and all things in connection with such servicing and
administration which the Company may deem necessary or desirable, consistent
with the terms of this Agreement and with Accepted Servicing Practices.
Unless the Mortgagor is in default with respect to the Mortgage Loan or
such default is, in the judgment of the Company, imminent, the Company shall not
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Interest Rate, defer or forgive the payment of principal or change the
final maturity date on such Mortgage Loan. The Company shall request written
consent from the Purchaser to permit such a modification and the Purchaser shall
provide written consent or notify the Company of its objection to such
modification within five (5) Business Days after its receipt of the Company's
request. Without limiting the generality of the foregoing, the Company shall
continue, and is hereby authorized and empowered, to execute and deliver on
behalf of itself and the Purchaser, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. If reasonably required by the Company, the Purchaser shall
furnish the Company with any powers of attorney and other documents necessary or
appropriate to enable the Company to carry out its servicing and administrative
duties under this Agreement.
In servicing and administering the Mortgage Loans, the Company shall employ
procedures (including collection procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering mortgage loans
for its own account, giving due consideration to Accepted Servicing Practices
where such practices do not conflict with the requirements of this Agreement,
and the Purchaser's reliance on the Company.
(b) The Company may arrange for the subservicing of any Mortgage Loan it
services by a Subservicer pursuant to a Subservicing Agreement, a copy of which
shall be provided to the Purchaser; provided, however, that such subservicing
arrangement and the terms of the related Subservicing Agreement must provide for
the servicing of such Mortgage Loan in a manner consistent with the servicing
arrangements contemplated hereunder. The Company shall be solely liable for all
fees owed to the Subservicer under the Subservicing Agreement, regardless
whether the Company's compensation hereunder is adequate to pay such fees.
Notwithstanding the provisions of any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Company and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Company shall remain obligated and liable to the Purchaser for
the servicing and administration of the Mortgage Loans it services in accordance
with the provisions of this Agreement without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
52
same terms and conditions as if the Company alone were servicing and
administering those Mortgage Loans. All actions of each Subservicer performed
pursuant to the related Subservicing Agreement shall be performed as agent of
the Company with the same force and effect as if performed directly by the
Company. For purposes of this Agreement, the Company shall be deemed to have
received any collections, recoveries or payments with respect to the Mortgage
Loans it services that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Company. Any Subservicing
Agreement entered into by the Company shall provide that it may be assumed or
terminated by the Purchaser, if the Purchaser has assumed the duties of the
Company, or by any successor servicer, at the Purchaser's or successor
servicer's option, as applicable, without cost or obligation to the assuming or
terminating party or its assigns. Any Subservicing Agreement, and any other
transactions or services relating to the Mortgage Loans involving a Subservicer,
shall be deemed to be between the Company and such Subservicer alone, and the
Purchaser shall not be deemed a party thereto and shall have no claims or rights
of action against, rights, obligations, duties or liabilities to or with respect
to the Subservicer or its officers, directors or employees, except as set forth
in Section 4.01(a).
Section 4.02. Liquidation of Mortgage Loans.
-----------------------------
In the event that any payment due under any Mortgage Loan and not postponed
pursuant to Section 4.01 is not paid when the same becomes due and payable, or
in the event the Mortgagor fails to perform any other covenant or obligation
under the Mortgage Loan and such failure continues beyond any applicable grace
period, the Company shall take such action as (1) the Company would take under
similar circumstances with respect to a similar mortgage loan held for its own
account for investment, (2) shall be consistent with Accepted Servicing
Practices, (3) the Company shall determine prudently to be in the best interest
of Purchaser and (4) is consistent with any related PMI Policy. Foreclosure or
comparable proceedings shall be initiated within one hundred twenty (120) days
of default for Mortgaged Properties for which no satisfactory arrangements can
be made for collection of delinquent payments unless prevented by statutory
limitations or states whose bankruptcy laws prohibit such actions within such
timeframe. The Company shall use its best efforts to realize upon defaulted
Mortgage Loans in such manner as will maximize the receipt of principal and
interest by the Purchaser, taking into account, among other things, the timing
of foreclosure proceedings. In such connection, the Company shall from its own
funds make all necessary and proper Servicing Advances; provided, however, that
the Company shall not be required to expend its own funds in connection with any
foreclosure or towards the restoration or preservation of any Mortgaged
Property, unless it shall determine (a) that such preservation, restoration
and/or foreclosure will increase the net proceeds of liquidation of the Mortgage
Loan to Purchaser after reimbursement for such expenses and (b) that such
expenses will be recoverable by it either through Liquidation Proceeds
(respecting which it shall have priority for purposes of withdrawals from the
Custodial Account pursuant to Section 4.05) or through Insurance Proceeds
(respecting which it shall have similar priority).
Notwithstanding anything to the contrary contained herein, in connection
with a foreclosure or acceptance of a deed in lieu of foreclosure, in the event
the Company has reasonable cause to believe that a Mortgaged Property is
contaminated by hazardous or toxic substances or wastes, or if the Purchaser
53
otherwise requests an environmental inspection or review of such Mortgaged
Property, such an inspection or review is to be conducted by a qualified
inspector. The cost for such inspection or review shall be borne by the
Purchaser. Upon completion of the inspection or review, the Company shall
promptly provide the Purchaser with a written report of the environmental
inspection.
After reviewing the environmental inspection report, the Purchaser shall
determine how the Company shall proceed with respect to the Mortgaged Property.
In the event (a) the environmental inspection report indicates that the
Mortgaged Property is contaminated by hazardous or toxic substances or wastes
and (b) the Purchaser directs the Company to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Company shall be reimbursed for
all reasonable costs associated with such foreclosure or acceptance of a deed in
lieu of foreclosure and any related environmental clean up costs, as applicable,
from the related Liquidation Proceeds and/or Insurance Proceeds, or if the
Liquidation Proceeds and/or Insurance Proceeds are insufficient to fully
reimburse the Company, the Company shall be entitled to be reimbursed from
amounts in the Custodial Account pursuant to Section 4.05 hereof. In the event
the Purchaser directs the Company not to proceed with foreclosure or acceptance
of a deed in lieu of foreclosure, the Company shall be reimbursed for all
Servicing Advances made with respect to the related Mortgaged Property from the
Custodial Account pursuant to Section 4.05 hereof.
Section 4.03. Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the date hereof until the related Servicing Transfer
Date, in accordance with this Agreement and Accepted Servicing Practices, the
Company shall proceed diligently to collect all payments due under each of the
Mortgage Loans when the same shall become due and payable and shall ascertain
and estimate Escrow Payments, if included under the terms of the Mortgage Loan,
and all other charges that will become due and payable with respect to the
Mortgage Loan and the Mortgaged Property, to the end that the installments
payable by the Mortgagors will be sufficient to pay such charges as and when
they become due and payable.
Section 4.04. Establishment of and Deposits to Custodial Account.
--------------------------------------------------
The Company shall segregate and hold all funds collected and received
pursuant to a Mortgage Loan separate and apart from any of its own funds and
general assets and shall establish and maintain one or more Custodial Accounts,
in the form of time deposit or demand accounts, titled "Accredited Home Lenders,
Inc., in trust for Bank of America, National Association and/or subsequent
purchasers of Mortgage Loans - P & I." The Custodial Account shall be
established with a Qualified Depository. Upon request of the Purchaser and
within ten (10) days thereof, the Company shall provide the Purchaser with
written confirmation of the existence of such Custodial Account. Any funds
deposited in the Custodial Account shall at all times be insured to the fullest
extent allowed by applicable law. Funds deposited in the Custodial Account may
be drawn on by the Company in accordance with Section 4.05.
The Company shall deposit in the Custodial Account within two (2) Business
Days of Company's receipt, and retain therein, the following collections
received by the Company and payments made by the Company after the related
Cut-off Date, other than payments of principal and interest due on or before the
54
related Cut-off Date, or received by the Company prior to the related Cut-off
Date but allocable to a period subsequent thereto:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments (including Prepayment Premiums paid by
the Mortgagor or the Company pursuant to Section 4.21 of this Agreement);
(ii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Interest Rate but net of the Interim Servicing Fee
due to the Company;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds, including amounts required to be
deposited pursuant to Section 4.10 (other than proceeds to be held in the
Escrow Account and applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with Section 4.14),
Section 4.11 and Section 4.15;
(v) all Condemnation Proceeds which are not applied to the restoration
or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Section 4.14;
(vi) any amounts required to be deposited in the Custodial Account
pursuant to Sections 4.01, 6.01 or 6.02;
(vii) any amounts payable in connection with the repurchase or
substitution of any Mortgage Loan pursuant to Sections 3.03, 3.04 and 3.05
and all amounts required to be deposited by the Company in connection with
a shortfall in principal amount of any Qualified Substitute Mortgage Loan
pursuant to Section 3.03;
(viii) any amounts required to be deposited by the Company pursuant to
Section 4.11 in connection with the deductible clause in any blanket hazard
insurance policy; and
(ix) any amounts received with respect to or related to any REO
Property and all REO Disposition Proceeds pursuant to Section 4.16.
The foregoing requirements for deposit into the Custodial Account shall be
exclusive. Any interest paid on funds deposited in the Custodial Account by the
depository institution shall accrue to the benefit of the Company and the
Company shall be entitled to retain and withdraw such interest from the
Custodial Account pursuant to Section 4.05. Prior to changing the location of
the Custodial Account, the Company shall give notice to the Purchaser of such
change, which notice shall set forth the new location of the Custodial Account
when established. The Company shall maintain adequate records with respect to
all withdrawals made pursuant to this Section 4.04. All funds required to be
deposited in the Custodial Account shall be held in trust for the Purchaser
until withdrawn in accordance with Section 4.05.
55
Section 4.05. Permitted Withdrawals From Custodial Account.
--------------------------------------------
The Company shall, from time to time, withdraw funds from the Custodial
Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the manner
provided for in Section 5.01;
(ii) to reimburse itself for unreimbursed Servicing Advances, the
Company's right to reimburse itself pursuant to this subclause (ii) with
respect to any Mortgage Loan being limited to related Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Company from the Mortgagor or otherwise relating to the
Mortgage Loan, it being understood that, in the case of any such
reimbursement, the Company's right thereto shall be prior to the rights of
Purchaser, except where the Company is required to repurchase a Mortgage
Loan pursuant to Section 3.03, 3.04 or 6.02, in which case the Company's
right to such reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections and all other
amounts required to be paid to the Purchaser with respect to such Mortgage
Loan;
(iii) to pay itself as part of its servicing compensation interest on
funds deposited in the Custodial Account if such interest amount was
previously credited;
(iv) to pay itself any Interim Servicing Fees that are due and unpaid;
(v) to pay any amount required to be paid pursuant to Section 4.16
related to any REO Property, it being understood that, in the case of any
such expenditure or withdrawal related to a particular REO Property, the
amount of such expenditure or withdrawal from the Custodial Account shall
be limited to amounts on deposit in the Custodial Account with respect to
the related REO Property;
(vi) to reimburse itself for any Servicing Advances or REO expenses
after liquidation of the Mortgaged Property not otherwise reimbursed above;
(vii) to remove funds inadvertently placed in the Custodial Account by
the Company; and
(viii) to clear and terminate the Custodial Account upon the
termination of this Agreement.
In the event that the Custodial Account is interest bearing, on each
Remittance Date, the Company shall withdraw all funds from the Custodial Account
except for those amounts which, pursuant to Section 5.01, the Company is not
obligated to remit on such Remittance Date. The Company may use such withdrawn
funds only for the purposes described in this Section 4.05. The Company shall
keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan
basis, for the purpose of justifying any withdrawal from the Custodial Account.
56
Section 4.06. Establishment of and Deposits to Escrow Account.
-----------------------------------------------
The Company shall segregate and hold all funds collected and received
pursuant to a Mortgage Loan constituting Escrow Payments separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Escrow Accounts, in the form of time deposit or demand accounts, titled,
"Accredited Home Lenders, Inc., in trust for Bank of America, National
Association and/or subsequent purchasers of Mortgage Loans, and various
Mortgagors - T & I." The Escrow Accounts shall be established with a Qualified
Depository, in a manner which shall provide maximum available insurance
thereunder. Upon request of the Purchaser and within ten (10) days thereof, the
Company shall provide the Purchaser with written confirmation of the existence
of such Escrow Account. Funds deposited in the Escrow Account may be drawn on by
the Company in accordance with Section 4.07.
The Company shall deposit in the Escrow Account or Accounts within two (2)
Business Days of Company's receipt, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage Loans,
for the purpose of effecting timely payment of any such items as required
under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property.
The Company shall make withdrawals from the Escrow Account only to effect
such payments as are required under this Agreement, as set forth in Section
4.07. The Company shall be entitled to retain any interest paid on funds
deposited in the Escrow Account by the depository institution, other than
interest on escrowed funds required by law to be paid to the related Mortgagor.
To the extent required by law, the Company shall pay interest on escrowed funds
to the related Mortgagor notwithstanding that the Escrow Account may be
non-interest bearing or that interest paid thereon is insufficient for such
purposes.
Section 4.07. Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account or Accounts may be made by the Company
only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, mortgage insurance premiums, condominium charges, fire and
hazard insurance premiums or other items constituting Escrow Payments for
the related Mortgage;
(ii) to reimburse the Company for any Servicing Advances made by the
Company pursuant to Section 4.08 with respect to a related Mortgage Loan,
but only from amounts received on the related Mortgage Loan which represent
late collections of Escrow Payments thereunder;
(iii) to refund to any Mortgagor any funds found to be in excess of
the amounts required under the terms of the related Mortgage Loan;
57
(iv) for transfer to the Custodial Account for application to reduce
the principal balance of the Mortgage Loan in accordance with the terms of
the related Mortgage and Mortgage Note;
(v) for application to the restoration or repair of the Mortgaged
Property in accordance with the procedures outlined in Section 4.14;
(vi) to pay to the Company, or any Mortgagor to the extent required by
law, any interest paid on the funds deposited in the Escrow Account;
(vii) to remove funds inadvertently placed in the Escrow Account by
the Company; and
(viii) to clear and terminate the Escrow Account on the termination of
this Agreement.
Section 4.08. Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
With respect to each Mortgage Loan, the Company shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates,
sewer rents, and other charges which are or may become a lien upon the related
Mortgaged Property and the status of PMI Policy premiums, if applicable, and
fire and hazard insurance coverage and, to the extent the Mortgage Loan includes
Escrow Payments, shall obtain, from time to time, all bills for the payment of
such charges (including renewal premiums) and shall effect payment thereof prior
to the applicable penalty or termination date, employing for such purpose
deposits of the Mortgagor in the Escrow Account which shall have been estimated
and accumulated by the Company in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. The Company assumes full responsibility
for the timely payment of all such bills and shall effect timely payment of all
such charges irrespective of each Mortgagor's faithful performance in the
payment of same or the making of the Escrow Payments, and the Company shall make
advances from its own funds to effect such payments, which advances shall
constitute Servicing Advances hereunder; provided that the Company shall be
required to so advance only to the extent that the Company, in its good faith
judgment, believes the Servicing Advance to be recoverable from Insurance
Proceeds or Liquidation Proceeds or otherwise. To the extent that a Mortgage
Loan does not include Escrow Payments, the Company shall use its reasonable
efforts in accordance with Accepted Servicing Practices to determine whether any
such payments are made by the Mortgagor at the time they first become due. The
Company shall make advances from its own funds to effect such delinquent
payments within such time period as will avoid the loss of the related Mortgaged
Property by foreclosure of a tax or other lien. The costs incurred by the
Company, if any, in effecting the timely payments of taxes and assessments on
the Mortgaged Properties and related insurance premiums shall not be added to
the Stated Principal Balances of the related Mortgage Loans, notwithstanding
that the terms of such Mortgage Loans so permit.
Section 4.09. Transfer of Accounts.
--------------------
The Company may transfer the Custodial Account or the Escrow Account to a
different Qualified Depository from time to time; provided that the Company
shall give notice to the Purchaser of any proposed change of the location of
58
either Account not later than ten (10) Business Days prior to any change
thereof.
Section 4.10. Maintenance of Hazard Insurance.
-------------------------------
The Company shall cause to be maintained for each Mortgage Loan hazard
insurance such that all buildings upon the Mortgaged Property are insured by an
insurer acceptable to Xxxxxx Xxx or Xxxxxxx Mac against loss by fire, hazards of
extended coverage and such other hazards as are customary or required by law in
the area where the Mortgaged Property is located, in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan and (ii) the greater of (a) the outstanding
principal balance of the Mortgage Loan and (b) an amount such that the proceeds
thereof shall be sufficient to prevent the Mortgagor or the loss payee from
becoming a co-insurer. In the event a hazard insurance policy shall be in danger
of being terminated, or in the event the insurer shall cease to be acceptable to
Xxxxxx Mae or Xxxxxxx Mac, the Company shall notify the Purchaser and the
related Mortgagor, and shall follow Accepted Servicing Practices, as permitted
by applicable law, to obtain from another qualified insurer a replacement hazard
insurance policy substantially and materially similar in all respects to the
original policy. In no event, however, shall a Mortgage Loan be without a hazard
insurance policy at any time, subject only to Section 4.11 hereof.
If the related Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), the Company will cause to be
maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration as in effect with a generally
acceptable insurance carrier acceptable to Xxxxxx Xxx or Xxxxxxx Mac in an
amount representing coverage equal to the lesser of (i) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement cost basis (or the unpaid balance of the mortgage if replacement
cost coverage is not available for the type of building insured) and (ii) the
maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973, as amended. If at any time during the term of the
Mortgage Loan, the Company determines in accordance with applicable law and
pursuant to the Federal Emergency Management Agency Guides that a Mortgaged
Property is located in a special flood hazard area and is not covered by flood
insurance or is covered in an amount less than the amount required by the Flood
Disaster Protection Act of 1973, as amended, the Company shall notify the
related Mortgagor to obtain such flood insurance coverage, and if said Mortgagor
fails to obtain the required flood insurance coverage within forty-five (45)
days after such notification, the Company shall immediately force place the
required flood insurance on the Mortgagor's behalf. Any out-of-pocket expenses
or advance made by the Company on such force placed flood insurance coverage
shall be deemed a Servicing Advance.
If a Mortgage is secured by a unit in a condominium project, the Company
shall verify that the coverage required of the homeowner's association,
including hazard, flood, liability, and fidelity coverage, is being maintained
in accordance with then current Xxxxxx Mae or Xxxxxxx Mac requirements, and
secure from the owner's association its agreement to notify the Company promptly
of any change in the insurance coverage or of any condemnation or casualty loss
that may have a material effect on the value of the Mortgaged Property as
security.
59
In the event that the Purchaser or the Company shall determine that the
Mortgaged Property should be insured against loss or damage by hazards and risks
not covered by the insurance required to be maintained by the Mortgagor pursuant
to the terms of the Mortgage, the Company shall communicate and consult with the
Mortgagor with respect to the need for such insurance and bring to the
Mortgagor's attention the desirability of protection of the Mortgaged Property.
All policies required hereunder shall name the Company as loss payee and
shall be endorsed with standard mortgagee clauses, without contribution, which
shall provide for at least thirty (30) days prior written notice of any
cancellation, reduction in amount or material change in coverage.
The Company shall not interfere with the Mortgagor's freedom of choice in
selecting either an insurance carrier or agent; provided, however, that the
Company shall not accept any such insurance policies from insurance companies
unless such companies are acceptable to Xxxxxx Mae or Xxxxxxx Mac and are
licensed to do business in the jurisdiction in which the Mortgaged Property is
located. The Company shall determine that such policies provide sufficient risk
coverage and amounts, that they insure the property owner, and that they
properly describe the property address. The Company shall furnish to the
Mortgagor a formal notice of expiration of any such insurance in sufficient time
for the Mortgagor to arrange for renewal coverage by the expiration date.
Pursuant to Section 4.04, any amounts collected by the Company under any
such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Company's normal servicing procedures as
specified in Section 4.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 4.05.
Section 4.11. Maintenance of Mortgage Impairment Insurance.
--------------------------------------------
In the event that the Company shall obtain and maintain a blanket policy
insuring against losses arising from fire and hazards covered under extended
coverage on all of the Mortgage Loans, then, to the extent such policy (1) names
the Company as loss payee, (2) provides coverage in an amount equal to the
amount required pursuant to Section 4.10 without coinsurance and (3) otherwise
complies with Accepted Servicing Practices and all other requirements of Section
4.10, it shall conclusively be deemed to have satisfied its obligations as set
forth in Section 4.10. The Company shall prepare and make any claims on the
blanket policy as deemed necessary by the Company in accordance with prudent
servicing practices. Any amounts collected by the Company under any such policy
relating to a Mortgage Loan shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 4.05. Such policy may contain a deductible
clause, in which case, in the event that there shall not have been maintained on
the related Mortgaged Property a policy complying with Section 4.10, and there
shall have been a loss which would have been covered by such policy, the Company
shall deposit in the Custodial Account at the time of such loss the amount not
otherwise payable under the blanket policy because of such deductible clause,
such amount to be deposited from the Company's funds, without reimbursement
60
therefor. Upon request of the Purchaser, the Company shall cause to be delivered
to the Purchaser a certified true copy of any such policy and a statement from
the insurer thereunder that such policy shall in no event be terminated or
materially modified without thirty (30) days' prior written notice to the
Purchaser.
Section 4.12. Maintenance of Fidelity Bond and Errors and Omissions
-----------------------------------------------------------
Insurance.
---------
The Company shall maintain with responsible companies, at its own expense,
a blanket Fidelity Bond and an Errors and Omissions Insurance Policy, with broad
coverage on all officers, employees or other persons acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the Mortgage Loans ("Company Employees"). Any such Fidelity Bond and Errors and
Omissions Insurance Policy shall be in the form of the Mortgage Banker's Blanket
Bond and shall protect and insure the Company against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of such
Company Employees. Such Fidelity Bond and Errors and Omissions Insurance Policy
also shall protect and insure the Company against losses in connection with the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 4.12
requiring such Fidelity Bond and Errors and Omissions Insurance Policy shall
diminish or relieve the Company from its duties and obligations as set forth in
this Agreement. The minimum coverage under any such Fidelity Bond and Errors and
Omissions Insurance Policy shall be at least equal to the amounts acceptable to
Xxxxxx Mae or Xxxxxxx Mac. Upon the request of the Purchaser, the Company shall
cause to be delivered to the Purchaser a certificate of insurance for such
Fidelity Bond and Errors and Omissions Insurance Policy and a statement from the
surety and the insurer that such Fidelity Bond and Errors and Omissions
Insurance Policy shall in no event be terminated or materially modified without
thirty (30) days' prior written notice to the Purchaser.
Section 4.13. Inspections.
-----------
If any Mortgage Loan is more than sixty (60) days delinquent, the Company
immediately shall inspect the Mortgaged Property and shall conduct subsequent
inspections in accordance with Accepted Servicing Practices or as may be
required by the primary mortgage guaranty insurer. The Company shall keep a
written report of each such inspection.
Section 4.14. Restoration of Mortgaged Property.
---------------------------------
The Company need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be
applied to the restoration or repair of the Mortgaged Property if such release
is in accordance with Accepted Servicing Practices. For claims greater than
$15,000, at a minimum the Company shall comply with the following conditions in
connection with any such release of Insurance Proceeds or Condemnation Proceeds:
(i) the Company shall receive satisfactory independent verification of
completion of repairs and issuance of any required approvals with respect
thereto;
(ii) the Company shall take all steps necessary to preserve the
priority of the lien of the Mortgage, including, but not limited to
requiring waivers with respect to mechanics' and materialmen's liens;
61
(iii) the Company shall verify that the Mortgage Loan is not in
default; and
(iv) pending repairs or restoration, the Company shall place the
Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
If the Purchaser is named as an additional loss payee, the Company is
hereby empowered to endorse any loss draft issued in respect of such a
claim in the name of the Purchaser.
Section 4.15. Maintenance of PMI Policy; Claims.
---------------------------------
With respect to each Mortgage Loan covered by a PMI Policy, the Company
shall, without any cost to the Purchaser, maintain in full force and effect such
PMI Policy until terminated pursuant to the Homeowners Protection Act of 1998,
12 USC ss.4901, et seq. In the event that such PMI Policy shall be terminated
other than as required by law, the Company shall obtain from another Qualified
Insurer a comparable replacement policy, with a total coverage equal to the
remaining coverage of such terminated PMI Policy. If the insurer shall cease to
be a Qualified Insurer, the Company shall determine whether recoveries under the
PMI Policy are jeopardized for reasons related to the financial condition of
such insurer, it being understood that the Company shall in no event have any
responsibility or liability for any failure to recover under the PMI Policy for
such reason. If the Company determines that recoveries are so jeopardized, it
shall notify the Purchaser and the related Mortgagor, if required, and obtain
from another Qualified Insurer a replacement insurance policy. The Company shall
not take any action which would result in noncoverage under any applicable PMI
Policy of any loss which, but for the actions of the Company would have been
covered thereunder. In connection with any assumption or substitution agreement
entered into or to be entered into pursuant to Section 6.01, the Company shall
promptly notify the insurer under the related PMI Policy, if any, of such
assumption or substitution of liability in accordance with the terms of such PMI
Policy and shall take all actions which may be required by such insurer as a
condition to the continuation of coverage under such PMI Policy. If such PMI
Policy is terminated as a result of such assumption or substitution of
liability, the Company shall obtain a replacement PMI Policy as provided above.
In connection with its activities as servicer, the Company agrees to
prepare and present, on behalf of itself and the Purchaser, claims to the
insurer under any PMI Policy in a timely fashion in accordance with the terms of
such PMI Policy and, in this regard, to take such action as shall be necessary
to permit recovery under any PMI Policy respecting a defaulted Mortgage Loan.
Pursuant to Section 4.04, any amounts collected by the Company under any PMI
Policy shall be deposited in the Custodial Account, subject to withdrawal
pursuant to Section 4.05.
Section 4.16. Title, Management and Disposition of REO Property.
-------------------------------------------------
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the Purchaser, or in the event the Purchaser is
not authorized or permitted to hold title to real property in the state where
the REO Property is located, or would be adversely affected under the "doing
business" or tax laws of such state by so holding title, the deed or certificate
of sale shall be taken in the name of the Company or such Person or Persons as
62
shall be consistent with an Opinion of Counsel obtained by the Company from any
attorney duly licensed to practice law in the state where the REO Property is
located. The Person or Persons holding such title other than the Purchaser shall
acknowledge in writing that such title is being held as nominee for the
Purchaser.
The Purchaser shall have the option to manage and operate the REO Property
provided the Purchaser gives written notice of its intention to do so within
sixty (60) days after such REO Property is acquired in foreclosure or by deed in
lieu of foreclosure and reimburses the Company for any unreimbursed Servicing
Advances with respect to such REO Property incurred prior to transferring such
management responsibilities to the Purchaser. The election by the Purchaser to
manage the REO Property shall not constitute a termination of any rights of the
Company pursuant to Section 11.02.
If the Purchaser does not elect to manage and operate the REO Property, the
Company shall manage, conserve, protect and operate each REO Property for the
Purchaser solely for the purpose of its prompt disposition and sale. The
Company, either itself or through an agent selected by the Company, shall
manage, conserve, protect and operate the REO Property in the same manner that
it manages, conserves, protects and operates other foreclosed property for its
own account, and in the same manner that similar property in the same locality
as the REO Property is managed. The Company shall attempt to sell the same (and
may temporarily rent the same for a period not greater than one year, except as
otherwise provided below) on such terms and conditions as the Company deems to
be in the best interest of the Purchaser.
The Company shall use its best efforts to dispose of the REO Property as
soon as possible and shall sell such REO Property in any event within one year
after title has been taken to such REO Property, unless (i) a REMIC election has
not been made with respect to the arrangement under which the Mortgage Loans and
the REO Property are held, and (ii) the Company determines, and gives an
appropriate notice to the Purchaser to such effect, that a longer period is
necessary for the orderly liquidation of such REO Property. If a period longer
than one year is permitted under the foregoing sentence and is necessary to sell
any REO Property, (i) the Company shall report monthly to the Purchaser as to
the progress being made in selling such REO Property and (ii) if, with the
written consent of the Purchaser, a purchase money mortgage is taken in
connection with such sale, such purchase money mortgage shall name the Company
as mortgagee, and such purchase money mortgage shall not be held pursuant to
this Agreement, but instead a separate participation agreement among the Company
and Purchaser shall be entered into with respect to such purchase money
mortgage.
The Company shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements which are a part of such property,
liability insurance and, to the extent required and available under the Flood
Disaster Protection Act of 1973, as amended, flood insurance in the amount
required above.
The disposition of REO Property shall be carried out by the Company at such
price, and upon such terms and conditions, as the Company deems to be in the
best interests of the Purchaser. The proceeds of sale of the REO Property shall
be promptly deposited in the Custodial Account. As soon as practical thereafter
63
the expenses of such sale shall be paid and the Company shall reimburse itself
for any related unreimbursed Servicing Advances, unpaid Interim Servicing Fees
and unreimbursed advances made pursuant to Section 5.03.
The Company shall withdraw from the Custodial Account funds necessary for
the proper operation management and maintenance of the REO Property, including
the cost of maintaining any hazard insurance pursuant to Section 4.10. The
Company shall make monthly distributions on each Remittance Date to the
Purchaser of the net cash flow from the REO Property (which shall equal the
revenues from such REO Property net of the expenses described in this Section
4.16 and of any reserves reasonably required from time to time to be maintained
to satisfy anticipated liabilities for such expenses).
Section 4.17. Real Estate Owned Reports.
-------------------------
Together with the statement furnished pursuant to Section 5.02, the Company
shall furnish to the Purchaser on or before the Remittance Date each month a
statement in a mutually agreeable format with respect to any REO Property
covering the operation of such REO Property for the previous month and the
Company's efforts in connection with the sale of such REO Property and any
rental of such REO Property incidental to the sale thereof for the previous
month. That statement shall be accompanied by such other information as the
Purchaser shall reasonably request.
Section 4.18. Liquidation Reports.
-------------------
Upon the foreclosure sale of any Mortgaged Property or the acquisition
thereof by the Purchaser pursuant to a deed in lieu of foreclosure, the Company
shall submit to the Purchaser a liquidation report in a mutually agreeable
format with respect to such Mortgaged Property.
Section 4.19. Reports of Foreclosures and Abandonments of Mortgaged
-----------------------------------------------------------
Property.
--------
Following the foreclosure sale or abandonment of any Mortgaged Property,
the Company shall report such foreclosure or abandonment as required pursuant to
Section 6050J of the Code. The Company shall file information reports with
respect to the receipt of mortgage interest received in a trade or business and
information returns relating to cancellation of indebtedness income with respect
to any Mortgaged Property as required by the Code. Such reports shall be in form
and substance sufficient to meet the reporting requirements imposed by the Code.
Section 4.20. Notification of Adjustments.
---------------------------
With respect to each Adjustable-Rate Mortgage Loan, the Company shall
adjust the Mortgage Interest Rate on the related Adjustment Date in compliance
with the requirements of applicable law and the related Mortgage and Mortgage
Note. The Company shall execute and deliver any and all necessary notices
required under applicable law and the terms of the related Mortgage Note and
Mortgage regarding the Mortgage Interest Rate adjustments. Upon the discovery by
the Company or the receipt of notice from the Purchaser that the Company has
failed to adjust a Mortgage Interest Rate in accordance with the terms of the
related Mortgage Note, the Company shall immediately deposit in the Custodial
Account from its own funds the amount of any interest loss or deferral caused
the Purchaser thereby.
64
Section 4.21. Prepayment Premiums.
-------------------
(a) To the extent consistent with the terms of this Agreement, the
Company may (or shall, in the case of clauses (ii) and (iii) below) waive (or
permit a subservicer to waive) a Prepayment Premium only under the following
circumstances: (i) such waiver relates to a default or a reasonably foreseeable
default and would, in the reasonable judgment of the Company, maximize recovery
of total proceeds taking into account the value of such Prepayment Premium and
the related Mortgage Loan, (ii) such waiver is required under state or federal
law or (iii) the mortgage debt has been accelerated as a result of the related
Mortgagor's default in making its Monthly Payments. The Company shall not waive
any Prepayment Premium unless it is waived in accordance with this Section
4.21(a).
(b) The Company shall pay the amount of any Prepayment Premium (to
the extent not collected and remitted to the Purchaser) to the Purchaser or its
assignees if (1) the representation in Section 3.02(eee) is breached and such
breach materially and adversely affects the interests of the Purchaser or its
assigns, (2) the Company waives any Prepayment Premium other than as permitted
under Section 4.21(a)(i) or (iii) or (3) the Company is unable to collect such
Prepayment Premium as a result of its enforceability being found to be limited
or prohibited by applicable law. The Company shall pay the amount of such
Prepayment Premium, for the benefit of the Purchaser or any assignee of the
Purchaser, by depositing such amount into the Custodial Account at the time that
the amount prepaid on the related Mortgage Loan is required to be deposited into
the Custodial Account or, following the related Servicing Transfer Date, into
such other account as the Purchaser shall identify to the Company, within thirty
(30) days following receipt of written demand and appropriate supporting
documentation.
Section 4.22. Credit Reporting; Gramm Xxxxx Xxxxxx Act.
----------------------------------------
(a) The Company agrees to fully furnish, in accordance with the Fair Credit
Reporting Act and its implementing regulations, accurate and complete
information (e.g., favorable and unfavorable) on its borrower credit files to
Equifax, Experian, and Trans Union Credit Information Company (three of the
credit repositories), on a monthly basis.
(b) The Company agrees to transmit full-file credit reporting data for each
Mortgage Loan pursuant to Xxxxxx Mae Guide Announcement 95-19 and that for each
Mortgage Loan, the Company shall report one of the following statuses each
month: new origination, current, delinquent (30-, 60-, 90-days, etc.),
foreclosed or charged-off.
(c) The Company shall comply with Title V of the Xxxxx-Xxxxx-Xxxxxx Act of
1999 and all applicable regulations promulgated thereunder, relating to the
Mortgage Loans and the related Mortgagors and shall provide all required notices
thereunder.
Section 4.23. Disaster Recovery/Business Continuity Plan.
------------------------------------------
The Company shall establish and maintain contingency plans, recovery plans
and proper risk controls to ensure Company's continued performance under this
Agreement. The plans must be in place within thirty (30) calendar days after the
Closing Date of this Agreement and shall include, but not be limited to,
testing, control functions, accountability and corrective actions to be
65
immediately implemented, if necessary. The Company agrees to make copies or
summaries of the plans available to the Purchaser or appropriate regulator upon
reasonable request.
ARTICLE V
PAYMENTS TO PURCHASER
Section 5.01. Remittances.
-----------
On each Remittance Date the Company shall remit by wire transfer of
immediately available funds to the Purchaser all amounts deposited in the
Custodial Account as of the close of business on the Determination Date (net of
charges against or withdrawals from the Custodial Account pursuant to Section
4.05).
With respect to any remittance received by the Purchaser after the
Remittance Date on which such payment was due, the Company shall pay to the
Purchaser interest on any such late payment at an annual rate equal to the Prime
Rate, adjusted as of the date of each change, plus three percentage points, but
in no event greater than the maximum amount permitted by applicable law. Such
interest shall be deposited in the Custodial Account by the Company on the date
such late payment is made and shall cover the period commencing with the day
following the Business Day on which such payment was due and ending with the
Business Day on which such payment is made, both inclusive. Such interest shall
be remitted along with the distribution payable on the next succeeding
Remittance Date. The payment by the Company of any such interest shall not be
deemed an extension of time for payment or a waiver of any default by the
Company hereunder.
Section 5.02. Statements to Purchaser.
-----------------------
Not later than the Business Day prior to the each Remittance Date, the
Company shall deliver to the Purchaser in electronic format and hard copy a
remittance advice in form and substance mutually agreeable to the Company and
the Purchaser.
ARTICLE VI
GENERAL SERVICING PROCEDURES
Section 6.01. Transfers of Mortgaged Property.
-------------------------------
The Company shall use its best efforts to enforce any "due-on-sale"
provision contained in any Mortgage or Mortgage Note and to deny assumption by
the person to whom the Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains liable on the Mortgage and the Mortgage Note. When the
Mortgaged Property has been conveyed by the Mortgagor, the Company shall, to the
extent it has knowledge of such conveyance, exercise its rights to accelerate
the maturity of such Mortgage Loan under the "due-on-sale" clause applicable
thereto; provided, however, that the Company shall not exercise such rights if
prohibited by law from doing so or if the exercise of such rights would impair
or threaten to impair any recovery under the related PMI Policy, if any.
66
If the Company reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, the Company shall enter into (i) an
assumption and modification agreement with the person to whom such property has
been conveyed, pursuant to which such person becomes liable under the Mortgage
Note and the original Mortgagor remains liable thereon or (ii) in the event the
Company is unable under applicable law to require that the original Mortgagor
remain liable under the Mortgage Note and the Company has the prior consent of
the primary mortgage guaranty insurer, a substitution of liability agreement
with the purchaser of the Mortgaged Property pursuant to which the original
Mortgagor is released from liability and the purchaser of the Mortgaged Property
is substituted as Mortgagor and becomes liable under the Mortgage Note. The
Company shall notify the Purchaser that any substitution of liability or
assumption agreement has been completed by forwarding to the Purchaser the
original of any such substitution of liability or assumption agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. If an assumption
fee is collected by the Company for entering into an assumption agreement the
fee will be retained by the Company as additional servicing compensation. In
connection with any such assumption, neither the Mortgage Interest Rate borne by
the related Mortgage Note, the term of the Mortgage Loan, the outstanding
principal amount of the Mortgage Loan nor any other material terms shall be
changed without Purchaser's consent.
To the extent that any Mortgage Loan is assumable, the Company shall
inquire diligently into the credit-worthiness of the proposed transferee, and
shall use the underwriting criteria for approving the credit of the proposed
transferee which are used with respect to underwriting mortgage loans of the
same type as the Mortgage Loans. If the credit-worthiness of the proposed
transferee does not meet such underwriting criteria, the Company diligently
shall, to the extent permitted by the Mortgage or the Mortgage Note and by
applicable law, accelerate the maturity of the Mortgage Loan.
Section 6.02. Satisfaction of Mortgages and Release of Mortgage Files.
-------------------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the
Company of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Company shall immediately notify the Purchaser
and shall request the release of any Mortgage Loan Documents.
If the Company satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Company otherwise prejudice any rights the Purchaser may have under the
mortgage instruments, upon written demand of the Purchaser, the Company shall
repurchase the related Mortgage Loan at the Repurchase Price by deposit thereof
in the Custodial Account within two (2) Business Days of receipt of such demand
by the Purchaser. The Company shall maintain the Fidelity Bond and Errors and
Omissions Insurance Policy as provided for in Section 4.12 insuring the Company
against any loss it may sustain with respect to any Mortgage Loan not satisfied
in accordance with the procedures set forth herein.
67
Section 6.03. Servicing Compensation.
----------------------
As compensation for its services hereunder, the Company shall be entitled
to withdraw from the Custodial Account the amount of its Interim Servicing Fee.
The Interim Servicing Fee shall be payable monthly and shall be computed on the
basis of the same unpaid principal balance and for the period respecting which
any related interest payment on a Mortgage Loan is computed. The obligation of
the Purchaser to pay the Interim Servicing Fee is limited to, and payable solely
from, the interest portion of the related Monthly Payments on the Mortgage
Loans. Additional servicing compensation in the form of assumption fees, to the
extent provided in Section 6.01, late payment charges and interest on funds
deposited in the Custodial Account pursuant to Section 4.04 and any other
ancillary income shall be retained by the Company to the extent not required to
be deposited in the Custodial Account. The Company shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.
Section 6.04. Annual Statement as to Compliance.
---------------------------------
On or before March 15 of each calendar year, commencing in 2007, the
Company shall deliver to the Purchaser a statement of compliance addressed to
the Purchaser and signed by an authorized officer of the Company, to the effect
that (i) a review of the Company's activities during the immediately preceding
calendar year (or applicable portion thereof) and of its performance under this
Agreement during such period has been made under such officer's supervision, and
(ii) to the best of such officer's knowledge, based on such review, the Company
has fulfilled all of its obligations under this Agreement in all material
respects throughout such calendar year (or applicable portion thereof) or, if
there has been a failure to fulfill any such obligation in any material respect,
specifically identifying each such failure known to such officer and the nature
and the status thereof.
To the extent the Company serviced no Mortgage Loans pursuant to this
agreement in a calendar year, the Company shall not be required to deliver a
statement of compliance with respect to such calendar year.
Section 6.05. Right to Examine Company Records.
--------------------------------
The Purchaser, or its designee, at its sole cost and expense, shall have
the right, which right shall be exercised reasonably in scope and frequency, to
examine and audit any and all of the related books, records, or other
information of the Company, whether held by the Company or by another on its
behalf, with respect to or concerning the Company's obligations under this
Agreement or with respect to the Mortgage Loans, during business hours or at
such other times as may be reasonable under applicable circumstances, upon
reasonable advance notice. The Purchaser shall pay its own travel and other
expenses associated with such examination.
Section 6.06. Compliance with REMIC Provisions.
--------------------------------
If a REMIC election has been made with respect to the arrangement under
which the Mortgage Loans and REO Property are held, the Company shall not take
any action, cause the REMIC to take any action or fail to take (or fail to cause
to be taken) any action that, under the REMIC Provisions, if taken or not taken,
as the case may be, could (i) endanger the status of the REMIC as a REMIC or
68
(ii) result in the imposition of a tax upon the REMIC (including but not limited
to the tax on "prohibited transactions" as defined in Section 860 (a) (2) of the
Code and the tax on "contributions" to a REMIC set forth in Section 860(d) of
the Code) unless the Company has received an Opinion of Counsel (at the expense
of the party seeking to take such action) to the effect that the contemplated
action will not endanger such REMIC status or result in the imposition of any
such tax.
ARTICLE VII
TRANSFER OF SERVICING
Section 7.01. Assumption of Responsibilities at Servicing Transfer Date
---------------------------------------------------------
On the related Servicing Transfer Date, the Purchaser, or its designee,
shall assume all servicing responsibilities related to, and the Company will
cease all servicing responsibilities (except as expressly set forth herein)
related to, the Mortgage Loans. On or prior to the related Servicing Transfer
Date (or in the case of (c), (d) and (e) below, within three (3) Business Days
from and after the related Servicing Transfer Date or by such other date as may
be specified in this Agreement or as may be otherwise agreed), the Company will
take such steps as may be necessary or appropriate to effectuate and evidence
the transfer of the servicing of the Mortgage Loans to the Purchaser, or its
designee, including but not limited to the following:
(a) Notice to the Mortgagors. The Company shall mail to each Mortgagor a
letter advising the Mortgagor of the transfer of the servicing of the related
transferring Mortgage Loan to the Purchaser, or its designee, in accordance with
RESPA, Regulation X and other applicable laws and regulations; provided,
however, the content and format of the letter in a standard form shall have the
prior approval of the Purchaser. The Company shall provide the Purchaser with
copies of all such related notices no later than fifteen (15) days from and
after the related Servicing Transfer Date.
(b) Notice of Taxing Authorities and Insurance Companies. The Company shall
transmit to the applicable taxing authorities (or to the tax service vendor, as
applicable) and insurance companies (including PMI Policy insurers, if
applicable) and/or agents, notification of the transfer of the servicing to the
Purchaser, or its designee, and instructions to deliver all notices, tax bills
and insurance statements, as the case may be, to the Purchaser, or its designee,
from and after the related Servicing Transfer Date. Each assignable tax service
contract shall be assigned to the Purchaser, or its designee, with a certificate
from an authorized signatory of the Company, confirming that all such notices
have been transmitted, together with a copy of the related standard form(s) of
such notifications no later than the related Servicing Transfer Date or such
other date as the parties may agree. On the related Servicing Transfer Date, the
Company will reimburse the Purchaser or its designee for the cost of acquiring a
life-of-loan tax service contract and a life of loan flood certification for
each Mortgage Loan that does not have such contracts that are assignable to the
Purchaser or its assignees.
(c) Delivery of Servicing Records. The Company shall forward to the
Purchaser, or its designee, all servicing records and the complete Servicing
File in the Company's possession relating to each transferring Mortgage Loan,
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and shall make available to the Purchaser, or its designee, during normal
business hours, any such records.
(d) Escrow Payments. The Company shall provide the Purchaser, or its
designee, by wire transfer of immediately available funds in the amount of the
net Escrow Payments and suspense balances and all loss draft balances associated
with the Mortgage Loans. The Company shall provide the Purchaser, or its
designee, with an accounting statement of Escrow Payments and suspense balances
and loss draft balances sufficient to enable the Purchaser, or its designee, to
reconcile the amount of such payment with the accounts of the Mortgage Loans.
Additionally, the Company shall wire transfer to the Purchaser the amount of any
prepaid transferring Mortgage Loan payments and all other similar amounts held
by the Company.
(e) Mortgage Payments Received Prior to Servicing Transfer Date. Prior to
the related Servicing Transfer Date all payments received by the Company on each
Mortgage Loan shall be properly applied by the Company to the account of the
particular Mortgagor.
(f) Mortgage Payments Received After the Servicing Transfer Date. The
amount of any Monthly Payments for the Mortgage Loans received by the Company
within ninety (90) days after the related Servicing Transfer Date shall be
forwarded to the Purchaser by wire transfer or overnight mail within three (3)
Business Days of receipt and the Company shall notify the Purchaser of the
particulars of the payment, which notification requirement shall be satisfied if
the Company forwards with the payment sufficient information to permit
appropriate processing of the payment to the Purchaser. The Company shall assume
full responsibility for the endorsement of such Monthly Payment to the Purchaser
with the particulars of the payment such as the account number, dollar amount,
date received and any special Mortgagor application instructions with respect to
such Monthly Payments received by the Company after the related Servicing
Transfer Date with respect to any Mortgage Loans then in foreclosure or
bankruptcy. Any Monthly Payments received by the Company more than ninety (90)
days following the Servicing Transfer Date shall be promptly returned to the
sender.
(g) Misapplied Payments. Misapplied payments on Mortgage Loans shall be
processed as follows: (i) all parties shall cooperate in correcting
misapplication errors; (ii) the party receiving notice of a misapplied payment
occurring prior to the related Servicing Transfer Date and discovered after the
related Servicing Transfer Date shall immediately notify the other party; (iii)
if a misapplied payment occurred prior to the related Servicing Transfer Date
cannot be identified and said misapplied payment has resulted in a shortage in a
Custodial Account or Escrow Account, the Company shall be liable for the amount
of such shortage; the Company shall reimburse the Purchaser for the amount of
such shortage within thirty (30) days after the receipt of written demand
thereof from the Purchaser; (iv) if a misapplied payment which occurred prior to
the related Servicing Transfer Date has created an improper Purchase Price as
the result of an inaccurate outstanding principal balance, the party with notice
of such misapplied payment shall promptly inform the other party and a wire
transfer or check shall be issued to the party shorted by the improper payment
application within ten (10) Business Days after notice thereof by the other
party; and (v) any wire transfer or check issued under the provisions of this
Section 7.01(g) shall be accompanied by a statement indicating the corresponding
Company Mortgage Loan identification number and an explanation of the allocation
of any such payments or by fax.
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(h) Books and Records. On the related Servicing Transfer Date, the books,
records and accounts of the Company with respect to the servicing of the
Mortgage Loans shall be in accordance with Accepted Servicing Practices.
(i) Reconciliation. The Company shall, on or before the related Servicing
Transfer Date, reconcile principal balances and make any monetary adjustments
for the Mortgage Loans as agreed to by Company and Purchaser. Any such monetary
adjustments will be transferred between the Company and the Purchaser as
appropriate.
(j) IRS Forms. The Company shall file all IRS forms 1099, 1099A, 1098, or
1041 and K-1 which are required to be filed in relation to the servicing and
ownership of the Mortgage Loans on or before the related Servicing Transfer
Date. The Company shall provide copies of such forms to the Purchaser upon
reasonable request and shall reimburse the Purchaser for any penalties or
reasonable costs incurred by the Purchaser due to the Company's failure to
comply with this paragraph.
(k) Insurance Premiums. With respect to any Mortgage Loan which includes
related Escrow Payments, the Company shall pay all hazard and flood insurance
premiums, PMI Policy and LPMI Policy premiums, due within thirty (30) days after
the Servicing Transfer Date, provided that the Company has received bills for
insurance premiums at least fourteen (14) days prior to the Servicing Transfer
Date.
(l) Property Taxes. With respect to any Mortgage Loan which includes
related Escrow Payments, the Company shall pay all tax bills (including
interest, late charges and penalties in connection therewith) due, meaning
economic loss, within thirty (30) days after the related Servicing Transfer
Date, provided that the Company has received such bills at least fourteen (14)
days prior to the related Servicing Transfer Date. For ninety (90) days after
the related Servicing Transfer Date, the Company shall deliver such tax bills as
it may receive with respect to the Mortgage Loans to Purchaser within ten (10)
Business Days of receipt of the same, thereafter Company shall exercise
reasonable efforts to deliver such tax bills as it may receive with respect to
the Mortgage Loans to Purchaser within a reasonable time of its receipt of same.
(m) Insurance Policies. For ninety (90) days after the related Servicing
Transfer Date, the Company shall deliver such insurance policies or renewals and
invoiced as it may receive with respect to the Mortgage Loans to Purchaser
within ten (10) Business Days of its receipt of same, thereafter Company shall
exercise reasonable efforts to deliver such insurance policies or renewals and
invoices as it may receive with respect to the Mortgage Loans to Purchaser
within a reasonable time of its receipt of same.
(n) Escrow Analysis. If a Mortgage Loan was originated more than twelve
(12) months prior to the related Servicing Transfer Date, then the Company has
properly conducted escrow analysis with respect to such Mortgage Loan as may be
required under the applicable law. With respect to any such Mortgage Loan, any
adjustment to the escrow payment due, refunds of escrow overages and collections
of escrow shortages have been made in accordance with applicable law.
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(o) Transfer of Servicing. On the related Servicing Transfer Date, the
Company shall transfer servicing of the related Mortgage Loans to the Purchaser
or its designee pursuant to the terms of this Agreement, in accordance with
Accepted Servicing Practices and the procedures reasonably agreed to by the
Company, the Purchaser and the Purchaser's designee. At the Purchaser's option
and upon reasonable notice, the Company shall effect the transfer of servicing
for the related Mortgage Loans by means of a "tape to tape" transfer or other
electronic delivery of servicing data as is customary in the industry. All
information provided to the Purchaser or its designee shall be provided
electronically. The Company shall pay any costs and expenses the Purchaser or
its designee incurs related to the manual transfer of any information to the
Purchaser or its designee.
(p) Reimbursement for Servicing Advances and Interim Servicing Fee.
Following a Servicing Transfer Date, the Company shall be reimbursed for any
unreimbursed Servicing Advances or unpaid Interim Servicing Fee in relation to
any related Mortgage Loan. Such reimbursement shall be paid by the Purchaser or
its designee to the Company within ten (10) Business Days following the delivery
of a reasonably detailed invoice or other evidence of such amounts to the
Purchaser or its designee. This Section 7.01(p) shall survive each Servicing
Transfer Date.
ARTICLE VIII
COMPANY TO COOPERATE
Section 8.01. Provision of Information.
------------------------
During the term of this Agreement, the Company, at the Purchaser's sole
cost and expense, shall furnish to the Purchaser such periodic, special, or
other reports or information as the Purchaser may reasonably request, and copies
or originals of any documents contained in the Servicing File for each Mortgage
Loan provided for herein. All other special reports or information not provided
for herein as shall be necessary, reasonable, or appropriate with respect to the
Purchaser or any regulatory agency will also be provided at the Purchaser's
expense. All such reports, documents or information shall be provided by and in
accordance with all reasonable instructions and directions which the Purchaser
may give.
In addition, during the term of this Agreement, the Company shall provide,
at the Purchaser's sole cost and expense, to the OCC, the FDIC and to comparable
regulatory authorities supervising the Purchaser or any of Purchaser's assigns
(including beneficial owners of securities issued in Pass-Through Transfers
backed by the Mortgage Loans) and the examiners and supervisory agents of the
OCC, the FDIC and such other authorities, access to the documentation required
by applicable regulations of the OCC, the FDIC and other authorities with
respect to the Mortgage Loans. Such access shall be afforded without charge, but
only upon reasonable and prior written request and during normal business hours
at the offices designated by the Company.
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Section 8.02. Financial Statements.
--------------------
The Company also shall make available to the Purchaser or prospective
purchaser, upon reasonable request, a knowledgeable financial or accounting
officer for the purpose of answering questions respecting recent developments
affecting the Company or the financial statements of the Company, and to permit
the Purchaser to inspect the Company's servicing facilities for the purpose of
satisfying the Purchaser that the Company has the ability to interim service the
Mortgage Loans as provided in this Agreement.
ARTICLE IX
THE COMPANY
Section 9.01. Indemnification; Third Party Claims.
-----------------------------------
The Company shall indemnify the Purchaser, its directors, officers, agents,
employees and assigns and the Successor Servicer (each, an "Indemnified Party")
and hold each such Indemnified Party harmless against any and all claims,
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and any other costs, fees and expenses that
such Indemnified Party may sustain in any way related to the failure of the
Company to perform its duties hereunder and to service the Mortgage Loans in
strict compliance with the terms of this Agreement. The Company immediately
shall notify the Purchaser if a claim is made by a third party with respect to
this Agreement or the Mortgage Loans, assume (with the prior written consent of
the Purchaser) the defense of any such claim and pay all reasonable and
customary out-of-pocket expenses in connection therewith, including counsel
fees, and promptly pay, discharge and satisfy any judgment or decree which may
be entered against it or an Indemnified Party in respect of such claim. The
Company shall follow any written instructions received from the Purchaser in
connection with such claim. The Purchaser promptly shall reimburse the Company
for all amounts advanced by it pursuant to the preceding sentence except when
the claim is in any way related to the Company's indemnification pursuant to
Section 3.03, or the failure of the Company to service and administer the
Mortgage Loans in strict compliance with the terms of this Agreement. The
provisions of this Section 9.01 shall survive the termination of this Agreement.
Section 9.02. Merger or Consolidation of the Company.
--------------------------------------
The Company shall keep in full effect its existence, rights and franchises
as a corporation, and shall obtain and preserve its qualification to do business
as a foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Agreement
or any of the Mortgage Loans and to perform its duties under this Agreement.
Any person into which the Company may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Company shall be a party, or any Person succeeding to the business of the
Company, shall be the successor of the Company hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
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the successor or surviving Person shall be an institution having a GAAP net
worth of not less than $15,000,000. Furthermore, in the event the Company
transfers or otherwise disposes of all or substantially all of its assets to an
affiliate of the Company, such affiliate shall satisfy the conditions above, and
shall also be fully liable to the Purchaser for all of the Company's obligations
and liabilities hereunder.
Section 9.03. Limitation on Liability of Company and Others.
---------------------------------------------
Neither the Company nor any of the directors, officers, employees or agents
of the Company shall be under any liability to the Purchaser for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Company or any such person against any breach of
warranties or representations made herein, or failure to perform its obligations
in strict compliance with any standard of care set forth in this Agreement or
any other liability which would otherwise be imposed under this Agreement. The
Company and any director, officer, employee or agent of the Company 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 Company
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may cause it to incur
any expense or liability; provided, however, that the Company may, with the
consent of the Purchaser, undertake any such action which it may deem necessary
or desirable in respect to this Agreement and the rights and duties of the
parties hereto. In such event, the Company shall be entitled to reimbursement
from the Purchaser of the reasonable legal expenses and costs of such action,
unless any such costs result from a breach of the Company's representations and
warranties made herein or its failure to perform its obligations in compliance
with this Agreement.
Section 9.04. Limitation on Resignation and Assignment by Company.
---------------------------------------------------
Except as may be permitted by this Agreement, the Company shall not assign
this Agreement or the servicing hereunder or delegate its rights or duties
hereunder or any portion hereof without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld.
The Company shall not resign from the obligations and duties hereby imposed
on it except by mutual consent of the Company and the Purchaser or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Company. Any such
determination permitting the resignation of the Company shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance reasonably acceptable to the Purchaser.
No such resignation shall become effective until a successor acceptable to the
Purchaser shall have assumed the Company's responsibilities and obligations
hereunder.
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ARTICLE X
PASS-THROUGH TRANSFERS, WHOLE LOAN TRANSFERS AND AGENCY
TRANSFERS; COMPLIANCE WITH REGULATION AB
Section 10.01. Intent of the Parties; Reasonableness.
-------------------------------------
The Purchaser and the Company acknowledge and agree that the purpose of
Article X of this Agreement is to facilitate compliance by the Purchaser and any
Depositor with the provisions of Regulation AB and related rules and regulations
of the Commission. Although Regulation AB is applicable by its terms only to
offerings of asset-backed securities that are registered under the Securities
Act, the Company acknowledges that investors in privately offered securities may
require that the Purchaser or any Depositor provide comparable disclosure in
unregistered offerings. References in this Agreement to compliance with
Regulation AB include provision of comparable disclosure in private offerings.
Neither the Purchaser nor any Depositor shall 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 thereunder (or
the provision in a private offering of disclosure comparable to that required
under the Securities Act). The Company 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 asset-backed securities markets, advice of counsel, or otherwise, and
agrees to comply with requests made by the Purchaser or any Depositor in good
faith for delivery of information under these provisions on the basis of
evolving interpretations of Regulation AB. Furthermore, the Purchaser and the
Company agree that if any such changes in the interpretations of the
requirements of Regulation AB materially affect this Article X, then the
Purchaser and the Company will amend such affected provisions in accordance with
this Agreement. In connection with any Pass-Through Transfer, the Company shall
cooperate fully with the Purchaser to deliver to the Purchaser (including any of
its assignees or designees) and any Depositor, any and all statements, reports,
certifications, records and any other information necessary in the good faith
determination of the Purchaser or any Depositor to permit the Purchaser or such
Depositor to comply with the provisions of Regulation AB, together with such
disclosures relating to the Company, any Third-Party Originator and the Mortgage
Loans, reasonably believed by the Purchaser or any Depositor to be necessary in
order to effect such compliance.
The Purchaser (including any of its assignees or designees) shall cooperate
with the Company by providing timely notice of requests for information under
these provisions and by reasonably limiting such requests to information
required, in the Purchaser's reasonable judgment, to comply with Regulation AB.
Section 10.02. Additional Representations and Warranties of the Company.
--------------------------------------------------------
(a) The Company shall be deemed to represent to the Purchaser and to any
Depositor, as of the date on which information is first provided to the
Purchaser or any Depositor under Section 10.03 that, except as disclosed in
writing to the Purchaser or such Depositor prior to such date: (i) there are no
material legal or governmental proceedings pending (or known to be contemplated)
against the Company or any Third-Party Originator; and (ii) there are no
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affiliations, relationships or transactions relating to the Company or any
Third-Party Originator with respect to any Pass-Through Transfer and any party
thereto identified by the related Depositor of a type described in Item 1119 of
Regulation AB.
(b) If so requested by the Purchaser or any Depositor on any date following
the date on which information is first provided to the Purchaser or any
Depositor under Section 10.03, the Company 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 request,
provide reasonably adequate disclosure of the pertinent facts, in writing, to
the requesting party.
Section 10.03. Reconstitutions.
---------------
The Purchaser and the Company agree that with respect to some or all of the
Mortgage Loans, the Purchaser, at its sole option, may effect one or more
Reconstitutions. On the related Servicing Transfer Date, the Mortgage Loans
transferred shall cease to be serviced by the Company pursuant to this
Agreement.
In connection with any Pass-Through Transfer the Company shall (i) within
five Business Days following request by the Purchaser or any Depositor, provide
to the Purchaser and such Depositor (or, as applicable, cause each Third-Party
Originator to provide), in writing and in form and substance reasonably
satisfactory to the Purchaser and such Depositor, the information and materials
specified in paragraphs (a) and (b)of this Section, and (ii) as promptly as
practicable following notice to or discovery by the Company, provide to the
Purchaser and any Depositor (in writing and in form and substance reasonably
satisfactory to the Purchaser and such Depositor) the information specified in
paragraph (c) of this Section. Notwithstanding the foregoing, it is understood
and agreed that (1) the information required pursuant to Items 1103(a)(1),
1110(a) and 1119 of Regulation AB (including the information required pursuant
to subparts (a)(A), (a)(D) and (c)(i)(B) of this Section) shall only be required
to the extent that mortgage loans originated by the Company or a Third Party
Originator, as the case may be, in the related Pass-Through Transfer comprise
10% or more of the aggregate pool of mortgage loans in such Pass-Through
Transfer, (2) the information required pursuant to Items 1110(b) and 1117 of
Regulation AB (including the information required pursuant to subparts (a)(B),
(a)(C) and (c)(i)(A) of this Section) shall only be required to the extent that
mortgage loans originated by the Company or a Third Party Originator, as the
case may be, in the related Pass-Through Transfer comprise 20% or more of the
aggregate pool of mortgage loans in such Pass-Through Transfer and (3) the
information required pursuant to Item 1105 of Regulation AB (including the
information required pursuant to subpart (b) below) shall only be required in
Pass-Through Transfers in which mortgage loans originated by the Company or any
Third Party Originator, as the case may be, comprise a material portion of the
aggregate pool of mortgage loans in such Pass-Through Transfer, as determined by
the Purchaser or Depositor in its sole reasonable determination of the
requirements of Regulation AB.
(a) Subject to the preceding paragraph, if so requested by the Purchaser or
any Depositor, the Company shall provide such information regarding (i) the
Company, as originator of the Mortgage Loans (including as an acquirer of
Mortgage Loans from a Qualified Correspondent), or (ii) each Third-Party
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Originator, as is requested for the purpose of compliance with Items 1103(a)(1),
1105, 1110, 1117 and 1119 of Regulation AB. Such information shall include, as
applicable, at a minimum:
(A) the originator's form of organization;
(B) a description of the originator's origination program and how
long the originator has been engaged in originating residential
mortgage loans, which description shall include a discussion of the
originator's experience in originating mortgage loans of a similar
type as the Mortgage Loans; information regarding the size and
composition of the originator's origination portfolio; and information
that may be material, in the good faith judgment of the Purchaser or
any Depositor, to an analysis of the performance of the Mortgage
Loans, including the originators' credit-granting or underwriting
criteria for mortgage loans of similar type(s) as the Mortgage Loans
and such other information as the Purchaser or any Depositor may
reasonably request for the purpose of compliance with Item 1110(b)(2)
of Regulation AB;
(C) a description of any material legal or governmental
proceedings pending (or known to be contemplated) against the Company
and each Third-Party Originator; and
(D) a description of any affiliation or relationship between the
Company, each Third-Party Originator and any of the following parties
to a Pass-Through Transfer, as such parties are identified to the
Company by the Purchaser or any Depositor in writing in advance of
such Pass-Through Transfer:
(1) the sponsor;
(2) the depositor;
(3) the issuing entity;
(4) any servicer or master servicer;
(5) any trustee;
(6) any originator;
(7) any significant obligor;
(8) any enhancement or support provider; and
(9) any other material transaction party.
(b) Subject to the provisions of the initial paragraph of this Section, if
so requested by the Purchaser or any Depositor, the Company shall provide (or,
as applicable, cause each Third-Party Originator to provide) Static Pool
Information with respect to the mortgage loans (of a similar type as the
Mortgage Loans, as reasonably identified by the Purchaser as provided below)
originated by (i) the Company, if the Company is an originator of Mortgage Loans
(including as an acquirer of Mortgage Loans from a Qualified Correspondent),
and/or (ii) each Third-Party Originator. Such Static Pool Information shall be
prepared by the Company (or Third-Party Originator) on the basis of its
reasonable, good faith interpretation of the requirements of Item 1105(a)(1)-(3)
77
of Regulation AB. To the extent that there is reasonably available to the
Company (or Third-Party Originator) Static Pool Information with respect to more
than one mortgage loan type, the Purchaser or any Depositor shall be entitled to
specify whether some or all of such information shall be provided pursuant to
this paragraph. The content of such Static Pool Information may be in the form
customarily provided by the Company, and need not be customized for the
Purchaser or any Depositor. Such Static Pool Information for each vintage
origination year or prior securitized pool, as applicable, shall be presented in
increments no less frequently than quarterly over the life of the mortgage loans
included in the vintage origination year or prior securitized pool. The most
recent periodic increment must be as of a date no later than 135 days prior to
the date of the prospectus or other offering document in which the Static Pool
Information is to be included or incorporated by reference. The Static Pool
Information shall be provided in an electronic format that provides a permanent
record of the information provided, such as a portable document format (pdf)
file, or other such electronic format reasonably required by the Purchaser or
the Depositor, as applicable.
Promptly following notice or discovery of a material error in Static Pool
Information provided pursuant to the immediately preceding paragraph (including
an omission to include therein information required to be provided pursuant to
such paragraph), the Company shall provide corrected Static Pool Information to
the Purchaser or any Depositor, as applicable, in the same format in which
Static Pool Information was previously provided to such party by the Company.
If so requested by the Purchaser or any Depositor, the Company shall
provide (or, as applicable, cause each Third-Party Originator to provide), at
the expense of the requesting party (to the extent of any additional incremental
expense associated with delivery pursuant to this Agreement), such agreed-upon
procedures letters of certified public accountants reasonably acceptable to the
Purchaser or Depositor, as applicable, pertaining to Static Pool Information
relating to prior securitized pools for securitizations closed on or after
January 1, 2006 or, in the case of Static Pool Information with respect to the
Company's or Third-Party Originator's originations or purchases, to calendar
months commencing January 1, 2006, as the Purchaser or such Depositor shall
reasonably request. Such letters shall be addressed to and be for the benefit of
such parties as the Purchaser or such Depositor shall designate, which may
include, by way of example, any Sponsor, any Depositor and any broker dealer
acting as underwriter, placement agent or initial purchaser with respect to a
Pass-Through Transfer. Any such statement or letter may take the form of a
standard, generally applicable document accompanied by a reliance letter
authorizing reliance by the addressees designated by the Purchaser or such
Depositor.
(c) Subject to the provisions of the initial paragraph of this Section, if
so requested by the Purchaser or any Depositor for the purpose of satisfying its
reporting obligation under the Exchange Act with respect to any class of
asset-backed securities, the Company shall (or shall cause each Third-Party
Originator to) (i) notify the Purchaser and any Depositor in writing of (A) any
material litigation or governmental proceedings pending against the Company or
any Third-Party Originator and (B) any affiliations or relationships that
develop following the closing date of a Pass-Through Transfer between the
Company or any Third-Party Originator and any of the parties specified in clause
(D) of paragraph (a) of this Section (and any other parties identified in
writing by the requesting party) with respect to such Pass-Through Transfer, and
(ii) provide to the Purchaser and any Depositor a description of such
proceedings, affiliations or relationships.
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(d) The Company shall cooperate with the Purchaser in connection with each
Reconstitution in accordance with this Article X. In connection therewith the
Company shall:
(i) make all representations and warranties made herein regarding the
Company and the Mortgage Loans as of the closing date of each
Reconstitution; provided, however, unless otherwise specified herein, the
representations and warranties related to the Mortgage Loans shall be made
by the Company as of the date of the Reconstitution, modified to the extent
necessary to accurately reflect the pool statistics of the related Mortgage
Loans as of the date of such Reconstitution and subject to any events or
circumstances occurring or existing subsequent to the related Closing Date;
(ii) execute a mutually agreeable Assignment, Assumption and
Recognition Agreement in the form of Exhibit C attached hereto necessary to
effectuate the foregoing provided such agreement creates no greater
obligation or cost on the part of the Company than otherwise set forth in
this Agreement and does not materially and adversely alter the Company's
rights hereunder;
(iii) not be obligated to be a party to a pooling and servicing
agreement or service into Purchaser's securitization unless the Company
consents in its sole discretion;
(iv) not be obligated to incur any out-of-pocket expense in connection
with this Section 10.03(d) unless the Purchaser agrees to reimburse the
Company for such expense (any amount to be agreed upon prior to the Company
incurring it);
(v) (1) cooperate with Purchaser and any prospective purchaser with
respect to all reasonable requests and due-diligence procedures including
participating in telephonic meetings with rating agencies, bond insurers
and such other parties as Purchaser shall designate and participating in
telephonic meetings with prospective purchasers of the Mortgage Loans or
interests therein and providing information reasonably requested by such
purchasers; (2) execute all Reconstitution Agreements and such other
agreements reasonably requested and customarily required by bond insurers
or other credit enhancers involved in a pass-through transfer or net
interest margin securities related to such pass-through transfer; provided
that each of Company and Purchaser is given an opportunity to review and
reasonably negotiate in good faith the content of such documents; provided,
however, that Company shall not be obligated to be a party to a pooling and
servicing agreement or service into Purchaser's securitization unless the
Company consents in its sole discretion; (3) deliver to Purchaser for
inclusion in any prospectus or other offering material such publicly
available information regarding Company and its financial condition and its
mortgage loan delinquency, foreclosure and loss experience and any
additional information reasonably requested by Purchaser which does not
constitute material non-public information (including such information as
required by Article X hereof relating to Regulation AB Compliance) and, if
Company or its holding company is no longer a public company, to deliver to
Purchaser any similar nonpublic, unaudited financial information, in which
case Purchaser shall bear the cost of having such information audited by
certified public accountants if Purchaser desires such an audit, or as is
otherwise reasonably requested by Purchaser and which Company is capable of
providing without unreasonable effort, and to indemnify Purchaser and its
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affiliates for material misstatements or omissions contained (i) in the
foregoing information and (ii) on the Mortgage Loan Schedule; and (4)
deliver to Purchaser and to any Person designated by Purchaser, at
Purchaser's expense, such statements and audit letters of reputable,
certified public accountants pertaining to information provided by Company
pursuant to clause (3) above as shall be reasonably requested by Purchaser;
(vi) Prior to the closing date of a Reconstitution to Xxxxxx Xxx or a
Securitization involving the Mortgage Loans in which Xxxxxx Mae is
purchasing any of the securities, the Purchaser shall provide the Company
with an electronic listing of those Mortgage Loans which Purchaser intends
to sell or securitize and for which Purchaser requires information
regarding the points and fees charged to each related Mortgagor at
origination. The Company shall provide to the Purchaser an electronic
schedule of such points and fees for each such Mortgage Loan within five
(5) Business Days of Purchaser's request therefor. The Company hereby
represents and warrants to the Purchaser that such schedule is true,
correct and complete as of the date it is provided to the Purchaser; and
(vii) not be required to cooperate with respect to more than (4)
Reconstitutions with respect to any Mortgage Loan Package.
Section 10.04. Indemnification; Remedies.
-------------------------
The Company shall indemnify the Purchaser, each affiliate of the Purchaser,
and each of the following parties participating in a Pass-Through Transfer: each
sponsor, the issuing entity; each broker-dealer acting as underwriter, placement
agent or initial purchaser, each Person who controls any of such parties or the
Depositor (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act); and the respective present and former directors, officers,
employees and agents of each of the foregoing and of the Depositor, 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 provided in written or electronic form
under this Article X by or on behalf of the Company or any Third-Party
Originator (collectively, the "Company Information"), or (B) the omission
or alleged omission to state in the Company Information a material fact
required to be stated in the Company Information or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, by way of clarification, that
clause (B) of this paragraph shall be construed solely by reference to the
Company Information and not to any other information communicated in
connection with a sale or purchase of securities, without regard to whether
the Company Information or any portion thereof is presented together with
or separately from such other information;
(ii) any failure by the Company or any Third-Party Originator to
deliver any information when and as required under this Article X; or
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(iii) any breach by the Company of a representation or warranty set
forth in Section 10.02(a) or in a writing furnished pursuant to Section
10.02(b) and made as of a date prior to the closing date of the related
Pass-Through Transfer, to the extent that such breach is not cured by such
closing date, or any breach by the Company of a representation or warranty
in a writing furnished pursuant to Section 10.02(b) to the extent made as
of a date subsequent to such closing date.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
---------
This Agreement may be amended from time to time by the Company and by
written agreement signed by the Company and the Purchaser.
Section 11.02. Governing Law.
-------------
This Agreement shall be construed in accordance with the laws of the State
of New York (without giving effect to the conflict of laws principles thereof
other than Section 5-1401 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.
Each of the Company and the Purchaser hereby knowingly, voluntarily and
intentionally waives any and all rights it may have to a trial by jury in
respect of any litigation based on, or arising out of, under, or in connection
with, this Agreement, or any other documents and instruments executed in
connection herewith, or any course of conduct, course of dealing, statements
(whether oral or written), or actions of the Company or the Purchaser. This
provision is a material inducement for the Purchaser to enter into this
Agreement.
Section 11.03. Arbitration.
-----------
In the event a claim or controversy arises concerning the interpretation or
enforcement of the terms of this Agreement, the Purchaser and the Company agree
that such claim or controversy may be settled by final, binding arbitration if
the Purchaser and the Company, as applicable, consent to such arbitration at the
time such claim or controversy arises which consent may be withheld by the
Purchaser or the Company in each party's sole discretion.
Section 11.04. 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
registered mail, postage prepaid, addressed as follows:
(i) if to the Company:
Accredited Home Lenders, Inc.
00000 Xxxxxx xx Xxxxxxx
00
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Director of Capital Markets
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Accredited Home Lenders, Inc.
00000 Xxxxxx xx Xxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Secondary Markets Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
or such other address as may hereafter be furnished to the Purchaser
in writing by the Company;
(ii) if to the Purchaser:
Bank of America, National Association
Hearst Tower
NC1-027-21-04
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Managing Director
Telephone: (000) 000-0000
Fax: (000) 000-0000
or such other address as may hereafter be furnished to the Company in
writing by the Purchaser.
Section 11.05. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement.
Section 11.06. Relationship of Parties.
-----------------------
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto and the services of the
Company shall be rendered as an independent contractor and not as agent for the
Purchaser.
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Section 11.07. Successors and Assigns; Assignment of Agreement.
-----------------------------------------------
This Agreement shall bind and inure to the benefit of and be enforceable by
the Company and the Purchaser and the respective permitted successors and
assigns of the Company and the permitted successors and assigns of the
Purchaser. After the Closing Date, this Agreement shall not be assigned, pledged
or hypothecated by the Company to a third party without the prior written
consent of the Purchaser, which consent may be withheld by the Purchaser in its
sole discretion. The Purchaser shall have the right, with the written consent of
the Company but subject to the limits set forth in Section 2.02 hereof, to
assign, in whole or in part, its interest under this Agreement with respect to
some or all of the Mortgage Loans, and designate any person to exercise any
rights of the Purchaser hereunder, by executing an Assignment, Assumption and
Recognition Agreement, and the assignee or designee shall accede to the rights
and obligations hereunder of the Purchaser with respect to such Mortgage Loans.
All references to the Purchaser in this Agreement shall be deemed to include its
assignee or designee, subject to the provisions of this Section 11.07, and in
the event the Purchaser assigns this Agreement, and the assignee assumes any of
the Purchaser's obligations hereunder, the Company acknowledges and agrees to
look solely to such assignee, and not the Purchaser, for performance of the
obligations so assumed and the Purchaser shall be relieved from any liability to
the Company with respect thereto. The Successor Servicer shall be an intended
third party beneficiary of this Agreement to the same extent as if it were a
party hereto, shall have the right to enforce the provisions of this Agreement,
and shall be bound by the provisions of Section 9.01 of this Agreement.
Section 11.08. Recordation of Assignments of Mortgage.
--------------------------------------
To the extent permitted by applicable law, each Assignment of Mortgage is
subject to recordation in the appropriate public office for real property
records in the county or other comparable jurisdiction in which the related
Mortgaged Property is situated, such recordation to be effected at the Company's
expense, in the event recordation is necessary or advisable in accordance with
Acceptable Servicing Practices or under applicable law or, to the extent the
Mortgage Loan is not registered on MERS, is requested by the Purchaser at its
sole option, all in accordance with specific provisions set forth elsewhere in
this Agreement.
Section 11.09. Solicitation of Mortgagor.
-------------------------
The Company agrees that, after the Closing Date, it will not take any
action or permit or cause any action to be taken by any of its agents or
affiliates, or by any independent contractors or independent mortgage brokerage
companies personally, by telephone, mail or electronic mail, solicit the
borrower under any Mortgage Loan for the purpose of refinancing, in whole or in
part. It is understood and agreed that all rights and benefits relating to the
solicitation of any Mortgagors and the attendant rights, title and interest in
and to the list of such Mortgagors and data relating to the Mortgages (including
insurance renewal dates) shall be transferred to Purchaser pursuant to this
Agreement on the Closing Date and the Company shall take no action to undermine
these rights and benefits. Notwithstanding the foregoing, it is understood and
agreed that promotions undertaken by the Company or any affiliate of the Company
which are directed to the general public at large, including, without
83
limitation, mass mailings based on commercially acquired mailing lists, and
newspaper, radio, Internet and television advertisements shall not constitute
solicitation under this Section.
Section 11.10. Further Agreements.
------------------
The Purchaser and the Company each agree to execute and deliver to the
other such additional documents, instruments or agreements as may be necessary
or appropriate to effectuate the purposes of this Agreement.
Section 11.11. Confidential Information.
------------------------
Each of the Company and the Purchaser shall keep confidential and shall not
divulge to any party, without the other's prior written consent, the price paid
by the Purchaser for the Mortgage Loans, except to the extent that it is
reasonable and necessary for either the Company or the Purchaser to do so in
working with legal counsel, auditors, taxing authorities or other governmental
agencies or in securing the release of liens of the Company's warehouse lenders.
Each of the Company and the Purchaser agrees that it (i) shall comply with
all applicable laws and regulations regarding the privacy or security of
Consumer Personal Information, (ii) shall not collect, create, use, store,
access, disclose or otherwise handle Consumer Personal Information in any manner
inconsistent with any applicable laws or regulations regarding the privacy or
security of Consumer Personal Information, including but not limited to the
privacy provisions of the Xxxxx-Xxxxx-Xxxxxx Act of 1999, (iii) shall not
disclose Consumer Personal Information to any affiliated or non-affiliated third
party except to enforce or preserve its rights, as otherwise permitted or
required by applicable law (or by regulatory authorities having jurisdiction in
the premises), (iv) shall maintain appropriate administrative, technical and
physical safeguards to protect the security, confidentiality and integrity of
Consumer Personal Information and (v) shall promptly notify the other party in
writing upon becoming aware of any actual breach and of any suspected breach of
this section. Each party hereto shall indemnify and defend the other party
against, and shall hold the other party harmless from, any cost, expense, loss,
claim or other liability that such other party may suffer as a result of or in
connection with its failure to comply with or perform the obligations set forth
in this section.
Any non-public information regarding the Company or any of its affiliates
provided by the Company to the Purchaser shall be held by Purchaser in strict
confidence and shall not, without the prior written consent of the Company, be
disclosed to any third party, except for (i) disclosure to the Purchaser's
employees, affiliates, attorneys or accountants (collectively,
"representatives"), but only to the extent such disclosure is necessary and any
such party agrees to hold such information in strict confidence, and (ii)
disclosure required by law, rule, regulation or order of a court or other
similar authority. The Purchaser agrees not to use any such non-public
information in violation of applicable securities laws, and the Purchaser is
aware, and will advise its representatives to whom such information is disclosed
in accordance with the preceding sentence, of the restrictions imposed by the
securities laws on the purchase and sale of securities by any person who has
received material, non-public information from the issuer of such securities and
on the communication of such information to any other person when it is
reasonably foreseeable that such other person is likely to purchase or sell such
securities in reliance upon such information.
84
Notwithstanding any other express or implied agreement to the contrary, the
parties hereto agree and acknowledge that each of them and each of their
employees, representatives, and other agents may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to any of them relating to such tax treatment and
tax structure, except to the extent that confidentiality is reasonably necessary
to comply with U.S. federal or state securities laws. For purposes of this
paragraph, the terms "tax treatment" and "tax structure" have the meanings
specified in Treasury Regulation section 1.6011-4(c).
Section 11.12. Counterparts.
------------
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
Section 11.13. Exhibits.
--------
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
Section 11.14. General Interpretive Principles.
-------------------------------
For purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Agreement;
(d) a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
85
Section 11.15. Reproduction of Documents.
-------------------------
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by any party at the closing, and (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 11.16. Exhibits
--------
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
Section 11.17. Purchase Price and Terms Letter.
-------------------------------
The terms and conditions set forth in the Purchase Price and Terms Letter
between the Purchaser and the Company with respect to each Closing Date shall be
incorporated herein. In the event of any conflict between the terms of this
Agreement and the related Purchase Price and Terms Letter, the Purchase Price
and Terms Letter shall control.
Section 11.18. Servicing Provisions.
--------------------
Except as otherwise expressly set forth in this Agreement, the provisions
of Articles IV, V and VI shall only apply to a Mortgage Loan during the related
Interim Servicing Period (or such later date if relating to the Interim
Servicing Period).
[Next Page Signature Page]
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IN WITNESS WHEREOF, the Company and the Purchaser have caused their names
to be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
BANK OF AMERICA, NATIONAL ACCREDITED HOME LENDERS, INC.
ASSOCIATION Company
Purchaser
By:----------------------------- By:----------------------------
Name:--------------------------- Name:--------------------------
Title:-------------------------- Title:-------------------------
[Signature page to the Flow Sale and Interim Servicing Agreement,
dated as of September 1, 2006]
87
EXHIBIT A
CONTENTS OF EACH MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each of
the following items, which shall be available for inspection by the Purchaser
and any prospective Purchaser, and which shall be retained by the Company in the
Servicing File or delivered to the Custodian pursuant to Sections 2.01, 2.02 and
2.03 of the Flow Sale and Interim Servicing Agreement to which this Exhibit is
attached (the "Agreement"):
1. (a) The original Mortgage Note, including any riders thereto, endorsed
"Pay to the order of _____________, without recourse" and signed in
the name of the Company by an authorized officer (provided that, in
the event that the Mortgage Loan was acquired by the Company in a
merger, the signature must be in the following form: "[Company],
successor by merger to [name of predecessor]"; and in the event that
the Mortgage Loan was acquired or originated by the Company while
doing business under another name, the signature must be in the
following form: "[Company], formerly known as [previous name]"). The
Mortgage Note must contain all necessary intervening endorsements
showing a complete chain of endorsement from the related Originator
(each such endorsement being sufficient to transfer all right, title
and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note); or
(b) With respect to no more than 1% of the unpaid principal balance of
the Mortgage Loans as of the related Cut-off Date, a certified copy of
the Mortgage Note (endorsed as provided above), together with a lost
note affidavit, providing indemnification to the holder thereof for
any losses incurred due to the fact that the original Mortgage Note is
missing.
2. The original of any guarantee executed in connection with the Mortgage
Note (if any).
3. The original Mortgage, including any riders thereto, with evidence of
recording thereon, except as follows: If in connection with any
Mortgage Loan, the Company cannot deliver or cause to be delivered the
original Mortgage with evidence of recording thereon on or prior to
the Closing Date because of a delay caused by the public recording
office where such Mortgage has been delivered for recordation or
because such Mortgage has been lost or because such public recording
office retains the original recorded Mortgage, the Company shall
deliver or cause to be delivered to the Custodian, a photocopy of such
Mortgage, together with (i) in the case of a delay caused by the
public recording office, an Officer's Certificate of the Company
stating that such Mortgage has been dispatched to the appropriate
public recording office for recordation and that the original recorded
Mortgage or a copy of such Mortgage certified by such public recording
office to be a true and complete copy of the original recorded
Mortgage will be promptly delivered to the Custodian upon receipt
thereof by the Company; or (ii) in the case of a Mortgage where a
EXHIBIT A - Page 1
public recording office retains the original recorded Mortgage or in
the case where a Mortgage is lost after recordation in a public
recording office, a copy of such Mortgage certified by such public
recording office or by the title insurance company that issued the
title policy to be a true and complete copy of the original recorded
Mortgage.
4. The originals or certified true copies of any document sent for
recordation of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon, or, if the
original of any such agreement with evidence of recording thereon has
not been returned by the public recording office where such agreement
has been delivered for recordation or such agreement has been lost or
such public recording office retains the original recorded agreement,
a photocopy of such agreement, certified by the Company or its agent
to be a true and correct copy of the agreement delivered to the
appropriate public recording office for recordation. The original
recorded agreement or, in the case of a agreement where a public
recording office retains the original recorded agreement or in the
case where an agreement is lost after recordation in a public
recording office, a copy of such agreement certified by such public
recording office to be a true and complete copy of the original
recorded agreement, will be promptly delivered to the Custodian upon
receipt thereof by the Company.
5. The original Assignment of Mortgage, in blank, for each Mortgage Loan,
in form and substance acceptable for recording (except for the
insertion of the name of the assignee and recording information). If
the Mortgage Loan was acquired by the Company in a merger, the
Assignment of Mortgage must be made by "[Company], successor by merger
to [name of predecessor]." If the Mortgage Loan was acquired or
originated by the Company while doing business under another name, the
Assignment of Mortgage must be made by "[Company], formerly know as
[previous name]." Subject to the foregoing and where permitted under
the applicable laws of the jurisdiction wherein the Mortgaged property
is located, such Assignments of Mortgage may be made by blanket
assignments for Mortgage Loans secured by the Mortgaged Properties
located in the same county. If the related Mortgage has been recorded
in the name of Mortgage Electronic Registration Systems, Inc. ("MERS")
or its designee, no Assignment of Mortgage will be required to be
prepared or delivered and instead, the Company shall take all actions
as are necessary to cause the Purchaser to be shown as the owner of
the related Mortgage Loan on the records of MERS for purposes of the
system of recording transfers of beneficial ownership of mortgages
maintained by MERS.
6. For any Mortgage Loan not recorded in the name of MERS, originals or
certified true copies of documents sent for recordation of all
intervening assignments of the Mortgage with evidence of recording
thereon, or if any such intervening assignment has not been returned
from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of
mortgage, the Company shall deliver or cause to be delivered to the
Custodian, a photocopy of such intervening assignment, together with
(i) in the case of a delay caused by the public recording office, an
EXHIBIT A - Page 2
Officer's Certificate of the Company stating that such intervening
Assignment of Mortgage has been dispatched to the appropriate public
recording office for recordation and that such original recorded
intervening Assignment of Mortgage or a copy of such intervening
Assignment of Mortgage certified by the appropriate public recording
office or by the title insurance company that issued the title policy
to be a true and complete copy of the original recorded intervening
Assignment of Mortgage will be promptly delivered to the Custodian
upon receipt thereof by the Company; or (ii) in the case of an
intervening assignment where a public recording office retains the
original recorded intervening Assignment of Mortgage or in the case
where an intervening Assignment of Mortgage is lost after recordation
in a public recording office, a copy of such intervening Assignment of
Mortgage certified by such public recording office to be a true and
complete copy of the original recorded intervening Assignment of
Mortgage.
7. The original PMI Policy, if applicable, or certificate of insurance,
where required pursuant to the Agreement.
8. The original mortgagee policy of title insurance in the form required
by the Agreement or, if the original lender's title insurance policy
has not been issued, the preliminary report or irrevocable binder or
commitment to issue the same.
9. Any security agreement, chattel mortgage or equivalent executed in
connection with the Mortgage
With respect to each Mortgage Loan, the Mortgage File shall include each of the
following items to the extent required in the Underwriting Guidelines:
10. For each Mortgage Loan which is secured by a residential long-term
lease, if any, a copy of the lease with evidence of recording
indicated thereon, or, if the lease is in the process of being
recorded, a photocopy of the lease, certified by an officer of the
respective prior owner of such Mortgage Loan or by the applicable
title insurance company, closing/settlement/escrow agent or company or
closing attorney to be a true and correct copy of the lease
transmitted for recordation.
11. The original hazard insurance policy and, if required by law, flood
insurance policy, in accordance with Section 4.10 of the Agreement.
12. Fully executed residential loan application.
13. Fully executed Mortgage Loan closing statement (Form HUD-1) and any
other truth-in-lending or real estate settlement procedure forms
required by law.
14. Verification of employment and income (if required pursuant to the
Underwriting Guidelines).
15. Verification of acceptable evidence of source and amount of down
payment (if required pursuant to the Underwriting Guidelines).
EXHIBIT A - Page 3
16. Credit report on the Mortgagor.
17. Residential appraisal report.
18. Photograph of the Mortgaged Property.
19. Survey of the Mortgaged Property, if required by the title company or
applicable law.
20. Copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy,
i.e. map or plat, restrictions, easements, sewer agreements, home
association declarations, etc.
21. All fully executed required disclosure statements required by state
and federal law.
22. If applicable, termite report, structural engineer's report, water
potability and septic certification.
23. Sales contract, if applicable.
24. Evidence of payment of taxes and insurance premiums, insurance claim
files, correspondence, current and historical computerized data files,
and all other processing, underwriting and closing papers and records
which are customarily contained in a mortgage file and which are
required to document the Mortgage Loan or to service the Mortgage
Loan.
25. Amortization schedule, if available.
26. Payment history for any Mortgage Loan that has been closed for more
than ninety (90) days.
27. Original or certified copy of fully executed power of attorney, if
applicable.
In the event of a delay by the public recording office in returning any
recorded document, the Company shall deliver to the Custodian, within 180 days
of the Closing Date, an Officer's Certificate which shall (i) identify the
recorded document, (ii) state that the recorded document has not been delivered
to the Custodian due solely to a delay caused by the public recording office,
(iii) state the amount of time generally required by the applicable recording
office to record and return a document submitted for recordation, and (iv)
specify the date the applicable recorded document will be delivered to the
Custodian. The Company shall be required to deliver to the Custodian the
applicable recorded document by the date specified in (iv) above. An extension
of the date specified in (iv) above may be requested form the Purchaser, which
consent shall not be unreasonably withheld.
EXHIBIT A - Page 4
EXHIBIT B
[RESERVED]
EXHIBIT B - Page 1
EXHIBIT C
ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
[DATE OF ASSIGNMENT]
ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT (this "AAR"), dated
_______, 200_, among Bank of America, National Association, a national banking
association having an office at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000 (the "Assignor"), ______________, a ___________ [corporation]
having an office at _______________________ (the "Assignee") and Accredited Home
Lenders, Inc., a California corporation having an office at 00000 Xxxxxx xx
Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (the "Company").
For and in consideration of the sum of one dollar ($1.00) and other
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and of the mutual covenants herein contained, the parties hereto
hereby agree as follows:
(a) The Assignor hereby grants, transfers and assigns to the Assignee all
of the right, title and interest of the Assignor, as Purchaser, under the Flow
Sale and Interim Servicing Agreement (the "Flow Sale Agreement"), dated as of
September 1, 2006, and the related Memorandum of Sale, dated __________, 200_
(the "Original Closing Date") (the "Memorandum of Sale," and together with the
Flow Sale Agreement, the "Transfer Agreement") each by and between the Assignor
and the Company, including but not limited to the representations and warranties
made by the Company in Sections 3.01 and 3.02 and the remedy provisions set
forth in Section 3.03 of the Flow Sale Agreement (other than the Assignor's
rights to indemnification thereunder), but excluding the Assignor's rights under
Section 3.04 and 3.05 of the Flow Sale Agreement. Notwithstanding the foregoing,
the Company and the Assignee acknowledge that in the event the Assignor
repurchases any Mortgage Loan or otherwise performs any other obligation under
the Mortgage Loan Purchase Agreement (as defined below) that is also the
obligation of the Company under the Transfer Agreement, the Assignor shall be
deemed to have retained its right to enforce such obligation against the Company
and the Assignee will be deemed to have waived such right. In addition,
notwithstanding any provision in this AAR to the contrary, the Assignor
specifically reserves and does not assign to the Assignee any right, title and
interest in, to or under any Mortgage Loans subject to the Transfer Agreement
other than the Mortgage Loans that are subject to the Mortgage Loan Purchase
Agreement (the "Assigned Mortgage Loans").
(b) The Assignor has sold, assigned, set over, and otherwise conveyed its
rights in, to and under the Assigned Mortgage Loans delivered under the Transfer
Agreement to the Assignee pursuant to that certain Mortgage Loan Purchase
Agreement (the "Mortgage Loan Purchase Agreement"), dated as of _________, 200_,
by and between the Assignee, as purchaser, and the Assignor, as seller.
(c) The Assignee has further assigned its rights in, to and under (i) this
AAR, (ii) Sections 3.02, 3.03 and 4.21 of the Flow Sale Agreement in respect of
the Assigned Mortgage Loans and (iii) the Assigned Mortgage Loans delivered
EXHIBIT C - Page 1
under the Transfer Agreement to ________________, as trustee (the "Trustee"),
pursuant to that certain Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of ___________, 200_, among the Assignee, as
depositor, ______________, as servicer, and the Trustee.
(d) The Assignor represents and warrants to, and covenants with, the
Assignee that:
(i) The Assignor has not received notice of, and has no knowledge of,
any offsets, counterclaims or other defenses available to the Company with
respect to the Transfer Agreement;
(ii) The Assignor is the lawful owner of the Assigned Mortgage Loans
with the full right to transfer the Assigned Mortgage Loans and all of its
interests, rights and obligations under the Transfer Agreement free from
any and all claims and encumbrances whatsoever. Except for the sale to the
Assignee, the Assignor has not assigned or pledged any Mortgage Note
related to any Assigned Mortgage Loan or the related Mortgage or any
interest or participation therein;
(iii) The Assignor has not satisfied, canceled, or subordinated in
whole or in part, or rescinded the Mortgage related to any Assigned
Mortgage Loan, and the Assignor has not released the Mortgaged Property
from the lien of the Mortgage related to any Assigned Mortgage Loan, in
whole or in part, nor has the Assignor executed an instrument that would
effect any such release, cancellation, subordination, or rescission;
(iv) The Assignor has not taken any action that would serve to impair
or encumber the Assignor's ownership interest in any Assigned Mortgage Loan
since the Original Closing Date; and
(v) The Assignor has not waived or agreed to any waiver under, or
agreed to any amendment or other modification of, the Transfer Agreement.
The Assignor has no knowledge of, and has not received notice of, any
waivers under or amendments or other modifications of, or assignments of
rights or obligations under, the Transfer Agreement.
(e) The Assignee represents and warrants to, and covenants with, the
Assignor and the Company pursuant to Section 11.07 of the Flow Sale Agreement
that:
(i) The Assignee agrees to be bound, as Purchaser, by all of the
terms, covenants and conditions of Article 3 of the Flow Sale Agreement
with respect to the Assigned Mortgage Loans, and from and after the date
hereof, the Assignee assumes for the benefit of each of the Company and the
Assignor all of the Assignor's obligations as purchaser thereunder with
respect to the Assigned Mortgage Loans; and
(ii) The Assignee's address for purposes of all notices and
correspondence related to Sections 3.02, 3.03 and 4.21 of the Flow Sale
Agreement is:
____________________________
____________________________
____________________________
Attention: _________________
EXHIBIT C - Page 2
(f) The Company represents and warrants to the Assignor and the Assignee
and covenants, acknowledges and agrees that, as of the date hereof:
(i) The Company serviced the Mortgage Loans in accordance with the
provisions of the Flow Sale Agreement until the Servicing Transfer Date and
has complied with all covenants and obligations thereunder;
(ii) The representations and warranties set forth in Section 3.01 and
3.02 of the Flow Sale Agreement are made by the Company as of the date
hereof with respect to the Assigned Mortgage Loans; provided, however, the
representations and warranties related to the Assigned Mortgage Loans shall
be modified to the extent necessary to accurately reflect the pool
statistics of the Assigned Mortgage Loans as of the date hereof and subject
to any events or circumstances occurring or existing subsequent to the
Original Closing Date.
(g) It is the intention of the Assignor, the Company and the Assignee that,
as to the Assigned Mortgage Loans, Sections 3.02 and 3.03 of the Flow Sale
Agreement shall be binding upon and inure to the benefit of the Company and the
Assignee and their respective successors and assigns.
(h) Capitalized terms used but not defined herein shall have the respective
meaning ascribed thereto in the Mortgage Loan Purchase Agreement.
[Signatures Follow]
EXHIBIT C - Page 3
IN WITNESS WHEREOF, the parties have caused this Assignment, Assumption and
Recognition Agreement be executed by their duly authorized officers as of the
date first above written.
BANK OF AMERICA, NATIONAL [NAME OF ASSIGNEE]
ASSOCIATION
Assignor Assignee
By: By:
-------------------------- ------------------------------
Name: Name:
------------------------ ----------------------------
Its: Its:
------------------------ ----------------------------
ACCREDITED HOME LENDERS, INC.
Company
By:
--------------------------
Name:
------------------------
Its:
------------------------
EXHIBIT C - Page 4
EXHIBIT D
UNDERWRITING GUIDELINES
[On file with the Purchaser]
EXHIBIT D - Page 1
EXHIBIT E
FORM OF OPINION OF COUNSEL
[___________], [____]
Bank of America, National Association
Hearst Tower
NC1-027-21-04
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Re: Accredited Home Lenders, Inc.
Ladies and Gentlemen:
I am the Secondary Markets Counsel of Accredited Home Lenders, Inc., a
California corporation (the "Company"), and am rendering these opinions in
connection with the sale of Mortgage Loans pursuant to that certain Flow Sale
and Interim Servicing Agreement by and between the Company and Bank of America,
National Association, dated as of September 1, 2006 (the "Agreement").
Capitalized terms not otherwise defined herein have the meanings given them in
the Agreement.
In rendering the opinions set forth below, I have examined and relied upon
originals or copies, certified or otherwise identified to my satisfaction, of
the articles of incorporation and by-laws of the Company, the Agreement and such
corporate records, agreements or other instruments of the Company, and such
certificates, records and other documents, agreements and instruments, as I have
deemed necessary and proper as the basis for my opinions. In connection with
such examination, I have assumed the genuineness of all signatures, the
authenticity of all documents, agreements and instruments submitted to me as
originals, the conformity to original documents, agreements and instruments of
all documents, agreements and instruments submitted to me as copies or
specimens, the authenticity of the originals of such documents, agreements and
instruments submitted to us as copies or specimens, the conformity to executed
original documents of all documents submitted to me in draft and the accuracy of
the matters set forth in the documents we reviewed. I have also assumed that all
documents, agreements and instruments have been duly authorized, executed and
delivered by all parties thereto. As to any facts material to such opinions that
I did not independently establish or verify, I have relied upon statements and
representations of officers and other representatives of the Company as I have
deemed necessary and proper as the basis for my opinions, including, among other
things, the representations and warranties in the Agreement.
EXHIBIT E - Page 1
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of California.
2. The Company has the power to engage in the transactions contemplated by the
Agreement and all requisite power, authority and legal right to execute and
deliver the Agreement, and to perform and observe the terms and conditions of
the Agreement.
3. Each person who, as an officer of the Company, signed (a) the Agreement, and
(b) any other document delivered prior hereto or on the date hereof in
connection with the sale and servicing of the Mortgage Loans, other than
endorsements of Mortgage Notes and Assignments of Mortgages, was, at the
respective times of such signing and delivery, duly elected or appointed,
qualified and acting as such officer, and the signatures of such persons
appearing on such documents are their genuine signatures.
4. The Agreement has been duly authorized, executed and delivered by the Company
and is a legal, valid and binding agreement, enforceable in accordance with its
terms, subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance.
5. The Company has been duly authorized to allow its officers to execute any and
all documents by original signature or facsimile signature in order to complete
the transactions contemplated by the Agreement, and by original or facsimile
signature in order to execute the endorsements of the Mortgage Notes and the
Assignments of Mortgages, and the original or facsimile signature of the officer
of the Company executing the endorsements of the Mortgage Notes and the
Assignments of Mortgages represents the legal and valid signature of said
officer of the Company.
6. Either (i) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Company of or compliance by the Company with the Agreement,
or the consummation of the transactions contemplated by the Agreement; or (ii)
any required consent, approval, authorization or order has been obtained by the
Company.
7. Neither the consummation of the transactions contemplated by, nor the
fulfillment of the terms of the Agreement, will conflict with or result in a
breach of or constitute a default under the charter or by-laws of the Company,
the terms of any indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which it is subject, or violate any
statute or order, rule, regulations, writ, injunction or decree of any court,
governmental authority or regulatory body to which the Company is subject or by
which it is bound.
8. Except as set forth on Exhibit A hereto, there is no action, suit, proceeding
or investigation pending or, to the best of my knowledge, threatened against the
Company which, in my opinion, either in any one instance or in the aggregate,
would likely result in any material adverse change in the business, operations,
financial condition, properties or assets of the Company or in any material
EXHIBIT E - Page 2
impairment of the right or ability of the Company to carry on its business
substantially as now conducted or in any material liability on the part of the
Company or which would draw into question the validity of the Agreement, or of
any action taken or to be taken in connection with the transactions contemplated
thereby, or which would be likely to impair materially the ability of the
Company to perform under the terms of the Agreement.
9. The sale of each Mortgage Note and Mortgage as and in the manner contemplated
by the Agreement is sufficient fully to transfer all right, title and interest
of the Company thereto as noteholder and mortgagee, apart from the rights to
service the Mortgage Loans pursuant to the Agreement.
10. The form of endorsement that is to be used with respect to the Mortgage
Loans is legally valid and sufficient to duly endorse the Mortgage Notes to the
Purchaser.
The opinions expressed herein are limited to matters of federal and
California law and do not purport to cover any matters as to which laws of any
other jurisdiction are applicable. Except as expressly provided herein, this
opinion is being furnished to the addressees hereof solely for their benefit in
connection with the transactions contemplated in the Agreement, and it is not to
be used, circulated, quoted or otherwise referred to for any purpose without my
express written consent. I make no undertaking to supplement or update this
opinion if, after the date hereof, facts or circumstances come to my attention
or changes in the law occur which could affect such opinion.
Sincerely,
By:____________________________
[Name of Counsel]
Its: [Secondary Markets Counsel]
EXHIBIT E - Page 3
EXHIBIT F
FORM OF MEMORANDUM OF SALE
--------------------------
CLOSING DATE:
------------------------
This Memorandum of Sale (this "Memorandum"), dated as of the Closing Date
referred to above, confirms the sale by Accredited Home Lenders, Inc. (the
"Company") to Bank of America, National Association (the "Purchaser"), and the
purchase by the Purchaser from the Company, of the first and second lien
adjustable and fixed rate residential mortgage loans on a servicing released
basis described on the Mortgage Loan Schedule attached as Schedule I hereto (the
"Mortgage Loans"), pursuant to the terms of the Flow Sale and Interim Servicing
Agreement (the "Flow Sale and Interim Servicing Agreement"), dated as of
September 1, 2006, by and between the Purchaser and the Company.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company does hereby bargain, sell, convey, assign
and transfer to Purchaser without recourse, except as provided in the Flow Sale
and Interim Servicing Agreement, and on a servicing released basis, all right,
title and interest of the Company in and to each of the Mortgage Loans, together
with all documents maintained as part of the related Mortgage Files, all
Mortgaged Properties which secure any Mortgage Loan but are acquired by
foreclosure, deed in lieu of foreclosure after the Cut-off Date or otherwise,
all payments of principal and interest received on the Mortgage Loans after the
Cut-off Date, all other unscheduled collections, including Prepayment Premiums,
collected in respect of the Mortgage Loans after the Cut-off Date, and all
proceeds of the foregoing, subject, however, to the rights of the Company under
the Flow Sale and Interim Servicing Agreement.
The Company and the Purchaser acknowledge and agree that (i) the Purchase
Price percentage with respect to the Mortgage Loans is ___%, (ii) the aggregate
Stated Principal Balance of the Mortgage Loans as of __________ (the "Cut-off
Date") is $_________ and (iii) the Purchase Price with respect to the Mortgage
Loans, including accrued interest as described in the Flow Sale and Interim
Servicing Agreement, is $________, such Purchase Price to be paid by the
Purchaser to the Company pursuant to the Flow Sale and Interim Servicing
Agreement.
The Company has delivered to the Custodian prior to the date hereof the
Mortgage Loan Documents with respect to each Mortgage Loan required to be
delivered under the Flow Sale and Interim Servicing Agreement.
The Company hereby acknowledges its duties and obligations under the Flow
Sale and Interim Servicing Agreement with respect to the Mortgage Loans.
Capitalized terms that are used herein but are not defined herein shall
have the respective meanings set forth in the Flow Sale and Interim Servicing
Agreement.
EXHIBIT F - Page 1
IN WITNESS WHEREOF, the parties hereto, by the hands of their duly
authorized officers, execute this Memorandum as of the Closing Date referred to
above.
BANK OF AMERICA, NATIONAL ACCREDITED HOME LENDERS, INC.
ASSOCIATION Company
Purchaser
By: By:
-------------------------- ------------------------------
Name: Name:
------------------------ ----------------------------
Its: Its:
------------------------ ----------------------------
EXHIBIT F - Page 2
EXHIBIT G
DESCRIPTION OF MATERIAL LITIGATION
Legal Matters--In December 2002, AHL was served with a complaint and motion for
class certification in a class action lawsuit, Xxxxxxxxxx et al. v. Accredited
Home Lenders, Inc., brought in Madison County, Illinois under the Illinois
Consumer Fraud and Deceptive Business Practices Act, the consumer protection
statutes of the other states in which AHL does business and the common law of
unjust enrichment. The complaint alleges that AHL has a practice of
misrepresenting and inflating the amount of fees it pays to third parties in
connection with the residential mortgage loans that it funds. The plaintiffs
claim to represent a nationwide class consisting of others similarly situated,
that is, those who paid AHL to pay, or reimburse AHL's payments of, third-party
fees in connection with residential mortgage loans and never received a refund
for the difference between what they paid and what was actually paid to the
third party. The plaintiffs are seeking to recover damages on behalf of
themselves and the class, in addition to pre-judgment interest, post-judgment
interest, and any other relief the court may grant. On January 28, 2005, the
court issued an order conditionally certifying (1) a class of Illinois residents
with respect to the alleged violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act who, since November 19, 1997, paid money to AHL
for third-party fees in connection with residential mortgage loans and never
received a refund of the difference between the amount they paid to AHL and the
amount AHL paid to the third party and (2) a nationwide class of claimants with
respect to an unjust enrichment cause of action included in the original
complaint who, since November 19, 1997 paid money to AHL for third-party fees in
connection with residential mortgage loans and never received a refund of the
difference between the amount they paid AHL and the amount AHL paid the third
party. The court conditioned its order limiting the statutory consumer fraud act
claims to claimants in the State of Illinois on the outcome of a case pending
before the Illinois Supreme Court in which one of the issues is the propriety of
certifying a nationwide class based on the Illinois Consumer Fraud and Deceptive
Business Practices Act. That case has now been decided in a manner favorable to
AHL's position, and, in light of this ruling, AHL intends to petition the
Illinois Supreme Court for a supervisory order reversing the lower court's class
certification decision, the lower court having denied AHL's motion for
reconsideration of (a) the court's order granting class certification and (b)
the court's denial of AHL's request for leave to take an interlocutory appeal of
such order. There has not yet been a ruling on the merits of either the
plaintiffs' individual claims or the claims of the class, and the ultimate
outcome of this matter and the amount of liability, if any, that may result is
not presently determinable. AHL intends to continue to vigorously defend this
matter and does not believe it will have a material adverse effect on its
business.
In January 2004, AHL was served with a complaint, Xxxxxxxxx v. Accredited
Home Lenders, Inc., brought in Sacramento County, California. The named
plaintiff is a former commissioned loan officer of AHL, and the complaint
alleges that AHL violated California and federal law by misclassifying the
plaintiff and other non-exempt employees as exempt employees, failing to pay the
plaintiff on an hourly basis and for overtime worked, and failing to properly
and accurately record and maintain payroll information. The plaintiff seeks to
recover, on behalf of himself and all of our other similarly situated current
and former employees, lost wages and benefits, general damages, multiple
EXHIBIT G - Page 1
statutory penalties and interest, attorneys' fees and costs of suit, and also
seeks to enjoin further violations of wage and overtime laws and retaliation
against employees who complain about such violations. AHL has been served with
eleven substantially similar complaints on behalf of certain other former and
current employees, which have been consolidated with the Xxxxxxxxx action. AHL
has appealed the court's denial of its motion to compel arbitration of the
consolidated cases, and a resolution of that appeal is not expected before mid
2006. In the meantime, discussions are ongoing between the parties regarding
potential settlement or mediation of the claims, and AHL has pursued and
effected settlements directly with many current and former employees covered by
the allegations of the complaints. A motion to certify a class has not yet been
filed, and there has been no ruling on the merits of either the plaintiffs'
individual claims or the claims of the putative class. AHL does not believe
these matters will have a material adverse effect on its business, but, at the
present time, the ultimate outcome of the litigation and the total amount of
liability is not determinable.
In June 2005, AHL was served with a complaint, Xxxxxxxx et al. v.
Accredited Home Lenders, Inc., brought in the United States District Court for
the Northern District of Georgia. The two named plaintiffs are former
commissioned loan officers of AHL, and the complaint alleges that AHL violated
federal law by requiring the plaintiffs to work overtime without compensation.
The plaintiffs seek to recover, on behalf of themselves and other similarly
situated employees, the allegedly unpaid overtime, liquidated damages,
attorneys' fees and costs of suit. The plaintiffs' motion to certify a
collective class was denied on July 25, 2006, leaving the two named plaintiffs
as the only plaintiffs in the lawsuit.. On August 24, 2006, plaintiffs filed a
Notice of Appeal with the Eleventh Circuit requesting that it reverse the lower
court's order denying plaintiffs' motion to certify a collective class. There
has been no notice from the Eleventh Circuit as to whether it will consider the
appeal, and no briefing schedule has yet been set. The ultimate outcome of this
matter and the amount of liability, if any, which may result is not presently
determinable. AHL intends to continue to vigorously defend this matter and does
not believe it will have a material adverse effect on its business.
In September 2005, AHL and AHLHC were served with a class action complaint,
Xxxxxxxx v. Accredited Home Lenders Holding Company, et al., brought in the
United States District Court, Central District of California. The complaint
alleges violations of the Fair Credit Reporting Act in connection with
prescreened offers of credit made by AHL. The plaintiff seeks to recover, on
behalf of herself and similarly situated individuals, damages, pre-judgment
interest, declaratory and injunctive relief, attorneys' fees, and any other
relief the court may grant. On January 4, 2006, plaintiff re-filed the action in
response to the court's December 9, 2005, decision granting AHL's and AHLHC's
motion to (1) dismiss with prejudice plaintiff's claim that AHL's offer of
credit failed to include the clear and conspicuous disclosures required by FCRA,
(2) strike plaintiff's request for declaratory and injunctive relief, and (3)
sever plaintiff's claims as to AHL and AHLHC from those made against other
defendants unaffiliated with AHL or AHLHC. Plaintiff's remaining claim is that
AHL's offer of credit did not meet FCRA's "firm offer" requirement. A motion to
certify a class has not yet been filed, and there has been no ruling on the
merits of either the plaintiff's individual claims or the claims of the putative
class. AHL and AHLHC intend to vigorously defend this matter. If, however, a
class were to be certified and were to prevail on the merits, the potential
liability could have a material adverse effect on Accredited. The ultimate
outcome of this matter and the amount of liability, if any, which may result is
not presently determinable.
EXHIBIT G - Page 2
In March 2006, AHL was served with a class action complaint, Cabrejas v.
Accredited Home Lenders, Inc., brought in the Circuit Court for Prince George's
County, Maryland. The complaint alleges that AHL's origination of second lien
loans in Maryland violated the Maryland Secondary Mortgage Loan Law and Consumer
Protection Act in that fees charged on such loans exceeded 10% of the respective
loan amounts. The plaintiffs seek to recover, on behalf of themselves and
similarly situated individuals, damages, disgorgement of fees, pre-judgment
interest, declaratory and injunctive relief, attorneys' fees, and any other
relief the court may grant. On April 13, 2006, AHL removed the action to the
United States District Court, District of Maryland. On May 15, 2006, AHL filed a
motion to dismiss plaintiffs' second cause of action alleging a violation of the
Maryland Consumer Protection Act on the basis that full disclosure of the fees
cannot be an unfair or deceptive trade practice. A hearing date for the motion
to dismiss has not been set. A motion to certify a class has not yet been filed,
and there has been no ruling on the merits of either the plaintiff's individual
claims or the claims of the putative class, and the ultimate outcome of this
matter and the amount of liability, if any, which may result is not presently
determinable. AHL intends to vigorously defend this matter and does not believe
it will have a material adverse effect on its business.
Accredited has accrued for loss contingencies with respect to the foregoing
matters to the extent it is probable that a liability has been occurred at the
date of the consolidated financial statements and the amount of the loss can be
reasonably estimated. Management does not deem the amount of such accrual to be
material.
In addition, because the nature of our business involves the collection of
numerous accounts, the validity of liens and compliance with various state and
federal lending laws, we are subject to various legal proceedings in the
ordinary course of business related to foreclosures, bankruptcies, condemnation
and quiet title actions, and alleged statutory and regulatory violations. We are
also subject to legal proceedings in the ordinary course of business related to
employment matters. We do not believe that the resolution of these lawsuits will
have a material adverse effect on our financial position or results of
operations.
EXHIBIT G - Page 3