1
EXHIBIT 10(c)
SERVICING AGREEMENT
BETWEEN
D&N CAPITAL CORPORATION
PURCHASER
D&N BANK
SERVICER
DATED AS OF [__________], 1997
CONVENTIONAL RESIDENTIAL MORTGAGE LOANS
2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.......................................................................................1
Section 1. Definitions.................................................................1
ARTICLE II
SERVICING.........................................................................................5
Section 2.01 Bank to Act as Servicer....................................................5
Section 2.02 Liquidation of Mortgage Loans..............................................7
Section 2.03 Collection of Mortgage Loan Payments.......................................8
Section 2.04 Establishment of and Deposits to Custodial Account.........................8
Section 2.05 Permitted Withdrawals From Custodial Account...............................9
Section 2.06 Establishment of and Deposits to Escrow Account...........................10
Section 2.07 Permitted Withdrawals From Escrow Account.................................11
Section 2.08 Payment of Taxes, Insurance and Other Charges, Tax Contracts..............12
Section 2.09 Protection of Accounts....................................................12
Section 2.10 Maintenance of Hazard Insurance...........................................12
Section 2.11 Maintenance of Mortgage Impairment Insurance..............................13
Section 2.12 Maintenance of Fidelity Bond and Errors and Omissions Insurance...........14
Section 2.13 Inspections...............................................................14
Section 2.14 Restoration of Mortgaged Property.........................................15
Section 2.15 Maintenance of PMI Policy, Claims.........................................15
Section 2.16 Deteriorating Mortgage Loans..............................................16
Section 2.17 Title, Management and Disposition of REO Property.........................16
Section 2.18 Permitted Withdrawals with respect to REO Property........................17
Section 2.19 Real Estate Owned Reports.................................................18
Section 2.20 Liquidation Reports.......................................................18
Section 2.21 Reports Of Foreclosures and Abandonments..................................18
Section 2.22 Notification of Adjustments...............................................18
Section 2.23 Notification of Maturity Date.............................................18
ARTICLE III
PAYMENTS TO PURCHASER............................................................................19
Section 3.01 Remittances...............................................................19
Section 3.02 Statements to Purchaser...................................................19
Section 3.03 Advances by Servicer......................................................20
i
3
ARTICLE IV
GENERAL SERVICING PROCEDURES.....................................................................21
Section 4.01 Transfers of Mortgaged Property...........................................21
Section 4.02 Satisfaction of Mortgages and Release of Mortgage Files...................21
Section 4.03 Servicing Compensation....................................................22
Section 4.04 Annual Statement as to Compliance.........................................22
Section 4.05 Annual Independent Public Accountants' Servicing Report...................22
Section 4.06 Right to Examine Seller Records...........................................23
ARTICLE V
SERVICER TO COOPERATE............................................................................23
Section 5.01 Provision of Information..................................................23
Section 5.02 Financial Statements; Servicing Facilities................................23
ARTICLE VI
TERMINATION......................................................................................24
Section 6.01 Agency Suspensions........................................................24
Section 6.02 Damages...................................................................24
Section 6.03 Termination...............................................................24
Section 6.04 Termination Without Cause.................................................24
ARTICLE VII
BOOKS AND RECORDS................................................................................24
Section 7.01 Possession of Servicing Files.............................................24
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT...................................................................26
Section 8.01 Indemnification...........................................................26
Section 8.02 Limitation on Liability of Seller and Others..............................26
Section 8.03 Limitation on Registration and Assignment by Seller.......................26
Section 8.04 Assignment by Purchaser...................................................27
Section 8.05 Merger or Consolidation of the Seller.....................................27
Section 8.06 Successor to the Seller...................................................28
ii
4
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER...........................................29
Section 9.01 Due Organization and Authority............................................29
Section 9.02 No Conflicts..............................................................29
Section 9.03 Ability to Perform........................................................29
Section 9.04 No Litigation Pending.....................................................29
Section 9.05 No Consent Required.......................................................30
Section 9.06 Assistance................................................................30
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER.........................................................30
Section 10.01 Due Organization and Authority...........................................30
Section 10.02 Ordinary Course of Business..............................................30
Section 10.03 No Conflicts.............................................................30
Section 10.04 Ability to Service.......................................................31
Section 10.05 Ability to Perform.......................................................31
Section 10.06 No Litigation Pending....................................................31
Section 10.07 No Consent Required......................................................31
Section 10.08 No Untrue Information....................................................31
Section 10.09 Reasonable Servicing Fee.................................................32
Section 10.10 Financial Statements.....................................................32
Section 10.11 Conflict of Interest.....................................................32
ARTICLE XI
DEFAULT..........................................................................................32
Section 11.01 Events of Default........................................................32
Section 11.02 Waiver of Defaults.......................................................34
ARTICLE XII
MISCELLANEOUS PROVISIONS.........................................................................34
Section 12.01 Notices..................................................................34
Section 12.02 Waivers..................................................................34
Section 12.03 Entire Agreement; Amendment..............................................35
Section 12.04 Execution; Binding Effect................................................35
Section 12.05 Headings.................................................................35
Section 12.06 Applicable Law...........................................................35
Section 12.07 Relationship of Parties..................................................35
Section 12.08 Severability of Provisions...............................................35
iii
5
Section 12.09 Recordation of Assignments of Mortgage...................................35
Section 12.10 Exhibits.................................................................36
EXHIBITS
EXHIBIT 1 FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT 2 FORM OF CUSTODIAL ACCOUNT CERTIFICATION
EXHIBIT 3 FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT 4 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT 5 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT 6 FORM OF CONFIDENTIALITY AGREEMENT
iv
6
SERVICING AGREEMENT
This Servicing Agreement (the "Servicing Agreement" or the "Agreement")
is entered into as of [__________,] 1997, by and between D&N BANK (the "Seller"
or "Servicer"), a federally chartered savings bank, and D&N CAPITAL CORPORATION,
a Delaware corporation (the "Purchaser").
WHEREAS, the Purchaser and Seller entered into a Mortgage Loan Purchase
and Warranties Agreement dated as of [________,] 1997 (the "Purchase Agreement")
pursuant to which the Purchaser agreed to purchase from the Seller certain
conventional, residential, adjustable and fixed rate first mortgage loans (the
"Mortgage Loans") to be delivered as whole loans, with the Servicer retaining
servicing rights in connection with the purchase of such Mortgage Loans; and
WHEREAS, the Purchaser desires to have the Servicer service the
Mortgage Loans, the Servicer desires to service and administer the Mortgage
Loans on behalf of the Purchaser, and the parties desire to provide the terms
and conditions of such servicing by the Servicer.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and for other good and valuable consideration, the receipt and
the sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Purchase Agreement. The
following terms are defined as follows:
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.
"Ancillary Income" means all late charges, escrow account benefits,
reinstatement fees, and similar types of fees arising from or in connection
with any Mortgage Loan to the extent not otherwise payable to the Mortgagor
under applicable law or pursuant to the terms of the related Mortgage Note.
"Bank" means D&N Bank.
"Best's" means Best's Key Rating Guide.
"BIF" means The Bank Insurance Fund, or any successor thereto.
1
7
"Closing Date" means [_______], 1997, or such other date as is mutually
agreed upon by the parties hereto.
"Condemnation Proceeds" means all awards or settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents
"Custodial Account" means the separate account or accounts created and
maintained pursuant to Section 2.04.
"Cut-off Date" means [__________], 1997.
"Due Period" means with respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the Remittance
Date and ending on the first day of the month of the Remittance Date.
"Errors and Omissions Insurance Policy" means an errors and omissions
insurance policy to be maintained by the Servicer pursuant to Section 2.12.
"Escrow Account" means the separate account or accounts created and
maintained pursuant to Section 2.06.
"Escrow Payment" means, with respect to any Mortgage Loan, the amounts
constituting taxes, assessments, water rates, sewer rents, municipal charges,
mortgage insurance premiums, 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 document.
"Event of Default" means any one of the conditions or circumstances
enumerated in Section 11.01.
"FDIC" means The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC Guide" means the FHLMC Sellers' and Servicers' Guide and all
amendments or additions thereto.
"Fidelity Bond" means a fidelity bond to be maintained by the Servicer
pursuant to Section 2.12.
"FNMA Guides" means the FNMA Sellers' Guide and the FNMA Servicers'
Guide and all amendments or additions thereto.
2
8
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, or the
sale of the related Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage Loan.
"Monthly Remittance Advice" means the monthly remittance advice, in the
form of Exhibit A annexed hereto, to be provided to the Purchaser pursuant to
Section 3.02.
"Mortgage Impairment Insurance Policy" means a mortgage impairment or
blanket hazard insurance policy as described in Section 2.11.
"Nonrecoverable Advance" means any advance of principal and interest
previously made or proposed to be made in respect of a Mortgage Loan which, in
the good faith judgment of the Servicer, will not or, in the case of a proposed
advance of principal and interest, would not, be ultimately recoverable from
related Insurance Proceeds, Liquidation Proceeds or otherwise. The determination
by the Servicer that it has made a Nonrecoverable Advance or that any proposed
advance of principal and interest, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officers' Certificate delivered to the
Purchaser.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Servicer, and delivered to the Purchaser as
required by this Agreement.
"OTS" means Office of Thrift Supervision, or any successor thereto.
"PMI Policy" means a policy of primary mortgage guaranty insurance
issued by a Qualified Insurer, as required by this Agreement with respect to
certain Mortgage Loans.
"Prime Rate" means the prime rate announced to be in effect from time
to time, as published as the average rate in The Wall Street Journal (Chicago
edition).
"Principal Prepayment" means any payment or other recovery of principal
on a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"Purchase Agreement" means the Mortgage Loan Purchase and Warranties
Agreement between the Purchaser and the Seller related to the purchase of the
Mortgage Loans dated as of [__________,] 1997.
3
9
"Qualified Depository" means a depository the accounts of which are
insured by the FDIC through the BIF or the SAIF.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, approved as an insurer by FNMA and
FHLMC with respect to primary mortgage insurance and, in addition, in the two
highest rating categories by Best's with respect to hazard and flood insurance.
"Remittance Date" means the 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately following) of any month,
beginning with the first Remittance Date on [_______,] 1997.
"REO Property" means a Mortgaged Property acquired by the Servicer on
behalf of the Purchaser through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.17.
"SAIF" means The Savings Association Insurance Fund, or any successor
thereto.
"Servicer Employees" has the meaning set forth in Section 2.12.
"Servicing Advances" means all customary, reasonable and necessary "out
of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures, (c) the management and liquidation
of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction
of the Mortgage and (d) compliance with the obligations under Section 2.08
(except with respect to any expenses incurred in connection with procuring or
transferring Tax Service Contracts, as provided therein).
"Servicing Agreement" means this agreement between the Purchaser and
the Servicer for the servicing and administration of the Mortgage Loans.
"Servicing Fee" means, with respect to each Mortgage Loan, the amount
of the annual fee the Purchaser shall pay to the Servicer, which shall, for a
period of one (1) full month, be equal to one-twelfth of the product of the
Servicing Fee Rate and (2) the Stated Principal Balance of such Mortgage Loan.
Such fee shall be payable monthly, computed on the basis of the same
principal amount and period in respect of which any related interest payment on
a Mortgage Loan is computed and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this Agreement.
The obligation of the Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds, to the extent permitted by
Section 4.03) of such Monthly Payment collected by the Servicer, or as otherwise
provided under Section 4.03.
4
10
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the
rate specified in the Mortgage Loan Schedule with respect to such Mortgage Loan.
"Servicing File" means, with respect to each Mortgage Loan, the file
retained by the Servicer consisting of originals of all documents in the
Mortgage File which are not delivered to the Purchaser or its designee and
copies of the Mortgage Loan Documents listed on Exhibit A to the Purchase
Agreement.
"Termination Fee" means the amount paid by the Purchaser to the
Servicer in the event of the Servicer's termination, without cause, as servicer.
Such fee shall equal the percentage amount set forth in Section 6.04 hereof of
the then current aggregate unpaid principal balance of the related Mortgage
Loans.
ARTICLE II
SERVICING
SECTION 2.01 The Bank to Act as Servicer. From and after the Closing
Date, the Servicer, as an independent contractor, shall service and administer
the Mortgage Loans and shall have full power and authority, acting alone, to do
any and all things in connection with such servicing and administration which
the Servicer may deem necessary or desirable, consistent with the terms of this
Agreement and with Accepted Servicing Practices. Except as set forth in this
Agreement, the Servicer shall service the Mortgage Loans in strict compliance
with the servicing provisions related to the FNMA MBS Program (Special Servicing
Option) of the FNMA Guides. In the event of any conflict, inconsistency or
discrepancy between any of the servicing provisions of this Agreement and any of
the servicing provisions of the FNMA Guides, the provisions of this Agreement
shall control and be binding upon the Purchaser and the Servicer.
Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the
Purchaser, provided, however, that unless the Servicer has obtained the prior
written consent of the Purchaser, the Servicer shall not permit any modification
with respect to any Mortgage Loan that would change the Mortgage Interest Rate,
defer or forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan. In the event of any such
modification which permits the deferral of interest or principal payments on any
Mortgage Loan, the Servicer shall, on the Business Day immediately preceding the
Remittance Date in any month in which any such principal or interest payment has
been deferred, deposit in the Custodial Account from its own funds, in
accordance with Section 2.04, the difference between (a) such month's principal
and one (1) month's interest at the Mortgage Interest Rate on the unpaid
principal balance of such Mortgage Loan and (b) the amount paid by the
Mortgagor.
5
11
The Servicer shall be entitled to reimbursement for such advances to
the same extent as for all other advances made pursuant to Section 2.05. Without
limiting the generality of the foregoing, the Servicer shall continue, and is
hereby authorized and empowered, to execute and deliver on behalf of itself and
the Purchaser, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Properties. If reasonably
required by the Servicer, the Purchaser shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties under this
Agreement.
In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures (including collection procedures) and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account, giving due consideration to Accepted
Servicing Practices where such practices do not conflict with the requirements
of this Agreement, the FNMA Guides and the Purchaser's reliance on the Servicer.
The Servicer shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Servicer
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Servicer shall be under no obligation to deal
with any Person with respect to this Agreement or the Mortgage Loans unless the
Servicer has been notified of such transfers as provided in this Section 2.01.
The Purchaser may sell and transfer, in whole or in part, the Mortgage Loans,
provided that no such sale and transfer shall be binding upon the Servicer
unless such transferee shall agree in writing in the form of the Assignment and
Assumption Agreement attached to the Purchase Agreement as Exhibit G, to be
bound by the terms of this Agreement and the Purchase Agreement, and an executed
copy of the same shall have been delivered to the Servicer. Upon receipt
thereof, the Servicer shall xxxx its books and records to reflect the ownership
of the Mortgage Loans by such assignee, and the previous Purchaser shall be
released from its obligations hereunder. The Servicer shall be required to remit
all amounts required to be remitted to the Purchaser hereunder to said
transferee commencing with the first Remittance Date falling after receipt of
said copy of the related Assignment and Assumption Agreement provided that the
Servicer receives said copy no later than three (3) Business Days immediately
prior to the first day of the month of the related Remittance Date. This
Agreement shall be binding upon and inure to the benefit of the Purchaser and
the Servicer and their permitted successors, assignees and designees.
The Servicing File retained by the Servicer pursuant to this Agreement
shall be appropriately marked and identified in the Servicer's computer system
to clearly reflect the sale of the related Mortgage Loan to the Purchaser. The
Servicer shall release from its custody the contents of any Servicing File
retained by it only in accordance with this Agreement, except when such release
is required in connection with a repurchase of any such Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement.
The Servicer must have an internal quality control program that
verifies, on a regular basis, the existence and accuracy of the legal documents,
credit documents, property appraisals,
6
12
and underwriting decisions. The program must be capable of evaluating and
monitoring the overall quality of its loan production and servicing activities.
The program is to ensure that the Mortgage Loans are serviced in accordance with
prudent mortgage banking practices and accounting principles; guard against
dishonest, fraudulent, or negligent acts; and guard against errors and omissions
by officers, employees, or other authorized persons.
SECTION 2.02 Liquidation of Mortgage Loans. In the event that any
payment due under any Mortgage Loan and not postponed pursuant to Section 2.01
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 Servicer shall
take such action as (1) the Servicer would take under similar circumstances with
respect to a similar mortgage loan held for its own account for investment, (2)
shall be consistent with Accepted Servicing Practices, (3) the Servicer shall
determine prudently to be in the best interest of Purchaser, and (4) is
consistent with any related PMI Policy. In the event that any payment due under
any Mortgage Loan is not postponed pursuant to Section 2.01 and remains
delinquent for a period of ninety (90) days or any other default continues for a
period of ninety (90) days beyond the expiration of any grace or cure period (or
such other period as is required by law in the jurisdiction where the related
Mortgaged Property is located), the Servicer shall commence foreclosure
proceedings in accordance with the FNMA Guides, provided that, prior to
commencing foreclosure proceedings, the Servicer shall notify the Purchaser in
writing of the Servicer's intention to do so, and the Servicer shall not
commence foreclosure proceedings if the Purchaser objects to such action within
ten (10) Business Days of receiving such notice or, if the provisions of the
next two paragraphs apply, in any event without the prior written consent of
Purchaser. In such connection, the Servicer shall from its own funds make all
necessary and proper Servicing Advances, provided, however, that the Servicer
shall not be required to expend its own funds in connection with any foreclosure
or towards the restoration or preservation of any Mortgaged Property, unless it
shall determine (a) that such preservation, restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan to Purchaser after
reimbursement to itself for such expenses and (b) that such expenses will be
recoverable by it either through Liquidation Proceeds (in respect of which it
shall have priority for purposes of withdrawals from the Custodial Account
pursuant to Section 2.05) or through Insurance Proceeds (in respect of which it
shall have similar priority).
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure, in the event the Servicer has reasonable cause to
believe that a Mortgaged Property is contaminated by hazardous or toxic
substances or wastes, or if the Purchaser otherwise requests an environmental
inspection or review of such Mortgaged Property to be conducted by a qualified
inspector, the Servicer shall cause the Mortgaged Property to be so inspected at
the expense of the Purchaser. Upon completion of the inspection, the Servicer
shall promptly provide the Purchaser with a written report of the environmental
inspection.
After reviewing the environmental inspection report, the Purchaser
shall determine how the Servicer shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental inspection report indicates that
the Mortgaged Property is contaminated by hazardous or toxic substances or
wastes and (b) the Purchaser directs the Servicer to proceed with
7
13
foreclosure or acceptance of a deed in lieu of foreclosure, the Servicer shall
be reimbursed for all reasonable costs associated with such foreclosure or
acceptance of a deed in lieu of foreclosure and any related environmental clean
up costs, as applicable, from the related Liquidation Proceeds, or if the
Liquidation Proceeds are insufficient to fully reimburse the Servicer, the
Servicer shall be entitled to be reimbursed from amounts in the Custodial
Account pursuant to Section 2.05 hereof and to the extent amounts in the
Custodial Account are insufficient to fully reimburse the Servicer, the Servicer
shall be entitled to be reimbursed by the Purchaser for such deficiencies (upon
presentation of evidence of such deficiency). In the event the Purchaser directs
the Servicer not to proceed with foreclosure or acceptance of a deed in lieu of
foreclosure, the Servicer shall be reimbursed for all Servicing Advances made
with respect to the related Mortgaged Property from the Custodial Account
pursuant to Section 2.05 hereof.
SECTION 2.03 Collection of Mortgage Loan Payments. Continuously from
the Closing Date, the Servicer shall proceed diligently to collect all payments
due under each of the Mortgage Loans when the same shall become due and payable
and shall take special care in ascertaining and estimating Escrow Payments and
all other charges that will become due and payable with respect to the Mortgage
Loans and each related 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 2.04 Establishment of and Deposits to Custodial Account. The
Servicer shall segregate and hold all funds collected and received pursuant to
the Mortgage Loans separate and apart from any of its own funds and general
assets and shall establish and maintain one or more Custodial Accounts, in the
form of time deposit or demand accounts, titled "D&N Bank in trust for Purchaser
of Conventional Residential Mortgage Loans, and various Mortgagors". The
Custodial Account shall be established with a Qualified Depository acceptable to
the Purchaser. Any funds deposited in the Custodial Account shall at all times
be fully insured to the full extent permitted under applicable law. Funds
deposited in the Custodial Account may be drawn on by the Servicer in accordance
with Section 2.05. The creation of any Custodial Account shall be evidenced by a
certification in the form of Exhibit 2 hereto, in the case of an account
established with the Servicer, or by a letter agreement in the form of Exhibit 3
hereto, in the case of an account held by a depository other than the Servicer.
A copy of such certification or letter agreement shall be furnished to the
Purchaser and, upon request, to any subsequent Purchaser.
The Servicer shall deposit in the Custodial Account within one Business
Day of receipt, and retain therein, the following collections received by the
Servicer and payments made by the Servicer after the Cut-off Date, other than
payments of principal and interest due on or before the Cut-off Date, or
received by the Servicer prior to the Cut-off Date but allocable to a period
subsequent thereto:
(I) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage;
8
14
(iii) all Liquidation Proceeds and any amount received with respect
to REO Property;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 2.10 (other than proceeds to be
held in the Escrow Account and applied to the restoration or
repair of the Mortgaged Property or released to the Mortgagor
in accordance with Section 2.14), and Section 2.11;
(v) all Condemnation Proceeds which are not applied to the
restoration or repair of the Mortgaged Property or released to
the Mortgagor in accordance with Section 2.14;
(vi) any amount required to be deposited in the Custodial Account
pursuant to Section 2.01, 2.09, 2.15, 2.17, 3.01, 3.03 or
4.02;
(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement; and
(viii) any amounts required to be deposited by the Servicer pursuant
to Section 2.11 in connection with the deductible clause in
any blanket hazard insurance policy.
The foregoing requirements for deposit into the Custodial Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, Ancillary Income need not be deposited by the
Servicer into the Custodial Account. Any interest paid on funds deposited in the
Custodial Account by the depository institution shall accrue to the benefit of
the Servicer and the Servicer shall be entitled to retain and withdraw such
interest from the Custodial Account pursuant to Section 2.05.
SECTION 2.05 Permitted Withdrawals From Custodial Account. Subject to
Section 2.17 hereof, the Servicer shall, from time to time, withdraw funds from
the Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the
manner provided for in Section 3.01;
(ii) to pay to itself the Servicing Fee;
(iii) to reimburse itself for advances of the Servicer's funds made
pursuant to Section 3.03, the Servicer's right to reimburse
itself pursuant to this subclause (iii) being limited to
amounts received on the related Mortgage Loan which represent
late payments of principal and/or interest in respect of which
any such advance was made, it being understood that, in the
case of any such reimbursement, the Servicer's right thereto
shall be prior to the rights of Purchaser, except that, where
the Seller or the Servicer is required to repurchase a
Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement or Section 4.02 of this Agreement, respectively, the
Servicer's right to such reimbursement shall be subsequent to
the payment to the Purchaser of the Repurchase Price pursuant
to such sections and all
9
15
other amounts required to be paid to the Purchaser with
respect to such Mortgage Loan;
(iv) to reimburse itself for unreimbursed Servicing Advances
(except to the extent reimbursed pursuant to Section 2.07),
any accrued but unpaid Servicing Fees and for unreimbursed
advances of Servicer funds made pursuant to Sections 2.15,
2.17 or 3.03, the Servicer's right to reimburse itself
pursuant to this subclause (iv) with respect to any Mortgage
Loan being limited to related Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds and such other
amounts as may be collected by the Servicer from the Mortgagor
or otherwise relating to the Mortgage Loan, it being
understood that, in the case of any such reimbursement, the
Servicer's right thereto shall be prior to the rights of the
Purchaser except that, where the Seller or the Servicer is
required to repurchase a Mortgage Loan pursuant to Section
8.03 of the Purchase Agreement or Section 4.02 of this
Agreement, respectively, the Servicer's right to such
reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections
and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
(v) to pay itself any interest earned on funds deposited in the
Custodial Account (all such interest to be withdrawn monthly
not later than each Remittance Date); and
(vi) to clear and terminate the Custodial Account upon the
termination of this Agreement.
In the event that the Custodial Account is interest bearing, on each
Remittance Date, the Servicer shall withdraw all funds from the Custodial
Account except for those amounts which, pursuant to Section 3.01, the Servicer
is not obligated to remit on such Remittance Date. The Servicer may use such
withdrawn funds only for the purposes described in this Section 2.05.
SECTION 2.06 Establishment of and Deposits to Escrow Account. The
Servicer shall segregate and hold all funds collected and received pursuant to a
Mortgage Loan constituting Escrow Payments separate and apart from any of its
own funds and general assets and shall establish and maintain one or more Escrow
Accounts, in the form of time deposit or demand accounts. The Escrow Account or
Accounts shall be established with a Qualified Depositary, in a manner which
shall provide maximum available insurance thereunder. Funds deposited in the
Escrow Accounts may be drawn on by the Servicer in accordance with Section 2.07.
The creation of any Escrow Account shall be evidenced by a certification in the
form of Exhibit 2 hereto, in the case of an account established with the
Servicer, or by a letter agreement in the form of Exhibit 5 hereto, in the case
of an account held by a depository other than the Servicer. A copy of such
certification shall be furnished to the Purchaser and, upon request, to any
subsequent Purchaser.
10
16
The Servicer shall deposit in the Escrow Account or Accounts within one
Business Day of receipt, and retain therein:
(I) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such
items as required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property.
The Servicer shall make withdrawals from the Escrow Account only to
effect such payments as are required under this Agreement, as set forth in
Section 2.07. The Servicer shall be entitled to retain any interest paid on
funds deposited in the Escrow Account by the depository institution, other than
interest on escrowed funds required by law to be paid to the Mortgagor. To the
extent required by law, the Servicer shall pay from its own funds interest on
escrowed funds to the Mortgagor notwithstanding that the Escrow Account may be
noninterest bearing or that interest paid thereon is insufficient for such
purposes.
SECTION 2.07 Permitted Withdrawals From Escrow Account. Withdrawals
from each Escrow Account may be made by the Servicer only:
(I) to effect timely payments of 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 Servicer for any Servicing Advance made by
the Servicer pursuant to Section 2.08 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 the related Mortgagor any funds found to be in
excess of the amounts required under the terms of the related
Mortgage Loan or applicable federal or state law or judicial
or administrative ruling;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in
accordance with the terms of the related Mortgage and Mortgage
Note;
(v) for application to restoration or repair of the related
Mortgaged Property in accordance with the procedures outlined
in Section 2.14;
(vi) to pay to the Servicer, or any Mortgagor to the extent
required by law, any interest paid on the funds deposited in
the Escrow Account; and
(vii) to clear and terminate the Escrow Account on the termination
of this Agreement.
11
17
SECTION 2.08 Payment of Taxes, Insurance and Other Charges, Tax
Contracts. With respect to each Mortgage Loan, the Servicer shall maintain
accurate records reflecting the status of taxes, assessments, water rates, sewer
rents, and other charges, as applicable, which are or may become a lien upon the
Mortgaged Property and the status of PMI Policy premiums and fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage. To the extent that a
Mortgage does not provide for Escrow Payments, the Servicer shall determine that
any such payments relating to taxes or maintaining insurance policies are made
by the Mortgagor at the time they first become due. The Servicer assumes full
responsibility for the timely payment of all such bills to the extent it has or
should have notice of such bills and shall effect timely payment of all such
charges irrespective of each Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments, and the Servicer shall make advances
from its own funds to effect such payments, such advances to be reimbursable to
the same extent as Servicing Advances.
SECTION 2.09 Protection of Accounts. The Servicer may transfer the
Custodial Account or the Escrow Account to a different Qualified Depository from
time to time. Such transfer shall be made only upon obtaining the consent of the
Purchaser, which consent shall not be withheld unreasonably. The Servicer shall
bear any expenses, losses or damages sustained by the Purchaser because the
Custodial Account and/or the Escrow Account are not demand deposit accounts.
SECTION 2.10 Maintenance of Hazard Insurance. The Servicer shall cause
to be maintained for each Mortgage Loan, hazard insurance such that all
buildings upon the Mortgaged Property are insured by a generally acceptable
insurer rated A:VI or better in the current Best's against loss by fire, hazards
of extended coverage and such other hazards as are required to be insured
pursuant to the FNMA Guides or the FHLMC Guide, in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan and (ii) the greater of (a) the outstanding
principal balance of the Mortgage Loan and (b) an amount such that the proceeds
thereof shall be sufficient to prevent the Mortgagor or the loss payee from
becoming a co-insurer.
If required by the Flood Disaster Protection Act of 1973, as amended,
each Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
in effect with a generally acceptable insurance carrier rated A:VI or better in
Best's in an amount representing coverage not less than the lesser of (i) the
outstanding principal balance of the related Mortgage Loan and (ii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. If at any time during the term of the Mortgage Loan, the
Servicer determines in accordance with applicable law and pursuant to the FNMA
Guides that a Mortgaged Property is located in a special flood hazard area and
is not covered by flood insurance or is covered in an amount less than the
amount required by the Flood Disaster Protection Act of 1973, as amended, the
Servicer shall notify the related Mortgagor that the Mortgagor must obtain such
flood insurance coverage, and if said Mortgagor fails to obtain the required
flood insurance coverage within forty five (45) days after such
12
18
notification, the Servicer shall immediately purchase the required flood
insurance on the Mortgagor's behalf.
If a Mortgage is secured by a unit in a condominium project, the
Servicer shall verify that the coverage required of the owner's association,
including hazard, flood, liability, and fidelity coverage, is being maintained
in accordance with then current FNMA requirements, and secure from the owner's
association its agreement to notify the Servicer 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.
The Servicer shall cause to be maintained on each Mortgaged Property
such other or additional insurance as may be required pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance, or pursuant to the requirements of any
primary mortgage guaranty insurer.
All policies required hereunder shall name the Servicer and its
successors and assigns as mortgagee and shall be endorsed with non-contributory
standard Michigan mortgagee clauses which shall provide for at least thirty (30)
days' prior written notice of any cancellation, reduction in amount or material
change in coverage.
The Servicer shall not interfere with the Mortgagor's freedom of choice
in selecting either his insurance carrier or agent, provided, however, that the
Servicer shall not accept any such insurance policies from insurance companies
unless such companies are rated A:VI or better in Best's and are licensed to do
business in the jurisdiction in which the Mortgaged Property is located. The
Servicer shall determine that such policies provide sufficient risk coverage and
amounts as required pursuant to the FNMA Guides or the FHLMC Guide, that they
insure the property owner, and that they properly describe the property address.
To the extent reasonably possible the Servicer shall furnish to the Mortgagor a
formal notice of expiration of any such insurance in sufficient time for the
Mortgagor to arrange for renewal coverage by the expiration date; provided,
however, that in the event that no such notice is furnished by the Servicer, the
Servicer shall ensure that replacement insurance policies are in place in the
required coverages and the Servicer shall be solely liable for any losses in the
event such coverage is not provided.
Pursuant to Section 2.04, any amounts collected by the Servicer under
any such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Servicer's normal servicing procedures as
specified in Section 2.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 2.05.
SECTION 2.11 Maintenance of Mortgage Impairment Insurance. In the event
that the Servicer shall obtain and maintain a blanket policy insuring against
losses arising from fire and hazards covered under extended coverage on all of
the Mortgage Loans, then, to the extent such policy provides coverage in an
amount equal to the amount required pursuant to Section 2.10 and otherwise
complies with all other requirements of Section 2.10, it shall conclusively be
deemed
13
19
to have satisfied its obligations as set forth in Section 2.10. Any amounts
collected by the Servicer under any such policy relating to a Mortgage Loan
shall be deposited in the Custodial Account subject to withdrawal pursuant to
Section 2.05. 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 2.10, and there shall have been a loss
which would have been covered by such policy, the Servicer shall deposit in the
Custodial Account at the time of such loss the amount not otherwise payable
under the blanket policy because of such deductible clause, such amount to be
deposited from the Servicer's funds, without reimbursement therefor. Upon
request of the Purchaser, the Servicer shall cause to be delivered to the
Purchaser a certified true copy of such policy and a statement from the insurer
thereunder that such policy shall in no event be terminated or materially
modified without thirty (30) days' prior written notice to the Purchaser.
SECTION 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance. The Servicer shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("Servicer Employees"). Any such Fidelity Bond
and Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Servicer Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Servicer against
losses in connection with the release or satisfaction of a Mortgage Loan without
having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 2.12 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. The minimum coverage
under any such Fidelity Bond and Errors and Omissions Insurance Policy shall be
at least equal to the corresponding amounts required by FNMA in the FNMA
Mortgage-Backed Securities Selling and Servicing Guide or by FHLMC in the FHLMC
Guide. Upon the request of the Purchaser, the Servicer shall cause to be
delivered to the Purchaser a certified true copy of such Fidelity Bond and
Errors and Omissions Insurance Policy and a statement from the surety and the
insurer that such Fidelity Bond and Errors and Omissions Insurance Policy shall
in no event be terminated or materially modified without thirty (30) days' prior
written notice to the Purchaser. In the event that the surety or insurer charges
the Servicer a fee for providing such evidence, the Purchaser shall reimburse
the Servicer for the reasonable expense incurred by the Servicer in furnishing
such evidence.
SECTION 2.13 Inspections. The Servicer shall inspect the Mortgaged
Property as often as deemed necessary by the Servicer to assure itself that the
value of the Mortgaged Property is being preserved. In addition, if any Mortgage
Loan is more than sixty (60) days delinquent, the Servicer immediately shall
inspect the Mortgaged Property and shall conduct subsequent inspections in
accordance with Accepted Servicing Practices or as may be required by the
primary mortgage guaranty insurer. The Servicer shall keep a written report of
each such inspection.
14
20
SECTION 2.14 Restoration of Mortgaged Property. The Servicer need not
obtain the approval of the Purchaser prior to releasing any Insurance Proceeds
or Condemnation Proceeds to the Mortgagor to be applied to the restoration or
repair of the Mortgaged Property if such release is in accordance with Accepted
Servicing Practices and the terms of this Agreement. At a minimum, the Servicer
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:
(i) the Servicer shall receive satisfactory independent
verification of completion of repairs and issuance of any
required approvals with respect thereto;
(ii) the Servicer shall take all steps necessary to preserve the
priority of the lien of the Mortgage, including, but not
limited to requiring waivers with respect to mechanics' and
materialmen's liens;
(iii) the Servicer shall verify that the Mortgage Loan is not in
default; and
(iv) pending repairs or restoration, the Servicer shall place the
Insurance Proceeds or Condemnation Proceeds in the Escrow
Account.
If the Purchaser is named as an additional mortgagee, the Servicer is
hereby empowered to endorse any loss draft issued in respect of such a claim in
the name of the Purchaser.
SECTION 2.15 Maintenance of PMI Policy, Claims. With respect to each
Mortgage Loan with an LTV in excess of 85%, the Servicer shall, without any cost
to the Purchaser, maintain or cause the Mortgagor to maintain in full force and
effect a PMI Policy insuring that portion of the Mortgage Loan in excess of 75%
of value, and shall pay or shall cause the Mortgagor to pay the premium thereon
on a timely basis, until the LTV of such Mortgage Loan is reduced to 85%. In the
event that such PMI Policy shall be terminated, the Servicer 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 Servicer 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 Servicer shall
in no event have any responsibility or liability for any failure to recover
under the PMI Policy for such reason. If the Servicer determines that recoveries
are so jeopardized, it shall notify the Purchaser and the Mortgagor, if
required, and obtain from another Qualified Insurer a replacement insurance
policy. The Servicer 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
Servicer, would have been covered thereunder. In connection with any assumption
or substitution agreement entered into or to be entered into pursuant to Section
4.01, the Servicer 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 Servicer shall obtain a replacement PMI Policy
as provided above.
15
21
In connection with its activities as servicer, the Servicer agrees to
prepare and present, on behalf of itself and the Purchaser, claims to the
insurer under any PMI Policy in a timely fashion in accordance with the terms of
such PMI Policy and, in this regard, to take such action as shall be necessary
to permit recovery under any PMI Policy with respect to a defaulted Mortgage
Loan. Pursuant to Section 2.04, any amounts collected by the Servicer under any
PMI Policy shall be deposited in the Custodial Account, subject to withdrawal
pursuant to Section 2.05.
SECTION 2.16 Deteriorating Mortgage Loans. If, in the course of
carrying out its obligations under this Agreement, the Servicer discovers that a
Mortgage Loan (or an interest therein) (i) is or has been, at any time during
the preceding twelve months, (a) classified, (b) in nonaccrual status or (c)
renegotiated due to the financial deterioration of the Mortgagor or (ii) has
been, more than once during the preceding twelve months, more than 30 days past
due in the payment of principal and interest, the Servicer shall notify the
Purchaser as soon as possible and cooperate with the Purchaser in the
disposition of any such Mortgage Loan as soon as possible.
SECTION 2.17 Title, Management and Disposition of REO Property. In the
event that title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be taken in the
name of the Purchaser, or in the event the Purchaser is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be consistent with an
Opinion of Counsel obtained by the Servicer from any attorney duly licensed to
practice law in the state where the REO Property is located. The Person or
Persons holding such title other than the Purchaser shall acknowledge in writing
that such title is being held as nominee for the Purchaser.
The Servicer shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition and
sale. The Servicer, either itself or through an agent selected by the Servicer
and reasonably acceptable to the Purchaser, shall manage, conserve, protect and
operate the REO Property in the same manner that it manages, conserves, protects
and operates other foreclosed property for its own account, and in the same
manner that similar property in the same locality as the REO Property is
managed. The Servicer shall attempt to sell the same (and may temporarily rent
the same for a period not greater than one (1) year, except as otherwise
provided below) on such terms and conditions as the Servicer deems to be in the
best interest of the Purchaser.
The Servicer shall use 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 the Servicer
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 (1) year is permitted under the foregoing
sentence and is necessary to sell any REO Property, the Servicer shall report
monthly to the Purchaser as to the progress being made in selling such REO
Property.
16
22
The Servicer shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements which are a part of such property,
liability insurance and, to the extent required and available under the Flood
Disaster Protection Act of 1973, as amended, flood insurance in the amount
required above.
The disposition of REO Property shall be carried out by the Servicer at
such price, and upon such terms and conditions, as the Servicer deems to be in
the best interests of the Purchaser. The proceeds of sale of the REO Property
shall be promptly deposited in the Custodial Account. As soon as practical
thereafter the expenses of such sale shall be paid and the Servicer shall
reimburse itself pursuant to Section 2.05(iii) or 2.05(iv) hereof, as
applicable, for any related unreimbursed Servicing Advances, unpaid Servicing
Fees and unreimbursed advances made pursuant to this Section, and on the
Remittance Date immediately following the Due Period in which such sale proceeds
are received the net cash proceeds of such sale remaining in the Custodial
Account shall be distributed to the Purchaser; provided that such distribution
shall, in any event, be made within ninety (90) days from and after the closing
of the sale of such REO Property.
In addition to the Servicer's obligations set forth in this Section
2.17, the Servicer shall deliver written notice to the Purchaser whenever title
to any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure together with a copy of the drive-by appraisal of the related
Mortgaged Property obtained by the Servicer on or prior to the date of such
acquisition. Notwithstanding anything to the contrary contained herein, the
Purchaser may, at the Purchaser's sole option, terminate the Servicer as
servicer of any such REO Property without payment of any Termination Fee with
respect thereto, provided that (i) the Purchaser gives the Servicer notice of
such termination within ten (10) Business Days of receipt of said written notice
from the Servicer which termination shall be effective no more than fifteen (15)
Business Days from and after the date of said notice from the Purchaser and (ii)
the Servicer shall on the date said termination takes effect be reimbursed by
Purchaser for any unreimbursed advances of the Servicer's funds made pursuant to
Section 3.02 and any unreimbursed Servicing Advances in each case relating to
the Mortgage Loan underlying such REO Property. In the event of any such
termination, the provisions of Section 8.06 hereof shall apply to said
termination and the transfer of servicing responsibilities with respect to such
REO Property to the Purchaser or its designee.
With respect to each REO Property, the Servicer shall deposit all funds
collected and received in connection with the operation of the REO Property in
the Custodial Account. The Servicer shall cause to be deposited on a daily basis
upon the receipt thereof in the Custodial Account all revenues received with
respect to the conservation and disposition of the related REO Property.
SECTION 2.18 Permitted Withdrawals with respect to REO Property. For so
long as the Servicer is acting as servicer of any Mortgage Loan relating to any
REO Property, the Servicer shall withdraw funds on deposit in the Custodial
Account with respect to each related REO Property necessary for the proper
operation, management and maintenance of the REO Property, including the cost of
maintaining any hazard insurance pursuant to Section 2.10 and the fees of
17
23
any managing agent acting on behalf of the Servicer. The Servicer shall make
monthly distributions on each Remittance Date to the Purchaser of the net cash
flow from the REO Property (which shall equal the revenues from such REO
Property net of the expenses described in Section 2.17 and of any reserves
reasonably required from time to time to be maintained to satisfy anticipated
liabilities for such expenses).
SECTION 2.19 Real Estate Owned Reports. For so long as the Servicer is
acting as servicer of any Mortgage Loan relating to any REO Property, the
Servicer shall furnish to the Purchaser on or before the 15th day of each month
a statement with respect to any REO Property covering the operation of such REO
Property for the previous month and the Servicer'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 2.20 Liquidation Reports. For so long as the Servicer is acting
as servicer of any Mortgage Loan relating to any REO Property, upon the
foreclosure sale of any Mortgaged Property or the acquisition thereof by the
Purchaser pursuant to a deed in lieu of foreclosure, the Servicer shall submit
to the Purchaser a liquidation report with respect to such Mortgaged Property.
SECTION 2.21 Reports Of Foreclosures and Abandonments. For so long as
the Servicer is acting as servicer of any Mortgage Loan relating to any REO
Property, following the foreclosure sale or abandonment of any Mortgaged
Property, the Servicer shall report such foreclosure or abandonment as required
pursuant to Section 6050J of the Internal Revenue Code of 1986, as amended
("Code").
SECTION 2.22 Notification of Adjustments. With respect to each
Adjustable Rate Mortgage Loan, the Servicer shall adjust the Mortgage Interest
Rate on the related Interest Rate Adjustment Date and shall adjust the Monthly
Payment accordingly in compliance with the requirements of applicable law and
the related Mortgage and Mortgage Note. If, pursuant to the terms of the
Mortgage Note, another index is selected for determining the Mortgage Interest
Rate, the same index will be used with respect to each Mortgage Note which
requires a new index to be selected, provided that such selection does not
conflict with the terms of the related Mortgage Note. The Servicer shall execute
and deliver any and all necessary notices required under applicable law and the
terms of the related Mortgage Note and Mortgage regarding the Mortgage Interest
Rate and the Monthly Payment adjustments. The Servicer shall promptly upon
written request therefor, deliver to the Purchaser such notifications and any
additional applicable data regarding such adjustments and the methods used to
calculate and implement such adjustments. Upon the discovery by the Servicer or
the Purchaser that the Servicer has failed to adjust a Mortgage Interest Rate or
a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage, the Servicer shall immediately deposit in the Custodial Account from
its own funds the amount of any interest loss caused the Purchaser thereby.
SECTION 2.23 Notification of Maturity Date. With respect to each Fixed
Rate Mortgage Loan, the Purchaser shall execute and deliver to the Mortgagor any
and all necessary notices
18
24
required under applicable law and the terms of the related Mortgage Note and
Mortgage regarding the maturity date if required under applicable law.
ARTICLE III
PAYMENTS TO PURCHASER
SECTION 3.01 Remittances. On each Remittance Date the Servicer shall
remit by wire transfer of immediately available funds to the Purchaser (a) all
amounts deposited in the Custodial Account as of the close of business on the
Determination Date, except Principal Prepayments received on or after the first
day of the month in which the Remittance Date occurs which shall be remitted to
the Purchaser on the next following Remittance Date; plus (b) an amount
representing compensating interest (up to a maximum amount equal to the
aggregate Servicing Fee for the Mortgage Loans held by the Purchaser with
respect to such Mortgage Loans) which, when added to all amounts allocable to
interest received in connection with such Principal Prepayment equals thirty
(30) days' interest at the Mortgage Interest Rate net of the Servicing Fee on
the amount of principal so prepaid (net of charges against or withdrawals from
the Custodial Account pursuant to Section 2.05), plus (c) all amounts, if any,
which the Servicer is obligated to distribute pursuant to Section 3.03 and minus
(d) any amounts attributable to Monthly Payments collected but due on a Due Date
or Dates subsequent to the first day of the month of the Remittance Date, which
amounts shall be remitted on the Remittance Date next succeeding the Due Period
for such amounts.
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Servicer shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one (1) percentage point, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the Servicer on the date such late payment is made and shall cover
the period commencing with and including the day following such second Business
Day and ending with the Business Day on which such payment is made, exclusive of
such Business Day; provided, however, that in the event that the Servicer remits
such amounts after 11:00 A.M. (Michigan time) on any day, such period shall
include such day. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Servicer of
any such interest shall not be deemed an extension of time for payment or a
waiver of any Event of Default by the Servicer.
SECTION 3.02 Statements to Purchaser. Not later than the twentieth day
of each month, the Servicer shall furnish by modem and/or diskette to the
Purchaser or its designee a listing of the outstanding Mortgage Loans, including
with respect to each Mortgage Loan: the Mortgage Loan number, the actual
balance, the actual paid-through dates and the Mortgage Interest Rate and
principal and interest payment, and with respect to Adjustable Rate Mortgage
Loans, the next Interest Rate Adjustment Date, the Mortgage Interest Rate and
the principal and interest payment effective as of the next Interest Rate
Adjustment Date (if available), and shall furnish to the
19
25
Purchaser manually a Monthly Remittance Advice, with a trial balance report
attached thereto, in the form of Exhibit 1 annexed hereto as to the preceding
remittance and the period ending on the preceding Determination Date.
In addition, not more than sixty (60) days after the end of each
calendar year, the Servicer shall furnish to each Person who was a Purchaser at
any time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.
Such obligation of the Servicer shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by the
Servicer pursuant to any requirements of the Code as from time to time are in
force.
The Servicer shall prepare and file, with respect to each Mortgage
Loan, any and all tax returns, information statements or other filings required
to be delivered to any governmental taxing authority or to the Purchaser
pursuant to any applicable law with respect to the Mortgage Loans and the
transactions contemplated hereby. In addition, the Servicer shall provide the
Purchaser with such information concerning the Mortgage Loans as is necessary
for the Purchaser to prepare its federal income tax return as the Purchaser may
reasonably request from time to time.
SECTION 3.03 Advances by Servicer. On the Business Day immediately
preceding each Remittance Date, the Servicer shall deposit in the Custodial
Account from its own funds an amount equal to all Monthly Payments which were
due on the Mortgage Loans during the applicable Due Period and which were
delinquent at the close of business on the immediately preceding Determination
Date or which were deferred pursuant to Section 2.01, provided that the Servicer
shall only be required to make such advances with respect to a Mortgage Loan
until such advances are, in the Servicer's good faith determination as evidenced
by an Officer's Certificate of the Servicer delivered to the Purchaser on the
Business Day next following the Determination Date on or prior to which said
determination is or was made, deemed to be a Nonrecoverable Advance. The
Servicer's obligation to make such advances as to any Mortgage Loan will
continue through the earlier of (i) the disposition of such Mortgage Loan and
(ii) the date of foreclosure sale with respect to such Mortgage Loan. Except as
otherwise provided herein, the Servicer shall be entitled to first priority
reimbursement pursuant to Section 2.05 hereof for principal and interest
advances and for servicing advances from recoveries from the related mortgagor
or from all Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds and Condemnation Proceeds) with respect to the related
Mortgage Loan.
20
26
ARTICLE IV
GENERAL SERVICING PROCEDURES
SECTION 4.01 Transfers of Mortgaged Property. The Servicer shall be
required to enforce any "due-on-sale" provision contained in any Mortgage or
Mortgage Note and to deny assumption by the person to whom the Mortgaged
Property has been or is about to be sold whether by absolute conveyance or by
contract of sale, whether or not the Mortgagor remains liable on the Mortgage
and the Mortgage Note. When the Mortgaged Property has been conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance, exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause applicable thereto, provided, however, that the
Servicer shall not exercise such rights if prohibited by law from doing so or if
the exercise of such rights would impair or threaten to impair any recovery
under the related PMI Policy, if any.
If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, the Servicer, in the Purchaser's name,
shall, to the extent permitted by applicable law, enter into (i) an assumption
and modification agreement with the person to whom such property has been
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and the original Mortgagor remains liable thereon or (ii) in the event the
Servicer is unable under applicable law to require that the original Mortgagor
remain liable under the Mortgage Note and the Servicer has the prior consent of
the primary mortgagee guaranty insurer, a substitution of liability agreement
with the purchaser of the Mortgaged Property pursuant to which the original
Mortgagor is released from liability and the purchaser of the Mortgaged Property
is substituted as Mortgagor and becomes liable under the Mortgage Note. In
connection with any such assumption, neither the Mortgage Interest Rate borne by
the related Mortgage Note, the term of the Mortgage Loan nor the outstanding
principal amount of the Mortgage Loan shall be changed.
To the extent that any Mortgage Loan is assumable, the Servicer shall
inquire diligently into the creditworthiness of the proposed transferee, and
shall use the underwriting criteria for approving the credit of the proposed
transferee which are used by FNMA with respect to underwriting mortgage loans of
the same type as the Mortgage Loans. If the credit of the proposed transferee
does not meet such underwriting criteria, the Servicer diligently shall, to the
extent permitted by the Mortgage or the Mortgage Note and by applicable law,
accelerate the maturity of the Mortgage Loan.
SECTION 4.02 Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of
a notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall notify the Purchaser in the Monthly Remittance
Advice as provided in Section 3.02, and may request the release of any Mortgage
Loan Documents from the Purchaser in accordance with this Section 4.02 hereof.
The Servicer shall obtain discharge of the related Mortgage Loan as of record
within any related time limit required by applicable law.
21
27
If the Servicer satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Servicer otherwise prejudice any rights the Purchaser may have under the
mortgage instruments, upon written demand of the Purchaser, the Servicer shall
repurchase the related Mortgage Loan at the Repurchase Price by deposit thereof
in the Custodial Account within two (2) Business Days of receipt of such demand
by the Purchaser. Upon such repurchase, all funds maintained in the Escrow
Account with respect to such repurchased Mortgage Loan shall be transferred to
the Servicer. The Servicer shall maintain the Fidelity Bond and Errors and
Omissions Insurance Policy as provided for in Section 2.12 insuring the Servicer
against any loss it may sustain with respect to any Mortgage Loan not satisfied
in accordance with the procedures set forth herein.
SECTION 4.03 Servicing Compensation. As consideration for servicing the
Mortgage Loans hereunder, the Servicer shall withdraw the Servicing Fee with
respect to each Mortgage Loan from the Custodial Account pursuant to Section
2.05 hereof. Such Servicing Fee shall be payable monthly, computed on the basis
of the same principal amount and period in respect of which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee shall be pro-rated
when servicing is for less than one month. The obligation of the Purchaser to
pay, and the Servicer's right to withdraw, the Servicing Fee is limited to, and
the Servicing Fee is payable solely from, the interest portion (including
recoveries with respect to interest from Liquidation Proceeds, to the extent
permitted by Section 2.05), of such Monthly Payment collected by the Servicer,
or as otherwise provided under Section 2.05.
Additional servicing compensation in the form of Ancillary Income shall
be retained by the Servicer. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement thereof except as specifically provided for
herein.
SECTION 4.04 Annual Statement as to Compliance. The Servicer shall
deliver to the Purchaser, on or before March 31 each year beginning March 31,
1998, an Officer's Certificate, stating that (i) a review of the activities of
the Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (ii) the Servicer
has complied in all material respects with the provisions of Article II and
Article IV, and (iii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year or part thereof, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Servicer to cure such default.
SECTION 4.05 Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with the first March 31 that
occurs at least six months after the Closing Date, the Servicer at its expense
shall cause a firm of independent public accountants (who may also render other
services to the Servicer or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to the
Purchaser to the effect that such firm has, as part of their examination of the
financial statements of the Servicer performed tests embracing the records and
documents relating to mortgage loans serviced
22
28
by the Servicer in accordance with the requirements of the Uniform Single Audit
Program for Mortgage Bankers and that their examination disclosed no exceptions
that, in their opinion were material, relating to mortgage loans serviced by the
Servicer.
SECTION 4.06 Right to Examine Servicer Records. The Purchaser, upon
reasonable notice, shall have the right to examine and audit any and all of the
books, records, or other information of the Servicer, whether held by the
Servicer or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or at such other times as
may be reasonable under applicable circumstances, upon reasonable advance
notice.
ARTICLE V
SERVICER TO COOPERATE
SECTION 5.01 Provision of Information. During the term of this
Agreement, the Servicer shall furnish to the Purchaser such periodic, special,
or other reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Purchaser or the
purposes of this Agreement. All such reports or information shall be provided by
and in accordance with all reasonable instructions and directions which the
Purchaser may give.
The Servicer shall execute and deliver all such instruments and take
all such action as the Purchaser may reasonably request from time to time, in
order to effectuate the purposes and to carry out the terms of this Agreement.
SECTION 5.02 Financial Statements; Servicing Facilities. In connection
with disposition of Mortgage Loans, the Purchaser may make available to a
prospective purchaser audited financial statements of the Servicer for the most
recently completed two (2) fiscal years for which such statements are available,
as well as a Consolidated Statement of Condition at the end of the last two (2)
fiscal years covered by any Consolidated Statement of Operations. If it has not
already done so, the Servicer shall furnish promptly to the Purchaser or a
prospective purchaser copies of the statements specified above; provided,
however, that prior to furnishing such statements or information to any
prospective purchaser, the Servicer may require such prospective purchaser to
execute a confidentiality agreement in form reasonably satisfactory to it.
The Servicer shall make available to the Purchaser or any prospective
Purchaser a knowledgeable financial or accounting officer for the purpose of
answering questions with respect to recent developments affecting the Servicer
or the financial statements of the Servicer, and to permit any prospective
purchaser to inspect the Servicer's servicing facilities for the purpose of
satisfying such prospective purchaser that the Servicer has the ability to
service the Mortgage Loans as provided in this Agreement.
23
29
ARTICLE VI
TERMINATION
SECTION 6.01 Agency Suspension. Should the Servicer at any time during
the term of this Agreement have its right to service temporarily or permanently
suspended by FNMA or FHLMC or otherwise cease to be an approved seller/servicer
of conventional residential mortgage loans for FNMA or FHLMC, then the Purchaser
may immediately terminate this Agreement and accelerate performance of the
provisions of the Purchase Agreement to require immediate transfer of the
Servicing Rights.
SECTION 6.02 Damages. The Purchaser shall have the right at any time to
seek and recover from the Servicer any damages or losses suffered by it as a
result of any failure by the Servicer to observe or perform any duties,
obligations, covenants or agreements herein contained, or as a result of a
party's failure to remain an approved FNMA mortgage servicer.
SECTION 6.03 Termination. The respective obligations and
responsibilities of the Servicer shall terminate upon: (i) the later of the
final payment or other liquidation (or any advance with respect thereto) of the
last Mortgage Loan serviced by the Servicer or the disposition of all REO
Property serviced by the Servicer and the remittance of all funds due hereunder;
or (ii) by mutual consent of the Servicer and the Purchaser in writing, unless
earlier terminated pursuant to this Agreement.
SECTION 6.04 Termination Without Cause. The Purchaser may, at its sole
option, upon not less than thirty (30) days' prior written notice to the
Servicer terminate any rights the Servicer may have hereunder with respect to
any or all of the Mortgage Loans, without cause, upon written notice, provided
that the Servicer shall have an additional period of not more than sixty (60)
days from and after the date of said notice from the Purchaser within which to
effect the related transfer of servicing. Any such notice of termination shall
be in writing and delivered to the Servicer as provided in Section 12.01 of this
Agreement. In the event of such termination, the Servicer shall be entitled to a
Termination Fee, equal to 2.0% of the then current aggregate unpaid principal
balance of the related Mortgage Loans; provided, however, that the successor
servicer is not an Affiliate of the Servicer.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.01 Possession of Servicing Files. The contents of each
Servicing File are and shall be held in trust by the Servicer for the benefit of
the Purchaser as the owner thereof. The Servicer shall maintain in the Servicing
File a copy of the contents of each Mortgage File and the originals of the
documents in each Mortgage File not delivered to the Purchaser. The possession
24
30
of the Servicing File by the Servicer is at the will of the Purchaser for the
sole purpose of servicing the related Mortgage Loan, pursuant to this Agreement,
and such retention and possession by the Servicer is in its capacity as Servicer
only and at the election of the Purchaser. The Servicer shall release its
custody of the contents of any Servicing File only in accordance with written
instructions from the Purchaser or other termination of the Servicer with
respect to the related Mortgage Loans, unless such release is required as
incidental to the Servicer's servicing of the Mortgage Loans pursuant to this
Agreement, or is in connection with a repurchase of any Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement or Section 4.02 of this Agreement.
The Servicer shall be responsible for maintaining, and shall maintain,
a complete set of books and records for each Mortgage Loan which shall be marked
clearly to reflect the ownership of each Mortgage Loan by the Purchaser. In
particular, the Servicer shall maintain in its possession, available for
inspection by the Purchaser or its designee during normal business hours, and
shall deliver to the Purchaser or its designee upon reasonable notice, evidence
of compliance with all federal, state and local laws, rules and regulations, and
requirements of FNMA or FHLMC, including but not limited to documentation as to
the method used in determining the applicability of the provisions of the Flood
Disaster Protection Act of 1973, as amended, to the Mortgaged Property,
documentation evidencing insurance coverage and eligibility of any condominium
project for approval by FNMA and periodic inspection reports as required by
Section 2.13 and the FNMA Guides.
To the extent that original documents are not required for purposes of
realization of Liquidation Proceeds or Insurance Proceeds, documents maintained
by the Servicer may be in the form of microfilm or microfiche so long as the
Servicer complies with the requirements of the FNMA Guides.
The Servicer shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Servicer
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Servicer shall be under no obligation to deal
with any person with respect to this Agreement or the Mortgage Loans unless the
books and records show such person as the owner of the Mortgage Loan. The
Purchaser may, subject to the terms of this Agreement, sell or transfer one or
more of the Mortgage Loans. The Purchaser also shall advise the Servicer of the
transfer.
Upon receipt of notice of the transfer, the Servicer shall xxxx its
books and records to reflect the ownership of the Mortgage Loans of such
assignee, and shall release the Purchaser from its obligations hereunder with
respect to the Mortgage Loans sold or transferred.
25
31
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT
SECTION 8.01 Indemnification. The Servicer agrees to indemnify and hold
the Purchaser harmless from any liability, claim, loss or damage (including,
without limitation, any reasonable legal fees, judgments or expenses relating to
such liability, claim, loss or damage) to the Purchaser directly or indirectly
resulting from the Servicer's failure to observe and perform any or all of
Servicer's duties, obligations, covenants, agreements, warranties or
representations contained in this Agreement or in the Purchase Agreement or the
Servicer's failure to comply with all applicable requirements with respect to
the transfer of Servicing Rights as set forth herein.
The Servicer shall notify the Purchaser as soon as reasonably possible
if a claim is made by a third party with respect to this Agreement.
SECTION 8.02 Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Purchaser for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment, provided, however, that this provision
shall not protect the Servicer or any such person against any breach of
warranties or representations made herein, or failure to perform its obligations
in material compliance with any standard of care set forth in this Agreement, or
any liability which would otherwise be imposed by reason of any breach of the
terms and conditions of this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person with respect to
any matter arising hereunder. The Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
duties to service the Mortgage Loans in accordance with this Agreement and which
in its opinion may involve it in any expense or liability, provided, however,
that the Servicer may, with the prior written consent of the Purchaser,
undertake any such action which it may deem necessary or desirable in respect to
this Agreement and the rights and duties of the parties hereto. In such event,
the Servicer shall be entitled to reimbursement from the Purchaser of the
reasonable legal expenses and costs of such action.
SECTION 8.03 Limitation on Registration and Assignment by Servicer. The
Purchaser has entered into this Agreement with the Servicer in reliance upon the
independent status of the Servicer, and the representations as to the adequacy
of its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Nonetheless, the Servicer may subcontract all or a portion of its servicing
obligations under the Agreement to one or more of its affiliates. However, if
none of its affiliates is engaged in the business of servicing mortgage loans,
the Servicer may subcontract all or a portion of its obligations under the
Servicing Agreement to an unrelated third party subject to approval of a
majority of the Independent Directors. Any delegation of such rights or duties
shall not release the Servicer from its obligations hereunder and the Servicer
shall remain responsible hereunder for all acts and omissions of any delegee as
if such acts or omissions were those of the Servicer
26
32
and any such assignee or designee shall satisfy the requirements for a successor
or surviving Person set forth in Section 8.05 and Section 8.06 hereof. The
Servicer shall notify the Purchaser in writing at least 30 days prior to selling
or otherwise disposing of all or substantially all of its assets and receipt of
such notice shall entitle the Purchaser to terminate this Agreement except as
set forth in Section 8.05 hereof.
The Servicer shall not resign from the obligations and duties hereby
imposed on it, except by mutual consent of the Servicer and the Purchaser or
upon the determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Servicer. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance acceptable to the Purchaser. No such
resignation shall become effective until a successor shall have assumed the
Servicer's responsibilities and obligations hereunder in the manner provided in
Section 8.06.
Without in any way limiting the generality of this Section 8.03, in the
event that the Servicer either shall assign this Agreement or the servicing
responsibilities hereunder or delegate its duties hereunder or any portion
thereof without satisfying the requirements set forth herein, then the Purchaser
shall have the right to terminate this Agreement as set forth in Section 6.04,
without any payment of any penalty or damages and without any liability
whatsoever to the Servicer (other than with respect to accrued but unpaid
Servicing Fees and Servicing Advances remaining unpaid) or any third party.
SECTION 8.04 Assignment by Purchaser. The Purchaser shall have the
right, without the consent of the Servicer, to assign, in whole or in part, its
interest under this Agreement with respect to some or all of the Mortgage Loans,
and designate any person to exercise any rights of the Purchaser hereunder, by
executing an Assignment and Assumption Agreement substantially in the form of
Exhibit G to the Purchase Agreement and the assignee or designee shall accede to
the rights and obligations hereunder of the Purchaser with respect to such
Mortgage Loans. All references to the Purchaser in this Agreement shall be
deemed to include its assignee or designee. Notwithstanding the foregoing, at
any one time there shall not be more than fifteen (15) separate Purchasers under
this Agreement.
SECTION 8.05 Merger or Consolidation of the Servicer. The Servicer will
keep in full effect its existence, rights and franchises as a corporation under
the laws of the state of its incorporation except as permitted herein, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
27
33
parties hereto, anything herein to the contrary notwithstanding; provided,
however, that the successor or surviving Person shall be an institution whose
deposits are insured by FDIC or a company whose business includes the
origination and servicing of mortgage loans, shall be qualified to service
mortgage loans on behalf of FNMA or FHLMC and shall satisfy the requirements of
Section 8.06 with respect to the qualifications of a successor to the Servicer.
SECTION 8.06 Successor to the Servicer. Prior to termination of
Servicer's responsibilities and duties under this Agreement pursuant to Sections
2.17, 6.04, 8.03 or 11.01, the Purchaser shall (i) succeed to and assume all of
the Servicer's responsibilities, rights, duties and obligations under this
Agreement, or (ii) appoint a successor having a tangible net worth of not less
than $30,000,000 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this Agreement
prior to the termination of Servicer's responsibilities, duties and liabilities
under this Agreement. Any successor to the Servicer shall be a FNMA- or
FHLMC-approved servicer in good standing. In connection with such appointment
and assumption, the Purchaser may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor shall
agree. In the event that the Servicer's duties, responsibilities and liabilities
under this Agreement should be terminated pursuant to the aforementioned
sections, the Servicer shall discharge such duties and responsibilities during
the period from the date it acquires knowledge of such termination until the
effective date thereof with the same degree of diligence and prudence which it
is obligated to exercise under this Agreement, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition of
its successor. The resignation or removal of Servicer pursuant to the
aforementioned Sections shall not become effective until a successor shall be
appointed pursuant to Article X hereof this Section and shall in no event
relieve the Servicer of the representations, warranties and covenants made
pursuant to and the remedies available to the Purchaser with respect thereto, it
being understood and agreed that the provisions of such Article X shall be
applicable to the Servicer notwithstanding any such resignation or termination
of the Servicer, or the termination of this Agreement.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Servicer and to the Purchaser, an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement pursuant to Section 2.17, 6.04, 8.03 or 11.01
shall not affect any claims that the Purchaser may have against the Servicer
arising prior to any such termination or resignation.
The Servicer shall timely deliver to the successor the funds in the
Custodial Account and the Escrow Account and the Mortgage Files and related
documents and statements held by it hereunder and the Servicer shall account for
all funds. The Servicer shall execute and deliver such instruments and do such
other things all as may reasonably be required to more fully and definitely vest
and confirm in the successor all such rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer. The successor shall make
arrangements as it may deem appropriate to reimburse the Servicer for amounts
the Servicer actually expended pursuant to this Agreement
28
34
which the successor is entitled to retain hereunder and which would otherwise
have been recovered by the Servicer pursuant to this Agreement but for the
appointment of the successor servicer.
Upon a successor's acceptance of appointment as such, the Servicer
shall notify by mail the Purchaser of such appointment.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As of the Closing Date, the Purchaser warrants and represents to, and
covenants and agrees with, the Servicer as follows:
SECTION 9.01 Due Organization and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Purchaser has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement evidences the valid, binding and
enforceable obligation of the Purchaser; and all requisite corporate action has
been taken by the Purchaser to make this Agreement valid and binding upon the
Purchaser in accordance with its terms.
SECTION 9.02 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Purchaser's charter or by-laws or any legal
restriction or any agreement or instrument to which the Purchaser is now a party
or by which it is bound, or constitute a default or result in an acceleration
under any of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Purchaser or its property is
subject.
SECTION 9.03 Ability to Perform. The Purchaser does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant made by it in this Agreement.
SECTION 9.04 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Purchaser, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Purchaser, or in
any material impairment of the right or ability of the Purchaser to carry on its
business substantially as now conducted, or in any material liability on the
part of the Purchaser, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of the Purchaser contemplated herein.
29
35
SECTION 9.05 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Purchaser of, or compliance by the
Purchaser with, this Agreement as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 9.06 Assistance. To the extent reasonably possible, the
Purchaser shall cooperate with and assist the Servicer as requested by the
Servicer, in carrying out Servicer's covenants, agreements, duties and
responsibilities under the Purchase Agreement and in connection therewith shall
execute and deliver all such papers, documents and instruments as nay be
necessary and appropriate in furtherance thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SERVICER
As of the Closing Date, the Servicer warrants and represents to, and
covenants and agrees with, the Purchaser as follows:
SECTION 10.01 Due Organization and Authority. The Servicer is a
federally chartered savings bank duly organized and validly existing under the
laws of the United States and is licensed, qualified and in good standing in
each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the type
conducted by the Servicer, and in any event the Servicer is in compliance with
the laws of any such state to the extent necessary to ensure the enforceability
of the related Mortgage Loan in accordance with the terms of this Agreement; the
Servicer has the full corporate power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, legal, binding and enforceable obligation of the
Servicer subject to bankruptcy laws and other similar laws of general
application affecting rights of creditors and subject to the application of the
rules of equity, including those respecting the availability of specific
performance, none of which will materially interfere with the realization of the
benefits provided thereunder, regardless of whether such enforcement is sought
in a proceeding in equity or at law; and all requisite corporate action has been
taken by the Servicer to make this Agreement valid and binding upon the Servicer
in accordance with its terms.
SECTION 10.02 Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Servicer.
SECTION 10.03 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Servicer's charter
30
36
or by-laws or any legal restriction or any agreement or instrument to which the
Servicer is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the violation
of any law, rule, regulation, order, judgment or decree to which the Servicer or
its property is subject, or impair the ability of the Purchaser to realize on
the Mortgage Loans, impair the value of the Mortgage Loans, or impair the
ability of the Purchaser to realize the full amount of any mortgage insurance
benefits accruing pursuant to this Agreement.
SECTION 10.04 Ability to Service. The Servicer is an approved
seller/servicer of conventional residential mortgage loans for FNMA and FHLMC,
with the facilities, procedures, and experienced personnel necessary for the
sound servicing of mortgage loans of the same type as the Mortgage Loans. The
Servicer is duly qualified, licensed, registered and otherwise authorized under
all applicable federal, state and local laws, and regulations, if applicable,
meets the minimum capital requirements set forth by the OTS, and is in good
standing to enforce, originate, sell mortgage loans to, and service mortgage
loans in the jurisdiction wherein the Mortgaged Properties are located for,
either FNMA or FHLMC, and no event has occurred, including but not limited to a
change in insurance coverage, which would make the Servicer unable to comply
with either FNMA or FHLMC eligibility requirements or which would require
notification to FNMA or FHLMC.
SECTION 10.05 Ability to Perform. The Servicer does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement.
SECTION 10.06 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Servicer, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Servicer, or in any
material impairment of the right or ability of the Servicer to carry on its
business substantially as now conducted, or in any material liability on the
part of the Servicer, or which would draw into question the validity of this
Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Servicer contemplated herein, or which
would be likely to impair materially the ability of the Servicer to perform
under the terms of this Agreement.
SECTION 10.07 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of or compliance by the
Servicer with this Agreement or the servicing of the Mortgage Loans as evidenced
by the consummation of the transactions contemplated by this Agreement, or if
required, such approval has been obtained prior to the Closing Date.
SECTION 10.08 No Untrue Information. Neither this Agreement nor any
statement, tape, diskette, form, report or other document furnished or to be
furnished pursuant to this Agreement
31
37
or in connection with the transactions contemplated hereby contains any untrue
statement of fact or omits to state a fact necessary to make the statements
contained therein not misleading.
SECTION 10.09 Reasonable Servicing Fee. The Servicer acknowledges and
agrees that the Servicing Fee represents reasonable compensation for performing
such services and that the entire Servicing Fee shall be treated by the
Servicer, for accounting and tax purposes, as compensation for the servicing and
administration of the Mortgage Loans pursuant to this Agreement.
SECTION 10.10 Financial Statements. The Servicer has delivered to the
Purchaser financial statements as to its last two complete fiscal years. All
such financial statements fairly present the pertinent results of operations and
changes in financial position for each of such periods and the financial
position at the end of each such period of the Servicer and its subsidiaries and
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set forth in the
notes thereto. There has been no change in the business, operations, financial
condition, properties or assets of the Servicer since the date of the Servicer's
financial statements that would have a material adverse effect on its ability to
perform its obligations under this Agreement.
SECTION 10.11 Conflict of Interest. The Servicer agrees that it shall
service the Mortgage Loans hereunder solely with a view toward the interests of
the Purchaser, and without regard to the interests of the Seller or its other
affiliates.
ARTICLE XI
DEFAULT
SECTION 11.01 Events of Default. The following shall constitute an
Event of Default under this Agreement on the part of the Servicer:
(a) any failure by the Servicer to remit to the Purchaser any
payment required to be made under the terms of this Agreement
which continues unremedied for a period of five (5) Business
Days after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by the Purchaser; or
(b) the failure by the Servicer duly to observe or perform in any
material respect any other of the covenants or agreements on
the part of the Servicer set forth in this Agreement which
continues unremedied for a period of thirty (30) days (except
that such number of days shall be fifteen (15) in the case of
a failure to pay any premium for any insurance policy required
to be maintained under this Agreement) after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the
Purchaser; or
32
38
(c) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a
conservator or receiver or liquidator in any insolvency,
bankruptcy, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in
force undischarged or unstayed for a period of sixty (60)
days; or
(d) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of its property; or
(e) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
(f) the Servicer ceases to meet the qualifications of a FNMA or
FHLMC seller/servicer which continues unremedied for a period
of thirty (30) days after the date of such cessation; or
(g) the Servicer, without the consent of the Purchaser, attempts
to assign this Agreement or the servicing responsibilities
hereunder or to delegate any substantial part of its duties
hereunder or any portion thereof; or
(h) the Servicer fails to maintain its license to do business or
service residential mortgage loans in any jurisdiction where
the Mortgaged Properties are located and such failure results
in a material adverse effect on the Mortgage Loans, the
servicing of the Mortgage Loans, or the Purchaser's rights
with respect to the Mortgage Loans.
In each and every such case, so long as an Event of Default shall not
have been remedied, in addition to whatsoever rights the Purchaser may have at
law or equity to damages, including injunctive relief and specific performance,
the Purchaser, by notice in writing to the Servicer, may terminate without
compensation or reimbursement (other than Servicing Fees previously earned but
remaining unpaid and Servicing Advances remaining unreimbursed) all the rights
and obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof.
Upon receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 8.06. Upon written request from the Purchaser, the Servicer
shall prepare, execute and deliver any and all documents and other instruments
reasonably requested by the Purchaser, place in such successor's possession all
33
39
Mortgage Files (to the extent not properly delivered to the Purchaser by the
Servicer previously), and do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise, at the Servicer's sole expense. The Servicer
agrees to reasonably cooperate with the Purchaser and such successor in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to such successor for
administration by it of all cash amounts which shall at the time be credited by
the Servicer to the Custodial Account or Escrow Account or thereafter received
with respect to the Mortgage Loans.
SECTION 11.02 Waiver of Defaults. The Purchaser may waive any default
by the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon except
to the extent expressly so waived.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01 Notices. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given upon the
delivery or mailing thereof, as the case may be, sent by registered or certified
mail, return receipt requested:
(a) If to Purchaser to:
D&N Capital Corporation
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
(b) If to Servicer to:
D&N Bank
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
SECTION 12.02 Waivers. Either the Servicer or the Purchaser may upon
consent of all parties, by written notice to the others:
34
40
(a) Waive compliance with any of the terms, conditions or
covenants required to be complied with by the others
hereunder; and
(b) Waive or modify performance of any of the obligations of the
others hereunder.
The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other subsequent
breach.
SECTION 12.03 Entire Agreement; Amendment. This Agreement and the
Purchase Agreement constitute the entire agreement between the parties with
respect to servicing of the Mortgage Loans. This Agreement may be amended and
any provision hereof waived, but, only in writing signed by the party against
whom such enforcement is sought.
SECTION 12.04 Execution; Binding Effect. This Agreement may be executed
in one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement. Subject to Sections 8.03 and 8.04, this Agreement shall inure to the
benefit of and be binding upon the Servicer and the Purchaser and their
respective successors and assigns.
SECTION 12.05 Headings. Headings of the Articles and Sections in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.
SECTION 12.06 Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Michigan and the obligations, rights
and remedies hereunder shall be determined in accordance with the substantive
laws of the State of Michigan (without regard to conflicts of laws principles),
except to the extent preempted by Federal law.
SECTION 12.07 Relationship of Parties. Nothing herein contained shall
be deemed or construed to create a partnership or joint venture between the
parties. The duties and responsibilities of the Servicer shall be rendered by it
as an independent contractor and not as an agent of the Purchaser. The Servicer
shall have full control of all of its acts, doings, proceedings, relating to or
requisite in connection with the discharge of its duties and responsibilities
under this Agreement.
SECTION 12.08 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 12.09 Recordation of Assignments of Mortgage. To the extent
permitted by applicable law, each of the Assignments of Mortgage is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
35
41
recording office or elsewhere, such recordation to be effected by the Purchaser
or the Purchaser's designee, but in any event, at the Servicer's expense for a
single recordation relating to each Assignment of Mortgage in the event
recordation is either necessary under applicable law or requested by the
Purchaser at its sole option.
SECTION 12.10 Exhibits. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are integral parts of this Agreement.
36
42
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date and year first above written.
D&N CAPITAL CORPORATION
(the Purchaser)
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
D&N BANK
(the Servicer)
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
37
43
EXHIBIT 1
MONTHLY REMITTANCE ADVICE
38
44
EXHIBIT 2
CUSTODIAL ACCOUNT CERTIFICATION
___________, 1997
_________________ hereby certifies that it has established the account
described below as a Custodial Account pursuant to Section 2.04 of the Servicing
Agreement, dated as of ______, 1997.
Title of Account: "D&N Bank, in trust for Purchaser of Residential Mortgage
Loans, and various Mortgagors."
Account Number: ________________________
Address of office or branch of the Servicer at which Account is
maintained:
_________________________
_________________________
_________________________
_________________________
_________________________
D&N BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
39
45
EXHIBIT 3
CUSTODIAL ACCOUNT LETTER AGREEMENT
___________, 1997
To: ____________________
(the "Depository")
As Servicer under the Servicing Agreement, dated as of ______, 1997,
(the "Agreement"), we hereby authorize and request you to establish an account,
as a Custodial Account pursuant to Section 2.04 of the Agreement, to be
designated as D&N Bank, in trust for Purchaser of Residential Mortgage Loans,
and various Mortgagors." All deposits in the account shall be subject to
withdrawal therefrom by order signed by the Servicer. You may refuse any deposit
which would result in violation of the requirement that the account be fully
insured as described below. This letter is submitted to you in duplicate. Please
execute and return one original to us.
D&N BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number , at the office of
the Depository indicated above, and agrees to honor withdrawals on such account
as provided above. The full amount deposited at any time in the account will be
insured by the Federal Deposit Insurance Corporation through the Bank Insurance
Fund ("BIF") or the Savings Association Insurance Fund ("SAIF").
-------------------------------------------
Depository
By:_______________________________________
Name:_____________________________________
Title:____________________________________
40
46
EXHIBIT 4
ESCROW ACCOUNT CERTIFICATION
_____________, 1997
____________________________hereby certifies that it has established
the account described below as an Escrow Account pursuant to Section 2.06 of the
Servicing Agreement, dated as of ________, 1997, Conventional Residential
Mortgage Loans.
Title of Account: "D&N Bank, in trust for Purchaser of Residential and various
Mortgagors."
Account Number: _________________________
Address of office or branch of the Servicer at which Account is maintained:
_________________________
_________________________
_________________________
_________________________
_________________________
D&N BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
41
47
EXHIBIT 5
ESCROW ACCOUNT LETTER AGREEMENT
______________, 1997
To: __________________________
__________________________
__________________________
(the "Depository")
As Servicer under the Servicing Agreement, dated as of ____________,
1997, Conventional Residential Mortgage Loans (the "Agreement"), we hereby
authorize and request you to establish an account, as an Escrow Account pursuant
to Section 2.06 of the Agreement, to be designated as "D&N Bank in trust for the
Purchasers of Residential Mortgage Loans, and various Mortgagors." All deposits
in the account shall be subject to withdrawal therefrom by order signed by the
Servicer. You may refuse any deposit which would result in violation of the
requirement that the account be fully insured as described below. This letter is
submitted to you in duplicate. Please execute and return one original to us.
D&N BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number , at the office of
the Depository indicated above, and agrees to honor withdrawals on such account
as provided above. The full amount deposited at any time in the account will be
insured by the Federal Deposit Insurance Corporation through the Bank Insurance
Fund ("BIF") or the Savings Association Insurance Fund ("SAIF").
-------------------------------------------
Depository
By:_______________________________________
Name:_____________________________________
Title:____________________________________
42
