EXHIBIT 4.3
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NOVASTAR MORTGAGE, INC.,
as Servicer,
FIRST UNION NATIONAL BANK,
as Indenture Trustee,
and
NOVASTAR HOME EQUITY LOAN TRUST SERIES 1997-2,
as Issuer
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SERVICING AGREEMENT
Dated as of November 1, 1997
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Fixed and Adjustable-Rate Home Equity Loans
NovaStar Home Equity Loan Asset-Backed Bonds, Series 1997-2
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
Section 1.01. Definitions.................................................-1-
Section 1.02. Other Definitional Provisions...............................-2-
Section 1.03. Interest Calculations.......................................-2-
ARTICLE II
Representations and Warranties
Section 2.01. Representations And Warranties Regarding The Servicer.......-3-
Section 2.02. Existence...................................................-4-
Section 2.03. Enforcement Of Representations And Warranties...............-4-
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. Servicer To Assure Servicing................................-6-
Section 3.02. Subservicing Agreements Between Servicer And
Subservicers..............................................-7-
Section 3.03. Successor Subservicers......................................-8-
Section 3.04. Liability Of The Servicer...................................-8-
Section 3.05. Assumption Or Termination Of Subservicing Agreements
By Indenture Trustee .....................................-9-
Section 3.06. Collection Of Mortgage Loan Payments; Collection
Account......................................-9-
Section 3.07. Withdrawals From The Collection Account.....................-11-
Section 3.08. Collection Of Taxes, Assessments And Similar Items;
Servicing Accounts.......................-13-
Section 3.09. Access To Certain Documentation And Information
Regarding The Mortgage Loans..............................-14-
Section 3.10. Superior Liens..............................................-14-
Section 3.11. Maintenance Of Hazard Insurance And Fidelity
Coverage..................................................-14-
Section 3.12. Due-on-sale Clauses; Assumption Agreements..................-16-
Section 3.13. Realization Upon Defaulted Mortgage Loans...................-17-
Section 3.14. Indenture Trustee To Cooperate; Release Of Mortgage Files...-18-
Section 3.15. Servicing Compensation......................................-20-
Section 3.16. Annual Statements Of Compliance.............................-20-
Section 3.17. Annual Independent Public Accountants' Servicing Report.....-20-
Section 3.18. Optional Purchase Of Defaulted Mortgage Loans...............-21-
Section 3.19. Information Required By The Internal Revenue Service
Generally And Reports Of Foreclosures And
Abandonments Of Mortgaged Property.........................-21-
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ARTICLE IV
Remittance Reports
Section 4.01. Remittance Reports..........................................-22-
Section 4.02. Advances....................................................-22-
Section 4.03. Compensating Interest Payments..............................-23-
Article V
The Servicer
Section 5.01. Liability Of The Servicer...................................-24-
Section 5.02. Merger Or Consolidation Of, Or Assumption Of The
Obligations Of, The Servicer...............................-24-
Section 5.03. Limitation On Liability Of The Servicer And Others..........-24-
Section 5.04. Servicer Not To Resign......................................-25-
Section 5.05. Delegation Of Duties........................................-25-
Section 5.06. Servicer To Pay Indenture Trustee's And Owner Trustee's
Fees And Expenses; Indemnification.........................-26-
Article VI
Default
Section 6.01. Servicing Default...........................................-28-
Section 6.02. Indenture Trustee To Act; Appointment Of Successor..........-31-
Section 6.03. Notification To Bondholders.................................-32-
Section 6.04. Waiver Of Defaults..........................................-32-
Article VII
Administrative Duties Of The Servicer
Section 7.01. Administrative Duties.......................................-33-
Section 7.02. Records.....................................................-34-
Section 7.03. Additional Information To Be Furnished......................-34-
Article VIII
Miscellaneous Provisions
Section 8.01. Amendment...................................................-35-
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Section 8.02. Governing Law...............................................-35-
Section 8.03. Notices.....................................................-35-
Section 8.04................................................-37-
Section 8.05. Third-party Beneficiaries...................................-37-
Section 8.06. Counterparts................................................-37-
Section 8.07. Effect Of Headings And Table Of Contents....................-37-
Section 8.08. Termination.................................................-37-
Section 8.09. No Petition.................................................-37-
Section 8.10. No Recourse.................................................-37-
EXHIBIT A - MORTGAGE LOAN SCHEDULE..........................................A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE.....................................B-1
EXHIBIT C - FORM OF LIQUIDATION REPORT......................................C-1
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This Servicing Agreement, dated as of November 1, 1997, among
NovaStar Mortgage, Inc., as Servicer (the "Servicer"), First Union National
Bank, as Indenture Trustee, and NovaStar Home Equity Loan Trust Series 1997-2,
as Issuer (the "Issuer").
W I T N E S S E T H T H A T:
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WHEREAS, pursuant to the terms of the Home Equity Loan Purchase
Agreement, the Seller will sell (i) the Initial Mortgage Loans to the Transferor
on the Closing Date and (ii) the Subsequent Mortgage Loans to the Issuer on each
Subsequent Transfer Date;
WHEREAS, pursuant to the terms of the Ownership Transfer
Agreement, the Transferor will sell the Initial Mortgage Loans and transfer all
of its rights under the Home Equity Loan Purchase Agreement to the Company on
the Closing Date;
WHEREAS, the Company will sell the Initial Mortgage Loans and
transfer all of its rights under the Ownership Transfer Agreement and the Home
Equity Loan Purchase Agreement to the Issuer on the Closing Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will issue and transfer to or at the direction of the Transferor the
Certificates;
WHEREAS, pursuant to the terms of the Certificates Sale Agreement,
the Transferor will sell the Certificates to NCFC;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will
issue and transfer to or at the direction of the Company, the Bonds; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Servicer will service the Mortgage Loans directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Servicing Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Definitions contained in Appendix A to the
Indenture dated as of November 1, 1997 (the "Indenture") between the Issuer and
the Indenture Trustee, which Definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1.02. Other Definitional Provisions. (a) All terms defined in this
Servicing Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Servicing Agreement shall refer to this Servicing Agreement as
a whole and not to any particular provision of this Servicing Agreement; Section
and Exhibit references contained in this Servicing Agreement are references to
Sections and Exhibits in or to this Servicing Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Servicing Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03. Interest Calculations. All calculations of interest hereunder
that are made in respect of the Principal Balance of a Mortgage Loan shall be
made in accordance with the terms of the related Mortgage Note and Mortgage. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest xxxxx with one-half of one xxxxx being rounded
up.
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ARTICLE II
Representations and Warranties
Section 2.01. Representations And Warranties Regarding The Servicer. The
Servicer represents and warrants to the Issuer and for the benefit of the
Indenture Trustee, as pledgee of the Mortgage Loans, the Bond Insurer and the
Bondholders, as of the Closing Date, that:
(i) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Virginia and has the
corporate power to own its assets and to transact the business in which it
is currently engaged. The Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure to so
qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Servicer or the validity
or enforceability of the Mortgage Loans;
(ii) The Servicer has the corporate power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered, this
Servicing Agreement will constitute the legal, valid and bind ing
obligation of the Servicer enforceable in accordance with its terms, except
as enforce ment of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
by the availability of equitable remedies;
(iii) The Servicer is not required to obtain the consent of any
other Person or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Servicing Agreement, except for such consent,
license, approval or authorization, or registration or declaration, as
shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and
the performance of the transactions contemplated hereby by the Servicer
will not violate any provision of any existing law or regulation or any
order or decree of any court applicable to the Servicer or any provision of
the certificate of incorporation or bylaws of the Servicer, or constitute a
material breach of any mortgage, indenture, contract or other agreement to
which the Servicer is a party or by which the Servicer may be bound; and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Servicing Agreement or the Bonds or the
Certificates which, to the knowledge of the Servicer, has
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a reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Servicing Agreement.
The foregoing representations and warranties shall survive any termination
of the Servicer hereunder.
Section 2.02. Existence. The Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be neces sary to protect
the validity and enforceability of this Servicing Agreement.
Section 2.03. Enforcement Of Representations And Warranties. The Servicer,
on behalf of and subject to the direction of the Indenture Trustee, as pledgee
of the Mortgage Loans, or the Bond Insurer, shall enforce the representations
and warranties and related obligations for breaches thereof of the Seller
pursuant to the Home Equity Loan Purchase Agreement. Upon the discovery by the
Seller, NovaStar Assets, the Servicer, the Indenture Trustee, the Issuer, the
Owner Trustee, the Bond Insurer or the Company of a breach of any of the
representations and warranties made in the Home Equity Loan Purchase Agreement,
in respect of any Mortgage Loan which materially and adversely affects the value
of the related Mortgage Loan or the interests of the Bondholders or the
Certificateholders or the Bond Insurer, the party discovering such breach shall
give prompt written notice to the other parties. The Servicer shall promptly
notify the Seller of such breach and request that, pursuant to the terms of the
Home Equity Loan Purchase Agreement, the Seller either (i) cure such breach in
all material respects or (ii) purchase such Mortgage Loan, in each instance in
accordance with the Home Equity Loan Purchase Agreement; PROVIDED that the
Seller shall, subject to the conditions set forth in the Home Equity Loan
Purchase Agreement, have the option to substitute an Eligible Substitute
Mortgage Loan or Eligible Substitute Mortgage Loans for such Mortgage Loan.
Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the
month of substitution shall not be part of the Trust Estate and will be retained
by the Servicer and remitted by the Servicer to the Seller on the next
succeeding Payment Date. For the month of substitution, distributions to the
Payment Account pursuant to the Servicing Agreement will include the Monthly
Payment due on a Deleted Mortgage Loan for such month and thereafter the Seller
shall be entitled to retain all amounts received in respect of such Deleted
Mortgage Loan. The Servicer shall amend or cause to be amended the Mortgage Loan
Schedule to reflect the removal of such Mortgage Loan and the substitution of
the Eligible Substitute Mortgage Loans and the Servicer shall promptly deliver
the amended Mortgage Loan Schedule to the related Subservicer, if any, the Bond
Insurer, the Owner Trustee and the Indenture Trustee.
In connection with the substitution of one or more Eligible Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer will
determine the amount (such amount, a "Substitution Adjustment Amount"), if any,
by which the aggregate principal balance of all such Eligible Substitute
Mortgage Loans as of the date of substitution is less than the aggregate
principal balance of all such Deleted Mortgage Loans (after application of the
principal portion of the Monthly Payments due in the month of substitution that
are to be distributed to the Payment Account in the month of substitution). The
Seller shall pay the Substitution Adjustment Amount
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to the Servicer and the Servicer shall deposit such Substitution Adjustment
Amount into the Collection Account upon receipt.
It is understood and agreed that the obligation of the Seller to cure such
breach or purchase or substitute for such Mortgage Loan as to which such a
breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and the Indenture Trustee, as
pledgee of the Mortgage Loans, against the Seller, except as set forth in
Section 6.1 of the Home Equity Loan Purchase Agreement. In connection with the
purchase of or substitution for any such Mortgage Loan by the Seller, the Issuer
shall assign to the Seller all of its right, title and interest in respect of
the Home Equity Loan Purchase Agreement applicable to such Mortgage Loan. Upon
receipt of the Repurchase Price, or upon completion of such substitution, the
Servicer shall notify the Indenture Trustee and then the Indenture Trustee shall
deliver the Mortgage Files relating to such Mortgage Loan to the Servicer,
together with all relevant endorse ments and assignments prepared by the
Servicer which the Indenture Trustee shall execute.
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ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. Servicer To Assure Servicing. (a) The Servicer shall
supervise, or take such actions as are necessary to ensure, the servicing and
administration of the Mortgage Loans and any REO Property in accordance with
this Servicing Agreement and its normal servicing practices, which generally
shall conform to the standards of an institution prudently servicing mortgage
loans for its own account and shall have full authority to do anything it
reasonably deems appropriate or desirable in connection with such servicing and
administration. The Servicer may perform its responsibilities relating to
servicing through other agents or independent contractors, but shall not thereby
be released from any of its responsibilities as hereinafter set forth. The
authority of the Servicer, in its capacity as Servicer, and any Subservicer
acting on its behalf, shall include, without limitation, the power to (i)
consult with and advise any Subservicer regarding administration of a related
Mortgage Loan, (ii) approve any recommendation by a Subservicer to foreclose on
a related Mortgage Loan, (iii) supervise the filing and collection of insurance
claims and take or cause to be taken such actions on behalf of the insured
Person thereunder as shall be reasonably necessary to prevent the denial of
coverage thereunder, and (iv) effectuate foreclosure or other conversion of the
ownership of the Mortgaged Property securing a related Mortgage Loan, including
the employment of attorneys, the institution of legal proceedings, the
collection of deficiency judgments, the acceptance of compromise proposals and
any other matter pertaining to a delinquent Mortgage Loan. The authority of the
Servicer shall include, in addition, the power on behalf of the Bondholders, the
Indenture Trustee, the Bond Insurer or any of them to (i) execute and deliver
customary consents or waivers and other instruments and documents, (ii) consent
to transfer of any related Mortgaged Property and assumptions of the related
Mortgage Notes and Security Instruments (in the manner provided in this
Servicing Agreement) and (iii) collect any Insurance Proceeds and Liquidation
Proceeds. Without limiting the generality of the foregoing, the Servicer and any
Subservicer acting on its behalf may, and is hereby authorized, and empowered by
the Indenture Trustee when the Servicer believes it is reasonably necessary in
its best judgment in order to comply with its servicing duties hereunder, to
execute and deliver, on behalf of itself, the Bondholders, the Indenture
Trustee, the Bond Insurer or any of them, any instruments of satisfaction,
cancellation, partial or full release, discharge and all other comparable
instruments, with respect to the related Mortgage Loans, the Insurance Policies
and the accounts related thereto, and the Mortgaged Properties. The Servicer may
exercise this power in its own name or in the name of a Subservicer. The
Servicer will not waive any prepayment penalties without the consent of the Bond
Insurer.
The Servicer, in such capacity, may not consent to the placing of a lien
senior to that of the Mortgage on the related Mortgaged Property other than any
first lien which is prior to the Mortgage Loan on the related Mortgaged Property
as of the Cut-off Date or Subsequent Cut-off Date, as applicable. If the
Mortgage relating to a Mortgage Loan had a lien senior to the Mortgage Loan on
the related Mortgaged Property as of the Cut-off Date, or the Subsequent Cutoff
Date in the case of a Subsequent Mortgage Loan, then the Servicer, in such
capacity, may consent to the refinancing of the prior senior lien; PROVIDED that
(i) the resulting Combined Loan- to-Value Ratio of such Mortgage Loan is no
higher than the Combined Loan-to-Value Ratio prior
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to such refinancing, (ii) the interest rate for the loan evidencing the
refinanced senior lien is no higher than the interest rate on the loan
evidencing the existing senior lien immediately prior to the date of such
refinancing; PROVIDED HOWEVER if the loan evidencing the existing senior lien
prior to the date of refinancing has an adjustable rate and the loan evidencing
the refinanced senior lien has a fixed rate, then the loan evidencing the
refinanced senior lien may be up to 2.0% higher than the then-current mortgage
rate of the loan evidencing the existing senior lien and (iii) the loan
evidencing the refinanced senior lien is not subject to negative amortization.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Servicing Agreement) to the Issuer and the Indenture Trustee
under this Servicing Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
(b) Notwithstanding the provisions of Subsection 3.01(a), the Servicer
shall not take any action inconsistent with the interests of the Indenture
Trustee, the Bond Insurer or the Bondholders or with the rights and interests of
the Indenture Trustee, the Bond Insurer or the Bondholders under this Servicing
Agreement.
(c) The Indenture Trustee shall furnish the Servicer with any powers of
attorney and other documents in form as provided to it necessary or appropriate
to enable the Servicer to service and administer the related Mortgage Loans and
REO Property and the Indenture Trustee shall not be liable for the actions of
the Servicer or any Subservicers under such powers of attorney.
Section 3.02. Subservicing Agreements Between Servicer And Subservicers.
(a) The Servicer may enter into Subservicing Agreements with Subservicers for
the servicing and administration of the Mortgage Loans and for the performance
of any and all other activities of the Servicer hereunder. Each Subservicer
shall be either (i) an institution the accounts of which are insured by the FDIC
or (ii) another entity that engages in the business of originating or servicing
mortgage loans comparable to the Mortgage Loans, and in either case shall be
authorized to transact business in the state or states in which the related
Mortgaged Properties it is to service are situated, if and to the extent
required by applicable law to enable the Subservicer to perform its obligations
hereunder and under the Subservicing Agreement. Any Subservicing Agreement
entered into by the Servicer shall include the provision that such Subservicing
Agreement may be immediately terminated (i) (x) with cause and without any
termination fee by the Servicer hereunder and/or (y) without cause, in which
case the Servicer shall be solely responsible for any termination fee or penalty
resulting therefrom and (ii) at the option of the Bond Insurer upon the
termination or resignation of the Servicer hereunder, in which case the Servicer
shall be solely responsible for any termination fee or penalty resulting
therefrom. In addition, each Subservicing Agreement shall provide for servicing
of the Mortgage Loans consistent with the terms of this Servicing Agreement. The
Servicer and the Subservicers may enter into Subservicing Agreements and make
amendments to the Subservicing Agreements or enter into different forms of
Subservicing Agreements providing for, among other things, the delegation by the
Servicer to a Subservicer of additional duties regarding the administration of
the Mortgage Loans; provided, however, that any such amendments or different
forms shall be consistent with and not violate the
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provisions of this Servicing Agreement, and that no such amendment or different
form shall be made or entered into which could be reasonably expected to be
materially adverse to the interests of the Bond Insurer or the Bondholders,
without the consent of the Bond Insurer or, if a Bond Insurer Default exists,
the holders of at least 51% of the aggregate Bond Principal Balance of the
Outstanding Bonds.
(b) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Indenture Trustee, the Bond Insurer and the Bondholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements and the pursuit of
other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, but shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement only to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loan or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed.
Section 3.03. Successor Subservicers. The Servicer shall be entitled to
terminate any Subservicing Agreement that may exist in accordance with the terms
and conditions of such Subservicing Agreement and without any limitation by
virtue of this Servicing Agreement; PROVIDED, HOWEVER, that upon termination,
the Servicer shall either act as servicer of the related Mortgage Loans or enter
into an appropriate contract with a successor Subservicer reasonably acceptable
to the Indenture Trustee and the Bond Insurer pursuant to which such successor
Subservicer will be bound by all relevant terms of the related Subservicing
Agreement pertaining to the servicing of such Mortgage Loan.
Section 3.04. Liability Of The Servicer. (a) Notwithstanding any
Subservicing Agreement, any of the provisions of this Servicing Agreement
relating to agreements or arrangements between the Servicer and a Subservicer or
reference to actions taken through a Subservicer or otherwise, the Servicer
shall under all circumstances remain obligated and primarily liable to the
Indenture Trustee, the Bondholders and the Bond Insurer for the servicing and
administering of the Mortgage Loans and any REO Property in accordance with this
Servicing Agreement. The obligations and liability of the Servicer shall not be
diminished by virtue of Subservicing Agreements or by virtue of indemnification
of the Servicer by any Subservicer, or any other Person. The obligations and
liability of the Servicer shall remain of the same nature and under the same
terms and conditions as if the Servicer alone were servicing and administering
the related Mortgage Loans. The Servicer shall, however, be entitled to enter
into indemnification agreements with any Subservicer or other Person and nothing
in this Servicing Agreement shall be deemed to limit or modify such
indemnification. For the purposes of this Servicing Agreement, the Servicer
shall be deemed to have received any payment on a Mortgage Loan on the date the
Subservicer received such payment; PROVIDED, HOWEVER, that this sentence shall
not apply to the Indenture Trustee acting as the Servicer; PROVIDED, FURTHER,
however, that the foregoing provision shall not affect the obligation of the
Servicer if it is also the Indenture Trustee to advance amounts which are not
Nonrecoverable Advances.
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(b) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Indenture Trustee, the Bond
Insurer and the Bondholders shall not be deemed parties thereto and shall have
no claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Section 3.05.
Section 3.05. Assumption Or Termination Of Subservicing Agreements By
Indenture Trustee. (a) If the Indenture Trustee or its designee shall assume the
servicing obligations of the Servicer in accordance with Section 6.02 below, the
Indenture Trustee, to the extent necessary to permit the Indenture Trustee to
carry out the provisions of Section 6.02 with respect to the Mortgage Loans,
shall succeed to all of the rights and obligations of the Servicer under each of
the Subservicing Agreements. In such event, the Indenture Trustee or its
designee as the successor Servicer shall be deemed to have assumed all of the
Servicer's rights and obligations therein and to have replaced the Servicer as a
party to such Subservicing Agreements to the same extent as if such Subservicing
Agreements had been assigned to the Indenture Trustee or its designee as a
successor Servicer, except that the Indenture Trustee or its designee as a
successor Servicer shall not be deemed to have assumed any obligations or
liabilities of the Servicer arising prior to such assumption and the Servicer
shall not thereby be relieved of any liability or obligations under such
Subservicing Agreements arising prior to such assumption. Nothing in the
foregoing shall be deemed to entitle the Indenture Trustee or its designee as a
successor Servicer at any time to receive any portion of the servicing
compensation provided under Section 3.15 except for such portion as the Servicer
would be entitled to receive.
(b) In the event that the Indenture Trustee or its designee as successor
Servicer for the Indenture Trustee assumes the servicing obligations of the
Servicer under Section 6.02, upon the request of the Indenture Trustee or such
designee as successor Servicer, the Servicer shall at its own expense deliver to
the Indenture Trustee, or at its written request to such designee, originals or,
if originals are not available, photocopies of all documents, files and records,
electronic or otherwise, relating to the Subservicing Agreements and the related
Mortgage Loans or REO Property then being serviced and an accounting of amounts
collected and held by it, if any, and will otherwise cooperate and use its
reasonable efforts to effect the orderly and efficient transfer of the
Subservicing Agreements, or responsibilities hereunder to the Indenture Trustee,
or at its written request to such designee as successor Servicer.
Section 3.06. Collection Of Mortgage Loan Payments; Collection Account. (a)
The Servicer will coordinate and monitor remittances by Subservicers to it with
respect to the Mortgage Loans in accordance with this Servicing Agreement.
(b) The Servicer shall make its best reasonable efforts to collect or cause
to be collected all payments required under the terms and provisions of the
Mortgage Loans and shall follow, and use its best reasonable efforts to cause
Subservicers to follow, collection procedures comparable to the collection
procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Servicing
Agreement. Consistent with the foregoing, the Servicer or the related
Subservicer may in its discretion (i)
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waive or permit to be waived any late payment charge, prepayment charge,
assumption fee, or any penalty interest in connection with the prepayment of a
Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced
regular monthly payments for a period of up to six months, or arrange or permit
an arrangement with a Mortgagor for a scheduled liquidation of delinquencies;
provided, however, that the Servicer or the related Subservicer may permit the
foregoing only if it believes, in good faith, that recoveries of Monthly
Payments will be maximized; provided further, however, that the Servicer may not
without the prior written consent of the Bond Insurer permit any waiver,
modification or variance which would (a) change the loan rate, (b) forgive any
payment of principal or interest, (c) lessen the lien priority or (d) extend the
final maturity date of a Mortgage Loan past 12 months prior to the final
maturity date on the Bonds. In the event the Servicer or related Subservicer
shall consent to the deferment of the due dates for payments due on a Mortgage
Note, the Servicer shall nonetheless make an Advance or shall cause the related
Subservicer to make an advance to the same extent as if such installment were
due, owing and delinquent and had not been deferred through liquidation of the
Mortgaged Property; PROVIDED, HOWEVER, that the obligation of the Servicer or
the related Subservicer to make an Advance shall apply only to the extent that
the Servicer believes, in good faith, that such advances are not Nonrecoverable
Advances.
(c) Within five Business Days (i) after the Servicer has determined that
all amounts which it expects to recover from or on account of a Mortgage Loan
have been recovered and that no further Liquidation Proceeds will be received in
connection therewith, or (ii) in the case of a Mortgage Loan secured by a second
lien of which any portion of a Scheduled Monthly Payment of principle and
interest is in excess of 180 days past due the Servicer shall provide to (i) the
Indenture Trustee a certificate of a Servicing Officer that such Mortgage Loan
became a Liquidated Mortgage Loan as of the date of such determination and (ii)
the Bond Insurer and the Indenture Trustee a Liquidation Report in the form
attached hereto as Exhibit C.
(d) The Servicer shall establish a segregated account in the name of the
Indenture Trustee (the "COLLECTION ACCOUNT"), which shall be an Eligible
Account, in which the Servicer shall deposit or cause to be deposited any
amounts representing payments on and any collections in respect of the Initial
Mortgage Loans received by it after the Cut-Off Date or, with respect to the
Subsequent Mortgage Loans, the Subsequent Cut-off Date (other than in respect of
the payments referred to in the following paragraph) within two Business Days
following receipt thereof, including the following payments and collections
received or made by it (without duplication):
(i) all payments of principal of or interest on the Mortgage Loans
received by the Servicer after the Cut-off Date or the Subsequent Cut-off
Date directly from Mortgagors or from the respective Subservicer;
(ii) the aggregate Repurchase Price of the Mortgage Loans
purchased by the Servicer pursuant to Section 3.18;
(iii) Net Liquidation Proceeds;
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(iv) all proceeds of any Mortgage Loans repurchased by the Seller
pursuant to the Home Equity Loan Purchase Agreement, and all Substitution
Adjustment Amounts required to be deposited in connection with the
substitution of an Eligible Substitute Mortgage Loan pursuant to the Home
Equity Loan Purchase Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds,
resulting from any insurance policy maintained on a Mortgaged Property;
(vi) any Advance and any Compensating Interest payments; and
(vii) any other amounts received by the Servicer, including all
Foreclosure Profits, assumption fees, prepayment penalties and any other
fees that are required to be deposited in the Collection Account pursuant
to this Servicing Agreement.
Provided, however, that with respect to each Due Period, the Servicer shall be
permitted to retain from payments in respect of interest on the Mortgage Loans,
the Servicing Fee for such Due Period. The foregoing requirements respecting
deposits to the Collection Account are exclusive, it being understood that,
without limiting the generality of the foregoing, the Servicer need not deposit
in the Collection Account late payment charges payable by Mortgagors, as further
described in Section 3.15, or amounts received by the Subservicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items. In the event any amount not required to
be deposited in the Collection Account is so deposited, the Servicer may at any
time (prior to being terminated under this Servicing Agreement) withdraw such
amount from the Collection Account, any provision herein to the contrary
notwithstanding. The Servicer shall keep records that accurately reflect the
funds on deposit in the Collection Account that have been identified by it as
being attributable to the Mortgage Loans and shall hold all collections in the
Collection Account for the benefit of the Owner Trustee, the Indenture Trustee,
the Bondholders and the Bond Insurer, as their interests may appear.
Funds in the Collection Account may be invested in Eligible Investments,
but shall not be commingled with the Servicer's own funds or general assets or
with funds respecting payments on mortgage loans or with any other funds not
related to the Bonds. Income earned on such Eligible Investments shall be for
the account of the Servicer.
The Servicer will require each Subservicer to hold all funds constituting
collections on the Mortgage Loans, pending remittance thereof to the Servicer,
in one or more accounts in the name of the Indenture Trustee meeting the
requirements of an Eligible Account, and such funds shall not be invested. The
Subservicer shall segregate and hold all funds collected and received pursuant
to each Mortgage Loan separate and apart from any of its own funds and general
assets and any other funds. Each Subservicer shall make remittances to the
Servicer no later than one Business Day following receipt thereof and the
Servicer shall deposit any such remittances received from any Subservicer within
one Business Day following receipt by the Servicer.
Section 3.07. Withdrawals from the collection account. (a) The Servicer
shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on
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deposit therein pursuant to Section 3.06 that are attributable to the Mortgage
Loans for the following purposes (without duplication):
(i) to deposit in the Payment Account, by the fourth Business Day
prior to each Payment Date, all collections on the Mortgage Loans required
to be distributed from the Payment Account on a Payment Date;
(ii) to the extent deposited to the Collection Account, to
reimburse itself or the related Subservicer for previously unreimbursed
expenses incurred in maintaining individual insurance policies pursuant to
Section 3.11, or Liquidation Expenses, paid pursuant to Section 3.13, such
withdrawal right being limited to amounts received on particular Mortgage
Loans (other than any Repurchase Price in respect thereof) which represent
late recoveries of the payments for which such advances were made, or from
related Liquidation Proceeds;
(iii) to pay to itself out of each payment received on account of
interest on a Mortgage Loan as contemplated by Section 3.15, an amount
equal to the related Servicing Fee (to the extent not retained pursuant to
Section 3.06);
(iv) to pay to itself or the Seller, with respect to any Mortgage
Loan or property acquired in respect thereof that has been purchased by the
Seller, the Servicer or other entity, all amounts received thereon and not
required to be distributed to Bondholders as of the date on which the
related Repurchase Price is determined;
(v) to reimburse the Servicer or any Subservicer for any
unreimbursed Advance of its own funds or any unreimbursed advance of such
Subservicer's own funds, the right of the Servicer or a Subservicer to
reimbursement pursuant to this subclause (v) being limited to amounts
received on a particular Mortgage Loan (including, for this purpose, the
Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds)
which represent late payments or recoveries of the principal of or interest
on such Mortgage Loan respecting which such Advance or advance was made;
(vi) to reimburse the Servicer or any Subservicer from Insurance
Proceeds or Liquidation Proceeds relating to a particular Mortgage Loan for
amounts expended by the Servicer or such Subservicer pursuant to Section
3.13 in good faith in connection with the restoration of the related
Mortgage Property which was damaged by the uninsured cause or in connection
with the liquidation of such Mortgage Loan;
(vii) to reimburse the Servicer or any Subservicer for any
unreimbursed Nonrecoverable Advance previously made, and otherwise not
reimbursed pursuant to this Subsection 3.07(a);
(viii) to pay the Owner Trustee, on the Payment Date occurring in
December of each year, the Owner Trustee Fee;
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(ix) to withdraw any other amount deposited in the Collection
Account that was not required to be deposited therein pursuant to Section
3.06;
(x) to reimburse the Servicer for costs associated with the
environmental report specified in Section 3.13(c);
(xi) to clear and terminate the Collection Account upon a
termination pursuant to Section 7.08; and
(xi) to pay to the Servicer income earned on Eligible Investments
in the Collection Account.
In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v) and
(vi), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Mortgage Loan, and the Servicer shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Collection Account pursuant to
such clauses.
(b) Notwithstanding the provisions of this Section 3.07, the Servicer may,
but is not required to, allow the Subservicers to deduct from amounts received
by them or from the related account maintained by a Subservicer, prior to
deposit in the Collection Account, any portion to which such Subservicers are
entitled as reimbursement of any reimbursable Advances made by such
Subservicers.
Section 3.08. Collection of taxes, assessments and similar items; servicing
Accounts.
(a) The Servicer shall establish and maintain or cause the related
Subservicer to establish and maintain, one or more Servicing Accounts. The
Servicer or a Subservicer will deposit and retain therein all collections from
the Mortgagors for the payment of taxes, assessments, insurance premiums, or
comparable items as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by the
Servicer or a Subservicer (and its successors and assigns) in the name of the
Indenture Trustee. Such Servicing Accounts shall be Eligible Accounts and, if
permitted by applicable law, invested in Eligible Investments held in trust by
the Servicer or a Subservicer as described above and maturing, or be subject to
redemption or withdrawal, no later than the date on which such funds are
required to be withdrawn, and in no event later than 45 days after the date of
investment; withdrawals of amounts from the Servicing Accounts may be made only
to effect timely payment of taxes, assessments, insurance premiums, or
comparable items, to reimburse the Servicer or a Subservicer for any advances
made with respect to such items, to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to Mortgagors on
balances in the Servicing Accounts or to clear and terminate the Servicing
Accounts at or any time after the termination of this Servicing Agreement.
Amounts received from Mortgagors for deposit into the Servicing Accounts shall
be deposited in the Servicing Accounts by the Servicer within two days of
receipt. The Servicer shall advance from its own funds amounts needed to pay
items payable
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from the Servicing Accounts if the Servicer reasonably believes that such
amounts are recoverable from the related Mortgagor. The Servicer shall comply
with all laws relating to the Servicing Accounts, including laws relating to
payment of interest on the Servicing Accounts. If interest earned by the
Servicer on the Servicing Accounts is not sufficient to pay required interest on
the Servicing Accounts, the Servicer shall pay the difference from its own
funds. The Servicing Accounts shall not be the property of the Issuer.
Section 3.09. Access To Certain Documentation And Information Regarding The
Mortgage Loans. The Servicer shall provide, and shall cause any Subservicer to
provide, to the Indenture Trustee, the Owner Trustee and the Bond Insurer access
to the documentation regarding the related Mortgage Loans and REO Property and
to the Bondholders, the FDIC, and the supervisory agents and examiners of the
FDIC (to which the Indenture Trustee shall also provide) access to the
documentation regarding the related Mortgage Loans required by applicable
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer or the
Subservicers that are designated by these entities; PROVIDED, HOWEVER, that,
unless otherwise required by law, the Indenture Trustee, the Servicer or the
Subservicer shall not be required to provide access to such documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor;
provided, further, however, that the Indenture Trustee, the Bond Insurer and the
Owner Trustee shall coordinate their requests for such access so as not to
impose an unreasonable burden on, or cause an unreasonable interruption of, the
business of the Servicer or any Subservicer. The Servicer, the Subservicers and
the Indenture Trustee shall allow representatives of the above entities to
photocopy any of the documentation and shall provide equipment for that purpose
at a charge that covers their own actual out-of-pocket costs.
Section 3.10. Superior Liens. If the Servicer is notified that any
lienholder under a Superior Lien has accelerated or intends to accelerate the
obligations secured by such Superior Lien, or has declared or intends to declare
a default under the related mortgage or the promissory note secured thereby, or
has filed or intends to file an election to have any Mortgaged Property sold or
foreclosed, the Servicer shall take, on behalf of the Issuer, the Bond Insurer
and the Indenture Trustee, reasonable actions to protect the interests of the
Securityholders and the Bond Insurer and/or to preserve the security of the
related Mortgage Loan consistent with the requirements of this Servicing
Agreement, provided that the Servicer shall not be required to make any
Servicing Advances to cure the default or reinstate the Superior Lien. The
Servicer shall promptly notify the Issuer, and the Bond Insurer and the
Indenture Trustee if it takes any such action.
Section 3.11. Maintenance Of Hazard Insurance And Fidelity Coverage. (a)
The Servicer shall maintain and keep, or cause each Subservicer to maintain and
keep, with respect to each Mortgage Loan and each REO Property, in full force
and effect hazard insurance (fire insurance with extended coverage) equal to at
least the lesser of the Principal Balance of the Mortgage Loan (or the combined
Principal Balance owing on such Mortgage Loan and any mortgage loan senior to
such Mortgage Loan) or the current replacement cost of the Mortgaged Property,
and containing a standard mortgagee clause, PROVIDED, HOWEVER, that the amount
of hazard insurance may not be less than the amount necessary to prevent loss
due to the application of any co-insurance provision of the related policy.
Unless applicable state law requires a higher deductible,
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the deductible on such hazard insurance policy may be no more than $1,500 or 1%
of the applicable amount of coverage, whichever is less. In the case of a
condominium unit or a unit in a planned unit development, the required hazard
insurance shall take the form of a multi-peril policy covering the entire
condominium project or planned unit development, in an amount equal to at least
100% of the insurable value based on replacement cost. If the Servicer shall
obtain and maintain a blanket policy consistent with its general mortgage
servicing activities from an insurer acceptable to the Bond Insurer insuring
against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligations as set forth in this Section 3.11(a),
it being understood and agreed that such policy may contain a deductible clause,
in which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with this
Section 3.11(a) and there shall have been a loss which would have been covered
by such policy, deposit in the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause without any
right of reimbursement. Any such deposit by the Servicer shall be made on the
last Business Day of the Due Period in the month in which payments under any
such policy would have been deposited in the Collection Account. In connection
with its activities as servicer of the Mortgage Loans, the Servicer agrees to
present, on behalf of itself, the Issuer and the Indenture Trustee, claims under
any such blanket policy.
(b) Any amounts collected by the Servicer or a Subservicer under any such
hazard insurance policy (other than amounts to be applied to the restoration or
repair of the Mortgaged Property or amounts released to the Mortgagor in
accordance with the Servicer's or a Subservicer's normal servicing procedures,
the Mortgage Note, the Security Instrument or applicable law) shall be deposited
in the Collection Account.
(c) Any cost incurred by a Servicer or a Subservicer in maintaining any
such individual hazard insurance policies shall not be added to the amount owing
under the Mortgage Loan for the purpose of calculating monthly distributions to
Bondholders, notwithstanding that the terms of the Mortgage Loan so permit. Such
costs of maintaining individual hazard insurance policies shall be recoverable
by the Servicer or a Subservicer out of related late payments by the Mortgagor
or out of Insurance Proceeds or Liquidation Proceeds or by the Servicer from the
Repurchase Price, to the extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Servicer shall use its best reasonable efforts to cause with respect
to the Mortgage Loans and each REO Property flood insurance (to the extent
available and in accordance with mortgage servicing industry practice) to be
maintained. Such flood insurance shall cover the Mortgaged Property, including
all items taken into account in arriving at the Appraised Value on which the
Mortgage Loan was based, and shall be in an amount equal to the lesser of (i)
the Principal Balance of the related Mortgage Loan and (ii) the minimum amount
required under the terms of coverage to compensate for any damage or loss on a
replacement cost basis, but not more than the maximum
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amount of such insurance available for the related Mortgaged Property under
either the regular or emergency programs of the National Flood Insurance Program
(assuming that the area in which such Mortgaged Property is located is
participating in such program). Unless applicable state law requires a higher
deductible, the deductible on such flood insurance may not exceed $1,500 or 1%
of the applicable amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections 3.11
(a) and (d) and there shall have been a loss which would have been covered by
such insurance had it been maintained, the Servicer shall pay, or cause the
related Subservicer to pay, for any necessary repairs without any right of
reimbursement.
(f) The Servicer shall present, or cause the related Subservicer to
present, claims under any related hazard insurance or flood insurance policy.
(g) The Servicer shall obtain and maintain at its own expense, and shall
cause each Subservicer to obtain and maintain at its own expense, and for the
duration of this Servicing Agreement, a blanket fidelity bond and an errors and
omissions insurance policy covering the Servicer's and such Subservicer's
officers, employees and other persons acting on its behalf in connection with
its activities under this Servicing Agreement. The amount of coverage shall be
consistent with industry standards but in an amount not less than presently
maintained by the Servicer. The Servicer shall promptly notify the Indenture
Trustee and the Bond Insurer of any material change in the terms of such bond or
policy. The Servicer shall provide annually to the Indenture Trustee and the
Bond Insurer a certificate of insurance that such bond and policy are in effect.
If any such bond or policy ceases to be in effect, the Servicer shall, to the
extent possible, give the Indenture Trustee and the Bond Insurer ten days'
notice prior to any such cessation and shall use its reasonable best efforts to
obtain a comparable replacement bond or policy, as the case may be. Any amounts
relating to the Mortgage Loans collected under such bond or policy shall be
deposited in the Collection Account.
Section 3.12. Due-on-sale Clauses; Assumption Agreements. (a) In any case
in which the Servicer is notified by any Mortgagor or Subservicer that a
Mortgaged Property relating to a Mortgage Loan has been or is about to be
conveyed by the Mortgagor, the Servicer shall enforce, or shall instruct such
Subservicer to enforce, any due-on-sale clause contained in the related Security
Instrument to the extent permitted under the terms of the related Mortgage Note
and by applicable law. The Servicer or the related Subservicer may repurchase a
Mortgage Loan at the Repurchase Price when the Servicer requires acceleration of
the Mortgage Loan, but only if the Servicer is satisfied, as evidenced by an
Officer's Certificate delivered to the Indenture Trustee and the Bond Insurer,
that such Mortgage Loan is in default or default is reasonably foreseeable. If
the Servicer reasonably believes that such due-on-sale clause cannot be enforced
under applicable law or if the Mortgage Loan does not contain a due-on-sale
clause, the Servicer is authorized, and may authorize any Subservicer, to
consent to a conveyance subject to the lien of the Mortgage, and to take or
enter into an assumption agreement from or with the Person to whom such property
has been or is about to be conveyed, pursuant to which such Person becomes
liable under the related Mortgage Note and unless prohibited by applicable state
law, such Mortgagor remains liable thereon, on condition, however, that the
related Mortgage Loan shall continue to
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be covered by a hazard policy. In connection with any such assumption, no
material term of the related Mortgage Note may be changed. The Servicer shall
notify the Indenture Trustee and the Bond Insurer, whenever possible, before the
completion of such assumption agreement, and shall forward to the Indenture
Trustee the original copy of such assumption agreement, which copy shall be
added by the Indenture Trustee to the related Mortgage File and which shall, for
all purposes, be considered a part of such Mortgage File to the same extent as
all other documents and instruments constituting a part thereof.
(b) Notwithstanding the foregoing paragraph or any other provision of this
Servicing Agreement, the Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or any conveyance by the Mortgagor of the
related Mortgaged Property or assumption of a Mortgage Loan which the Servicer
reasonably believes it may be restricted by law from preventing, for any reason
whatsoever or if the exercise of such right would impair or threaten to impair
any recovery under any applicable insurance policy.
Section 3.13. Realization Upon Defaulted Mortgage Loans. (a) The Servicer
shall, or shall direct the related Subservicer to, foreclose upon or otherwise
comparably convert the ownership of properties securing any Mortgage Loans that
come into and continue in default and as to which no satisfactory arrangements
can be made for collection of delinquent payments pursuant to Section 3.06,
except that the Servicer shall not, and shall not direct the related Subservicer
to, foreclose upon or otherwise comparably convert a Mortgaged Property if there
is evidence of toxic waste or other environmental hazards thereon unless the
Servicer follows the procedures in Subsection (c) below. In connection with such
foreclosure or other conversion, the Servicer in conjunction with the related
Subservicer, if any, shall use its best reasonable efforts to preserve REO
Property and to realize upon defaulted Mortgage Loans in such manner as to
maximize the receipt of principal and interest by the Bondholders, taking into
account, among other things, the timing of foreclosure and the considerations
set forth in Subsection 3.13(b). The foregoing is subject to the proviso that
the Servicer shall not be required to expend its own funds in connection with
any foreclosure or towards the restoration of any property unless it determines
in good faith (i) that such restoration or foreclosure will increase the
proceeds of liquidation of the Mortgage Loan to Bondholders after reimbursement
to itself for such expenses and (ii) that such expenses will be recoverable to
it either through Liquidation Proceeds (respecting which it shall have priority
for purposes of reimbursements from the Collection Account pursuant to Section
3.07) or through Insurance Proceeds (respecting which it shall have similar
priority). The Servicer shall be responsible for all costs and expenses
constituting Liquidation Expenses incurred by it in any such proceedings;
PROVIDED, HOWEVER, that it shall be entitled to reimbursement thereof (as well
as its normal servicing compensation) as set forth in Section 3.07. Any income
from or other funds (net of any income taxes) generated by REO Property shall be
deemed for purposes of this Servicing Agreement to be Liquidation Proceeds.
Any subsequent collections with respect to any Liquidated Mortgage Loan
shall be deposited to the Collection Account. For purposes of determining the
amount of any Liquidation Proceeds or Insurance Proceeds, or other unscheduled
collections, the Servicer may take into
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account any estimated additional Liquidation Expenses expected to be incurred in
connection with the related defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, who shall hold the same on behalf of
the Issuer in accordance with the Indenture. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage Loan, such
Mortgaged Property shall (except as otherwise expressly provided herein) be
considered to be an outstanding Mortgage Loan held as an asset of the Issuer
until such time as such property shall be sold.
(b) The Servicer shall not acquire any real property (or any personal
property incident to such real property) on behalf of the Trust Estate except in
connection with a default or reasonably foreseeable default of a Mortgage Loan.
In the event that the Servicer acquires any real property (or personal property
incident to such real property) on behalf of the Trust Estate in connection with
a default or imminent default of a Mortgage Loan, such property shall be
disposed of by the Servicer on behalf of the Trust Estate within two years after
its acquisition on behalf of the Trust Estate.
(c) With respect to any Mortgage Loan as to which the Servicer or a
Subservicer has received notice of, or has actual knowledge of, the presence of
any toxic or hazardous substance on the Mortgaged Property, the Servicer shall
promptly notify the Indenture Trustee, the Owner Trustee and the Bond Insurer
and shall act in accordance with any such directions and instructions provided
by the Bond Insurer, or if a Bond Insurer Default exists, by the Indenture
Trustee, as pledgee of the Issuer. Notwithstanding the preceding sentence of
this Section 3.13(c), with respect to any Mortgage Loan described by such
sentence, the Servicer shall, if requested by the Bond Insurer, obtain and
deliver to the Issuer, the Indenture Trustee and the Bond Insurer an
environmental audit report prepared by a Person who regularly conducts
environmental audits using customary industry standards. The Servicer shall be
entitled to reimbursement for such report pursuant to Section 3.07. If the Bond
Insurer or Indenture Trustee, as applicable, has not provided directions and
instructions to the Servicer in connection with any such Mortgage Loan within 30
days of a request by the Servicer for such directions and instructions, then the
Servicer shall take such action as it deems to be in the best economic interest
of the Trust Estate (other than proceeding against the Mortgaged Property) and
is hereby authorized at such time as it deems appropriate to release such
Mortgaged Property from the lien of the related Mortgage. The parties hereto
acknowledge that the Servicer shall not obtain on behalf of the Issuer a deed as
a result or in lieu of foreclosure, and shall not otherwise acquire possession
of or title to, or commence any proceedings to acquire possession of or title
to, or take any other action with respect to, any Mortgaged Property, if the
Owner Trustee could reasonably be considered to be a responsible party for any
liability arising from the presence of any toxic or hazardous substance on the
Mortgaged Property, unless the Owner Trustee has been indemnified to its
reasonable satisfaction against such liability.
Section 3.14. Indenture Trustee To Cooperate; Release Of Mortgage Files.
(a) Upon payment in full of any Mortgage Loan, the Servicer will immediately
notify the Indenture Trustee by a certification signed by a Servicing Officer
(which certification shall include a statement to
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the effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account have been so deposited) and
shall request delivery to the Servicer or Subservicer, as the case may be, of
the Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee shall promptly release the related Mortgage File to the Servicer or
Subservicer and execute and deliver to the Servicer, without recourse, the
request for reconveyance, deed of reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Security Instrument
(furnished by the Servicer), together with the Mortgage Note with written
evidence of cancellation thereon.
(b) From time to time as is appropriate, for the servicing or foreclosure
of any Mortgage Loan or collection under an insurance policy, the Servicer may
deliver to the Indenture Trustee a Request for Release signed by a Servicing
Officer on behalf of the Servicer in substantially the form attached as Exhibit
B hereto. Upon receipt of the Request for Release, the Indenture Trustee shall
deliver the Mortgage File or any document therein to the Servicer or Sub
servicer, as the case may be, as bailee for the Indenture Trustee.
(c) The Servicer shall cause each Mortgage File or any document therein
released pursuant to Subsection 3.14(b) to be returned to the Indenture Trustee
when the need therefor no longer exists, and in any event within 21 days of the
Servicer's receipt thereof, unless the Mortgage Loan has become a Liquidated
Mortgage Loan and the Liquidation Proceeds relating to the Mortgage Loan have
been deposited in the Collection Account or such Mortgage File is being used to
pursue foreclosure or other legal proceedings. Prior to return of a Mortgage
File or any document to the Indenture Trustee, the Servicer, the related insurer
or Subservicer to whom such file or document was delivered shall retain such
file or document in its respective control as bailee for the Indenture Trustee
unless the Mortgage File or such document has been delivered to an attorney, or
to a public trustee or other public official as required by law, to initiate or
pursue legal action or other proceedings for the foreclosure of the Mortgaged
Property either judicially or non-judicially, and the Servicer has delivered to
the Indenture Trustee a certificate of a Servicing Officer certifying as to the
name and address of the Person to which such Mortgage File or such document was
delivered and the purpose or purposes of such delivery. If a Mortgage Loan
becomes a Liquidated Mortgage Loan, the Indenture Trustee shall deliver the
Request for Release with respect thereto to the Servicer upon deposit of the
related Liquidation Proceeds in the Collection Account.
(d) The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to (i)
the foreclosure or trustee's sale with respect to a Mortgaged Property; (ii) any
legal action brought to obtain judgment against any Mortgagor on the Mortgage
Note or Security Instrument; (iii) obtain a deficiency judgment against the
Mortgagor; or (iv) enforce any other rights or remedies provided by the Mortgage
Note or Security Instrument or otherwise available at law or equity. Together
with such documents or pleadings the Servicer shall deliver to the Indenture
Trustee a certificate of a Servicing Officer in which it requests the Indenture
Trustee to execute the pleadings or documents. The certificate shall certify and
explain the reasons for which the pleadings or documents are required. It shall
further certify that the Indenture Trustee's execution and delivery of the
pleadings or documents will not invalidate any insurance coverage under the
insurance policies or invalidate or otherwise affect
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the lien of the Security Instrument, except for the termination of such a lien
upon completion of the foreclosure or trustee's sale.
Section 3.15. Servicing Compensation. (a) As compensation for its
activities hereunder, the Servicer shall be entitled to receive the Servicing
Fee from full payments of accrued interest on each Mortgage Loan. The Servicer
shall be solely responsible for paying any and all fees with respect to a
Subservicer and the Trust Estate shall not bear any fees, expenses or other
costs directly associated with any Subservicer.
(b) The Servicer may retain additional servicing compensation in the form
of late payment charges, to the extent such charges are collected from the
related Mortgagors and investment earnings on the Collection Account. The
Servicer shall be required to pay all expenses it incurs in connection with
servicing activities under this Servicing Agreement and shall not be entitled in
connection with servicing activities under this Servicing Agreement to
reimbursement except as provided in this Servicing Agreement. Expenses to be
paid by the Servicer without reimbursement under this Subsection 3.15(b) shall
include payment of the expenses of the accountants retained pursuant to Section
3.17.
Section 3.16. Annual Statements Of Compliance. Within 120 days after
December 31 of each year, the Servicer at its own expense shall deliver to the
Indenture Trustee, with a copy to the Bond Insurer and the Rating Agencies, an
Officer's Certificate stating, as to the signer thereof, that (i) a review of
the activities of the Servicer during the preceding calendar year and of
performance under this Servicing Agreement has been made under such officer's
supervision, (ii) to the best of such officer's knowledge, based on such review,
the Servicer has fulfilled its obligations under this Servicing Agreement in all
material respects for such year, 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 including the steps being taken by the
Servicer to remedy such default; (iii) a review of the activities of each
Subservicer during the Subservicer's most recently ended calendar year and its
performance under its Subservicing Agreement has been made under such officer's
supervision; and (iv) to the best of the Servicing Officer's knowledge, based on
his review and the certification of an officer of the Subservicer (unless the
Servicing Officer has reason to believe that reliance on such certification is
not justified), either each Subservicer has performed and fulfilled its duties,
responsibilities and obligations under this Servicing Agreement and its
Subservicing Agreement in all material respects throughout the year, or, if
there has been a default in performance or fulfillment of any such duties,
responsibilities or obligations, specifying the nature and status of each such
default known to the Servicing Officer. Copies of such statements shall be
provided by the Servicer to the Bondholders upon request or by the Indenture
Trustee at the expense of the Servicer should the Servicer fail to provide such
copies.
Section 3.17. Annual Independent Public Accountants' Servicing Report. (a)
Within 120 days after December 31 of each year, the Servicer, at its expense,
shall cause a firm of Independent public accountants who are members of the
American Institute of Certified Public Accountants and who are either KPMG Peat
Marwick LLP (or a successor thereof) or are otherwise acceptable to the Bond
Insurer to furnish a statement to the Servicer, which will be
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provided to the Indenture Trustee, the Bond Insurer and the Rating Agencies, to
the effect that, in connection with the firm's examination of the Servicer's
financial statements as of the end of such calendar year, nothing came to their
attention that indicated that the Servicer was not in compliance with Sections
3.06, 3.07 and 3.08 except for (i) such exceptions as such firm believes to be
immaterial and (ii) such other exceptions as are set forth in such statement.
(b) Within 120 days after December 31 of each year, the Servicer, at its
expense, shall, and shall cause each Subservicer to cause, a nationally
recognized firm of independent certified public accountants to furnish to the
Servicer or such Subservicer, as the case may be, a report stating that (i) it
has obtained a letter of representation regarding certain matters from the
management of the Servicer or such Subservicer, as the case may be, which
includes an assertion that the Servicer or such Subservicer, as the case may be,
has complied with certain minimum mortgage loan servicing standards identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America with respect to the servicing of
first and second lien conventional single family mortgage loans during the most
recently completed calendar year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. Immediately upon receipt of such report, the Servicer
shall or shall cause each Subservicer to furnish a copy of such report to the
Indenture Trustee, the Rating Agencies and the Bond Insurer.
Section 3.18. Optional Purchase Of Defaulted Mortgage Loans. The Servicer
may repurchase any Mortgage Loan delinquent in payment for a period of 90 days
or longer for a price equal to the Repurchase Price. The procedure for such
repurchase shall be the same as for repurchase by the Seller under the Home
Equity Loan Purchase Agreement. Notwithstanding the foregoing, the Indenture
Trustee, whether acting as Indenture Trustee or in the capacity of successor
Servicer, shall have no obligation to repurchase any Mortgage Loan.
Section 3.19. Information Required By The Internal Revenue Service
Generally And Reports Of Foreclosures And Abandonments Of Mortgaged Property.
The Servicer shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws. In
particular, with respect to the requirement under Section 6050J of the Code to
the effect that the Servicer or Subservicer shall make reports of foreclosures
and abandonments of any mortgaged property for each year beginning in 1997, the
Servicer or Subservicer shall file reports relating to each instance occurring
during the previous calendar year in which the Servicer (i) acquires an interest
in any Mortgaged Property through foreclosure or other comparable conversion in
full or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to
know that any Mortgaged Property has been abandoned. The reports from the
Servicer or Subservicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Section 6050J, Section 6050H (reports relating
to mortgage interest received) and Section 6050P of the Code (reports relating
to cancellation of indebtedness).
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ARTICLE IV
Remittance Reports
Section 4.01. Remittance Reports. On the second Business Day following each
Determination Date, the Servicer shall deliver to the Indenture Trustee a
report, prepared as of the close of business on the Determination Date (the
"Determination Date Report"), and shall forward to the Indenture Trustee in the
form of computer readable electromagnetic tape or disk of such report. The
Determination Date Report and any written information supplemental thereto shall
include such information with respect to the Mortgage Loans that is reasonably
available to the Servicer and that is required by the Indenture Trustee for
purposes of making the calculations and providing the reports referred to in the
Indenture, as set forth in written specifications or guidelines issued by the
Indenture Trustee from time to time. Such information shall include the
aggregate amounts required to be withdrawn from the Collection Account and
deposited into the Payment Account pursuant to Section 3.07. Such information
shall also include (a) the number of Mortgage Loans that prepaid in the previous
month; (b) the loan balance of each such Mortgage Loan; (c) whether a prepayment
penalty was applied to such Mortgage Loan; and (d) the amount of prepayment
penalty with respect to each such Mortgage Loan. The Servicer agrees to
cooperate with the Indenture Trustee in providing all information as is
reasonably requested by the Indenture Trustee to prepare the reports required
under the Indenture. Upon written request by the Bond Insurer, the Servicer
shall deliver the Determination Date Report to the Bond Insurer.
The determination by the Servicer of such amounts shall, in the absence of
obvious error, be presumptively deemed to be correct for all purposes hereunder
and the Owner Trustee and Indenture Trustee shall be protected in relying upon
the same without any independent check or verification.
Section 4.02. Advances. If any Monthly Payment (together with any advances
from the Subservicers) on a Mortgage Loan that was due on the immediately
preceding Due Date and delinquent on the Determination Date is delinquent other
than as a result of application of the Relief Act, the Servicer will deposit in
the Collection Account not later than the fourth Business Day immediately
preceding the related Payment Date an amount equal to such deficiency net of the
related Servicing Fee for such Mortgage Loan, except to the extent the Servicer
determines any such advance to be nonrecoverable from Liquidation Proceeds,
Insurance Proceeds or future payments on such Mortgage Loan. Subject to the
foregoing and in the absence of such a determination, the Servicer shall
continue to make such advances through the date that the related Mortgaged
Property has, in the judgment of the Servicer, been completely liquidated. If
applicable, on the fourth Business Day preceding each Payment Date, the Servicer
shall present an Officer's Certificate to the Indenture Trustee and the Bond
Insurer (i) stating that the Servicer elects not to make an Advance in a stated
amount and (ii) detailing the reason it deems the advance to be nonrecoverable.
The Indenture Trustee shall forward a copy of such Officer's Certificate to the
Bond Insurer.
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Section 4.03. Compensating Interest Payments. The Servicer shall deposit in
the Collection Account not later than the fourth Business Day preceding the
Payment Date an amount equal to the Compensating Interest related to the related
Determination Date. The Servicer shall not be entitled to any reimbursement of
any Compensating Interest payment.
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ARTICLE V
The Servicer
Section 5.01. Liability Of The Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Servicer herein.
Section 5.02. Merger Or Consolidation Of, Or Assumption Of The Obligations
Of, The Servicer. Any corporation into which the Servicer may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer shall be a
party, or any corporation succeeding to the business of the Servicer, shall be,
with the consent of the Bond Insurer, the successor of the Servicer, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
The Servicer may fully assign all of its rights and delegate its duties and
obligations under this Servicing Agreement; PROVIDED, that the Person accepting
such assignment or delegation shall be a Person which is reasonably satisfactory
to the Indenture Trustee (as pledgee of the Mortgage Loans), the Company and the
Bond Insurer (in its sole discretion), is willing to service the Mortgage Loans
and executes and delivers to the Indenture Trustee and the Issuer an agreement,
in form and substance reasonably satisfactory to the Bond Insurer, the Indenture
Trustee and the Issuer, which contains an assumption by such Person of the due
and punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under this Servicing Agreement; PROVIDED,
FURTHER, that each Rating Agency's rating of the Bonds in effect immediately
prior to such assignment and delegation will not be qualified, reduced, or
withdrawn as a result of such assignment and delegation (as evidenced by a
letter to such effect from each Rating Agency) without taking into account the
Bond Insurance Policy.
Section 5.03. Limitation On Liability Of The Servicer And Others. Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Issuer, the Owner Trustee, the
Indenture Trustee, the Bond Insurer or the Bondholders for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Servicing Agreement, PROVIDED, HOWEVER, that this provision shall not protect
the Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the
performance of its duties hereunder or by reason of its reckless disregard of
its obligations and duties hereunder. The Servicer and any director or officer
or employee or agent of the Servicer may rely in good faith on any document of
any kind PRIMA FACIE properly executed and submitted by any Person respecting
any matters arising hereunder. The Servicer and any director or officer or
employee or agent of the Servicer shall be indemnified by the Issuer and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Servicing Agreement or the Bonds, including any
amount paid to the Owner Trustee or the Indenture Trustee pursuant to Section
5.06(b), other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Servicing Agreement)
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and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or negligence in the performance of its duties hereunder
or by reason of its reckless disregard of its obligations and duties 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 Servicing Agreement, and which in its opinion may
involve it in any expense or liability; PROVIDED, HOWEVER, that the Servicer may
in its sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Servicing Agreement, and the rights and duties of
the parties hereto and the interests of the Bondholders hereunder. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Issuer, and
the Servicer shall be entitled to be reimbursed therefor. The Servicer's right
to indemnity or reimbursement pursuant to this Section 5.03 shall survive any
resignation or termination of the Servicer pursuant to Section 5.04 or 6.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination). Any reimbursements or indemnification to the
Servicer from the Issuer pursuant to this Section 5.03 shall be payable in the
priority set forth in Section 3.05(a)(ix) of the Indenture.
Section 5.04. Servicer Not To Resign. Subject to the provisions of Section
5.02, the Servicer shall not resign from the obligations and duties hereby
imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or (ii) upon satisfaction of the following conditions: (a) the Servicer has
proposed a successor servicer to the Issuer, the Bond Insurer and the Indenture
Trustee in writing and such proposed successor servicer is reasonably acceptable
to the Issuer and the Indenture Trustee; (b) each Rating Agency shall have
delivered a letter to the Issuer, the Bond Insurer and the Indenture Trustee
prior to the appointment of the successor servicer stating that the proposed
appointment of such successor servicer as Servicer hereunder will not result in
the reduction or withdrawal of the then current rating of the Bonds or the then
current rating of the Bonds without taking into account the Bond Insurance
Policy; and (c) such proposed successor servicer is acceptable to the Bond
Insurer, as evidenced by a letter to the Issuer, the Servicer and the Indenture
Trustee; PROVIDED, HOWEVER, that no such resignation by the Servicer shall
become effective until such successor servicer or, in the case of (i) above, the
Indenture Trustee, as pledgee of the Mortgage Loans, shall have assumed the
Servicer's responsibilities and obligations hereunder or the Indenture Trustee,
as pledgee of the Mortgage Loans, shall have designated a successor servicer in
accordance with Section 6.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 6.01
and 6.02 as obligations that survive the resignation or termination of the
Servicer. The Servicer shall have no claim (whether by subrogation or otherwise)
or other action against any Bondholder or the Bond Insurer for any amounts paid
by the Servicer pursuant to any provision of this Servicing Agreement. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Indenture Trustee and the
Bond Insurer.
Section 5.05. Delegation Of Duties. In the ordinary course of business, the
Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, who agrees to conduct such duties in accordance
with the same standards with which the Servicer complies pursuant to Section
3.01. Such delegation shall not relieve the Servicer of its liabilities
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and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 5.04.
Section 5.06. Servicer To Pay Indenture Trustee's And Owner Trustee's Fees
And Expenses; Indemnification. (a) The Servicer covenants and agrees to pay to
the Owner Trustee, the Indenture Trustee and any co-trustee of the Indenture
Trustee from time to time, and the Owner Trustee, the Indenture Trustee and any
such co-trustee shall be entitled to, reasonable compensation, including all
indemnification payments (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by each of them in the execution of the trusts created under the Trust
Agreement and the Indenture and in the exercise and performance of any of the
powers and duties under the Trust Agreement or the Indenture, as the case may
be, of the Owner Trustee, the Indenture Trustee and any co-trustee of the
Indenture Trustee, and the Servicer will pay or reimburse the Indenture Trustee
and any co-trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by the Indenture Trustee or any co-trustee of the
Indenture Trustee in accordance with any of the provisions of this Servicing
Agreement except any such expense, disbursement or advance as may arise from its
negligence or bad faith.
(b) The Servicer agrees to indemnify the Indenture Trustee and the Owner
Trustee for, and to hold the Indenture Trustee and the Owner Trustee, as the
case may be, harmless against, any claim, tax, penalty, loss, liability or
expense of any kind whatsoever, incurred without negligence or willful
misconduct on its part, arising out of, or in connection with, the failure by
the Servicer to perform its duties in compliance with this Servicing Agreement,
including the reasonable costs and expenses (including reasonable legal fees and
expenses) of defending itself against any claim in connection with the exercise
or performance of any of its powers or duties under any Basic Document, provided
that:
(i) with respect to any such claim, the Indenture Trustee or Owner
Trustee, as the case may be, shall have given the Servicer written notice
thereof promptly after the Indenture Trustee or Owner Trustee, as the case
may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Indenture
Trustee or Owner Trustee, as the case may be, shall cooperate and consult
fully with the Servicer in preparing such defense; and
(iii) notwithstanding anything in this Servicing Agreement to the
contrary, the Servicer shall not be liable for settlement of any claim by
the Indenture Trustee or the Owner Trustee, as the case may be, entered
into without the prior consent of the Servicer, which consent shall not be
unreasonably withheld.
No termination of this Servicing Agreement shall affect the obligations created
by this Section 5.06 of the Servicer to indemnify the Indenture Trustee and the
Owner Trustee under the condi tions and to the extent set forth herein. This
section shall survive the termination of this Servicing
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Agreement. Any amounts to be paid by the Servicer pursuant to this Subsection
may not be paid from the Trust Estate.
Notwithstanding the foregoing, the indemnification provided by the Servicer
in this Section 5.06 shall not pertain to any loss, liability or expense of the
Indenture Trustee or the Owner Trustee, including the costs and expenses of
defending itself against any claim, incurred in connection with any actions
taken by the Indenture Trustee or the Owner Trustee at the direction of the
Securityholders, as the case may be, pursuant to the terms of this Servicing
Agreement.
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ARTICLE VI
Default
Section 6.01. Servicing Default. If any one of the following events (a
"Servicing Default") shall occur and be continuing:
(i) Any failure by the Servicer to deposit in the Collection
Account or Payment Account any deposit required to be made under the terms
of this Servicing Agreement, including any Advances and Compensating
Interest, which continues un remedied for a period of three Business Days
after the date upon which written notice of such failure shall have been
given to the Servicer by the Issuer or the Indenture Trustee or to the
Servicer, the Issuer and the Indenture Trustee by the Bond Insurer; or
(ii) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Servicing Agreement, which failure, in each
case, materially and adversely affects the interests of Bondholders or the
Bond Insurer, or the breach of any representation or warranty of the
Servicer in this Servicing Agreement or in the Insurance Agreement which
materially and adversely affects the interests of the Bondholders or the
Bond Insurer, and which in either case continues unremedied for a period of
30 days after the date on which written notice of such failure or breach,
requiring the same to be remedied, and stating that such notice is a
"Notice of Default" hereunder, shall have been given to the Servicer by the
Issuer or the Indenture Trustee or to the Servicer, the Issuer and the
Indenture Trustee by the Bond Insurer; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership, readjustment
of debt, marshalling of assets and liabilities or similar proceed ings, or
for the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation, consent
to the appointment of a conservator, receiver, liquidator or similar person
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of its property, or a decree or order
of a court, agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceed ings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force undischarged,
unbonded or unstayed for a period of 60 days; or the Servicer shall admit
in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any appli-
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cable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations;
or
(v) Any failure by the Servicer to pay when due any amount payable
by it under the terms of the Insurance Agreement which continues unremedied
for a period of three Business Days after the date upon which written
notice of such failure shall have been given to the Servicer, the Issuer
and the Indenture Trustee by the Bond Insurer; or;
(vi) Failure on the part of the Seller or the Servicer to duly
perform in any material respect any covenant or agreement set forth in the
Insurance Agreement, which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Indenture Trustee, the
Issuer, the Seller or the Servicer, as the case may be, by the Bond
Insurer; or
(vii) So long as the Seller is an affiliate, the parent of or
under the common control with the Servicer, any failure of the Seller to
repurchase any Mortgage Loan required to be repurchased, or pay any amount
due, pursuant to the Home Equity Loan Purchase Agreement which continues
unremedied for a period of 30 days after the date upon which written notice
of such failure shall have been given to the Seller, the Servicer, the
Issuer and the Indenture Trustee.
(viii) (A) the Cumulative Loss Percentage for any period set forth
below exceeds the percentage set forth below.
PERIOD CUMULATIVE LOSS PERCENTAGE
------ --------------------------
Dec. 2, 1997 - Dec. 1, 1998 1%
Dec. 2, 1998 - Dec. 1, 1999 2%
Dec. 2, 1999 - Dec. 1, 2000 3%
Dec. 2, 2000 - Dec. 1, 2001 4%
Dec. 2, 2001 - Dec. 1, 2002 5%
For any period thereafter 6%
(B) Realized Losses on the Mortgage Loans over any one
twelve- month period exceed 1.25% of the aggregate Principal Balances of the
Mortgage Loans as of the Cut-Off Date, and
(C) the Rolling Delinquency Percentage exceeds 15%;
then, (a) and in every such case, other than that set forth in (v) or (vi)
hereof, so long as a Servicing Default shall not have been remedied by the
Servicer, either the Issuer, subject to the direction of the Indenture Trustee
as pledgee of the Mortgage Loans, with the consent of the Bond
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Insurer, or the Bond Insurer, or if a Bond Insurer Default exists, the holders
of at least 51% of the aggregate Bond Principal Balance of the Bonds, by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Issuer if given by the Bond Insurer) or (b) in the case of the events set forth
in (v) or (vi) hereof, the Bond Insurer or, if a Bond Insurer Default exists,
the holders of at least 51% of the aggregate Bond Principal Balance of the
Bonds, may, by notice to the Servicer, terminate all of the rights and
obligations of the Servicer as servicer under this Servicing Agreement other
than its right to receive servicing compensation and expenses for servicing the
Mortgage Loans hereunder during any period prior to the date of such termination
and the Issuer, subject to the direction of the Indenture Trustee as pledgee of
the Mortgage Loans, with the consent of the Bond Insurer, or the Bond Insurer
may exercise any and all other remedies available at law or equity. Any such
notice to the Servicer shall also be given to each Rating Agency, the Bond
Insurer and the Issuer. On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Servicing Agreement,
whether with respect to the Bonds or the Mortgage Loans or otherwise, shall pass
to and be vested in the Indenture Trustee, pursuant to and under this Section
6.01; and, without limitation, the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or accom
plish all other acts or things necessary or appropriate to effect the purposes
of such notice of termination, whether to complete the transfer and endorsement
of each Mortgage Loan and related documents, or otherwise. The Servicer agrees
to cooperate with the Indenture Trustee in effecting the termination of the
responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer within one Business Day to the Indenture Trustee for
the administration by it of all cash amounts relating to the Mortgage Loans that
shall at the time be held by the Servicer and to be deposited by it in the
Collection Account, or that have been deposited by the Servicer in the
Collection Account or thereafter received by the Servicer with respect to the
Mortgage Loans. In addition, the Servicer agrees promptly (and in any event no
later than five Business Days subsequent to such notice) to provide the
Indenture Trustee with all documents and records requested by it to enable it to
assume the Servicer's functions under this Agreement. All reasonable costs and
expenses (including, but not limited to, attorneys' fees) incurred in connection
with amending this Servicing Agreement to reflect such succession as Servicer
pursuant to this Section 6.01 shall be paid by the predecessor Servicer (or if
the predecessor Servicer is the Indenture Trustee, the Servicer succeeded by the
Indenture Trustee) upon presentation of reason able documentation of such costs
and expenses. For purposes of this Section 6.01, the Indenture Trustee shall not
be deemed to have knowledge of a Servicer Default unless a Responsible Officer
of the Indenture Trustee assigned to and working in the Indenture Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Servicer Default is received by the Indenture
Trustee and such notice references the Bonds or this Servicing Agreement.
Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a payment on a Mortgage Loan which was due prior to the notice terminating
the Servicer's rights and obligations hereunder and received after such notice,
that portion to which the Servicer would have been entitled pursuant to Sections
3.07 and 3.15 as well as its Servicing Fee in respect thereof, and any other
amounts payable to
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the Servicer hereunder the entitlement to which arose prior to the termination
of its activities hereunder.
The Servicer shall immediately notify the Indenture Trustee, the Bond
Insurer and the Owner Trustee in writing of any Servicing Default.
Section 6.02. Indenture Trustee To Act; Appointment Of Successor. (a) On
and after the time the Servicer receives a notice of termination pursuant to
Section 6.01 or sends a notice pursuant to Section 5.04, the Indenture Trustee
on behalf of the Bondholders and the Bond Insurer shall be the successor in all
respects to the Servicer in its capacity as servicer under this Servicing
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, including but not
limited to the provisions of Article VIII. Nothing in this Servicing Agreement
shall be construed to permit or require the Indenture Trustee to (i) be
responsible or accountable for any act or omission of the Servicer prior to the
issuance of a notice of termination hereunder, (ii) require or obligate the
Indenture Trustee, in its capacity as successor Servicer, to purchase,
repurchase or substitute any Mortgage Loan, (iii) fund any losses on any
Eligible Investment directed by any other Servicer, or (iv) be responsible for
the representations and warranties of the Servicer; PROVIDED, HOWEVER, that the
Indenture Trustee, as successor Servicer, shall be required to make any required
Advances to the extent that the Servicer failed to make such Advances. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Servicer, or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee may (in the
situation described in clause (i)) or shall (in the situation described in
clause (ii)) appoint or petition a court of competent jurisdiction to appoint
any established hous ing and home finance institution, bank or other mortgage
loan servicer having a net worth of not less than $10,000,000 as the successor
to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; PROVIDED,
that any such successor Servicer shall be acceptable to the Bond Insurer, as
evidenced by the Bond Insurer's prior written consent and provided further that
the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the Bonds by
the Rating Agencies or the ratings assigned to the Bonds without taking into
account the Bond Insurance Policy. Pending appointment of a successor to the
Servicer hereunder, unless the Indenture Trustee is prohibited by law from so
acting, the Indenture Trustee shall act in such capa city as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the compensation which the Servicer would otherwise have
received pursuant to Section 3.15 (or such lesser compensation as the Indenture
Trustee and such successor shall agree). The appointment of a successor Servicer
shall not affect any liability of the predecessor Servicer which may have arisen
under this Servicing Agreement prior to its termination as Servicer (including,
without limitation, the obligation to purchase Mortgage Loans pursuant to
Section 3.01, to pay any deductible under an insurance policy pursuant to
Section 3.11 or to indemnify the Indenture Trustee pursuant to Section 5.06),
nor shall any successor Servicer be liable for any acts or omissions of the
predecessor Servicer or for any breach by such Servicer of any of its
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representations or warranties contained herein or in any related document or
agreement. The Indenture Trustee and such successor shall take such action,
consistent with this Servicing Agreement, as shall be necessary to effectuate
any such succession.
(b) Any successor, including the Indenture Trustee on behalf of the
Bondholders, to the Servicer as servicer shall during the term of its service as
servicer (i) continue to service and administer the Mortgage Loans for the
benefit of the Bondholders and the Bond Insurer, (ii) maintain in force a policy
or policies of insurance covering errors and omissions in the perfor xxxxx of
its obligations as Servicer hereunder and a fidelity bond in respect of its
officers, employees and agents to the same extent as the Servicer is so required
pursuant to Section 3.11.
(c) Any successor Servicer, including the Indenture Trustee on behalf of
the Bondholders and the Bond Insurer, shall not be deemed to be in default or to
have breached its duties hereunder if the predecessor Servicer shall fail to
deliver any required deposit to the Collection Account or otherwise cooperate
with any required servicing transfer or succession here under.
Section 6.03. Notification To Bondholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VI or
Section 5.04, the Indenture Trustee shall give prompt written notice thereof to
the Bondholders, the Bond Insurer, the Owner Trustee, the Company, the Issuer
and each Rating Agency.
Section 6.04. Waiver Of Defaults. The Indenture Trustee shall transmit by
mail to all Bondholders and the Bond Insurer, within 5 days after the occurrence
of any Servicing Default known to the Indenture Trustee, unless such Servicing
Default shall have been cured, notice of each such Servicing Default hereunder
known to the Indenture Trustee. The Bond Insurer or, if a Bond Insurer Default
exists, the holders of at least 51% of the aggregate Bond Principal Balance of
the Bonds may waive any default by the Servicer in the performance of its
obligations hereunder and the consequences thereof, except a default in the
making of or the causing to be made any required distribution on the Bonds. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived. The Servicer shall
give notice of any such waiver to the Rating Agencies.
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ARTICLE VII
Administrative Duties Of The Servicer
Section 7.01. Administrative Duties.
(a) Duties With Respect To The Indenture. The Servicer shall perform all
its duties and, as agent for the Issuer, the duties of the Issuer under the
Indenture. In addition, the Servicer shall consult with the Owner Trustee as the
Servicer deems appropriate regarding the duties of the Issuer under the
Indenture. The Servicer shall monitor the performance of the Issuer and shall
advise the Owner Trustee when action is necessary to comply with the Issuer's
duties under the Indenture. The Servicer shall prepare or shall cause the
preparation by other appropriate Persons for execution by the Issuer of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture.
In furtherance of the foregoing, the Servicer, as agent for the Issuer, shall
take all necessary action that is the duty of the Issuer to take pursuant to the
Indenture.
(b) Duties With Respect To The Issuer.
(i) In addition to the duties of the Servicer set forth in this
Servicing Agreement or any of the Basic Documents, the Servicer, as agent for
the Issuser, shall perform such calculations and shall prepare or shall cause
the preparation by other appropriate Persons for execution by the Issuer or the
Owner Trustee of all such documents, reports, filings, instruments, certificates
and opinions as it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to this Servicing Agreement or any of the
Basic Documents or under state and federal tax and securities laws, and at the
request of the Owner Trustee or the Bond Insurer, shall take, as agent for the
Issuer, all appropriate action that it is the duty of the Issuer to take
pursuant to this Servicing Agreement or any of the Basic Documents. In
accordance with the directions of the Issuer, the Bond Insurer or the Owner
Trustee, the Servicer shall administer, perform or supervise the performance of
such other activities in connection with the Bonds (including the Basic
Documents) as are not covered by any of the foregoing provisions and as are
expressly requested by the Issuer, the Bond Insurer or the Owner Trustee and are
reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Servicing Agreement or any of the
Basic Documents to the contrary, the Servicer shall promptly notify the Owner
Trustee, the Certificate Paying Agent and the Bond Insurer in the event that the
Servicer obtains knowledge that any withholding tax is imposed on the Issuer's
payments (or allocations of income) to a Certificateholder (as defined in the
Trust Agreement) as contemplated in Section 5.03 of the Trust Agreement. Any
such notice shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee pursuant to such provision.
(iii) In carrying out the foregoing duties or any of its other
obligations under this Servicing Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be in
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accordance with any directions received from the Issuer and shall be, in the
Servicer's opinion, no less favorable to the Issuer in any material respect than
with terms made available to unrelated third-parties.
(c) Tax Matters. The Servicer shall provide such services as are reasonably
necessary to assist the Issuer, the Indenture Trustee or the Owner Trustee, as
applicable, in the preparation of tax returns and information reports as
provided in Section 5.03 of the Trust Agreement.
(d) Non-ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article VII unless within a reasonable time before the
taking of such action, the Servicer shall have notified the Owner Trustee, the
Bond Insurer and the Indenture Trustee of the proposed action and the Owner
Trustee, the Bond Insurer and, with respect to items (A), (B), (C) and (D)
below, the Indenture Trustee shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Mortgage Loans);
(C) the amendment, change or modification of this Agreement or any of
the Basic Documents;
(D) the appointment of successor Certificate Paying Agents and
successor Indenture Trustees pursuant to the Indenture and the Trust
Agreement or the appointment of successor Servicers or the consent to the
assignment by the Certificate Registrar, Paying Agent or Indenture Trustee
of its obligations under the Indenture and the Trust Agreement; and
(E) the removal of the Indenture Trustee.
Section 7.02. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Servicing
Agreement, which books of account and records shall be accessible for inspection
by the Issuer, the Indenture Trustee and the Bond Insurer upon reasonable
request and at any time during normal business hours.
Section 7.03. Additional Information To Be Furnished. The Servicer shall
furnish to the Issuer, the Indenture Trustee and the Bond Insurer from time to
time such additional information regarding the Bonds as the Issuer, the
Indenture Trustee or the Bond Insurer shall reasonably request.
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ARTICLE VIII
Miscellaneous Provisions
Section 8.01. Amendment. This Servicing Agreement may be amended from time
to time by the parties hereto with the prior written consent of the Bond
Insurer, provided that any amendment be accompanied by a letter from the Rating
Agencies to the effect that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to the Bonds or the rating then assigned
to the Bonds without taking into account the Bond Insurance Policy.
Section 8.02. GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 8.03. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by certified mail, return receipt requested, to:
(a) in the case of the Servicer: NovaStar Mortgage, Inc.
0000 X. 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxx,
Senior Vice President
(b) in the case of the Bond Insurer: MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Insured Portfolio
Management-
Structured Finance
(NovaStar Home Equity Loan
Asset-Backed Bonds, Series 1997-2)
(c) in the case of Rating Agencies: Xxxxx'x Investors Service, Inc.
0xx Xxxxx
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Residential Mortgage
Monitoring Department
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Standard & Poor's Rating Services
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Asset Backed
Surveillance Group
(d) in the case of the Owner Trustee,
the Corporate Trust Office: Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust
Administration
(e) in the case of the Issuer,
to NovaStar Home Equity
Loan Trust Series 1997-2: c/o NovaStar Financial, Inc.
0000 X. 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxx, Vice
President
(f) in the case of the Indenture
Trustee: First Union National Bank
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Fax No.: (000) 000-0000
Attention: Corporate Trust
Department
NovaStar Home Equity Loan Trust
Series 1997-2
(g) in the case of the Seller: NovaStar Financial, Inc.
0000 Xxxx 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxx,
Vice President
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to be
mailed to a Bondholder shall be given by first class mail, postage prepaid, at
the address of such Bondholder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee
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to any Rating Agency shall be given on a reasonable efforts basis and only as a
matter of courtesy and accommodation and the Indenture Trustee shall have no
liability for failure to deliver such
notice or document to any Rating Agency.
Section 8.04. Severability Of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Bonds or the rights of the Bondholders thereof.
Section 8.05. Third-party Beneficiaries. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Bondholders,
the Bond Insurer, the Owner Trustee, the Seller, and their respective successors
and permitted assigns. Except as otherwise provided in this Servicing Agreement,
no other Person will have any right or obligation hereunder. The Indenture
Trustee shall have the right to exercise all rights of the Issuer under this
Agreement.
Section 8.06. Counterparts. This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 8.07. Effect Of Headings And Table Of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 8.08. Termination. Except with respect to obligations of the
Servicer relating to any representations and warranties or indemnities made by
it in this Servicing Agreement, the respective obligations and responsibilities
of the Servicer and the Issuer created hereby shall terminate upon the
satisfaction and discharge of the Indenture pursuant to Section 4.10 thereof.
Section 8.09. No Petition. The Servicer, by entering into this Servicing
Agreement, hereby covenants and agrees that it will not at any time institute
against NovaStar Assets or the Issuer, or join in any institution against
NovaStar Assets or the Issuer, any bankruptcy proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations of NovaStar Assets or the Issuer. This section shall survive the
termination of this Servicing Agreement by one year.
Section 8.10. No Recourse. The Servicer acknowledges that no recourse may
be had against the Issuer, except as may be expressly set forth in this
Servicing Agreement.
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IN WITNESS WHEREOF, the Servicer, the Indenture Trustee and the Issuer have
caused this Servicing Agreement to be duly executed by their respective officers
or representatives all as of the day and year first above written.
NOVASTAR MORTGAGE, INC.,
as Servicer
By
--------------------------------------
Name:
Title:
NOVASTAR HOME EQUITY LOAN TRUST
SERIES 1997-2, as Issuer
By Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By
-------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
not in its individual capacity but
solely as Indenture Trustee
By
---------------------------------------
Name:
Title:
EXHIBIT A
INITIAL MORTGAGE LOAN SCHEDULE
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
-------------------------------------
[Name of Servicer]
Authorized Signature
******************************************************************
TO CUSTODIAN/Indenture Trustee: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other: _________________________
------------------------
Name
------------------------
Title
------------------------
Date
B-1
EXHIBIT C
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition
2. Liquidation Proceeds
Principal Prepayment $____________
Property Sale Proceeds ____________
Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances ____________
Delinquency Advances ____________
Monthly Advances ____________
Servicing Fees ____________
Other Servicing Compensation ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
C-1
