Exhibit 10(a)
SERVICING AGREEMENT
Dated as of March 18, 1997
between
MAIN PLACE REAL ESTATE INVESTMENT TRUST,
Issuer
and
NATIONSBANC MORTGAGE CORPORATION,
Servicer
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Incorporated Terms.
Section 1.02. Additional Terms.
ARTICLE II
ADMINISTRATION AND SERVICING OF THE MORTGAGE NOTES
Section 2.01. Contract for Servicing; Possession of
Servicing Files.
Section 2.02. Commencement of Servicing
Responsibilities.
Section 2.03. The Servicer to Act as Servicer
Section 2.04. Collection of Mortgage Note Payments
Section 2.05. Foreclosure
Section 2.06. Sub-Servicing Agreements
Section 2.07. Maintenance of Hazard Insurance
Section 2.08. Maintenance of PMI Policy
Section 2.09. Fidelity Bond and Errors and Omissions
Insurance
Section 2.10. Establishment of and Deposits to
Collection Account
Section 2.11. Permitted Withdrawals from Collection
Account
Section 2.12. Establishment of and Deposits to Escrow
Account
Section 2.13. Permitted Withdrawals from Escrow
Section 2.14. Maintenance of FHA Mortgage Insurance
and VA Guaranty
Section 2.15. Notification of Adjustments
Section 2.16. Completion and Recordation of Assignment
of Mortgage and FHA and
VA Change Notices
Section 2.17. Protection of Accounts; Eligible
Investments
Section 2.18. Custodial Agreement
Section 2.19. Servicing Compensation
Section 2.20. Withdrawals and Substitutions of
Mortgage Notes
ARTICLE III
REMITTANCES AND REPORTING BY THE SERVICER
Section 3.01. Remittances to Trustee
Section 3.02. Reporting by the Servicer
Section 3.03. Annual Certificate
Section 3.04. Annual Accountants' Report
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Servicer
Section 4.02. Remedies for Breach of Representations
and Warranties of the Servicer
ARTICLE V
THE SERVICER
Section 5.01. Corporate Existence of the Servicer;
Status as Servicer; Merger
Section 5.02. Performance of Obligations
Section 5.03. The Servicer Not to Resign; Assignment
ARTICLE VI
DEFAULT
Section 6.01. Events of Default
Section 6.02. No Effect on Other Parties
Section 6.03. Rights Cumulative.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Successor to the Servicer
Section 7.02. Termination of the Agreement
Section 7.03. Amendment.
Section 7.04. Governing Law
Section 7.05. Notices
Section 7.06. Severability of Provisions
Section 7.07. Inspection and Audit Rights
Section 7.08. Binding Effect
Section 7.09. Article and Section Headings
Section 7.10. Counterparts
SERVICING AGREEMENT
Servicing Agreement, dated March 18, 1997, between MAIN PLACE REAL
ESTATE INVESTMENT TRUST, a Maryland real estate investment trust (herein,
together with its successors and assigns, called the "Issuer"), and NATIONSBANC
MORTGAGE CORPORATION, a Texas corporation (herein, together with its successors
and assigns, called the "Servicer").
PRELIMINARY STATEMENT
The Issuer is the owner of certain Mortgages (as defined) and Mortgage
Notes (as defined) and the Servicer is an independent contractor in the business
of servicing mortgage loans. The Issuer has entered into an Indenture (the
"Indenture"), dated as of the date of this Agreement, with First Trust National
Association, as trustee (herein, together with its successors and assigns called
the "Trustee"), pursuant to which the Issuer intends to issue $1,000,000,000
aggregate principal amount of its Mortgage-Backed Bonds, Series 1997-1 Due 2000
(the "Securities"). Pursuant to the Indenture, as security for the indebtedness
represented by such Securities, the Issuer is and will be pledging with the
Trustee certain Mortgage Notes and is and will be assigning its rights under
this Agreement to the Trustee.
The Servicer and the Issuer desire to enter into this Agreement to
provide, among other things, for the servicing by the Servicer of the Mortgage
Notes pledged to the Trustee while such Mortgage Notes are subject to the lien
of the Indenture. The Servicer acknowledges that the Issuer's rights hereunder
are and will be assigned to the Trustee as security for the Securities, and
agrees that all covenants and agreements made by the Servicer herein with
respect to the Mortgage Notes shall also be for the benefit and security of the
Trustee and the Holders.
ARTICLE I
DEFINITIONS
Section 1.01. Incorporated Terms.
Capitalized terms not otherwise defined herein have the respective
meanings given to them under Article I of the Indenture, as said Indenture may
be amended from time to time.
Section 1.02. Additional Terms.
The following terms have the respective meanings set forth below for
all purposes of this Agreement, and the definitions of such terms are applicable
to the singular as well as to the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms:
Accepted Servicing Practices: With respect to any Mortgage Notes, the
services and duties customary to the servicing by prudent mortgage lending
institutions of mortgages of the same type as such Mortgage Notes in the
jurisdictions where the related Mortgaged Properties are located.
Act: The National Housing Act, as amended from time to time.
Agreement: This Servicing Agreement and all amendments hereof and
supplements hereto.
Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument in recordable form, sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
the transfer of the Mortgage to the party indicated therein, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Notes secured by Mortgaged Properties
located in the same jurisdiction, if permitted by law.
Available Amount: The amount defined as such in Section 3.01 hereof.
Best Efforts: Efforts determined to be reasonably diligent by the
Issuer or Servicer, as the case may be, in its sole discretion. Such efforts do
not require the Issuer or Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or Servicer, as the case may be, to advance or expend fees or
sums of money in addition to those specifically set forth in this Agreement.
Business Day: Any day other than (i) a Saturday, (ii) a Sunday, or
(iii) a day that is either a legal holiday or a day on which banking
institutions are authorized or obligated by law or regulation to close in the
States of North Carolina or Kentucky, or any other state in which the Servicer
is located (or, for purposes of remittances by the Servicer, any state in which
functions relating to the Collection Account are performed).
Closing Date: March 18, 1997.
Collection Account: The separate account or accounts created and
maintained pursuant to Section 2.10.
Collection Period: With respect to a Servicer Remittance Date, the
calendar month preceding the month in which such Servicer Remittance Date
occurs.
Condemnation Proceeds: All awards of settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Note documents.
Custodial Agreement: The agreement to be entered into pursuant to
Section 6.08 of the Indenture.
Custodian: The Custodian under the Custodial Agreement, or its
successor in interest or assigns or any successor to the Custodian under the
Custodial Agreement as provided therein.
Determination Date: A date not more than three Business Days prior to
the applicable Servicer Remittance Date.
Eligible Mortgage Note: Any Mortgage Note meeting the requirements of
Section 856 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Escrow Account: The separate account or accounts operated and
maintained pursuant to Section 2.12.
Escrow Payments: With respect to any Mortgage Note, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default: Any event set forth in Section 6.01.
FHA Approved Mortgagee: A corporation or institution approved as a
mortgagee by FHA under the Act, and applicable HUD regulations, and eligible to
own and service mortgage loans such as the FHA Loans.
FHA Insurance Contract: The contractual obligation of FHA respecting
the insurance of a Mortgage Note.
FHA Loan: A residential Mortgage Note which is the subject of an FHA
Insurance Contract as evidenced by a mortgage insurance certificate.
FHA Mortgage Insurance: Mortgage insurance authorized under the Act
and provided by the FHA.
FHA Regulations: Regulations promulgated by HUD under the Act,
codified in 24 Code of Federal Regulations, and other HUD issuances relating to
FHA Loans, including the related handbooks, circulars, notices and mortgagee
letters.
Holder: The Person in whose name a Security is registered in
accordance with Section 2.08 of the Indenture.
Independent Accountant: Any accountant, who may also be the
accountant who audits the books of the Servicer, who is independent with respect
to the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
Insurance Proceeds: With respect to each Mortgage Note, proceeds of
insurance policies insuring the Mortgage Note or the related Mortgaged Property
including FHA insurance proceeds and/or VA guaranty proceeds.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Note, whether through the sale or assignment
of such Mortgage Note, trustee's sale, foreclosure sale or otherwise, or the
sale of the related REO Property, if the Mortgaged Property is acquired in
satisfaction of the Mortgage Note.
Monthly Payment: The scheduled monthly payment of principal and
interest on a Mortgage Note.
Mortgage: The mortgage, deed of trust or other instrument securing a
Mortgage Note, which creates a first lien on an unsubordinated estate in real
property securing such Mortgage Note.
Mortgage Interest Rate: The annual rate of interest borne at any time
by a Mortgage Note.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage, each Mortgage Note subject to this Agreement
being identified on the Mortgage Note Schedule.
Mortgage Note Schedule: The schedule of Mortgage Notes delivered by
the Issuer to the Servicer setting forth information with respect to such
Mortgage Notes, which schedule shall be amended from time to time to reflect the
addition of Mortgage Notes to, or the withdrawal of Mortgage Notes from, the
terms of this Agreement and the Lien of the Indenture.
Mortgaged Property: The real property securing repayment of the debt
evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
NationsBank, N.A.: NationsBank, N.A., a national banking association,
and the indirect parent of the Issuer.
NationsBank South: NationsBank, N.A. (South), a national banking
association, and an affiliate of the Issuer.
NationsBank Texas: NationsBank of Texas, N.A., a national banking
association, and an Affiliate of Issuer.
NRSRO: Any nationally recognized statistical rating organization.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or any Vice President of
the Servicer, and delivered to the Issuer as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an
employee of the Servicer, and who is reasonably acceptable to the Issuer.
PMI Policy: A policy of private mortgage insurance issued by a
Qualified Insurer, as required by the Indenture with respect to certain Mortgage
Notes.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Note which is received in advance of its scheduled due date, including
any prepayment penalty or premium thereon, and which is not accompanied by an
amount of interest representing scheduled interest due on any date or dates in
any month or months subsequent to the month of prepayment.
Qualified Depository: NationsBank, N.A. or another Affiliate of the
Issuer or another depository the accounts of which are insured by the FDIC and
the short-term debt obligations of which are rated in at least one of the two
highest rating categories by an NRSRO.
Qualified Insurer: A mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by FNMA and FHLMC and rated in at
least one of the two highest rating categories by an NRSRO.
REO Disposition: The final sale by the Servicer, on behalf of the
Issuer, of any REO Property.
REO Disposition Proceeds: All amounts received with respect to an REO
Disposition.
REO Property: A Mortgaged Property acquired by the Servicer on behalf
and in the name of the Issuer through foreclosure or by deed in lieu of
foreclosure.
Servicer Remittance Date: The 23rd day of any month (or, if such day
is not a Business Day, the first Business Day immediately preceding such 23rd
day), commencing the month after the date of this Agreement.
Servicing Advances: All customary, reasonable and necessary "out-of-
pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Servicer of its servicing
obligations. including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
administrative or judicial proceedings, including foreclosures, (c) the
management and liquidation of the Mortgaged Property if the Mortgaged Property
is acquired in satisfaction of the Mortgage, (d) taxes, assessments, water
rates, sewer rates and other charges which are or may become a lien upon the
Mortgaged Property, and PMI Policy premiums and fire and hazard insurance
coverage and (e) any losses sustained by the Servicer with respect to the
liquidation of the Mortgaged Property.
Servicing Fee:
(a) With respect to each Mortgage Note which was owned by NationsBank
of Texas, N.A., NationsBank, N.A. (South) or NationsBank, N.A. or by any of
their bank affiliates prior to January l, 1992, and is serviced hereunder, the
monthly fee the Issuer shall pay to the Servicer, which shall be equal to
one-twelfth of the product of (a)(i) three-eighths of one percent (3/8%) for
each such fixed rate Mortgage Note, and (ii) one-half of one percent (1/2%) for
each such adjustable rate Mortgage Note and (b) the outstanding principal
balance of such Mortgage Note.
(b) With respect to each Mortgage Note which was owned by NationsBank
of Texas, N.A., NationsBank, N.A. (South) or NationsBank, N.A. or by any of
their bank affiliates after January l, 1992, and is serviced hereunder, the
monthly fee the Issuer shall pay to the Servicer, which shall be equal to
one-twelfth of the product of (a)(i) one-half of one percent (1/2%) for each
such fixed rate or adjustable rate FHA and VA Loan serviced hereunder,
(ii) three-eighths of one percent (3/8%) for each such adjustable rate Mortgage
Note (other than FHA and VA Loans) the interest rate of which adjusts every
month, every 6 months, every year or every 3 years and (iii) one-quarter of one
percent (1/4%) for all other such Mortgage Notes serviced hereunder, and (b) the
outstanding principal balance of such Mortgage Note.
(c) Any prepayment penalty shall be paid to the Servicer and shall be
considered additional compensation to the Servicer.
Notwithstanding the foregoing, the Servicing Fee payable hereunder for any
Mortgage Note shall not be less than $10.00 per month.
Servicing File: The items pertaining to a particular Mortgage Note
including, but not limited to, a copy of the original Mortgage Note, the
computer files, data disks, books, records, data tapes, notes, and all
additional documents generated as a result of or utilized in originating and/or
servicing each Mortgage Note, which are held in trust for the Issuer by the
Servicer.
Trustee: The Trustee under the Indenture, or its successor in
interest or assigns or any successor to the Trustee under the Indenture as
provided therein.
VA Approved Lender: Those lenders which are approved by the VA to act
as a lender in connection with the origination of VA loans.
VA Loan: A Mortgage Loan which is the subject of a VA Loan Guaranty
Agreement as evidenced by a Loan Guaranty Certificate, or a Mortgage Loan which
is a vendee loan sold by the VA.
VA Loan Guaranty Agreement: The obligation of the United States to
pay a specific percentage of a Mortgage (subject to a maximum amount) upon
default of the Mortgagor pursuant to the Servicemen's Readjustment Act, as
amended.
VA Loan Guaranty Certificate: The certificate evidencing a VA Loan
Guaranty Agreement.
VA Regulations: Regulations promulgated by the VA pursuant to the
Servicemen's Readjustment Act, as amended, codified in 38 Code of Federal
Regulations, and other VA issuances relating to VA Loans, including related
Handbooks, Circulars and Notices.
ARTICLE II
ADMINISTRATION AND SERVICING OF THE MORTGAGE NOTES
Section 2.01. Contract for Servicing; Possession of
Servicing Files.
The Issuer, by execution and delivery of this Agreement, does hereby
contract with the Servicer, subject to the terms of this Agreement, for the
servicing of the Mortgage Notes that are from time to time subject to this
Agreement. With respect to each Mortgage Note listed on the Mortgage Note
Schedule as of the date of this Agreement the Issuer shall cause to be delivered
or will use its Best Efforts to cause to be delivered, on or before the Closing
Date, the related Servicing File to the Servicer. With respect to each Mortgage
Note that becomes subject to this Agreement at any time after the date hereof,
the Issuer shall cause the Mortgage Note Schedule to be amended to reflect the
Mortgage Notes then subject to this Agreement and shall cause to be delivered or
will use its Best Efforts to cause to be delivered as soon as practicable each
related Servicing File to the Servicer. Each Servicing File delivered to the
Servicer shall be held by the Servicer in order to service the Mortgage Notes
pursuant to this Agreement and is and shall be held in trust as agent for the
Issuer and for the benefit of the Issuer as the Issuer thereof. The Servicer's
possession of any Servicing File shall be at the will of the Issuer for the sole
purpose of facilitating servicing of the related Mortgage Note pursuant to this
Agreement, and such retention and possession by the Servicer shall be in a
custodial capacity only. The ownership of each Mortgage Note, Mortgage, and the
contents of the Servicing File shall be vested in the Issuer and the ownership
of all records and documents with respect to the related Mortgage Loan prepared
by or which come into the possession of the Servicer shall immediately vest in
the Issuer and shall be retained and maintained, in trust, by the Servicer at
the will of the Issuer in such custodial capacity only. The Servicer shall
release from its custody the contents of any Servicing File retained by it only
in accordance with this Agreement.
Section 2.02. Commencement of Servicing Responsibilities.
On the Closing Date, the Servicer shall assume all servicing
responsibilities hereunder with respect to the Mortgage Notes.
Section 2.03. The Servicer to Act as Servicer.
(a) The Servicer, as an independent contractor, shall diligently
service and administer the Mortgage Notes from and after the Closing Date and
shall have full power and authority, acting alone, to do any and all things in
connection with such servicing and administration which the Servicer may deem
necessary or desirable, consistent with Accepted Servicing Practices where such
practices do not conflict with the requirements of this Agreement, including
taking all actions that a mortgagee is permitted or required to take by the FHA
or VA, with respect to FHA Loans and VA Loans, as the case may be.
(b) Without limiting the generality of the foregoing, the Issuer and
the Servicer hereby agree as follows:
(i) The Servicer may waive any prepayment charge, assumption
fee, late payment charge or any other charge in connection with the
prepayment of a Mortgage Note;
(ii) The Servicer may arrange with a mortgagor a plan of relief,
including a modification or extension of the Mortgage Note, when
appropriate, rather than recommending liquidation; provided, however, such
arrangement will be made only upon determining that the coverage of such
Mortgage Note by any PMI Policy, FHA Insurance Contract or VA Loan Guaranty
Certificate will not be affected and that any such modified Mortgage Note
continues to be an Eligible Mortgage Note;
(iii) The Servicer shall enforce "due-on-sale" clauses with
respect to Mortgage Notes; provided, however, where an assumption of, or
substitution of liability with respect to, a Mortgage Note is required by
law, upon receipt of assurance that any PMI Policy covering such Mortgage
Note will not be affected, the Servicer may permit the assumption of a
Mortgage Note, pursuant to which the mortgagor shall remain liable on the
Mortgage Note, or a substitution of liability with respect to such Mortgage
Note, pursuant to which the new Mortgagor shall be substituted for the
original Mortgagor as being liable on the Mortgage Note. Notwithstanding
the foregoing, the Servicer shall not permit any modification with respect
to any Mortgage Note that would change the Mortgage Interest Rate or affect
the FHA Insurance Contract with respect to FHA Loans or the VA Loan
Guaranty Agreement with respect to VA Loans;
(iv) The Servicer may give any consents under the terms and
provisions of any Mortgage Note, including, without limitation, consents to
the placing of easements, covenants, conditions and restrictions on any
Mortgaged Property; and
(v) The Servicer may permit the modification of an Eligible
Mortgage Note which the related Mortgagor has indicated a desire to
refinance, or in connection with a prepayment, provided that any such
Mortgage Note would continue to be Eligible Mortgage Note following such
modification.
(c) In the event of any waiver or modification of the terms and
provisions of any Mortgage Note pursuant to subsection (b) of this Section 2.03,
the Servicer shall promptly deliver to the Trustee or pursuant to the Custodial
Agreement, to the Custodian, the original documentation reflecting such waiver
or modification for addition to the related Servicing File.
(d) The Servicer shall establish and maintain adequate and customary
books and records with respect to each Mortgage Note and, upon request of the
Issuer or Trustee shall, within a reasonable time following the Servicer's
receipt of such request, furnish the same (in the form of either an original
document or a certified true copy of such original document) to the Issuer or
Trustee. In the event of a request for any non-standard report, the Servicer
and the Issuer shall mutually agree in writing to a reasonable expense
reimbursement payable by the Issuer to the Servicer for such report.
In servicing and administering FHA Loans and VA Loans, if any, the
Servicer shall comply strictly with the Act and the FHA Regulations, the
Servicemen's Readjustment Act, the VA Regulations and administrative guidelines
issued thereunder or pursuant thereto, and, to the extent permitted hereunder,
promptly discharge all of the obligations of the mortgagee thereunder and under
each Mortgage, including the payment of any fees, premiums and charges and the
timely giving of notices.
Section 2.04. Collection of Mortgage Note Payments.
Continuously from the Closing Date until the date each Mortgage Note
ceases to be subject to this Agreement, the Servicer shall proceed diligently to
collect all payments due under each of the Mortgage Notes when the same shall
become due and payable and shall exercise reasonable diligence in ascertaining
and estimating Escrow Payments and all other charges that will become due and
payable with respect to the Mortgage Notes and each related Mortgaged Property,
to the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
Section 2.05. Foreclosure.
The Servicer shall process and manage: (i) the foreclosure or other
acquisition of the property securing any Mortgage Note; (ii) the transfer of
such property to the FHA, VA, or a private mortgage insurer, as applicable; and
(iii) the collection of any applicable mortgage insurance or guaranty proceeds;
and pending completion of these steps, the protection of the Mortgaged Property
from waste and vandalism. The Servicer will thereafter assign or convey to the
Issuer any title, equity or other property or right acquired by such
proceedings. In no event shall the Servicer be required to take title in its
name to any Mortgaged Property which has, or may reasonably be deemed to have,
an environmental or similar problem or defect for which the Servicer would
become liable by reason of its holding title to such property. The Issuer
agrees promptly to reimburse the Servicer for its reasonable Servicing Advances
incurred in complying with its obligations under this paragraph, including
attorney's fees. In case of a voluntary deed in lieu of foreclosure or the
purchase of any such property by the Issuer or for its account, the Issuer will
assume responsibility for the same. The marketing and sales of all REO
Properties will be the responsibility of the Servicer, on behalf of the Issuer.
Section 2.06. Sub-Servicing Agreements.
Any provision of this Agreement notwithstanding, the Servicer may
contract with other Persons for the performance of its responsibilities, duties
and obligations under this Agreement to service and administer any of the
Mortgage Notes, provided that none of the provisions of this Section 2.06
relating to agreements or arrangements between the Servicer and other Persons,
or to actions taken through any such other Persons or otherwise, shall be deemed
to relieve the Servicer of any of its duties and obligations to the Issuer, the
Trustee and the Holders with respect to the servicing and administration of the
Mortgage Notes, and the Servicer shall be obligated with respect thereto to the
same extent and under the same terms and conditions as if it alone were
performing all duties and obligations in connection with servicing and
administering the Mortgage Notes. The Servicer shall be entitled to enter into
any agreement with any Person performing services for it related to its duties
and obligations under this Agreement for indemnification of the Servicer by such
Person, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification. Any transactions or services relating to the
Mortgage Notes involving any Person performing services for the Servicer shall
be deemed to be between such Person and the Servicer alone, and the Issuer, the
Trustee and the Holders shall not be deemed to be parties thereto and shall have
no claims, rights, obligations, duties or liabilities with respect to any such
Person.
Section 2.07. Maintenance of Hazard Insurance.
The Servicer will cause insurance to be maintained on the Mortgaged
Property covered by each Mortgage Note consistent with the Accepted Servicing
Practices and will make certain that each such property is insured as provided
below at all times for the benefit of the mortgagee on a standard insurance
policy form with an appropriate mortgagee payable clause. Such insurance shall
be in an amount not less than the lesser of the outstanding principal balance of
the Mortgage Note and the minimum amount necessary to compensate fully for any
damage or loss on a replacement cost basis. Such insurance shall be of a type
at least as protective as fire and extended coverage. The Servicer shall pay
the premium for such insurance as a Servicing Advance on a timely basis in the
event that the Mortgagor does not make such payments. With respect to any
Mortgaged Property located in an area identified by the Federal Emergency
Management Agency as having special flood hazards and as to which flood
insurance has been made available, the Servicer shall maintain or cause to be
maintained a flood insurance policy maintained with a generally acceptable
insurance carrier meeting the requirements of the current guidelines of the
Federal Insurance Administration. Such flood insurance policy will provide
coverage in an amount not less than the least of (i) the unpaid principal
balance of the Mortgage Note, (ii) the insurable value of the Mortgaged Property
and (iii) the maximum amount of insurance available under the Flood Disaster
Protection Act of 1973, as amended.
In the event that the Servicer chooses to maintain a blanket policy
insuring against hazard losses on certain of the Mortgage Notes, it shall
conclusively be deemed to have satisfied its obligation relating to the
maintenance of insurance under this Section 2.07. The Servicer shall maintain
accurate and complete records with respect to the insurance and insurance
premiums for each Mortgage Note and the status thereof. In the event the
Servicer receives actual notice of any loss or damage to any property securing a
Mortgage Note, the Servicer will proceed diligently to adjust any loss or damage
claim, and to protect the interest of the mortgagee under any such insurance
policy covering the incidence of damage. In the event that the Issuer shall
request an inspection by an engineer or other professional construction
inspector with respect to any such repairs, the Servicer will arrange for such
inspection.
Section 2.08. Maintenance of PMI Policy.
Pursuant to Section 1.01 of the Indenture, a Mortgage Note secured by
a Mortgaged Property having an original loan-to-value ratio in excess of 80%
must have a PMI Policy insuring against default of that portion of the principal
amount thereof in excess of 75% of the value of the Mortgaged Property. The
Servicer shall exercise its Best Efforts to keep each PMI Policy (if and so long
as any is required) in full force and effect. The Servicer shall pay the
premium for each PMI Policy as a Servicing Advance on a timely basis in the
event that the Mortgagor does not make such payments.
The Servicer, on behalf of the Issuer, shall present claims to the
insurer under any applicable PMI Policy and shall take such reasonable steps as
are necessary to permit recovery under such insurance policies respecting
defaulted Mortgage Notes. All Insurance Proceeds received by the Servicer under
such policies that are not applied to the restoration of the related Mortgaged
Property or refunded to the Mortgagor shall be deposited in the Collection
Account.
If any property securing a defaulted Mortgage Note is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
any applicable PMI Policy, the Servicer shall be required to expend its own
funds to restore the damaged property unless the Servicer reasonably determines
(i) that such restoration will not increase the proceeds to the Issuer upon
liquidation of the Mortgage Note after reimbursement of the Servicer for its
expenses and (ii) that such expenses will not be recoverable by it through
Liquidation Proceeds. In the event that the Servicer elects to restore the
damaged property and the cost of restoration exceeds the amount recovered by it
through Liquidation Proceeds, the Issuer shall reimburse the Servicer for the
difference between the amount expended by the Servicer and the amount recovered
through Liquidation Proceeds.
Section 2.09. Fidelity Bond and Errors and Omissions
Insurance.
The Servicer, at no expense to the Trustee or the Issuer, shall
maintain adequate fidelity bond coverage and adequate errors and omissions
insurance, and shall annually furnish to the Trustee or the Issuer proof of such
coverage in the form of an insurance certificate.
Section 2.10. Establishment of and Deposits to Collection
Account.
The Servicer shall establish and maintain the Collection Account in
the name of the Trustee for the benefit of the Holders and shall segregate and
hold all funds collected and received pursuant to the Mortgage Notes separate
and apart from any of its own funds and general assets in such Collection
Account. The Collection Account shall be established and maintained with a
Qualified Depository. The Collection Account may be maintained as an
interest-bearing account (which may include a money market savings account), or
the funds held therein may be invested from time to time in Eligible Investments
subject to the provisions of Section 2.17 hereof.
The Servicer shall deposit in or credit to the Collection Account on a
daily basis, as applicable, and retain therein, the following collections
received by the Servicer:
(i) All payments on account of principal and interest received
by the Servicer on the Mortgage Notes (which, at its option, may be net of
the Servicing Fee), including Principal Prepayments (in whole or in part);
(ii) All Liquidation Proceeds, net of expenses incurred in
connection with any liquidation;
(iii) All Insurance Proceeds received under any PMI Policy or
title, hazard or other insurance policy covering any Mortgage Note, other
than proceeds to be applied to the restoration or repair of the related
Mortgaged Property or to be refunded to the Mortgagor;
(iv) Any amounts required to be deposited or credited by the
Servicer in connection with losses realized on investments for the benefit
of the Servicer of funds held in the Collection Account;
(v) Any amounts required to be deposited or credited by the
Servicer in connection with interest loss or deferral as a result of a
failure to adjust a Mortgage Interest Rate or Monthly Payment under Section
2.15 hereof;
(vi) All rents collected on REO Properties; and
(vii) All other amounts required to be deposited in or credited to
the Collection Account under this Agreement.
Any interest paid on funds deposited in the Collection Account by the
related Qualified Depository shall accrue to the benefit of the Servicer, and
the Servicer shall be entitled to retain and withdraw such interest from the
Collection Account pursuant to Section 2.11 hereof.
Section 2.11. Permitted Withdrawals from Collection
Account.
The Servicer shall, from time to time, withdraw funds from the
Collection Account for the following purposes:
(i) To reimburse the Servicer from related Insurance or
Liquidation Proceeds for amounts expended by the Servicer in connection
with the restoration of property damaged by an uninsured cause or the
liquidation of a Mortgage Note;
(ii) To pay to the Servicer its Servicing Fee from interest
payments received on Mortgage Notes, if not previously retained, and any
earnings from the investment of funds in the Collection Account in Eligible
Investments;
(iii) To pay to the Servicer any expenses which were incurred by
the Servicer and are reimbursable pursuant to this Agreement, including but
not limited to expenses incurred by the Servicer in respect of property
repairs or maintenance on Mortgaged Properties;
(iv) To pay to the Servicer any amounts in respect of which the
Mortgagor's check has been returned and not honored by the Mortgagor's bank
for any reason or any amounts deposited in or credited to the Collection
Account in error;
(v) To remit funds to the Trustee in accordance with Section
3.01 hereof;
(vi) To remit funds to any Mortgagor or the designee of any
Mortgagor in respect of any payments due to the Mortgagor, including but
not limited to payments to be remitted to any Mortgagor under any
applicable insurance policy, as determined by the Servicer;
(vii) To transfer funds to another Qualified Depository in
accordance with Section 2.17 hereof;
(viii) To invest funds in certain Eligible Investments in
accordance with Section 2.17 hereof;
(ix) To remit funds to the Issuer or other Person entitled
thereto in accordance with Section 2.20 hereof; and
(x) To clear the Collection Account upon the termination of this
Agreement.
Section 2.12. Establishment of and Deposits to Escrow
Account.
The Servicer shall segregate and hold all funds collected and received
pursuant to a Mortgage Note constituting Escrow Payments separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Escrow Accounts, in the form of time deposit or demand accounts, titled in
the name of the Mortgagor. The Escrow Accounts shall be established with a
Qualified Depository and may be maintained as interest-bearing accounts.
The Servicer shall credit to the Escrow Account or Escrow Accounts on
a daily basis, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Notes for the purpose of effecting timely payment of any such items as are
required under the terms of this Agreement and the related Mortgage or
Mortgage Note; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property or refunded to the Mortgagor.
The Servicer shall retain any interest paid on funds deposited in the
Escrow Account by the depository institution, other than interest on escrowed
funds required by law to be paid to the Mortgagor. To the extent required by
law, the Servicer shall pay interest on escrowed funds to the Mortgagor
notwithstanding that the Escrow Account may be non-interest bearing or that
interest paid thereon is insufficient for such purposes. The Servicer shall be
responsible for the administration of the Escrow Account or Escrow Accounts and
shall be expected to make Servicing Advances to such account when a deficiency
exists therein.
Section 2.13. Permitted Withdrawals from Escrow Account.
Withdrawals from the Escrow Account or Escrow Accounts may be made by
the Servicer only:
(i) to effect timely payments of taxes; assessments, water
rates, mortgage insurance premiums, condominium charges, fire and hazard
insurance premiums or other items constituting Escrow Payments for the
related Mortgage Note;
(ii) to reimburse the Servicer for any Servicing Advance made by
the Servicer with respect to a related Mortgage Note, but only from amounts
received on the related Mortgage Note;
(iii) to refund to any Mortgagor any funds found to be in excess
of the amounts required under the terms of the related Mortgage Note at any
time or funds remaining therein after the principal balance of the related
Mortgage Note has been paid in full;
(iv) for transfer to the Collection Account and application to
reduce the principal balance of the Mortgage Note in accordance with the
terms of the related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the Mortgaged
Property;
(vi) for transfer to the Collection Account of fire and hazard
insurance proceeds and Escrow Payments with respect to any FHA Loan or VA
Loan, where the FHA or the VA, respectively, has directed application of
funds as a credit against the proceeds of the FHA Insurance Contract or VA
Loan Guaranty Agreement;
(vii) to pay to the Servicer, or any Mortgagor to the extent
required by law, any interest paid on the funds deposited therein;
(viii) to remit funds to the Issuer or other Person entitled
thereto in accordance with Section 2.20 hereof;
(ix) to pay to the Mortgagor or the Servicer as appropriate any
amounts in respect of which the Mortgagor's check has been returned and not
honored by the Mortgagor's bank for any reason or any amounts deposited or
credited to the Escrow Account in error;
(x) to pay late fees to the extent permitted by the terms of the
related Mortgage and Mortgage Note;
(xi) to withdraw funds deposited in error; and
(xii) to clear the Escrow Account or Accounts on the termination
of this Agreement.
Section 2.14. Maintenance of FHA Mortgage Insurance and VA
Guaranty.
With respect to any FHA Loans and VA Loans, the Servicer shall
maintain and keep the FHA Mortgage Insurance and the VA Guaranty Agreement,
respectively, in full force and effect throughout the term of this Agreement and
discharge its obligations arising out of FHA Mortgage Insurance and the VA Loan
Guaranty Agreement. The Servicer hereby agrees that it shall be liable to the
Issuer for any loss, liability or expense incurred by the Issuer by reason of
any FHA Mortgage Insurance or VA Loan Guaranty Agreement being voided, reduced,
released or adversely affected by reason of the negligence or willful misconduct
of the Servicer. The Servicer will service and administer the Mortgage Notes in
accordance with the obligations of mortgagees under the Act and the applicable
regulations thereunder and under the Servicemen's Readjustment Act and VA
Regulations and will discharge all obligations of the mortgagee under each
Mortgage Note including, with respect to FHA Loans and VA Loans, paying all FHA
and VA insurance premiums, fees or charges, as required, and, subject to the
right to assign the Mortgage Note to the FHA or VA, as the case may be, will
take all action reasonably necessary to preserve the lien of such Mortgage,
including, the defense of actions to challenge or foreclose such lien.
Section 2.15. Notification of Adjustments.
With respect to each adjustable rate Mortgage Note the Servicer shall
adjust the Mortgage Interest Rate on the related interest rate adjustment date
and shall adjust the Monthly Payment on the related mortgage payment adjustment
date, if applicable, in compliance with the requirements of applicable law and
the related Mortgage Note. The Servicer shall execute and deliver any and all
necessary notices required under applicable law and the terms of the related
Mortgage Note regarding the Mortgage Interest Rate and Monthly Payment
adjustments. The Servicer shall promptly, upon written request therefor,
deliver to the Issuer and the Trustee such notifications and any additional
applicable data regarding such adjustments and the methods used to calculate and
implement such adjustments. Upon the discovery by the Servicer or the receipt
of notice from the Issuer or the Trustee that the Servicer has failed to adjust
a Mortgage Interest Rate or Monthly Payment in accordance with the terms of the
related Mortgage Note, the Servicer shall immediately deposit in or credit to
the Collection Account from its own funds the amount of any interest loss or
deferral caused thereby.
Section 2.16. Completion and Recordation of Assignment of
Mortgage and FHA and VA Change Notices.
To the extent permitted by applicable law, each of the Assignments of
Mortgage is subject to recordation in all appropriate public offices for real
property records in all the counties or other comparable jurisdictions in which
any or all of the Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected at the Issuer's expense at the direction of the Issuer, but only if
required and (if so required) in accordance with, the terms of the Indenture.
If applicable, at the Issuer's direction, the Servicer shall cause the
endorsements on the Mortgage Note, the Assignment of Mortgage, the assignment of
security agreement and the HUD form 92080 Mortgage Record Charge with respect to
all FHA Loans to be completed, and shall give notice to the VA of a transfer of
insurance credits, if applicable, with respect to VA Loans on the form
prescribed by the VA.
Section 2.17. Protection of Accounts; Eligible Investments.
The Servicer may transfer the Collection Account or the Escrow Account
to a different Qualified Depository from time to time. Such transfer shall be
made only upon obtaining the consent of the Issuer, which consent shall not be
withheld unreasonably.
The Servicer shall bear any expenses, losses or damages sustained by
the Issuer if the Collection Account and/or the Escrow Account are not demand
deposit accounts.
Amounts in the Collection Account may at the option of the Servicer be
invested in Eligible Investments. Any such Eligible Investment shall mature no
later than the date two Business Days prior to the Servicer Remittance Date next
following the date of such Eligible Investment, provided, however, that if such
Eligible Investment is an obligation of a Qualified Depository that maintains
the Collection Account, then such Eligible Investment may mature on such
Servicer Remittance Date. Any such Eligible Investment shall be made in the
name of the Servicer in trust for the benefit of the Issuer. All income on or
gain realized from any such Eligible Investment shall be for the benefit of the
Servicer and may be withdrawn at any time by the Servicer. Any losses incurred
in respect of any such investment shall be deposited in the Collection Account,
by the Servicer out of its own funds immediately as realized.
Section 2.18. Custodial Agreement.
Pursuant to the Custodial Agreement, the Issuer shall deliver to the
Custodian on or prior to the Closing Date those documents relating to the
Mortgage Notes required by Section 2.1 of the Custodial Agreement to be so
delivered. In the event of any conflict, inconsistency or discrepancy between
any of the provisions of this Agreement and any of the provisions of the
Custodial Agreement, the provisions of this Agreement shall control and be
binding upon the Issuer and the Servicer.
On or prior to the Closing Date, the Custodian shall have acknowledged
its receipt of all such documents required to be delivered to the Custodian
pursuant to the Custodial Agreement with respect to the Mortgage Notes initially
pledged to the Trustee.
The Servicer shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Note entered into in accordance with this Agreement as soon as
practicable after their execution and recordation, if applicable, in the
appropriate public recording office; provided, however, that the Servicer shall
provide to the Custodian (i) a copy certified by the Servicer as true and
complete of any such executed document submitted for recordation within ten days
after receipt by the Servicer and (ii) with respect to each jurisdiction in
which such original documents are retained by the appropriate public recording
office, a copy of any document submitted for recordation certified by such
public recording office to be a true and complete copy of the original as soon
as practicable.
Section 2.19. Servicing Compensation.
As consideration for servicing the Mortgage Notes subject to this
Agreement, the Servicer shall retain the relevant Servicing Fee for each
Mortgage Note remaining subject to this Agreement during any month or part
thereof.
Such Servicing Fee shall be payable monthly. The obligation of the
Issuer to pay the Servicing Fee is limited to, and the Servicing Fee is payable
solely from, the interest portion (including recoveries with respect to interest
from Liquidation Proceeds or Insurance Proceeds) of each Monthly Payment
actually received by the Servicer. The Servicing Fee percentage shall be
computed on the same principal amount and for the same period as the interest
portion of each payment.
In addition, the Servicer shall be entitled to retain as additional
compensation the late charges and other fees and expenses related to loan
assumptions, delinquencies, modifications, partial releases of security and
releases for payment in full, if any, collected under the applicable loan
documents or customarily collected by servicers consistent with Accepted
Servicing Practices.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement thereof except as specifically provided for herein.
Section 2.20. Withdrawals and Substitutions of Mortgage
Notes.
Subject to the terms of the Indenture, the Issuer may, at its option,
at any time and from time to time, (i) withdraw Mortgage Notes from the Lien of
the Indenture or (ii) pledge additional Mortgage Notes for inclusion under the
Lien of the Indenture. All Mortgage Notes that become subject to the Lien of
the Indenture shall be subject to the terms of this Agreement. All Mortgage
Notes that are no longer subject to the Lien of the Indenture shall not be
subject to the terms of this Agreement and shall be serviced by the Servicer
pursuant to a separate servicing agreement.
Upon five days prior written notice to the Servicer, the Issuer may
cause Mortgage Notes to become subject to the terms of this Agreement or remove
Mortgage Notes from the terms of this Agreement. The addition of Mortgage Notes
under this Section 2.20 shall be in accordance with the provisions of Section
2.01. In connection with the removal of any Mortgage Notes under this Section
2.20, the Servicer shall promptly transfer any funds in the Collection Account
and the Escrow Account with respect to such Mortgage Notes not due to be paid to
the Trustee, to the Issuer or to such other Person as the Issuer may direct, and
the Servicer shall take such other actions as the Issuer may reasonably request
to transfer the Servicing Files with respect to such Mortgage Notes to the
Issuer or at the direction of the Issuer.
ARTICLE III
REMITTANCES AND REPORTING BY THE SERVICER
Section 3.01. Remittances to Trustee.
Subject to the provisions of this Section 3.01, on each Servicer
Remittance Date, the Servicer shall withdraw and remit by wire transfer of
immediately available funds to the Trustee all amounts on deposit in the
Collection Account received during the preceding Collection Period (net of
charges against or withdrawals from the Collection Account pursuant to Section
2.11(i) through (iv) and (viii)) (the "Available Amount"). Notwithstanding the
foregoing, in the event that the Servicer receives notice of an occurrence of an
Event of Default (as defined in the Indenture) with respect to the Issuer, the
Servicer shall remit to the Trustee all amounts on deposit in the Collection
Account (net of charges against or withdrawals from the Collection Account
pursuant to Section 2.11(i) through (iv) and (viii)) not later than (i) in the
case of funds deposited in the Collection Account on or prior to 1:00 p.m.
(central time), on the date of deposit of such funds or (ii) in the case of
funds deposited in the Collection Account after 1:00 p.m. (central time), the
Business Day following the date of deposit of such funds in the Collection
Account.
Section 3.02. Reporting by the Servicer.
(a) On the 18th day of each month (or, if such day is not a Business
Day, the preceding Business Day), the Servicer shall deliver to the Issuer and
the Trustee with a copy to the Rating Agencies, a report setting forth the
following information as of the end of the preceding day:
(i) The total amount of funds received by the Servicer and
credited to the Collection Account;
(ii) The aggregate outstanding principal balance of all of the
Eligible Mortgage Notes;
(iii) The weighted average coupon, weighted average maturity and
outstanding principal balance of the Eligible Mortgage Notes, grouped as
follows:
(A) for the Fixed Rate Mortgage Notes, by the
following ranges of original term to maturity:
(1) 15 years or less; and
(2) greater than 15 years and up to and
including 30 years; and
(B) for the Adjustable Rate Mortgage Notes, by index
and, for each index, by the length of the initial fixed rate period
and the length of the subsequent adjustable rate period; and
(iv) With respect to Eligible Mortgage Notes as to which there is
currently a Late Payment, the number and outstanding principal balance of
such Eligible Mortgage Notes, grouped in accordance with clause (iii)
above, that are (A) one installment delinquent, (B) two installments
delinquent, (C) three installments delinquent and (D) more than three
installments delinquent.
(b) In addition, the report delivered by the Servicer on the 18th day
of each month (or if such day is not a Business Day, the preceding Business Day)
shall contain the information set forth in Exhibit B attached hereto.
Section 3.03. Annual Certificate.
On or before March 31, 1998 and on or before each March 31st
thereafter, the Servicer shall deliver or cause to be delivered to the Issuer an
Officer's Certificate, to the effect that a review of the activities of the
Servicer during the last calendar year (or the period since the Closing Date in
the case of the first such Officer's Certificate required to be delivered) has
been made under the supervision of the officer executing such Officer's
Certificate with a view to determining whether during such period the Servicer
had performed and observed all of its obligations under this Agreement, and
either (A) stating that to the best of such officer's knowledge no default by
the Servicer under this Agreement has occurred and is continuing, or (B) if such
a default has occurred and is continuing, specifying such default and the nature
and status thereof.
Section 3.04. Annual Accountants' Report.
On or before March 31, 1997 and on or before each March 31st
thereafter, the Servicer shall deliver to the Issuer and the Trustee with a copy
to each Rating Agency a report, prepared by a firm of Independent Accountants of
recognized national standing selected by the Servicer, to the effect that
(i) they have examined certain documents and records relating to the Mortgage
Notes, in accordance with the requirements of the Uniform Single Audit Program
and (ii) their examinations disclosed no exceptions which, in their opinion,
were material, relating to such Mortgage Notes, or, if any such exceptions were
disclosed thereby, setting forth such exceptions which, in their opinion, were
material. If any of the Mortgage Notes are being serviced by a Person other
than the Servicer, as permitted by Section 2.06 hereof, the firm of Independent
Accountants preparing the report with respect to the servicing of such Mortgage
Notes by the Servicer may rely, as to matters relating to the servicing of such
Mortgage Notes, upon a comparable report (rendered with respect to the most
recent fiscal year of such other Person which ended at or prior to the end of
the Servicer's fiscal year) of another firm of Independent Accountants with
respect to such other Person's servicing of such Mortgage Notes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Servicer.
The Servicer, as a condition to the consummation of the transactions
contemplated hereby, makes the following representations and warranties to the
Issuer and to the Trustee, as assignee of the Issuer, as of the date hereof and
as of the Closing Date:
(a) Due Organization and Authority. The Servicer is a Texas
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good standing
in each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the type
conducted by the Servicer, and in any event the Servicer is in compliance with
the laws of any such state to the extent necessary to ensure the enforceability
of the terms of this Agreement; the Servicer has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement by the
Servicer and the consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement evidences the valid, binding and
enforceable obligation of the Servicer and all requisite corporate action has
been taken by the Servicer to make this Agreement valid and binding upon the
Servicer in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Servicer;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the acquisition of the servicing responsibilities by the Servicer of
the transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Servicer's charter
or by-laws or any legal restriction or any agreement or instrument to which the
Servicer is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the violation
of any law, rule, regulation, order, judgment or decree to which the Servicer or
its property is subject, or impair the ability of the Servicer to service the
Mortgage Notes, or impair the value of the Mortgage Notes;
(d) Ability to Perform. The Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement;
(e) No Litigation Pending. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge, threatened
against the Servicer which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations, financial
condition, properties or assets of the Servicer, or in any material impairment
of the right or ability of the Servicer to carry on its business substantially
as now conducted, or in any material liability on the part of the Servicer, or
which would draw into question the validity of this Agreement or of any action
taken or to be taken in connection with the obligations of the Servicer
contemplated herein, or which would be likely to impair materially the ability
of the Servicer to perform under the terms of this Agreement;
(f) No Consent Required. No consent, approval, authorization or
order of any court or governmental agency or body is required for the execution,
delivery and performance by the Servicer of or compliance by the Servicer with
this Agreement, or if required, such approval will be obtained prior to the
Closing Date;
(g) Ability to Service. The Servicer is an FHA Approved Mortgagee, a
VA Approved Lender and an approved seller/servicer of conventional residential
mortgage loans for FNMA or FHLMC, with the facilities, procedures, and
experienced personnel necessary for the sound servicing of mortgage loans of the
same type as the Mortgage Notes. The Servicer is in good standing to service
mortgage loans for the FHA and the VA and either FNMA or FHLMC, and no event has
occurred, including but not limited to a change in insurance coverage, which
would make the Servicer unable to comply with FHA and VA and either FNMA or
FHLMC eligibility requirements or which would require notification to any of the
FHA, the VA, FNMA or FHLMC; and
(h) No Untrue Information. Neither this Agreement nor any statement,
report or other document furnished or to be furnished pursuant to this Agreement
or in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading.
Section 4.02. Remedies for Breach of Representations and
Warranties of the Servicer.
It is understood and agreed that the representations and warranties
set forth in Section 4.01 shall survive the engagement of the Servicer to
perform the servicing responsibilities as of the Closing Date hereunder and the
delivery of the Servicing Files to the Servicer and shall inure to the benefit
of the Issuer and the Trustee, as assignee of the Issuer. Upon discovery by any
of the Servicer, the Issuer or the Trustee of a breach of any of the foregoing
representations and warranties which materially and adversely affects the
ability of the Servicer to perform its duties and obligations under this
Agreement or otherwise materially and adversely affects the value of the
Mortgage Notes, the Mortgaged Property or the priority of the security interest
on such Mortgaged Property or the interest of the Issuer or the Trustee, the
Person discovering such breach shall give prompt written notice to the parties
to this Agreement and/or to the Trustee, as applicable.
Within 60 days of the earlier of either discovery by or notice to the
Servicer of any breach of a representation or warranty set forth in Section 4.01
which materially and adversely affects the ability of the Servicer to perform
its duties and obligations under this Agreement or otherwise materially and
adversely affects the value of the Mortgage Notes, the Mortgaged Property or the
priority of the security interest on such Mortgaged Property, the Servicer shall
use its Best Efforts promptly to cure such breach in all material respects and,
if such breach cannot be cured, the Servicer shall, at the Issuer's or Trustee's
option, assign the Servicer's rights and obligations under this Agreement (or
respecting the affected Mortgage Notes) to a successor servicer, subject to the
approval of the Issuer and the Trustee, which approval shall be in the Issuer's
and Trustee's sole discretion. Such assignment shall be made in accordance with
Section 7.01.
In addition, the Servicer shall indemnify the Issuer and the Trustee
and hold the Issuer and the Trustee harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other reasonable out-of-pocket costs and expenses
resulting from any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a breach of the Servicer representations and warranties
contained in this Agreement.
Any cause of action against the Servicer relating to or arising out of
the breach of any representations and warranties made in Section 4.01 shall
accrue upon (i) discovery of such breach by the Servicer or notice thereof by
the Issuer or the Trustee to the Servicer, (ii) failure by the Servicer to cure
such breach within the applicable cure period, and (iii) demand upon the
Servicer by the Issuer or the Trustee for compliance with this Agreement.
ARTICLE V
THE SERVICER
Section 5.01. Corporate Existence of the Servicer; Status
as Servicer; Merger.
(a) Subject to Section 5.01(b) hereof, the Servicer shall keep in
full force its existence, rights and franchises as a corporation, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Mortgage Notes and this
Agreement.
(b) Any Person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer shall be a party, or any Person succeeding to the properties
and assets of the Servicer substantially as a whole, shall be the successor of
the Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding, provided, however, that the successor or surviving
Person shall execute an agreement of assumption to perform every obligation of
the Servicer hereunder and shall be an institution (i) having a net worth of not
less than $10,000,000, and (ii) which is an approved seller/servicer of
conventional residential mortgage loans for FNMA or FHLMC and an FHA Approved
Mortgagee and a VA Approved Lender.
Section 5.02. Performance of Obligations.
(a) The Servicer shall diligently perform and observe all of its
obligations and agreements contained in this Agreement.
(b) The Servicer shall not take any action, or permit any action to
be taken by others, which would excuse any Person from any of its covenants or
obligations under any Mortgage Note, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, a Mortgage Note or any such instrument, except as
expressly provided herein or therein.
Section 5.03. The Servicer Not to Resign; Assignment.
(a) The Issuer has entered into this Agreement with the Servicer in
reliance upon the status of the Servicer as a mortgage servicer, and the
representations as to the adequacy of its servicing facilities, plant,
personnel, records and procedures, its integrity, reputation and financial
standing, and the continuance thereof. Therefore, the Servicer shall not assign
this Agreement or the servicing responsibilities hereunder or delegate its
rights or duties hereunder or any portion hereof (to other than a Subservicer)
or sell or otherwise dispose of all or substantially all of its property or
assets without the prior written consent of the Issuer and the Trustee, which
consent shall not be unreasonably withheld by the Issuer or the Trustee.
(b) The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon (i) the appointment of a successor Servicer in
the manner provided in Section 7.01 and receipt by the Trustee of a letter from
each Rating Agency that such resignation and appointment shall not result in the
withdrawal, qualification or downgrading of the ratings then assigned to the
Securities, or (ii) the determination that its duties hereunder are no longer
permissible under applicable law and such incapacity cannot be cured by the
Servicer. Any such determination permitting the resignation of the Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Issuer and the Trustee, which Opinion of Counsel shall be in form and substance
acceptable to the Issuer and the Trustee.
(c) Without in any way limiting the generality of this Section 5.03,
in the event that the Servicer either shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof (to other than a Subservicer) or sell or otherwise dispose of
all or substantially all of its property or assets, without the prior written
consent of the Issuer and the Trustee, then the Issuer or the Trustee shall have
the right to terminate this Agreement upon notice given as set forth in Section
6.01, without any payment of any penalty or damages and without any liability
whatsoever to the Servicer or any third party.
(d) Except as provided in this Section 5.03 or Sections 4.02 or 6.01
hereof, the duties and obligations of the Servicer under this Agreement shall
continue until this Agreement shall have been terminated as provided in Section
7.02 hereof, and shall survive the exercise by the Issuer or the Trustee of any
right or remedy under this Agreement or the enforcement by the Issuer, the
Trustee or any Holder of any provision of the Indenture, or the Securities, or
the enforcement by the Issuer or Trustee of this Agreement.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default.
Any of the following acts or occurrences shall constitute an Event of
Default by the Servicer under this Agreement:
(i) The Servicer shall fail to distribute any amounts required
to be distributed to the Trustee on behalf of the Holders pursuant to
Section 3.01 hereof, which failure continues unremedied for five days; or
(ii) The Servicer shall fail duly to observe or perform in any
material respects any covenants or agreements of this Agreement, which
failure continues for a period of 60 days after written notice thereof
shall have been given to the Servicer by the Trustee or by the Holders of
not less than 25% of the aggregate principal amount of the Outstanding
Securities; or
(iii) The entry against the Servicer of a decree or order of a
court or agency or supervisory authority having jurisdiction for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, including bankruptcy, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, which decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(iv) The Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or relating to all or substantially all of its
property; or
(v) The Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment of
its obligations or cease its normal business operations for three Business
Days.
If an Event of Default hereunder shall have occurred and be
continuing, the Issuer or the Trustee or the Holders of not less than 50% of the
aggregate principal amount of the Outstanding Securities may, by notice given to
the Servicer (with copies to the Issuer and the Trustee), terminate all of the
rights and powers of the Servicer under this Agreement, including without
limitation all rights of the Servicer to receive the servicing compensation.
Upon the giving of such notice, all rights, powers, duties and responsibilities
of the Servicer under this agreement, whether with respect to the Mortgage
Notes, the Collection Account, any servicing compensation or otherwise, but
excluding any obligation of the Servicer under Section 3.01 hereof with respect
to the immediately preceding Servicer Remittance Date (which obligation shall
remain an obligation of the Servicer notwithstanding any termination of the
Servicer's rights and powers under this Agreement), shall vest in and be assumed
by the Trustee or a new Servicer as provided in Section 7.01, and the Issuer and
Trustee are each hereby authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, all documents and
other instruments (including any notices to Mortgagors deemed necessary or
advisable by the Trustee), and to do or accomplish all other acts or things
necessary or appropriate to effect such vesting and assumption.
By a written notice, the Issuer, the Trustee or Holders of not less
than 50% of the aggregate principal amount of the Outstanding Securities may
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any waiver of a past default, such default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
Section 6.02. No Effect on Other Parties.
Upon any termination of the rights and powers of the Servicer from
time to time pursuant to Section 6.01 hereof or upon any appointment of a
successor to the Servicer, all the rights, powers, duties and obligations of the
Issuer and the Trustee under this Agreement shall remain unaffected by such
termination or appointment and shall remain in full force and effect thereafter,
except as otherwise expressly provided in this Agreement or in the Indenture.
Section 6.03. Rights Cumulative.
All rights and remedies from time to time conferred upon or reserved
to the Issuer and the Trustee are cumulative, and none is intended to be
exclusive of another. No delay or omission in insisting upon the strict
observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy. Every right and remedy may
be exercised from time to time and as often as deemed expedient.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Successor to the Servicer.
In the event that the Servicer's duties, responsibilities and
liabilities under this Agreement should be terminated pursuant to Sections 4.02,
5.03, 6.01 or 7.02, the Trustee shall (i) succeed to and assume all of the
Servicer's responsibilities, rights, duties and obligations under this
Agreement, or (ii) appoint a successor having the characteristics set forth in
clauses (i) and (ii) of Section 5.01(b) and which shall succeed to all rights
and assume all of the responsibilities, duties and liabilities of the Servicer
under this Agreement simultaneously with the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement. In addition,
with respect to all FHA Loans serviced hereunder, the Servicer shall provide
notice of such change in servicers to HUD on HUD form 92080 or such other form
as prescribed by HUD, at least 10 days prior to such transfer of servicing. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Notes as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer under this
Agreement without the consent of the Trustee. In the event that the Servicer's
duties, responsibilities and liabilities under this Agreement should be
terminated pursuant to the aforementioned Sections, the Servicer shall discharge
such duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the same
degree of diligence and prudence which it is obligated to exercise under this
Agreement, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The resignation or removal
of the Servicer pursuant to the aforementioned sections shall not become
effective until a successor servicer shall be appointed by the Issuer and such
resignation or removal of the Servicer shall not relieve the Servicer of the
representations and warranties made pursuant to Sections 4.01 and the remedies
available to the Issuer and Trustee under Section 4.02, it being understood and
agreed that the provisions of such Sections 4.01 and 4.02 shall be applicable to
the Servicer notwithstanding any such resignation or termination of the
Servicer, or the termination of this Agreement.
The Servicer shall deliver promptly to the successor Servicer the
funds in the Collection Account and Escrow Account, and the Servicer shall
account for all of such funds. Within 30 days of the appointment of a successor
entity by the Issuer, the Servicer shall prepare, execute and deliver to the
successor entity any and all documents and other instruments, place in such
successor's possession all Servicing Files and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of the notice of
termination described in Section 6.01 and to more fully and definitively vest in
the successor all such rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer. The Servicer shall cooperate with the Issuer, the
Trustee and such successor in effecting the termination of the Servicer's
responsibilities and rights hereunder and the transfer of servicing
responsibilities to the successor servicer, including, without limitation, the
transfer to such successor for administration by it of all cash amounts received
with respect to the Mortgage Notes by the Servicer after it has received notice
of termination. With respect to all FHA Loans serviced hereunder, the Servicer
shall provide notice of such change in servicers to HUD on HUD form 92080 or
such other form as prescribed by HUD, at least 10 days prior to such transfer of
servicing.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Servicer, the Issuer and the Trustee an instrument accepting
such appointment, wherein the successor shall make the representations and
warranties set forth in Section 4.01, whereupon such successor shall become
fully vested with all the rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer, with like effect as if originally named as a
party to this Agreement. Any termination or resignation of the Servicer or
termination of this Agreement pursuant to Sections 4.02, 5.03, 6.01 or 7.02
shall not affect any claims that the Issuer or the Trustee may have against the
Servicer arising out of the Servicer's actions or failure to act prior to any
such termination or resignation.
Upon a successor's acceptance of appointment as such, the Servicer
shall notify by mail the Issuer, the Trustee and each Rating Agency of such
appointment in accordance with the procedures set forth in Section 7.04.
Section 7.02. Termination of the Agreement.
(a) The respective duties and obligations of the Servicer and the
Issuer created by this Agreement shall terminate upon (i) the satisfaction and
discharge of the Indenture pursuant to Section 13.01 of the Indenture, (ii) the
distribution of the final payment or Liquidation Proceeds on the last Mortgage
Note to the Trustee, or (iii) the consent of the Servicer, the Issuer and the
Trustee in writing.
(b) Following an event of default by the Issuer under the Indenture
and foreclosure upon the Pledged Property pursuant thereto, the successor to the
rights of the Issuer in respect of the Mortgage Notes (including without
limitation the Trustee or any or all of the Holders) shall have the right to
terminate this Agreement, by notice to the Servicer and the Issuer, within
90 days after the date such successor shall have succeeded to such rights of the
Issuer.
Section 7.03. Amendment.
(a) This Agreement may not be amended without the consent of the
Holders of not less than 51% in principal amount of the Outstanding Securities;
provided, however, that this Agreement may be amended from time to time by the
Servicer and the Issuer without the consent of any Holders of Outstanding
Securities (i) to cure or correct any ambiguity or mistake, (ii) to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein or in the Indenture, (iii) to modify, eliminate or add to any
of its provisions to such extent as shall be necessary or helpful to comply or
maintain compliance with applicable law, (iv) to conform to evolving industry
standards regarding the servicing of residential mortgage loans generally,
(v) to change the timing and/or nature of deposits into the Collection Account,
Distribution Account or Reserve Fund (provided that (a) such change shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Holder and (b) such change shall not adversely affect the
then-current rating of the Securities as evidenced by written confirmation from
each Rating Agency to such effect) and (vi) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
materially inconsistent with the provisions of this Agreement (provided that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Holder).
(b) Promptly after the execution of any amendment, the Servicer shall
send to the Trustee and each Rating Agency a conformed copy of each such
amendment, but the failure to do so will not impair or affect its validity.
(c) It shall not be necessary, in any consent of Holders under this
Section 7.03, to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Holders shall be subject to such reasonable regulations as
the Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions
of this Section 7.03 shall be void.
Section 7.04. Governing Law.
This 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 7.05. Notices.
All demand notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed by overnight courier,
delivered in person or mailed by registered or certified United States mail,
postage prepaid, addressed as follows (or such address as may hereafter be
furnished to the other party by like notice):
(a) If to the Issuer:
Main Place Real Estate Investment Trust
000 Xxxxx Xxxxx Xxxxxx, 00xx Floor
NC1-007-23-02
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Secretary
(b) If to the Servicer:
NationsBanc Mortgage Corporation
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxx
(c) If to the Trustee
First Trust National Association
000 Xxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxxxxxx
(d) If to any Holder, as specified in the Indenture.
All notices and communications shall be deemed to have been
received either at the time of the personal delivery thereof to any officer of
the person entitled to receive such notices and communications at the address of
such person for notices hereunder, or on the third day after the mailing thereof
to such address, as the case may be.
Section 7.06. Severability of Provisions.
If one or more of the provisions of this Agreement shall be for any
reason whatever held invalid or unenforceable, such provisions shall be deemed
severable from the remaining covenants, agreements and provisions of this
Agreement and such invalidity of unenforceability shall in no way affect the
validity or enforceability of such remaining provisions, the rights of any
parties hereto or of the Trustee or any Holder. To the extent permitted by law,
the parties hereto hereby waive any provision of law which renders any provision
of this Agreement invalid or unenforceable in any respect.
Section 7.07. Inspection and Audit Rights.
The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the Trustee or the Issuer, during the Servicer's normal
business hours, to examine all the books of account, records, reports and other
papers of the Servicer relating to the Mortgage Notes, to make copies and
extracts therefrom, to cause such books to be audited by Independent Accountants
selected by the Trustee or the Issuer, and to discuss its affairs, finances and
accounts relating to the Mortgage Notes with officers, employees and Independent
Accountants of the Issuer (and by this provision the Servicer hereby authorizes
said accountants to discuss with such representatives such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any expense incident to this Section 7.07 shall be borne by the
Issuer, provided that if an audit is made during the continuance of an Event of
Default, the expense incident to such audit shall be borne by the Servicer.
Section 7.08. Binding Effect.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.
Section 7.09. Article and Section Headings.
The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.
Section 7.10. Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original for all purposes and all of which constitute, collectively,
one Agreement.
IN WITNESS WHEREOF, the Issuer and the Servicer have caused this
Agreement to be duly executed by their respective officers duly authorized as of
the day and year first above written.
MAIN PLACE REAL ESTATE INVESTMENT TRUST
By:/s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: President
NATIONSBANC MORTGAGE CORPORATION
By:/s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
