[NAME OF SERVICER],
as Servicer,
and
AMERIQUEST MORTGAGE SECURITIES INC.
as Company
----------------------
SERVICING AGREEMENT
Dated as of _______________
----------------------
Ameriquest Trust Series ____-__
1
TABLE OF CONTENTS
Page
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
Representations and Warranties of the
Company................................4
Section 2.03. Enforcement of Representations and
Warranties................................4
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The
Servicer.................................................................6
Section 3.02. Collection of Certain Mortgage Loan
Payments.................................7
Section 3.03. Withdrawals from the Collection
Account......................................9
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses...............11
Section 3.05. Modification
Agreements.....................................................12
Section 3.06. Trust Estate; Related
Documents.............................................12
Section 3.07. Realization Upon Defaulted Mortgage
Loans...................................13
Section 3.08. Company and Indenture Trustee to
Cooperate..................................14
Section 3.09. Servicing Compensation; Payment of Certain
Expenses by Servicer.............15
Section 3.10. Annual Statement as to
Compliance...........................................15
Section 3.11. Annual Servicing
Report.....................................................16
Section 3.12. Access to Certain Documentation and
Information Regarding the
Mortgage
Loans..............................................................16
Section 3.13. Maintenance of Certain Servicing Insurance
Policies.........................17
Section 3.14. Information Required by the Internal
Revenue Service Generally and
Reports of Foreclosures and Abandonments of
Mortgaged Property..............17
Section 3.15. Optional Repurchase of Defaulted Mortgage
Loans.............................17
i
Page
ARTICLE IV
Servicing Certificate
Section 4.01. Statements to
Securityholders...............................................18
ARTICLE V
Distribution and Payment Accounts
Section 5.01. Distribution
Account........................................................20
Section 5.02. Payment
Account.............................................................20
ARTICLE VI
The Servicer
Section 6.01. Liability of the
Servicer...................................................22
Section 6.02. Merger or Consolidation of, or Assumption
of the Obligations of,
the
Servicer................................................................22
Section 6.03. Limitation on Liability of the Servicer and
Others..........................22
Section 6.04. Servicer Not to
Resign......................................................23
Section 6.05. Delegation of
Duties........................................................24
Section 6.06. Servicer to Pay Indenture Trustee's and
Owner Trustee's Fees and
Expenses;
Indemnification...................................................24
ARTICLE VII
Default
Section 7.01. Servicing
Default...........................................................26
Section 7.02. Indenture Trustee to Act; Appointment of
Successor..........................28
Section 7.03. Notification to
Securityholders.............................................29
ARTICLE VIII
Miscellaneous Provisions
Section 8.01.
Amendment...................................................................30
Section 8.02. GOVERNING
LAW...............................................................30
Section 8.03.
Notices.....................................................................30
ii
Page
Section 8.04. Severability of
Provisions..................................................30
Section 8.05. Third-Party
Beneficiaries...................................................30
Section 8.06.
Counterparts................................................................31
Section 8.07. Effect of Headings and Table of
Contents....................................31
Section 8.08. Termination Upon Purchase by the Servicer
or Liquidation of All
Mortgage
Loans..............................................................31
Section 8.09. Certain Matters Affecting the Indenture
Trustee.............................31
[Section 8.10. Authority of the
Administrator..............................................32
EXHIBIT A - MORTGAGE LOAN
SCHEDULE........................................................................
......A-1
EXHIBIT B - POWER OF
ATTORNEY........................................................................
...........B-1
EXHIBIT C - CERTIFICATE PURSUANT TO SECTION
3.08................................................................C-1
EXHIBIT D - FORM OF REQUEST FOR
RELEASE.........................................................................
D-1
Schedule 1 - Mortgage Insurance Component
Schedule..............................................................S-1
iii
This Servicing Agreement, dated as of _______________, between
[Name of Servicer], as Servicer (the "Servicer") and Ameriquest Mortgage
Securities Inc., as Company (the "Company"),
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, Ameriquest Mortgage Securities Inc., will create
Ameriquest Trust Series ____-__, an owner trust (the "Issuer") under Delaware
law, and will transfer the Mortgage Loans and all of its rights under the
Mortgage Loan Purchase Agreement to the Issuer,;
WHEREAS, pursuant to the terms of a Trust Agreement dated as
of _______________ (the "Owner Trust Agreement") between the Company, as
depositor, and ______________________, as owner trustee (the "Owner Trustee"),
the Company will sell the Mortgage Collateral to Issuer in exchange for the cash
proceeds of the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement between
the Depositor and the Owner Trustee, the Issuer will issue and transfer to or at
the direction of the Depositor, the Mortgage-Backed Certificates, Series ____-__
(the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of
_______________ (the "Indenture") between the Issuer and the Indenture Trustee,
the Issuer will issue and transfer to or at the direction of the Purchaser the
Mortgage-Backed Notes, Series ____-__ (the "Notes"), consisting of the Notes and
secured by the Mortgage Collateral;
WHEREAS, pursuant to the terms of the Mortgage Loan Purchase
Agreement, the Company will acquire the Initial Loans; 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 which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms
defined in this Servicing Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03. INTEREST CALCULATIONS. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made on a daily basis using a 365-day year. All calculations of
interest on the Securities shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. 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 penny with one-half of one penny being rounded
down.
2
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER.
The Servicer represents and warrants to Company, the Issuer and for the benefit
of the Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, [the date of the Servicing Agreement],
the Closing Date [and any Deposit Date], that:
(i) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
[_______] 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;
(ii) The Servicer has the power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered,
this Servicing Agreement will constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The 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 Notes or the Certificates which in the opinion of the Servicer has
a
3
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. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Servicer for the benefit of the
Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, the Closing Date and any Deposit Date,
that:
(i) The Company is a corporation in good standing under
the laws of the State of ____________;
(ii) The Company has full power, authority and legal
right to execute and deliver this Servicing Agreement and to perform
its obligations under this Servicing Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Servicing Agreement; and
(iii) The execution and delivery by the Company of this
Servicing Agreement and the performance by the Company of its
obligations under this Servicing Agreement will not violate any
provision of any law or regulation governing the Company or any order,
writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Company or any of its assets.
Such execution, delivery, authentication and performance will not
require the authorization, consent or approval of, the giving of notice
to, the filing or registration with, or the taking of any other action
with respect to, any governmental authority or agency regulating the
activities of limited liability companies. Such execution, delivery,
authentication and performance will not conflict with, or result in a
breach or violation of, any mortgage, deed of trust, lease or other
agreement or instrument to which the Company is bound.
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 Collateral, or the Credit Enhancer, shall enforce the
representations and warranties of the Seller pursuant to the Mortgage Loan
Purchase Agreement. Upon the discovery by the Seller, the Servicer, the
Indenture Trustee, the Credit Enhancer, the Company or any Custodian of a breach
of any of the representations and warranties made in the Mortgage Loan Purchase
Agreement, in respect of any Mortgage Loan which materially and adversely
affects the interests of the Securityholders or the Credit Enhancer, the party
discovering such breach shall give prompt written notice to the other parties
(any Custodian being so obligated under a Custodial Agreement). The Servicer
shall promptly notify the Seller of such breach and request that, pursuant to
the terms of the Mortgage Loan Purchase Agreement, the Seller either (i) cure
such breach in all material respects within 45 days (with respect to a breach of
the representations and warranties contained in Section 3.1(a) of the Mortgage
Loan Purchase Agreement) or 90 days (with respect to a breach of the
representations and warranties contained in Section 3.1(b) of the Mortgage Loan
Purchase Agreement) from the date
4
the Seller was notified of such breach or (ii) purchase such Mortgage Loan from
the Company at the price and in the manner set forth in Section 3.1(b) of the
Mortgage Loan Purchase Agreement; PROVIDED that the Seller shall, subject to the
conditions set forth in the Mortgage Loan Purchase Agreement, have the option to
substitute an Eligible Substitute Mortgage Loan or Loans for such Mortgage Loan.
In the event that the Seller elects to substitute one or more Eligible
Substitute Mortgage Loans pursuant to Section 3.1(b) of the Mortgage Loan
Purchase Agreement, the Seller shall deliver to the Company with respect to such
Eligible Substitute Mortgage Loans, the original Mortgage Note, the Mortgage,
and such other documents and agreements as are required by the Mortgage Loan
Purchase Agreement. No substitution will be made in any calendar month after the
Determination Date for such month. Payments due with respect to Eligible
Substitute Mortgage Loans in the month of substitution shall not be transferred
to the Company and will be retained by the Servicer and remitted by the Servicer
to the Seller on the next succeeding Payment Date provided a payment has been
received by the Company for such month in respect of the Mortgage Loan to be
removed. 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 Owner Trustee and Indenture Trustee.
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 Company and the Indenture Trustee, as
pledgee of the Mortgage Collateral, against the Seller. In connection with the
purchase of or substitution for any such Mortgage Loan by the Seller, the
Company shall assign to the Seller all of the right, title and interest in
respect of the Mortgage Loan Purchase Agreement applicable to such Mortgage
Loan. Upon receipt of the Repurchase Price, or upon completion of such
substitution, the applicable Custodian shall deliver the Mortgage Files to the
Servicer, together with all relevant endorsements and assignments.
5
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. THE SERVICER. (a) The Servicer shall service and
administer the Mortgage Loans in the same manner as would prudent institutional
mortgage lenders servicing comparable mortgage loans for their own account in
the jurisdictions where the related Mortgaged Properties are located and in a
manner consistent with the terms of this Servicing Agreement and which shall be
normal and usual in its general mortgage servicing activities and shall have
full power and authority, acting alone or through a subservicer, to do any and
all things in connection with such servicing and administration which it may
deem necessary or desirable, it being understood, however, that the Servicer
shall at all times remain responsible to the Company, the Indenture Trustee, as
pledgee of the Mortgage Collateral, and the Securityholders for the performance
of its duties and obligations hereunder in accordance with the terms hereof and
the servicing standard set forth above. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Company and the Indenture Trustee, as pledgee of the Mortgage Collateral,
to execute and deliver, on behalf of itself, the Company, the Securityholders
and the Indenture Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments with respect to the Mortgage Loans and with respect
to the Mortgaged Properties. The Company, the Indenture Trustee and the
Custodian, as applicable, shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder. On the Closing Date, the
Company shall deliver to the Servicer a power of attorney substantially in the
form of Exhibit B hereto.
If the Mortgage relating to a Mortgage Loan did not have a lien senior
on the related Mortgaged Property as of the Cut-Off Date, then 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. If the Mortgage relating to a
Mortgage Loan had a lien senior to the Mortgage Loan on the related Mort gaged
Property as of the Cut-Off Date, then the Servicer, in such capacity, may
consent to the refinancing of such 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 to such refinancing and (ii) the interest
rate for the loan evidencing the refinanced senior lien on the date of such
refinancing is no higher than the interest rate on the loan evidencing the
existing senior lien immediately prior to the date of such refinancing.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Servicing Agreement) to the Company under this Servicing
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(b) The Servicer has entered into Initial Subservicing Agreements with the
Initial Subservicers for the servicing and administration of the Mortgage Loans
and may enter into additional Subservicing Agreements with Subservicers for the
servicing and administration of certain of the Mortgage Loans.
6
References in this Servicing Agreement to actions taken or to be taken by the
Servicer in servicing the Mortgage Loans include actions taken or to be taken by
a Subservicer on behalf of the Servicer and any amount received by such
Subservicer in respect of a Mortgage Loan shall be deemed to have been received
by the Servicer whether or not actually received by the Servicer. Each
Subservicing Agreement will be upon such terms and conditions as are not
inconsistent with this Servicing Agreement and as the Servicer and the
Subservicer have agreed. With the approval of the Servicer, a Subservicer may
delegate its servicing obligations to third-party servicers, but such
Subservicers will remain obligated under the related Subservicing Agreements.
The Servicer and the Subservicer may enter into amendments to the related
Subservicing Agreements; PROVIDED, HOWEVER, that any such amendments shall be
consistent with and not violate the provisions of this Servicing Agreement. The
Servicer shall be entitled to terminate any Subservicing Agreement in accordance
with the terms and conditions thereof and without any limitation by virtue of
this Servicing Agreement; PROVIDED, HOWEVER, that in the event of termination of
any Subservicing Agreement by the Servicer or the Subservicer, the Servicer
shall either act as servicer of the related Mortgage Loan or enter into a
Subservicing Agreement with a successor Subservicer which will be bound by the
terms of the related Subservicing Agreement. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer
and nothing contained in this Servicing Agreement shall be deemed to limit or
modify such indemnification.
In the event that the rights, duties and obligations of the Servicer
are terminated hereunder, any successor to the Servicer in its sole discretion
may, to the extent permitted by applicable law, terminate the existing
Subservicing Agreement with any Subservicer in accordance with the terms of the
applicable Subservicing Agreement or assume the terminated Servicer's rights and
obligations under such subservicing arrangements which termination or assumption
will not violate the terms of such arrangements.
As part of its servicing activities hereunder, the Servicer, for the
benefit of the Company, shall use reasonable efforts to enforce the obligations
of each Subservicer under the related Subservicing Agreement, to the extent that
the non-performance of any such obligation would have material and adverse
effect on a Mortgage Loan. Such enforcement, including, without limitation, the
legal prosecution of claims, termination of Subservicing Agreements and the
pursuit of other appropriate remedies, shall be in such form and carried out to
such an extent and at such time as the 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, and shall
be reimbursed therefor only (i) from a general recovery resulting from such
enforcement to the extent, if any, that such recovery exceeds all amounts due in
respect of the related Mortgage Loan or (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such enforcement is
directed.
Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Mortgage Loans, and shall, to the extent such
procedures shall be consistent with this Servicing Agreement, follow such
collection procedures as shall be normal and usual in its general mortgage
servicing activities. Consistent with the foregoing, and without limiting the
generality of the foregoing, the Servicer may in its discretion (i) waive any
late payment charge, penalty interest or other fees which
7
may be collected in the ordinary course of servicing such Mortgage Loan and (ii)
arrange with a Mortgagor a schedule for the payment of principal and interest
due and unpaid; PROVIDED such arrangement is consistent with the Servicer's
policies with respect to home equity mortgage loans; PROVIDED, FURTHER, that
notwithstanding such arrangement such Mortgage Loans will be included in the
information regarding delinquent Mortgage Loans set forth in the Servicing
Certificate. The Servicer may also extend the Due Date for payment due on a
Mortgage Loan, PROVIDED, HOWEVER, that the Servicer shall first determine that
any such waiver or extension will not adversely affect the lien of the related
Mortgage. Consistent with the terms of this Servicing Agreement, the Servicer
may also waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Securityholders or the Credit Enhancer, PROVIDED, HOWEVER, that
the Servicer may not modify or permit any Subservicer to modify any Mortgage
Loan (including without limitation any modification that would change the
Mortgage Rate, forgive the payment of any principal or interest (unless in
connection with the liquidation of the related Mortgage Loan) or extend the
final maturity date of such Mortgage Loan) unless such Mortgage Loan is in
default or, in the judgment of the Servicer, such default is reasonably
foreseeable.
(b) The Servicer shall establish an account (the "Collection Account")
in which the Servicer shall deposit or cause to be deposited any amounts
representing payments on and any collections in respect of the Mortgage Loans
received by it subsequent to the Cut-Off Date as to any Initial Loan or the
related Deposit Date as to any Additional Loan (other than in respect of the
payments referred to in the following paragraph) within __ Business Day[s]
following receipt thereof (or otherwise on or prior to the Closing Date),
including the following payments and collections received or made by it (without
duplication):
(i) all payments of principal of or interest on the
Mortgage Loans received by the Servicer from the respective
Subservicer, net of any portion of the interest thereof retained by the
Subservicer as Subservicing Fees;
(ii) the aggregate Repurchase Price of the Mortgage
Loans purchased by the Servicer pursuant to Section 3.15;
(iii) Net Liquidation Proceeds net of any related
Foreclosure Profit;
(iv) all proceeds of any Mortgage Loans repurchased by
the Seller pursuant to the Mortgage 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 Mortgage Loan Purchase Agreement;
(v) insurance proceeds, other than Net Liquidation
Proceeds, resulting from any insurance policy maintained on a Mortgaged
Property; and
(vi) amounts required to be paid by the Servicer
pursuant to Section 8.08.
8
PROVIDED, HOWEVER, that with respect to each Collection Period, the Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection 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 amounts representing
Foreclosure Profits, fees (including annual fees) or late charge penalties,
payable by Mortgagors, or amounts received by the Servicer for the accounts of
Mortgagors for application towards the payment of taxes, insurance premiums,
assessments and similar items. In the event any amount not required to be
deposited in the Collection Account is so deposited, the Servicer may at any
time withdraw such amount from the Collection Account, any provision herein to
the contrary notwithstanding. The Collection Account may contain funds that
belong to one or more trust funds created for the notes or certificates of other
series and may contain other funds respecting payments on mortgage loans
belonging to the Servicer or serviced or serviced by it on behalf of others.
Notwithstanding such commingling of funds, 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 to the extent they represent collections
on the Mortgage Loans for the benefit of the Company, the Indenture Trustee, the
Securityholders and the Credit Enhancer, as their interests may appear. The
Servicer shall remit all Foreclosure Profits to itself as additional servicing
compensation.
The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Servicer or any of its Affiliates, if such
obligations otherwise qualify as Eligible Investments), which shall mature not
later than the Business Day next preceding the Payment Date and shall not be
sold or disposed of prior to its maturity. Except as provided above, all income
and gain realized from any such investment shall be for the benefit of the
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of the principal amount of any such
investments shall be deposited in the Collection Account by the Servicer out of
its own funds immediately as realized.
(c) 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 meeting the requirements of an Eligible
Account, and invested in Eligible Investments, unless, all such collections are
remitted on a daily basis to the Servicer for deposit into the Collection
Account.
Section 3.03. WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Servicer
shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.02 that
are attributable to the Mortgage Loans for the following purposes:
(i) to deposit in the Distribution Account, on the
Business Day prior to each Payment Date, an amount equal to the
Security Collections required to be distributed on such Payment Date;
9
(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 3.04, or Liquidation Expenses, paid
pursuant to Section 3.07 or otherwise reimbursable pursuant to the
terms of this Servicing Agreement (to the extent not payable pursuant
to Section 3.09), such withdrawal right being limited to amounts
received on particular 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 or
the proceeds of the purchase of such Mortgage Loan;
(iii) to pay to itself out of each payment received on
account of interest on a Mortgage Loan as contemplated by Section 3.09,
an amount equal to the related Servicing Fee (to the extent not
retained pursuant to Section 3.02), and to pay to any Subservicer any
Subservicing Fees not previously withheld by the Subservicer;
(iv) to the extent deposited in the Collection Account
to pay to itself as additional servicing compensation any interest or
investment income earned on funds deposited in the Collection Account
and Payment Account that it is entitled to withdraw pursuant to
Sections 3.02(b) and 5.01;
(v) to the extent deposited in the Collection Account,
to pay to itself as additional servicing compensation any Foreclosure
Profits;
(vi) to pay to itself or the Seller, with respect to any
Mortgage Loan or property acquired in respect thereof that has been
purchased or otherwise transferred to the Seller, the Servicer or other
entity, all amounts received thereon and not required to be distributed
to Securityholders as of the date on which the related Purchase Price
or Repur chase Price is determined;
(vii) to withdraw any other amount deposited in the
Collection Account that was not required to be deposited therein
pursuant to Section 3.02;
(viii) to pay to the Seller the amount, if any, deposited
in the Collection Account by the Indenture Trustee upon release thereof
from the Funding Account representing payments for Additional Loans;
and
(ix) after the occurrence of an Amortization Event, to
pay to the Seller, the Excluded Amount.
Since, in connection with withdrawals pursuant to clauses (iii), (iv), (vi) and
(vii), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Mortgage Loan, 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. Notwithstanding any other provision of this Servicing Agreement, the
Servicer shall be entitled to reimburse itself for any previously unreimbursed
expenses incurred pursuant to Section 3.07 or
10
otherwise reimbursable pursuant to the terms of this Servicing Agreement that
the Servicer determines to be otherwise nonrecoverable (except with respect to
any Mortgage Loan as to which the Repurchase Price has been paid), by withdrawal
from the Collection Account of amounts on deposit therein attributable to the
Mortgage Loans on any Business Day prior to the Payment Date succeeding the date
of such determination.
Section 3.04. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES. The Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Servicer or related Subservicer as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also cause to be maintained on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, fire
insurance with extended coverage in an amount which is at least equal to the
amount necessary to avoid the application of any co-insurance clause contained
in the related hazard insurance policy. Amounts collected by the Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the related Mortgaged Property or property thus acquired or amounts released
to the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited in the Collection Account to the extent called for by Section
3.02. In cases in which any Mortgaged Property is located at any time during the
life of a Mortgage Loan in a federally designated flood area, the hazard
insurance to be maintained for the related Mortgage Loan shall include flood
insurance (to the extent available). All such flood insurance shall be in
amounts equal to the lesser of (i) the amount required to compensate for any
loss or damage to the Mortgaged Property on a replacement cost basis and (ii)
the maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program). The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Servicer shall obtain and maintain a blanket policy consistent with its
general mortgage servicing activities insuring against hazard losses on all of
the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section 3.04, it being
understood and agreed that such 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 the first sentence of
this Section 3.04 and there shall have been a loss which would have been covered
by such policy, deposit in the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause. Any such
deposit by the Servicer shall be made on the last Business Day of the Collection
Period in the month in which payments under any such policy would have been
deposited in the Collection Account. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to
present, on behalf of itself, the Company, the Issuer, the Indenture Trustee and
the Securityholders, claims under any such blanket policy.
11
Section 3.05. MODIFICATION AGREEMENTS. The Servicer or the related
Subservicer, as the case may be, shall be entitled to (A) execute assumption
agreements, substitution agreements, and instruments of satisfaction or
cancellation or of partial or full release or discharge, or any other document
contemplated by this Servicing Agreement and other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties
subject to the Mortgages (and the Company shall promptly execute any such
documents on request of the Servicer) and (B) approve the granting of an
easement thereon in favor of another Person, any alteration or demolition of the
related Mortgaged Property or other similar matters, if it has determined,
exercising its good faith business judgment in the same manner as it would if it
were the owner of the related Mortgage Loan, that the security for, and the
timely and full collectability of, such Mortgage Loan would not be adversely
affected thereby. A partial release pursuant to this Section 3.05 shall be
permitted only if the Combined Loan-to-Value Ratio for such Mortgage Loan after
such partial release does not exceed the Combined Loan-to-Value Ratio for such
Mortgage Loan as of the Cut-Off Date. Any fee collected by the Servicer or the
related Subservicer for processing such request will be retained by the Servicer
or such Subservicer as additional servicing compensation.
Section 3.06. TRUST ESTATE; RELATED DOCUMENTS. (a) When required by the
provisions of this Servicing Agreement, the Company shall execute instruments to
release property from the terms of this Servicing Agreement, or convey the
Company's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Servicing Agreement. No party
relying upon an instrument executed by the Company as provided in this Article
III shall be bound to ascertain the Company's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) If from time to time the Servicer shall deliver to the Company or
the related Custodian copies of any written assurance, assumption agreement or
substitution agreement or other similar agreement pursuant to Section 3.05, the
Company or the related Custodian shall check that each of such documents
purports to be an original executed copy (or a copy of the original executed
document if the original executed copy has been submitted for recording and has
not yet been returned) and, if so, shall file such documents, and upon receipt
of the original executed copy from the applicable recording office or receipt of
a copy thereof certified by the applicable recording office shall file such
originals or certified copies with the Related Documents. If any such documents
submitted by the Servicer do not meet the above qualifications, such documents
shall promptly be returned by the Company or the related Custodian to the
Servicer, with a direction to the Servicer to forward the correct documentation.
(c) Upon Company Request accompanied by an Officers' Certificate of the
Servicer pursuant to Section 3.09 of this Servicing Agreement to the effect that
a Mortgage Loan has been the subject of a final payment or a prepayment in full
and the related Mortgage Loan has been terminated or that substantially all
Liquidation Proceeds which have been determined by the Servicer in its
reasonable judgment to be finally recoverable have been recovered, and upon
deposit to the Collection Account of such final monthly payment, prepayment in
full together with accrued and unpaid interest to the date of such payment with
respect to such Mortgage Loan or, if applicable, Liquidation Proceeds, the
Company shall promptly release the Related Documents to the Servicer, along with
such documents as the Servicer or the Mortgagor may request as contemplated by
the
12
Servicing Agreement to evidence satisfaction and discharge of such Mortgage
Loan. If from time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Servicer requests the Company or the related Custodian
to release the Related Documents and delivers to the Company or the related
Custodian a trust receipt reasonably satisfactory to the Company or the related
Custodian and signed by a Responsible Officer of the Servicer, the Company or
the related Custodian shall release the Related Documents to the Servicer. If
such Mortgage Loans shall be liquidated and the Company or the related Custodian
receives a certificate from the Servicer as provided above, then, upon request
of the Company or the related Custodian shall release the trust receipt to the
Servicer.
Section 3.07. REALIZATION UPON DEFAULTED MORTGAGE LOANS. With respect
to such of the Mortgage Loans as come into and continue in default, the Servicer
will decide whether to foreclose upon the Mortgaged Properties securing such
Mortgage Loans or write off the unpaid principal balance of the Mortgage Loans
as bad debt; PROVIDED that if the Servicer has actual knowledge that any
Mortgaged Property is affected by hazardous or toxic wastes or substances and
that the acquisition of such Mortgaged Property would not be commercially
reasonable, then the Servicer will not cause the Company to acquire title to
such Mortgaged Property in a foreclosure or similar proceeding. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices (including, in the case of any default on a related senior mortgage
loan, the advancing of funds to correct such default) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
mortgage servicing activities; PROVIDED that the Servicer shall not be liable in
any respect hereunder if the Servicer is acting in connection with any such
foreclosure or attempted foreclosure which is not completed or other conversion
in a manner that is consistent with the provisions of this Servicing Agreement.
The foregoing is subject to the proviso that the Servicer shall not be required
to expend its own funds in connection with any foreclosure or attempted
foreclosure which is not completed or towards the correction of any default on a
related senior mort gage loan or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In the
event of a determination by the Servicer that any such expenditure previously
made pursuant to this Section 3.07 will not be reimbursable from Net Liquidation
Proceeds, the Servicer shall be entitled to reimbursement of its funds so
expended pursuant to Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Mortgage
Loan may be deemed to be finally liquidated if substantially all amounts
expected by the Servicer to be received in connection with the related defaulted
Mortgage Loan have been received; PROVIDED, HOWEVER, any subsequent collections
with respect to any such 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
account minimal amounts of additional receipts expected to be received or any
estimated additional liquidation expenses expected to be incurred in connection
with the related defaulted 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 Company and the Indenture Trustee as their interests may
appear, or to their respective nominee on behalf of Securityholders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such
13
Mortgaged Property shall (except as otherwise expressly provided herein) be
considered to be an outstanding Mortgage Loan held as an asset of the Company
until such time as such property shall be sold. Consistent with the foregoing
for purposes of all calculations hereunder, so long as such Mortgaged Property
shall be considered to be an outstanding Mortgage Loan it shall be assumed that,
notwithstanding that the indebtedness evidenced by the related Mortgage Note
shall have been discharged, such Mortgage Note in effect at the time of any such
acquisition of title before any adjustment thereto by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver or grace period will
remain in effect.
Any proceeds from foreclosure proceedings or the purchase or repurchase
of any Mortgage Loan pursuant to the terms of this Servicing Agreement, as well
as any recovery resulting from a collection of Liquidation Proceeds or Insurance
Proceeds, will be applied in the following order of priority: first, to
reimburse the Servicer or the related Subservicer in accordance with Section
3.07; second, to all Servicing Fees payable therefrom; third, to the extent of
accrued and unpaid interest on the related Mortgage Loan, at the Net Mortgage
Rate to the Due Date prior to the Payment Date on which such amounts are to be
deposited in the Payment Account; fourth, as a recovery of principal on the
Mortgage Loan; and fifth, to Foreclosure Profits.
Section 3.08. COMPANY AND INDENTURE TRUSTEE TO COOPERATE. On or before
each Payment Date, the Servicer will notify the Indenture Trustee or the
relevant Custodian, with a copy to the Company, of the termination of or the
payment in full and the termination of any Mortgage Loan during the preceding
Collection Period, which notification shall be by a certification in
substantially the form attached hereto as Exhibit C (which certification shall
include a statement to the effect that all amounts received in connection with
such payment which are required to be deposited in the Collection Account
pursuant to Section 3.02 have been so deposited or credited) of a Servicing
Officer. Upon receipt of payment in full, the Servicer is authorized to execute,
pursuant to the authorization contained in Section 3.01, if the assignments of
Mortgage have been recorded as required under the Mortgage Loan Purchase
Agreement, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto. It is understood
and agreed that any expenses incurred in connection with such instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account. From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Indenture Trustee or the relevant
Custodian shall, upon request of the Servicer and delivery to the Indenture
Trustee or relevant Custodian, with a copy to the Company, of a Request for
Release, in the form annexed hereto as Exhibit D, signed by a Servicing Officer,
release or cause to be released the related Mortgage File to the Servicer and
the Company and Indenture Trustee shall promptly execute such documents, in the
forms provided by the Servicer, as shall be necessary for the prosecution of any
such proceedings or the taking of other servicing actions. Such trust receipt
shall obligate the Servicer to return the Mortgage File to the Indenture Trustee
or the related Custodian (as specified in such receipt) when the need therefor
by the Servicer no longer exists unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released to the Servicer.
14
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions of the Mortgage Loan Purchase
Agreement, the Company shall, if so requested in writing by the Servicer,
promptly execute an appropriate assignment in the form provided by the Servicer
to assign such Mortgage Loan for the purpose of collection to the Servicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, such assignee for
collection will thereupon bring all required actions in its own name and
otherwise enforce the terms of the Mortgage Loan and deposit or credit the Net
Liquidation Pro ceeds, exclusive of Foreclosure Profits, received with respect
thereto in the Collection Account. In the event that all delinquent payments due
under any such Mortgage Loan are paid by the Mortgagor and any other defaults
are cured then the assignee for collection shall promptly reassign such Mortgage
Loan to the Company and return all Related Documents to the place where the
related Mortgage File was being maintained.
In connection with the Company's obligation to cooperate as provided in
this Section 3.08 and all other provisions of this Servicing Agreement requiring
the Company to authorize or permit any actions to be taken with respect to the
Mortgage Loans, the Indenture Trustee, as pledgee of the Mortgage Collateral in
the Company, expressly agrees, on behalf of the Company, to take all such
actions on behalf of the Company and to promptly execute and return all
instruments reasonably required by the Servicer in connection therewith;
PROVIDED that if the Servicer shall request a signature of the Indenture
Trustee, on behalf of the Company, the Servicer will deliver to the Indenture
Trustee an Officer's Certificate stating that such signature is necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Servicing Agreement.
Section 3.09. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. The Servicer shall be entitled to receive the Servicing Fee in
accordance with Section 3.03 as compen sation for its services in connection
with servicing the Mortgage Loans. Moreover, additional servicing compensation
in the form of late payment charges and certain other receipts not required to
be deposited in the Collection Account as specified in Section 3.02 shall be
retained by the Servicer. The Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all other fees and expenses not expressly stated hereunder to be for the account
of the Securityholders, including, without limitation, the fees and expenses of
the Administrator, Owner Trustee, Indenture Trustee and any Custodian) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Servicer will
deliver to the Company, the Issuer and the Indenture Trustee, with a copy to the
Credit Enhancer, on or before ________ of each year, beginning ________, ____,
an Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year and of its performance under this
Servicing Agreement has been made under such officer's supervision, (ii) to the
best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its material obligations under this Servicing Agreement in all
material respects throughout such fiscal year, or, if there has been a material
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and (iii) to the best of
such officer's knowledge, based on
15
consultation with counsel, any continuation Uniform Commercial Code financing
statement or other Uniform Commercial Code financing statement during the
preceding fiscal year which the Servicer determined was necessary to be filed
was filed in order to continue protection of the interest of the Company in the
Mortgage Loans. In addition, the Servicer shall deliver or cause each
Subservicer to deliver to the Indenture Trustee, the Company, the Issuer, the
Depositor and the Credit Enhancer a copy of each certification, accountant's
report or other document upon which the foregoing Officer's Certificate is based
with respect to such Subservicer's performance.
(b) The Servicer shall deliver to the Company, the Issuer and the
Indenture Trustee, with a copy to the Credit Enhancer, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice by means of an Officer's Certificate of any event
which with the giving of notice or the lapse of time or both, would become a
Servicer of Default.
Section 3.11. ANNUAL SERVICING REPORT. On or before ________ of each
year, beginning ________, ____, the Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Company, the Issuer,
the Indenture Trustee, the Depositor, the Credit Enhancer and each Rating Agency
to the effect that such firm has examined certain documents and records relating
to the servicing of mortgage loans by the Servicer during the most recent
calendar year then ended under servicing agreements (including this Servicing
Agreement) substantially similar to this Servicing Agreement and that such
examination, which has been conducted substantially in compliance with the audit
guide for audits of non-supervised mortgagees approved by the Department of
Housing and Urban Development for use by independent public accountants (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements), has disclosed no items of
noncompliance with the provisions of this Servicing Agreement which, in the
opinion of such firm, are material, except for such items of noncompliance as
shall be set forth in such report. In rendering such statement, such firm may
rely, as to matters relating to direct servicing of mortgage loans by
Subservicers, upon comparable statements for examinations conducted
substantially in the manner described above (rendered within one year of such
statement) of independent public accountants with respect to the related
Subservicer. For purposes of such statement, such firm may conclusively assume
that all servicing agreements among the Company and the Servicer relating to
home equity mortgage loans are substantially similar one to another except for
any such servicing agreement which, by its terms, specifically states otherwise.
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS. Whenever required by statute or regulation, the Servicer
shall provide to the Credit Enhancer, any Securityholder upon reasonable request
(or a regulator for a Securityholder) or the Indenture Trustee, reasonable
access to the documentation regarding the Mortgage Loans such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section 3.12
shall derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section 3.12 as a result
of such obligation shall not constitute a breach of this Section 3.12.
16
Section 3.13. MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall be at least equal to the coverage that would be required by FNMA or
FHLMC, whichever is greater, for Persons performing servicing for mortgage loans
purchased by such entity.
Section 3.14. 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
