EXHIBIT 99.1
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IMPAC FUNDING CORPORATION,
as Master Servicer,
IMPAC CMB TRUST SERIES 1999-1,
as Issuer
and
LASALLE NATIONAL BANK
as Indenture Trustee,
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SERVICING AGREEMENT
Dated as of February 1, 1999
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Mortgage Loans
Impac CMB Trust Series 1999-1
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TABLE OF CONTENTS
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ARTICLE I
Definitions
Section 1.01. DEFINITIONS..........................................................................1
Section 1.02. OTHER DEFINITIONAL PROVISIONS........................................................2
Section 1.03. INTEREST CALCULATIONS................................................................2
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER SERVICER.........................3
Section 2.02. EXISTENCE............................................................................4
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES........................................4
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. MASTER SERVICER TO ASSURE SERVICING..................................................6
Section 3.02. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND SUBSERVICERS
.............................................................................................8
Section 3.03. SUCCESSOR SUBSERVICERS...............................................................9
Section 3.04. LIABILITY OF THE MASTER SERVICER.....................................................9
Section 3.05. ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY INDENTURE
TRUSTEE......................................................................................10
Section 3.06. COLLECTION OF MORTGAGE LOAN PAYMENTS................................................11
Section 3.07. WITHDRAWALS FROM THE COLLECTION ACCOUNT.............................................13
Section 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE MORTGAGE
LOANS........................................................................................16
Section 3.10. MAINTENANCE OF PRIMARY INSURANCE POLICIES AND THE CMAC POLICY;
COLLECTION THEREUNDER........................................................................16
Section 3.11. MAINTENANCE OF HAZARD INSURANCE AND FIDELITY COVERAGE...............................17
Section 3.12. DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.........................................18
Section 3.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS...........................................19
Section 3.14. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES...........................21
Section 3.15. MASTER SERVICING COMPENSATION.......................................................22
Section 3.16. ANNUAL STATEMENTS OF COMPLIANCE.....................................................23
Section 3.18. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS AND MANDATORY REPURCHASE
OF CONVERTED MORTGAGE LOANS..................................................................24
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Section 3.19. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE GENERALLY AND
REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY...............................24
ARTICLE IV
Servicing Certificate
Section 4.01. DETERMINATION DATE REPORTS..........................................................25
Section 4.02. RESERVED............................................................................25
Section 4.03. PAYMENT ACCOUNT.....................................................................25
Section 4.04. ADVANCES............................................................................26
Section 4.05. COMPENSATING INTEREST PAYMENTS......................................................26
ARTICLE V
The Master Servicer
Section 5.01. LIABILITY OF THE MASTER SERVICER....................................................27
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE
MASTER SERVICER..............................................................................27
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND OTHERS...........................27
Section 5.04. MASTER SERVICER NOT TO RESIGN.......................................................28
Section 5.05. DELEGATION OF DUTIES................................................................29
Section 5.06. MASTER SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER TRUSTEE'S FEES AND
EXPENSES; INDEMNIFICATION....................................................................29
Section 5.07. TAX ADMINISTRATION..................................................................30
ARTICLE VI
Default
Section 6.01. SERVICING DEFAULT...................................................................31
Section 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR..................................33
Section 6.03. NOTIFICATION TO BONDHOLDERS.........................................................35
Section 6.04. WAIVER OF DEFAULTS..................................................................35
ARTICLE VII
Miscellaneous Provisions
Section 7.01. AMENDMENT...........................................................................36
Section 7.02. GOVERNING LAW.......................................................................36
Section 7.03. NOTICES.............................................................................36
Section 7.04. SEVERABILITY OF PROVISIONS..........................................................37
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Section 7.05. THIRD-PARTY BENEFICIARIES...........................................................37
Section 7.06. COUNTERPARTS........................................................................38
Section 7.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS............................................38
Section 7.08. TERMINATION.........................................................................38
Section 7.09. NO PETITION.........................................................................38
Section 7.10. NO RECOURSE.........................................................................38
ARTICLE VIII
DUTIES OF THE MASTER SERVICER
Section 8.01. ADMINISTRATIVE DUTIES...............................................................39
Section 8.02. RECORDS.............................................................................40
Section 8.03. ADDITIONAL INFORMATION TO BE FURNISHED..............................................40
EXHIBIT A - MORTGAGE LOAN SCHEDULE..............................................................................A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE.........................................................................B-1
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This Servicing Agreement, dated as of February 1, 1999, among
Impac Funding Corporation, as Master Servicer (the "Master Servicer"), Impac CMB
Trust Series 1999-1, as Issuer (the "Issuer") and LaSalle National Bank, as
Indenture Trustee (the "Indenture Trustee").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of the Mortgage Loan Sale and
Contribution Agreement, IMH Assets Corp. (the "Company" or the "Depositor") will
acquire the Mortgage Loans;
WHEREAS, the Company will create Impac CMB Trust Series
1999-1, a Delaware business trust, and will transfer the Mortgage Loans and all
of its rights under the Mortgage Loan Sale and Contribution Agreement to the
Issuer;
WHEREAS, pursuant to the terms of a Trust Agreement dated as
of February 26, 1999 (the "Trust Agreement") between the Company, as depositor,
and Wilmington Trust Company, as owner trustee (the "Owner Trustee") and LaSalle
National Bank, as certificate registrar and certificate paying agent, the
Company will convey the Mortgage Loans to the Issuer in exchange for the
Certificates (as defined below);
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Depositor, the
Trust Certificates, Series 1999-1 (the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of
February 26, 1999 (the "Indenture") between the Issuer and LaSalle National Bank
(the "Indenture Trustee"), the Issuer will pledge the Mortgage Loans and issue
and transfer to or at the direction of the Purchaser the Collateralized
Asset-Backed Bonds, Series 1999-1 (the "Bonds"); and
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Master Servicer will service the Mortgage Loans set forth on the Mortgage
Loan Schedule attached hereto as Exhibit A 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 the basis of a 360-day year consisting of twelve 30-day months,
notwithstanding the terms of the related Mortgage Note and Mortgage. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months.
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ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE MASTER
SERVICER. The Master Servicer represents and warrants to the Issuer and for the
benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, the Bond
Insurer and the Bondholders, as of the Cut-Off Date and the Closing Date, that:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California and has the corporate power to own its assets and
to transact the business in which it is currently engaged. The Master
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 Master Servicer or the validity
or enforceability of the Mortgage Loans;
(ii) The Master 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 Master 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 Master 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 Master Servicer will not violate any provision of any existing
law or regulation or any order or decree of any court applicable to the
Master Servicer or any provision of the certificate of incorporation or
bylaws of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master 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 Master
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Servicer threatened, against the Master Servicer or any of its
properties or with respect to this Servicing Agreement or the Bonds or
the Certificates which, to the knowledge of the Master Servicer, has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Servicing Agreement.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
Section 2.02. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Servicing Agreement.
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Loans, or the Bond Insurer shall enforce the
representations and warranties and related obligations for breaches thereof of
the Seller pursuant to the Mortgage Loan Sale and Contribution Agreement. Upon
the discovery by the Seller, the Master Servicer, the Indenture Trustee, the
Bond Insurer, the Company or any Custodian of a breach of any of the
representations and warranties made in the Mortgage Loan Sale and Contribution
Agreement, in respect of any Mortgage Loan which materially and adversely
affects the interests of the Bondholders or the Certificateholders or the Bond
Insurer, the party discovering such breach shall give prompt written notice to
the other parties (any Custodian being so obligated under a Custodial
Agreement). The Master Servicer shall promptly notify the Seller of such breach
and request that, pursuant to the terms of the Mortgage Loan Sale and
Contribution Agreement, the Seller either (i) cure such breach in all material
respects or (ii) purchase such Mortgage Loan, in each instance in accordance
with the Mortgage Loan Sale and Contribution Agreement; PROVIDED that the Seller
shall, subject to the conditions set forth in the Mortgage Loan Sale and
Contribution Agreement, have the option to substitute an Eligible Substitute
Mortgage Loan or Eligible Substitute Mortgage Loans for such Mortgage Loan.
Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the
month of substitution shall not be part of the Trust Estate and will be retained
by the Master Servicer and remitted by the Master Servicer to the Seller on the
next succeeding Payment Date. For the month of substitution, distributions to
the Payment Account pursuant to the Servicing Agreement will include the Monthly
Payment due on a Deleted Mortgage Loan for such month and thereafter the Seller
shall be entitled to retain all amounts received in respect of such Deleted
Mortgage Loan. The Master 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 Master Servicer
shall promptly deliver the amended Mortgage Loan Schedule to the related
Subservicer, the Bond Insurer, Owner Trustee and Indenture Trustee.
In connection with the substitution of one or more Eligible Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (such
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amount, a "Substitution Adjustment Amount"), if any, by which the aggregate
principal balance of all such Eligible Substitute Mortgage Loans as of the date
of substitution is less than the aggregate principal balance of all such Deleted
Mortgage Loans (after application of the principal portion of the Monthly
Payments due in the month of substitution that are to be distributed to the
Payment Account in the month of substitution). The Seller shall pay the
Substitution Adjustment Amount to the Master Servicer and the Master Servicer
shall deposit such Substitution Adjustment Amount into the Collection Account
upon receipt.
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ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. MASTER SERVICER TO ASSURE SERVICING. (a) The Master
Servicer shall supervise, or take such actions as are necessary to ensure, the
servicing and administration of the Mortgage Loans and any REO Property in
accordance with this Servicing Agreement and its normal servicing practices,
which generally shall conform to the standards of an institution prudently
servicing mortgage loans for its own account and shall have full authority to do
anything it reasonably deems appropriate or desirable in connection with such
servicing and administration. The Master Servicer may perform its
responsibilities relating to servicing through other agents or independent
contractors, but shall not thereby be released from any of its responsibilities
as hereinafter set forth. The authority of the Master Servicer, in its capacity
as master servicer, and any Subservicer acting on its behalf, shall include,
without limitation, the power to (i) consult with and advise any Subservicer
regarding administration of a related Mortgage Loan, (ii) approve any
recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii)
supervise the filing and collection of insurance claims and take or cause to be
taken such actions on behalf of the insured Person thereunder as shall be
reasonably necessary to prevent the denial of coverage thereunder, and (iv)
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing a related Mortgage Loan, including the employment of
attorneys, the institution of legal proceedings, the collection of deficiency
judgments, the acceptance of compromise proposals, the filing of claims under
any Primary Insurance Policy and the CMAC PMI Policies with respect to any ARM
Loan and any other matter pertaining to a delinquent Mortgage Loan. The
authority of the Master Servicer shall include, in addition, the power on behalf
of the Bondholders, the Indenture Trustee, the Bond Insurer or any of them to
(i) execute and deliver customary consents or waivers and other instruments and
documents, (ii) consent to transfer of any related Mortgaged Property and
assumptions of the related Mortgage Notes and Security Instruments (in the
manner provided in this Servicing Agreement) and (iii) collect any Insurance
Proceeds and Liquidation Proceeds. Without limiting the generality of the
foregoing, the Master Servicer and any Subservicer acting on its behalf may, and
is hereby authorized, and empowered by the Indenture Trustee to, execute and
deliver, on behalf of itself, the Bondholders, the Indenture Trustee, the Bond
Insurer or any of them, any instruments of satisfaction, cancellation, partial
or full release, discharge and all other comparable instruments, with respect to
the related Mortgage Loans, the Insurance Policies and the accounts related
thereto, and the Mortgaged Properties. The Master Servicer may exercise this
power in its own name or in the name of a Subservicer.
(b) If the Mortgage relating to a Mortgage Loan did not have a lien
senior to the Mortgage Loan on the related Mortgaged Property as of the Cut-off
Date or Subsequent Cut-off Date, as applicable, then the Master 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 High
LTV Loan had a lien senior to the High LTV Loan on the related Mortgaged
Property as of the Cut-off Date, then the Master Servicer, in such capacity, may
consent to the refinancing of the prior senior lien, provided that the following
requirements are met:
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(i) the resulting Combined Loan-to-Value Ratio of such High LTV Loan is
no higher than the Combined Loan-to-Value Ratio prior to such refinancing;
PROVIDED, HOWEVER, if such refinanced mortgage loan is a "rate and term"
mortgage loan (meaning, the borrower does not receive any cash from the
refinancing), the Combined Loan-to-Value Ratio may increase to the extent of
either (a) the reasonable closing costs of such refinancing or (b) any decrease
in the value of the related Mortgaged Property, if the borrower is in good
standing;
(ii) the interest rate for the loan evidencing the refinanced senior
lien is no higher than the interest rate on the loan evidencing the existing
senior lien immediately prior to the date of such refinancing; PROVIDED, HOWEVER
if the loan evidencing the existing senior lien prior to the date of refinancing
has an adjustable rate and the loan evidencing the refinanced senior lien has a
fixed rate, then the loan evidencing the refinanced senior lien may be up to
2.0% higher than the then-current mortgage rate of the loan evidencing the
existing senior lien; and
(iii) the loan evidencing the refinanced senior lien is not subject to
negative amortization.
(b) The Master 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 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 Issuer and the
Indenture Trustee each shall promptly execute any such documents delivered to it
and acceptable to it on request of the Master 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. An assumption pursuant to this Section 3.01 is
permitted solely if the creditworthiness of the prospective purchaser of a
Mortgaged Property meets the same or better underwriting guidelines as those
which were applied to the original borrower and the security for such Mortgage
Loan is not impaired by the assumption. Any fee collected by the Master Servicer
or the related Subservicer for processing such request will be retained by the
Master Servicer or such Subservicer as additional servicing compensation.
(c) Certain of the Mortgage Notes related to the High LTV Loans contain
a rider allowing the related Mortgagor to transfer the lien on the related
Mortgaged Property to another, new Mortgaged Property. In the event that a
Mortgagor requests such a transfer, such Mortgage Loan shall remain in the Trust
Fund only if the following requirements are met:
(i) the Combined Loan-to-Value Ratio of the High LTV Loan after such
transfer must be less than or equal to the original Combined
Loan-to-Value Ratio;
(ii) the Loan-to-Value Ratio of the first lien on the new Mortgaged
Property must be less than or equal to the Loan-to-Value Ratio of the
first lien on the prior Mortgaged Property at the time the related High
LTV Loan was originated;
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(iii) both the original and the new Mortgaged Property must be a
single-family owner occupied property;
(iv) following such transfer, the aggregate Principal Balance of High
LTV Loans included in the Trust Fund which have been similarly
transferred is equal to 5% or less of the aggregate Principal Balance
of the Mortgage Loans at such time; and
(v) following such transfer, not more than 40% of the aggregate
Principal Balance of the Mortgage Loans will be: (a) obligations
secured by real estate the fair market value of which equaled at least
eighty percent (80%) of the adjusted issue price of such obligation at
the time of origination; or (b) obligations substantially all of the
proceeds of which were used to acquire, improve or protect an interest
in real property that, at the origination date, was the only security
for such obligation.
If such requirements cannot be met, the High LTV Loan must be purchased from the
Trust Fund at the Repurchase Price in accordance with Section 3.18 hereof.
For purposes of applying the criteria of clause (v) of the preceding
paragraph, "substantially all of the proceeds" shall mean at least sixty-six and
two-thirds percent (66 2/3%) of such proceeds, and the fair market value of real
estate shall first be reduced by the amount of any lien senior to the lien
securing a High LTV Loan (or reduced proportionately by the amount of any lien
in parity with such lien).
(d) Notwithstanding the provisions of Subsection 3.01(a), the Master
Servicer shall not take any action inconsistent with the interests of the
Indenture Trustee, the Bond Insurer or the Bondholders or with the rights and
interests of the Indenture Trustee, the Bond Insurer or the
Bondholders under this Servicing Agreement.
(e) The Indenture Trustee shall furnish the Master Servicer with any
limited powers of attorney and other documents in form as provided to it
necessary or appropriate to enable the Master Servicer to service and administer
the related Mortgage Loans and REO Property.
Section 3.02. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUBSERVICERS. (a) The Master Servicer may enter into Subservicing Agreements
with Subservicers for the servicing and administration of the Mortgage Loans and
for the performance of any and all other activities of the Master Servicer
hereunder. Each Subservicer shall be either (i) an institution the accounts of
which are insured by the FDIC or (ii) another entity that engages in the
business of originating or servicing mortgage loans comparable to the Mortgage
Loans, and in either case shall be authorized to transact business in the state
or states in which the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Subservicer to perform its obligations hereunder and under the Subservicing
Agreement, and in either case shall be a FHLMC or FNMA approved mortgage
servicer. Any Subservicing Agreement entered into by the Master Servicer shall
include the provision that such Agreement may be immediately terminated (x) with
cause and without any termination fee by any Master Servicer hereunder or (y)
without cause in which case the Master Servicer shall be responsible for any
termination fee
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or penalty resulting therefrom. In addition, each Subservicing Agreement shall
provide for servicing of the Mortgage Loans consistent with the terms of this
Servicing Agreement. With the consent of the Indenture Trustee and the Bond
Insurer, the Master Servicer and the Subservicers may enter into Subservicing
Agreements and make amendments to the Subservicing Agreements or enter into
different forms of Subservicing Agreements providing for, among other things,
the delegation by the Master Servicer to a Subservicer of additional duties
regarding the administration of the Mortgage Loans; provided, however, that any
such amendments or different forms shall be consistent with and not violate the
provisions of this Servicing Agreement, and that no such amendment or different
form shall be made or entered into which could be reasonably expected to be
materially adverse to the interests of the Bond Insurer or the Bondholders,
without the consent of the Bond Insurer or, if a Bond Insurer Default exists,
the holders of at least 51% of the aggregate Bond Principal Balance of the
Outstanding Bonds.
The Master Servicer has entered into Subservicing Agreements with the
Initial Subservicer for the servicing and administration of the Mortgage Loans
and may enter into additional Subservicing Agreements with Subservicers
acceptable to the Indenture Trustee and the Bond Insurer for the servicing and
administration of certain of the Mortgage Loans.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Indenture Trustee, the Bond Insurer and the Bondholders,
shall enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements and the pursuit of
other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, but
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement only to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan or (ii) from a specific
recovery of costs, expenses or attorneys' fees against the party against whom
such enforcement is directed.
Section 3.03. SUCCESSOR SUBSERVICERS. The Master Servicer shall be
entitled to terminate any Subservicing Agreement that may exist in accordance
with the terms and conditions of such Subservicing Agreement and without any
limitation by virtue of this Servicing Agreement; PROVIDED, HOWEVER, that upon
termination, the Master Servicer shall either act as servicer of the related
Mortgage Loan or enter into an appropriate contract with a successor Subservicer
acceptable to the Indenture Trustee and the Bond Insurer pursuant to which such
successor Subservicer will be bound by all relevant terms of the related
Subservicing Agreement pertaining to the servicing of such Mortgage Loan.
Section 3.04. LIABILITY OF THE MASTER SERVICER. (a) Notwithstanding any
Subservicing Agreement, any of the provisions of this Servicing Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall under all circumstances remain obligated and primarily
liable to the Indenture Trustee, the Bondholders and the Bond Insurer for the
servicing and administering of the Mortgage Loans and any REO Property in
accordance with this Servicing
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Agreement. The obligations and liability of the Master Servicer shall not be
diminished by virtue of Subservicing Agreements or by virtue of indemnification
of the Master Servicer by any Subservicer, or any other Person. The obligations
and liability of the Master Servicer shall remain of the same nature and under
the same terms and conditions as if the Master Servicer alone were servicing and
administering the related Mortgage Loans. The Master Servicer shall, however, be
entitled to enter into indemnification agreements with any Subservicer or other
Person and nothing in this Servicing Agreement shall be deemed to limit or
modify such indemnification. For the purposes of this Servicing Agreement, the
Master Servicer shall be deemed to have received any payment on a Mortgage Loan
on the date the Subservicer received such payment; PROVIDED, HOWEVER, that this
sentence shall not apply to the Indenture Trustee acting as the Master Servicer;
PROVIDED, FURTHER, however, that the foregoing provision shall not affect the
obligation of the Master Servicer if it is also the Indenture Trustee to advance
amounts which are not Nonrecoverable Advances.
(b) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Master Servicer alone, and the Indenture Trustee, the
Bond Insurer and the Bondholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Section 3.05.
Section 3.05. ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY
INDENTURE TRUSTEE. (a) If the Indenture Trustee or a successor Master Servicer
shall assume the master servicing obligations of the Master Servicer in
accordance with Section 6.02 below, the Indenture Trustee, to the extent
necessary to permit the Indenture Trustee to carry out the provisions of Section
6.02 with respect to the Mortgage Loans, shall succeed to all of the rights and
obligations of the Master Servicer under each of the Subservicing Agreements. In
such event, the Indenture Trustee or its designee as the successor master
servicer shall be deemed to have assumed all of the Master Servicer's rights and
obligations therein and to have replaced the Master Servicer as a party to such
Subservicing Agreements to the same extent as if such Subservicing Agreements
had been assigned to the Indenture Trustee or its designee as a successor master
servicer, except that the Indenture Trustee or its designee as a successor
master servicer shall not be deemed to have assumed any obligations or
liabilities of the Master Servicer arising prior to such assumption (other than
the obligation to make any Advances) and the Master Servicer shall not thereby
be relieved of any liability or obligations under such Subservicing Agreements
arising prior to such assumption. Any termination fee existing under a
Subservicing Agreement shall be paid by the Master Servicer. The Indenture
Trustee as successor Master Servicer or any other successor Master Servicer
shall have the right to terminate any Subservicing Agreement at any time with or
without cause. Nothing in the foregoing shall be deemed to entitle the Indenture
Trustee or its designee as a successor master servicer at any time to receive
any portion of the servicing compensation provided under Section 3.17 except for
such portion as the Master Servicer would be entitled to receive.
(b) In the event that the Indenture Trustee or a successor Master
Servicer assumes the servicing obligations of the Master Servicer under Section
6.02, upon the reasonable request of
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the Indenture Trustee or such successor Master Servicer, the Master Servicer
shall at its own expense deliver to the Indenture Trustee, or to such successor
Master Servicer, photocopies of all documents, files and records, electronic or
otherwise, relating to the Subservicing Agreements and the related Mortgage
Loans or REO Property then being serviced and an accounting of amounts collected
and held by it, if any, and will otherwise cooperate and use its reasonable
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements, or responsibilities hereunder to the Indenture Trustee, or to such
successor Master Servicer.
Section 3.06. COLLECTION OF MORTGAGE LOAN PAYMENTS. (a) The Master
Servicer will coordinate and monitor remittances by Subservicers to it with
respect to the Mortgage Loans in accordance with this Servicing Agreement.
(b) The Master Servicer shall make its best reasonable efforts to
collect or cause to be collected all payments required under the terms and
provisions of the Mortgage Loans and shall follow, and use its best reasonable
efforts to cause Subservicers to follow, collection procedures comparable to the
collection procedures of prudent mortgage lenders servicing mortgage loans for
their own account to the extent such procedures shall be consistent with this
Servicing Agreement. Consistent with the foregoing, the Master Servicer or the
related Subservicer may in its discretion (i) waive or permit to be waived any
late payment charge, prepayment charge, assumption fee, or any penalty interest
in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce
or permit to be suspended or reduced regular monthly payments for a period of up
to six months, or arrange or permit an arrangement with a Mortgagor for a
scheduled liquidation of delinquencies; provided, however, that the Master
Servicer or the related Subservicer may permit the foregoing only if it
believes, in good faith, that recoveries of Monthly Payments will be maximized;
provided further, however, that Monthly Payments may not be suspended during the
twelve months prior to the final maturity of the Bonds. In the event the Master
Servicer or related Subservicer shall consent to the deferment of the due dates
for payments due on a Mortgage Note, the Master Servicer shall nonetheless make
an Advance or shall cause the related Subservicer to make an advance to the same
extent as if such installment were due, owing and delinquent and had not been
deferred through liquidation of the Mortgaged Property; PROVIDED, HOWEVER, that
the obligation of the Master Servicer or the related Subservicer to make an
Advance shall apply only to the extent that the Master Servicer believes, in
good faith, that such advances are not Nonrecoverable Advances.
(c) Within five Business Days after the Master Servicer has determined
that all amounts which it expects to recover from or on account of a Mortgage
Loan have been recovered and that no further Liquidation Proceeds will be
received in connection therewith, the Master Servicer shall provide to the
Indenture Trustee a certificate of a Servicing Officer that such Mortgage Loan
became a Liquidated Mortgage Loan as of the date of such determination.
(d) The Master Servicer shall establish a segregated account in the
name of the Indenture Trustee (the "Collection Account"), which shall be an
Eligible Account, in which the Master Servicer shall deposit or cause to be
deposited any amounts representing payments on and any collections in respect of
the Mortgage Loans due subsequent to the Cut-Off Date (other than in respect of
the payments referred to in the following paragraph) within one Business Day
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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 Master Servicer directly from Mortgagors
or 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 Master Servicer pursuant to Section 3.18;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by
the Seller pursuant to the Mortgage Loan Sale and Contribution
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 Sale and Contribution
Agreement;
(v) Insurance Proceeds, other than Net Liquidation
Proceeds, resulting from any insurance policy maintained on a Mortgaged
Property;
(vi) any Advance and any Compensating Interest payments;
and
(vii) any other amounts received by the Master Servicer,
including any fees or penalties not retained by a Subservicer, required
to be deposited in the Collection Account pursuant to this Servicing
Agreement.
PROVIDED, HOWEVER, that with respect to each Due Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Due Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account fees (including
annual fees or assumption fees) or late charge and prepayment penalties, payable
by Mortgagors, each as further described in Section 3.15, or amounts received by
the Subservicer for the accounts of Mortgagors for application towards the
payment of taxes, insurance premiums, assessments and similar items. In the
event any amount not required to be deposited in the Collection Account is so
deposited, the Master Servicer may at any time (prior to being terminated under
this Agreement) withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding. The Master Servicer shall keep records
that accurately reflect the funds on deposit in the Collection Account that have
been identified by it as being attributable to the Mortgage Loans and shall hold
all collections in the Collection Account for the benefit of the Owner Trustee,
the Indenture Trustee, the Bondholders and the Bond Insurer, as their interests
may appear. The Master Servicer shall remit all Foreclosure Profits to the
Collection Account.
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Funds in the Collection Account may not be invested and shall not be
commingled with the Master Servicer's own funds or general assets or with funds
respecting payments on mortgage loans or with any other funds not related to the
Bonds. Funds in the Collection Account shall be invested solely in Eligible
Investments, designated in the name of the Indenture Trustee, which shall mature
not later than the Business Day next preceding the third Business Day prior to
each Payment Date next following the date of such investment and shall not be
sold or disposed of prior to maturity. All income and gain realized from any
such investment shall be for the benefit of the Master Servicer or the related
Subservicer. The amount of any losses incurred with respect to any such
investments shall be deposited in the Collection Account by the Master Servicer.
In the event the Indenture Trustee assumes the responsibilities of the
Master Servicer under this Servicing Agreement upon a Servicing Event of Default
under Section 6.01, the Indenture Trustee shall be entitled to reimburse itself
for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to
reimbursement of the terminated Master Servicer or any successor Master
Servicer.
(e) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Master Servicer, in one or more accounts meeting the requirements of an
Eligible Account, and invested in Eligible Investments, and in the name of the
Indenture Trustee. The Subservicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets and any other funds. Each Subservicer shall make
remittances to the Master Servicer no later than the eighteenth (18th) day of
each month, commencing on the eighteenth (18th) day of the month next following
the Cut-off Date, or if such eighteenth (18th) day is not a Business Day, the
first Business Day immediately preceding such eighteenth (18th) day.
Section 3.07. WITHDRAWALS FROM THE COLLECTION ACCOUNT. (a) The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.06 that
are attributable to the Mortgage Loans for the following purposes (without
duplication):
(i) to deposit in the Payment Account, by the third
Business Day prior to each Payment Date, the ARM Pool Available Funds
and the High LTV Pool Available Funds required to be distributed as
provided in the Indenture on a Payment Date;
(ii) to the extent deposited to the Collection Account,
to reimburse itself or the related Subservicer for previously
unreimbursed expenses incurred in maintaining individual insurance
policies pursuant to Sections 3.10 or 3.11, or Liquidation
Expenses, paid pursuant to Section 3.13 or otherwise reimbursable
pursuant to the terms of this Servi cing Agreement, 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;
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(iii) to pay to itself out of each payment received on
account of interest on a Mortgage Loan as contemplated by Section 3.15,
an amount equal to the related Servicing Fee (to the extent not
retained pursuant to Section 3.06) and to pay to any Subservicer any
subservicing fees not previously withheld by the Subservicer;
(iv) 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 Master Servicer
or other entity, all amounts received thereon and not required to be
distributed to Bondholders as of the date on which the related Purchase
Price or Repurchase Price is determined;
(v) to reimburse the Master Servicer or any Subservicer
for any Advance of its own funds or any advance of such Subservicer's
own funds, the right of the Master Servicer or a Subservicer to
reimbursement pursuant to this subclause (v) being limited to amounts
received on a particular Mortgage Loan (including, for this purpose,
the Repurchase Price therefor, Insurance Proceeds and Liquidation
Proceeds) which represent late payments or recoveries of the principal
of or interest on such Mortgage Loan respecting which such Advance or
advance was made;
(vi) to reimburse the Master Servicer or any Subservicer
from Insurance Proceeds or Liquidation Proceeds relating to a
particular Mortgage Loan for amounts expended by the Master Servicer or
such Subservicer pursuant to Section 3.13 in good faith in connection
with the restoration of the related Mortgage Property which was damaged
by the uninsured cause or in connection with the liquidation of such
Mortgage Loan;
(vii) to pay the Master Servicer or any Subservicer
(payment to any Subservicer to be subject to prior payment to the
Master Servicer of an amount equal to the Servicing Fee), as
appropriate, from Liquidation Proceeds or Insurance Proceeds received
in connection with the liquidation of any Mortgage Loan, the amount
which it or such Subservicer would have been entitled to receive under
subclause (x) of this Subsection 3.07(a) as servicing compensation on
account of each defaulted scheduled payment on such Mortgage Loan if
paid in a timely manner by the related Mortgagor, but only to the
extent that the aggregate of Liquidation Proceeds and Insurance
Proceeds with respect to such Mortgage Loan, after any reimbursement to
the Master Servicer or any Subservicer, pursuant to other subclauses of
this Subsection 3.07(a), exceeds the outstanding Principal Balance of
such Mortgage Loan plus accrued and unpaid interest thereon at the
related Mortgage Rate less the Servicing Fee to but not including the
date of payment (in any event, the amount of servicing compensation
received by a Subservicer and the Master Servicer with respect to any
defaulted scheduled payment shall not exceed the applicable Servicing
Fee);
(viii) to reimburse the Master Servicer or any Subservicer
for advances of funds pursuant to Article III, the right to
reimbursement pursuant to this subclause being limited to amounts
received on the related Mortgage Loan (including, for this purpose, the
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Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds)
which represent late recoveries of the payments for which such advances
were made;
(ix) to reimburse the Master Servicer or any Subservicer
for any Nonrecoverable Advance previously made, and not reimbursed
pursuant to this Subsection
3.07(a);
(x) to deposit in the Payment Account, by the third
Business Day prior to each Payment Date, the Indenture Trustee Fee;
(xi) to withdraw any other amount deposited in the
Collection Account that was not required to be deposited therein
pursuant to Section 3.06;
(xii) to pay CMAC the premium with respect to the CMAC
PMI Policies;
(xiii) to pay the Owner Trustee the Owner Trustee Fee and
the Bond Insurer the Premium Amount;
(xiv) to reimburse the Master Servicer for costs
associated with the environmental report specified in Section 3.13(c);
and
(xv) clear and terminate the Collection Account
following a termination of the Trust pursuant to Section 8.01 of the
Trust Agreement.
In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v), (vi),
(vii) and (viii), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, and the Master
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 Servi cing Agreement, the Master Servicer shall be entitled to reimburse
itself for any previously unreimbursed expenses incurred pursuant to Section
3.13 or otherwise reimbursable expenses incurred pursuant to the terms of this
Servicing Agreement, but only to the extent of collections or other recoveries
on the related Mortgage Loan.
(b) Notwithstanding the provisions of this Section 3.07, the Master
Servicer may, but is not required to, allow the Subservicers to deduct from
amounts received by them or from the related account maintained by a
Subservicer, prior to deposit in the Collection Account, any portion to which
such Subservicers are entitled as servicing compensation (including income on
Eligible Investments) or reimbursement of any reimbursable Advances made by such
Subservicers.
Section 3.08. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING Accounts.
(a) The Master Servicer shall establish and maintain or cause the
related Subservicer to establish and maintain, one or more Servicing Accounts.
The Master Servicer or a Subservicer
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will deposit and retain therein all collections from the Mortgagors for the
payment of taxes, assessments, insurance premiums, or comparable items as agent
of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by
the Master Servicer or a Subservicer (and its successors and assigns) in the
name of the Indenture Trustee. Such Servicing Accounts shall be Eligible
Accounts and if permitted by applicable law, invested in Eligible Investments
held in trust by the Master Servicer or a Subservicer as described above and
maturing, or be subject to redemption or withdrawal, no later than the date on
which such funds are required to be withdrawn, and in no event later than 45
days after the date of investment; withdrawals of amounts from the Servicing
Accounts may be made only to effect timely payment of taxes, assessments,
insurance premiums, or comparable items, to reimburse the Master Servicer or a
Subservicer for any advances made with respect to such items, to refund to any
Mortgagors any sums as may be determined to be overages, to pay interest, if
required, to Mortgagors on balances in the Servicing Accounts or to clear and
terminate the Servicing Accounts at or any time after the termination of this
Servicing Agreement.
Section 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS. The Master Servicer shall provide, and shall cause any
Subservicer to provide, to the Indenture Trustee, the Owner Trustee and the Bond
Insurer access to the documentation regarding the related Mortgage Loans and REO
Property and to the Bondholders, the FDIC, and the supervisory agents and
examiners of the FDIC (to which the Indenture Trustee shall also provide) access
to the documentation regarding the related Mortgage Loans required by applicable
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Master Servicer
or the Subservicers that are designated by these entities; PROVIDED, HOWEVER,
that, unless otherwise required by law, the Indenture Trustee, the Master
Servicer or the Subservicer shall not be required to provide access to such
documentation if the provision thereof would violate the legal right to privacy
of any Mortgagor; PROVIDED, FURTHER, HOWEVER, that the Indenture Trustee, the
Bond Insurer and the Owner Trustee shall coordinate their requests for such
access so as not to impose an unreasonable burden on, or cause an unreasonable
interruption of, the business of the Master Servicer or any Subservicer. The
Master Servicer, the Subservicers and the Indenture Trustee shall allow
representatives of the above entities to photocopy any of the documentation and
shall provide equipment for that purpose at a charge that covers their own
actual out-of-pocket costs.
Section 3.10. MAINTENANCE OF PRIMARY INSURANCE POLICIES AND THE CMAC
POLICY; COLLECTION THEREUNDER. The Master Servicer shall, or shall cause the
related Subservicer to, exercise its best reasonable efforts to maintain and
keep in full force and effect each Primary Insurance Policy by a Qualified
Insurer, or other insurer satisfactory to the Bond Insurer and the Rating
Agencies, with respect to each first lien ARM Loan as to which as of the Cut-Off
Date such a Primary Insurance Policy was in effect (or, in the case of a
Substitute Mortgage Loan, the date of substitution) and the original principal
amount of the related Mortgage Note exceeded 80% of the Original Value in an
amount at least equal to the excess of such original principal amount over 75%
of such Original Value until the principal amount of any such first lien
Mortgage Loan is reduced below 80% of the Original Value or, based upon a new
appraisal, the principal amount of such first lien Mortgage Loan represents less
than 80% of the new appraised value. The Master
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Servicer shall, or shall cause the related Subservicer to, effect the timely
payment of the premium on each Primary Insurance Policy and the CMAC PMI
Policies. The Master Servicer and the related Subservicer shall have the power
to substitute for any Primary Insurance Policy another substantially equivalent
policy issued by another Qualified Insurer, PROVIDED, THAT, such substitution
shall be subject to the condition that (i) it will not cause the ratings on the
Bonds to be downgraded or withdrawn without taking into account the Bond
Insurance Policies, as evidenced by a writing from each Rating Agency, and (ii)
the Bond Insurer shall have consented thereto, which consent shall not be
unreasonably withheld.
The Master Servicer shall pay or cause any Subservicer to pay directly
to CMAC the premium with respect to the CMAC PMI Policy from interest payments
on the Mortgage Loans, in accordance with the CMAC PMI Policy. Such obligation
will be assigned to any successor Master Servicer.
Section 3.11. MAINTENANCE OF HAZARD INSURANCE AND FIDELITY COVERAGE.
(a) The Master Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each ARM Loan and each REO Property, in full
force and effect hazard insurance (fire insurance with extended coverage) equal
to at least the lesser of the Principal Balance of the ARM Loan or the current
replacement cost of the Mortgaged Property, and containing a standard mortgagee
clause, PROVIDED, HOWEVER, that the amount of hazard insurance may not be less
than the amount necessary to prevent loss due to the application of any
co-insurance provision of the related policy. Unless applicable state law
requires a higher deductible, the deductible on such hazard insurance policy may
be no more than $1,000 or 1% of the applicable amount of coverage, whichever is
less. In the case of a condominium unit or a unit in a planned unit development,
the required hazard insurance shall take the form of a multi-peril policy
covering the entire condominium project or planned unit development, in an
amount equal to at least 100% of the insurable value based on replacement cost.
(b) Any amounts collected by the Master Servicer or a Subservicer under
any such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with the Master Servicer's or a Subservicer's normal
servicing procedures, the Mortgage Note, the Security Instrument or applicable
law) shall be deposited initially in a Collection Account, for transmittal to
the Payment Account, subject to withdrawal pursuant to Section 3.07.
(c) Any cost incurred by a Master Servicer or a Subservicer in
maintaining any such hazard insurance policy shall not be added to the amount
owing under the ARM Loan for the purpose of calculating monthly distributions to
Bondholders, notwithstanding that the terms of the ARM Loan so permit. Such
costs shall be recoverable by the Master Servicer or a Subservicer out of
related late payments by the Mortgagor or out of Insurance Proceeds or
Liquidation Proceeds or by the Master Servicer from the Repurchase Price, to the
extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of
any Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional
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insurance. When, at the time of origination of the ARM Loan or at any subsequent
time, the Mortgaged Property is located in a federally designated special flood
hazard area, the Master Servicer shall use its best reasonable efforts to cause
with respect to the ARM Loans and each REO Property flood insurance (to the
extent available and in accordance with mortgage servicing industry practice) to
be maintained. Such flood insurance shall cover the Mortgaged Property,
including all items taken into account in arriving at the Appraised Value on
which the ARM Loan was based, and shall be in an amount equal to the lesser of
(i) the Principal Balance of the related Mortgage Loan and (ii) the minimum
amount required under the terms of coverage to compensate for any damage or loss
on a replacement cost basis, but not more than the maximum amount of such
insurance available for the related Mortgaged Property under either the regular
or emergency programs of the National Flood Insurance Program (assuming that the
area in which such Mortgaged Property is located is participating in such
program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,000 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections
3.11 (a) and (d) and there shall have been a loss which would have been covered
by such insurance had it been maintained, the Master Servicer shall pay, or
cause the related Subservicer to pay, for any necessary repairs.
(f) The Master Servicer shall present, or cause the related Subservicer
to present, claims under any applicable Primary Insurance Policy or the related
hazard insurance or flood insurance policy.
(g) The Master Servicer shall obtain and maintain at its own expense
and for the duration of this Servicing Agreement a blanket fidelity bond and
shall cause each Subservicer to obtain and maintain an errors and omissions
insurance policy covering such Subservicer's officers, employees and other
persons acting on its behalf in connection with its activities under this
Servicing Agreement. The amount of coverage shall be at least equal to the
coverage maintained by the Master Servicer acceptable to FNMA or FHLMC to
service loans for it or otherwise in an amount as is commercially available at a
cost that is generally not regarded as excessive by industry standards. The
Master Servicer shall promptly notify the Indenture Trustee of any material
change in the terms of such bond or policy. The Master Servicer shall provide
annually to the Indenture Trustee a certificate of insurance that such bond and
policy are in effect. If any such bond or policy ceases to be in effect, the
Master Servicer shall, to the extent possible, give the Indenture Trustee ten
days' notice prior to any such cessation and shall use its reasonable best
efforts to obtain a comparable replacement bond or policy, as the case may be.
Any amounts relating to the Mortgage Loans collected under such bond or policy
shall be deposited initially in a Collection Account for transmittal to the
Payment Account, subject to withdrawal pursuant to Section 3.07.
Section 3.12. DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS. (a) In any
case in which the Master Servicer is notified by any Mortgagor or Subservicer
that a Mortgaged Property relating to a Mortgage Loan has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall enforce, or shall instruct
such Subservicer to enforce, any due-on-sale clause
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contained in the related Security Instrument to the extent permitted under the
terms of the related Mortgage Note and by applicable law. The Master Servicer or
the related Subservicer may repurchase a Mortgage Loan at the Repurchase Price
when the Master Servicer requires acceleration of the Mortgage Loan, but only if
the Master Servicer is satisfied, as evidenced by an Officer's Certificate
delivered to the Indenture Trustee, that either (i) such Mortgage Loan is in
default or default is reasonably foreseeable or (ii) if such Mortgage Loan is
not in default or default is not reasonably foreseeable, such repurchase will
have no adverse tax consequences for the Trust Estate or any Securityholder. If
the Master Servicer reasonably believes that such due-on-sale clause cannot be
enforced under applicable law or if the Mortgage Loan does not contain a
due-on-sale clause, the Master Servicer is authorized, and may authorize any
Subservicer, to consent to a conveyance subject to the lien of the Mortgage, and
to take or enter into an assumption agreement from or with the Person to whom
such property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the related Mortgage Note and unless prohibited by
applicable state law, such Mortgagor remains liable thereon, on condition,
however, that the related Mortgage Loan shall continue to be covered by a hazard
policy and (if so covered before the Master Servicer or the related Subservicer
enters into such agreement) by any Primary Insurance Policy. In connection with
any such assumption, no material term of the related Mortgage Note may be
changed. The Master Servicer shall notify the Indenture Trustee, whenever
possible, before the completion of such assumption agreement, and shall forward
to the Custodian the original copy of such assumption agreement, which copy
shall be added by the Custodian to the related Mortgage File and which shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. A portion,
equal to up to 2% of the Principal Balance of the related Mortgage Loan, of any
fee or additional interest collected by the related Subservicer for consenting
in any such conveyance or entering into any such assumption agreement may be
retained by the related Subservicer as additional servicing compensation.
(b) Notwithstanding the foregoing paragraph or any other provision of
this Servicing Agreement, the Master Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan by operation of law or any conveyance by the
Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan
which the Master Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever or if the exercise of such right would
impair or threaten to impair any recovery under any applicable insurance policy.
Section 3.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The Master
Servicer shall, or shall direct the related Subservicer to, foreclose upon or
otherwise comparably convert the ownership of properties securing any ARM Loans
that come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.06, except that the Master Servicer shall not, and shall not direct
the related Subservicer to, foreclose upon or otherwise comparably convert a
Mortgaged Property if there is evidence of toxic waste or other environmental
hazards thereon unless the Master Servicer follows the procedures in Subsection
(e) below.
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(b) With respect to such of the High LTV Loans as come into
and continue in default, the Master Servicer shall, or shall direct the related
Subservicer to decide whether to (i) foreclose upon the Mortgaged Properties
securing such High LTV Loans, (ii) write off the unpaid principal balance of the
High LTV Loans as bad debt, (iii) take a deed in lieu of foreclosure, (iv)
accept a short sale, (v) arrange for a repayment plan, (vi) agree to a
modification in accordance with this Servicing Agreement, or (vii) take an
unsecured note, in the case of (i) subject to the rights of any related first
lien holder, except that the Master Servicer shall not, and shall not direct the
related Subservicer to, foreclose upon or otherwise comparably convert a
Mortgaged Property if the Master Servicer has actual knowledge that any
Mortgaged Property is affected by hazardous or toxic wastes or other substances
and the acquisition or such property would not be commercially reasonable, which
determination shall be made in accordance with the procedures in Subsection (e)
below; and provided, that the Master Servicer may not modify more than 10% (by
current Principal Balance) of the High LTV Loans without the consent of the Bond
Insurer; and provided further, that the Master Servicer may not take an
unsecured note pursuant to clause (vii) above for more than 10% (by current
Principal Balance) of the High LTV Loans without the consent of the Bond
Insurer. In connection with such decision, the Master Servicer shall follow such
practices (including, in the case of any default on a related senior mortgage
loan, the advanc ing of funds to correct such default if deemed to be
appropriate by the Master Servicer) and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities (including any analysis and decisions regarding whether to realize a
gain or loss pursuant to Section 1001 of the Code); PROVIDED that the Master
Servicer shall not be liable in any respect hereunder if the Master 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.
(c) In connection with such foreclosure or other conversion,
the Master Servicer in conjunction with the related Subservicer, if any, shall
use its best reasonable efforts to preserve REO Property and to realize upon
defaulted Mortgage Loans in such manner as to maximize the receipt of principal
and interest by the Bondholders, taking into account, among other things, the
timing of foreclosure and the considerations set forth in Subsection 3.13(d).
The foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the restoration of any property unless it determines in good faith (i) that such
restoration or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Bondholders after reimbursement to itself for such expenses and
(ii) that such expenses will be recoverable to it either through Liquidation
Proceeds (respecting which it shall have priority for purposes of reimbursements
from the Collection Account pursuant to Section 3.07) or through Insurance
Proceeds (respecting which it shall have similar priority). The Master Servicer
shall be responsible for all other costs and expenses incurred by it in any such
proceedings; PROVIDED, HOWEVER, that it shall be entitled to reimbursement
thereof (as well as its normal servicing compensation), and in respect of any
Subservicer only, to receive Foreclosure Profits as additional servicing
compensation to the extent that transfers or withdrawals from the Collection
Account with respect thereto are permitted under Section 3.07. Any income from
or other funds (net of any income taxes) generated by REO Property shall be
deemed for purposes of this Servicing Agreement to be Insurance Proceeds.
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(d) The Trust Estate shall not acquire any real property (or any
personal property incident to such real property) except in connection with a
default or reasonably foreseeable default of a Mortgage Loan. In the event that
the Trust Estate acquires any real property (or personal property incident to
such real property) in connection with a default or imminent default of a
Mortgage Loan, such property shall be disposed of by the Indenture Trustee (or
its agent) on behalf of the Trust Estate within two years after its acquisition
by the Trust Estate.
(e) With respect to any Mortgage Loan as to which the Master Servicer
or a Subservicer has received notice of, or has actual knowledge of, the
presence of any toxic or hazardous substance on the Mortgaged Property, the
Master Servicer shall promptly notify the Indenture Trustee, the Owner Trustee
and the Bond Insurer and shall act in accordance with any such directions and
instructions provided by the Bond Insurer, or if a Bond Insurer Default exists,
by the Indenture Trustee, as pledgee of the Issuer. Notwithstanding the
preceding sentence of this Section 3.13(e), with respect to any Mortgage Loan
described in such sentence, the Master Servicer shall, if requested by the Bond
Insurer, obtain and deliver to the Issuer, the Indenture Trustee and the Bond
Insurer an environmental audit report prepared by a Person who regularly
conducts environmental audits using customary industry standards, a copy of
which shall be delivered to the Issuer and the Indenture Trustee. The Master
Servicer shall be entitled to reimbursement for such report pursuant to Section
3.07. If the Bond Insurer or Indenture Trustee, as applicable, has not provided
directions and instructions to the Master Servicer in connection with any such
Mortgage Loan within 30 days of a request by the Master Servicer for such
directions and instructions, then the Master Servicer shall take such action as
it deems to be in the best economic interest of the Trust Estate (other than
proceeding against the Mortgaged Property) and is hereby authorized at such time
as it deems appropriate to release such Mortgaged Property from the lien of the
related Mortgage. The parties hereto acknowledge that the Master Servicer shall
not obtain on behalf of the Issuer a deed as a result or in lieu of foreclosure,
and shall not otherwise acquire possession of or title to, or commence any
proceedings to acquire possession of or title to, or take any other action with
respect to, any Mortgage Property, if the Owner Trustee could reasonably be
considered to be a responsible party for any liability arising from the presence
of any toxic or hazardous substance on the Mortgaged Property, unless the Owner
Trustee has been indemnified to its reasonable satisfaction against such
liability.
Section 3.14. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE
FILES. (a) Upon payment in full of any Mortgage Loan or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Indenture Trustee and the Custodian by a certification signed by a Servicing
Officer in the form of the request for release (the "Request for Release")
attached hereto as Exhibit B (which certification shall include a statement to
the effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Payment Account have been or
will be so deposited) and shall request delivery to the Master Servicer or
Subservicer, as the case may be, of the Mortgage File. Upon receipt of such
certification and request, the Custodian shall promptly release the related
Mortgage File to the Master Servicer or Subservicer and execute and deliver to
the Master Servicer, without recourse, the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such
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instrument releasing the lien of the Security Instrument (furnished by the
Master Servicer), together with the Mortgage Note with written evidence of
cancellation thereon.
(b) From time to time as is appropriate, for the servicing or
foreclosure of any Mortgage Loan or collection under an insurance policy, the
Master Servicer may deliver to the Indenture Trustee and the Custodian a Request
for Release signed by a Servicing Officer on behalf of the Master Servicer in
substantially the form attached as Exhibit B hereto. Upon receipt of the Request
for Release, the Custodian shall deliver the Mortgage File or any document
therein to the Master Servicer or Subservicer, as the case may be, as bailee for
the Custodian.
(c) The Master Servicer shall cause each Mortgage File or any document
therein released pursuant to Subsection 3.14(b) to be returned to the Custodian
when the need therefor no longer exists, and in any event within 21 days of the
Master Servicer's receipt thereof, unless the Mortgage Loan has become a
Liquidated Mortgage Loan and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Collection Account or such Mortgage File is
being used to pursue foreclosure or other legal proceedings. Prior to return of
a Mortgage File or any document to the Custodian, the Master Servicer, the
related insurer or Subservicer to whom such file or document was delivered shall
retain such file or document in its respective control as bailee for the
Custodian unless the Mortgage File or such document has been delivered to an
attorney, or to a public trustee or other public official as required by law, to
initiate or pursue legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially, and the Master Servicer
has delivered to the Indenture Trustee and the Custodian a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or purposes of
such delivery. If a Mortgage Loan becomes a Liquidated Mortgage Loan, the
Custodian shall deliver the Request for Release with respect thereto to the
Master Servicer and upon deposit of the related Liquidation Proceeds in the
Collection Account.
(d) The Indenture Trustee shall execute and deliver to the Master
Servicer any court pleadings, requests for trustee's sale or other documents
necessary to (i) the foreclosure or trustee's sale with respect to a Mortgaged
Property; (ii) any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment
against the Mortgagor; or (iv) enforce any other rights or remedies provided by
the Mortgage Note or Security Instrument or otherwise available at law or
equity. Together with such documents or pleadings the Master Servicer shall
deliver to the Indenture Trustee a certificate of a Servicing Officer in which
it requests the Indenture Trustee to execute the pleadings or documents. The
certificate shall certify and explain the reasons for which the pleadings or
documents are required. It shall further certify that the Indenture Trustee's
execution and delivery of the pleadings or documents will not invalidate any
insurance coverage under the insurance policies or invalidate or otherwise
affect the lien of the Security Instrument, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
Section 3.15. MASTER SERVICING COMPENSATION. (a) As compensation for
its activities hereunder, the Master Servicer shall be entitled to receive the
Servicing Fee from full payments of accrued interest on each Mortgage Loan. The
Master Servicer shall be solely responsible for
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paying any and all fees with respect to a Subservicer and the Trust Estate shall
not bear any fees, expenses or other costs directly associated with any
Subservicer.
(b) The related Subservicer may retain additional servicing
compensation in the form of conversion fees, if any, with respect to a Converted
Mortgage Loan, prepayment charges, if any, a portion of the assumption fees up
to 2% of the Principal Balance of the related Mortgage Loan, tax service fees,
fees for statement of account or payoff, late payment charges, or otherwise, to
the extent such fees are collected from the related Mortgagors or, with respect
to a Liquidated Mortgage Loan, to the extent such fees have accrued. The Master
Servicer shall not be entitled to servicing compensation other than its
Servicing Fee. The Master Servicer shall be required to pay all expenses it
incurs in connection with servicing activities under this Servicing Agreement
and shall not be entitled in connection with servicing activities under this
Servicing Agreement to reimbursement except as provided in this Servicing
Agreement. Expenses to be paid by the Master Servicer under this Subsection
3.15(b) shall include payment of the expenses of the accountants retained
pursuant to Section 3.17.
Section 3.16. ANNUAL STATEMENTS OF COMPLIANCE. Within 120 days after
December 31 of each year, commencing December 1999, the Master Servicer at its
own expense shall deliver to the Indenture Trustee, with a copy to the Bond
Insurer and the Rating Agencies, an Officer's Certificate stating, as to the
signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of performance under this Servicing
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Servicing Agreement for such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof including the steps being taken by the Master Servicer to remedy such
default; (iii) a review of the activities of each Subservicer during the
Subservicer's most recently ended calendar year on or prior to such December 31
and its performance under its Subservicing Agreement has been made under such
officer's supervision; and (iv) to the best of the Servicing Officer's
knowledge, based on his review and the certification of an officer of the
Subservicer (unless the Servicing Officer has reason to believe that reliance on
such certification is not justified), either each Subservicer has performed and
fulfilled its duties, responsibilities and obligations under this Servicing
Agreement and its Subservicing Agreement in all material respects throughout the
year, or, if there has been a default in performance or fulfillment of any such
duties, responsibilities or obligations, specifying the nature and status of
each such default known to the Servicing Officer. Copies of such statements
shall be provided by the Master Servicer to the Bondholders upon request or by
the Indenture Trustee at the expense of the Master Servicer should the Master
Servicer fail to provide such copies.
Section 3.17. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
(a) Within 120 days after December 31 of each year, commencing December 1999,
the Master Servicer, at its expense, shall cause a firm of Independent public
accountants who are members of the American Institute of Certified Public
Accountants and who are KPMG LLP (or a successor thereof) or are otherwise
acceptable to the Bond Insurer to furnish a statement to the Master Servicer,
which will be provided to the Indenture Trustee, the Bond Insurer and the Rating
Agencies, to the effect that, in connection with the firm's examination of the
Master Servicer's financial statements as of the
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end of such calendar year, nothing came to their attention that indicated that
the Master Servicer was not in compliance with Sections 3.06, 3.07 and 3.08
except for (i) such exceptions as such firm believes to be immaterial and (ii)
such other exceptions as are set forth in such statement.
(b) Within 120 days after December 31 of each year, commencing
December 1999, the Master Servicer, at its expense, shall or shall cause each
Subservicer to cause a nationally recognized firm of independent certified
public accountants to furnish to the Master Servicer or such Subservicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Master Servicer or such Subservicer
which includes an assertion that the Master Servicer or such Subservicer has
complied with certain minimum mortgage loan servicing standards (to the extent
applicable to residential mortgage loans) identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America with respect to the servicing of first and second lien
conventional single family mortgage loans during the most recently completed
calendar year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. Immediately upon receipt of such report, the Master Servicer shall
or shall cause each Subservicer to furnish a copy of such report to the
Indenture Trustee, the Rating Agencies and the Bond Insurer.
Section 3.18. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS AND
MANDATORY REPURCHASE OF CONVERTED MORTGAGE LOANS. The Master Servicer may, but
is not obligated to, repurchase any Mortgage Loan delinquent in payment for a
period of 90 days or longer for a price equal to the Repurchase Price. In
addition, the Master Servicer shall be obligated to repurchase any Converted
Mortgage Loan at a price equal to the Repurchase Price therefor. In addition,
the Master Servicer must repurchase any Mortgage Loan which does not satisfy the
requirements of 3.01(c) at a price equal to the Repurchase Price. Any such
purchase shall be accomplished as provided in Subsection 2.03 hereof.
Notwithstanding the foregoing, the Indenture Trustee, whether acting as
Indenture Trustee or in the capacity of successor Master Servicer, shall have no
obligation to repurchase any Mortgage Loan including, without limitation, a
Converted Mortgage Loan.
Section 3.19. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer or Subservicer shall make reports of
foreclosures and abandonments of any mortgaged property for each year beginning
in 1999, the Master Servicer or Subservicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) acquires an interest in any Mortgaged Property through foreclosure
or other comparable conversion in full or partial satisfaction of a Mortgage
Loan, or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Master Servicer or Subservicer shall be in form
and substance sufficient to meet the reporting requirements imposed by Section
6050J, Section 6050H (reports relating to mortgage interest received) and
Section 6050P of the Code (reports relating to cancellation of indebtedness).
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ARTICLE IV
Servicing Certificate
Section 4.01. DETERMINATION DATE REPORTS. On the second Business Day
following each Determination Date, the Master Servicer shall deliver to the
Indenture Trustee a report, prepared as of the close of business on the
Determination Date (the "Determination Date Report"), in the form of a magnetic
tape or disk or such other method as to which the Master Servicer and Indenture
Trustee shall agree. The Determination Date Report and any written information
supplemental thereto shall include such information with respect to the Mortgage
Loans that is reasonably available to the Master Servicer and that is required
by the Indenture Trustee for purposes of making the calculations and providing
the reports referred to in the Indenture, as set forth in written specifications
or guidelines issued by the Indenture Trustee from time to time. Such
information shall include the aggregate amounts required to be withdrawn from
the Collection Account and deposited into the Payment Account pursuant to 3.07.
In addition, prior to each Payment Date, the Master Servicer shall
determine the total amount of Realized Losses, if any, that resulted from any
Cash Liquidation, Debt Service Reduction, Deficient Valuation or REO Disposition
that occurred during the related Collection Period and the total amount of
Realized Losses incurred due to a High LTV Loan being 180 days or more
delinquent. The amount of each Realized Loss shall be evidenced by an Officer's
Certificate delivered to the Indenture Trustee and the Bond Insurer with the
related Determination Date Report.
The determination by the Master Servicer of such amounts shall, in the
absence of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee and Indenture Trustee shall be protected in
relying upon the same without any independent check or verification.
Section 4.02. RESERVED.
Section 4.03. PAYMENT ACCOUNT. The Indenture Trustee shall establish
and maintain a separate account (the "Payment Account") in accordance with the
Indenture. The Payment Account shall be an Eligible Account. On each Payment
Date, amounts on deposit in the Payment Account will be distributed by the
Indenture Trustee in accordance with Section 3.05 of the Indenture. The
Indenture Trustee shall, upon written request from the Master Servicer, invest
or cause the institution maintaining the Payment Account to invest the funds in
the Payment Account in Eligible Investments designated in the name of the
Indenture Trustee, which shall mature not later than the Business Day next
preceding the Payment Date next following the date of such investment and shall
not be sold or disposed of prior to maturity. All income and gain realized from
any such investment shall be for the benefit of the Bond Insurer and the
Bondholders. The amount of any losses incurred with respect to any such
investments shall be deposited in the Payment Account by the Master Servicer.
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Section 4.04. ADVANCES. If any Monthly Payment on a Mortgage Loan
(other than Balloon Payments) that was due on the immediately preceding Due Date
(with respect to an ARM Loan) or due during the related Collection Period (with
respect to a High LTV Loan) and delinquent on the Determination Date is
delinquent other than as a result of application of the Relief Act, the Master
Servicer will deposit in the Collection Account not later than the third
Business Day immediately preceding the related Payment Date an amount equal to
such Monthly Payment (with respect to an ARM Loan) or the interest portion of
such Monthly Payment (with respect to a High LTV Loan) net of the related
Servicing Fee and CMAC PMI Policy Fee for such Mortgage Loan, except to the
extent the Master Servicer or the related Subservicer determines any such
advance to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or
future payments on any Mortgage Loan. Subject to the foregoing and in the
absence of such a determination, the Master Servicer shall continue to make such
advances through the date that the related Mortgaged Property has, in the
judgment of the Master Servicer, been completely liquidated. No later than the
fourth Business Day preceding each Payment Date, the Master Servicer shall
present an Officer's Certificate to the Indenture Trustee and the Bond Insurer
with respect to the ARM Loans, (i) stating that the Master Servicer elects not
to make an Advance in a stated amount and (ii) detailing the reason it deems the
advance to be a Nonrecoverable Advance. Such an Officer's Certificate is not
required with respect to to the Master Servicer's determination not to make an
Advance in connection with a High LTV Loan. The Master Servicer will include in
the Determination Date Report a list of each ARM Loan or High LTV Loan for which
it does not make an Advance in accordance with this Section.
Such Advances may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Payment Dates in subsequent months. Any funds being held for
future distribution to Securityholders and so used shall be replaced by the
Master Servicer from its own funds by deposit in the Collection Account on or
before the fourth Business Day preceding any Payment Date to the extent that
funds in the Collection Account with respect to such Payment Date shall be less
than payments to Securityholders required to be made on such date.
Section 4.05. COMPENSATING INTEREST PAYMENTS. The Master Servicer shall
deposit in the Collection Account not later than the third Business Day
preceding the Payment Date an amount equal to the Compensating Interest related
to the related Determination Date. The Master Servicer shall not be entitled to
any reimbursement of any Compensating Interest payment.
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ARTICLE V
The Master Servicer
Section 5.01. LIABILITY OF THE MASTER SERVICER. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE MASTER SERVICER. Any corporation into which the Master
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer shall be a party, or any corporation succeeding to the business
of the Master Servicer, shall be the successor of the Master Servicer,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; PROVIDED, that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is reasonably satisfactory to the
Indenture Trustee (as pledgee of the Mortgage Loans) and the Company (in its
sole discretion) and the Bond Insurer, is willing to service the Mortgage Loans
and executes and delivers to the Indenture Trustee and the Company an agreement,
in form and substance reasonably satisfactory to the Bond Insurer, the Indenture
Trustee and the Company, which contains an assumption by such Person of the due
and punctual performance and observance of each covenant and condition to be
performed or observed by the Master Servicer under this Servicing Agreement;
PROVIDED, FURTHER, that each Rating Agency's rating of the Bonds in effect
immediately prior to such assignment and delegation will not be qualified,
reduced, or withdrawn as a result of such assignment and delegation (as
evidenced by a letter to such effect from each Rating Agency) or considered to
be below investment grade without taking into account the Bond Insurance
Policies.
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS. Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Company, the Issuer, the Owner Trustee, the Indenture Trustee or the Bondholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Servicing Agreement, PROVIDED, HOWEVER, that this
provision shall not protect the Master Servicer or any such Person against any
liability which would otherwise be imposed by reason of its willful misfeasance,
bad faith or gross negligence in the performance of its duties hereunder or by
reason of its reckless disregard of its obligations and duties hereunder. The
Master Servicer and any director or officer or employee or agent of the Master
Servicer may rely in good faith on any document of any kind PRIMA FACIE properly
executed and submitted by any Person respecting any matters arising hereunder.
The Master Servicer and any director or officer or employee or agent of the
Master Servicer shall be indemnified by the Company and held harmless against
any loss, liability or expense incurred in connection with any legal action
relating to this Servicing Agreement or the Bonds, including any amount paid to
the Owner Trustee or the
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Indenture Trustee pursuant to Section 5.06(b), other than any loss, liability or
expense related to any specific Mortgage Loan or Mortgage Loans (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Servicing Agreement) and any loss, liability or expense incurred by reason of
its willful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder or by reason of its reckless disregard of its obligations and
duties hereunder. The Master Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
duties to service the Mortgage Loans in accordance with this Servicing
Agreement, and which in its opinion may involve it in any expense or liability;
PROVIDED, HOWEVER, that the Master Servicer may in its sole discretion undertake
any such action which it may deem necessary or desirable in respect of this
Servicing Agreement, and the rights and duties of the parties hereto and the
interests of the Bondholders hereunder. In such event, the reasonable legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Company, and the Master Servicer shall be
entitled to be reimbursed therefor. The Master Servicer's right to indemnity or
reimbursement pursuant to this Section 5.03 shall survive any resignation or
termination of the Master Servicer pursuant to Section 5.04 or 6.01 with respect
to any losses, expenses, costs or liabilities arising prior to such resignation
or termination (or arising from events that occurred prior to such resignation
or termination).
Section 5.04. MASTER SERVICER NOT TO RESIGN. Subject to the provisions
of Section 5.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or (ii) upon satisfaction of the following conditions: (a) the
Master Servicer has proposed a successor servicer to the Company, the Bond
Insurer and the Indenture Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Company and the Indenture Trustee; (b)
each Rating Agency shall have delivered a letter to the Company, the Bond
Insurer and the Indenture Trustee prior to the appointment of the successor
servicer stating that the proposed appointment of such successor servicer as
Master Servicer hereunder will not result in the reduction or withdrawal of the
then current rating of the Bonds or the then current rating of the Bonds without
taking into account the Bond Insurance Policies; and (c) such proposed successor
servicer is acceptable to the Bond Insurer, as evidenced by a letter to the
Company and the Indenture Trustee; PROVIDED, HOWEVER, that no such resignation
by the Master Servicer shall become effective until such successor servicer or,
in the case of (i) above, the Indenture Trustee, as pledgee of the Mortgage
Loans, shall have assumed the Master Servicer's responsibilities and obligations
hereunder or another successor Master Servicer has been approved in accordance
with Section 6.02. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02 as
obligations that survive the resignation or termination of the Master Servicer.
The Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Bondholder or the Bond Insurer for any amounts paid by
the Master Servicer pursuant to any provision of this Servicing Agreement. Any
such determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee and the Bond Insurer.
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Section 5.05. DELEGATION OF DUTIES. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 5.04.
Section 5.06. MASTER SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER
TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. (a) The Master Servicer covenants
and agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee
of the Indenture Trustee from time to time, and the Owner Trustee, the Indenture
Trustee and any such co-trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each
of them in the execution of the trusts created under the Trust Agreement and the
Indenture and in the exercise and performance of any of the powers and duties
under the Trust Agreement or the Indenture, as the case may be, of the Owner
Trustee, the Indenture Trustee and any co-trustee of the Indenture Trustee, and
the Master Servicer will pay or reimburse (i) the Indenture Trustee and any
co-trustee upon request for all reasonable expenses, disbursements and advances
incurred or made by the Indenture Trustee or any co-trustee of the Indenture
Trustee in accordance with any of the provisions of this Servicing Agreement
except any such expense, disbursement or advance as may arise from its
negligence or bad faith and (ii) the Owner Trustee upon request for all
reasonable expenses, disbursements and advances incurred or made by the Owner
Trustee in accordance with any of the provisions of this Servicing Agreement
except any such expense, disbursement or advance as may arise from its willful
misconduct, gross negligence or bad faith or grossly negligent failure to act.
(b) The Master Servicer agrees to indemnify the Indenture Trustee and
the Owner Trustee for, and to hold the Indenture Trustee and the Owner Trustee,
as the case may be, harmless against, any claim, tax, penalty, loss, liability
or expense of any kind whatsoever, incurred without negligence (gross negligence
in the case of the Owner Trustee) or willful misconduct on its part, arising out
of, or in connection with, the failure by the Master Servicer to perform its
duties in compliance with this Servicing Agreement, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Indenture
Trustee or Owner Trustee, as the case may be, shall have given the
Master Servicer written notice thereof promptly after the Indenture
Trustee or Owner Trustee, as the case may be, shall have actual
knowledge thereof; it being understood that failure to give such notice
shall not relieve the Master Servicer of its indemnification
obligations hereunder;
(ii) while maintaining control over its own defense, the
Company, the Indenture Trustee or Owner Trustee, as the case may be,
shall cooperate and consult fully with the Master Servicer in preparing
such defense; and
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(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Master Servicer shall not be liable for
settlement of any claim by the Indenture Trustee or the Owner Trustee,
as the case may be, entered into without the prior consent of the
Master Servicer, which consent shall not be unreasonably withheld.
(c) The Master Servicer agrees to indemnify the Owner Trustee for, and
to hold the Owner Trustee, harmless against, any claim, tax, penalty, loss,
liability or expense of any kind whatsoever, in connection with the Owner
Trustee's duties under any of the Basic Documents, except to the extent that
such claim, tax, penalty, loss liability or expense is (i) caused by the Owner
Trustee's own willful misconduct, gross negligence or bad faith or grossly
negligent failure to act or (ii) incurred as a result of the inaccuracy of any
representation or warranty contained in Section 6.03 of the Trust Agreement
expressly made by the Owner Trustee.
(d) The Master Servicer agrees to indemnify the Indenture Trustee, its
officers, directors, employees, agents and "control" persons within the meaning
of the Securities Act and the Exchange Act for, and to hold the Indenture
Trustee, harmless against, any claim, tax, penalty, loss, liability or expense
of any kind whatsoever, due to the gross negligence, bad faith or willful
misconduct of the Master Servicer and due to the negligent or willful misuse by
the Master Servicer or any Subservicer of the power of attorney granted by the
Indenture Trustee pursuant to Section 3.01 of this Servicing Agreement.
(e) No termination of this Servicing Agreement or the resignation or
removal of the Owner Trustee or the Indenture Trustee shall affect the
obligations created by this Section 5.06 of the Master Servicer to indemnify the
Indenture Trustee and the Owner Trustee under the condi tions and to the extent
set forth herein. This section shall survive the termination of this Servicing
Agreement and the resignation or removal of the Master Servicer. Any amounts to
be paid by the Master Servicer pursuant to this Subsection may not be paid from
the Trust Estate.
Section 5.07. TAX ADMINISTRATION. It is the intention of the parties
hereto that, as of the Closing Date, the trust created by the Trust Agreement be
disregarded as a separate entity for federal income tax purposes and the Trust
will not be required to file separate entity level tax returns. In the event
that separate entity-level tax returns are required to be filed or the Trust
Certificates are held by more than one holder for federal income tax purposes,
or the Trust in any event is successfully recharacterized by the IRS as a
partnership, the Master Servicer shall file an application with the IRS for a
taxpayer identification number with respect to the Trust and prepare or cause to
be prepared and sign and/or file partnership tax returns including the
partnership information return on Form 1065 in connection with the transactions
contemplated hereby.
For purposes of preparing Form 1099 and any other information report
requiring the provision of a federal employer identification (EIN), so long as
the Trust is disregarded for federal income tax purposes the Indenture Trustee
shall use the EIN of IMPAC Mortgage Holdings,
Inc.
In the event the Trust is to be treated as a partnership or the certificates are
in any event transferred to another person, the Master Servicer shall provide
the Indenture Trustee with the applicable EIN.
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ARTICLE VI
Default
Section 6.01. SERVICING DEFAULT. If any one of the following events
("Servicing Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in
the Collection Account or Payment Account any deposit required to be
made under the terms of this Servicing Agreement, including any
Advances and Compensating Interest (other than Servicing Advances),
which continues unremedied for a period of one (1) Business Day after
the date upon which written notice of such failure shall have been
given to the Master Servicer by the Company, the Issuer or the
Indenture Trustee or to the Master Servicer, the Company, the Issuer
and the Indenture Trustee by the Bond Insurer; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer (including Servicing Advances) set
forth in the Bonds or in this Servicing Agreement, which failure, in
each case, materially and adversely affects the interests of
Bondholders or the Bond Insurer and which continues unremedied for a
period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied, and stating that such
notice is a "Notice of Default" hereunder, shall have been given to the
Master Servicer by the Company, the Issuer or the Indenture Trustee or
to the Master Servicer, the Company, the Issuer and the Indenture
Trustee by the Bond Insurer; or
(iii) The entry against the Master Servicer of a decree
or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshaling of assets and
liabilities or similar proceed ings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(iv) The Master Servicer shall voluntarily go into
liquidation, consent to the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceed ings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged, unbonded or unstayed for a period of 60 days; or the
Master Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations; or
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(v) Any failure by the Seller (so long as the Seller is
the Master Servicer) or the Master Servicer, as the case may be, to pay
when due any amount payable by it under the terms of the Insurance
Agreement which continues unremedied for a period of three (3) Business
Days after the date upon which written notice of such failure shall
have been given to the Seller (so long as the Seller is the Master
Servicer) or the Master Servicer, as the case may be; or
(vi) Failure on the part of the Seller or the Master
Servicer to duly perform in any material respect any covenant or
agreement set forth in the Insurance Agreement, which failure continues
unremedied for a period of 30 days (5 days in the event of a failure to
enforce the CMAC PMI Policy) after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given
to the Seller or the Master Servicer (with a copy to the Indenture
Trustee), as the case may be, by the Bond Insurer; or
(vii) (A) With respect to the ARM Pool, the occurrence of
either of the following additional events: (1) with respect to any
Payment Date, the aggregate Cumulative Loss Percentage with respect to
the ARM Loans over the prior twelve months is more than 1.00% of the
aggregate Principal Balance of the ARM Loans as of the first day of the
first month of such twelve month period, or (2) the Rolling Delinquency
Percentage with respect to the ARM Loans for any Payment Date is more
than 4.50%; or (B) with respect to the High LTV Pool, with respect to
any Payment Date, the aggregate Cumulative Loss Percentage with respect
to the High LTV Loans over the prior twelve months is more than 6.00%
of the aggregate Principal Balance of the High LTV Loans as of the
first day of the first month of such twelve month period;
then, (a) and in every such case, other than that set forth in (v), (vi) or
(vii) hereof, so long as a Servicing Default shall not have been remedied by the
Master Servicer, either the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans, with the consent of the Bond Insurer,
or the Bond Insurer, or if a Bond Insurer Default exists, the holders of at
least 51% of the aggregate Bond Principal Balance of the Bonds, by notice then
given in writing to the Master Servicer (and to the Indenture Trustee and the
Issuer if given by the Bond Insurer) or (b) in the case of the events set forth
in (v), (vi) or (vii) hereof, the Bond Insurer or, if a Bond Insurer Default
exists, the holders of at least 51% of the aggregate Bond Principal Balance of
the Bonds may, by notice to the Master Servicer, terminate all of the rights and
obligations of the Master Servicer as servicer under this Servicing Agreement
other than its right to receive servicing compensation and expenses for
servicing the Mortgage Loans hereunder during any period prior to the date of
such termination and the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans, with the consent of the Bond Insurer,
or the Bond Insurer may exercise any and all other remedies available at law or
equity. Any such notice to the Master Servicer shall also be given to each
Rating Agency, the Bond Insurer, the Company and the Issuer. On or after the
receipt by the Master Servicer of such written notice, all authority and power
of the Master Servicer under this Servicing Agreement, whether with respect to
the Bonds or the Mortgage Loans or otherwise, shall pass to and be vested in the
Indenture Trustee, pursuant to and
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under this Section 6.01; and, without limitation, the Indenture Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Mortgage Loan and related
documents, or other wise. The Master Servicer agrees to cooperate with the
Indenture Trustee in effecting the termination of the responsibilities and
rights of the Master Servicer hereunder, including, without limitation, the
transfer to the Indenture Trustee for the administration by it of all cash
amounts relating to the Mortgage Loans that shall at the time be held by the
Master Servicer and to be deposited by it in the Collection Account, or that
have been deposited by the Master Servicer in the Collection Account or
thereafter received by the Master Servicer with respect to the Mortgage Loans.
All reasonable costs and expenses (including, but not limited to, attorneys'
fees) incurred in connection with the succession as Master Servicer, including
amending this Servicing Agreement to reflect such succession as Master Servicer
pursuant to this Section 6.01 shall be paid by the predecessor Master Servicer
(or if the predecessor Master Servicer is the Indenture Trustee, the initial
Master Servicer) upon presentation of reasonable documentation of such costs and
expenses, and if not so paid by the predecessor Master Servicer, shall be
reimbursed by the Trust.
Notwithstanding the foregoing, a breach of Section 6.01(vii)(B) shall
not be deemed an Event of Default if the servicing with respect to the High LTV
Loans is immediately transferred to the Back-Up Servicer.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a payment on a Mortgage Loan which was due prior to the
notice terminating the Master Servicer's rights and obligations hereunder and
received after such notice, that portion to which the Master Servicer would have
been entitled pursuant to Sections 3.07 and 3.15 as well as its Servicing Fee in
respect thereof, and any other amounts payable to the Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(i) or under Section 6.01(ii) after the applicable grace
periods specified in such Sections, shall not constitute a Servicing Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The pre ceding sentence shall not relieve
the Master Servicer from using reasonable efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Servicing
Agreement and the Master Servicer shall provide the Indenture Trustee, the Bond
Insurer and the Bondholders with notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations. The Master
Servicer shall immediately notify the Indenture Trustee, the Bond Insurer and
the Owner Trustee in writing of any Servicing Default.
Section 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a)
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 6.01 or sends a notice
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pursuant to Section 5.04, the Indenture Trustee on behalf of the Bondholders and
the Bond Insurer shall be the successor in all respects to the Master Servicer
in its capacity as servicer under this Servicing Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof, including but not limited to the
provisions of Article VIII. Nothing in this Servicing Agreement shall be
construed to permit or require the Indenture Trustee to (i) succeed to the
responsibilities, duties and liabilities of the initial Master Servicer in its
capacity as the Seller under the Mortgage Loan Sale and Contribution Agreement,
(ii) be responsible or accountable for any act or omission of the Master
Servicer prior to the effectiveness of the Master Servicer's termination
hereunder, (iii) require or obligate the Indenture Trustee, in its capacity as
successor Master Servicer, to purchase, repurchase or substitute any Mortgage
Loan, (iv) fund any losses on any Eligible Investment directed by any other
Master Servicer, or (v) be responsible for the representations and warranties of
the Master Servicer; PROVIDED, HOWEVER, that the Indenture Trustee, as successor
Master Servicer, shall be required to make any Advances to the extent that the
Master Servicer failed to make such Advances, to the extent such Advance is not
determined by the Indenture Trustee to be nonrecoverable. As compensation
therefor, the Indenture Trustee shall be entitled to such compensation as the
Master Servicer would have been entitled to hereunder if no such notice of
termination had been given. Notwithstanding the above, (i) if the Indenture
Trustee is unwilling to act as successor Master Servicer, or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee on behalf
of the Bondholders and the Bond Insurer may (in the situation described in
clause (i)) or shall (in the situation described in clause (ii)) appoint or
petition a court of competent jurisdiction to appoint any established housing
and home finance institution, bank or other mortgage loan servicer having a net
worth of not less than $10,000,000 as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder; PROVIDED, that any such
successor Master Servicer shall be acceptable to the Bond Insurer, as evidenced
by the Bond Insurer's prior written consent and provided further that the
appointment of any such successor Master Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the Bonds by
the Rating Agencies without taking the Bond Insurance Policies into account.
Pending appointment of a successor to the Master Servicer hereunder, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensa tion which the Master Servicer would otherwise have received pursuant
to Section 3.15 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The appointment of a successor Master Servicer shall not
affect any liability of the predecessor Master Servicer which may have arisen
under this Servicing Agreement prior to its termination as Master Servicer
(including, without limitation, the obligation to purchase Mortgage Loans
pursuant to Section 3.01, to pay any deductible under an insurance policy
pursuant to Section 3.11 or to indemnify the Indenture Trustee pursuant to
Section 5.06), nor shall any successor Master Servicer be liable for any acts or
omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Indenture Trustee and such successor shall
take such action, consistent with this Servicing Agreement, as shall be
necessary to effectuate any such succession.
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(b) Any successor, including the Indenture Trustee on behalf of the
Bondholders, to the Master Servicer as servicer shall during the term of its
service as servicer (i) continue to service and administer the Mortgage Loans
for the benefit of the Bondholders and the Bond Insurer, (ii) maintain in force
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as Master Servicer hereunder and a fidelity bond
in respect of its officers, employees and agents to the same extent as the
Master Servicer is so required pursuant to Section 3.11(g).
(c) Any successor Master Servicer, including the Indenture Trustee on
behalf of the Bondholders, shall not be deemed to be in default or to have
breached its duties hereunder if the predecessor Master Servicer shall fail to
deliver any required deposit to the Collection Account or otherwise cooperate
with any required servicing transfer or succession hereunder.
Section 6.03. NOTIFICATION TO BONDHOLDERS. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VI or
Section 5.04, the Indenture Trustee shall give prompt written notice thereof to
the Bondholders, the Bond Insurer, the Owner Trustee, the Company, the Issuer
and each Rating Agency.
Section 6.04. WAIVER OF DEFAULTS. The Indenture Trustee shall transmit
by mail to all Bondholders and the Bond Insurer, within 10 days after the
occurrence of any Servicing Default known to the Indenture Trustee, unless such
Servicing Default shall have been cured, notice of each such Servicing Default
hereunder actually known to a Responsible Officer the Indenture Trustee. The
Bond Insurer or if a Bond Insurer Default exists, the holders of at least 51% of
the aggregate Bond Principal Balance of the Bonds may waive any default by the
Master Servicer in the performance of its obligations hereunder and the
consequences thereof, except a default in the making of or the causing to be
made any required distribution on the Bonds. Upon any such waiver of a past
default, such default shall be deemed to cease to exist, and any Servicing
Default arising therefrom shall be deemed to have been timely remedied for every
purpose of this Servicing 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. The Master Servicer shall give notice of any such
waiver to the Rating Agencies.
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ARTICLE VII
Miscellaneous Provisions
Section 7.01. AMENDMENT. This Servicing Agreement may be amended from
time to time by the parties hereto, provided that any amendment be accompanied
by a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Bonds or the rating
then assigned to the Bonds without taking into account the Bond Insurance
Policies, and the consent of the Bond Insurer and the Indenture Trustee.
Section 7.02. GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 7.03. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
when delivered to:
(a) in the case of the Master Servicer: Impac Funding Corporation
20371 Irvine Avenue
Santa Ana Heights, CA 92707
Attention: Mary Glass-Schannault
(b) in the case of the Bond Insurer: Ambac Assurance Corporation
One State Street Plaza
New York, NY 10004
Attention: Structured Finance --
Mortgage Backed Securities
(c) in the case of Rating Agencies: Moody's Investors Service, Inc.
4th Floor
99 Church Street
New York, NY 10007
Attention: Residential Mortgage
Monitoring Unit
Standard & Poor's - a division of The
McGraw-Hill Companies, Inc.
25 Broadway
New York, NY 10004
Attention: Asset Backed Surveillance
Group
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(d) in the case of the Owner Trustee,
the Corporate Trust Office: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust
Administration
(e) in the case of the Issuer,
to Impac CMB Trust Series 1999-1: c/o IMH Assets Corp.
20371 Irvine Avenue
Santa Ana Heights, California 92707
Attention: Richard Johnson
(f) in the case of the Indenture Trustee: 135 South LaSalle Street
Chicago, Illinois 60674
Attention: Impac CMB Trust Series
1999-1
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to be
mailed to a Bondholder shall be given by first class mail, postage prepaid, at
the address of such Bondholder as shown in the Bond Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any Rating Agency.
Section 7.04. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Bonds or the rights of the Bondholders thereof.
Section 7.05. THIRD-PARTY BENEFICIARIES. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Bondholders,
the Bond Insurer, the Owner Trustee, the Indenture Trustee and their respective
successors and permitted assigns. Except as otherwise provided in this Servicing
Agreement, no other Person will have any right or obligation hereunder. The
Indenture Trustee shall have the right to exercise all rights of the Issuer
under this Agreement.
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Section 7.06. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 7.08. TERMINATION. The respective obligations and
responsibilities of the Master Servicer and the Issuer created hereby shall
terminate upon the satisfaction and discharge of the Indenture pursuant to
Section 4.10 thereof.
Section 7.09. NO PETITION. The Master Servicer, by entering into this
Servicing Agreement, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join in any institution against the Issuer, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations of the Issuer. This section shall
survive the termination of this Servicing Agreement by one year.
Section 7.10. NO RECOURSE. The Master Servicer acknowledges that no
recourse may be had against the Issuer, except as may be expressly set forth in
this Servicing Agreement.
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ARTICLE VIII
DUTIES OF THE MASTER SERVICER
Section 8.01. ADMINISTRATIVE DUTIES. (a) DUTIES WITH RESPECT TO THE
INDENTURE. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall consult
with the Owner Trustee as the Master Servicer deems appropriate regarding the
duties of the Issuer under the Indenture. The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Master
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Master Servicer shall take all necessary action that is the
duty of the Issuer to take pursuant to the Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Master
Servicer set forth in this Servicing Agreement or any of the Basic Documents,
the Master Servicer shall perform such calculations and shall prepare for
execution by the Issuer or the Owner Trustee or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the Owner
Trustee to prepare, file or deliver pursuant to this Servicing Agreement or any
of the Basic Documents or under state and federal tax and securities laws, and
at the request of the Owner Trustee or the Bond Insurer shall take all
appropriate action that it is the duty of the Issuer to take pursuant to this
Servicing Agreement or any of the Basic Documents. In accordance with the
directions of the Issuer, the Bond Insurer or the Owner Trustee, the Master
Servicer shall administer, perform or supervise the performance of such other
activities in connection with the Bonds (including the Basic Documents) as are
not covered by any of the foregoing provisions and as are expressly requested by
the Issuer, the Bond Insurer, the Indenture Trustee or the Owner Trustee and are
reasonably within the capability of the Master Servicer.
(ii) Notwithstanding anything in this Servicing
Agreement or any of the Basic Documents to the contrary, the Master Servicer
shall be responsible for promptly notifying the Owner Trustee and the Bond
Insurer in the event that any withholding tax is imposed on the Issuer's
payments (or allocations of income) to an Owner (as defined in the Trust
Agreement) as contemplated in Section 5.03 of the Trust Agreement. Any such
notice shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee pursuant to such provision.
(iii) In carrying out the foregoing duties or any of
its other obligations under this Servicing Agreement, the Master Servicer may
enter into transactions with or otherwise deal with any of its Affiliates;
PROVIDED, HOWEVER, that the terms of any such transactions or dealings shall be
in accordance with any directions received from the Issuer and shall be, in the
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Master Servicer's opinion, no less favorable to the Issuer in any material
respect than with terms made available to unrelated third-parties.
(c) TAX MATTERS. The Indenture Trustee shall prepare and file
(or cause to be prepared and filed), on behalf of the Owner Trustee, all tax
returns and information reports, tax elections, financial statements and such
annual or other reports of the Issuer as are necessary for preparation of tax
returns and information reports as provided in Section 5.03 of the Trust
Agreement, including without limitation Form 1099.
For purposes of preparing Form 1099 and any other information
report requiring the provision of a federal employer identification number
(EIN), so long as the Trust is disregarded for federal income tax purposes the
Indenture Trustee shall use the EIN of IMPAC Mortgage Holdings, Inc. In the
event the Trust is to be treated as a partnership or the certificates are in any
event transferred to another person, the Master Servicer shall provide the
Indenture Trustee with the applicable EIN.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article VIII unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee, the Bond Insurer and the Indenture Trustee of the
proposed action and the Owner Trustee, the Bond Insurer and, with respect to
items (A), (B), (C) and (D) below, the Indenture Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include:
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit
brought by or against the Issuer (other than in connection
with the collection of the Mortgage Loans);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Certificate Paying
Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Servicers or the
consent to the assignment by the Certificate Registrar, Paying
Agent or Indenture Trustee of its obligations under the
Indenture; and
(E) the removal of the Indenture Trustee.
Section 8.02. RECORDS. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Servicing Agreement, which books of account and records shall be accessible
for inspection by the Issuer and the Bond Insurer at any time during normal
business hours.
Section 8.03. ADDITIONAL INFORMATION TO BE FURNISHED. The
Master Servicer shall furnish to the Issuer, the Indenture Trustee and the Bond
Insurer from time to time such additional information regarding the Bonds as the
Issuer, the Indenture Trustee or the Bond Insurer shall
reasonably request.
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IN WITNESS WHEREOF, the Master Servicer, the Issuer and the Indenture
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers or representatives
all as of the day and year first above written.
IMPAC FUNDING CORPORATION,
as Master Servicer
By:
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Name: Mary Glass-Schannault
Title: Senior Vice President
IMPAC CMB TRUST SERIES 1999-1,
as Issuer
Wilmington Trust Company, not in its
capacity but solely as Owner Trustee
By:
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Name:
Title:
LASALLE NATIONAL BANK
as Indenture Trustee
By:
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Name:
Title:
EXHIBIT A
MORTGAGE LOAN SCHEDULE
(provided upon request)
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full
Other
Mortgage Loan Repurchased
Please deliver the Mortgage File to:
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"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
- -------------------------------------
[Name of Master Servicer]
Authorized Signature
******************************************************************
TO CUSTODIAN/Indenture Trustee: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other:
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Name
- ----------------------------
Title
- ----------------------------
Date
B-1