Exhibit 99.2
Independent Auditor's Annual Servicer Compliance Certificate
To Interstar Securitisation Management Pty Limited
SCOPE
We have reviewed the activities of Interstar Wholesale Finance Pty Ltd (the
"Servicer") for the purpose of determining its compliance with the servicing
standards contained in the Master Trust Deed dated 2 December 1999 and the
Investment Management Agreement dated 3 December 1999 (collectively the
"Documents") (attached as Appendix 1), in relation to the Interstar Millennium
Series 2002-1G, Interstar Millennium Series 2003-1G, Interstar Millennium Series
2003-3G, Interstar Millennium Series 2003-5G and Interstar Millennium Series
2004-2G (collectively, the "Trusts") for the period from 1 January 2004 to 31
December 2004, in accordance with the statement by the Division of Corporation
Finance of the Securities and Exchange Commission dated 21 February 2003, and
our engagement letter dated 4 March 2005.
We have reviewed the servicing standards contained in the Agreement to enable us
to report on whether those servicing standards are similar to those contained in
the Uniform Single Attestation Program for Mortgage Bankers ("USAP") (attached
as Appendix 2), which establishes a minimum servicing standard for the asset
backed securities market in the United States of America. No equivalent of the
USAP exists in Australia.
The management of the Servicer is responsible for maintaining an effective
internal control structure including internal control policies and procedures
relating to the servicing of mortgage loans. We have conducted an independent
review of the servicing standards contained in the Agreement, in order to
express a statement on the Servicer's compliance with them to Interstar
Securitisation Management Pty Ltd.
Our review of the servicing standards has been conducted in accordance with
Australian Auditing Standards applicable to performance audits and accordingly
included such tests and procedures as we considered necessary in the
circumstances. In conducting our review we have also had regard to the guidance
contained in the USAP. These procedures have been undertaken to enable us to
report on whether anything has come to our attention to indicate that there has
been significant deficiencies in the Servicer's compliance with the servicing
standards contained in the Documents for the period from 1 January 2004 to 31
December 2004 in respect of the Trusts.
A review is limited primarily to inquiries of company personnel and analytical
procedures applied to the financial data. These procedures do not provide all
the evidence that would be required in an audit, thus the level of assurance
provided is less than given in an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion. Our review did not include an
assessment of the adequacy of the servicing standards themselves.
This statement has been prepared for the use of Interstar Securitisation
Management Pty Ltd as at 31 December 2004 in accordance with the requirements of
the statement by the Division of Corporation Finance of the Securities and
Exchange Commission dated 21 February 2003, and the engagement letter dated 4
March 2005. We disclaim any assumption of responsibility for any reliance on
this review statement, to any person other than Interstar Securitisation
Management Pty Ltd.
STATEMENT
Based on our review, which is not an audit, nothing has come to our attention to
indicate that;
o there has been significant deficiencies in the Servicer's compliance
with the servicing standards contained in the Documents attached hereto
as Appendix 1, in respect of the Trusts, for the period from 1 January
2004 to 31 December 2004 and;
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o the servicing standards contained in the Documents are not similar to
the minimum servicing standards contained in the Uniform Single
Attestation Program for Mortgage Bankers ("USAP"), except for the
following:
o Reconciliations shall be prepared on a monthly basis for all
custodial bank accounts and related bank clearing accounts. These
reconciliations shall be mathematically accurate, be prepared within
forty-five (45) calendar days after the cutoff date, be reviewed and
approved by someone other than the person who prepared the
reconciliation and document explanations for reconciling items.
These reconciling items shall be resolved within ninety (90)
calendar days of their original identification;
o Funds of the servicing entity shall be advanced in cases where there
is an overdraft in an investor's or a mortgagor's account.
o Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage
loan;
o Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and
insurance premium notices, respectively, provided that such support
has been received by the servicing entity at least thirty (30)
calendar days prior to these dates;
o Any late payment penalties paid in conjunction with the payment of
any tax bill or insurance premium notice shall be paid from the
servicing entity's funds and not charged to the mortgagor, unless
the late payment was due to the mortgagor's error or omission;
o Adjustments on ARM loans shall be computed based on the related
mortgage note and any ARM rider;
o Escrow accounts shall be analyzed, in accordance with the
mortgagor's loan documents, on at least an annual basis;
o Interest on escrow accounts shall be paid, or credited, to
mortgagors in accordance with the applicable state laws;
o A fidelity bond and errors and omissions policy shall be in effect
on the servicing entity throughout the reporting period in the
amount of coverage represented to investors in management's
assertion.
Ernst & Young
/S/ T J COYNE
- ------------------
T J Coyne
Partner
Melbourne
18 March 2005
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APPENDIX 1
INTERSTAR WHOLESALE FINANCE PTY LIMITED (THE "SERVICER") SERVICING STANDARDS
A) The following servicing standards are contained in the Investment Management
Agreement (IMA) dated 3 December 1999:
IMA 2.4 - Records
The Servicer will keep or cause to be kept proper separate accounting records
and files of the Loans and Loan Securities in relation to each Relevant Trust
and provide, collect and maintain such information as the Servicer may from time
to time in writing be reasonably required to provide, collect or maintain in
respect of those Loans and Loan Securities in order to provide the Services and
perform its obligations under this Agreement. Such accounting records and files
will be kept at the office of the Servicer or such other place as approved by
the Trustee in writing and will be open to the inspection of the Trustee and/or
the authorised agents of the Trustee. The Servicer will allow such persons to
take copies of any such accounting records and files.
IMA 4.1 - Servicing Undertakings
The Servicer undertakes that at all times during the Term it will:
a) (Notice of default) give notice in writing to the Trustee and the
Designated Rating Agency of it becoming aware of the occurrence of any
Servicer Transfer Event;
b) (Compliance with law)
i) maintain in effect all qualifications, consents, licenses,
permits, approvals, exemptions, filings and registrations as may
be required under any applicable law in order properly to service
the Loans and Loan Securities and to perform or comply with its
obligations under this agreement; and
ii) comply with all Laws in connection with servicing the Loans and
Loan Securities;
c) (Default) upon becoming aware that any default has occurred in respect of any
Loan:
i) promptly notify the Mortgage Insurer of that default in accordance
with the provisions of the relevant Mortgage Insurance Policy;
ii) subjectto obtaining the prior consent of the Mortgage Insurer,
promptly take such action as the Servicer considers necessary in
relation to such default, including:
(A) serving any notice of default upon the Obligor or any other
party;
(B) instituting and conducting legal proceedings against the
Obligor or any other party; and
(C) taking all necessary steps and engaging all necessary persons
to sell the Subject Property pursuant to the exercise of
the power of sale authorised by the relevant Loan Security;
and
iii) otherwise enforce the Loan and Loan Security in accordance with
the directions and requirements of the Mortgage Insurer;
d) (Insurance Policies)
i) enter into:
(A) Mortgage Insurance Policies; and
(B) General Insurance Policies,
for and on behalf of and in the name of the Trustee and/or the
mortgagee of a Loan Security whenever required to do so, and
ensure that the Trustee's and/or mortgagee's interest is duly
noted and/or endorsed upon all such contracts;
ii) ensure by its conduct that no Mortgage Insurance Policy or General
Insurance Policy in relation to the Loans and Loan Securities
become invalid, unenforceable or lapse; and
iii) not commit, or allow or cause to be committed, any act or omission
whereby any Mortgage Insurance Policy or General Insurance Policy
may be rendered void or voidable at the option of the insurer.
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e) (No Security Interests) not consent to the creation or existence of any
Security Interest in favour of a third party in relation to any Mortgaged
Property in connection with a Loan and the Loan Security (other than as
contemplated by the relevant Transaction Documents):
i) without limiting sub-paragraph (e)(ii), unless priority arrangements
are entered into with that third party under which the third party
acknowledges that the Loan and Loan Security rank ahead in priority
to the third party Security Interest on enforcement for an amount
not less than the Unpaid Balance of the Loan plus such other amount
as the Servicer determines in accordance with its ordinary course of
business; or
ii) which would rank before or pari passu with the relevant Loan and
Loan Security;
f) (Vary terms) not agree to any variation, amendment or modification of any
of the terms and conditions of any Loan or Loan Security or do any act,
matter or thing which could constitute a diminution, restriction, waiver or
modification of the Trustee's rights under that Loan or Loan Security
without the Trustee's prior written consent.
g) (Other miscellaneous things) procure the stamping and registration of all
Relevant Documents for each Relevant Trust (including documents which
became Relevant Documents) following any amendment, consolidation or other
action, and in the case of any registration of any Mortgage that
registration will result in the Mortgage having the ranking referred to in
the relevant eligibility criteria in the Series Notice. In relation to any
Mortgage that is not registered at the relevant Closing Date, the Servicer
will procure that it is lodged for registration not later than 30 days
after that Closing Date;
h) (Setting the Investment Rate) set the Investment Rate in respect of any
Relevant Trust as 0.25% higher than the percentage rate of return on the
Purchased Loans, and taking into account the percentage rate of return
being earned on other Authorised Investments, which it determines will be
necessary to ensure that the Trustee has sufficient cash available at all
times to enable the Trustee to pay all payments of Interest in respect of
the Relevant Trust and otherwise comply with all of the Trustee's duties
and obligations under the relevant Transactions Documents as and when they
fall due, including payment of any Approved Seller's Fee as and when it
falls due.
i) (Notification) notify:
i) the Trustee and the Trust Manager of any event which it reasonably
believes is likely to have an Adverse Effect promptly after becoming
aware of such event; and
ii) the Trust Manager of anything else which the Trust Manager
reasonably requires regarding any proposed modification to the terms
of any Loan or Loan Security;
j) (Provide information and access on request) provide information reasonably
requested by the Trustee or the Trust Manager, with respect to all matters
relating to each Relevant Trust and the assets of the relevant Trust, and
the Trustee or the Trust Manager believes reasonably necessary for it to
perform its obligations under the relevant Transaction Documents, and upon
reasonable notice and at reasonable times permit the Trustee to inspect the
Data Base in relation to each Relevant Trust and the Relevant Documents;
k) (Comply with other obligations) comply with all its obligations under any
Transaction Document to which it is a party;
l) (Pay taxes) subject to receiving payment from, or being reimbursed by, the
relevant Obligor or being indemnified by the Trustee, pay all Taxes that
relate to the Services (other than any Tax on the income of a Trust) or
ensure those Taxes are paid or where such Taxes are incurred due to the
default or breach of duty by the Servicer;
m) (Not claim) not claim any Security Interest over any Asset (other than in
accordance with the relevant Transaction Documents);
n) (Comply with Series Notice) comply with any undertaking specified as an
additional Servicer undertaking in a relevant Series Notice, including
providing the Trust Manager with any information referred to in that Series
Notice;
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o) (Account to Trustee) regularly account to the Trustee in such manner as
prescribed by the Trustee from time to time;
p) (Enforce Loans) enforce the Trustee's rights pursuant to or in connection
with the Loans in accordance with the directions of the Trustee in that
regard and ensure prompt compliance by the Obligor under each Loan;
q) (Act as directed by Trustee) take all or any necessary steps which the
Trustee may direct the Servicer to take to ensure that the Trustee's rights
pursuant to or in connection with the Loans are in no way diminished,
restricted or modified;
r) (Performing or non-performing Loans) determine whether Loans are performing
or non-performing as required by the Master Trust Deed and the Series
Notice for the Relevant Trust; and
s) (Collect moneys) arrange to collect all moneys paid or payable under the
Loans and Loan Securities and pay them into the relevant Collection
Account.
IMA 5 - Report by Servicer
On or before each date which is 3 Business Days before each Payment Date for
each Relevant Trust, if so requested by the Trust Manager, the Servicer will
prepare and submit to the Trust Manager a report and provide such other
information as the Trust Manager reasonably requires to prepare its report (if
any) under clause 17.16 of the Master Trust Deed.
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B) The following servicing standards are contained in the Master Trust Deed
(MTD) dated 3 December 1999:
MTD Section 17.9:
Trust Manager will account to Trustee for moneys received
o The Trust Manager will pay to the Trustee, within one Business Day of
receipt, all moneys coming into its hands belonging to the Trusts or
payable to the Trusts.
o The Trust Manager will keep any Assets which it may come to hold from time
to time separate from any other property belonging to or entrusted to or
held by the Trust Manager.
MTD 17.16:
Make calculations, co-ordinate and provide reports
The Trust Manager shall:
o calculate all payments due on any relevant Payment Date;
o co-ordinate the issue of relevant Notes and the raising of funds from those
issues, or from any Support Facility; and
o as and when required by any Series Notice or other Transaction Document
prepare and distribute for each Trust the Trust Manager's Report,
o and where relevant (and when the Trust Manager is actually aware that the
directions need to be given, including any directions expressly required of
it under the Transaction Documents) provide all directions to the Trustee
as may be required for the Trustee to comply with its obligations under the
Transaction Documents.
MTD Section 21.9:
Location of bank accounts
o (Central bank account) Unless otherwise directed in writing by the Trust
Manager, the central bank account of each Trust shall be opened and
maintained at a branch of an Approved Bank in Victoria.
(Interstate branch bank accounts) The Trustee may, if necessary or desirable for
the operation of a Trust, open bank accounts with a branch outside Victoria of
an Approved Bank provided that if such accounts are opened it shall enter into
arrangements so that as soon as practicable after the receipt of moneys to the
credit of such accounts, such moneys are to be transferred to the credit of the
central bank accounts of the Trust in Victoria (subject to a direction to the
contrary by the Trust Manager under clause 26.2(a)).
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Appendix 2 - Uniform Single Attestation Program for Mortgage Bankers ("USAP")
I. CUSTODIAL BANK ACCOUNTS
1. Reconciliations shall be prepared on a monthly basis for all custodial
bank accounts and related bank clearing accounts. These
reconciliation's shall:
o Be mathematically accurate;
o Be prepared within forty-five (45) calendar days after the cutoff date;
o Be reviewed and approved by someone other than the person who prepared
the reconciliation; and
o Document explanations for reconciling items. These reconciling items
shall be resolved within ninety (90) calendar days of their original
identification.
2. Funds of the servicing entity shall be advanced in cases where there is
an overdraft in an investor's or a mortgagor's account.
3. Each custodial account shall be maintained at a federally insured
depository institution in trust for the applicable investor.
4. Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage
loan.
II. MORTGAGE PAYMENTS
1. Mortgage payments shall be deposited into the custodial bank accounts
and related bank clearing accounts within two business days of receipt.
2. Mortgage payments made in accordance with the mortgagor's loan
documents shall be posted to the applicable mortgagor records within
two business days of receipt.
3. Mortgage payments shall be allocated to principal, interest, insurance,
taxes or other escrow items in accordance with the mortgagor's loan
documents.
4. Mortgage payments identified as loan payoffs shall be allocated in
accordance with the mortgagor's loan documents.
III. DISBURSEMENTS
1. Disbursements made via wire transfer on behalf of a mortgagor or
investor shall be made only by authorized personnel.
2. Disbursements made on behalf of a mortgagor or investor shall be posted
within two business days to the mortgagor's or investor's records
maintained by the servicing entity.
3. Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and
insurance premium notices, respectively, provided that such support has
been received by the servicing entity at least thirty (30) calendar
days prior to these dates.
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4. Any late payment penalties paid in conjunction with the payment of any
tax bill or insurance premium notice shall be paid from the servicing
entity's funds and not charged to the mortgagor, unless the late
payment was due to the mortgagor's error or omission.
5. Amounts remitted to investors per the servicer's investor reports shall
agree with cancelled checks, or other form of payment, or custodial
bank statements.
6. Unissued checks shall be safeguarded so as to prevent unauthorized
access.
IV. INVESTOR ACCOUNTING AND REPORTING
1. The servicing entity's investor reports shall agree with, or reconcile
to, investors' records on a monthly basis as to the total unpaid
principal balance and number of loans serviced by the servicing entity.
V. MORTGAGOR LOAN ACCOUNTING
1. The servicing entity's mortgage loan records shall agree with, or
reconcile to, the records of mortgagors with respect to the unpaid
principal balance on a monthly basis.
2. Adjustments on ARM loans shall be computed based on the related
mortgage note and any ARM rider.
3. Escrow accounts shall be analyzed, in accordance with the mortgagor's
loan documents, on at least an annual basis.
4. Interest on escrow accounts shall be paid, or credited, to mortgagors
in accordance with the applicable state laws. (A compilation of state
laws relating to the payment of interest on escrow accounts may be
obtained through the MBA's FAX ON DEMAND service. For more information,
contact MBA.)
VI. DELINQUENCIES
1. Records documenting collection efforts shall be maintained during the
period a loan is in default and shall be updated at least monthly. Such
records shall describe the entity's activities in monitoring delinquent
loans including, for example, phone calls, letters and mortgage payment
rescheduling plans in cases where the delinquency is deemed temporary
(e.g., illness or unemployment).
VII. INSURANCE POLICIES
1. A fidelity-bond and errors and omissions policy shall be in effect on
the servicing entity throughout the reporting period in the amount of
coverage represented to investors in management's assertion.
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