Exhibit 99.2
Mortgage Guaranty Insurance Corporation MGIC
250 E. Kilbourn Avenue
P.O. Box 488, Milwaukee, Wisconsin 53201-0488
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Declaration Page for Use With
Mortgage Guaranty Master Policy
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Mortgage Guaranty Insurance Corporation (a stock insurance company hereinafter called the "Company") agrees to pay to the Insured
identified below, in consideration of the premium or premiums to be paid as specified in this Policy and in reliance on the
Insured's Application for coverage under this Policy any Loss due to the Default by a Borrower on a Loan, subject to the terms and
conditions in this Policy.
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Insured's Name and Mailing Address: Master Policy Number:
US Bank as Trustee for ACE Securities Corp. Home Equity 04-690-4-3803
Loan Trust, Series 2001-AQ1
180 East Fifth Street Effective Date of Policy:
Saint Paul, Minnesota 55101 April 1, 2001
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Includes Terms and Conditions #71-7135 (8/94)
Includes Endorsement(s):
#71-7139 (8/94)
#71-70163 (2/01)
#71-70181 (5/01)
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In Witness Whereof, the Company has caused its Corporate Seal to be hereto
affixed and these presents to be signed by
[GRAPHIC OMITTED]
its duly authorized officers in facsimile to become effective as its original seal and signatures and binding on the Company.
MORTGAGE GUARANTY INSURANCE CORPORATION
_________________________________________________________
Authorized Representative
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Form # 71-70035 (10/96)
Table of Contents
Mortgage Guaranty Master Policy
1 Definitions
1.1 Application
1.2 Appropriate Proceedings
1.3 Borrower
1.4 Borrower's Title
1.5 Certificate
1.6 Certificate Effective Date
1.7 Claim
1.8 Claim Amount
1.9 Commitment
1.10 Default
1.11 Environmental Condition
1.12 Good and Merchantable Title
1.13 Insured
1.14 Loan
1.15 Loss
1.16 Owner or Owner of the Loan
1.17 Perfected Claim
1.18 Person
1.19 Physical Damage
1.20 Policy
1.21 Possession of the Property
1.22 Property
1.23 Residential
1.24 Servicer
1.25 Settlement Period
1.26 Value
2 Obtaining Coverage and Payment of Premiums
2.1 Application and Certificate
2.2 Representations of the Insured
2.3 Company's Remedies for Misrepresentation
2.4 Incontestability for Certain Misrepresentations
2.5 Initial Premium and Term of Coverage
2.6 Renewal of Certificate and Termination for Non-Payment of Renewal
Premium; Reinstatement of Terminated Coverage
2.7 Special Procedures for Certification of Coverage; Payment of
Initial and Renewal Premiums
2.8 Cancellation by the Insured of a Certificate
2.9 Cancellation of Policy
2.10 Relationship Among the Company, the Owner of a Loan, and the
Servicer of a Loan
2.11 Refund of Premium for Denial of Claim in Full
3 Changes in Various Loan Terms, Servicing and Insured; Co-ordination
and Duplication of Insurance Benefits
3.1 Loan Modifications
3.2 Open End Provisions
3.3 Assumptions
3.4 Change of Servicing
3.5 Change of Owner
3.6 Co-ordination and Duplication of Insurance Benefits
4 Exclusions From Coverage
4.1 Balloon Payment
4.2 Effective Date
4.3 Incomplete Construction
4.4 Fraud, Misrepresentation and Negligence
4.5 Non-Approved Servicer
4.6 Physical Damage (Other than Relating to Pre-Existing
Environmental Conditions)
4.7 Pre-Existing Environmental Conditions
4.8 Down Payment
4.9 First Lien Status
4.10 Breach of the Insured's Obligations or Failure to Comply with
Terms
5 Conditions Precedent to Payment of Claim
5.1 Notice of Default
5.2 Monthly Reports
5.3 Company's Option to Accelerate Filing of a Claim
5.4 Voluntary Conveyance
5.5 Appropriate Proceedings
5.6 Mitigation of Damages
5.7 Advances
5.8 Claim Information and Other Requirements
5.9 Acquisition of Borrower's Title Not Required
5.10 Sale of a Property by the Insured
Before End of Settlement Period
5.11 Foreclosure Bidding Instructions Given by the Company
5.12 Effect of Unexpired Redemption Period on Payment of a Claim
5.13 Collection Assistance
6 Loss Payment Procedure
6.1 Filing of Claim
6.2 Calculation of Claim Amount
6.3 Payment of Loss; Company's Options
6.4 Calculation of Settlement Period
6.5 Payment by the Company After the Settlement Period
6.6 Discharge of Obligation
7 Additional Conditions
7.1 Proceedings of Eminent Domain
7.2 Pursuit of Deficiencies
7.3 Subrogation
7.4 Policy for Exclusive Benefit of the Insured and the Owner
7.5 Effect of Borrower Insolvency or Bankruptcy on Principal Balance
7.6 Arbitration of Disputes; Suits and Actions Brought by the Insured
7.7 Release of Borrower; Defenses of Borrower
7.8 Amendments; No Waiver; Rights and Remedies; Use of
Term "Including"
7.9 No Agency
7.10 Successors and Assigns
7.11 Applicable Law and Conformity to Law
7.12 Notice
7.13 Reports and Examinations
7.14 Electronic Media
Terms and Conditions
1 Definitions
1.1 Application means a request for coverage, including assumption
of coverage, under this Policy for a Loan on a form or in a
format provided by the Company, and all other statements,
documents or information furnished to the Company by the Insured
or any other Person in connection with the insuring of the Loan.
An application will include information, if so furnished to the
Company, contained in the Borrower's Loan application,
appraisal, verifications of income and deposit, plans and
specifications for the Property, and all other exhibits and
documents, and will include all data and information so
furnished by electronic means.
1.2 Appropriate Proceedings means any legal or administrative
action by the Insured affecting either a Loan or title to a
Property, including:
a. Preserving a deficiency recovery by making a bid at the
foreclosure sale and pursuing a deficiency judgment until
the end of the Settlement Period, where appropriate and
permissible and where directed by the Company; or
b. Enforcing the terms of the Loan as allowed by the laws
where the Property is located; or
c. Acquiring Borrower's Title or Good and Merchantable Title
to the Property, as either may be required under this
Policy, but excluding such title as may be acquired by a
voluntary conveyance from the Borrower; or
d. Asserting the Insured's interest in the Property in a
Borrower's bankruptcy.
1.3 Borrower means any Person legally obligated to repay the debt
obligation created by a Loan, including any co-signer or
guarantor of the Loan.
1.4 Borrower's Title means such title to a Property as was vested in
the Borrower at the time of a conveyance to the Insured arising
out of or pursuant to a foreclosure of the Loan; provided,
however, if the Insured so elects, the redemption period need
not have expired. Borrower's Title in the Insured may be, but
need not be the equivalent of Good and Merchantable Title, and
the deed evidencing Borrower's Title need not be recorded unless
required by applicable law.
1.5 Certificate means the document, which may be on the same form as
the Commitment, issued by the Company pursuant to this Policy
and extending the coverage indicated therein to a specified
Loan.
1.6 Certificate Effective Date means, as specified in the
Certificate, (a) the closing date of a Loan, or (b) the later
date requested by the Insured and accepted by the Company.
1.7 Claim means the timely filed written request, made on a form or
in a format provided or approved by the Company, to receive the
benefits of this Policy.
1.8 Claim Amount means the amount calculated in accordance with
Section 6.2 of this Policy.
1.9 Commitment means the document, which may be on the same form as
the Certificate, issued by the Company evidencing the Company's
offer to insure the Loan identified therein, subject to the
terms and conditions therein and in this Policy.
1.10 Default means the failure by a Borrower (a) to pay when due an
amount equal to or greater than one (1) monthly regular periodic
payment due under the terms of a Loan or (b) to pay all amounts
due on acceleration of the Loan by the Insured after breach by
the Borrower of a due on sale provision in the Loan, granting
the Insured the right to accelerate the Loan upon transfer of
title to, or an interest in, the Property and to institute
Appropriate Proceedings. Violation by the Borrower of any other
term or condition of the Loan which is a basis for Appropriate
Proceedings shall not be considered to be a Default.
A Loan is deemed to be in Default for that month as of the close
of business on the installment due date for which a scheduled
monthly payment has not been made or as of the close of business
on the due date stated in the notice of acceleration given
pursuant to the due-on-sale provision in the Loan. The Loan will
be considered to remain in Default until filing of a Claim so
long as such periodic payment has not been made or such basis
for Appropriate Proceedings remains. For example, a Loan is
"four (4) months in Default" if the monthly installments due on
January 1 through April 1 remain unpaid as of the close of
business on April 1 or if a basis for acceleration and
Appropriate Proceedings exists for a continuous period of four
months.
1.11 Environmental Condition means the presence of environmental
contamination, including nuclear reaction or radioactive waste,
toxic waste, or poisoning, contamination or pollution of earth
or water subjacent to the Property or of the atmosphere above
the Property; or the presence, on or under a Property, of any
"Hazardous Substance" as that term is defined by the federal
Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Sec. 9601 et. seq., as amended from
time to time) or as defined by any similar state law, or of any
"Hazardous Waste" or "Regulated Substance" as those terms are
defined by the federal Resource Conservation and Recovery Act
(42 U.S.C. sec. 6901, et seq., as amended from time to time) or
as defined by any similar state law. Environmental Condition
does not mean the presence of radon, lead paint, or asbestos.
1.12 Good and Merchantable Title means title to a Property free and
clear of all liens, encumbrances, covenants, conditions,
restrictions, easements and rights of redemption, except for any
of the following or as permitted in writing by the Company:
a. Any lien established by public bond, assessment or tax, when no
installment, call or payment of or under such bond, assessment
or tax is delinquent;
b. Any municipal and zoning ordinances and exceptions to title
waived by the regulations of federal mortgage insurers and
guarantors with respect to mortgages on one-to-four family
residences in effect on the date on which the Loan was closed
and all documents were executed; and
c. Any other impediments which will not have a materially adverse
effect on either the transferability of the Property or the
sale thereof to a bona fide purchaser.
Good and Merchantable Title will not exist if (i) there is any
lien pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, or similar federal or state
law, as in effect from time to time, providing for liens in
connection with the removal and clean-up of environmental
conditions, or if notice has been given of commencement of
proceedings which could result in such a lien, or (ii) there
are limitations on ingress and egress to the Property or on use
of utilities. Any action or proceeding after a foreclosure sale
relating to establishing a deficiency judgment will not be
considered in determining whether the Insured has acquired Good
and Merchantable Title.
1.13 Insured means:
a. The Person designated on the face of this Policy; or
b. Any Person to whom coverage has been assigned resulting in
a change in the Insured named on a Certificate in
accordance with this Policy.
The Insured must be the Servicer of a Loan or, if there is no
Servicer, the Owner of the Loan.
1.14 Loan means any note, bond, or other evidence of indebtedness
secured by a mortgage, deed of trust, or other similar
instrument, which constitutes or is equivalent to a first lien
or charge on a Property and which the Company has approved for
insurance and to which coverage under this Policy has been
extended.
1.15 Loss means the liability of the Company with respect to a Loan
for payment of a Perfected Claim which is calculated in
accordance with Section 6.3. A Loss will be deemed to have
occurred when a Default on a Loan occurs, even though the amount
of Loss is not then either presently ascertainable or due and
payable.
1.16 Owner or Owner of the Loan means the Person who owns a Loan and
of whom the Company is notified in accordance with this Policy.
1.17 Perfected Claim means a Claim received by the Company which
contains all information or proof required by the Company and
for which all requirements of this Policy applicable to payment
of a Claim are satisfied.
1.18 Person means any individual, corporation, partnership,
association or other entity.
1.19 Physical Damage means any tangible injury to a Property, whether
caused by accident, natural occurrence, or any other reason,
including damage caused by defects in construction, land
subsidence, earth movement or slippage, fire, flood, earthquake,
riot, vandalism or any Environmental Condition.
1.20 Policy means this contract of insurance and all Applications,
Commitments, endorsements, schedules, and Certificates, which
are incorporated in this Policy, related to Loans insured under
this Policy.
1.21 Possession of the Property means, if the Company elects to
acquire the Property, physical and undisputed occupancy and
control of the Property at the time of acquisition.
1.22 Property means a Residential real property and all improvements
thereon which secure a Loan, together with all easements and
appurtenances, all rights of access, all rights to use common
areas, recreational and other facilities, and all of their
replacements or additions.
1.23 Residential means a type of building or a portion thereof which
is designed for occupancy by not more than four (4) families, or
a single-family condominium, or a unit in a planned unit
development.
1.24 Servicer means that Person acting on behalf of the Owner of a
Loan (or on behalf of the Owner's designee, if any) to service
the Loan and of whom the Company has been notified. The Servicer
acts as a representative of the Owner of the Loan (and the
Owner's designee, if any) and will bind the Owner and its
designee for all purposes of this Policy, including providing
information to the Company, receiving any notices, paying
premiums, accepting Loss payments, and performing any other acts
under this Policy. References in this Policy to a Servicer's
obligations will not be construed as relieving the Owner or its
designee of responsibility for the Servicer's performance.
1.25 Settlement Period means the sixty (60) day period as determined
under Section 6.4, at the end of which a Loss is payable by the
Company; provided that if the Company pays a Loss prior to
expiration of such sixty (60) day period, the Settlement Period
ends with such payment.
1.26 Value means the lesser of the sales price of a Property (only
applicable in the case of a Loan to finance the purchase of such
Property) or appraised value of the Property as set forth in the
Certificate.
Any pronouns, when used in this Policy, will mean the singular or
plural, masculine or feminine, as the case may be.
2 Obtaining Coverage and Payment of Premiums
2.1 Application and Certificate -- In order to insure a Loan under
this Policy, the Insured or a Person acting on behalf of the
Insured must submit to the Company a properly completed
Application. Approval of any Application will be at the
discretion of the Company and will be in the form of a
Commitment or a Certificate which offers to extend, or extends
coverage under the terms and conditions of both this Policy and
the Commitment or Certificate, as the case may be.
In lieu of such an Application and supporting statements,
documents and information submitted to the Company in connection
with insuring a Loan, the Company may accept an alternative form
of Application, containing more limited information, including
certifications by or on behalf of the Insured as to
characteristics of a Loan in lieu of supporting statements,
documents and information. The Company shall be entitled to
fully rely on such alternative Application as submitted. Use of
an alternative form of Application shall not waive or change the
other terms and conditions of this Policy under which a Loan is
insured or the responsibility of the Insured for the accuracy of
statements, documents and information submitted by it or other
Persons to the Company as provided in this Policy.
If the Company declines to approve a mortgage loan, it will not
issue a Commitment or Certificate, and it will notify the
Insured in writing of such declination. If the Insured or the
Person acting on its behalf subsequently denies the mortgage
loan application which it received from the applicant, the
Insured or such Person will be responsible for notifying the
applicant that the Company declined to approve the mortgage
loan. Such notification will be made in compliance with any
applicable state or federal laws or regulations, including the
Equal Credit Opportunity Act and any other similar law or
regulation.
2.2 Representations of the Insured -- The Insured represents that:
a. all statements made and information provided to the Company
in an Application or in any Commitment or Certificate
(including as such is related to continuation of coverage
upon assumption of a Loan), whether by it, the Borrower, or
any other Person, have been made and presented for and on
behalf of the Insured; and
b. such statements and information are not false or misleading
in any material respect as of the date(s) on which they are
made or provided and do not omit any fact necessary in
order to make such statements and information not false or
misleading in any material respect as of such date(s).
It is understood and agreed that such statements and information
in the aggregate are, and in certain instances individually may
be, material to the Company's decision to offer, provide or so
continue coverage of the related Loan; the Company issues the
related Commitment and Certificate or continues coverage in
reliance on the accuracy and completeness of such statements and
information and without any obligation to independently verify
the statements and information submitted to it; and the
Company's reliance on the representations in Section 2.2(a) and
(b) above survive the issuance of a Commitment and Certificate
or such continuation of coverage.
Without otherwise limiting the scope of this Section 2.2, a
breach of Section 4.8 relating to down payment will be deemed a
material misrepresentation for purposes of this Section 2.2. The
foregoing representations shall be effective whether or not they
are made by the Insured or other Person with the intent to
deceive or mislead, or with the knowledge that they are not true
and correct.
2.3 Company's Remedies for Misrepresentation -- Subject to Section
2.4, if any of the Insured's representations as described in
Section 2.2 are materially false or misleading with respect to a
Loan, the Company will have at its option, the right to defend
against a Claim, or to the extent permitted by applicable law,
to cancel or rescind coverage under any Certificate
retroactively to commencement of coverage (or if the
misrepresentation occurs with respect to continuation of
coverage upon assumption of a Loan, to so defend, cancel or
rescind retroactively to the date of such continuation). In the
case of such cancellation or rescission, the Company shall
return at that time all paid premiums retroactively to such
applicable date.
2.4 Incontestability for Certain Misrepresentations --
Notwithstanding Sections 2.2 or 2.3, no Claim for Loss will be
denied or adjusted, nor will the Certificate's coverage be
rescinded or canceled, by reason of any misrepresentations
(whether by statements made or omitted) contained in an
Application, provided that all of the following requirements,
conditions and circumstances, to the extent not waived in
writing at the option of the Company, are satisfied:
a. The misrepresentation must not have been knowingly made,
or knowingly participated in, by:
1. The Insured or any other Person which originated the
Loan; or
2. Any other of the following Persons:
i) correspondent lender, mortgage loan broker or
other intermediary underwriting or processing
the Loan on behalf of the Insured or any other
Person which originated the Loan; or
ii) escrow or closing agents, or any other agent of,
or broker for, the Insured or any other Person
which originated the Loan acting with respect to
the Loan or the related Property transaction.
b. The Borrower must have made twelve (12) consecutive full
installment payments of principal, interest and impound or
escrow amounts in the amounts as called for by the Loan,
and all of those payments must have been made from the
Borrower's own funds.
A payment will be considered to be "consecutive" only if it
is made prior to the date the next scheduled installment
becomes due. The "Borrower's own funds" will include any
funds used by the Borrower for the purpose of making
installment payments, but will not include funds provided
directly or indirectly by any Person (other than the
Borrower) who is or was a party to the Loan or to the
related Property transaction, unless expressly set forth in
the Application.
c. This Section 2.4 will not apply to a Certificate if within
twelve (12) months before or after a material
misrepresentation by a Borrower or other Person (other than
those Persons identified in Section 2.4(a)), there are one
or more material misrepresentations in an Application (i)
with respect to three (3) or more other mortgage loans
insured at any time by the Company for the Insured or any
other lender and (ii) which result from the direct or
indirect acts or omissions of the same Borrower or same
other Person (including any other Person acting directly or
indirectly in concert).
d. This Section 2.4 shall not be construed to limit the
applicability of Section 4.4(b) to a misrepresentation
which is subject to this Section 2.4.
e. The Company's payment of a Claim will not limit any rights
which the Company has against the Borrower or any other
Person (other than the Insured) for any misrepresentation.
2.5 Initial Premium and Term of Coverage
a. Within fifteen (15) days from the Certificate Effective
Date, or such other date as the Company and the Insured
may agree to in writing, the Insured must forward to the
Company the appropriate initial premium. Payment of the
initial premium shall be a condition precedent to coverage
being extended to the Loan. Subject to cancellation by the
Insured or the Company as provided in this Policy,
coverage shall remain in full force and effect for the
period covered by the initial premium. Tender of the
initial premium will constitute a representation for
purposes of Section 2.2 by the Insured that any special
conditions included by the Company in the related
Commitment have been satisfied and that no payment which
is then due under the Loan is more than thirty (30) days
past due.
b. The Company will not rescind or cancel coverage, or deny or
adjust a Claim for Loss, with respect to a Loan on the
basis of a failure to satisfy a special condition (other
than a special condition relating to completion of
construction, as described in Section 4.3 or to
rehabilitation or repairs) if the Borrower has made
twenty-four (24) consecutive full installment payments from
the Borrower's own funds. The terms "installment payments,"
"consecutive," and "Borrower's own funds" shall have the
meanings provided in Section 2.4(b).
2.6 Renewal of Certificate and Termination for Non-Payment of Renewal
Premium; Reinstatement of Terminated Coverage
a. The Company must give the Insured prior notice of the due
date for payment of the applicable renewal premium payable
for continued coverage of each Certificate. The entire
renewal premium must be paid within a forty-five (45) day
grace period (or such longer grace period generally allowed
by the Company) after the due date for payment. Upon
payment of the entire renewal premium within such grace
period, the Certificate will be deemed renewed for the
applicable renewal period and a Default occurring within
said grace period which is not cured, and which results in
a Claim being filed, will be covered.
If a Default occurs prior to the date through which the
applicable premium has been paid, and if such Default is
not cured and results in a Claim being filed, such Default
shall remain covered and no further premium shall be due in
order to maintain coverage of such Default.
With respect to a Loan with renewal premiums due on an
annual basis, if the annual renewal premium is not paid
within such grace period (but subject to the Owner's right
to cure non-payment as provided in (b) of this Section
2.6), the coverage of the Certificate and the Company's
liability will terminate effective as of 12:01 a.m. on the
first day following the date through which the applicable
premium has been paid and as a result, any Default
occurring after the date through which the applicable
premium has been paid will not be covered.
With respect to a Loan with renewal premiums due on a
monthly basis, if the monthly renewal premium is not paid
within such grace period (but subject to the Owner's right
to cure non-payment as provided in (b) of this Section
2.6), the coverage of the Certificate and the Company's
liability will terminate as of 12:01 a.m. on the first day
following the date through which the applicable monthly
premium has been paid, except that if a Default on the Loan
occurs between the last date through which the applicable
monthly renewal premium has been paid and the end of such
grace period, the Insured shall not be required to pay
renewal premiums, and coverage of such Default will
continue, while such Default exists. If such Default is
cured, all monthly renewal premiums not paid during the
period of Default shall be payable (unless previously paid
by the Insured) within forty-five (45) days or such longer
period generally allowed by the Company after notice from
the Company in order to continue coverage. If such Default
is not cured and results in a Claim, the unpaid monthly
renewal premiums through the renewal month in which such
Default occurred shall be paid as provided in Section 6.3
by deduction from the Loss.
b. If there occurs a transfer of servicing rights for a group
of Loans to a new Servicer, a seizure of servicing rights
by the Owner of such Loans, or a Servicer's surrender to
the Owner of such servicing rights and if:
1. the Company terminates coverage on one or more of
such Loans for nonpayment of the renewal premium; and
the grace period for payment of the renewal premium
provided for in Section 2.6 (a) expired after such
transfer, seizure or surrender;
2. either the Owner of such Loans on which coverage was
terminated, or the new Servicer for such Loans,
certifies in writing to the Company within sixty (60)
days after expiration of such grace period, that all
of such Loans were serviced for the Owner at the time
of nonpayment of renewal premium; and that in good
faith it believes that the failure to pay the renewal
premium on all such Loans was an error or omission
caused by such transfer, seizure or surrender of
servicing; and
3. either the Owner or the new Servicer of such Loans
pays the entire amount of renewal premiums due and
unpaid on all such Loans within such sixty day
period; then
upon satisfaction of all of the foregoing conditions, the
Company shall reinstate coverage on such Loans
retroactively to the effective date of termination of
coverage, under all of the terms and conditions in effect
at termination and as if there had been no lapse in
coverage.
2.7 Special Procedures for Certification of Coverage; Payment of
Initial and Renewal Premiums
a. The Company may permit coverage of a Loan to be certified
and become effective without the Insured's return of an
executed Commitment or Certificate, but coverage will only
become effective if within fifteen (15) days after the
Certificate Effective Date (or such longer period as the
Company may allow) the Insured provides the Company with
the Certificate Effective Date and other information
required by the Company, and pays the required premium. If
signature and return of an executed Commitment or
Certificate is not required, the Insured will nevertheless
be automatically deemed to have made all certifications,
representations and statements attributable to it in the
form of the Commitment or Certificate, as though, and to
the same extent as if, the Insured had executed and
returned the Commitment or Certificate.
b. The Insured acknowledges that the Company deposits initial
and renewal premium checks immediately upon receipt and
agrees that the receipt and deposit of a premium check by
the Company after the time specified in this Policy for
receipt, does not constitute a waiver of the requirements
of this Policy for timely receipt or an acceptance of
premium by the Company. The Company will have the right to
return such late premium payment, but only within sixty
(60) days after receipt, in which case coverage will be
cancelled retroactively to the Certificate Effective Date
for a late initial premium, or to the last day of the
period covered by the previous premium payment for a late
renewal premium. Receipt, deposit and retention of a
premium check will not constitute a waiver of any defenses
with respect to any other matters which the Company may
have under this Policy.
2.8 Cancellation by the Insured of a Certificate -- The Insured may
obtain cancellation of a Certificate by returning the
Certificate to the Company or making a written request to the
Company for cancellation. Upon receipt, the Company will refund,
where applicable, a portion of the premium paid in accordance
with the appropriate cancellation schedule which is either
attached to this Policy or which will be provided by the Company
to the Insured upon request. However, no refund on a Certificate
will be paid if the Loan is in Default on the date the Company
receives the request. Cancellation of a Certificate will not
cancel this Policy.
2.9 Cancellation of Policy -- Either the Insured or the Company may
cancel their respective right or obligation to receive or issue
new Commitments or Certificates under this Policy by providing
thirty (30) days' written notice of cancellation of this Policy.
However, Commitments and Certificates issued prior to such
cancellation of this Policy will continue in force so long as
all premiums are paid and all other terms and conditions of this
Policy for coverage are complied with by the Insured.
2.10 Relationship Among the Company, the Owner of a Loan, and the
Servicer of a Loan -- The Company will be entitled to assume
that the Insured identified on this Policy and under a
Certificate is the Owner of the Loan. If the Company receives
written notice acceptable to it that there is an Owner of the
Loan who is not the Insured, the Company shall identify that
Owner in its internal records and for purposes of this Policy.
The Company shall be required to identify only one Owner for a
Loan at any one time.
The Company will provide the Owner of a Loan so identified in
its records with an opportunity to cure non-payment of renewal
premium, as provided under Section 2.6; will notify such Owner
of the Loan of a non-approved Servicer and allow replacement
with a new Servicer, as provided under Section 4.5; will allow
the Owner (or its designee, if any) to replace a Servicer and
allow the replacement Servicer to become the Insured under
Section 1.13; and will allow the Owner to become the Insured
under Section 1.13 if the Owner services the Loan itself. Any
Person becoming an Insured under this Policy shall be subject to
all of the terms and conditions of this Policy to the same
extent as any previous Insured hereunder and without regard to
the extent of the knowledge or responsibility of such Person,
relating to matters occurring before such Person became an
Insured.
2.11 Refund of Premium for Denial of Claim in Full -- If, because of
a provision in Sections 2, 3 or 4 (other than Sections 4.3, 4.6,
or 4.7), no Loss is payable to the Insured, the Company shall
return to the Insured all paid premiums retroactively and pro
rata to the date when the event or circumstance occurred which
resulted in no Loss being payable.
3 Changes in Various Loan Terms, Servicing and Owner; Co-ordination and
Duplication of Insurance Benefits
3.1 Loan Modifications -- Unless advance written approval is
provided by, or obtained from, the Company, the Insured may not
make any change in the terms of a Loan, including the borrowed
amount, interest rate, term or amortization schedule of the
Loan, except as permitted by terms of the Loan; nor make any
change in the Property or other collateral securing the Loan;
nor release the Borrower from liability on a Loan.
3.2 Open End Provisions -- The Insured may increase the principal
balance of a Loan, provided that the written approval of the
Company has been obtained. The Insured will pay the Company the
additional premium due at the then prevailing premium rate.
3.3 Assumptions -- If a Loan is assumed with the Insured's approval,
the Company's liability for coverage under its Certificate will
terminate as of the date of such assumption, unless the Company
approves the assumption in writing. The Company will not
unreasonably withhold approval of an assumption. It is
understood that coverage will continue, and that the restriction
of this Section 3.3 will not apply, if under the Loan or
applicable law the Insured cannot exercise a "due-on-sale"
clause or is obligated to consent to such assumption under the
Loan or applicable law.
3.4 Change of Servicing -- If the servicing rights for a Loan are
sold, assigned or transferred by the Insured or the Owner,
coverage of the Loan hereunder will continue provided that
written notice of the new Servicer is given to the Company and
the new Servicer is approved in writing by the Company. The
Company shall be automatically deemed to have approved as a
Servicer any person to whom the Company has issued a master
policy, which has not been cancelled, providing for residential
mortgage guaranty insurance.
3.5 Change of Owner -- If a Loan or a participation in a Loan is
sold, assigned or transferred by its Owner, coverage of the Loan
will continue, subject to all of the terms and conditions
contained in this Policy. The new Owner of the Loan will be
identified in the Company's records from the date that the
Company receives written notice thereof. In the case of the sale
of a participation in a Loan, the Company shall be notified of
only one new Owner. If there is new ownership, the Loan must
continue to be serviced by a Person approved by the Company as a
Servicer.
3.6 Co-ordination and Duplication of Insurance Benefits -- The
coverage under this Policy shall be excess over any other
insurance which may apply to the Property or to the Loan, except
for mortgage guaranty pool insurance or supplemental or second
tier mortgage insurance.
4 Exclusions From Coverage
The Company will not be liable for, and this Policy will not apply to,
extend to or cover the following:
4.1 Balloon Payment -- Any Claim arising out of or in connection
with the failure of the Borrower to make any payment of
principal and/or interest due under a Loan, (a) as a result of
the Insured exercising its right to call the Loan (other than
when the Loan is in Default) or because the term of the Loan is
shorter than the amortization period, and (b) which is for an
amount more than twice the regular periodic payments of
principal and interest that are set forth in the Loan (commonly
referred to as a "balloon payment"). This exclusion will not
apply if the Insured, the Owner of the Loan, or other Person
acting on either's behalf offers the Borrower, in writing, a
renewal or extension of the Loan or a new loan which (i)
constitutes a first lien, (ii) is at rates and terms generally
prevailing in the marketplace (but otherwise subject to Section
3.1), (iii) is in an amount not less than the then outstanding
principal balance, (iv) has no decrease in the amortization
period, and (v) is offered regardless of whether the Borrower is
then qualified under the Insured's or Owner's underwriting
standards. This exclusion also will not apply if the Borrower is
notified of the availability of such renewal or extension of the
Loan or new loan and does not accept the renewal, extension or
new loan.
4.2 Effective Date -- Any Claim resulting from a Default existing at
the Certificate Effective Date or occurring after lapse or
cancellation of a Certificate.
4.3 Incomplete Construction -- Any Claim when, as of the date of
such Claim, construction of a Property is not completed in
accordance with the construction plans and specifications upon
which the appraisal of the Property at origination of the Loan
was based.
4.4 Fraud, Misrepresentation and Negligence -- (a) Any Claim not
otherwise within the scope of Section 2.3 where there was fraud
or misrepresentation by the Insured with respect to the Loan,
and the fraud or misrepresentation (1) materially contributed to
the Default resulting in such Claim; or (2) increased the Loss,
except that if the Company can reasonably determine the amount
of such increase, such Claim will not be excluded, but the Loss
will be reduced to the extent of such amount.
(b) Any Claim where there was negligence by the Insured with
respect to the Loan, which (1) was material to either the
acceptance of the risk or the hazard assumed by the Company; (2)
materially contributed to the Default resulting in such Claim;
or (3) increased the Loss, except that if the Company can
reasonably determine the amount of such increase, such Claim
will not be excluded, but the Loss will be reduced to the extent
of such amount.
4.5 Non-Approved Servicer -- Any Claim occurring when the Servicer,
at time of Default or thereafter, is not approved in writing or
in a list published by the Company; provided that this exclusion
shall only apply if the Company notifies the Owner of the Loan
in writing if a Servicer is no longer approved and if within
ninety (90) days thereafter the Owner does not complete a
transfer of servicing to a new Servicer approved by the Company.
4.6 Physical Damage (Other than Relating to Pre-Existing
Environmental Conditions) -- Any Claim where, at any time after
the Certificate Effective Date, Physical Damage to a Property
(of a type other than as described in Section 4.7 and other than
reasonable wear and tear), occurs or manifests itself subject to
the following provisions:
a. This exclusion will not apply if the Company in good faith
determines that the aggregate cost of restoring all such
Physical Damage is less than fifteen hundred dollars
($1,500), or such higher amount as the Company may provide
from time to time.
b. This exclusion will apply only if such Physical Damage
occurred or manifested itself (1) prior to expiration of
the Settlement Period and the Company elects to acquire the
related Property in settlement of a Claim; or (2) prior to
the Default and was the most important cause of the Default
and the Property was either uninsured for loss arising from
such Physical Damage or was insured for an amount which,
disregarding normal and customary deductibles not to exceed
fifteen hundred dollars ($1,500) or such higher amount as
the Company may provide from time to time, was insufficient
to restore the Property as provided in paragraph (c) below.
c. The exclusion resulting from paragraph (b) will not apply
if the Property is restored in a timely and diligent manner
to its condition (except reasonable wear and tear) as of
the Certificate Effective Date. In lieu of requiring
restoration of the Property, the Company may, at its
option, reduce the Claim Amount by an amount equal to the
cost of such restoration.
d. For purposes of this Section 4.6, the Property subject to
restoration will consist only of the land, improvements or
personal property deemed part of the real property under
applicable law; and chattel items affixed to the real
property and identified in the appraisal of the Property at
the time the Loan was made, whether or not they are deemed
part of the real property.
e. Cost estimates relied upon by the Company in connection
with this Section 4.6 shall be provided in writing by an
independent party selected by the Company. The Company will
furnish the Insured with any such written cost estimates,
if requested by the Insured.
4.7 Pre-Existing Environmental Conditions -- Any Claim where there
is an Environmental Condition which existed on the Property
(whether or not known by the Person submitting an Application
for coverage of the Loan) as of the Certificate Effective Date,
subject to the following provisions:
a. This exclusion will not apply if the existence of such
Environmental Condition, or the suspected existence of such
Environmental Condition, was specifically disclosed to the
Company in the Application relating to the Property.
b. This exclusion will apply only if such Environmental
Condition (1) was a principal cause of the Default, and (2)
has made the principal Residential structure on the
Property uninhabitable. A structure will be considered
"uninhabitable" if generally recognized standards for
residential occupancy are violated or if, in the absence of
such standards, a fully informed and reasonable person
would conclude that such structure was not safe to live in
without fear of injury to health or safety.
c. This exclusion will not apply if the Environmental
Condition is removed or remedied in a timely and diligent
manner in accordance with applicable governmental standards
for safe residential occupancy.
4.8 Down Payment -- Any Claim involving a Loan which is for the
purchase of the Property, and for which the Borrower did not
make a down payment as described in the Application.
4.9 First Lien Status -- Any Claim, if the mortgage, deed of trust
or other similar instrument executed by the Borrower and insured
hereunder did not provide the Insured at origination with a
first lien on the Property.
4.10 Breach of the Insured's Obligations or Failure to Comply with
Terms -- Any Claim involving or arising out of any breach by the
Insured of its obligations under, or its failure to comply with
the terms of, this Policy or of its obligations as imposed by
operation of law, if the breach or failure:
a. Materially contributed to the Default resulting in such
Claim; or
b. Except for a breach described in Section 2.3, increased the
Loss; provided that if the Company can reasonably determine
the amount of such increase, such Claim will not be
excluded, but the Loss will be reduced to the extent of
such amount.
5 Conditions Precedent to Payment of Claim
It is a condition precedent to the Company's obligation to pay a Loss
that the Insured comply with all of the following requirements:
5.1 Notice of Default -- The Insured must give the Company written
notice:
a. Within forty-five (45) days of the Default, if it occurs
when the first payment is due under the Loan; or
b. Within ten (10) days of either
1. The date when the Borrower becomes four (4) months in
Default on the Loan; or
2. The date when any Appropriate Proceedings which
affect the Loan or the Property or the Insured's or
Borrower's interest therein have been started;
whichever occurs first.
5.2 Monthly Reports -- Following a notice of Default on the Loan,
the Insured must give the Company monthly reports on forms or in
a format acceptable to the Company on the status of the Loan and
on the servicing efforts undertaken to remedy the Default. These
monthly reports may be furnished less frequently if allowed in
writing by the Company and must continue until the Borrower is
no longer in Default, the Appropriate Proceedings terminate, or
until the Insured has acquired the Property.
5.3 Company's Option to Accelerate Filing of a Claim -- If the
Company so directs, at any time after receiving the Insured's
notice of Default, the Insured must file a Claim within twenty
(20) days after notice from the Company. The Company will then
make a payment of Loss in accordance with the percentage
guaranty option in Section 6.3(b). Thereafter, following the
acquisition of Borrower's Title by the Insured, the Insured will
be entitled to file a supplemental Claim at the time prescribed
in Section 6.1 in an amount equal to the sum of its advances,
less the deductions, all as specified in Section 6.2, to the
extent not included in the payment of the initial Claim. Such
supplemental Claim must be paid by the Company in accordance
with Section 6.3(b). No interest shall be includable in the
Claim Amount under this Section 5.3 after the date that the
accelerated claim is filed. If a Loan for which the Company has
paid a Claim is subsequently brought current by the Borrower,
the Insured shall refund to the Company the Loss paid by the
Company with respect to that Loan. If the Company exercises its
option under this Section 5.3, the Company shall not have the
right to direct or participate in a deficiency recovery under
Section 7.2.
5.4 Voluntary Conveyance -- The Insured may only accept a conveyance
of the Property from the Borrower in lieu of foreclosure or
other proceeding if the prior written approval of the Company
has been obtained. Such approval shall not be considered as an
acknowledgement of liability by the Company with respect to such
Loan.
5.5 Appropriate Proceedings -- The Insured must begin Appropriate
Proceedings no later than when the Loan becomes six (6) months
in Default unless the Company provides written instructions that
some other action be taken. Such instructions may be general or
applicable only to specific Loans. The Company reserves the
right to direct the Insured to institute Appropriate Proceedings
at any time after Default. When either defending against or
bringing Appropriate Proceedings, the Insured must report their
status to the Company as reasonably and expeditiously as
possible.
In conducting Appropriate Proceedings, the Insured must:
a. Diligently pursue the Appropriate Proceedings once they
have begun;
b. Apply for the appointment of a receiver and assignment of
rents, if permitted by law and requested by the Company;
c. Furnish the Company with copies of all notices and
pleadings filed or required in the Appropriate
Proceedings, except as the Company may waive such
requirement in writing;
d. Act and bid at the foreclosure sale in accordance with
Section 5.11 so that its ability to preserve, transfer and
assign to the Company its rights against the Borrower are
not impaired; and so that the rights of the Company under
this Policy against the Borrower are fully protected. Such
rights include any rights to obtain a deficiency judgment,
subject to the Company's compliance with Sections 7.2 and
7.3 relating to establishing a deficiency; and
e. When requested by the Company, furnish the Company with a
written statement indicating the estimated potential Claim
Amount (as computed under Section 6.2) at least fifteen
(15) days before the foreclosure sale.
5.6 Mitigation of Damages -- The Insured must actively cooperate
with and assist the Company to prevent and mitigate the Loss,
including good faith efforts by the Insured to obtain a cure of
the Default, collect amounts due under the Loan, inspect and
appraise the Property and effectuate the early disposition of
the Property. The Company must administer this Policy in good
faith.
5.7 Advances -- The Insured must advance:
a. Normal and customary hazard insurance premiums and real
estate property taxes, in each case as due and payable;
b. Reasonable and necessary Property protection and
preservation expenses approved by the Company at the time
the Company reviews the Claim, which shall not include
expenditures to remove an exclusion from coverage under
Section 4; and
c. Reasonable costs to complete Appropriate Proceedings and
eviction and moving of occupants, including related court
expenses and attorney's fees.
5.8 Claim Information and Other Requirements -- The Insured must
provide the Company with:
a. All information reasonably requested by the Company;
b. A completed form furnished by or acceptable to the Company
for payment of a Claim;
c. If the Property is not being acquired by the Company: a
copy of an executed trustee's or sheriff's deed (which may
be unrecorded) conveying Borrower's Title to the Property
to the Insured (or satisfactory evidence that the
foreclosure sale has been completed if the Borrower's right
of redemption has not expired); or a deed from the Borrower
(which may be unrecorded) if a voluntary conveyance has
been approved by the Company, conveying to the Insured the
title that was required by the Company in the approval of
the conveyance.
In the event the most important cause of Default was a
circumstance or event which would prevent the Insured from
obtaining Good and Merchantable Title, the Insured shall
instead provide the Company with evidence described in
Section 5.8(d)(2) that it has acquired Good and
Merchantable Title to the Property.
d. If the Property is being acquired by the Company:
1. a recordable deed in normal and customary form
containing the customary warranties and covenants
conveying to the Company or its designee Good and
Merchantable Title to the Property;
2. a title insurance policy acceptable to the Company or
an attorney's opinion of title acceptable to the
Company, confirming that the Insured has and can
convey to the Company Good and Merchantable Title to
the Property; and
3. Possession of the Property, but only if the Company
has required such Possession in writing.
e. Access to the Property, if requested by the Company under
Section 6.4 (b).
5.9 Acquisition of Borrower's Title Not Required -- The Insured will
not be required to acquire Borrower's Title to a Property if (a)
the Company approves a sale of the Property prior to a
foreclosure sale and such sale is closed; (b) the Company
requires an early Claim filing pursuant to Section 5.3, except
that such acquisition will be required as a condition to the
Insured's filing of a supplemental Claim; or (c) the Property is
acquired by someone other than the Insured at a foreclosure
sale, as provided in Section 5.11, or thereafter pursuant to
exercise of rights of redemption.
5.10 Sale of a Property by the Insured Before End of Settlement Period
a. The Insured must submit to the Company any offer to
purchase a Property which it receives after the Company has
notified the Insured that it will acquire the Property and
before the end of the Settlement Period. The Company must
then promptly notify the Insured that it will either (1)
not approve of such offer, in which case the Company's
notice to acquire the Property will remain in effect, or
(2) approve such offer, in which case the Company's notice
of acquisition will remain in effect, if the approved offer
does not close as scheduled. The Insured shall promptly
notify the Company if the approved offer does not close as
scheduled.
b. If the Company has not notified the Insured that it will
acquire the Property, and if the Company's right to
acquire the Property has not expired pursuant to Section
6.5 or has not been waived, the Insured must submit to the
Company for approval any offer to purchase the Property
which would be acceptable to the Insured. The Company
shall then promptly either approve or not approve such
offer. If the approved offer expires or is terminated, the
Company shall be entitled to pay the Loss payable by (1)
paying the percentage guaranty option as calculated under
Section 6.3(b), or (2) paying the property acquisition
settlement option as calculated under Section 6.3(a), and
acquiring the Property; but if the Company's right to
acquire the Property has expired pursuant to Section 6.5,
or been waived, then such acquisition shall be under the
same terms and conditions as the expired or terminated
offer, except for terms and conditions relating to the
sale price and method of payment of the sale price, which
shall instead be governed by Section 6.3.
c. The following provisions shall apply to offers submitted
to the Company under this Section 5.10:
1. At the time it presents an offer, the Insured must
also provide the Company with a good faith estimate
of gross proceeds and expenses in sufficient detail
for the Company to calculate the estimated net
proceeds described below. The Company may not require
any changes to the offer or direct the marketing of
the Property or expenditures by the Insured for
restoration of the Property as a condition to its
approval.
2. If the Company approves the offer submitted by the
Insured, it must also advise the Insured of the
estimated net proceeds which it has calculated. The
estimated net proceeds calculated by the Company will
be the estimated gross sales proceeds to be received
by the Insured less all reasonable estimated expenses
submitted by the Insured and approved by the Company
in its approval of the offer which have been or are
expected to be paid by the Insured in obtaining and
closing the sale of the Property. If the estimated
net proceeds as calculated by the Company is
acceptable to the Insured, the Loss payable shall be
computed as determined below. If such calculation is
not acceptable to the Insured, the offer shall be
deemed to have not been approved by the Company.
3. If the Company approves the offer, the Loss payable
by the Company under this Section 5.10 will be the
lesser of (i) the actual net amount as calculated
below, or (ii) the percentage guaranty option under
Section 6.3(b) without regard to a sale of the
Property. The actual net amount will be the Claim
Amount calculated under Section 6.2, except that (a)
delinquent interest will be computed through the
closing date for sale of the Property and (b) the
Claim Amount shall be reduced by the actual net
proceeds realized by the Insured from the sale of the
Property. The actual net proceeds will be determined
in the same manner as the estimated net proceeds, but
on the basis of the actual sales proceeds. For
purposes of computing a Loss, such actual net
proceeds shall not be less than the estimated net
proceeds calculated by the Company under this
subparagraph (c), or as otherwise approved by the
Company.
4. The Company shall not unreasonably withhold its
approval of expenses submitted to it after its
approval of an offer. Expenses paid to Persons
employed or controlled by the Insured or the Owner of
the Loan or their internal costs will not be allowed
in calculation of either the estimated or actual net
proceeds.
5. If requested by the Company, the Insured shall advise
the Company of the name of the real estate broker or
other Person marketing the Property and authorize
such broker or other Person to release marketing
information about the Property to the Company, if
requested by the Company.
5.11 Foreclosure Bidding Instructions Given by the Company -- The
Insured will be entitled to bid at the foreclosure sale held as
part of the Appropriate Proceedings any amount which it
determines necessary to obtain Borrower's Title to the Property,
unless otherwise directed by the Company. The Company will be
entitled to direct the Insured to bid an amount to be determined
by the Insured within a minimum and maximum range, as follows:
a. The minimum amount shall not be less than the fair market
value of the Property, but if there has been Physical
Damage to the Property which affects its fair market value
(as determined before such Physical Damage) by more than
ten per cent (10%), the fair market value of the Property
shall be its fair market value after restoration of the
Property.
b. The maximum amount shall not exceed the greater of (1) the
fair market value of the Property as determined under
subparagraph (a) above, or (2) the estimated Claim Amount
less the amount which the Company would pay as the
percentage guaranty option under Section 6.3(b).
c. For purposes of this Section 5.11, fair market value shall
be determined as of a date acceptable to the Company by an
opinion of an independent real estate broker, or by an
independent appraiser, in either case selected by or
acceptable to the Company.
The Insured is not required to acquire Borrower's Title if it
has bid in accordance with this Section 5.11, whether or not
pursuant to directions from the Company.
5.12 Effect of Unexpired Redemption Period on Payment of a Claim --
If the Insured files a Claim prior to expiration of an
applicable redemption period, the Loss payable shall only be
computed through the date of filing of the Claim, and if the
Company elects to acquire the Property, the Insured will remain
responsible for management and control of the Property until the
Company's acquisition thereof, which may be after expiration of
the redemption period, but not later than as required by Section
6.4.
If the Company has paid to the Insured a Claim under its
percentage guaranty option in Section 6.3 (b), and the related
Property is subsequently redeemed by the Borrower, the Insured
shall promptly report such redemption to the Company and
reimburse the Company for the amount of the Company's Claim
payment, to the extent that the sum of the Company's Claim
payment and the amount realized by the Insured from the
redemption exceeds the Claim Amount, as would have been
calculated through the date of redemption.
5.13 Collection Assistance -- If the Company so requests, the Insured
shall permit the Company to cooperatively assist the Insured in
the collection of moneys due under the Loan, including obtaining
information from the Borrower, attempting to develop payment
schedules acceptable to the Insured, conducting Property
inspections and requesting appraisals of the Property.
6 Loss Payment Procedure
6.1 Filing of Claim -- The Insured shall file a Claim after, but no
later than sixty (60) days following, the conveyance to the
Insured of Borrower's Title to the Property. If the Insured is
not required to have Borrower's Title to file a Claim for a
reason described in Section 5.9, then the Claim must be filed
(a) within sixty (60) days after the Property is conveyed in a
pre-foreclosure sale, at the foreclosure sale, or by exercise of
the rights of redemption or (b) at the time specified by Section
5.3. If the Insured fails to file a Claim within the applicable
time, the Insured will not be entitled to, and the Company will
not be obligated for, any payment under this Policy for amounts,
including additional interest and expenses, which would
otherwise be claimable, but which accrue or are incurred after
the sixty (60) day period for filing of a Claim.
If the Insured fails to file a Perfected Claim within one
hundred eighty (180) days after the filing of the Claim (or
within such longer period of time as the Company may allow in
writing), the Insured will no longer be entitled to payment of a
Loss and the Company will not be obligated to make any payment
under this Policy.
6.2 Calculation of Claim Amount -- Subject to Sections 7.5 and 5.3,
the Claim Amount will be an amount equal to the sum of:
a. The amount of unpaid principal balance due under the Loan
as of the date of Default without capitalization of
delinquent interest, penalties or advances; and
b. The amount of accrued and unpaid interest due on the Loan
computed at the contract rate stated in the Loan through
the date that the Claim is filed with the Company, but
excluding applicable late charges, penalty interest or
other changes to the interest rate by reason of Default;
and
c. The amount of advances incurred by the Insured under
Section 5.7 prior to filing of the Claim (except to Persons
employed or controlled by the Insured or the Owner of the
Loan or their other internal costs) provided that:
1. Attorney's fees advanced for completion of
Appropriate Proceedings and obtaining Possession of
the Property will not be allowed to the extent they
exceed three percent (3%) of the sum of the unpaid
principal balance and the accrued and accumulated
interest due; and
2. Such advances, other than attorney's fees, must have
first become due and payable after the Default, and
payment of such advances must be prorated through the
date the Claim is filed with the Company;
less:
(i) The amount of all rents and other payments (excluding
proceeds of a sale of the Property and the proceeds of
fire and extended coverage insurance) collected or
received by the Insured, which are derived from or in any
way related to the Property;
(ii) The amount of cash remaining in any escrow account as of
the last payment date;
(iii) The amount of cash or other collateral to which the
Insured has retained the right of possession as security
for the Loan;
(iv) The amount paid under applicable fire and extended
coverage policies which are in excess of the cost of
restoring and repairing the Property, if the Property is
damaged, and which has not been paid to the Borrower or
applied to the payment of the Loan as required by the
terms of the Loan; and
(v) Any other amounts claimed by the Insured to the extent
they are excluded from the Claim Amount by reason of
Section 4.
6.3 Payment of Loss; Company's Options -- Within the Settlement
Period, but only if the Insured has satisfied all requirements
for a payment of Loss and if the Company has received a
Perfected Claim, the Company shall at its sole option exercise
its:
a. Property acquisition settlement option. Pay to the Insured
as the Loss the Claim Amount calculated in accordance with
Section 6.2 for the Company's acquisition of the Property;
or
b. Percentage guaranty option. Allow the Insured to retain
all rights in and title to the Property, and pay to the
Insured as the Loss the Claim Amount calculated in
accordance with Section 6.2 of this Policy multiplied by
the percentage of coverage or as otherwise calculated as
specified in the Certificate. However, if prior to the
Company's payment of the Loss, a third party acquires
title to the Property at the foreclosure sale or a
Borrower redeems the Property (unless such acquisition or
redemption occurs because the Insured failed to bid as
provided in Section 5.11), then the Company shall pay the
lesser of: (i) the percentage guaranty option amount
described above; or (ii) the difference between the Claim
Amount and the amount realized by the Insured at the
foreclosure sale or redemption; or
c. Pre-Claim sale option. Pay to the Insured as the Loss the
amount calculated in accordance with Section 5.10, if the
terms and conditions of Section 5.10 are met.
In addition to the sum due pursuant to the option described
above which the Company selects, the Loss payable by the Company
will include the other amounts provided for under Sections 6.5
or 7.2 when such Sections are applicable. The Company will
deduct from its payment of Loss such amounts as may be permitted
by this Policy and the aggregate amounts of any payments of Loss
which it had previously made. In the event of a Loss on a Loan
with renewal premiums due monthly, which results from a Default
covered under Section 2.6(a), the Company shall deduct from the
payment of Loss an amount equal to any unpaid renewal premiums
for the subject Loan through the end of the monthly renewal
period in which such Default occurred.
6.4 Calculation of Settlement Period -- The Settlement Period will
be a sixty (60) day period after the Company's receipt of a
Claim, calculated as follows:
a. No later than the twentieth (20th) day after filing of a
Claim, the Company may notify the Insured of additional
documents or information which it requires for processing
the Claim. The sixty-day period will be suspended until
the Company receives such additional documents and
information. The Company may request additional documents
and information after such twenty-day period, and the
Insured must use reasonable efforts to satisfy such
request.
b. No later than the sixtieth (60th) day after filing of a
Claim, the Company may notify the Insured that it will
require access to the Property sufficient to inspect,
appraise and evaluate the Property. If the Company does
not notify the Insured by that date, its right to such
access will be deemed waived. If such notice is given, the
Insured will use its best efforts to provide access to the
Company and, if access is not then available, the sixty
day period will be suspended from the date such notice was
given until the Company receives notice from the Insured
that access is available to it. If access is in fact not
available when sought by the Company after such notice
from the Insured, the Company will promptly notify the
Insured of such unavailability, and the passage of the
sixty day period will remain suspended as if the Insured's
notice of availability had not been given to the Company.
c. If the Company has elected to acquire the Property in
settlement of a Claim, the sixty day period also will be
suspended if necessary for there to be a period of ten
(10) days after the date on which the Insured satisfies
all conditions to acquisition, including any required
restoration of the Property, for the Insured's delivery of
a recordable deed and title policy or opinion evidencing
Good and Merchantable Title (not subject to any rights of
redemption, unless the Company waives such requirement)
and, if applicable, delivery of Possession to the
Property.
d. If the sixty day period is suspended for more than one
reason, the resulting suspended periods will only be
cumulative if in fact they occur at different times; to
the extent they occur simultaneously, they will not be
cumulative.
6.5 Payment by the Company After the Settlement Period -- If the
Company has not paid a Loss during the Settlement Period, then
(a) the Company will include in its payment of Loss, if a Loss
is ultimately payable, simple interest on the amount payable
accruing after the Settlement Period to the date of payment of
Loss at the applicable interest rate or rates which would have
been payable on the Loan during such period, and (b) the Company
will no longer be entitled to acquire the Property as an option
for payment of the Loss.
The Company must either pay the amount of applicable Loss
(including any additional applicable interest as computed above)
or deny the Claim in its entirety within (a) one hundred twenty
(120) days after expiration of the Settlement Period, or (b) if
the Settlement Period has not expired, no later than one hundred
eighty (180) days after filing of the Claim. If at a later date
it is finally determined by agreement between the Insured and
the Company (or by completion of legal or other proceedings to
which the Insured and the Company are parties) that the Company
was not entitled to deny all or a portion of the Claim, the
Company will include in any resulting subsequent payment of Loss
interest as calculated above through the date of such payment on
the amount of Loss which the Company was not entitled to deny.
6.6 Discharge of Obligation -- Payment by the Company of the amount
of Loss required to be paid in accordance with this Policy will
be a full and final discharge of its obligation with respect to
such Loss under this Policy.
7 Additional Conditions
7.1 Proceedings of Eminent Domain -- In the event that part or all
of a Property is taken by eminent domain, or condemnation or by
any other proceedings by federal, state or local governmental
unit or agency, the Insured must require that the Borrower apply
the maximum permissible amount of any compensation awarded in
such proceedings to reduce the principal balance of the Loan, in
accordance with the law of the jurisdiction where the Property
is located.
7.2 Pursuit of Deficiencies
a. The Insured will be entitled to pursue Appropriate
Proceedings, or shall at the direction of the Company
pursue Appropriate Proceedings through the end of the
Settlement Period, which may result in the Borrower
becoming liable for a deficiency after completion of the
Insured's acquisition of a Property. Such pursuit may not
be directed by the Company unless such deficiency is
estimated to exceed $7,500. If the Company proposes to
pursue a deficiency judgment, in whole or in part for its
account, it will notify the Insured at least thirty (30)
days before the foreclosure sale. If the Company does not
so notify the Insured, the deficiency judgment, if
established by the Insured, will be solely for the account
of the Insured, and the Company will not be subrogated to
any rights to pursue the deficiency judgment.
b. The following provisions will apply if, in completing
Appropriate Proceedings there are additional expenses
advanced pursuant to Section 5.7 or additional interest
accrued on the Loan, due to (1) an additional redemptive
period or a delay in acquisition of Borrower's Title,
which period or delay is directly related to establishing
the deficiency judgment or (2) legal proceedings which
are necessary to establish and pursue the deficiency
judgment and which would not otherwise be the custom and
practice used.
i. If the deficiency judgment is to be established,
in whole or in part, for the account of the
Company, the Company must pay the Insured at the
time of payment of the Claim, regardless of which
settlement option the Company has selected, the
full amount of:
(A) such additional expenses advanced pursuant to
Section 5.7 by the Insured; and
(B) such additional interest accrued on the
unpaid principal balance of the Loan at the
contract rate stated in the Loan, but
excluding applicable late charges, penalty
interest, or other changes to the interest
rate by reason of Default.
ii. If the deficiency judgment is not to be
established, in whole or in part, for the account
of the Company, none of the additional interest or
expenses of the type described in subparagraph (i)
above will be includable in the Claim Amount or
payable at any time by the Company.
iii. For purposes of determining the additional
expenses described in subparagraph (i) above
resulting from pursuing the deficiency judgment,
the limitation on attorneys' fees in Section 6.2
will not apply.
iv. All of the additional interest, expenses,
attorney's fees and court expenses described in
subparagraph (i) above will be accrued or advanced
only through acquisition of Borrower's Title,
including any additional redemptive period.
c. The Company and the Insured may agree generally or with
respect to a Loan to different terms and conditions than
set forth in this Section 7.2. The Company and the
Insured also may agree to the joint pursuit or other
arrangements for the collection of deficiency judgments
on mutually acceptable terms and conditions.
7.3 Subrogation -- Subject to Section 7.2(a), and only to the extent
that the Company is entitled under applicable law to pursue such
deficiency rights, the Company will be subrogated, upon payment
of the Loss, in the amount thereof and with an equal priority to
all of the Insured's rights of recovery against a Borrower and
any other Person relating to the Loan or to the Property. The
Insured must execute and deliver at the request of the Company
such instruments and papers and undertake such actions as may be
necessary to transfer, assign and secure such rights. The
Insured shall refrain from any action, either before or after
payment of a Loss, that prejudices such rights.
7.4 Policy for Exclusive Benefit of the Insured and the Owner -- A
Commitment and Certificate issued as the result of any
Application submitted hereunder and the coverage provided under
this Policy will be for the sole and exclusive benefit of the
Insured and the Owner of the related Loan, and in no event will
any Borrower or other Person be deemed a party to, or an
intended beneficiary of, this Policy or any Commitment or
Certificate.
7.5 Effect of Borrower Insolvency or Bankruptcy on Principal Balance
-- If under applicable insolvency or bankruptcy law, a Loan's
principal balance secured by a Property is reduced (after all
appeals of such reduction are final or the time for such appeals
has lapsed without appeal), the portion of such principal
balance of the Loan not secured by the Property, and related
interest, will be includable in the Claim Amount, as provided in
this Section 7.5.
If a Default occurs on the Loan, the Insured has acquired
Borrower's Title or Good and Merchantable Title to the Property
as required by this Policy, and all other requirements for
filing of a Claim are complied with, the Insured will be
entitled to include in the Claim Amount (a) the amount of the
principal balance of the Loan which was deemed unsecured under
applicable insolvency or bankruptcy law, less any collections or
payments on such unsecured principal balance received by the
Insured, and (b) interest thereon at the rate and as computed in
Section 6.2, from the date of Default giving rise to the Claim
(but for no prior period). In no event will any expenses or
other amounts associated with the amount by which the principal
balance of the Loan became unsecured be includable in the Claim
Amount, directly or by an addition to the principal balance
includable in the Claim Amount.
7.6 Arbitration of Disputes; Suits and Actions Brought by the Insured
a. Unless prohibited by applicable law, all controversies,
disputes or other assertions of liability or rights
arising out of or relating to this Policy, including the
breach, interpretation or construction thereof, shall be
settled by arbitration. Notwithstanding the foregoing, the
Company or the Insured both retain the right to seek a
declaratory judgement from a court of competent
jurisdiction on matters of interpretation of the Policy.
Such arbitration shall be conducted in accordance with the
Title Insurance Arbitration Rules of the American
Arbitration Association in effect on the date the demand
for arbitration is made, or if such Rules are not then in
effect, such other Rules of the American Arbitration
Association as the Company may designate as its
replacement.
The arbitrator(s) shall be neutral person(s) selected from
the American Arbitration Association's National Panel of
Arbitrators familiar with the mortgage lending or mortgage
guaranty insurance business. Any proposed arbitrator may
be disqualified during the selection process, at the
option of either party, if they are, or during the
previous two (2) years have been, an employee, officer or
director of any mortgage guaranty insurer, or of any
entity engaged in the origination, purchase, sale or
servicing of mortgage loans or mortgage-backed securities.
b. No suit or action (including arbitration hereunder)
brought by the Insured against the Company with respect to
the Company's liability for a Claim under this Policy
shall be sustained in any court of law or equity or by
arbitration unless the Insured has substantially complied
with the terms and conditions of this Policy, and unless
the suit or action is commenced within three (3) years
(five (5) years in Florida or Kansas) after the Insured
has acquired Borrower's Title to the Property or sale of
the Property approved by the Company is completed,
whichever is applicable to a Loan. No such suit or action
with respect to a Claim may be brought by the Insured
against the Company until sixty (60) days after such
acquisition of Borrower's Title or sale, as applicable to
a Loan.
c. If a dispute arises concerning the Loan which involves
either the Property or the Insured, the Company has the
right to protect its interest by defending the suit, even
if the allegations contained in such suit are groundless,
false or fraudulent. The Company is not required to defend
any lawsuit involving the Insured, the Property or the
Loan.
7.7 Release of Borrower; Defenses of Borrower -- The Insured's
execution of a release or waiver of the right to collect any
portion of the unpaid principal balance of a Loan or other
amounts due under the Loan will release the Company from its
obligation under its Certificate to the extent and amount of
said release. If, under applicable law, the Borrower
successfully asserts defenses which have the effect of
releasing, in whole or in part, the Borrower's obligation to
repay the Loan, or if for any other reason the Borrower is
released from such obligation, the Company will be released to
the same extent and amount from its liability under this Policy,
except as provided by Section 7.5.
7.8 Amendments; No Waiver; Rights and Remedies; Use of Term
"Including"
a. The Company reserves the right to amend the terms and
conditions of this Policy from time to time; provided,
however, that any such amendment will be effective only
after the Company has given the Insured written notice
thereof by endorsement setting forth the amendment. Such
amendment will only be applicable to those Certificates
where the related Commitment was issued on or after the
effective date of the amendment.
b. No condition or requirement of this Policy will be deemed
waived, modified or otherwise compromised unless that
waiver, modification or compromise is stated in a writing
properly executed on behalf of the Company. Each of the
conditions and requirements of this Policy is severable,
and a waiver, modification or compromise of one will not
be construed as a waiver, modification or compromise of
any other.
c. No right or remedy of the Company provided for by this
Policy will be exclusive of, or limit, any other rights
or remedies set forth in this Policy or otherwise
available to the Company at law or equity.
d. As used in this Policy, the term "include" or "including"
will mean "include or including, without limitation."
7.9 No Agency -- Neither the Insured, any Servicer or Owner, nor any
of their employees or agents, will be deemed for any reason to
be agents of the Company. Neither the Company, nor any of its
employees or agents, will be deemed for any reason to be agents
of any Insured, Servicer or Owner.
7.10 Successors and Assigns -- This Policy will inure to the benefit
of and shall be binding upon the Company and the Insured and
their respective successors and permitted assigns.
7.11 Applicable Law and Conformity to Law -- All matters under this
Policy will be governed by and construed in accordance with the
laws of the jurisdiction in which the office of the original
Insured on a Certificate is located. Any provision of this
Policy which is in conflict with any provision of the law of
such jurisdiction is hereby amended to conform to the provisions
required by that law.
7.12 Notice -- All claims, premium payments, tenders, reports, other
data and any other notices required to be submitted to the
Company by the Insured must be sent to the Company at MGIC
Plaza, 250 East Kilbourn Avenue, Milwaukee, WI 53202. The
Company may change this address by giving written notice to the
Insured. Unless the Insured otherwise notifies the Company in
writing, all notices to the Insured must be sent to the address
on the face of this Policy or, if the Insured is not located at
such address, to the last known address of the Insured.
All notices under this Policy, whether or not identified in this
Policy as required to be in writing, will be effective only if
in writing and only upon receipt thereof. Written notices may
instead be given in the form of telecopy or, if acceptable to
the Company (for notices given to the Company) or to the Insured
(for notices given to the Insured) in the form of computer tape
or computer-generated or any other electronic message. A
telecopy or such tape or message shall be effective only when
received. The Company and the Insured may mutually agree that
notices will be sent to any additional Person. Except as
expressly agreed to by the Company and the Insured, no liability
shall be incurred by the Company for the failure to give a
notice to a Person other than the Insured.
7.13 Reports and Examinations -- The Company may request, and the
Insured must provide, such files, reports or information as the
Company may deem necessary pertaining to any Loan, and the
Company will be entitled to inspect the files, books and records
of the Insured or any of its representatives pertaining to such
Loan.
7.14 Electronic Media -- The Company and the Insured may, from time
to time, deliver or transfer information, documents or other
data between them by electronic media acceptable to them. In
addition, the Company and the Insured may maintain information,
documents or other data on electronic media or other media
generally accepted for business records, including microfiche.
Such electronic or other media will be as equally acceptable for
all purposes between the Insured and the Company as information,
documents or other data maintained in printed or written form.
Mortgage Guaranty Insurance Corporation MGIC
250 E. Kilbourn Avenue
P.O. Box 488, Milwaukee, Wisconsin 53201-0488
---------------------------------
Master Reporting Program Endorsement
---------------------------------
- -------------------------------------------------------------------------------
Insured's Name and Mailing Address: Master Policy Number
US Bank as Trustee for ACE Securities Corp. Home Equity 04-690-4-3803
Loan Trust, Series 2001-AQ1
180 East Fifth Street Effective Date of Policy:
Saint Paul, Minnesota 55101 April 1, 2001
- -------------------------------------------------------------------------------
The purpose of this Endorsement is to amend terms and conditions of the Policy
to provide for the insurance of Loans under the Master Reporting Program made
available by the Company to certain Insureds to whom this Endorsement is
issued. An Insured will be entitled to submit Loans for insurance under this
Endorsement unless this Endorsement is revoked by the Company. The Company
reserves the right to revoke this Endorsement immediately upon written notice
to the Insured. This Endorsement will apply only to a Loan which is identified
by the Company as being insured under the Master Reporting Program. To the
extent of any inconsistency or conflict between the terms of the Policy and
this Endorsement, this Endorsement will control. The Policy is amended by
adding, deleting, or amending the following terms and conditions, as
indicated:
A. The following additional definitions are added to Section 1 of the
Policy:
1.27 Eligibility Criteria means the requirements
established by the Company from time to time applicable to
the origination of a Loan (including approved mortgage loan
programs, maximum loan-to-value ratios and original
principal amounts, coverage limitations and underwriting
requirements) and of which the Company notifies the Insured,
as the same may be amended from time to time by the Company
on prior written notice to the Insured.
1.28 Transmittal means the information and format
designated as such by the Company which requests or directs
the Company to issue its Commitment and tender its
Certificate with respect to the Loan identified therein,
which may be identified by the title "Transmittal" and which
includes all data and information and all exhibits and
documents furnished in connection therewith to the Company.
Whenever the term "Application" is used in this Policy, the
term "Transmittal" and its definition will be substituted
therefor.
1.29 Loan File means, with respect to a Loan, copies of all
documents (including all data and information in electronic
format) created or received in connection with the
origination and closing of the Loan, including the
Borrower's loan application, purchase contract, appraisal,
credit report, verifications of employment, income and
deposit, and HUD-1 or other settlement statement.
B. Sections 2.1 through 2.4 of the Policy are deleted in their entirety
and replaced with the following:
2.1 Loan Underwriting and Obtaining Coverage -- This
Policy shall automatically extend to each Loan which the
Insured makes, provided that it is made in accordance with
the terms and provisions of this Policy, including the
Eligibility Criteria, and is evidenced by a Certificate
issued by the Company. In order to obtain coverage under
this Policy for a Loan, the Insured or the Person acting on
its behalf must submit a duly completed Transmittal to the
Company within thirty (30) days after the Insured makes the
Loan (or such longer period as allowed by the Company), and
the Company shall then issue a Commitment and Certificate,
if all applicable requirements are satisfied.
If the Insured or the Person acting on its behalf
subsequently denies the mortgage loan application received
by it from the applicant, the Insured will be responsible
for notifying the applicant in compliance with any
applicable state or federal laws or regulations, including
the Equal Credit Opportunity Act and any other similar law
or regulation.
2.2 Representations of the Insured , The Insured represents to
the Company that:
a. All statements made and information provided to the
Company in a Transmittal or in a Commitment or
Certificate (including as such is related to
continuation of coverage upon assumption of a Loan)
are supported by statements and information in the
Loan File;
b. All statements made and information
provided to the Company in the Transmittal or in
any Commitment or Certificate when provided to the
Company or in the Loan File when the Loan is closed
by the Insured are not false or misleading in any
material respect as of such date(s) and do not omit
any fact necessary in order to make such statements
and information not false or misleading in any
material respect as of such date(s); and
c. The Loan complies with the Eligibility Criteria in
effect at the time the Transmittal is submitted to
the Company.
The foregoing representations will apply to all statements
and information provided to the Company in the Transmittal,
Commitment or Certificate or Loan File, whether made or
submitted by the Insured, the Borrower or any other Person,
and will be deemed to have been made and provided for and on
behalf of the Insured. The foregoing representations shall
be effective whether or not they are made by the Insured or
other Person with the intent to deceive or mislead, or with
the knowledge that they are not true and correct.
It is understood and agreed that such statements and
information in the Transmittal, Commitment or Certificate,
or Loan File in the aggregate are, and in certain instances
individually may be, material to the Company's decision to
offer, provide or so continue coverage of the related Loan;
the Company issues the related Commitment and Certificate or
continues coverage in reliance on the accuracy and
completeness of such statements and information submitted to
it; and the Company's reliance on the representations in
this Section 2.2 survive the issuance of a Commitment and
Certificate or such continuation of coverage and any later
review or audit of the Insured's files by the Company.
Without otherwise limiting the scope of this Section 2.2, a
breach of Section 4.8 relating to down payment will be
deemed a material misrepresentation for purposes of this
Section 2.2.
2.3 Company's Remedies for Misrepresentation -- Subject to
Section 2.4, if any of the Insured's representations as
described in Section 2.2 are materially false or misleading
with respect to a Loan, the Company will have at its option,
the right to defend against a Claim, or to the extent
permitted by applicable law, to cancel or rescind coverage
under any Certificate retroactively to commencement of
coverage (or if the misrepresentation occurs with respect to
continuation of coverage upon assumption of a Loan, to so
defend, cancel or rescind retroactively to the date of such
continuation). In the case of such cancellation or recision,
the Company shall return at that time all paid premiums
retroactively to such applicable date.
2.4 Incontestability for Certain Misrepresentations --
Notwithstanding Sections 2.2 and 2.3, no Claim for Loss will
be denied or adjusted, nor will such Certificate's coverage
be rescinded or canceled, by reason of any
misrepresentations (whether by statements made or
information provided, or of statements or information
omitted) contained in a Transmittal or the related Loan
File, provided that all of the following requirements,
conditions and circumstances, to the extent not waived in
writing at the option of the Company, are satisfied:
a. The misrepresentation must not have been knowingly
made, or knowingly participated in, by:
1. The Insured or any other Person which
originated the Loan; or
2. Any other of the following Persons:
i) correspondent lender,
mortgage loan broker or other
intermediary underwriting or
processing the Loan on behalf of
the Insured or any other Person
which originated the Loan; or
ii) escrow or closing agents,
or any other agent of, or broker
for, the Insured or any other
Person which originated the Loan
acting with respect to the Loan or
the related Property transaction.
b. This Section 2.4 will not apply to a Certificate if
within twelve (12) months before or after a material
misrepresentation by a Borrower or other Person
(other than those Persons identified in Section
2.4(a) above), there are one or more material
misrepresentations in a Transmittal or Loan File (i)
with respect to three or more other mortgage loans
insured at any time by the Company for the Insured
or any other lender and (ii) which result from the
direct or indirect acts or omissions of the same
borrower or same other Person (including any other
Person acting directly or indirectly in concert).
c. This Section 2.4 shall not be construed to limit the
applicability of Section 4.4(b) to a
misrepresentation covered by this Section 2.4.
d. The Company's payment of a Claim will not
limit any rights which the Company has against the
Borrower or any other Person (other than the
Insured) for any misrepresentation.
D. Section 4.8 is deleted in its entirety and replaced with the following:
4.8 Down Payment -- Any Claim involving a Loan which is
for the purchase of the Property, and for which the Borrower
did not make a down payment as described in the Transmittal
or Loan File.
E. Section 4.11 of the Policy is added with the following:
4.11 Non-Eligible Loans -- Any Loan that did not meet the
Eligibility Criteria in effect at the time the related
Transmittal was submitted to the Company.
F. Section 7.9 of the Policy is deleted in its entirety and replaced with
the following:
7.9 No Agency -- Neither the Insured, any Servicer, or
Owner nor any of their employees or agents (including the
Persons underwriting the Loan on behalf of the Insured) will
be deemed for any reason to be agents of the Company.
Neither the Company, nor any of its employees or agents,
will be deemed for any reason to be agents of any Insured,
Servicer or Owner.
All terms capitalized herein will have the meanings set forth in the Policy,
except as otherwise defined herein. Nothing herein contained will be held to
vary, alter, waive or extend any of the terms and conditions of the Policy, or
any amendments thereto, except as expressly set forth above.
Mortgage Guaranty Insurance Corporation
MGIC
250 E. Kilbourn Avenue
P.O. Box 488, Milwaukee, Wisconsin 53201-0488
--------------------------------------------
Endorsement to Mortgage Guaranty Master Policy
With Aggregate Loss Limit
--------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Policy Issued To: Attached to and Forming Part of Master Policy
Number:
US Bank as Trustee for ACE Securities Corp. Home Equity 04-690-4-3803
Loan Trust, Series 2001-AQ1
180 East Fifth Street Effective Date of Policy:
Saint Paul, Minnesota 55101 April 1, 2001
Total Initial Principal Balance: $365,751,810.38
Aggregate Loss Percentage: 19.0%
Aggregate Loss Limit: $69,492,843.96
- ------------------------------------------------------------------------------------------------------------------
The purpose of this Endorsement is to amend terms and conditions of the Policy
to provide for an aggregate loss limit for the mortgage guaranty insurance
coverage under the Policy. To the extent of any inconsistency or conflict
between the terms of the Policy and this Endorsement, this Endorsement will
control. The terms and conditions of this Endorsement shall apply to the
coverage of all Loans under the Policy.
I. Aggregate Loss Limit.
A. The following definitions are added to the Policy:
1.40 Aggregate Loss means, at any given time, the total of
all Losses on Loans which are subject to this Policy,
including advance payments of Loss and partial payments of
Loss with respect to a Default, paid by the Company, reduced
by the net proceeds received by the Company upon disposal of
Properties acquired by the Company in settlement of such
Losses. For purposes hereof, the term "net proceeds" shall
consist of the sale price received by the Company, reduced
by any expenses, payments or costs incurred by the Company
in the ownership, maintenance and disposition of a Property,
including all expenses of the type which would have been
includable in a Claim for Loss, brokerage commissions, title
insurance expenses, recording fees, and other costs and
expenses of closing the sale of the Property; and expenses
regarding the physical condition of the Property in order to
make it ready for sale.
1.41 Aggregate Loss Limit means the Total Initial Principal
Balance (as shown on this Policy) of Loans which are subject
to this Policy, multiplied by the Aggregate Loss Percentage.
The Aggregate Loss Limit represents the maximum aggregate
amount payable by the Company under this Policy, and when
the Aggregate Losses paid by the Company under this Policy
are an amount equal to the Aggregate Loss Limit, the
liability of the Company to pay any additional Losses
ceases, unless and until the Aggregate Losses are reduced
below the Aggregate Loss Limit.
1.42 Aggregate Loss Percentage means that percentage
identified on this Policy, as such percentage may be
adjusted and in effect from time to time as set forth on
such Endorsement.
1.43 Initial Principal Balance means the unpaid principal balance
at the Certificate Effective Date of a Loan which is
subject to this Policy.
1.44 Total Initial Principal Balance means the sum of the Initial
Principal Balances of all Loans insured under this
Policy.
B. Section 1.15 is deleted in its entirety and replaced with the
following:
1.15 Loss means the liability of the Company with respect
to a Loan for payment of a Perfected Claim which is
calculated in accordance with Section 6.3, but subject to
the Aggregate Loss Limit. A Loss will be deemed to have
occurred when a Default on a Loan occurs, even though the
amount of Loss is not then either presently ascertainable or
due and payable.
C. The introduction to Section 6.2 is deleted in its entirety and
replaced with the following:
6.2 Calculation of Claim Amount --- Subject to Sections 7.5
and 5.3, and to the Aggregate Loss Limit, the Claim
Amount will be an amount equal to the sum of:
D. The following is added as the new last sentence of Section 6.3 of the
Policy:
When the Aggregate Loss paid by the Company under this
Policy is an amount equal to the Aggregate Loss Limit, the
liability of the Company to pay any additional Claims for
Losses ceases until the Aggregate Loss is reduced below the
Aggregate Loss Limit, at which time this Section 6.3 will
again apply to any previously Perfected Claims.
II. Construction and Interpretation. All terms capitalized will have
the meanings set forth in the Policy, except as otherwise defined
herein. Nothing herein contained will be held to vary, alter, waive or
extend any of the terms and conditions of the Policy, or any amendments
thereto, except as expressly set forth above.
Mortgage Guaranty Insurance Corporation
MGIC
250 E. Kilbourn Avenue
P.O. Box 488, Milwaukee, Wisconsin 53201-0488
--------------------------------------------
Endorsement to Mortgage Guaranty Master Policy
--------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Policy Issued To: Attached to and Forming Part of Master Policy
Number:
US Bank as Trustee for ACE Securities Corp. Home Equity 04-690-4-3803
Loan Trust, Series 2001-AQ1
180 East Fifth Street Effective Date of Policy:
Saint Paul, Minnesota 55101 April 1, 2001
- -------------------------------------------------------------------------------------------------------------
The purpose of this Endorsement is to amend certain terms and conditions of
the Policy as provided herein. An Insured will be entitled to submit Loans for
insurance under this Endorsement unless this Endorsement is revoked by the
Company. The Company reserves the right to revoke this Endorsement for future
mortgage loans submitted to it, effective upon written notice to the Insured.
This Endorsement will apply only to a Loan which is approved by the Company
for insurance under it, which approval shall include a Loan underwritten by
the Insured in accordance with the Company's Master Reporting Program
(Delegated Underwriting Program). To the extent of any inconsistency or
conflict between the terms of the Policy and this Endorsement, this
Endorsement will control. The terms and conditions of the Policy shall apply
to a Loan insured under this Endorsement, but with the Policy amended by
adding, deleting, or amending the following terms and conditions, as
indicated:
A. Section 1.13 of the Policy is deleted in its entirety and replaced
with the following:
1.13 Insured means:
a. The Person designated on the face of this Policy; or
b. any Person to whom coverage has been assigned with the
written approval of the Company as provided in Section 3.5
resulting in a change in the Insured named on a
Certificate in accordance with this Policy.
B. Section 2.4 and all references thereto in the Policy are deleted in
their entirety.
C. Section 2.8 is amended to read in its entirety as follows:
2.8 Cancellation by the Insured of a Certificate ---
Notwithstanding any provision to the contrary in this
Policy, the Insured shall be obligated to maintain coverage
of a Certificate for a Loan and to pay corresponding
premiums for continuation of such coverage except that
coverage on a Loan may be cancelled by the Insured effective
when the unpaid principal balance of the Loan is less than
50% of the Value of the Property. Subject to the foregoing
obligation of the Insured to maintain coverage, the Insured
may obtain cancellation of coverage on a Loan, if permitted,
by making a written request to the Company for cancellation.
However, no refund on a cancellation of coverage on a Loan
will be paid upon cancellation. Cancellation of coverage on
a Loan will not cancel this Policy.
D. Section 3.5 is amended to read in its entirety as follows:
3.5 Change of Insured --- Change of Insured shall only be
allowed if advance written approval is obtained from the
Company (which approval shall be in the sole and absolute
discretion of the Company). If coverage of a Loan is to be
assigned or transferred by the Insured to a new Insured, the
Insured shall request the Company's approval thereof and if
the Company approves the change of Insured, the Company
shall, thereafter, change its records to identify the new
Insured for such Loan.
E. With reference to the Master Reporting Program Endorsement
(Form #71-7139 (8/94)):
1. In the first sentence of Section 2.1 the word
"makes" is deleted and replaced with "submits for coverage
under this Policy" and in the second sentence of Section
2.1, after the word "makes" is inserted "or purchases".
2. In the first sentence of the first paragraph of Section
2.2(b), the word "contained" is inserted before "in the
Loan File" and the words "by the Insured" are deleted;
and in the first sentence of the second paragraph, after
the words "Certificate or" and before "Loan File" is
inserted "contained in the".
3. Section 2.4 and all references thereto in the Policy are
deleted in their entirety.
All terms capitalized will have the meanings set forth in the Policy, except
as otherwise defined herein. Nothing herein contained will be held to vary,
alter, waive or extend any of the terms and conditions of the Policy, or any
amendments thereto, except as expressly set forth above.