EXHIBIT 10.22
SUBSERVICING AGREEMENT
THIS SUBSERVICING AGREEMENT ("Agreement"), made as of the 15th day of
April, 1998, by and between Continental Capital Corp., a New York corporation
(herein, "Lender/Servicer") and Essex Home Mortgage Servicing Corporation, a
Virginia corporation (herein, "Subservicer").
RECITALS:
WHEREAS, Subservicer is engaged in the business of servicing loans
including residential mortgage loans evidenced by notes and secured by deeds of
trust, mortgages, trust deeds or like security instruments; and
WHEREAS, Lender/Servicer desires that Subservicer subservice the Loans
as hereinafter defined; and
WHEREAS, Subservicer has agreed to subservice the Loans, as hereinafter
defined.
NOW, THEREFORE, in consideration of the mutual recitals, promises and
covenants set forth herein, and other good and valuable consideration herein
receipted for, but not herein recited, the receipt of which is hereby
acknowledged, the parties hereto agree and covenant as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement each of the following terms shall have
the meaning specified with respect thereto.
1.1 Agreement. "Agreement" shall mean this Agreement as the same may be
from time to time amended.
1.2 Borrower. "Borrower" shall mean any maker, endorser, guarantor or other
person or entity obligated for the payment of a Note in accordance with
its terms.
1.3 Deconversion Fee. The fee described in Section 4.3 below and on
Schedule II attached hereto.
1.4 Direct Cost. The term "Direct Cost" shall mean all reasonable and
customary costs incurred by Subservicer in accepting the Loans for
subservicing, including costs of travel, meals and lodging, costs of
transferring data to Subservicer from the current servicer or
subservicer and letters to Borrowers advising them of the change in
servicing.
1.5 Effective Date. "Effective Date" shall mean June 1, 1998.
1.6 FDIC. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.7 FHA. "FHA" shall mean the Federal Housing Administration.
1.8 FHLMC. "FHLMC" shall mean the Federal Home Loan Mortgage Corporation.
1.9 FNMA. "FNMA" shall mean the Federal National Mortgage Association.
1.10 GE. "GE" shall mean General Electric Credit Corporation.
1.11 GNMA. "GNMA" shall mean the Government National Mortgage Association.
1.12 Guide. The FNMA Selling Guide and the FNMA, FHLMC, GNMA, HUD, GE,
Investor, Mortgage Insurance Company Servicing Guide appropriate for
each Loan and all announcements, bulletins and exhibits thereto, all as
amended and updated from time to time.
1.13 HUD. "HUD" shall mean the Department of Housing and Urban Development.
1.14 Investor. "Investor" shall mean the owner and holder of a Note.
1.15 Lender/Servicer. "Lender/Servicer" shall mean Continental Capital Corp.
a New York corporation.
1.16 Loan Documents. "Loan Documents" shall mean all of the Notes and
Mortgages and any other documents evidencing or securing the Loans or
otherwise related to the Loans.
1.17 Loans. "Loans" shall mean the loans described on Schedule I and any
other loans made subject to this Agreement on a periodic basis. Any one
of the Loans shall be referred to herein as a "Loan".
1.18 Mortgage. "Mortgage" shall mean the original security deed, trust deed,
deed of trust, security agreement, financing statement, guaranty and/or
other document securing a Loan, including any riders, addenda,
assumption agreements, modifications and amendments thereto.
1.19 Mortgagor. "Mortgagor" or "Mortgagors" shall mean the grantors or
makers of any Mortgages, including mortgagors and trustors of trust
deeds and deeds of trust.
1.20 Note. "Note" shall mean for each Loan, the original promissory note,
bond or other evidence of indebtedness executed by a Borrower and
evidencing the indebtedness of such Borrower under such Loan and any
riders, addenda, modification or amendments thereto.
1.21 OTS. "OTS" shall mean the Office of Thrift Supervision.
1.22 Subservicer. "Subservicer" shall mean Essex Home Mortgage Servicing
Corporation, a Virginia corporation.
1.23 Prime. "Prime" shall mean the prime rate of interest published in The
Wall Street Journal or any successor publication.
1.24 Taxes. "Taxes" shall mean all real estate taxes and other taxes
assessed against property securing Loans, the nonpayment of which will
result in a lien taking priority over the Mortgage.
1.25 Termination Fee. The fee described on Schedule II that is payable to
Subservicer under Article V hereof.
1.26 VA. "VA" shall mean the Veterans Administration.
ARTICLE II
AGREEMENTS OF SUBSERVICER
2.1 General.
Subservicer hereby agrees to service each Loan pursuant and subject to
the terms of this Agreement. Lender/Servicer and Subservicer agree that this
Agreement shall be effective as of the Effective Date.
2.2 Compliance.
Subservicer will comply with, and Subservicer will use best efforts to
cause each Borrower and Mortgagor to comply with, (a) all applicable state and
federal rules and regulations, (b) the requirements of private mortgage
insurance companies for Loans insured by private mortgage insurance, including
those requiring the giving of notices, and (c) the Guide.
2.3 Procedure.
Until the principal and interest of each Note and all obligations under
each Note and Mortgage are paid in full, unless sooner terminated pursuant to
the terms hereof, Subservicer shall perform the following services in full
compliance with the Guide:
(a) Collect as they become due (i) payments of principal and
interest (ii) any sums to be held in escrow for the payment of
Taxes, assessments and other public charges that are generally
impounded, hazard and/or flood insurance premiums, FHA
insurance or private mortgage insurance premiums, condominium
association dues and fees and other sums required to be
collected and disbursed for Borrowers (collectively "Escrowed
Sums") and (iii) all other payments from Borrowers and/or
Mortgagors.
(b) Accept payments of principal and interest and impound deposits
only in accordance with the Loan Documents or information
provided by Lender/Servicer including information received
from Lender/Servicer's servicing system. Deficiencies in or
excess in payments or deposits shall be accepted and applied
in accordance with the Loan Documents or, if not covered in
such documents, in accordance with Investor or mortgage
insurer guidelines.
(c) Apply all installments and impound deposits collected by it
from the Borrower or Mortgagor, and maintain permanent
mortgage account records capable of producing, at any time and
in chronological order: the date, amount, distribution,
installment due date or other transactions affecting the
amounts due from or to the Borrower and/or Mortgagor and
indicating the latest outstanding balances of principal,
impound deposits, advances, and unapplied payments.
(d) Pending disbursement, segregate and hold by it in a custodial
account or accounts in a financial institution insured by the
FDIC ("Custodial Accounts"; each a "Custodial Account"), in
such manner as to show the custodial nature thereof, and so
that the Investor and each separate Borrower whose funds have
been contributed to such account or accounts will be
individually protected under the rules of the FDIC.
Subservicer's records shall show the respective interest of
the Investor and each Borrower in all Custodial Accounts. All
funds collected for principal and interest shall be held by
and carried in records of the Subservicer as "trustee" for the
Investor, and shall be established in such a manner as to
comply with all applicable rules and regulations of any
governmental agency insuring or guaranteeing each Loan.
(e) Maintain deposits received for the payment of Escrowed Sums in
a separate custodial account as specified in subparagraph (d)
of this section for each Borrower ("Borrower Custodial
Account"). If any federal or state statute or rule of law
requires or may require the payment of interest on such
deposits, Subservicer will pay such interest on each such
Borrower Custodial Account which it maintains or controls.
Lender/Servicer shall reimburse Subservicer for said interest
immediately upon billing. Subservicer will determine the
amount of deposits to be made by Borrowers and will furnish to
each Borrower, at least once a year, an analysis of his/her
Borrower Custodial Account and in accordance with written
instructions from the Lender/Servicer, if given.
(f) Maintain accurate records reflecting the status of Taxes,
ground rents and other recurring charges generally accepted by
the mortgage servicing industry which would become a lien on
the property given as security for the loan (the "Security
Property"). For all Loans providing for the payment to and
collection by Subservicer of any Escrowed Sums, Subservicer
shall pay such charges before any penalty date. Subservicer
assumes responsibility for the timely payment of all Escrowed
Sums and will hold harmless and indemnify Lender/Servicer and
Investor from all penalties, loss or damage resulting from
Subservicer's failure to discharge said responsibility.
(g) For all Loans which have no provisions for the payment to and
collection by Subservicer of Escrowed Sums for Taxes,
Subservicer shall, upon notification by its tax service,
promptly contact Lender/Servicer regarding the delinquency of
any such Taxes. Subservicer will pay any delinquent Taxes
pursuant to the Guide. Additionally, Subservicer shall not be
responsible for payment of ground rents or other charges for
any Loan for which it is not obligated to collect Escrowed
Sums and will pay such charges only upon receipt of
notification by Subservicer that such other charges will
result in a lien against a Security Property. Reimbursement
for any such payments will be made in accordance with
subparagraph 2.3(h) below.
(h) When Escrowed Sums held in a Borrower Custodial Account are
insufficient to pay Taxes, assessments, mortgage insurance
premiums, hazard or flood insurance premiums, or other items
due therefrom, Lender/Servicer shall reimburse Subservicer
monthly for all outstanding deficiencies, and any other
advances made by Subservicer to protect the security of
Lender/Servicer and Investor and Lender/Servicer shall wire
funds necessary to reimburse Subservicer for any advances
within five (5) business days of receipt of an invoice
therefor. Funds received after the fifth day will be subject
to a finance charge at a rate per annum equal to two percent
(2%) over Prime. Subservicer shall attempt to obtain the
necessary additional funds from each Borrower to recover such
advances made on behalf of each Borrower and Lender/Servicer.
(i) Maintain in full force and effect at all times FHA mortgage
insurance, or private mortgage insurance, as applicable, in
accordance with the type of Loan, and will assume
responsibility for the payment of the premium thereon for each
Loan, with reimbursement for such payments being made in
accordance with subparagraph 2.3(h) above.
(j) Assure that improvements on Security Property securing each
Mortgage are insured by hazard insurance issued by companies
acceptable to Investor in an amount at least equal to the
unpaid principal balance of the loan or the full insurable
value of the improvements, whichever is less, of a type at
least as protective as fire and extended coverage, and
containing a "standard" or "union" mortgage clause (without
contribution) in the form customarily used in the area in
which the Security Property is located. In all events, the
provisions of the Loan Documents shall prevail. The mortgagee
clause will be reflected as running to the benefit of
Lender/Servicer, its successors and assigns. During the course
of subservicing, the mortgagee clause in the hazard insurance
will read as follows:
Continental Capital Corp.
Its Successors and Assigns
C/O Essex Home Mortgage Servicing Corporation
P.O. Box 8068
Virginia Beach, VA 23450
Subservicer shall maintain evidence of the original insurance
policy for any Loan delivered for subservicing as provided
within Subservicer's mortgage impairment insurance policy.
2.4 Other.
Subservicer shall be responsible for further safeguarding Investor's
interest and rights in any real property, mobile home or other Security Property
under any Mortgage by performing the following services in full compliance with
the Guide:
(a) Inspecting such Security Property when any Borrower becomes
sixty (60) days or more delinquent in the payment of principal
and interest or Escrowed Sums under the Note and perform such
other inspections as prudent and sound business judgment
suggests;
(b) To the extent possible and pursuant to the Guide, securing any
such Security Property found to be vacant or abandoned, and
advising Lender/Servicer of the status thereof;
(c) Notifying Investor and Lender/Servicer whenever Subservicer
receives notice or otherwise becomes aware of any notice of
liens, bankruptcy, condemnations, probate proceeding, tax
sale, partition, local ordinance violation, condemnation or
proceeding in the nature of eminent domain or similar event
that would, in Subservicer's reasonable judgment, impair
Investor's security; and Subservicer shall assist Investor in
undertaking appropriate action to preserve its security;
(d) Advising Investor and Lender/Servicer with respect to requests
for partial releases, easements, substitutions, division,
subordination, alterations, or waivers of security instrument
terms;
(e) Advising Investor and Lender/Servicer, if requested, of any
change in ownership of such Security Property, and subject to
governing laws and regulations, comply with all instructions
from Investor with respect to the acceleration or modification
of the Note; Subservicer, at the direction of Lender/Servicer,
will forward all requests for Loan assumption immediately upon
receipt. Subservicer will, upon request, provide the initial
paperwork necessary to obtain Loan assumption information.
This information will be forwarded to Lender/Servicer and/or
Investor for approval and all necessary disclosures.
Lender/Servicer and/or Investor will prepare the necessary
assumption papers and forward to Subservicer for processing.
(f) Maintaining in force at all times a policy of errors and
omissions insurance coverage at Subservicer's sole expense.
The purpose of such coverage is to provide Lender/Servicer and
Investor protection in liquidating a Loan against net loss
that can be attributed to damage to the Security Property from
a hazard or peril required to be insured by the Investor and
that otherwise would be insured but for Subservicer's
negligence in allowing insurance coverage to lapse or failing
to keep a sufficient amount of insurance in force;
(g) Disbursing insurance loss settlements according to Investor
guidelines.
Except as otherwise provided above, all advices and notifications required to be
given in the Section 2.4 shall be provided at least monthly.
2.5 Investor Accounting.
In full compliance with the Guide, Subservicer shall:
(a) Make interest rate adjustments in compliance with applicable
regulatory adjustable loan requirements and the Note, which
reflect the applicable movements of the applicable loan rate
index. Applicable interest rate adjustments shall be
implemented in accordance with applicable adjustable loan
regulations and the Note. Subservicer shall execute and
deliver all appropriate notices required by applicable
adjustable loan regulations and the Note regarding such
interest rate adjustments including but not by way of
limitation, timely notification to Investor or to Investor's
successors or assigns, of applicable date and information
regarding such interest rate adjustment, and methods of
implementation of such interest rate adjustments, new
schedules of Investor's pro rata share of collections of
principal and interest, and of all prepayments of any Loan
hereunder by Borrower or Mortgagor.
(b) Perform such other duties, furnish such other reports and
execute such other documents in connection with its duties
hereunder as Lender/Servicer and Investor from time to time
may require consistent with requirements performed by other
servicers of loans in accordance with the Guide.
(c) Not accept any prepayment of any Loan except as specified by
law or as authorized by law and permitted by the terms of the
Loan Documents, nor waive, modify, release or consent to
postponement on the part of the Borrower or Mortgagor of any
term or provision of the Loan Documents without the written
consent of Investor; notwithstanding the foregoing, however,
Subservicer shall not be required to obtain written consent
for the waiver of any late charge or the waiver, modification,
release or consent postponement of any term or provision which
may be waived, modified, released or consented to without the
consent of the Investor under the terms of its written
instructions ("Investors Instructions") or under the Guide.
(d) Upon payment of a Loan in full, have prepared and file any
necessary release or satisfaction documents, and shall
continue subservicing of the Loan pending final settlement,
and refund any Escrowed Sums within state mandated time frames
or pay penalties associated with failure to so comply unless
such failure results from Lender/Servicer's or Investor's
delay.
(e) Where Investors require interest paid through the end of the
month although interest due from the Borrower is to the actual
date of the payoff, advance its own funds to cover any
uncollected interest due the Investor and will periodically
bill Lender/Servicer for reimbursement of such advances.
Lender/Servicer will reimburse Subservicer for said advances
immediately upon billing.
(f) Remit to the Investor, on a date and in a manner specified by
Investor, all principal and interest collected from Borrowers
or Mortgagors, retaining as compensation the fees set forth in
Schedule II attached hereto. Subservicer will remit any
guaranty fees to the appropriate Investor as required. By
mutual agreement, Subservicer will remit monthly to
Lender/Servicer the remaining portion of the gross service fee
collected.
(g) Where Investors such as FHLMC, FNMA, GNMA require the
reporting of balances and cash remittances to be reported and
remitted at one time and consolidated on the appropriate
reports, service one hundred percent (100%) of Loans which are
servicing retained by Lender/Servicer for those Investors
which follow such reporting requirements. Subservicer also
will submit all reports to Investor under Lender/Servicer's
assigned "seller/servicer" number or such other number that
Lender/Servicer and Investor may designate in writing to
Subservicer.
(h) In the event the Investor instructs Lender/Servicer to service
release any Loan(s), and Lender/Servicer shall deliver written
notice thereof to Subservicer, Subservicer shall proceed in
accordance with the Investor's Instructions. In the event
Lender/Servicer determines and instructs Subservicer not to
proceed with the Investor's Instructions, Lender/Servicer
agrees to hold Subservicer harmless from any action taken
against Subservicer by the Investor, and from any loss or
damage, including reasonable attorney fees, resulting
therefrom. With respect to servicing released Loans,
Subservicer shall be responsible to provide such information
as Investor and Lender/Servicer shall reasonably request and
shall assist Lender/Servicer in resolving routine problems and
issues with Investor.
(i) In the event Investor sells all or any part of its interest in
any Loan to a third party or parties, including the sale of
participating interests therein, and such third parties
succeed to all of the right of Investor hereunder for the Loan
interest purchased and this Agreement shall remain in full
force and effect, remit all principal and interest
installments collected under the Loan Documents directly to
such third party or parties in accordance with the terms of
the applicable servicing agreement, after deduction of the
servicing fee which is paid to the Lender/Servicer and
subservicing fees and other fees, costs and charges chargeable
by Subservicer under the terms of this Agreement. The
obligation to make direct remittances to such third party or
parties shall arise upon thirty (30) days written notice of
such assignments given by such third party(ies) to
Subservicer. Subservicer shall be entitled to and be paid an
additional One Dollar ($1.00) per Loan per remittee per month,
for each such third party remittance beyond the first one,
excluding GNMA security holders.
(j) Hold Custodial Accounts associated with the receipt,
disbursement and accumulation of principal and interest as
"trustee" for Lender/Servicer and/or Investors and each
Borrower Custodial Account as "trustee" for the benefit of
each Borrower in accordance with Investor's Instructions, and
where none apply, the Guide, with the exception of GNMA
servicing. Pursuant to GNMA's regulations, Subservicer is not
permitted to withdraw/disburse funds from Custodial Accounts
for principal and interest. Any benefit or value derived from
all demand deposits shall accrue to the benefit of the
Subservicer or Lender/Servicer as set forth on Schedule II.
(k) Subservicer shall be responsible for accurate and timely
reporting and remittance pursuant to the requirements of the
Guide as well as costs and penalties that may be incurred in
failing to meet such responsibility unless such failure is a
result of Lender/Servicer's actions or inactions.
2.6 Delinquency Control.
In full compliance with the Guide, Subservicer shall:
(a) Be responsible for protecting Investor's investment in the
Loans by maintaining the maximum possible number of Loans in a
current status, dealing quickly and effectively with Borrowers
who are delinquent or in default. Subservicer's delinquent
mortgage servicing program shall include an adequate
accounting system which will immediately and positively
indicate the existence of delinquent Loans, a procedure that
provides for sending delinquent notices, assessing late
charges, and returning inadequate payment, and a procedure for
the individual analysis of distressed or chronically
delinquent Loans. Attached to this Agreement is Schedule III
which is a minimum sample of reports required under this
Agreement.
(b) Maintain a collection department and an on-line automated
collection system. All delinquent Loans shall be serviced in
accordance with Investors Instructions or where none apply,
the Guide.
(c) Provide Lender/Servicer and Investor with a month-end
collection and delinquency report identifying and describing
the status of any delinquent Loans, and will from time to time
as the need may arise, provide Lender/Servicer and Investor
with loan service reports relating to any items of information
which Subservicer is otherwise required to provide hereunder
per Schedule IV attached hereto, or detailing any matters the
Subservicer reasonably believes should be brought to the
special attention of Lender/Servicer and Investor. The reports
as outlined in Schedule III shall be delivered to
Lender/Servicer via hard copy. All information in
Subservicer's custody and control with respect to
Lender/Servicer's Loans shall be immediately available to
Lender/Servicer and, in no event, later than five (5) business
days following receipt of a request therefor. Subservicer
shall provide a master file tape to Lender/Servicer twice
monthly.
(d) Upon the request and under the direction of Lender/Servicer
and Investor, assist in the foreclosure or other acquisition
of the Security Property pursuant to a Mortgage, the transfer
of such Security Property to the FHA or VA and the collection
of any applicable mortgage insurance, and pending completion
of these steps, protect such Security Property from waste and
vandalism. Subservicer shall be responsible for filing all
reimbursement claim forms. Subservicer will have title to such
Security Property conveyed in the name designated by Investor.
Upon receipt of billing by Subservicer, Lender/Servicer will
immediately reimburse Subservicer for all of its expenses so
incurred under this paragraph, provided that they are
reimbursable pursuant to the Guide, including court costs and
reasonable attorney's fees. In case of a voluntary deed in
lieu of foreclosure, and purchase by Investor for its account,
Subservicer will protect the Security Property while so owned.
These operations shall be on terms and as determined and
directed by Investor from time to time. Under the sale of such
Security Property, on terms as specified by Investor, if
payments are deferred and payable under contract or Mortgage,
Subservicer will service the same until completely liquidated.
2.7 Books and Records.
Upon Lender/Servicer's written request, Subservicer shall furnish a
detailed statement of its financial condition, shall give Lender/Servicer or its
authorized representative opportunity at any time during its normal business
hours to examine Subservicer's books and records, or shall cause a certified
public accountant selected and employed by it to provide Lender/Servicer not
later than ninety (90) days after the close of Subservicer's fiscal year, with a
certified statement of Subservicer's financial condition as of the close of its
fiscal year. Any additional requests for Loan audit or confirmations to be
performed by Subservicer's audit firm on Loans, shall be at Lender/Servicer's
sole expense. Subservicer will keep records satisfactory to Lender/Servicer and
Investor pertaining to each Loan, and such records shall be the property of
Lender/Servicer and upon termination of this Agreement shall be delivered to
Lender/Servicer at Lender/Servicer's expense.
Notwithstanding the foregoing, however, Subservicer at its own expense may copy
any such record before delivering it to the Lender/Servicer, so long as the
Guide does not prohibit such copying.
2.8 Insurance.
Subservicer will maintain in effect at all times and at its cost, a
blanket fidelity bond and an errors and omission policy in accordance with the
requirements of the Guide. Subservicer shall cause certificates evidencing the
existence of such coverage to be delivered to Lender/Servicer.
ARTICLE III
AGREEMENTS OF LENDER/SERVICER
3.1 Documentation.
Lender/Servicer shall provide to Subservicer at Lender/Servicers' sole
cost and expense:
(a) Any documents or records which are necessary or appropriate
for Subservicer to receive in order to service the Loans.
(b) Applicable documentation for each Loan submitted hereunder to
enable Subservicer to place and continue each Loan on its
computer system. All such documentation must be received in a
reasonable amount of time by Subservicer, prior to any
reporting due Investor.
(c) Its pro-rata portion of the fee required for any extraordinary
audit expense levied by any state or other jurisdiction.
(d) If applicable and as soon as possible, a complete listing of
any Loans where the mortgage payment is inclusive of a
personal or group insurance premium. This list will include
the name of the insurance company; type of premium coverage;
premium amount; and the name and telephone number of the
individual at Lender/Servicer's firm or affiliation
knowledgeable of such coverage. Furthermore, should
Lender/Servicer misrepresent, misinform, provide inadequate
information or no information regarding the status of such
personal or group insurance coverages (e.g., mortgage life or
disability insurance) which would cause Subservicer to incur a
loss or damage, Lender/Servicer agrees to hold Subservicer
harmless from any and all claims, liabilities, damages, and
loss, including reasonable attorneys fees, resulting
therefrom.
(e) Physical evidence that a hazard insurance policy is in force
for each Mortgage delivered to Subservicer for subservicing
and allowing Subservicer sufficient time to receive evidence
in house that all notifications shall be forwarded to
Subservicer. Further, Lender/Servicer agrees to hold
Subservicer harmless from any loss or damage caused by
insufficient evidence of hazard insurance coverage delivered
to Subservicer or any loss or damage which occurred during a
lapsed policy prior to delivery of servicing to Subservicer.
(f) Remittance by check for an amount sufficient to pay for a real
estate tax contract issued by Subservicer's tax service. If a
tax contract is in existence, pay any fees associated with a
transfer to Subservicer.
3.2 Further Notification.
Lender/Servicer shall:
(a) Advise Subservicer upon delivery of each Loan submitted
for subservicing, as to whether the Loan is in a warehouse
(unsold) status or, if sold, specific information regarding
the permanent Investor. If a Loan which has been delivered to
Subservicer in a warehouse (unsold) status is sold,
Lender/Servicer will immediately notify Subservicer of the
sale by phone and will deliver a written copy of the permanent
Investor's purchase advice or funding detailed report
immediately thereafter. In the event the permanent Investor
charges a penalty for late reporting, remittances, etc., which
were caused by Lender/Servicer's delay in notifying
Subservicer of the permanent Investor's purchase of the
Loan(s), Lender/Servicer agrees to promptly pay the penalty
and Subservicer shall have no liability on account therof.
(b) Discharge Subservicer from all liability for any advances of
principal and interest resulting from delinquent whole Loans
and delinquent Loans which are included in any pool that has
been created through "mortgage-backed pass through"
certificates or securities, as well as for all advances due to
negative amortization. Lender/Servicer will immediately
reimburse, by wire, Subservicer for such advances. Subservicer
will reimburse Lender/Servicer if and when recoveries are made
from Borrowers or Mortgagors.
3.3 Default.
In the event Lender/Servicer shall fail to pay to Subservicer any sums
due and payable to Subservicer under this Agreement when and as the same shall
be due and payable, whether as compensation, reimbursement, or otherwise,
Subservicer shall be entitled to adjust Lender/Servicer's "net service fee due"
in set-off of the amount of any sum so owing and unpaid together with any
finance charges payable in accordance with paragraph 9.12 below or as otherwise
provided herein.
ARTICLE IV
COMPENSATION
4.1 Compensation to Subservicer.
For providing the services contained in this Agreement it is agreed
that:
(a) Subservicer shall be paid in accordance with the fees
established by Schedule II, attached hereto.
(b) Any miscellaneous costs incurred by Subservicer from
extraordinary requests for items beyond the scope of those
required by the Guide shall be billed to Lender/Servicer and
promptly paid by Lender/Servicer upon receipt of billing.
(c) All monthly fees and charges (including guaranty fees on pools
of mortgage-backed securities and unrecoverable scheduled
interest and all bank charges and/or interest related to
negative balances, for example, interest charged by
Subservicer's depository bank for payments received but not
collected from Borrower's depository bank and disbursed to the
appropriate Custodial Accounts but not collected as of the
date of disbursement) shall be billed to the Lender/Servicer
and due within five (5) days of receipt of the invoice
therefor. All invoices for special services will be due within
five (5) days of receipt of the invoice therefor. Funds
received after five (5) days will be subject to a finance
charge of two percent (2%) above Prime. Subservicer reserves
the right to deduct any unpaid fees and charges from
Lender/Servicer's gross servicing fee remittance.
4.2 Insurance Commissions; Solicitation.
While Subservicer is servicing any Loan, all commissions related to
force place insurance and other fees payable for obtaining such insurance
coverage or collecting premiums and other charges, excluding all sums payable to
the insurer, shall be retained by Subservicer as ancillary income. Subservicer
warrants that subsequent to the date of this Agreement, Subservicer will not
solicit in any manner, directly or indirectly, or intentionally assist or
participate in any solicitation by a third party, whether by telephone, mail, or
direct contact, any Borrower for the purpose of refinancing or recasting any
Loan, the Servicing of which is being transferred pursuant to this Agreement.
4.3 Deconversion Fee.
If subservicing hereunder is terminated with respect to any or all of
the Loans for any reason other than foreclosure, acquisition of the Security
Property in lieu of payment or payment in full or for cause (as defined in
Section 5.2(b) below), Lender/Servicer shall pay to Subservicer the Deconversion
Fee described on Schedule II in consideration of Subservicer's work in assisting
with the transfer of servicing for any such Loans. The Deconversion Fee shall be
withheld by Subservicer from Lender/Servicer's remittance. Any amount still due
after this offset is exhausted shall be paid within five (5) business days of
receipt of an invoice therefor. If termination is made for cause (as defined in
Section 5.2(b) below), Lender/Servicer will pay all costs charged by the new
servicer for transferring data to the new servicer.
ARTICLE V
TERM AND TERMINATION
5.1 Term.
The term of this Agreement shall be for two (2) year(s) for commencing
upon the Effective Date and ending at twelve o'clock midnight on May 31, 2000.
If neither party shall terminate this Agreement by ninety (90) days written
notice to the other prior to the expiration of the initial term, this Agreement
shall renew itself and exist and continue for successive terms of two (2)
year(s) each until terminated by such notice.
5.2 Notice.
(a) In the event Lender/Servicer terminates this Agreement
during the initial two (2) year term, Lender/Servicer shall
pay Subservicer the Termination Fee and the Deconversion Fee
described in Schedule II. After the expiration of the initial
two (2) term, either party may, without cause by ninety (90)
days prior written notice to the other, terminate this
Agreement as to any or all Loans then being subserviced.
Termination for "cause" is described in subparagraphs 5.2(b)
and 5.2(c) below). If any termination of subservicing for 75%
or more of the Loans occurs at any time during the initial
term of this Agreement, Lender/Servicer shall pay Subservicer
the Termination Fee and Deconversion Fee.
(b) At Lender/Servicer's option, this Subservicing Agreement shall
immediately terminate for cause after fifteen (15) days
written notice to Subservicer. The term "for cause" as applied
to termination of Subservicer shall mean (i) the occurrence of
any event which constitutes a material breach on the part of
the Subservicer of its servicing obligations and covenants
described in Articles II, VII, VIII and IX (ii) a material
change in Subservicer's financial circumstances which would
adversely affect Subservicer's ability to perform its
obligations under this Agreement, (iii) any breach of such
servicing obligations that may result in immediate or
irreparable harm, or (iv) if any representation or warranty of
Subservicer under Article VII is inaccurate or untrue in any
material respect. If terminated pursuant to this Section
5.2(b), Lender/Servicer shall be entitled to all remedies
available at law.
(c) This Subservicing Agreement shall immediately terminate, at
Subservicer's option, upon fifteen (15) days written notice
after the occurrence of any event which constitutes a breach
on the part of the Lender/Servicer of the obligations and
covenantsdescribed in Articles III, VI, VIII, and IX or in the
event of any breach of such obligations that may result in
immediate or irreparable harm as determined by the Subservicer
or upon Subservicer's determination that any representation or
warranty of Lender/Servicer under Article VI is inaccurate or
untrue in any material respect. If terminated pursuant to this
Section 5.2(c), Subservicer shall be entitled to receive a
Termination Fee and Deconversion Fee with respect to all
Loans.
(d) Notwithstanding the provisions of paragraphs 5.2(b) and 5.2(c)
above, any party receiving notice of termination under those
paragraphs shall have thirty (30) days to cure any breach of a
covenant (other than a covenant to make payments hereunder
which shall be made in strict accordance with the terms
hereof), or to correct any untrue or inaccurate facts, unless
curing any such failure requires acts to be done or conditions
to be removed which cannot, by their nature, be performed,
done or removed, as the case may be, within such thirty (30)
day period, in which event, the curing party may avoid
termination so long as such curing party shall have commenced
curing such failure within fifteen (15) days from the receipt
of said notice and shall diligently prosecute the cure to
completion, provided that the curing party shall in any event
complete such cure within forty-five (45) days after written
notice of termination and termination shall become effective
upon such date if the cure has not been completed at the
expiration of such forty-five (45) day period.
5.3 Subservicer's Contingencies.
Subservicer's obligations and duties hereunder shall be contingent upon
(a) Lender/Servicer providing the information and documents described in
paragraphs 3.1 and 3.2(a) above, (b) receipt by Subservicer of letters or other
documents from all Investors approving this Agreement and Subservicer as a
servicer of such Loans and (c) receipt by Subservicer of certified copies of the
Lender/Servicer's audited financial statements for 1997.
5.4 Reimbursement of Servicing Released Loans.
Subservicer's right to reimbursement for actual expenses, and
reimbursement for any advances of principal and interest and escrow made on
behalf of Lender/Servicer in accordance with the terms of this Agreement shall
also apply to any Loans sold by Lender/Servicer as an Investor to a new Investor
on a "servicing released" basis.
5.5 Accounting.
Upon termination of this Agreement under this section, Subservicer will
account for and turn over to Lender/Servicer, Lender/Servicer's designee, or the
Investor or Investor's designee, all funds collected under each Note and
Mortgage, less the compensation and any fees then due Subservicer, and deliver
to Lender/Servicer, Lender/Servicer's designee, Investor or Investor's designee
all records and documents relating to each Loan then subserviced and will advise
Borrowers that their Loans will henceforth be serviced by Lender/Servicer,
Lender/Servicer's designee, Investor or Investor's designee in accordance with
the Guide.
ARTICLE VI
REPRESENTATION, WARRANTIES AND COVENANTS OF LENDER/SERVICER
6.1 Assistance.
Lender/Servicer warrants and represents to, and covenants and agrees
with Subservicer that, to the extent possible, Lender/Servicer shall cooperate
with and assist Subservicer as requested by Subservicer, in carrying out
Subservicer's covenants, agreements, duties and responsibilities under this
Agreement and in connection therewith shall execute and deliver all such papers,
documents and instruments as may be necessary and appropriate in furtherance
therof.
6.2 Notice of Breach.
Lender/Servicer shall immediately notify Subservicer (i) of any failure
or anticipated failure on its part to observe and perform any covenant or
agreement required to be observed and performed by it as a Lender/Servicer and
(ii) if any representation or warranty of Lender/Servicer made in connection
with this Agreement is untrue or inaccurate in any material respect.
6.3 Taxes.
As of the Effective Date, Lender/Servicer warrants that to the best of
their knowledge all Taxes have been paid prior to the tax delinquent date.
Lender/Servicer will indemnify and hold Subservicer harmless of and from any tax
penalties and interest which arose or accrued prior to the Effective Date and
for any other claims, demands, costs fees or expenses, including reasonable
attorneys' fees, resulting from any failure to pay such Taxes in a timely
manner.
6.4 Authority; Prior Servicing.
Lender/Servicer is a duly organized and validly existing corporation in
good standing under the laws of its state of incorporation and has all requisite
power and authority to enter into this Agreement and the persons executing this
Agreement on behalf of Lender/Servicer are duly authorized so to do.
Lender/Servicer is the owner of all servicing rights for all Loans and
represents and warrants that all information contained in any database or
document related to Loans is true, accurate and correct in every respect.
6.5 Financial Statements.
Lender/Servicer shall provide Subservicer with copies of its audited
financial statements on an annual basis within thirty (30) days following the
date of their issuance but in no event later than one hundred twenty (120) days
following the end of its fiscal year.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSERVICER
Subservicer warrants and represents to, and covenants and agrees with,
Lender/Servicer as follows:
7.1 Notice of Breach.
Subservicer shall immediately notify Lender/Servicer (i) of any failure
or anticipated failure on its part to observe and perform any covenant or
agreement required to be observed and performed by it as Subservicer and (ii) if
any representation or warranty of Subservicer made in connection with this
Agreement is untrue or inaccurate in any material respect.
7.2 Agency Approvals.
Subservicer is an approved Servicer for FHLMC, FNMA, HUD, GE and GNMA.
7.3 Authority.
Subservicer is a duly organized and validly existing corporation in
good standing under the laws of its state of incorporation and has all requisite
power and authority to enter into this Agreement and the persons executing this
Agreement on behalf of Subservicer are duly authorized so to do.
7.4 Financial Statements.
Subservicer shall provide Lender/Servicer with copies of its audited
financial statements on an annual basis within thirty (30) days following the
date of their issuance but in no event later than one hundred twenty (120) days
following the end of its fiscal year. Subservicer has delivered to
Lender/Servicer their financial statements for the year 1997.
7.5 Approvals.
To the extent reasonably necessary for Subservicer to fulfill its
obligations hereunder and so long as the cost of obtaining same is reasonable,
Subservicer shall obtain any approvals from government entities, Investors
and/or mortgage insurance companies that are necessary to effectuate
transactions to be undertaken hereunder.
7.6 Compliance; No Violations; Litigation.
Subservicer is in compliance with, and will continue to comply with,
the Guide in all material respects. Subservicer is not in violation or breach of
any agreement and not a party to any pending or threatened litigation which
would have a material adverse effect upon Subservicer's ability to perform this
Agreement.
ARTICLE VIII
INDEPENDENCE OF PARTIES; INDEMNIFICATION SURVIVAL
8.1 Independence of Parties.
The following terms shall govern the relationship between
Lender/Servicer and Subservicer:
(a) Subservicer shall have the status of and act as an
independent contractor. Nothing herein contained shall be
construed to create a partnership or joint venture between
Lender/Servicer and Subservicer.
(b) Subservicer shall not be responsible for representations,
warranties or contractual obligations in connection with (1)
sale to an Investor of any of the Loans, or (2) the servicing
of any such Loans prior to the assumption of subservicing of
the Loans pursuant to this Agreement.
(c) Anything herein contained in this Article VIII or elsewhere in
this Agreement to the contrary notwithstanding, the
representations and warranties of Subservicer contained in
this Agreement shall not be construed as a warranty or
guarantee by Subservicer as to future payments by any Borrower
or Mortgagor.
(d) Anything herein contained in this Article VIII or elsewhere in
this Agreement to the contrary notwithstanding, Subservicer
shall not be responsible for performance or compliance under
any loan repurchase agreements, representations or warranties
of an origination nature, or those servicing representations
and warranties directly or indirectly related to the
origination process made between Lender/Servicer and any
Investor, either prior or subsequent to this Agreement.
8.2 Indemnification by Subservicer.
Except as otherwise stated herein, Subservicer indemnifies and holds
harmless Lender/Servicer from any liabilities, claims, losses, damages, actions,
claims, fees, costs and expenses including reasonable attorneys' fees, directly
or indirectly resulting from or arising out of Subservicer's failure to observe
or perform any or all of Subservicer's covenants, agreements, warranties or
representations contained in this Agreement.
8.3 Indemnification by Lender/Servicer.
Lender/Servicer indemnifies and holds harmless the Subservicer from any
liabilities, claims, losses, damages, actions, claims, fees, expenses and costs,
including reasonable attorneys' fees, directly or indirectly resulting from or
arising out of (i) Lender/Servicer's failure to observe or perform any or all of
Lender/Servicer's covenants, agreements, warranties or representations contained
in this Agreement, (ii) the performance, negligence, actions or failure to act
of any Servicer or subservicer of the Loans, other than Subservicer, (iii) any
inaccuracies in any information provided by Lender/Servicer and (iv) the untruth
or inaccuracy of any of the representations and warranties set for in paragraphs
6.4 and the following additional representations and warranties to the best of
Lender/Servicer's knowledge:
(a) Each Loan, the Note and Mortgage, any insurance policy,
certificate of coverage, or other contract or agreement
relating to each Loan is in every respect genuine; is complete
in all respects; is the legal, valid, binding and enforceable
obligation of the Borrower thereunder in accordance with its
terms and is free from all claims, defenses, rights of
rescission, any discount, allowance, set-off, counterclaim,
presently pending bankruptcy or other defenses or contingent
liability by any Borrower which could adversely affect the
value or collectibility of any Loan; none of the Notes or
Mortgages nor anything contained in the Loan Documents, is
forged or has affixed thereto any unauthorized signature or
has been entered into by any persons without the required
legal capacity; and no foreclosure or any other legal action
has been brought by any Servicer in connection therewith
except as identified on Schedule I.
(b) The applicable Loan Documents have been duly and properly
executed by the Borrower, acknowledged, and recorded. Each
Loan is valid and complies with all applicable lending laws
and regulations, including the Truth-In-Lending Act, Real
Estate Settlement and Procedures Act, Equal Credit Opportunity
Act, Fair Housing and Disclosure Act and Regulation Z (the
"Acts"). The Loan Documents have been duly executed on the
dates indicated and in due and proper form.
(c) In connection with the creation, acquisition, ownership,
servicing, execution and content of all Loans, all applicable
federal and state laws, rules and regulations have been, and
are being, complied with by each Servicer thereof. All
information requested to be disclosed to the Borrower by the
Acts has been properly and accurately disclosed to the
Borrower by each Servicer thereof, in full compliance and in
accordance with the Acts. The Borrower has duly executed
appropriate documents or evidence indicating that the Borrower
has received the disclosure materials as required by
applicable law and regulations, including the Acts and such
evidence is located among the Loan Documents.
(d) The servicing and collection procedures used by each Servicer
and subservicer (other than Subservicer) with respect to each
Loan have been in all respects legal, proper and prudent.
(e) All of the terms, conditions and provisions of the interest
rate adjustments, payment adjustments and adjustments of the
outstanding principal balance are enforceable and all
adjustments have been timely and properly made, including, but
not limited to all required notices, and any adjustments so
made will not affect the enforceability of each Note.
8.4 Survival.
The indemnifications, representations and warranties set forth herein
shall survive the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Changes in Practices.
The parties hereto acknowledge that the standard practices and
procedures of the mortgage servicing industry change or may change over a period
of time. To accommodate these changes, Subservicer may from time to time notify
Lender/Servicer of such changes in practices and procedures. Should any such
proposed changes, made in good faith by Subservicer, be unacceptable to
Lender/Servicer, then Subservicer shall have no further obligation to continue
to accept subservicing under the terms of this Agreement, and may terminate this
Agreement in accordance with Article V.
9.2 Assignment.
This Agreement may be assigned only after obtaining prior written
consent of both Lender/Servicer and Subservicer.
9.3 Prior Agreements.
If any provision of this Agreement is inconsistent with any prior
Agreements between the parties, oral or written, the terms of this Agreement
shall prevail, and after the effective date of this Agreement, the relationship
and agreements between Lender/Servicer and Subservicer shall be governed in
accordance with the terms of this Agreement.
9.4 Entire Agreement.
This Agreement contains the entire agreement between the parties hereto
and cannot be modified in any respect except by an amendment in writing signed
by both parties.
9.5 Invalidity.
The invalidity of any portion of this Agreement shall in no way affect
the remaining portions hereof.
9.6 Effect.
Except as otherwise stated herein, this Agreement shall remain in
effect until Lender/Servicer's interest in all of the Loans including the
underlying security, are liquidated completely, unless sooner terminated
pursuant to the terms hereof.
9.7 Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Virginia.
9.8 Notices.
All notices, requests, demands and other communications which are
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given upon the delivery or mailing thereof, as
the case may be, sent by registered or certified mail, return receipt requested
to the address set forth on the signature page hereof.
9.9 Waivers.
Either Lender/Servicer or Subservicer may, upon mutual written consent
of both parties, by written notice to the other:
(a) Waive compliance with any of the terms, conditions or
covenants required to be complied with by the other hereunder;
and
(b) Waive or modify performance of any of the obligations of the
other hereunder.
The waiver by either party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other subsequent
breach.
9.10 Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors and assigns.
9.11 Headings; Certain Terms.
Headings of the Articles and Sections in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
The term "include" or "including" shall mean without limitation by reason of
enumeration. References herein to "paragraphs," "sections" and other
subdivisions without a reference to document are to designated paragraphs,
sections and other subdivisions of this Agreement. The words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular provision. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all genders, the singular shall include the plural and vice versa.
9.12 Due Date of Payments.
Unless otherwise stated herein, all fees, payments, charges, expenses,
advances and any other sums payable to Subservicer by Lender/Servicer hereunder,
shall be due and payable within five (5) business days from date of
subservicer's invoice and thereafter, all sums shall be subject to a finance
charge at a rate per annum equal to two percent (2%) over Prime.
9.13 Multiple Counterparts.
This Agreement may be executed in multiple counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute one and the same Agreement. Any signature page from one counterpart
may be appended to another counterpart to create a fully executed counterpart
hereof.
IN WITNESS WHEREOF, each party has caused this instrument to be signed
in its corporate name on its behalf by its proper officials duly authorized as
of the day, month and year first above written.
Subservicer:
Essex Home Mortgage Servicing Corporation
By: /s/ Stephen K. Sager
--------------------------------
Stephen K. Sager
Vice President
P.O. Box 8068
Virginia Beach, VA 23450
Lender/Servicer:
Continental Capital Corp.
By: /s/ Michael J. Wallace, Jr.
--------------------------------
Michael J. Wallace, Jr.
Chief Executive Officer
1841 New York Avenue
Huntington Station, NY 11746
SCHEDULE INDEX
SCHEDULE I - List of Loans
SCHEDULE II - Subservicing Fee Schedule for Schedule I Loans
SCHEDULE III - Investor Accounting Reports
SCHEDULE IV - Default Reports