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EXHIBIT 10(d)
SERVICING AGREEMENT
BETWEEN
D&N CAPITAL CORPORATION
PURCHASER
D&N BANK
SELLER
DATED AS OF [___________], 1997
CONVENTIONAL COMMERCIAL MORTGAGE LOANS
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS.....................................................................................1
Section 1. Definitions..............................................................1
ARTICLE II
SERVICING.......................................................................................5
Section 2.01 Seller to Act as Servicer................................................5
Section 2.02 Liquidation of Mortgage Loans............................................6
Section 2.03 Collection of Mortgage Loan Payments.....................................7
Section 2.04 Establishment of and Deposits to Custodial Account.......................7
Section 2.05 Permitted Withdrawals From Custodial Account.............................9
Section 2.06 Establishment of and Deposits to Escrow Account.........................10
Section 2.07 Permitted Withdrawals From Escrow Account...............................10
Section 2.08 Payment of Taxes, Insurance and Other Charges, Tax Contracts............11
Section 2.09 Protection of Accounts..................................................11
Section 2.10 Maintenance of Hazard Insurance.........................................11
Section 2.11 Maintenance of Mortgage Impairment Insurance............................12
Section 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance..................................................13
Section 2.13 Inspections.............................................................13
Section 2.14 Restoration of Mortgaged Property.......................................13
Section 2.15 Deteriorating Mortgage Loans............................................14
Section 2.16 Title, Management and Disposition of REO Property.......................14
Section 2.17 Permitted Withdrawals with respect to REO Property......................16
Section 2.18 Real Estate Owned Reports...............................................16
Section 2.19 Liquidation Reports.....................................................16
Section 2.20 Reports Of Foreclosures and Abandonments................................16
Section 2.21 Notification of Adjustments.............................................16
Section 2.22 Notification of Maturity Date...........................................17
ARTICLE III
PAYMENTS TO PURCHASER..........................................................................17
Section 3.01 Remittances.............................................................17
Section 3.02 Statements to Purchaser.................................................18
Section 3.03 Advances by Seller.......................................................18
ARTICLE IV
GENERAL SERVICING PROCEDURES...................................................................19
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Section 4.01 Transfers of Mortgaged Property.........................................19
Section 4.02 Satisfaction of Mortgages and Release of Mortgage Files.................19
Section 4.03 Servicing Compensation..................................................20
Section 4.04 Annual Statement as to Compliance.......................................20
Section 4.05 Annual Independent Public Accountants' Servicing Report.................20
Section 4.06 Right to Examine Seller Records.........................................21
ARTICLE V
SELLER TO COOPERATE............................................................................21
Section 5.01 Provision of Information................................................21
Section 5.02 Financial Statements; Servicing Facilities..............................21
ARTICLE VI
TERMINATION....................................................................................22
Section 6.01 Damages.................................................................22
Section 6.02 Termination.............................................................22
Section 6.03 Termination Without Cause...............................................22
ARTICLE VII
BOOKS AND RECORDS..............................................................................22
Section 7.01 Possession of Servicing Files...........................................22
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT.................................................................23
Section 8.01 Indemnification.........................................................23
Section 8.02 Limitation on Liability of Seller and Others............................23
Section 8.03 Limitation on Registration and Assignment by Seller.....................24
Section 8.04 Assignment by Purchaser.................................................24
Section 8.05 Merger or Consolidation of the Seller...................................25
Section 8.06 Successor to the Seller.................................................25
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.........................................26
Section 9.01 Due Organization and Authority..........................................26
Section 9.02 No Conflicts............................................................26
Section 9.03 Ability to Perform......................................................27
Section 9.04 No Litigation Pending...................................................27
Section 9.05 No Consent Required.....................................................27
Section 9.06 Assistance..............................................................27
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ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................27
Section 10.01 Due Organization and Authority.........................................27
Section 10.02 Ordinary Course of Business............................................28
Section 10.03 No Conflicts...........................................................28
Section 10.05 Ability to Service.....................................................28
Section 10.05 Ability to Perform.....................................................28
Section 10.06 No Litigation Pending..................................................28
Section 10.07 No Consent Required....................................................28
Section 10.08 No Untrue Information..................................................29
Section 10.09 Reasonable Servicing Fee...............................................29
Section 10.10 Financial Statements...................................................29
Section 10.11 Conflict of Interest...................................................29
ARTICLE XI
DEFAULT........................................................................................29
Section 11.01 Events of Default......................................................29
Section 11.02 Waiver of Defaults.....................................................31
ARTICLE XII
MISCELLANEOUS PROVISIONS.......................................................................31
Section 12.01 Notices................................................................31
Section 12.02 Waivers................................................................31
Section 12.03 Entire Agreement; Amendment............................................32
Section 12.04 Execution; Binding Effect..............................................32
Section 12.05 Headings...............................................................32
Section 12.06 Applicable Law.........................................................32
Section 12.07 Relationship of Parties................................................32
Section 12.08 Severability of Provisions.............................................32
Section 12.09 Recordation of Assignments of Mortgage.................................32
Section 12.10 Exhibits...............................................................33
EXHIBITS
EXHIBIT 1 FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT 2 FORM OF CUSTODIAL ACCOUNT CERTIFICATION
EXHIBIT 3 FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT 4 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT 5 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT 6 FORM OF CONFIDENTIALITY AGREEMENT
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SERVICING AGREEMENT
This Servicing Agreement (the "Servicing Agreement" or the "Agreement")
is entered into as of [________,] 1997, by and between D&N BANK (the "Seller"),
a federally chartered savings bank, and D&N CAPITAL CORPORATION, a Delaware
corporation (the "Purchaser").
WHEREAS, the Purchaser and the Seller entered into a Mortgage Loan
Purchase and Warranties Agreement dated as of [________,] 1997 (the "Purchase
Agreement") pursuant to which the Purchaser agreed to purchase from the Seller
certain conventional, commercial, adjustable rate first mortgage loans (the
"Mortgage Loans") to be delivered as whole loans, with the Seller retaining
servicing rights in connection with the purchase of such Mortgage Loans; and
WHEREAS, the Purchaser desires to have the Seller service the Mortgage
Loans, the Seller desires to service and administer the Mortgage Loans on behalf
of the Purchaser, and the parties desire to provide the terms and conditions of
such servicing by the Seller.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and for other good and valuable consideration, the receipt and
the sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Purchase Agreement. The
following terms are defined as follows:
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.
"Ancillary Income" means all late charges, escrow account benefits,
reinstatement fees, and similar types of fees arising from or in connection
with any Mortgage Loan to the extent not otherwise payable to the Mortgagor
under applicable law or pursuant to the terms of the related Mortgage Note.
"Bank" means D&N Bank.
"Best's" means Best's Key Rating Guide.
"BIF" means The Bank Insurance Fund, or any successor thereto.
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"Closing Date" means [_______,] 1997, or such other date as is mutually
agreed upon by the parties hereto.
"Condemnation Proceeds" means all awards or settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
"Custodial Account" means the separate account or accounts created and
maintained pursuant to Section 2.04.
"Cut-off Date" means [__________,] 1997.
"Due Period" means with respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the Remittance
Date and ending on the first day of the month of the Remittance Date.
"Errors and Omissions Insurance Policy" means an errors and omissions
insurance policy to be maintained by the Seller pursuant to Section 2.12.
"Escrow Account" means the separate account or accounts created and
maintained pursuant to Section 2.06.
"Escrow Payment" means, with respect to any Mortgage Loan, any payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to the
Mortgage or any other document, including without limitation the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums.
"Event of Default" means any one of the conditions or circumstances
enumerated in Section 11.01.
"FDIC" means The Federal Deposit Insurance Corporation, or any
successor thereto.
"Fidelity Bond" means a fidelity bond to be maintained by the Seller
pursuant to Section 2.12.
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, or the
sale of the related Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage Loan.
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"Monthly Remittance Advice" means the monthly remittance advice, in the
form of Exhibit A annexed hereto, to be provided to the Purchaser pursuant to
Section 3.02.
"Mortgage Impairment Insurance Policy" means a mortgage impairment or
blanket hazard insurance policy as described in Section 2.11.
"Nonrecoverable Advance" means any advance of principal and interest
previously made or proposed to be made in respect of a Mortgage Loan which, in
the good faith judgment of the Seller, will not or, in the case of a proposed
advance of principal and interest, would not, be ultimately recoverable from
related Insurance Proceeds, Liquidation Proceeds or otherwise. The determination
by the Seller that it has made a Nonrecoverable Advance or that any proposed
advance of principal and interest, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officers' Certificate delivered to the
Purchaser.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller, and delivered to the Purchaser as required
by this Agreement.
"OTS" means Office of Thrift Supervision, or any successor thereto.
"Prime Rate" means the prime rate announced to be in effect from time
to time, as published as the average rate in The Wall Street Journal (Chicago
edition).
"Principal Prepayment" means any payment or other recovery of principal
on a Mortgage Loan which is received in advance of its scheduled due date,
including any prepayment penalty or premium thereon and which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"Purchase Agreement" means the Mortgage Loan Purchase and Warranties
Agreement between the Purchaser and the Seller related to the purchase of the
Mortgage Loans dated as of [_________], 1997.
"Qualified Depository" means a depository the accounts of which are
insured by the FDIC through the BIF or the SAIF.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and in the two highest rating
categories by Best's with respect to hazard and flood insurance.
"Record Date" means the close of business of the last Business Day of
the month preceding the month of the related Remittance Date.
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"Remittance Date" means the 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately following) of any month,
beginning with the first Remittance Date on [________] 18, 1997.
"REO Property" means a Mortgaged Property acquired by the Seller on
behalf of the Purchaser through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.16.
"SAIF" means the Savings Association Insurance Fund, or any successor
thereto.
"Seller Employees" has the meaning set forth in Section 2.12.
"Servicing Advances" means all customary, reasonable and necessary "out
of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Seller of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures, (c) the management and liquidation
of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction
of the Mortgage and (d) compliance with the obligations under Section 2.08
(except with respect to any expenses incurred in connection with procuring or
transferring Tax Service Contracts, as provided therein).
"Servicing Agreement" means this agreement between the Purchaser and
the Seller for the servicing and administration of the Mortgage Loans.
"Servicing Fee" means, with respect to each Mortgage Loan, the amount
of the annual fee the Purchaser shall pay to the Seller, which shall, for a
period of one (1) full month, be equal to [one-twelfth] of the product of the
Servicing Fee Rate and (2) the Stated Principal Balance of such Mortgage Loan.
Such fee shall be payable monthly, computed on the basis of the same principal
amount and period in respect of which any related interest payment on a Mortgage
Loan is computed and shall be pro rated for any portion of a month during which
the Mortgage Loan is serviced by the Seller under this Agreement. The obligation
of the Purchaser to pay the Servicing Fee is limited to, and the Servicing Fee
is payable solely from, the interest portion (including recoveries with respect
to interest from Liquidation Proceeds, to the extent permitted by Section 4.03)
of such Monthly Payment collected by the Seller, or as otherwise provided under
Section 4.03.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the
rate specified in the Mortgage Loan Schedule with respect to such Mortgage Loan.
"Servicing File" means, with respect to each Mortgage Loan, the file
retained by the Seller consisting of originals of all documents in the Mortgage
File which are not delivered to the Purchaser or its designee and copies of the
Mortgage Loan Documents listed on Exhibit A to the Purchase Agreement.
"Servicing Officer" means any officer of the Seller involved in or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing
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officers furnished by the Seller to the Purchaser upon request, as such list may
from time to time be amended.
"Termination Fee" means the amount paid by the Purchaser to the Seller
in the event of the Seller's termination, without cause, as servicer. Such fee
shall equal the percentage amount set forth in Section 6.03 hereof of the then
current aggregate unpaid principal balance of the related Mortgage Loans.
ARTICLE II
SERVICING
SECTION 2.01 Seller to Act as Servicer. From and after the Closing
Date, the Seller, as an independent contractor, shall service and administer the
Mortgage Loans and shall have full power and authority, acting alone, to do any
and all things in connection with such servicing and administration which the
Seller may deem necessary or desirable, consistent with the terms of this
Agreement and with Accepted Servicing Practices.
Consistent with the terms of this Agreement, the Seller may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Seller's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the
Purchaser, provided, however, that unless the Seller has obtained the prior
written consent of the Purchaser, the Seller shall not permit any modification
with respect to any Mortgage Loan that would change the Mortgage Interest Rate,
defer or forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan. In the event of any such
modification which permits the deferral of interest or principal payments on any
Mortgage Loan, the Seller shall, on the Business Day immediately preceding the
Remittance Date in any month in which any such principal or interest payment has
been deferred, deposit in the Custodial Account from its own funds, in
accordance with Section 2.04, the difference between (a) such month's principal
and one (1) month's interest at the Mortgage Interest Rate on the unpaid
principal balance of such Mortgage Loan and (b) the amount paid by the
Mortgagor. The Seller shall be entitled to reimbursement for such advances to
the same extent as for all other advances made pursuant to Section 2.05. Without
limiting the generality of the foregoing, the Seller shall continue, and is
hereby authorized and empowered, to execute and deliver on behalf of itself and
the Purchaser, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Properties. If reasonably
required by the Seller, the Purchaser shall furnish the Seller with any powers
of attorney and other documents necessary or appropriate to enable the Seller to
carry out its servicing and administrative duties under this Agreement.
In servicing and administering the Mortgage Loans, the Seller shall
employ procedures (including collection procedures) and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account, giving due
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consideration to Accepted Servicing Practices where such practices do not
conflict with the requirements of this Agreement, and the Purchaser's reliance
on the Seller. The Seller shall keep at its servicing office books and records
in which, subject to such reasonable regulations as it may prescribe, the Seller
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, Seller shall be under no obligation to deal with any
Person with respect to this Agreement or the Mortgage Loans unless the Seller
has been notified of such transfers as provided in this Section 2.01. The
Purchaser may sell and transfer, in whole or in part, the Mortgage Loans,
provided that no such sale and transfer shall be binding upon the Seller unless
such transferee shall agree in writing in the form of the Assignment and
Assumption Agreement attached to the Purchase Agreement as Exhibit G, to be
bound by the terms of this Agreement and the Purchase Agreement, and an executed
copy of the same shall have been delivered to the Seller. Upon receipt thereof,
the Seller shall mark its books and records to reflect the ownership of the
Mortgage Loans by such assignee, and the previous Purchaser shall be released
from its obligations hereunder. The Seller shall be required to remit all
amounts required to be remitted to the Purchaser hereunder to said transferee
commencing with the first Remittance Date falling after receipt of said copy of
the related Assignment and Assumption Agreement provided that the Seller
receives said copy no later than three (3) Business Days immediately prior to
the first day of the month of the related Remittance Date. This Agreement shall
be binding upon and inure to the benefit of the Purchaser and the Seller and
their permitted successors, assignees and designees. The Servicing File retained
by the Seller pursuant to this Agreement shall be appropriately marked and
identified in the Seller's computer system to clearly reflect the sale of the
related Mortgage Loan to the Purchaser. The Seller shall release from its
custody the contents of any Servicing File retained by it only in accordance
with this Agreement, except when such release is required in connection with a
repurchase of any such Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement. The Seller must have an internal quality control program that
verifies, on a regular basis, the existence and accuracy of the legal documents,
credit documents, property appraisals, and underwriting decisions. The program
must be capable of evaluating and monitoring the overall quality of its loan
production and servicing activities. The program is to ensure that the Mortgage
Loans are serviced in accordance with prudent mortgage banking practices and
accounting principles; guard against dishonest, fraudulent, or negligent acts;
and guard against errors and omissions by officers, employees, or other
authorized persons.
SECTION 2.02 Liquidation of Mortgage Loans. In the event that any
payment due under any Mortgage Loan and not postponed pursuant to Section 2.01
is not paid when the same becomes due and payable, or in the event the Mortgagor
fails to perform any other covenant or obligation under the Mortgage Loan and
such failure continues beyond any applicable grace period, the Seller shall take
such action as (1) the Seller would take under similar circumstances with
respect to a similar mortgage loan held for its own account for investment, (2)
shall be consistent with Accepted Servicing Practices and (3) the Seller shall
determine prudently to be in the best interest of Purchaser. In the event that
any payment due under any Mortgage Loan is not postponed pursuant to Section
2.01 and remains delinquent for a period of ninety (90) days or any other
default continues for a period of ninety (90) days beyond the expiration of any
grace or cure period (or such other period as is required by law in the
jurisdiction where the related Mortgaged Property is located), the Seller shall
commence foreclosure proceedings, provided that, prior to
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commencing foreclosure proceedings, the Seller shall notify the Purchaser in
writing of the Seller's intention to do so, and the Seller shall not commence
foreclosure proceedings if the Purchaser objects to such action within ten (10)
Business Days of receiving such notice or, if the provisions of the next two
paragraphs apply, in any event without the prior written consent of Purchaser.
In such connection, the Seller shall from its own funds make all necessary and
proper Servicing Advances, provided, however, that the Seller shall not be
required to expend its own funds in connection with any foreclosure or towards
the restoration or preservation of any Mortgaged Property, unless it shall
determine (a) that such preservation, restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan to Purchaser after
reimbursement to itself for such expenses and (b) that such expenses will be
recoverable by it either through Liquidation Proceeds (in respect of which it
shall have priority for purposes of withdrawals from the Custodial Account
pursuant to Section 2.05) or through Insurance Proceeds (in respect of which it
shall have similar priority). Notwithstanding anything to the contrary contained
herein, in connection with a foreclosure, in the event the Seller has reasonable
cause to believe that a Mortgaged Property is contaminated by hazardous or toxic
substances or wastes, or if the Purchaser otherwise requests an environmental
inspection or review of such Mortgaged Property to be conducted by a qualified
inspector, the Seller shall cause the Mortgaged Property to be so inspected at 7
the expense of the Purchaser. Upon completion of the inspection, the Seller
shall promptly provide the Purchaser with a written report of the environmental
inspection. After reviewing the environmental inspection report, the Purchaser
shall determine how the Seller shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental inspection report indicates that
the Mortgaged Property is contaminated by hazardous or toxic substances or
wastes and (b) the Purchaser directs the Seller to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Seller shall be reimbursed for
all reasonable costs associated with such foreclosure or acceptance of a deed in
lieu of foreclosure and any related environmental clean up costs, as applicable,
from the related Liquidation Proceeds, or if the Liquidation Proceeds are
insufficient to fully reimburse the Seller, the Seller shall be entitled to be
reimbursed from amounts in the Custodial Account pursuant to Section 2.05 hereof
and to the extent amounts in the Custodial Account are insufficient to fully
reimburse the Seller, the Seller shall be entitled to be reimbursed by the
Purchaser for such deficiencies (upon presentation of evidence of such
deficiency). In the event the Purchaser directs the Seller not to proceed with
foreclosure or acceptance of a deed in lieu of foreclosure, the Seller shall be
reimbursed for all Servicing Advances made with respect to the related Mortgaged
Property from the Custodial Account pursuant to Section 2.05 hereof.
SECTION 2.03 Collection of Mortgage Loan Payments. Continuously from
the Closing Date the Seller shall proceed diligently to collect all payments due
under each of the Mortgage Loans when the same shall become due and payable and
shall take special care in ascertaining and estimating Escrow Payments and all
other charges that will become due and payable with respect to the Mortgage
Loans and each related Mortgaged Property, to the end that the installments
payable by the Mortgagors will be sufficient to pay such charges as and when
they become due and payable.
SECTION 2.04 Establishment of and Deposits to Custodial Account. The
Seller shall segregate and hold all funds collected and received pursuant to the
Mortgage Loans separate and
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apart from any of its own funds and general assets and shall establish and
maintain one or more Custodial Accounts, in the form of time deposit or demand
accounts, titled "D&N Bank in trust for Purchaser of Conventional Commercial
Mortgage Loans, and various Mortgagors". The Custodial Account shall be
established with a Qualified Depository acceptable to the Purchaser. Any funds
deposited in the Custodial Account shall at all times be fully insured to the
full extent permitted under applicable law; provided, however, that to the
extent the Custodial Account is established with the Corporate Trust Department
of the Seller, the Seller may maintain the Custodial Account as a single
account. Funds deposited in the Custodial Account may be drawn on by the Seller
in accordance with Section 2.05. The creation of any Custodial Account shall be
evidenced by a certification in the form of Exhibit 2 hereto, in the case of an
account established with the Seller, or by a letter agreement in the form of
Exhibit 3 hereto, in the case of an account held by a depository other than the
Seller. A copy of such certification or letter agreement shall be furnished to
the Purchaser and, upon request, to any subsequent Purchaser.
The Seller shall deposit in the Custodial Account within one Business
Day of receipt, and retain therein, the following collections received by the
Seller and payments made by the Seller after the Closing Date, other than
payments of principal and interest due on or before the Closing Date, or
received by the Seller prior to the Closing Date but allocable to a period
subsequent thereto:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage;
(iii) all Liquidation Proceeds and any amount received with respect
to REO Property;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 2.10 (other than proceeds to be
held in the Escrow Account and applied to the restoration or
repair of the Mortgaged Property or released to the Mortgagor
in accordance with Section 2.14), and Section 2.11;
(v) all Condemnation Proceeds which are not applied to the
restoration or repair of the Mortgaged Property or released to
the Mortgagor in accordance with Section 2.14;
(vi) any amount required to be deposited in the Custodial Account
pursuant to Section 2.01, 2.09, 2.14, 2.16, 3.01, 3.03 or
4.02;
(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement; and
(viii) any amounts required to be deposited by the Seller pursuant to
Section 2.11 in connection with the deductible clause in any
blanket hazard insurance policy. The foregoing requirements
for deposit into the Custodial Account shall be exclusive, it
being understood and agreed that, without limiting the
generality of the
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foregoing, Ancillary Income need not be deposited by
the Seller into the Custodial Account. Any interest paid on
funds deposited in the Custodial Account by the depository
institution shall accrue to the benefit of the Seller and the
Seller shall be entitled to retain and withdraw such interest
from the Custodial Account pursuant to Section 2.05.
SECTION 2.05 Permitted Withdrawals From Custodial Account. Subject to
Section 2.16 hereof, the Seller shall, from time to time, withdraw funds from
the Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the
manner provided for in Section 3.01;
(ii) to pay to itself the Servicing Fee;
(iii) to reimburse itself for advances of the Seller's funds made
pursuant to Section 3.03, the Seller's right to reimburse
itself pursuant to this subclause (iii) being limited to
amounts received on the related Mortgage Loan which represent
late payments of principal and/or interest in respect of which
any such advance was made, it being understood that, in the
case of any such reimbursement, the Seller's right thereto
shall be prior to the rights of Purchaser, except that, where
the Seller is required to repurchase a Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement or Section 4.02 of
this Agreement, respectively, the Seller's right to such
reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections
and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
(iv) to reimburse itself for unreimbursed Servicing Advances
(except to the extent reimbursed pursuant to Section 2.07),
any accrued but unpaid Servicing Fees and for unreimbursed
advances of Seller funds made pursuant to Sections 2.16, 2.16
or 3.03, the Seller's right to reimburse itself pursuant to
this subclause (iv) with respect to any Mortgage Loan being
limited to related Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Seller from the Mortgagor or otherwise
relating to the Mortgage Loan, it being understood that, in
the case of any such reimbursement, the Seller's right thereto
shall be prior to the rights of the Purchaser except that,
where the Seller is required to repurchase a Mortgage Loan
pursuant to Section 8.03 of the Purchase Agreement or Section
4.02 of this Agreement, respectively, the Seller's right to
such reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections
and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
(v) to pay itself any interest earned on funds deposited in the
Custodial Account (all such interest to be withdrawn monthly
not later than each Remittance Date); and
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(vi) to clear and terminate the Custodial Account upon the
termination of this Agreement. In the event that the Custodial
Account is interest bearing, on each Remittance Date, the
Seller shall withdraw all funds from the Custodial Account
except for those amounts which, pursuant to Section 3.01, the
Seller is not obligated to remit on such Remittance Date. The
Seller may use such withdrawn funds only for the purposes
described in this Section 2.05.
SECTION 2.06 Establishment of and Deposits to Escrow Account. The
Seller shall segregate and hold all funds collected and received pursuant to a
Mortgage Loan constituting Escrow Payments separate and apart from any of its
own funds and general assets and shall establish and maintain one or more Escrow
Accounts, in the form of time deposit or demand accounts. The Escrow Account or
Accounts shall be established with a Qualified Depositary, in a manner which
shall provide maximum available insurance thereunder. Funds deposited in the
Escrow Accounts may be drawn on by the Seller in accordance with Section 2.07.
The creation of any Escrow Account shall be evidenced by a certification in the
form of Exhibit 2 hereto, in the case of an account established with the Seller,
or by a letter agreement in the form of Exhibit 5 hereto, in the case of an
account held by a depository other than the Seller. A copy of such certification
shall be furnished to the Purchaser and, upon request, to any subsequent
Purchaser. The Seller shall deposit in the Escrow Account or Accounts within one
Business Day of receipt, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such
items as required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property. The Seller shall make withdrawals
from the Escrow Account only to effect such payments as are
required under this Agreement, as set forth in Section 2.07.
The Seller shall be entitled to retain any interest paid on
funds deposited in the Escrow Account by the depository
institution, other than interest on escrowed funds required by
law to be paid to the Mortgagor. To the extent required by
law, the Seller shall pay from its own funds interest on
escrowed funds to the Mortgagor notwithstanding that the
Escrow Account may be noninterest bearing or that interest
paid thereon is insufficient for such purposes.
SECTION 2.07 Permitted Withdrawals From Escrow Account. Withdrawals
from each Escrow Account may be made by the Seller only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, fire and hazard insurance premiums or other items
constituting Escrow Payments for the related Mortgage;
(ii) to reimburse the Seller for any Servicing Advance made by the
Seller pursuant to Section 2.08 with respect to a related
Mortgage Loan, but only from amounts
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received on the related Mortgage Loan which represent late
collections of Escrow Payments thereunder;
(iii) to refund to the related Mortgagor any funds found to be in
excess of the amounts required under the terms of the related
Mortgage Loan or applicable federal or state law or judicial
or administrative ruling;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in
accordance with the terms of the related Mortgage and Mortgage
Note;
(v) for application to restoration or repair of the related
Mortgaged Property in accordance with the procedures outlined
in Section 2.14;
(vi) to pay to the Seller, or any Mortgagor to the extent required
by law, any interest paid on the funds deposited in the Escrow
Account; and
(vii) to clear and terminate the Escrow Account on the termination
of this Agreement.
SECTION 2.08 Payment of Taxes, Insurance and Other Charges, Tax
Contracts. With respect to each Mortgage Loan, the Seller shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates, sewer rents, and other charges, as applicable, which are or may
become a lien upon the Mortgaged Property and the status of fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Seller in amounts sufficient for such purposes,
as allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for Escrow Payments, the Seller shall determine that any such
payments relating to taxes or maintaining insurance policies are made by the
Mortgagor at the time they first become due. The Seller assumes full
responsibility for the timely payment of all such bills to the extent it has or
should have notice of such bills and shall effect timely payment of all such
charges irrespective of each Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments, and the Seller shall make advances
from its own funds to effect such payments, such advances to be reimbursable to
the same extent as Servicing Advances.
SECTION 2.09 Protection of Accounts. The Seller may transfer the
Custodial Account or the Escrow Account to a different Qualified Depository from
time to time. Such transfer shall be made only upon obtaining the consent of the
Purchaser, which consent shall not be withheld unreasonably. The Seller shall
bear any expenses, losses or damages sustained by the Purchaser because the
Custodial Account and/or the Escrow Account are not demand deposit accounts.
SECTION 2.10 Maintenance of Hazard Insurance. The Seller shall cause to
be maintained for each Mortgage Loan, hazard insurance such that all buildings
upon the Mortgaged Property are insured by a generally acceptable insurer rated
A:VI or better in the current Best's against loss
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by fire and hazards of extended coverage, in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements securing
such Mortgage Loan and (ii) the greater of (a) the outstanding principal balance
of the Mortgage Loan and (b) an amount such that the proceeds thereof shall be
sufficient to prevent the Mortgagor or the loss payee from becoming a
co-insurer. If required by the Flood Disaster Protection Act of 1973, as
amended, each Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
in effect with a generally acceptable insurance carrier rated A:VI or better in
Best's in an amount representing coverage not less than the lesser of (i) the
outstanding principal balance of the related Mortgage Loan and (ii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. If at any time during the term of the Mortgage Loan, the
Seller determines in accordance with applicable law that a Mortgaged Property is
located in a special flood hazard area and is not covered by flood insurance or
is covered in an amount less than the amount required by the Flood Disaster
Protection Act of 1973, as amended, the Seller shall notify the related
Mortgagor that the Mortgagor must obtain such flood insurance coverage, and if
said Mortgagor fails to obtain the required flood insurance coverage within
forty five (45) days after such notification, the Seller shall immediately
purchase the required flood insurance on the Mortgagor's behalf. The Seller
shall cause to be maintained on each Mortgaged Property such other or additional
insurance as may be required pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance, or
pursuant to the requirements of any primary mortgage guaranty insurer. All
policies required hereunder shall name the Seller and its successors and assigns
as mortgagee and shall be endorsed with non-contributory standard Michigan
mortgagee clauses which shall provide for at least thirty (30) days' prior
written notice of any cancellation, reduction in amount or material change in
coverage. The Seller shall not interfere with the Mortgagor's freedom of choice
in selecting either his insurance carrier or agent, provided, however, that the
Seller shall not accept any such insurance policies from insurance companies
unless such companies are rated A:VI or better in Best's and are licensed to do
business in the jurisdiction in which the Mortgaged Property is located. The
Seller shall determine that such policies provide sufficient risk coverage and
amounts, that they insure the property owner, and that they properly describe
the property address. To the extent reasonably possible the Seller shall furnish
to the Mortgagor a formal notice of expiration of any such insurance in
sufficient time for the Mortgagor to arrange for renewal coverage by the
expiration date; provided, however, that in the event that no such notice is
furnished by the Seller, the Seller shall ensure that replacement insurance
policies are in place in the required coverages and the Seller shall be solely
liable for any losses in the event such coverage is not provided.
Pursuant to Section 2.04, any amounts collected by the Seller under any
such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Seller's normal servicing procedures as
specified in Section 2.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 2.05.
SECTION 2.11 Maintenance of Mortgage Impairment Insurance. In the event
that the Seller shall obtain and maintain a blanket policy insuring against
losses arising from fire and
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hazards covered under extended coverage on all of the Mortgage Loans, then, to
the extent such policy provides coverage in an amount equal to the amount
required pursuant to Section 2.11 and otherwise complies with all other
requirements of Section 2.11, it shall conclusively be deemed to have satisfied
its obligations as set forth in Section 2.11. Any amounts collected by the
Seller under any such policy relating to a Mortgage Loan shall be deposited in
the Custodial Account subject to withdrawal pursuant to Section 2.05. Such
policy may contain a deductible clause, in which case, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 2.11, and there shall have been a loss which would have
been covered by such policy, the Seller shall deposit in the Custodial Account
at the time of such loss the amount not otherwise payable under the blanket
policy because of such deductible clause, such amount to be deposited from the
Seller's funds, without reimbursement therefor. Upon request of the Purchaser,
the Seller shall cause to be delivered to the Purchaser a certified true copy of
such policy and a statement from the insurer thereunder that such policy shall
in no event be terminated or materially modified without thirty (30) days' prior
written notice to the Purchaser.
SECTION 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance. The Seller shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("Seller Employees"). Any such Fidelity Bond and
Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Seller against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Seller Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Seller against
losses in connection with the release or satisfaction of a Mortgage Loan without
having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 2.12 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Seller from its duties
and obligations as set forth in this Agreement. Upon the request of the
Purchaser, the Seller shall cause to be delivered to the Purchaser a certified
true copy of such Fidelity Bond and Errors and Omissions Insurance Policy and a
statement from the surety and the insurer that such Fidelity Bond and Errors and
Omissions Insurance Policy shall in no event be terminated or materially
modified without thirty (30) days' prior written notice to the Purchaser. In the
event that the surety or insurer charges the Seller a fee for providing such
evidence, the Purchaser shall reimburse the Seller for the reasonable expense
incurred by the Seller in furnishing such evidence.
SECTION 2.13 Inspections. The Seller shall inspect the Mortgaged
Property as often as deemed necessary by the Seller to assure itself that the
value of the Mortgaged Property is being preserved. In addition, if any Mortgage
Loan is more than sixty (60) days delinquent, the Seller immediately shall
inspect the Mortgaged Property and shall conduct subsequent inspections in
accordance with Accepted Servicing Practices or as may be required by the
primary mortgage guaranty insurer. The Seller shall keep a written report of
each such inspection.
SECTION 2.14 Restoration of Mortgaged Property. The Seller need not
obtain the approval of the Purchaser prior to releasing any Insurance Proceeds
or Condemnation Proceeds
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to the Mortgagor to be applied to the restoration or repair of the Mortgaged
Property if such release is in accordance with Accepted Servicing Practices and
the terms of this Agreement. At a minimum, the Seller shall comply with the
following conditions in connection with any such release of Insurance Proceeds
or Condemnation Proceeds:
(i) the Seller shall receive satisfactory independent verification
of completion of repairs and issuance of any required
approvals with respect thereto;
(ii) the Seller shall take all steps necessary to preserve the
priority of the lien of the Mortgage, including, but not
limited to requiring waivers with respect to mechanics' and
materialmen's liens;
(iii) the Seller shall verify that the Mortgage Loan is not in
default; and
(iv) pending repairs or restoration, the Seller shall place the
Insurance Proceeds or Condemnation Proceeds in the Escrow
Account.
If the Purchaser is named as an additional mortgagee, the Seller is
hereby empowered to endorse any loss draft issued in respect of such a claim in
the name of the Purchaser.
SECTION 2.15 Deteriorating Mortgage Loans. If, in the course of
carrying out its obligations under this Agreement, the Seller discovers that a
Mortgage Loan (or an interest therein) (i) is or has been, at any time during
the preceding twelve months, (a) classified, (b) in nonaccrual status or (c)
renegotiated due to the financial deterioration of the Mortgagor or (ii) has
been, more than once during the preceding twelve months, more than 30 days past
due in the payment of principal and interest, the Seller shall notify the
Purchaser as soon as possible and cooperate with the Purchaser in the
disposition of any such Mortgage Loan as soon as possible.
SECTION 2.16 Title, Management and Disposition of REO Property. In the
event that title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be taken in the
name of the Purchaser, or in the event the Purchaser is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be consistent with an
Opinion of Counsel obtained by the Seller from any attorney duly licensed to
practice law in the state where the REO Property is located. The Person or
Persons holding such title other than the Purchaser shall acknowledge in writing
that such title is being held as nominee for the Purchaser.
The Seller shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition and
sale. The Seller, either itself or through an agent selected by the Seller and
reasonably acceptable to the Purchaser, shall manage, conserve, protect and
operate the REO Property in the same manner that it manages, conserves, protects
and operates other foreclosed property for its own account, and in the same
manner that similar property in the same locality as the REO Property is
managed. The Seller shall attempt
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to sell the same (and may temporarily rent the same for a period not greater
than one (1) year, except as otherwise provided below) on such terms and
conditions as the Seller deems to be in the best interest of the Purchaser.
The Seller shall use its best efforts to dispose of the REO Property as
soon as possible and shall sell such REO Property in any event within one year
after title has been taken to such REO Property, unless the Seller determines,
and gives an appropriate notice to the Purchaser to such effect, that a longer
period is necessary for the orderly liquidation of such REO Property. If a
period longer than one (1) year is permitted under the foregoing sentence and is
necessary to sell any REO Property, the Seller shall report monthly to the
Purchaser as to the progress being made in selling such REO Property.
The Seller shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements which are a part of such property,
liability insurance and, to the extent required and available under the Flood
Disaster Protection Act of 1973, as amended, flood insurance in the amount
required above. The disposition of REO Property shall be carried out by the
Seller at such price, and upon such terms and conditions, as the Seller deems to
be in the best interests of the Purchaser. The proceeds of sale of the REO
Property shall be promptly deposited in the Custodial Account. As soon as
practical thereafter the expenses of such sale shall be paid and the Seller
shall reimburse itself pursuant to Section 2.05(iii) or 2.05(iv) hereof, as
applicable, for any related unreimbursed Servicing Advances, unpaid Servicing
Fees and unreimbursed advances made pursuant to this Section, and on the
Remittance Date immediately following the Due Period in which such sale proceeds
are received the net cash proceeds of such sale remaining in the Custodial
Account shall be distributed to the Purchaser; provided that such distribution
shall, in any event, be made within ninety (90) days from and after the closing
of the sale of such REO Property.
In addition to the Seller's obligations set forth in this Section 2.16,
the Seller shall deliver written notice to the Purchaser whenever title to any
Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure
together with a copy of the drive-by appraisal of the related Mortgaged Property
obtained by the Seller on or prior to the date of such acquisition.
Notwithstanding anything to the contrary contained herein, the Purchaser may, at
the Purchaser's sole option, terminate the Seller as servicer of any such REO
Property without payment of any Termination Fee with respect thereto, provided
that (i) the Purchaser gives the Seller notice of such termination within ten
(10) Business Days of receipt of said written notice from the Seller which
termination shall be effective no more than fifteen (15) Business Days from and
after the date of said notice from the Purchaser and (ii) the Seller shall on
the date said termination takes effect be reimbursed by Purchaser for any
unreimbursed advances of the Seller's funds made pursuant to Section 3.02 and
any unreimbursed Servicing Advances in each case relating to the Mortgage Loan
underlying such REO Property. In the event of any such termination, the
provisions of Section 8.06 hereof shall apply to said termination and the
transfer of servicing responsibilities with respect to such REO Property to the
Purchaser or its designee.
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With respect to each REO Property, the Seller shall deposit all funds
collected and received in connection with the operation of the REO Property in
the Custodial Account. The Seller shall cause to be deposited on a daily basis
upon the receipt thereof in the Custodial Account all revenues received with
respect to the conservation and disposition of the related REO Property.
SECTION 2.17 Permitted Withdrawals with respect to REO Property. For so
long as the Seller is acting as servicer of any Mortgage Loan relating to any
REO Property, the Seller shall withdraw funds on deposit in the Custodial
Account with respect to each related REO Property necessary for the proper
operation, management and maintenance of the REO Property, including the cost of
maintaining any hazard insurance pursuant to Section 2.10 and the fees of any
managing agent acting on behalf of the Seller. The Seller shall make monthly
distributions on each Remittance Date to the Purchaser of the net cash flow from
the REO Property (which shall equal the revenues from such REO Property net of
the expenses described in Section 2.16 and of any reserves reasonably required
from time to time to be maintained to satisfy anticipated liabilities for such
expenses).
SECTION 2.18 Real Estate Owned Reports. For so long as the Seller is
acting as servicer of any Mortgage Loan relating to any REO Property, the Seller
shall furnish to the Purchaser on or before the 15th day of each month a
statement with respect to any REO Property covering the operation of such REO
Property for the previous month and the Seller's efforts in connection with the
sale of such REO Property and any rental of such REO Property incidental to the
sale thereof for the previous month. That statement shall be accompanied by such
other information as the Purchaser shall reasonably request.
SECTION 2.19 Liquidation Reports. For so long as the Seller is acting
as servicer of any Mortgage Loan relating to any REO Property, upon the
foreclosure sale of any Mortgaged Property or the acquisition thereof by the
Purchaser pursuant to a deed in lieu of foreclosure, the Seller shall submit to
the Purchaser a liquidation report with respect to such Mortgaged Property.
SECTION 2.20 Reports Of Foreclosures and Abandonments. For so long as
the Seller is acting as servicer of any Mortgage Loan relating to any REO
Property, following the foreclosure sale or abandonment of any Mortgaged
Property, the Seller shall report such foreclosure or abandonment as required
pursuant to Section 6050J of the Internal Revenue Code of 1986, as amended
("Code").
SECTION 2.21 Notification of Adjustments. With respect to each Variable
Rate Mortgage Loan, the Seller shall adjust the Mortgage Interest Rate on the
related Interest Rate Adjustment Date and shall adjust the Monthly Payment
accordingly in compliance with the requirements of applicable law and the
related Mortgage and Mortgage Note. If, pursuant to the terms of the Mortgage
Note, another index is selected for determining the Mortgage Interest Rate, the
same index will be used with respect to each Mortgage Note which requires a new
index to be selected, provided that such selection does not conflict with the
terms of the related Mortgage Note. The Seller shall execute and deliver any and
all necessary notices required under applicable law and the terms of the related
Mortgage Note and Mortgage regarding the Mortgage Interest Rate and the Monthly
Payment adjustments. The Seller shall promptly upon written request therefor,
deliver to the Purchaser such notifications and any additional applicable data
regarding
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such adjustments and the methods used to calculate and implement such
adjustments. Upon the discovery by the Seller or the Purchaser that the Seller
has failed to adjust a Mortgage Interest Rate or a Monthly Payment pursuant to
the terms of the related Mortgage Note and Mortgage, the Seller shall
immediately deposit in the Custodial Account from its own funds the amount of
any interest loss caused the Purchaser thereby.
SECTION 2.22 Notification of Maturity Date. With respect to each Fixed
Rate Mortgage Loan, the Purchaser shall execute and deliver to the Mortgagor any
and all necessary notices required under applicable law and the terms of the
related Mortgage Note and Mortgage regarding the maturity date if required under
applicable law.
ARTICLE III
PAYMENTS TO PURCHASER
SECTION 3.01 Remittances. On each Remittance Date the Seller shall
remit by wire transfer of immediately available funds to the Purchaser (a) all
amounts deposited in the Custodial Account as of the close of business on the
Determination Date, except Principal Prepayments received on or after the first
day of the month in which the Remittance Date occurs which shall be remitted to
the Purchaser on the next following Remittance Date; plus (b) an amount
representing compensating interest (up to a maximum amount equal to the
aggregate Servicing Fee for the Mortgage Loans held by the Purchaser with
respect to such Mortgage Loans) which, when added to all amounts allocable to
interest received in connection with such Principal Prepayment equals thirty
(30) days' interest at the Mortgage Interest Rate net of the Servicing Fee on
the amount of principal so prepaid (net of charges against or withdrawals from
the Custodial Account pursuant to Section 2.05), plus (c) all amounts, if any,
which the Servicer is obligated to distribute pursuant to Section 3.03 and minus
(d) any amounts attributable to Monthly Payments collected but due on a Due Date
or Dates subsequent to the first day of the month of the Remittance Date, which
amounts shall be remitted on the Remittance Date next succeeding the Due Period
for such amounts.
With respect to any Principal Prepayment in full, the Seller shall
remit such Principal Prepayment to the Purchaser within five (5) Business Days
of receipt of such Principal Prepayment by the Seller.
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Seller shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one (1) percentage point, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the Seller on the date such late payment is made and shall cover the
period commencing with and including the day following such second Business Day
and ending with the Business Day on which such payment is made, exclusive of
such Business Day; provided, however, that in the event that the Seller remits
such amounts after 11:00 A.M. (Michigan time) on any day, such period shall
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include such day. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Seller of any
such interest shall not be deemed an extension of time for payment or a waiver
of any Event of Default by the Seller.
SECTION 3.02 Statements to Purchaser. Not later than the twentieth day
of each month, the Seller shall furnish by modem and/or diskette to the
Purchaser or its designee a listing of the outstanding Mortgage Loans, including
with respect to each Mortgage Loan: the Mortgage Loan number, the actual
balance, the actual paid-through dates, the Mortgage Interest Rate and principal
and interest payment, and with respect to Variable Rate Mortgage Loans, the next
Interest Rate Adjustment Date, the Mortgage Interest Rate and the principal and
interest payment effective as of the next Interest Rate Adjustment Date (if
available), and shall furnish to the Purchaser manually a Monthly Remittance
Advice, with a trial balance report attached thereto, in the form of Exhibit 1
annexed hereto as to the preceding remittance and the period ending on the
preceding Determination Date. In addition, not more than sixty (60) days after
the end of each calendar year, the Seller shall furnish to each Person who was a
Purchaser at any time during such calendar year an annual statement in
accordance with the requirements of applicable federal income tax law as to the
aggregate of remittances for the applicable portion of such year.
Such obligation of the Seller shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Seller pursuant to any requirements of the Code as from time to time are in
force.
The Seller shall prepare and file, with respect to each Mortgage Loan,
any and all tax returns, information statements or other filings required to be
delivered to any governmental taxing authority or to the Purchaser pursuant to
any applicable law with respect to the Mortgage Loans and the transactions
contemplated hereby. In addition, the Seller shall provide the Purchaser with
such information concerning the Mortgage Loans as is necessary for the Purchaser
to prepare its federal income tax return as the Purchaser may reasonably request
from time to time.
SECTION 3.03 Advances by Seller. On the Business Day immediately
preceding each Remittance Date, the Seller shall deposit in the Custodial
Account from its own funds an amount equal to all Monthly Payments which were
due on the Mortgage Loans during the applicable Due Period and which were
delinquent at the close of business on the immediately preceding Determination
Date or which were deferred pursuant to Section 2.01, provided that the Seller
shall only be required to make such advances with respect to a Mortgage Loan
until such advances are, in the Seller's good faith determination as evidenced
by an Officer's Certificate of the Seller delivered to the Purchaser on the
Business Day next following the Determination Date on or prior to which said
determination is or was made, deemed to be a Nonrecoverable Advance. The
Seller's obligation to make such advances as to any Mortgage Loan will continue
through the earlier of (i) the disposition of such Mortgage Loan and (ii) the
date of foreclosure sale with respect to such Mortgage Loan. Except as otherwise
provided herein, the Seller shall be entitled to first priority reimbursement
pursuant to Section 2.05 hereof for principal and interest advances and for
servicing advances from recoveries from the related mortgagor or from all
Liquidation Proceeds and other payments or recoveries (including Insurance
Proceeds and Condemnation Proceeds) with respect to the related Mortgage Loan.
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ARTICLE IV
GENERAL SERVICING PROCEDURES
SECTION 4.01 Transfers of Mortgaged Property. The Seller shall be
required to enforce any "due-on-sale" provision contained in any Mortgage or
Mortgage Note and to deny assumption by the person to whom the Mortgaged
Property has been or is about to be sold whether by absolute conveyance or by
contract of sale, whether or not the Mortgagor remains liable on the Mortgage
and the Mortgage Note. When the Mortgaged Property has been conveyed by the
Mortgagor, the Seller shall, to the extent it has knowledge of such conveyance,
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause applicable thereto.
If the Seller reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, the Seller, in the Purchaser's name, shall,
to the extent permitted by applicable law, enter into (i) an assumption and
modification agreement with the person to whom such property has been conveyed,
pursuant to which such person becomes liable under the Mortgage Note and the
original Mortgagor remains liable thereon or (ii) in the event the Seller is
unable under applicable law to require that the original Mortgagor remain liable
under the Mortgage Note, a substitution of liability agreement with the
purchaser of the Mortgaged Property pursuant to which the original Mortgagor is
released from liability and the purchaser of the Mortgaged Property is
substituted as Mortgagor and becomes liable under the Mortgage Note. In
connection with any such assumption, neither the Mortgage Interest Rate borne by
the related Mortgage Note, the term of the Mortgage Loan nor the outstanding
principal amount of the Mortgage Loan shall be changed.
To the extent that any Mortgage Loan is assumable, the Seller shall
inquire diligently into the creditworthiness of the proposed transferee, and
shall use the underwriting criteria for approving the credit of the proposed
transferee which are used by the Seller with respect to underwriting mortgage
loans of the same type as the Mortgage Loans. If the credit of the proposed
transferee does not meet such underwriting criteria, the Seller diligently
shall, to the extent permitted by the Mortgage or the Mortgage Note and by
applicable law, accelerate the maturity of the Mortgage Loan.
SECTION 4.02 Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Seller of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Seller shall notify the Purchaser in the Monthly Remittance
Advice as provided in Section 3.02, and may request the release of any Mortgage
Loan Documents from the Purchaser in accordance with this Section 4.02 hereof.
The Seller shall obtain discharge of the related Mortgage Loan as of record
within any related time limit required by applicable law.
If the Seller satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Seller otherwise prejudice any rights
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the Purchaser may have under the mortgage instruments, upon written demand of
the Purchaser, the Seller shall repurchase the related Mortgage Loan at the
Repurchase Price by deposit thereof in the Custodial Account within two (2)
Business Days of receipt of such demand by the Purchaser. Upon such repurchase,
all funds maintained in the Escrow Account with respect to such repurchased
Mortgage Loan shall be transferred to the Seller. The Seller shall maintain the
Fidelity Bond and Errors and Omissions Insurance Policy as provided for in
Section 2.12 insuring the Seller against any loss it may sustain with respect to
any Mortgage Loan not satisfied in accordance with the procedures set forth
herein.
SECTION 4.03 Servicing Compensation. As consideration for servicing the
Mortgage Loans hereunder, the Seller shall withdraw the Servicing Fee with
respect to each Mortgage Loan from the Custodial Account pursuant to Section
2.05 hereof. Such Servicing Fee shall be payable monthly, computed on the basis
of the same principal amount and period in respect of which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee shall be pro-rated
when servicing is for less than one month. The obligation of the Purchaser to
pay, and the Seller's right to withdraw, the Servicing Fee is limited to, and
the Servicing Fee is payable solely from, the interest portion (including
recoveries with respect to interest from Liquidation Proceeds, to the extent
permitted by Section 2.05), of such Monthly Payment collected by the Seller, or
as otherwise provided under Section 2.05.
Additional servicing compensation in the form of Ancillary Income shall
be retained by the Seller. The Seller shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement thereof except as specifically provided for
herein.
SECTION 4.04 Annual Statement as to Compliance. The Seller shall
deliver to the Purchaser, on or before March 31 each year beginning with March
31, 1998, an Officer's Certificate, stating that (i) a review of the activities
of the Seller during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (ii) the Seller
has complied in all material respects with the provisions of Article II and
Article IV, and (iii) to the best of such officer's knowledge, based on such
review, the Seller has fulfilled all its obligations under this Agreement
throughout such year or part thereof, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Seller to cure such default.
SECTION 4.05 Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with the first March 31 that
occurs at least six months after the Closing Date, the Seller at its expense
shall cause a firm of independent public accountants (who may also render other
services to the Seller, or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to the
Purchaser to the effect that such firm has, as part of their examination of the
financial statements of the Seller performed tests embracing the records and
documents relating to mortgage loans serviced by the Seller in accordance with
the requirements of the Uniform Single Audit Program for Mortgage
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Bankers and that their examination disclosed no exceptions that, in their
opinion were material, relating to mortgage loans serviced by the Seller.
SECTION 4.06 Right to Examine Seller Records. The Purchaser, upon
reasonable notice, shall have the right to examine and audit any and all of the
books, records, or other information of the Seller, whether held by the Seller
or by another on its behalf, with respect to or concerning this Agreement or the
Mortgage Loans, during business hours or at such other times as may be
reasonable under applicable circumstances, upon reasonable advance notice.
ARTICLE V
SELLER TO COOPERATE
SECTION 5.01 Provision of Information. During the term of this
Agreement, the Seller shall furnish to the Purchaser such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Purchaser or the
purposes of this Agreement. All such reports or information shall be provided by
and in accordance with all reasonable instructions and directions which the
Purchaser may give.
The Seller shall execute and deliver all such instruments and take all
such action as the Purchaser may reasonably request from time to time, in order
to effectuate the purposes and to carry out the terms of this Agreement.
SECTION 5.02 Financial Statements; Servicing Facilities. In connection
with disposition of Mortgage Loans, the Purchaser may make available to a
prospective purchaser audited financial statements of the Seller for the most
recently completed two (2) fiscal years for which such statements are available,
as well as a Consolidated Statement of Condition at the end of the last two (2)
fiscal years covered by any Consolidated Statement of Operations. If it has not
already done so, the Seller shall furnish promptly to the Purchaser or a
prospective purchaser copies of the statements specified above; provided,
however, that prior to furnishing such statements or information to any
prospective purchaser, the Seller may require such prospective purchaser to
execute a confidentiality agreement in form reasonably satisfactory to it.
The Seller shall make available to the Purchaser or any prospective
Purchaser a knowledgeable financial or accounting officer for the purpose of
answering questions with respect to recent developments affecting the Seller or
the financial statements of the Seller, and to permit any prospective purchaser
to inspect the Seller's servicing facilities for the purpose of satisfying such
prospective purchaser that the Seller has the ability to service the Mortgage
Loans as provided in this Agreement.
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ARTICLE VI
TERMINATION
SECTION 6.01 Damages. The Purchaser shall have the right at any time to
seek and recover from the Seller any damages or losses suffered by it as a
result of any failure by the Seller to observe or perform any duties,
obligations, covenants or agreements herein contained.
SECTION 6.02 Termination. The respective obligations and
responsibilities of the Seller shall terminate upon: (i) the later of the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan serviced by the Seller or the disposition of all REO Property
serviced by the Seller and the remittance of all funds due hereunder; or (ii) by
mutual consent of the Seller and the Purchaser in writing, unless earlier
terminated pursuant to this Agreement.
SECTION 6.03 Termination Without Cause. The Purchaser may, at its sole
option, upon not less than thirty (30) days' prior written notice to the Seller
terminate any rights the Seller may have hereunder with respect to any or all of
the Mortgage Loans, without cause, upon written notice, provided that the Seller
shall have an additional period of not more than sixty (60) days from and after
the date of said notice from the Purchaser within which to effect the related
transfer of servicing. Any such notice of termination shall be in writing and
delivered to the Seller as provided in Section 12.01 of this Agreement. In the
event of such termination, the Seller shall be entitled to a Termination Fee,
equal to [1.50]% of the then current aggregate unpaid principal balance of the
related Mortgage Loans; provided, however, that the successor servicer is not an
Affiliate of the Seller.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.01 Possession of Servicing Files. The contents of each
Servicing File are and shall be held in trust by the Seller for the benefit of
the Purchaser as the owner thereof. The Seller shall maintain in the Servicing
File a copy of the contents of each Mortgage File and the originals of the
documents in each Mortgage File not delivered to the Purchaser. The possession
of the Servicing File by the Seller is at the will of the Purchaser for the sole
purpose of servicing the related Mortgage Loan, pursuant to this Agreement, and
such retention and possession by the Seller is in its capacity as Seller only
and at the election of the Purchaser. The Seller shall release its custody of
the contents of any Servicing File only in accordance with written instructions
from the Purchaser or other termination of the Seller with respect to the
related Mortgage Loans, unless such release is required as incidental to the
Seller's servicing of the Mortgage Loans pursuant to this Agreement, or is in
connection with a repurchase of any Mortgage Loan pursuant to Section 8.03 of
the Purchase Agreement or Section 4.02 of this Agreement. The Seller shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be marked clearly to reflect the
ownership of each Mortgage Loan by the Purchaser. In particular, the Seller
shall maintain in its possession, available for inspection by
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the Purchaser or its designee during normal business hours, and shall deliver to
the Purchaser or its designee upon reasonable notice, evidence of compliance
with all federal, state and local laws, rules and regulations, including but not
limited to documentation as to the method used in determining the applicability
of the provisions of the Flood Disaster Protection Act of 1973, as amended, to
the Mortgaged Property, documentation evidencing insurance coverage and periodic
inspection reports as required by Section 2.13. To the extent that original
documents are not required for purposes of realization of Liquidation Proceeds
or Insurance Proceeds, documents maintained by the Seller may be in the form of
microfilm or microfiche.
The Seller shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Seller
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Seller shall be under no obligation to deal with
any person with respect to this Agreement or the Mortgage Loans unless the books
and records show such person as the owner of the Mortgage Loan. The Purchaser
may, subject to the terms of this Agreement, sell or transfer one or more of the
Mortgage Loans. The Purchaser also shall advise the Seller of the transfer. Upon
receipt of notice of the transfer, the Seller shall mark its books and records
to reflect the ownership of the Mortgage Loans of such assignee, and shall
release the Purchaser from its obligations hereunder with respect to the
Mortgage Loans sold or transferred.
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT
SECTION 8.01 Indemnification. The Seller agrees to indemnify and hold
the Purchaser harmless from any liability, claim, loss or damage (including,
without limitation, any reasonable legal fees, judgments or expenses relating to
such liability, claim, loss or damage) to the Purchaser directly or indirectly
resulting from the Seller's failure to observe and perform any or all of
Seller's duties, obligations, covenants, agreements, warranties or
representations contained in this Agreement or in the Purchase Agreement or the
Seller's failure to comply with all applicable requirements with respect to the
transfer of Servicing Rights as set forth herein. The Seller shall notify the
Purchaser as soon as reasonably possible if a claim is made by a third party
with respect to this Agreement.
SECTION 8.02 Limitation on Liability of Seller and Others. Neither the
Seller nor any of the directors, officers, employees or agents of the Seller
shall be under any liability to the Purchaser for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment, provided, however, that this provision
shall not protect the Seller or any such person against any breach of warranties
or representations made herein, or failure to perform its obligations in
material compliance with any standard of care set forth in this Agreement, or
any liability which would otherwise be imposed by reason of any breach of the
terms and conditions of this Agreement. The Seller and any director, officer,
employee or agent of the Seller may rely in good faith on any document of any
kind prima facie
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properly executed and submitted by any Person with respect to any matter arising
hereunder. The Seller shall not be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Agreement and which in its opinion may
involve it in any expense or liability, provided, however, that the Seller may,
with the prior written consent of the Purchaser, undertake any such action which
it may deem necessary or desirable in respect to this Agreement and the rights
and duties of the parties hereto. In such event, the Seller shall be entitled to
reimbursement from the Purchaser of the reasonable legal expenses and costs of
such action.
SECTION 8.03 Limitation on Registration and Assignment by Seller. The
Purchaser has entered into this Agreement with the Seller in reliance upon the
independent status of the Seller, and the representations as to the adequacy of
its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Nonetheless, the Seller may subcontract all or a portion of its servicing
obligations under this Agreement to one or more of its affiliates. However, if
none of its affiliates is engaged in the business of servicing mortgage loans,
the Seller may subcontract all or a portion of its obligations under this
Agreement to an unrelated third party subject to approval of a majority of the
Independent Directors. Any delegation of such rights or duties shall not release
the Seller from its obligations hereunder and the Seller shall remain
responsible hereunder for all acts and omissions of any delegee as if such acts
or omissions were those of the Seller and (b) any such assignee or designee
shall satisfy the requirements for a successor or surviving Person set forth in
Section 8.05 and Section 8.06 hereof. The Seller shall notify the Purchaser in
writing at least 30 days prior to selling or otherwise disposing of all or
substantially all of its assets and receipt of such notice shall entitle the
Purchaser to terminate this Agreement except as set forth in Section 8.06
hereof.
The Seller shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Seller and the Purchaser or upon
the determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Seller. Any such
determination permitting the resignation of the Seller shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance acceptable to the Purchaser. No such
resignation shall become effective until a successor shall have assumed the
Seller's responsibilities and obligations hereunder in the manner provided in
Section 8.06.
Without in any way limiting the generality of this Section 8.03, in the
event that the Seller either shall assign this Agreement or the servicing
responsibilities hereunder or delegate its duties hereunder or any portion
thereof without satisfying the requirements set forth herein, then the Purchaser
shall have the right to terminate this Agreement as set forth in Section 6.03,
without any payment of any penalty or damages and without any liability
whatsoever to the Seller (other than with respect to accrued but unpaid
Servicing Fees and Servicing Advances remaining unpaid) or any third party.
SECTION 8.04 Assignment by Purchaser. The Purchaser shall have the
right, without the consent of the Seller, to assign, in whole or in part, its
interest under this Agreement with
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respect to some or all of the Mortgage Loans, and designate any person to
exercise any rights of the Purchaser hereunder, by executing an Assignment and
Assumption Agreement substantially in the form of Exhibit G to the Purchase
Agreement and the assignee or designee shall accede to the rights and
obligations hereunder of the Purchaser with respect to such Mortgage Loans. All
references to the Purchaser in this Agreement shall be deemed to include its
assignee or designee. Notwithstanding the foregoing, at any one time there shall
not be more than fifteen (15) separate Purchasers under this Agreement.
SECTION 8.05 Merger or Consolidation of the Seller. The Seller will
keep in full effect its existence, rights and franchises as a corporation under
the laws of the state of its incorporation except as permitted herein, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the Seller,
shall be the successor of the Seller hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall be an institution whose deposits are insured
by FDIC or a company whose business includes the origination and servicing of
mortgage loans and shall satisfy the requirements of Section 8.06 with respect
to the qualifications of a successor to the Seller.
SECTION 8.06 Successor to the Seller. Prior to termination of Seller's
responsibilities and duties under this Agreement pursuant to Sections 2.16,
6.03, 8.03 or 11.01, the Purchaser shall (i) succeed to and assume all of the
Seller's responsibilities, rights, duties and obligations under this Agreement,
or (ii) appoint a successor having a tangible net worth of not less than
$30,000,000 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Seller under this Agreement
prior to the termination of Seller's responsibilities, duties and liabilities
under this Agreement. In connection with such appointment and assumption, the
Purchaser may make such arrangements for the compensation of such successor out
of payments on Mortgage Loans as it and such successor shall agree. In the event
that the Seller's duties, responsibilities and liabilities under this Agreement
should be terminated pursuant to the aforementioned sections, the Seller shall
discharge such duties and responsibilities during the period from the date it
acquires knowledge of such termination until the effective date thereof with the
same degree of diligence and prudence which it is obligated to exercise under
this Agreement, and shall take no action whatsoever that might impair or
prejudice the rights or financial condition of its successor. The resignation or
removal of Seller pursuant to the aforementioned Sections shall not become
effective until a successor shall be appointed pursuant to Article X hereof this
Section and shall in no event relieve the Seller of the representations,
warranties and covenants made pursuant to and the remedies available to the
Purchaser with respect thereto, it being understood and agreed that the
provisions of such Article X shall be applicable to the Seller notwithstanding
any such resignation or termination of the Seller, or the termination of this
Agreement.
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Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Seller and to the Purchaser, an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Seller, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement pursuant to Section 2.16, 6.03, 8.03 or 11.01
shall not affect any claims that the Purchaser may have against the Seller
arising prior to any such termination or resignation.
The Seller shall timely deliver to the successor the funds in the
Custodial Account and the Escrow Account and the Mortgage Files and related
documents and statements held by it hereunder and the Seller shall account for
all funds. The Seller shall execute and deliver such instruments and do such
other things all as may reasonably be required to more fully and definitely vest
and confirm in the successor all such rights, powers, duties, responsibilities,
obligations and liabilities of the Seller. The successor shall make arrangements
as it may deem appropriate to reimburse the Seller for amounts the Seller
actually expended pursuant to this Agreement which the successor is entitled to
retain hereunder and which would otherwise have been recovered by the Seller
pursuant to this Agreement but for the appointment of the successor servicer.
Upon a successor's acceptance of appointment as such, the Seller shall
notify by mail the Purchaser of such appointment.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As of the Closing Date, the Purchaser warrants and represents to, and
covenants and agrees with, the Seller as follows:
SECTION 9.01 Due Organization and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Purchaser has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement evidences the valid, binding and
enforceable obligation of the Purchaser; and all requisite corporate action has
been taken by the Purchaser to make this Agreement valid and binding upon the
Purchaser in accordance with its terms.
SECTION 9.02 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Purchaser's charter or by-laws or any legal
restriction or any agreement or instrument to which the Purchaser is now a party
or by which it is bound, or constitute a default or result in an acceleration
under any of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Purchaser or its property is
subject.
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SECTION 9.03 Ability to Perform. The Purchaser does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant made by it in this Agreement.
SECTION 9.04 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Purchaser, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Purchaser, or in
any material impairment of the right or ability of the Purchaser to carry on its
business substantially as now conducted, or in any material liability on the
part of the Purchaser, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of the Purchaser contemplated herein.
SECTION 9.05 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Purchaser of, or compliance by the
Purchaser with, this Agreement as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 9.06 Assistance. To the extent reasonably possible, the
Purchaser shall cooperate with and assist the Seller as requested by the Seller,
in carrying out Seller's covenants, agreements, duties and responsibilities
under the Purchase Agreement and in connection therewith shall execute and
deliver all such papers, documents and instruments as nay be necessary and
appropriate in furtherance thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Closing Date, the Seller warrants and represents to, and
covenants and agrees with, the Purchaser as follows:
SECTION 10.01 Due Organization and Authority. The Seller is a federally
chartered savings bank duly organized and validly exisiting under the laws of
the United States and is licensed, qualified and in good standing in each state
where a Mortgaged Property is located if the laws of such state require
licensing or qualification in order to conduct business of the type conducted by
the Seller, and in any event the Seller is in compliance with the laws of any
such state to the extent necessary to ensure the enforceability of the related
Mortgage Loan in accordance with the terms of this Agreement; the Seller has the
full corporate power and authority to execute and deliver this Agreement and to
perform in accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Seller and the consummation of the transactions
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contemplated hereby have been duly and validly authorized; this Agreement
evidences the valid, legal, binding and enforceable obligation of the Seller
subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits
provided thereunder, regardless of whether such enforcement is sought in a
proceeding in equity or at law; and all requisite corporate action has been
taken by the Seller to make this Agreement valid and binding upon the Seller in
accordance with its terms.
SECTION 10.02 Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Seller.
SECTION 10.03 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Seller's charter or by-laws or any legal
restriction or any agreement or instrument to which the Seller is now a party or
by which it is bound, or constitute a default or result in an acceleration under
any of the foregoing, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is subject, or
impair the ability of the Purchaser to realize on the Mortgage Loans, or impair
the value of the Mortgage Loans, or impair the ability of the Purchaser to
realize the full amount of any mortgage insurance benefits accruing pursuant to
this Agreement.
SECTION 10.04 Ability to Service. The Seller is duly qualified,
licensed, registered and otherwise authorized under all applicable federal,
state and local laws and regulations, meets the minimum capital requirements set
forth by OTS, and is in good standing to enforce, originate, sell mortgage
loans, and service mortgage loans in the jurisdiction wherein the Mortgaged
Properties are located.
SECTION 10.05 Ability to Perform. The Seller does not believe, nor does
it have any reason to believe, that it cannot perform each and every covenant
contained in this Agreement.
SECTION 10.06 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Seller, before any
court, administrative agency or other tribunal asserting the invalidity of this
Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Seller, or in any
material impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material liability on the
part of the Seller, or which would draw into question the validity of this
Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Seller contemplated herein, or which
would be likely to impair materially the ability of the Seller to perform under
the terms of this Agreement.
SECTION 10.07 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance
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by the Seller of or compliance by the Seller with this Agreement or the
servicing of the Mortgage Loans as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 10.08 No Untrue Information. Neither this Agreement nor any
statement, tape, diskette, form, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of fact or omits to state a
fact necessary to make the statements contained therein not misleading.
SECTION 10.09 Reasonable Servicing Fee. The Seller acknowledges and
agrees that the Servicing Fee represents reasonable compensation for performing
such services and that the entire Servicing Fee shall be treated by the Seller,
for accounting and tax purposes, as compensation for the servicing and
administration of the Mortgage Loans pursuant to this Agreement.
SECTION 10.10 Financial Statements. The Servicer has delivered to the
Purchaser financial statements as to its last two complete fiscal years. All
such financial statements fairly present the pertinent results of operations and
changes in financial position for each of such periods and the financial
position at the end of each such period of the Servicer and its subsidiaries and
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set forth in the
notes thereto. There has been no change in the business, operations, financial
condition, properties or assets of the Servicer since the date of the Servicer's
financial statements that would have a material adverse effect on its ability to
perform its obligations under this Agreement.
SECTION 10.11 Conflict of Interest. The Seller agrees that it shall
service the Mortgage Loans hereunder solely with a view toward the interests of
the Purchaser, and without regard to the interests of the Seller or its other
affiliates.
ARTICLE XI
DEFAULT
SECTION 11.01 Events of Default. The following shall constitute an
Event of Default under this Agreement on the part of the Seller:
(a) any failure by the Seller to remit to the Purchaser any
payment required to be made under the terms of this Agreement
which continues unremedied for a period of five (5) Business
Days after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Seller by the Purchaser; or
(b) the failure by the Seller duly to observe or perform in any
material respect any other of the covenants or agreements on
the part of the Seller set forth in this
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Agreement which continues unremedied for a period of thirty
(30) days (except that such number of days shall be fifteen
(15) in the case of a failure to pay any premium for any
insurance policy required to be maintained under this
Agreement) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Seller by the Purchaser; or
(c) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a
conservator or receiver or liquidator in any insolvency,
bankruptcy, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against
the Seller and such decree or order shall have remained in
force undischarged or unstayed for a period of sixty (60)
days; or
(d) the Seller shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Seller or of or
relating to all or substantially all of its property; or
(e) the Seller shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
(f) the Seller, without the consent of the Purchaser, attempts to
assign this Agreement or the servicing responsibilities
hereunder or to delegate any substantial part of its duties
hereunder or any portion thereof; or
(g) the Seller fails to maintain its license to do business or
service commercial mortgage loans in any jurisdiction where
the Mortgaged Properties are located and such failure results
in a material adverse effect on the Mortgage Loans, the
servicing of the Mortgage Loans, or the Purchaser's rights
with respect to the Mortgage Loans.
In each and every such case, so long as an Event of Default shall not
have been remedied, in addition to whatsoever rights the Purchaser may have at
law or equity to damages, including injunctive relief and specific performance,
the Purchaser, by notice in writing to the Seller, may terminate without
compensation or reimbursement (other than Servicing Fees previously earned but
remaining unpaid and Servicing Advances remaining unreimbursed) all the rights
and obligations of the Seller under this Agreement and in and to the Mortgage
Loans and the proceeds thereof.
Upon receipt by the Seller of such written notice, all authority and
power of the Seller under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 8.06. Upon written request from the Purchaser, the Seller
shall prepare, execute and deliver any and all documents and other
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instruments reasonably requested by the Purchaser, place in such successor's
possession all Mortgage Files (to the extent not properly delivered to the
Purchaser by the Seller previously), and do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise, at the Seller's sole
expense. The Seller agrees to reasonably cooperate with the Purchaser and such
successor in effecting the termination of the Seller's responsibilities and
rights hereunder, including, without limitation, the transfer to such successor
for administration by it of all cash amounts which shall at the time be credited
by the Seller to the Custodial Account or Escrow Account or thereafter received
with respect to the Mortgage Loans.
SECTION 11.02 Waiver of Defaults. The Purchaser may waive any default
by the Seller in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon except
to the extent expressly so waived.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01 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:
(a) If to Purchaser to:
D&N Capital Corporation
400 Quincy Street
Hancock, Michigan 49930
Attention: Corporate Secretary
(b) If to Seller to:
D&N Bank
400 Quincy Street
Hancock, Michigan 49930
Attention: Corporate Secretary
SECTION 12.02 Waivers. Either the Seller or the Purchaser may upon
consent of all parties, by written notice to the others:
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(a) Waive compliance with any of the terms, conditions or
covenants required to be complied with by the others
hereunder; and
(b) Waive or modify performance of any of the obligations of the
others hereunder.
The waiver by any 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.
SECTION 12.03 Entire Agreement; Amendment. This Agreement and the
Purchase Agreement constitute the entire agreement between the parties with
respect to servicing of the Mortgage Loans. This Agreement may be amended and
any provision hereof waived, but, only in writing signed by the party against
whom such enforcement is sought.
SECTION 12.04 Execution; Binding Effect. This Agreement may be executed
in one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement. Subject to Sections 8.03 and 8.04, this Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns.
SECTION 12.05 Headings. Headings of the Articles and Sections in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.
SECTION 12.06 Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Michigan and the obligations, rights
and remedies hereunder shall be determined in accordance with the substantive
laws of the State of Michigan (without regard to conflicts of laws principles),
except to the extent preempted by Federal law.
SECTION 12.07 Relationship of Parties. Nothing herein contained shall
be deemed or construed to create a partnership or joint venture between the
parties. The duties and responsibilities of the Seller shall be rendered by it
as an independent contractor and not as an agent of the Purchaser. The Seller
shall have full control of all of its acts, doings, proceedings, relating to or
requisite in connection with the discharge of its duties and responsibilities
under this Agreement.
SECTION 12.08 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 12.09 Recordation of Assignments of Mortgage. To the extent
permitted by applicable law, each of the Assignments of Mortgage is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
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recording office or elsewhere, such recordation to be effected by the Purchaser
or the Purchaser's designee, but in any event, at the Servicer's expense for a
single recordation relating to each Assignment of Mortgage in the event
recordation is either necessary under applicable law or requested by the
Purchaser at its sole option.
SECTION 12.10 Exhibits. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are integral parts of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date and year first above written.
D&N CAPITAL CORPORATION
(the Purchaser)
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
D&N BANK
(the Seller)
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
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EXHIBIT 1
MONTHLY REMITTANCE ADVICE
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EXHIBIT 2
CUSTODIAL ACCOUNT CERTIFICATION
___________, 1997
_________________ hereby certifies that it has established the account
described below as a Custodial Account pursuant to Section 2.04 of the Servicing
Agreement, dated as of _________, 1997.
Title of Account: "D&N Bank, in trust for Purchaser of Commercial Mortgage
Loans, and various Mortgagors."
Account Number: ________________________
Address of office or branch of the Seller at which Account is
maintained:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
D&N BANK
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 3
CUSTODIAL ACCOUNT LETTER AGREEMENT
_____________, 1997
To: ____________________ ____________________ ____________________ (the
"Depository"). As Seller under the Servicing Agreement, dated as of ______,
1997,(the "Agreement"), we hereby authorize and request you to establish an
account, as a Custodial Account pursuant to Section 2.04 of the Agreement, to be
designated as D&N Bank, in trust for Purchaser of Commercial Mortgage Loans and
various Mortgagors." All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Seller. You may refuse any deposit which would
result in violation of the requirement that the account be fully insured as
described below. This letter is submitted to you in duplicate. Please execute
and return one original to us.
D&N BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number, at the office of
the Depository indicated above, and agrees to honor withdrawals on such account
as provided above. The full amount deposited at any time in the account will be
insured by the Federal Deposit Insurance Corporation through the Bank Insurance
Fund ("BIF") or the Savings Association Insurance Fund ("SAIF").
------------------------------------------
Depository
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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EXHIBIT 4
ESCROW ACCOUNT CERTIFICATION
_____________, 1997
_____________________________ hereby certifies that it has established the
account described below as an Escrow Account pursuant to Section 2.06 of the
Servicing Agreement, dated as of ________, 1997, Conventional Commercial
Mortgage Loans. Title of Account: "D&N Bank in trust for Purchaser of Commercial
Mortgage Loans and various Mortgagors."
Account Number: _____________________________
Address of office or branch of the Seller at which Account is
maintained:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
D&N BANK
By:__________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT 5
ESCROW ACCOUNT LETTER AGREEMENT
______________, 1997
To: _________________ ____________________ ____________________ (the
"Depository"). As Seller under the Servicing Agreement, dated as of
____________, 1997, Conventional Commercial Mortgage Loans (the "Agreement"), we
hereby authorize and request you to establish an account, as an Escrow Account
pursuant to Section 2.06 of the Agreement, to be designated as "D&N Bank in
trust for the Purchasers of Commercial Loans and various Mortgagors." All
deposits in the account shall be subject to withdrawal therefrom by order signed
by the Seller. You may refuse any deposit which would result in violation of the
requirement that the account be fully insured as described below. This letter is
submitted to you in duplicate. Please execute and return one original to us.
D&N BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Date:____________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number, at the office of
the Depository indicated above, and agrees to honor withdrawals on such account
as provided above. The full amount deposited at any time in the account will be
insured by the Federal Deposit Insurance Corporation through the Bank Insurance
Fund ("BIF") or the Savings Association Insurance Fund ("SAIF").
------------------------------------------
Depository
By:_______________________________________
Name:_____________________________________
Title:____________________________________