ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
------------------------------------------------
This is an Assignment, Assumption and Recognition Agreement made this 30th
day of September, 1998, among Salomon Brothers Realty Corp. (the "Seller"),
Wilshire Real Estate Investment Trust Inc. (the "Purchaser") and Long Beach
Mortgage Company (the "Company").
In consideration of the mutual promises contained herein the parties hereto
agree that the mortgage loans listed on EXHIBIT ONE annexed hereto purchased by
the Seller from the Company in 1997 (the "1997 Mortgage Loans"), the mortgage
loans listed on EXHIBIT TWO annexed hereto purchased by the Seller from the
Company on February 20, 1998 (the "February Mortgage Loans"), the mortgage loans
listed on EXHIBIT THREE annexed hereto purchased by the Seller from the Company
on March 2, 1998 (the "March Mortgage Loans") and the mortgage loans listed on
EXHIBIT FOUR annexed hereto purchased by the Seller from the Company on April
14, 1998 (the "April Mortgage Loans", collectively with the 1997 Mortgage Loans,
the February Mortgage Loans and the March Mortgage Loans, the "Mortgage Loans")
now serviced by the Company for the Seller pursuant to the Master Mortgage Loan
Purchase and Servicing Agreement (the "Purchase Agreement"), dated as of June 1,
1997, between the Seller and the Company shall be subject to the terms of this
Agreement.
WARRANTIES
----------
1. (a) The Company and the Seller warrant and represent that attached
hereto as EXHIBIT FIVE is a true, accurate and complete copy of the Purchase
Agreement, which Purchase Agreement is in full force and effect as of the date
hereof and which has not been amended or modified in any respect nor has any
notice of termination been given thereunder.
(b) The Seller warrants and represents that it is the lawful owner of
the Mortgage Loans with the full right to transfer the Mortgage Loans free from
any claim or encumbrance whatsoever.
(c) The Seller hereby warrants and represents to the Purchaser that
no event has occurred from the date of origination, August 20, 1998, September
2, 1998 and September 30, 1998, respectively, with respect to the 1997 Mortgage
Loans, the February Mortgage Loans, the March Mortgage Loans and the April
Mortgage Loans, respectively, to the date hereof that would result in any
representation and warranty made pursuant to Section 3.01 of the Purchase
Agreement being untrue if made as of the date hereof with respect to the
Mortgage Loans (other than any statistical information with respect to the
Mortgage Loans and any changes due to the receipt of payments on the Mortgage
Loans, adjustment of the Mortgage Interest Rates on the Mortgage Loans and
similar changes, which information as reflected on EXHIBIT ONE, EXHIBIT TWO,
EXHIBIT THREE and EXHIBIT FOUR hereto is accurate in all material respects as of
September 1, 1998). In the event of a breach of the foregoing representation and
warranty which materially and adversely affects the value of any Mortgage Loan
or the Purchaser's interest therein, the Seller shall repurchase such affected
Mortgage Loan at a repurchase price equal to the unpaid principal balance of
such Mortgage Loan plus accrued interest at the net Mortgage Interest Rate from
the paid through date of the Mortgage Loan to the first day of the month
following the month in which such repurchase is effected; provided, that to the
extent that the Company would otherwise be required to repurchase a Mortgage
Loan due to the breach of any of the representations and warranties that are
made or deemed to have been made by the Company (other than any statistical
information with respect to the Mortgage Loans and any changes due to the
receipt of payments on the Mortgage Loans, adjustment of the Mortgage Interest
Rates on the Mortgage Loans and similar changes) after the date of origination
with respect to the 1997 Mortgage Loans, after August 20, 1998 with respect to
the February Mortgage Loans, after September 2, 1998 with respect to the March
Mortgage Loans and after September 30, 1998 with respect to the April Mortgage
Loans, then the Company (and not the Seller) shall be required to repurchase the
affected Mortgage Loan, and the Purchaser shall have no remedy against the
Seller. It is understood and agreed that the obligations of the Seller set forth
in this Section 1(c) to repurchase an affected Mortgage Loan constitutes the
sole remedy of the Purchaser respecting a breach of the representation and
warranty made in this Section 1(c).
ASSIGNMENT AND ASSUMPTION
-------------------------
2. The Seller hereby assigns to the Purchaser (i) all of its right,
title and interest in and to the Mortgage Loans and (ii) all of its right,
title, and interest in, to, and under the Purchase Agreement to the extent of
the Mortgage Loans, and the Purchaser hereby assumes all of the Seller's
obligations under the Purchase Agreement with respect to the Mortgage Loans from
and after the date hereof, and the parties hereto agree that the Seller shall be
relieved and released of all of its obligations under the Purchase Agreement to
the extent of the Mortgage Loans from and after the date hereof.
RECOGNITION OF THE PURCHASER
----------------------------
3. From and after the date hereof, the Company shall recognize the
Purchaser as the owner of the Mortgage Loans and will service the Mortgage Loans
for the Purchaser as if the Purchaser and the Company had entered into a
separate servicing agreement for the servicing of the Mortgage Loans in the form
of the Purchase Agreement, the terms of which are incorporated herein by
reference. It is the intention of the Seller, the Company and the Purchaser that
this Agreement will be a separate and distinct agreement, and the entire
agreement, between the Company and the Purchaser to the extent of the Mortgage
Loans and shall be binding upon and for the benefit of the respective successors
and assigns of the parties hereto.
ACKNOWLEDGEMENT
---------------
4. It is hereby acknowledged and agreed by the Purchaser, the Seller and
the Company that the assignment of the Seller's rights under this Agreement to
the extent of the Mortgage Loans and the Purchaser's assumption of such rights
shall not entitle the Purchaser to purchase mortgage loans pursuant to the
Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SALOMON BROTHERS REALTY CORP.,
Seller
By:____________________________
Name:__________________________
Title:_________________________
WILSHIRE REAL ESTATE INVESTMENT
TRUST, INC.
Purchaser
By:____________________________
Name:__________________________
Title:_________________________
LONG BEACH MORTGAGE COMPANY
Company
By:____________________________
Name:__________________________
Title:_________________________
EXECUTION COPY
MASTER MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT
Dated and effective as of June 1, 1997
SALOMON BROTHERS REALTY CORP.
(Purchaser)
and
LONG BEACH MORTGAGE COMPANY
(Company)
Fixed Rate and Adjustable Rate Mortgage Loans
Flow Delivery Program
TABLE OF CONTENTS
_________________
ARTICLE I DEFINITIONS....................................................... 1
Adjustable Rate
Mortgage Loan.......................................................... 1
Adjustment Date........................................................ 1
Agreement.............................................................. 2
Appraised Value........................................................ 2
Assignment and
Conveyance............................................................. 2
Assignment of Mortgage................................................. 2
Available Remittance
Amount................................................................. 2
Balloon Loan........................................................... 2
Business Day........................................................... 2
Closing Date........................................................... 2
Commitment Letters..................................................... 2
Company................................................................ 2
Confirmation........................................................... 3
Custodial Account...................................................... 3
Custodial Agreement.................................................... 3
Custodian.............................................................. 3
Customary Servicing Procedures......................................... 3
Cut-off Date........................................................... 3
Cut-off Date Principal Balance......................................... 3
Deleted Mortgage Loan.................................................. 3
Determination Date..................................................... 3
Due Date............................................................... 3
Due Period............................................................. 4
Eligible Account....................................................... 4
Escrow Account......................................................... 4
Escrow Payments........................................................ 4
Event of Default....................................................... 4
FDIC................................................................... 4
FHLMC.................................................................. 4
Fidelity Bond.......................................................... 4
Final Closing Date..................................................... 4
Final Due Diligence Date............................................... 4
Final Closing Date Principal Balance................................... 4
FNMA................................................................... 4
HUD.................................................................... 5
Index.................................................................. 5
Initial Closing Date................................................... 5
Initial Custodial Account Deposit...................................... 5
Liquidated Mortgage Loan............................................... 5
i
Liquidation Proceeds................................................... 5
Loan-to-Value Ratio.................................................... 5
LTV.................................................................... 5
Margin................................................................. 5
Maximum Rate........................................................... 5
Minimum Rate........................................................... 5
Monthly Payment........................................................ 6
Mortgage............................................................... 6
Mortgage File.......................................................... 6
Mortgage Interest Rate................................................. 6
Mortgage Loan.......................................................... 6
Mortgage Loan Documents................................................ 6
Mortgage Loan Package.................................................. 6
Mortgage Loan Remittance Rate.......................................... 6
Mortgage Loan Schedule................................................. 6
Mortgage Note.......................................................... 8
Mortgaged Property..................................................... 8
Mortgagor.............................................................. 8
Net Liquidation Proceeds............................................... 8
Net REO Disposition Proceeds........................................... 8
Nonrecoverable Advance................................................. 8
Officers' Certificate.................................................. 8
Opinion of Counsel..................................................... 8
OTS.................................................................... 8
P&I Advance............................................................ 8
Pass-Through Transfer.................................................. 9
Periodic Rate Cap...................................................... 9
Person................................................................. 9
Prepayment Interest Excess............................................. 9
Prepayment Interest Shortfall.......................................... 9
Principal Prepayment................................................... 9
Purchaser.............................................................. 9
Purchase Price......................................................... 9
Qualified Substitute Mortgage Loan..................................... 9
Realized Loss.......................................................... 10
Reconstitution Agreements.............................................. 10
Reconstitution Date.................................................... 10
Remittance Date........................................................ 11
REO Account............................................................ 11
REO Disposition........................................................ 11
REO Disposition Proceeds............................................... 11
REO Property........................................................... 11
Servicer............................................................... 11
Servicing Advances..................................................... 11
ii
Servicing Compensation.................................................. 11
Servicing Fee........................................................... 11
Servicing Fee Rate...................................................... 11
Servicing Officer....................................................... 12
Stated Principal Balance................................................ 12
Sub-Servicer............................................................ 12
ARTICLE II AGREEMENT TO PURCHASE; MORTGAGE LOAN SCHEDULE;PURCHASE PRICE;
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CONVEYANCE OF MORTGAGE LOANS;POSSESSION OF MORTGAGE FILES; BOOK AND
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RECORDS;DELIVERY OF MORTGAGE LOAN DOCUMENTS............................. 13
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Section 2.01 Agreement to Purchase; Mortgage Loan Schedules; Purchase
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Price..................................................... 13
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Section 2.02 Conveyance of Mortgage Loans; Possession of Mortgage
----------------------------------------------------
Files..................................................... 14
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Section 2.03 Books and Records......................................... 14
-----------------
Section 2.04 Delivery of Mortgage Loan Documents....................... 15
-----------------------------------
Section 2.05 Underwriting: Review of the Mortgage Files................ 16
------------------------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY; REPURCHASE OF
------------------------------------------------------------
MORTGAGE LOANS; CLOSING; CLOSING DOCUMENTS; COSTS....................... 18
-------------------------------------------------
Section 3.01 Individual Mortgage Loans ....................... 18
-------------------------
Section 3.02 Company Representations................................... 23
-----------------------
Section 3.03 Repurchase and Substitution............................... 25
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Section 3.04 Closing................................................... 27
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Section 3.05 Closing Documents......................................... 27
-----------------
Section 3.06 Costs..................................................... 29
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ARTICLE IV ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.................... 30
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Section 4.01 Company to Act as Servicer................................ 30
--------------------------
Section 4.02 Liquidation of Mortgage Loans............................. 30
-----------------------------
Section 4.03 Collection of Mortgage Loan Payments...................... 31
------------------------------------
Section 4.04 Establishment of Custodial Account; Deposits in Custodial
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Account................................................... 31
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Section 4.05 Withdrawals From the Custodial Account.................... 32
--------------------------------------
Section 4.06 Establishment of Escrow Account; Deposits in Escrow
---------------------------------------------------
Account................................................... 34
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Section 4.07 Withdrawals From Escrow Account........................... 34
-------------------------------
Section 4.08 Payment of Taxes, Insurance and Other Charges............. 35
---------------------------------------------
Section 4.09 Transfer of Accounts...................................... 35
--------------------
Section 4.10 Maintenance of Hazard Insurance........................... 35
-------------------------------
Section 4.11 Fidelity Bond; Errors and Omissions Insurance............. 36
---------------------------------------------
Section 4.12 Title, Management and Disposition of REO Property......... 37
-------------------------------------------------
Section 4.13 Liquidation Reports....................................... 38
-------------------
Section 4.14 Delivery of Documents in Possession of Custodian.......... 39
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Section 4.15 Notification of Adjustments............................... 39
---------------------------
ARTICLE V PAYMENTS TO THE PURCHASER.......................................... 40
-------------------------
iii
Section 5.01 Distributions............................................. 40
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Section 5.02 Statements to the Purchaser............................... 40
---------------------------
Section 5.03 Advances by the Company................................... 42
-----------------------
Section 5.04 Prepayment Interest Shortfalls............................ 42
------------------------------
ARTICLE VI GENERAL SERVICING PROCEDURE....................................... 43
---------------------------
Section 6.01 Assumption Agreements..................................... 43
---------------------
Section 6.02 Satisfaction of Mortgages and Release of Mortgage Files... 43
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Section 6.03 Servicing Compensation.................................... 44
----------------------
Section 6.04 Annual Statement as to Compliance......................... 44
---------------------------------
Section 6.05 Annual Independent Public Accountants' Servicing Report... 44
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Section 6.06 Option to Acquire Servicing; Continuation of Company as
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Servicer.................................................. 45
Section 6.07 Purchaser's Right to Examine Company Records.............. 45
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ARTICLE VII.................................................................. 46
REPORTS TO BE PREPARED BY COMPANY............................................ 46
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Section 7.01 Company Shall Provide Access and Information as Reasonably
----------------------------------------------------------
Required.................................................. 46
--------
Section 7.02 Financial Statements...................................... 46
--------------------
ARTICLE VIII................................................................. 47
REMOVAL OF MORTGAGE LOANS FROM INCLUSION UNDER THE AGREEMENT UPON A WHOLE
- -------------------------------------------------------------------------
LOAN TRANSFER OR A PASS-THROUGH TRANSFER ON ONE OR MORE RECONSTITUTION
----------------------------------------------------------------------
DATES................................................................... 47
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Section 8.01 Removal of Mortgage Loans from Inclusion Under this
Agreement Upon a Whole Loan Transfer or a Pass-Through
Transfer on One or More Reconstitution Dates.............. 47
-------------------------
ARTICLE IX THE COMPANY....................................................... 50
-----------
Section 9.01 Indemnification; Third Party Claims....................... 50
-----------------------------------
Section 9.02 Merger or Consolidation of the Company.................... 50
--------------------------------------
Section 9.03 Limitation on Liability of the Company and Others..........51
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Section 9.04 Company Not to Resign..................................... 51
---------------------
Section 9.05 No Transfer of Servicing; Sub-Servicing Agreement......... 51
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ARTICLE X DEFAULT............................................................ 53
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Section 10.01 Events of Default..........................................53
-----------------
Section 10.02 Waiver of Defaults........................................ 54
------------------
Section 10.03 Servicer to Retain Previous Entitlement................... 54
---------------------------------------
ARTICLE XI TERMINATION....................................................... 55
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Section 11.01 Termination............................................... 55
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iv
ARTICLE XII.................................................................. 56
MANDATORY DELIVERY; GRANT OF A SECURITY INTEREST............................. 56
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Section 12.01 Mandatory Delivery; Grant of Security Interest............ 56
ARTICLE XIII................................................................. 57
MISCELLANEOUS PROVISIONS..................................................... 57
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Section 13.01 Successor to the Company.................................. 57
------------------------
Section 13.02 Amendment................................................. 58
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Section 13.03 Recordation of Agreement.................................. 58
------------------------
Section 13.04 Recordation of Assignment of Mortgages.................... 58
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Section 13.05 Duration of Agreement..................................... 58
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Section 13.06 Governing Law............................................. 58
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Section 13.07 General Interpretive Principles........................... 59
-------------------------------
Section 13.08 Reproduction of Documents................................. 59
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Section 13.09 Notices................................................... 60
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Section 13.10 Severability of Provisions................................ 60
--------------------------
Section 13.11 No Partnership............................................ 60
--------------
Section 13.12 Execution; Successors and Assigns......................... 60
---------------------------------
v
Exhibits
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EXHIBIT A Contents of Mortgage Files
EXHIBIT B Custodial Account Letter Agreement
EXHIBIT C Escrow Account Letter Agreement
EXHIBIT D REO Account Letter Agreement
EXHIBIT E Assignment and Conveyance
EXHIBIT F Mortgage Loan Schedule
EXHIBIT G Form of Mortgage Note and Mortgage/Deed of Trust
EXHIBIT H Company's Underwriting Guidelines
EXHIBIT I [Intentionally Deleted]
EXHIBIT J Officer's Certificate
EXHIBIT K Resolutions
EXHIBIT L Security Release Certification
EXHIBIT M Representations and Warranties with Respect to the Pool
Characteristics of each Mortgage Loan Package
EXHIBIT N Commitment Letters
EXHIBIT O Sub-Servicing Agreement
vi
This is a Master Mortgage Loan Purchase and Servicing Agreement, dated
and effective as of June 1, 1997, and is executed between Salomon Brothers
Realty Corp., as purchaser (hereinafter, the "Purchaser"), and Long Beach
Mortgage Company, as seller and servicer (hereinafter, the "Company").
The Purchaser has agreed to purchase from the Company and the Company
has agreed to sell to the Purchaser Mortgage Loans, as described herein and in
the related Confirmations, on a servicing retained basis that shall be delivered
in groups of whole loans on various Closing Dates as provided herein.
All of the Mortgage Loans are secured by first mortgages or deeds of
trust on residential dwellings situated within the State(s) indicated on the
Mortgage Loan Schedule for the related Mortgage Loan Package, which is to be
annexed hereto on the related Closing Date as part of Exhibit F.
The Purchaser and the Company wish to prescribe the manner of purchase
by the Purchaser of the Mortgage Loans and the management, servicing and control
of the Mortgage Loans.
The Purchaser has purchased certain Mortgage Loans from the Company
pursuant to the Commitment Letters and such Mortgage Loans will be governed by
the terms of this Agreement.
Following its purchase of the Mortgage Loans from the Company, the
Purchaser desires to sell some or all of the Mortgage Loans to one or more
purchasers as a whole loan transfer in a whole loan or participation format or a
public or private mortgage-backed securities transaction.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Purchaser and the Company agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
"Adjustable Rate Mortgage Loan": A Mortgage Loan which bears interest
at a rate which adjusts from time to time in accordance with the terms of the
Mortgage Note.
"Adjustment Date": As to each Adjustable Rate Mortgage Loan, the date
on which the Mortgage Interest Rate adjusts as provided in the related Mortgage
Note.
"Agreement": This Master Mortgage Loan Purchase and Servicing
Agreement, including all exhibits hereto, and all amendments hereof and
supplements hereto.
"Appraised Value": With respect to a Mortgage Loan, the value of the
related Mortgaged Property based upon the appraisal made at the origination of
the Mortgage Loan or the sale price of the Mortgaged Property at the origination
of the Mortgage Loan, whichever is less.
"Assignment and Conveyance": An assignment and conveyance of the
Mortgage Loans purchased on a Closing Date in the form attached hereto as
Exhibit E.
"Assignment of Mortgage": An assignment of the Mortgage, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
of record the sale of the Mortgage Loan to the Purchaser.
"Available Remittance Amount": With respect to each Remittance Date,
(a) all amounts deposited in the Custodial Account as of the close of business
on the preceding Determination Date (net of charges against or withdrawals from
the Custodial Account pursuant to Section 4.05 except 4.05(i)), plus (b) all
amounts, if any, which the Company is obligated to deposit pursuant to Section
5.03, Section 5.04 or Section 4.12 and minus (c) any amounts attributable to
Monthly Payments collected but due on a Due Date or Dates subsequent to the Due
Period ending on 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.
"Balloon Loan": Any Mortgage Loan that by its original terms or by
virtue of any modification entered into as of the Closing Date provides for an
amortization schedule extending beyond its stated maturity date.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking or savings and loan institutions in the State of
California or the State of New York are authorized or obligated by law or
executive order to be closed.
"Closing Date": With respect to any Mortgage Loan Package, the date
on which the Purchaser shall purchase from the Company and the Company shall
sell to the Purchaser the Mortgage Loans listed on the related Mortgage Loan
Schedule.
"Commitment Letters": The letter agreements between the Purchaser and
the Company, including all exhibits thereto, a copy of each of which is attached
hereto as Exhibit N.
-3-
"Company": Long Beach Mortgage Company, or its successor in interest
or any successor to the Company under this Agreement appointed as herein
provided.
"Confirmation": With respect to the purchase and sale of any Mortgage
Loan Package, the agreement between the Purchaser and the Company setting forth
the variances, if any, of the terms and conditions of such purchase and sale
from the terms and conditions set forth in the related Commitment Letter.
"Custodial Account": The separate Eligible Account or Accounts
created and maintained pursuant to Section 4.04.
"Custodial Agreement": The agreement among the Purchaser, the Company
and the Custodian for the retention of each Mortgage Note, Mortgage, Assignment
of Mortgage and other documents.
"Custodian": The custodian under the Custodial Agreement, initially
Texas Commerce Bank, N.A., or its successor.
"Customary Servicing Procedures": Procedures (including collection
procedures) that the Company customarily employs and exercises in servicing and
administering mortgage loans similar to the Mortgage Loans for its own account
and which are in accordance with accepted mortgage servicing practices of
prudent lending institutions servicing mortgage loans similar to the Mortgage
Loans, giving due consideration to the Purchaser's reliance on the Company.
"Cut-off Date": With respect to any Mortgage Loan, the first day of
the month in which the related Closing Date occurs.
"Cut-off Date Principal Balance": As to any Mortgage Loan, the
scheduled unpaid principal balance thereof as of the close of business on the
related Cut-off Date after application of all payments of principal due on or
prior thereto, whether or not received, and all Principal Prepayments received
on or prior to the related Cut-off Date, but without giving effect to any
installments of principal received in respect of Due Dates after the related
Cut-off Date; provided that with respect to any Mortgage Loan originated after
the related Cut-off Date, the "Cut-off Date Principal Balance" shall mean the
original principal balance thereof.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced
with a Qualified Substitute Mortgage Loan.
"Determination Date": The 20th day (or if such 20th day is not a
Business Day, the Business Day immediately preceding such 20th day) of the month
of the related Remittance Date.
-4-
"Due Date": The first day of the month of the related Remittance
Date.
"Due Period": With respect to each Remittance Date, the applicable
Due Period shall be the period beginning 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.
"Eligible Account": (i) an account or accounts maintained with a
depository institution the short-term debt obligations of which are rated A-1 or
better by Standard & Poor's Corporation, or (ii) an account or accounts the
deposits in which are fully insured by the FDIC, or (iii) a trust account or
accounts maintained with a federal or state chartered depository institution or
trust company acting in its fiduciary capacity.
"Escrow Account": The separate Eligible Account or Accounts created
and maintained pursuant to Section 4.06.
"Escrow Payments": The amounts constituting ground rents, taxes,
assessments, water rates, mortgage insurance premiums, fire and hazard insurance
premiums and other payments required to be escrowed by the Mortgagor with the
mortgagee pursuant to any Mortgage Loan.
"Event of Default": Any one of the conditions or circumstances
enumerated in Section 10.01.
"FDIC": The Federal Deposit Insurance Corporation or any successor.
"FHLMC": The Federal Home Loan Mortgage Corporation or any successor.
"Fidelity Bond": A fidelity bond required to be obtained by the
Company pursuant to Section 4.11.
"Final Closing Date": With respect to each Mortgage Loan, the Final
Closing Date set forth in the related Commitment Letter.
"Final Due Diligence Date": With respect to each Mortgage Loan, the
date which is 30 days after the Final Closing Date.
"Final Closing Date Principal Balance": The aggregate unpaid
principal balance of the related Mortgage Loans as of the Final Closing Date.
"Final Settlement Date": With respect to each Mortgage Loan, the Final
Settlement Date set forth in the related Commitment Letter.
-5-
"FNMA": The Federal National Mortgage Association or any successor.
"HUD": The United States Department of Housing and Urban Development
or any successor organization.
"Index": As to each Adjustable Rate Mortgage Loan, the index for the
adjustment of the Mortgage Interest Rate set forth as such in the related
Mortgage Note. Should the Index become unavailable, the Purchaser, with the
consent of the Servicer, will select a new index that is based upon comparable
information.
"Initial Closing Date": July 30, 1997.
"Initial Custodial Account Deposit": An amount equal to, with respect
to each Mortgage Loan, the amount of all payments in respect of such Mortgage
Loan received by the Servicer before the applicable Closing Date in respect of
Due Dates after the applicable Cut-off Date.
"Liquidated Mortgage Loan": Any defaulted Mortgage Loan as to which
the Company has determined that all amounts which it reasonably and in good
faith expects to recover have been recovered from or on account of such Mortgage
Loan.
"Liquidation Proceeds": Cash (other than REO Disposition Proceeds),
including but not limited to insurance proceeds, and any other amounts
(including the sales price) received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of the Mortgage
Loan, trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage Loan,
the original principal balance of such Mortgage Loan divided by the Appraised
Value.
"Margin": With respect to each Adjustable Rate Mortgage Loan, the
fixed amount set forth in the related Mortgage Note to be added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
to determine the Mortgage Interest Rate for such Adjustable Rate Mortgage Loan.
The Margin as to each Adjustable Rate Mortgage Loan is set forth on the related
Mortgage Loan Schedule.
"Maximum Rate": With respect to each Adjustable Rate Mortgage Loan,
the rate per annum set forth in the related Mortgage Note as the maximum
Mortgage Interest Rate thereunder. The Maximum Rate as to each Mortgage Loan is
set forth on the related Mortgage Loan Schedule.
"Minimum Rate": With respect to each Adjustable Rate Mortgage Loan,
the rate per annum set forth in the related Mortgage Note as the minimum
Mortgage Interest Rate
-6-
thereunder. The Minimum Rate as to each Mortgage Loan is set forth on the
related Mortgage Loan Schedule.
"Monthly Payment": The scheduled monthly payment of principal and
interest on a Mortgage Loan which is payable by a Mortgagor from time to time
under the related Mortgage Note.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first lien on or first priority ownership interest in an estate in fee simple
in real property securing a Mortgage Note.
"Mortgage File": The items referred to in Exhibit A annexed hereto
pertaining to a particular Mortgage Loan (and any additional documents required
to be added to the Mortgage File pursuant to this Agreement).
"Mortgage Interest Rate": The annual rate at which interest accrues
on any Mortgage Loan in accordance with the provisions of the related Mortgage
Note. The Mortgage Interest Rate as of the Cut-off Date as to each Mortgage
Loan is set forth on the related Mortgage Loan Schedule.
"Mortgage Loan": An individual mortgage loan which is the subject of
this Agreement, each mortgage loan originally sold and subject to this Agreement
being identified on the related Mortgage Loan Schedule, including without
limitation the contents of the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, insurance proceeds, condemnation proceeds,
REO Disposition Proceeds and all other rights, benefits, proceeds and
obligations arising from or in connection with such mortgage loan after the
related Cut-off Date.
"Mortgage Loan Documents": The documents set forth in Section 2.04.
"Mortgage Loan Package": The Mortgage Loans listed on a Mortgage Loan
Schedule.
"Mortgage Loan Remittance Rate": As to each Mortgage Loan, the annual
rate of interest remitted to the Purchaser, which shall be equal to the related
Mortgage Interest Rate minus the related Servicing Fee Rate.
"Mortgage Loan Schedule": With respect to each Mortgage Loan Package,
the schedule of Mortgage Loans subject to this Agreement and identified as being
part of such Mortgage Loan Package to be attached hereto as part of Exhibit F on
the related Closing Date, which schedule (as amended from time to time to
reflect the addition of any Qualified Substitute Mortgage Loans) shall have
attached thereto a Prepayment Charge summary, if applicable, in the form
mutually agreed upon by the parties, and shall set forth the following
information with respect to each Mortgage Loan in such Mortgage Loan Package:
-7-
(i) the loan number and name of the Mortgagor;
(ii) the address, including zip codes, of the Mortgaged
Property;
(iii) the initial Mortgage Interest Rate and the current
Mortgage Interest Rate;
(iv) the maturity date;
(v) the principal balance at origination;
(vi) the first payment date;
(vii) the type of Mortgaged Property;
(viii) the Monthly Payment in effect as of the related Cut-off
Date;
(ix) the principal balance as of the related Cut-off Date as
used in determining the Cut-off Date Principal Balance;
(x) the Loan-to-Value Ratio at origination;
(xi) with respect to each Adjustable Rate Mortgage Loan, the
Margin;
(xii) with respect to each Adjustable Rate Mortgage Loan, the
next Adjustment Date after the related Cut-off Date;
(xiii) with respect to each Adjustable Rate Mortgage Loan, the
Minimum Rate and Maximum Rate;
(xiv) the occupancy status;
(xv) the Appraised Value of the Mortgaged Property at
origination;
(xvi) a code indicating the Company's credit grade category of
the Mortgage Loan at origination;
(xv) a code indicating whether such Mortgage Loan is a step-
down mortgage loan;
(xvi) a documentation code;
(xvii) a code indicating the existence of a prepayment penalty;
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(xviii) a code indicating the purpose of the Mortgage Loan;
(xix) the interest paid to date as of the related Cut-off Date;
(xx) a code indicating the type of Prepayment Charge, if
applicable; and
(xxi) the expiration date of the Prepayment Charge, if
applicable.
"Mortgage Note": The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property": The real property securing repayment of the debt
evidenced by a Mortgage Note, consisting of a single parcel of property
considered to be real estate under the law of the state in which it is located.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": Liquidation Proceeds net of the sum of any
reimbursements to the Servicer for such Liquidated Mortgage Loan made therefrom
pursuant to Section 4.05(ii).
"Net REO Disposition Proceeds": REO Disposition Proceeds net of the sum
of any unreimbursed Servicing Advances, accrued and unpaid servicing fees and
P&I Advances with respect to the related Mortgage Loan and reimbursements to the
Servicer for such REO Disposition and the related Mortgage Loan made therefrom
pursuant to Section 4.05(ii).
"Nonrecoverable Advance": As of any date of determination, any P&I
Advance previously made or any P&I Advance or Servicing Advance proposed to be
made in respect of a Mortgage Loan which, in the good faith judgment of the
Company, will not or, in the case of a proposed advance, would not be ultimately
recoverable pursuant to Section 4.05(ii). The determination by the Company that
it has made a Nonrecoverable Advance or that any proposed advance would
constitute a Nonrecoverable Advance shall be evidenced by an Officer's
Certificate delivered to the Purchaser on or before the Determination Date in
any month.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, or the Vice Chairman of the Board, the President, a Vice President, an
Assistant Vice President, the Treasurer, the Secretary, one of the Assistant
Treasurers or Assistant Secretaries or other officer whose position is of
equivalent responsibility of the Company, and delivered to the Purchaser as
required by this Agreement.
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"Opinion of Counsel": A written opinion of counsel, who may be in-house
counsel of the Company, reasonably acceptable to the Purchaser.
"OTS": The Office of Thrift Supervision or any successor.
"P&I Advance": Any advance made pursuant to Section 5.03.
"Pass-Through Transfer": The sale or transfer of some or all of the
Mortgage Loans by the Purchaser to a trust to be formed as part of a publicly
issued or privately placed mortgage-backed securities transaction.
"Periodic Rate Cap": With respect to each Adjustable Rate Mortgage
Loan, the provision in each Mortgage Note that limits permissible increases and
decreases in the Mortgage Interest Rate on any Adjustment Date to not more than
one percentage point.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Prepayment Charge": Each prepayment charge payable in connection with
Principal Prepayments on the Mortgage Loans transferred and assigned to the
Purchaser, the Prepayment Charges so held being identified in the Mortgage Loan
Schedule.
"Prepayment Interest Excess": With respect to any Remittance Date after
the first Remittance Date for the related Mortgage Loan, for each Mortgage Loan
that was the subject of a Principal Prepayment in full from the first day
through the twentieth day of the month of such Remittance Date, any payment of
interest received in connection therewith (net of the Servicing Fee)
representing interest accrued for any portion of such month of receipt after the
Due Date.
"Prepayment Interest Shortfall": With respect to each Principal
Prepayment received after the previous Determination Date during the calendar
month preceding the month of a Remittance Date (or in the case of such first
Remittance Date, from the related Cut-off Date), an amount to be deposited in
the Custodial Account prior to the related Remittance Date, to the extent of and
limited to the amount of the Servicing Fee received in respect of the related
Due Period equal to the difference between (a) 30 days' interest on the Stated
Principal Balance as of the beginning of the Due Period at the Mortgage Loan
Remittance Rate and (b) the amount of interest actually received on each such
Mortgage Loan for such Due Period net of the Servicing Fee.
"Principal Prepayment": 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, if any, and is not accompanied by an
amount of interest
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representing scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment.
"Purchaser": Salomon Brothers Realty Corp.
"Purchase Price": With respect to any Mortgage Loan, the price paid by
the Purchaser to the Company in connection with the purchase and sale of such
Mortgage Loan on the related Closing Date, calculated in accordance with Section
2.01.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted by
the Company for a Deleted Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding principal balance, after deduction of all
scheduled payments due and received in the month of substitution (or in the case
of a substitution of more than one mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the Stated Principal Balance of
the Deleted Mortgage Loan and not less than ninety percent (90%) of the Stated
Principal Balance of the Deleted Mortgage Loan (the amount of any shortfall to
be distributed by the Company to the Purchaser in the month of substitution),
(ii) have a remaining term to maturity not greater than (and not more than one
year less than) that of the Deleted Mortgage Loan, (iii) have a Mortgage
Interest Rate not less than (and not more than one percentage point greater
than) the Mortgage Interest Rate of the Deleted Mortgage Loan, (iv) have a
Servicing Fee Rate as provided herein for all Mortgage Loans subject to this
Agreement, (v) with respect to each Adjustable Rate Mortgage Loan, have a
Minimum Rate not less than that of the Deleted Mortgage Loan, (vi) with respect
to each Adjustable Rate Mortgage Loan, have a Maximum Rate not less than that of
the Deleted Mortgage Loan and not more than two (2) percentage points above that
of the Deleted Mortgage Loan, (vii) with respect to each Adjustable Rate
Mortgage Loan, have a Margin not less than that of the Deleted Mortgage Loan,
(viii) with respect to each Adjustable Rate Mortgage Loan, have a Periodic Rate
Cap equal to that of the Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio
at the time of substitution equal to or less than the Loan-to-Value Ratio of the
Deleted Mortgage Loan at the time of substitution, (x) with respect to each
Adjustable Rate Mortgage Loan, have the same Adjustment Date as that of the
Deleted Mortgage Loan, (xi) with respect to each Adjustable Rate Mortgage Loan,
have an Index as provided herein for all Adjustable Rate Mortgage Loans subject
to this Agreement, (xii) comply as of the date of substitution with each
representation and warranty set forth in Sections 3.01 and 3.02 and (xiii) be in
the same credit grade category as the Deleted Mortgage Loan.
"Realized Loss": As to any Liquidated Mortgage Loan, the amount, if
any, by which (i) the Stated Principal Balance (including any accrued and unpaid
interest) thereof as of the date of liquidation exceeds (ii) Net Liquidation
Proceeds realized thereon.
"Reconstitution Agreements": The agreement or agreements entered into by
the Company and the Purchaser and/or certain third parties on the Reconstitution
Date or Dates with respect to any or all of the Mortgage Loans serviced
hereunder, in connection with a Whole Loan Transfer or a Pass-Through Transfer
as set forth in Article XII, including, but not limited to, a pooling and
servicing agreement substantially in the form previously entered into by
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the Company in connection with public offerings of pass-through securities
backed by mortgage loans similar to the Mortgage Loans and sold by the Company
or such other form that has been entered into between the Purchaser (or an
affiliate of the Purchaser) and the Company since the Initial Closing Date. Such
agreement or agreements shall prescribe the rights and obligations of the
Company in servicing the related Mortgage Loans.
"Reconstitution Date": With respect to any Mortgage Loan, the date on
which such Mortgage Loan serviced under this Agreement shall be removed from
this Agreement and reconstituted as part of a Whole Loan Transfer or Pass-
Through Transfer pursuant to Article 12 hereof. On such date, the Mortgage Loans
transferred shall cease to be covered by this Agreement and the Company shall
cease to service those Mortgage Loans under this Agreement in accordance with
the termination provisions set forth in Article XII hereof.
"Remittance Date": The 24th day of any month, beginning in the month
next following the month in which the related Cut-off Date occurs, or if such
24th day is not a Business Day, the first Business Day immediately following.
"REO Account": The Eligible Account or Accounts maintained pursuant to
Section 4.12.
"REO Disposition": The final sale by the Company on behalf of the
Purchaser of a Mortgaged Property acquired by the Company in foreclosure or by
deed in lieu of foreclosure.
"REO Disposition Proceeds": All amounts received with respect to an REO
Disposition pursuant to Section 4.12.
"REO Property": A Mortgaged Property acquired by the Company on behalf
of the Purchaser through foreclosure or by deed in lieu of foreclosure, as
described in Section 4.12.
"Servicer": Long Beach Mortgage Company, or any successor appointed as
herein provided.
"Servicing Advances": All customary, reasonable and necessary "out-of-
pocket" costs and expenses incurred in the performance by the Company of its
servicing obligations, including, but not limited to, the cost of (a) payments
made by the Company pursuant to Section 4.08, (b) the preservation, restoration
and protection of the Mortgaged Property, (c) any enforcement or judicial
proceedings, including foreclosures and (d) the management and liquidation of
the Mortgaged Property if the Mortgaged Property is acquired in satisfaction of
the Mortgage.
"Servicing Compensation": The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 6.03.
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"Servicing Fee": With respect to each Mortgage Loan, the amount of the
annual fee to be paid to the Servicer, which shall, for a period of one full
month, be equal to one-twelfth of the product of (a) the Servicing Fee Rate and
(b) the principal balance of such Mortgage Loan. Such fee shall be payable
monthly, computed on the basis of the same principal amount and period
respecting which any related interest payment on a Mortgage Loan is computed.
The Servicing Fee is limited to, and payable solely from, full payments of the
interest portion (including recoveries with respect to interest from Liquidation
Proceeds, condemnation proceeds, REO Disposition Proceeds and all other
proceeds) of such Monthly Payments collected by the Company, or as otherwise
provided under Section 4.05.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Company involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished to the Purchaser by the
Company, as such list may from time to time be amended.
"Stated Principal Balance": As to each Mortgage Loan, (i) the Cut-off
Date Principal Balance of the Mortgage Loan, minus (ii) all amounts previously
distributed to the Purchaser with respect to the Mortgage Loan representing
payments or recoveries of principal, or advances in lieu thereof.
"Sub-Servicer": Any Person with which the Company has entered into a
sub-servicing agreement and which shall be (A) either (i) an institution the
accounts of which are insured by the FDIC or (ii) another entity that engages in
the business of originating mortgage loans, and in either case shall be
authorized to transact business in the state or states in which the related
Mortgaged Properties it is to service are situated, if and to the extent
required by applicable law to enable the sub-servicer to perform its obligations
hereunder and under the sub-servicing agreement, and in either case shall be a
FHLMC or FNMA approved mortgage servicer and (B) approved by the Purchaser.
"Subservicing Agreement": As applicable, the Master Sub-Servicing
Agreement between Long Beach Mortgage Company (formerly known as Ameriquest
Mortgage Corporation), as Master Servicer, and Ameriquest Mortgage Company
(formerly known as Long Beach Mortgage Company), as Sub-Servicer, dated as of
April 28, 1997, substantially in the form attached hereto as Exhibit O.
"Whole Loan Transfer": The sale or transfer by Purchaser of some or all
of the Mortgage Loans in a whole loan format or a certificated participation
format pursuant to a Reconstitution Agreement.
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ARTICLE II
AGREEMENT TO PURCHASE; MORTGAGE LOAN SCHEDULE;
----------------------------------------------
PURCHASE PRICE; CONVEYANCE OF MORTGAGE LOANS;
---------------------------------------------
POSSESSION OF MORTGAGE FILES; BOOK AND RECORDS;
-----------------------------------------------
DELIVERY OF MORTGAGE LOAN DOCUMENTS
-----------------------------------
Section 2.01 Agreement to Purchase; Mortgage Loan Schedules; Purchase
--------------------------------------------------------
Price.
-----
The Company agrees to sell, and the Purchaser agrees to purchase,
Mortgage Loans having an aggregate principal balance on the related Cut-off Date
in an amount as set forth in the related Commitment Letter, subject to the
permitted variances set forth therein. The Company agrees to use its best
efforts to deliver the principal amount of loans in accordance with the delivery
schedule set forth as Exhibit B to the related Commitment Letter. In any event,
the Company shall deliver the Mortgage Loans no later than the related Final
Settlement Date.
The Company shall deliver the Mortgage Loan Schedule for a Mortgage Loan
Package to be purchased on a particular Closing Date to the Purchaser on or
prior to the related Closing Date.
The Purchase Price for each Mortgage Loan listed on the related Mortgage
Loan Schedule shall be calculated as provided in the related Commitment Letter.
In addition to the Purchase Price as described above, the Purchaser
shall pay to the Company, on a particular Closing Date, accrued interest as set
forth in the related Commitment Letter.
The Purchaser shall be entitled to all scheduled payments of principal
due after the Cut-off Date, all other recoveries of principal collected and due
after the Cut-off Date, and all payments of interest on the Mortgage Loans
(minus that portion of any such payment which is allocable to the period prior
to the Cut-off Date). The principal balance of each Mortgage Loan as of the Cut-
off Date is determined after application of payments of principal due on or
before the Cut-off Date, whether or not collected. Therefore, payments of
scheduled principal and interest prepaid for a due date beyond the Cut-off Date
shall not be applied to the principal balance as of the Cut-off Date. Such
prepaid amounts shall be the property of the Purchaser. The Company shall
deposit any such prepaid amounts into the Custodial Account, which account is
established for the benefit of the Purchaser for subsequent remittance by the
Company to the
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Purchaser. All scheduled payments of principal due on or before the Cut-off Date
and collected by the Company after the Cut-off Date shall belong to the Company.
Section 2.02 Conveyance of Mortgage Loans; Possession of Mortgage
----------------------------------------------------
Files.
-----
The Company, simultaneously with the payment of the Purchase Price,
shall execute and deliver to the Purchaser an Assignment and Conveyance with
respect to the related Mortgage Loan Package in the form attached hereto as
Exhibit E. The contents of each Mortgage File not delivered to the Custodian
shall be held in trust by the Company for the benefit of the Purchaser as the
owner thereof and the Company's possession of the portion of each Mortgage File
so retained shall be at the will of the Purchaser for the sole purpose of
servicing the related Mortgage Loan, and such retention and possession by the
Company is in a custodial capacity only. Upon the purchase of the Mortgage
Loans, the ownership of each Mortgage Note, Mortgage and each related Mortgage
File shall be vested in the Purchaser and the ownership of all records and
documents with respect to each related Mortgage Loan prepared by or which come
into the possession of the Company shall immediately vest in the Purchaser and
shall be retained and maintained, in trust, by the Company at the will of the
Purchaser in such custodial capacity only. The Company shall release from its
custody the contents of any Mortgage File only in accordance with written
instructions from the Purchaser, unless such release is required as incidental
to the Company's servicing of the Mortgage Loans or is in connection with a
repurchase of any Mortgage Loan pursuant to Section 3.03.
Section 2.03 Books and Records.
-----------------
Notwithstanding the sale of the Mortgage Loans to the Purchaser, record
title to each Mortgage and the related Mortgage Note for which the Mortgaged
Property is located in California shall continue in the name of the Company and
be retained by the Company in trust for the Purchaser for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage
Loans. The foregoing procedures shall be applicable only so long as the related
Mortgage Files are maintained in the State of California. In the event that (i)
the Company or the Servicer gives written notice to the Custodian that recording
is required to protect the right, title and interest of the Purchaser in and to
any Mortgage Loan for which the Mortgaged Property is located in California, or
(ii) in case a court should recharacterize the sale of the Mortgage Loans as a
financing or, (iii) as a result of any change in or amendment to the laws of
California or any applicable political subdivision thereof, or any change in
official position regarding application or interpretation of such laws,
including a holding by a court of competent jurisdiction that such recording is
so required, or (iv) if the Company or the Servicer admits in writing its
inability to pay its debts as they become due, files a petition to take
advantage of any applicable insolvency or reorganization statute, makes an
assignment for the benefit of its creditors, or if the Company or the Servicer
voluntarily suspends payment of its obligations, or (v) if the Servicer receives
a notice of termination pursuant to Section 10.01 or the Purchaser receives the
resignation of the Servicer evidenced by an Opinion of Counsel pursuant
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to Section 7.04, or the Servicer is removed as servicer, then the Servicer shall
cause each such previously unrecorded Assignment of Mortgage to be submitted for
recording in the applicable jurisdiction as specified in the definition of
Assignment of Mortgage. However, in the event the Servicer fails to cause each
such previously unrecorded Assignment of Mortgage to be submitted for recording
as set forth in clauses (i) through (v) above, the successor Servicer shall
cause such previously unrecorded Assignment of Mortgage to be submitted for
recording in the manner specified above and at the expense of the Company. All
rights arising out of the Mortgage Loans including, but not limited to, all
funds received on or in connection with a Mortgage Loan as provided in Section
2.01 shall be held by the Company in trust for the benefit of the Purchaser as
the owner of the Mortgage Loans.
The sale of each Mortgage Loan shall be reflected on the Company's
balance sheet and other financial statements as a sale of assets by the Company.
The Company shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Mortgage Loan which shall be clearly marked
to reflect the ownership of each Mortgage Loan by the Purchaser.
Section 2.04 Delivery of Mortgage Loan Documents.
-----------------------------------
The Company shall in connection with each Closing Date deliver to the
Custodian, as agent of and custodian for the Purchaser, each of the following
documents for each Mortgage Loan to be purchased and sold on such Closing Date:
(a) The original Mortgage Note including any addendums thereto, endorsed by
the Company without recourse in the following form: "Pay to the order
of ________________, without recourse" and signed, by facsimile or
manual signature, in the name of the Company by an officer, together
with all intervening endorsements showing a complete chain of
endorsement from the originator to the Company;
(b) The original recorded Mortgage or, if the original Mortgage has not yet
been returned from the applicable recording office, a copy of the
Mortgage certified by an appropriate officer of the Company to be a true
and complete copy of the original Mortgage submitted for recording;
(c) A duly executed Assignment of Mortgage, in blank, from the Company,
which assignment shall be in form and substance acceptable for recording
or, if as a result of the related Mortgage not having been returned from
the applicable recording office, a copy of the Assignment of Mortgage
excluding information to be provided by the recording office;
(d) the original recorded Assignment or Assignments of the Mortgage, if any,
showing a complete chain of assignment from the originator to the
Company or, if any such
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Assignment of Mortgage has not been returned from the applicable public
recording office, a copy of such Assignment of Mortgage certified by an
appropriate officer of the Company to be a true and complete copy of the
original Assignment of Mortgage submitted or to be submitted for
recording;
(e) the original or duplicate original title insurance policy (or a
commitment (binder) to issue same) relating to the Mortgage Loan;
(f) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any;
(g) the original power of attorney, if any, or if the original power of
attorney has not been returned from the applicable public recording
office, a copy thereof certified by an appropriate officer of the
Company to be a true and complete copy of the original submitted for
recording, if any; and
(h) if identified on the Mortgage Loan Schedule as a step-down Mortgage
Loan, the related Addendum to Promissory Note.
In the event that the original Mortgage was not delivered pursuant to (b) above,
the original title insurance policy was not delivered pursuant to (e) above, the
duly executed Assignment of Mortgage was not delivered pursuant to (c) above or
the original recorded Assignment or Assignments of the Mortgage, if any, showing
a complete chain of assignment from the originator to the Company was not
delivered pursuant to (d) above, the Company shall use best reasonable efforts
to promptly secure the delivery of such originals and shall cause such originals
to be delivered to the Custodian promptly upon receipt thereof. In the event
that the Company cannot deliver the original Mortgage, the Company shall deliver
a copy of such Mortgage certified as true and complete by the appropriate
recording office in those instances where a copy thereof certified by the
Company was delivered pursuant to clause (b) above. In the event that the
original Mortgage or a certified copy thereof or the original policy of title
insurance is not so delivered to the Custodian within 365 days following the
related Closing Date, the related Mortgage Loan shall, upon the written request
of the Purchaser, be repurchased by the Company at the price and in the manner
specified in Section 3.03. The Custodian has certified its receipt of each
document set forth in clauses (a) through (e) above as evidenced by its Initial
Certification in the form annexed to the Custodial Agreement.
Section 2.05 Underwriting: Review of the Mortgage Files.
------------------------------------------
With respect to each Mortgage Loan, the Company shall make all documents
and instruments relating to such Mortgage Loan (including copies of any original
documents previously delivered to the Custodian and the mortgagor payment
histories specifying the number of times each Mortgage Loan was delinquent
within the immediately preceding twelve month period) available at its offices
for review during normal business hours, or such other location as
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the Purchaser and the Company shall mutually agree. Until the Final Due
Diligence Date, the Purchaser and any certificate guaranty insurance company
designated by the Purchaser and their designees shall have the right to review
the files and documents relating to each Mortgage Loan, to inspect, evaluate and
appraise the real property securing each such Mortgage Loan and to obtain
appraisal recertifications and otherwise to underwrite each such Mortgage Loan,
which shall not be an expense of the Company. Prior to the Final Due Diligence
Date, the Purchaser may reject any such Mortgage Loan which, either individually
or as part of a pool of all or some of the Mortgage Loans, does not, in its sole
discretion, conform to the underwriting standards of the Company, regardless of
whether a Closing Date has already occurred with respect to such Mortgage Loans.
With respect to any Mortgage Loan rejected by the Purchaser pursuant to the
preceding sentence as to which a Closing Date has already occurred, the Company
shall repurchase such Mortgage Loan at a price equal to the Purchase Price paid
for such Mortgage Loan by the Purchaser hereunder. The underwriting described in
this paragraph shall not impair or diminish the rights of the Purchaser, or any
assignee of the Purchaser, under this Agreement with respect to a breach of
representations and warranties contained in this Agreement.
-18-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY;
----------------------------------------------
REPURCHASE OF MORTGAGE LOANS; CLOSING;
--------------------------------------
CLOSING DOCUMENTS; COSTS
------------------------
Section 3.01 Individual Mortgage Loans.
-------------------------
The Company hereby represents and warrants to the Purchaser that, as to
each Mortgage Loan, as of the related Closing Date (or such other date as may be
specified herein or in the applicable Assignment and Conveyance):
(a) The information set forth on the related Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct in all material
respects;
(b) Except as set forth on Exhibit M, all payments due prior to the related
Cut-off Date have been made and none of the Mortgage Loans will have
been contractually delinquent for more than one calendar month more than
once since the origination thereof;
(c) Each Mortgage is a valid and enforceable first lien on the Mortgaged
Property, including all improvements thereon, subject only to (a) the
lien of nondelinquent current real property taxes and assessments, (b)
covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to
mortgage lending institutions generally or specifically reflected in the
appraisal made in connection with the origination of the related
Mortgage Loan, and (c) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of
the security intended to be provided by such Mortgage;
(d) Immediately prior to the assignment of the Mortgage Loans to the
Purchaser, the Company had good title to, and was the sole legal and
beneficial owner of, each Mortgage Loan free and clear of any pledge,
lien, encumbrance or security interest and has full right and authority,
subject to no interest or participation of, or agreement with, any other
party to sell and assign the same;
(e) To the best of the Company's knowledge, there is no delinquent tax or
assessment lien against any Mortgaged Property;
-19-
(f) There is no valid offset, defense or counterclaim to any Mortgage Note
or Mortgage, including the obligation of the Mortgagor to pay the unpaid
principal of or interest on such Mortgage Note, nor will the operation
of any of the terms of the Mortgage Note and the Mortgage, or the
exercise of any right thereunder, render the Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(g) To the best of the Company's knowledge, there are no mechanics' liens or
claims for work, labor or material affecting any Mortgaged Property
which are or may be a lien prior to, or equal with, the lien of the
related Mortgage, except those which are insured against by the title
insurance policy referred to in (k) below;
(h) To the best of the Company's knowledge, each Mortgaged Property is free
of material damage and is in good repair;
(i) Each Mortgage Loan at origination complied in all material respects with
applicable local, state and federal laws, including, without limitation,
usury, equal credit opportunity, real estate settlement procedures,
truth-in-lending and disclosure laws, and consummation of the
transactions contemplated hereby will not involve the violation of any
such laws;
(j) Neither the Company nor any prior holder of any Mortgage has modified
the Mortgage in any material respect (except that a Mortgage Loan may
have been modified by a written instrument which has been recorded, if
necessary, to protect the interests of the Purchaser and which has been
delivered to the Custodian); satisfied, cancelled or subordinated such
Mortgage in whole or in part; released the related Mortgaged Property in
whole or in part from the lien of such Mortgage; or executed any
instrument of release, cancellation, modification or satisfaction with
respect thereto;
(k) A lender's policy of title insurance together with a condominium
endorsement and extended coverage endorsement, if applicable, and, with
respect to each Adjustable Rate Mortgage Loan, an adjustable rate
mortgage endorsement in an amount at least equal to the related Cut-off
Date Principal Balance of each such Mortgage Loan or a commitment
(binder) to issue the same was effective on the date of the origination
of each Mortgage Loan, each such policy is valid and remains in full
force and effect, the transfer of the related Mortgage Loan to the
Purchaser will not affect the validity or enforceability of such policy
and each such policy was issued by a title insurer qualified to do
business in the jurisdiction where the Mortgaged Property is located and
acceptable to FNMA or FHLMC and in a form acceptable to FNMA or FHLMC,
which policy insures the Company and successor owners of indebtedness
secured by the insured Mortgage, as to the first priority lien of the
Mortgage; to the best of the
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Company's knowledge, no claims have been made under such mortgage title
insurance policy and no prior holder of the related Mortgage, including
the Company, has done, by act or omission, anything which would impair
the coverage of such mortgage title insurance policy;
(l) Each Mortgage Loan was originated by the Company (or, if generated on
behalf of the Company by a Person other than the Company, is subject to
the same standards and procedures used by the Company in originating
mortgage loans directly) or by a savings and loan association, savings
bank, commercial bank, credit union, insurance company or similar
institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved by the Secretary of Housing and
Urban Development pursuant to sections 203 and 211 of the National
Housing Act;
(m) With respect to each Adjustable Rate Mortgage Loan on each Adjustment
Date, the Mortgage Interest Rate will be adjusted to equal the Index
plus the Margin, rounded to the nearest 0.125%, subject to the Periodic
Rate Cap, the Maximum Rate and the Minimum Rate. Except for Balloon
Loans, the related Mortgage Note is payable on the first day of each
month in self-amortizing monthly installments of principal and interest,
with interest payable in arrears, and requires a Monthly Payment which
is sufficient to fully amortize the outstanding principal balance of the
Mortgage Loan over its remaining term and to pay interest at the
applicable Mortgage Interest Rate. No Mortgage Loan is subject to
negative amortization;
(n) To the best of the Company's knowledge, all of the improvements which
were included for the purpose of determining the Appraised Value of the
Mortgaged Property lie wholly within the boundaries and building
restriction lines of such property, and no improvements on adjoining
properties encroach upon the Mortgaged Property;
(o) All inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy, have been made or obtained from
the appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law;
(p) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with
any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located;
(q) The Mortgage Note and the related Mortgage are genuine, and each is the
legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms and with applicable laws. All parties to the
Mortgage Note and the Mortgage had
-21-
legal capacity to execute the Mortgage Note and the Mortgage and each
Mortgage Note and Mortgage have been duly and properly executed by such
parties;
(r) The proceeds of each Mortgage Loan have been fully disbursed, there is
no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied
with. All costs, fees and expenses incurred in making, closing or
recording the Mortgage Loans were paid;
(s) The related Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor
which would interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage;
(t) With respect to each Mortgage constituting a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no
fees or expenses are or will become payable by the Purchaser to the
trustee under the deed of trust, except in connection with a trustee's
sale after default by the Mortgagor;
(u) Each Mortgage Note and each Mortgage is in substantially the forms
attached hereto as Exhibit G;
(v) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no escrow deposits or payments
of other charges or payments due the Company have been capitalized under
the Mortgage or the related Mortgage Note;
(w) The origination, underwriting and collection practices used by the
Company with respect to each Mortgage Loan have been in all respects
legal, proper, prudent and customary in the mortgage servicing business;
(x) There is no pledged account or other security other than real estate
securing the Mortgagor's obligations;
(y) No Mortgage Loan has a shared appreciation feature, or other contingent
interest feature;
(z) No Mortgage Loan provides for primary mortgage insurance;
-22-
(aa) The improvements upon each Mortgaged Property are covered by a valid and
existing hazard insurance policy with a generally acceptable carrier
that provides for fire extended coverage and such other hazards as are
customary in the area where the Mortgaged Property is located
representing coverage not less than the lesser of the outstanding
principal balance of the related Mortgage Loan or the minimum amount
required to compensate for damage or loss on a replacement cost basis.
All individual insurance policies and flood policies referred to in
clause (bb) below contain a standard mortgagee clause naming the Company
or the original mortgagee, and its successors in interest, as mortgagee,
and the Company has received no notice that any premiums due and payable
thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance, including flood insurance, at
the Mortgagor's cost and expense, and upon the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(bb) If the Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the original outstanding principal balance of
the Mortgage Loan, (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis or (C) the maximum amount of
insurance that is available under the Flood Disaster Protection Act of
1973;
(cc) There is no default, breach, violation or event of acceleration existing
under the Mortgage or the related Mortgage Note; and the Company has not
waived any default, breach, violation or event of acceleration;
(dd) Each Mortgaged Property is improved by a one- to four-family residential
dwelling, including condominium units and dwelling units in planned unit
developments, which, to the best of the Company's knowledge, does not
include cooperatives or mobile homes and does not constitute other than
real property under state law;
(ee) There is no obligation on the part of the Company or any other party
under the terms of the Mortgage or related Mortgage Note to make
payments in addition to those made by the Mortgagor;
(ff) Any future advances made prior to the related Cut-off Date have been
consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment
-23-
term reflected on the related Mortgage Loan Schedule. The consolidated
principal amount does not exceed the original principal amount of the
Mortgage Loan;
(gg) Each Mortgage Loan was underwritten in accordance with the Company's
underwriting guidelines set forth as an exhibit hereto;
(hh) The Mortgage File contains an appraisal which was performed by an
appraiser who satisfied, and which was conducted in accordance with, all
of the applicable requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended;
(ii) None of the Mortgage Loans is a graduated payment mortgage loan, nor is
any Mortgage Loan subject to a temporary buydown or similar arrangement;
(jj) With respect to each Mortgage Loan, no loan junior in lien priority to
such Mortgage Loan and secured by the related Mortgaged Property was
originated by the Company at the time of origination of such Mortgage
Loan;
(kk) The characteristics of the related Mortgage Loan Package are as set
forth in the form of Exhibit M delivered in respect of the related
Closing Date;
(ll) Except as set forth in the related Confirmation, on the Final Closing
Date, the Mortgage Loans comply with the conditions set forth in Section
2 of the related Commitment Letter; and
(mm) The Mortgage contains an enforceable provision for the acceleration of
the payment of the unpaid principal balance of the Mortgage Loan in the
event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.
Section 3.02 Company Representations.
-----------------------
The Company hereby represents and warrants to the Purchaser as of the
Initial Closing Date and each subsequent Closing Date (or such other date as may
be specified herein or in the applicable Assignment and Conveyance):
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly
authorized and qualified to transact any and all business contemplated
by this Agreement to be conducted by the Company in any state in which a
Mortgaged Property is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such State, to the extent
necessary to
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ensure its ability to enforce each Mortgage Loan and to service the
Mortgage Loans in accordance with the terms of this Agreement;
(b) The Company has the full corporate power and authority to originate,
hold, sell and service each Mortgage Loan, and to execute, deliver and
perform, and to enter into and consummate the transactions contemplated
by this Agreement and has duly authorized by all necessary corporate
action on the part of the Company the execution, delivery and
performance of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery thereof by the Purchaser,
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to
the extent that (a) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought;
(c) The execution and delivery of this Agreement by the Company, the
servicing of the Mortgage Loans by the Company hereunder, the
consummation of any other of the transactions herein contemplated, and
the fulfillment of or compliance with the terms hereof are in the
ordinary course of business of the Company and will not (A) result in a
breach of any term or provision of the charter or by-laws of the Company
or (B) conflict with, result in a breach, violation or acceleration of,
or result in a default under, the terms of any other material agreement
or instrument to which the Company is a party or by which it may be
bound, or any statute, order or regulation applicable to the Company of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Company; and the Company is not a party to,
bound by, or in breach or violation of any indenture or other agreement
or instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and
adversely affects or, to the Company's knowledge, would in the future
materially and adversely affect, (x) the ability of the Company to
perform its obligations under this Agreement or (y) the business,
operations, financial condition, properties or assets of the Company
taken as a whole;
(d) The Company is an approved seller/servicer for FNMA or FHLMC in good
standing and is a HUD approved mortgagee pursuant to Section 203 of the
National Housing Act;
(e) No litigation is pending against the Company that would materially and
adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Company to service the Mortgage Loans or
to perform any of its other obligations hereunder in accordance with the
terms hereof;
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(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Company of, or compliance by the Company with, this
Agreement or the consummation of the transactions contemplated hereby,
or if any such consent, approval, authorization or order is required,
the Company has obtained the same;
(g) The information set forth in the applicable part of the Mortgage Loan
Schedule relating to the existence of a prepayment penalty is complete,
true and correct in all material respects at the date or dates
respecting which such information is furnished and each Prepayment
Charge is permissible and enforceable in accordance with its terms
(except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally or the collectability thereof
may be limited due to acceleration in connection with a foreclosure)
under the applicable state law; and
(h) The Company will not waive the Prepayment Charge (including any waiver
of a Prepayment Charge in connection with a refinancing of a Mortgage
Loan that is related to a default or a reasonably foreseeable default)
unless such waiver would maximize recovery of total proceeds taking into
account the value of the Prepayment Charge and related Mortgage Loan and
doing so is standard and customary in servicing similar Mortgage Loans,
and in no event will it waive a Prepayment Charge in connection with a
refinancing of a Mortgage Loan that is not related to a default or a
reasonably foreseeable default.
Section 3.03 Repurchase and Substitution.
---------------------------
It is understood and agreed that the representations and warranties set
forth in Sections 3.01 and 3.02 shall survive delivery of the Mortgage Loans to
the Purchaser and shall inure to the benefit of the Purchaser, notwithstanding
any restrictive or qualified endorsement on any Mortgage Note or Assignment of
Mortgage or the examination of any Mortgage File. Upon discovery (including
receipt of notice to such effect from the Purchaser) by either the Company or
the Purchaser of a breach of any of the foregoing representations and
warranties, without regard to any limitation set forth in such representation or
warranty concerning the knowledge of the Company as to the facts stated therein,
which materially and adversely affects the interest of the Purchaser in any
Mortgage Loan, the party discovering such breach shall give prompt notice to the
other parties. Within 90 days of the earlier of either discovery by or notice
to the Company of any breach of a representation or warranty, the Company shall
use its best efforts to promptly cure such breach in all material respects and,
if such breach cannot be cured, the Company shall repurchase such Mortgage Loan
at a price equal to (i) the Stated Principal Balance of the Mortgage Loan, plus
(ii) interest on such Stated Principal Balance at the Mortgage Loan Remittance
Rate from the date to which interest has last been paid by the Mortgagor to the
first day of the month in which such purchase price is to be distributed which
purchase price shall be
-26-
deposited in the Custodial Account on the next succeeding Determination Date
(after deducting therefrom any principal and interest amounts received in
respect of such repurchased Mortgage Loan and being held in the Custodial
Account for future distribution). However, the Company may, at its option and
assuming that the Company has a Qualified Substitute Mortgage Loan or Loans,
rather than repurchase the Mortgage Loan as provided above, remove such Mortgage
Loan ("Deleted Mortgage Loan") and substitute in its place a Qualified
Substitute Mortgage Loan or Loans, provided, however, that (i) if the Purchaser
exercises its rights under Section 2.05, the Company may not effect a
substitution without the prior written consent of the Purchaser and (ii) any
such substitution shall be effected not later than 120 days after the related
Closing Date. If the Company has no Qualified Substitute Mortgage Loan, it shall
repurchase the deficient Mortgage Loan. Any repurchase of a Mortgage Loan or
Loans pursuant to the foregoing provisions of this Section 3.03 shall be
accomplished by deposit in the Custodial Account of the amount of the repurchase
price set forth above (after deducting therefrom any principal and interest
amounts received in respect of such repurchased Mortgage Loan or Loans and being
held in the Custodial Account for future distribution).
If the representation made by the Company in Section 3.02(g) is
breached, the Company shall not have the right or obligation to cure, substitute
or repurchase the affected Mortgage Loan but shall deposit in the Custodial
Account, prior to the next succeeding Remittance Date, the amount of the
Prepayment Charge indicated on the applicable part of the Mortgage Loan Schedule
to be due from the Mortgagor in the circumstances less any amount collected and
paid by the Company into the Custodial Account; provided, however, that if a
representation in addition to that set forth in Section 3.01(g) is breached with
respect to a Mortgage Loan or Mortgage Loans, the Company shall both deposit the
applicable Prepayment Charge as provided in this paragraph and cure, substitute
or repurchase the affected Mortgage Loan or Mortgage Loans as provided in this
Section 3.03. In addition, if the covenant made by the Company in Section
3.02(h) is breached, the Company shall pay into the Custodial Account the amount
of the waived Prepayment Charge.
As to any Deleted Mortgage Loan for which the Company substitutes a
Qualified Substitute Mortgage Loan or Loans, the Company shall effect such
substitution by delivering to the Custodian for such Qualified Substitute
Mortgage Loan or Loans the Mortgage Note, the Mortgage, the Assignment of
Mortgage and such other documents and agreements as are required by Section
2.04, with the Mortgage Note endorsed as required by Section 2.04. No
substitution will be made in any calendar month after the Determination Date for
such month. The Company shall deposit in the Custodial Account the Monthly
Payment less the Servicing Fee due on such Qualified Substitute Mortgage Loan or
Loans in the month following the date of such substitution. Monthly Payments
due with respect to Qualified Substitute Mortgage Loans in the month of
substitution will be retained by the Company. For the month of substitution,
distributions to the Purchaser will include the Monthly Payment less the
Servicing Fee due on such Deleted Mortgage Loan or Loans in the month of
substitution, and the Company shall thereafter be entitled to retain all amounts
subsequently received by the Company in respect of such Deleted Mortgage Loan.
The Company shall give written notice to the Purchaser that such
-27-
substitution has taken place and shall amend the related Mortgage Loan Schedule
to reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects, and the Company
shall be deemed to have made with respect to such Qualified Substitute Mortgage
Loan or Loans, as of the date of substitution, the covenants, representations
and warranties set forth in Sections 3.01 and 3.02.
For any month in which the Company substitutes one or more Qualified
Substitute Mortgage Loan or Loans for one or more Deleted Mortgage Loans, the
Company will determine the amount (if any) by which the aggregate principal
balance of all such Qualified Substitute Mortgage Loans as of the date of
substitution (after application of scheduled principal payments due in the month
of substitution which have been received or as to which an advance has been
made) is less than the aggregate Stated Principal Balance of all such Deleted
Mortgage Loans. The amount of such shortfall shall be distributed by the
Company in the month of substitution pursuant to Section 5.01. Accordingly, on
the date of such substitution, the Company will deposit from its own funds into
the Custodial Account an amount equal to the amount of such shortfall.
In addition to such cure, repurchase and substitution obligation, the
Company shall indemnify the Purchaser and hold it harmless against any losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of the Company's representations and warranties contained in this Article
III. It is understood and agreed that the obligations of the Company set forth
in this Section 3.03 to cure or repurchase a defective Mortgage Loan and to
indemnify the Purchaser as provided in this Section 3.03 constitute the sole
remedies of the Purchaser respecting a breach of the foregoing representations
and warranties.
Any cause of action against the Company relating to or arising out of
the breach of any representations and warranties made in Sections 3.01 or 3.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Company to the Purchaser, (ii) failure by the
Company to cure such breach or repurchase such Mortgage Loan as specified above,
and (iii) demand upon the Company by the Purchaser for all amounts payable in
respect of such Mortgage Loan.
Section 3.04 Closing.
-------
The closing for the purchase and sale of each Mortgage Loan Package
shall take place on the related Closing Date. The closing shall, at the
Purchaser's option, be either: by telephone, confirmed by letter or wire as the
parties shall agree; or conducted in person, at such place as the parties shall
agree.
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The closing for the Mortgage Loans to be purchased on each Closing Date
shall be subject to each of the following conditions:
(a) All of the representations and warranties of the Company under
this Agreement shall be true and correct as of the related Closing Date and no
event shall have occurred which, with notice or the passage of time, would
constitute a default or Event of Default under this Agreement;
(b) The Purchaser and the Company shall have received, or the
Company's attorneys shall have received in escrow, all closing documents as
specified in Section 3.05 of this Agreement, in such forms as are agreed upon
and acceptable to the Purchaser and the Company, duly executed by all
signatories as required pursuant to the respective terms thereof;
(c) The Company shall have delivered and released to the Purchaser
under this Agreement all documents required pursuant thereto; and
(d) All other terms and conditions of this Agreement shall have been
complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the
Company on the related Closing Date the Purchase Price, plus accrued interest
pursuant to Section 2.01 of this Agreement, by wire transfer of immediately
available funds to the account designated by the Company.
Section 3.05 Closing Documents.
-----------------
(a) On or before the Initial Closing Date, the Company shall submit
to the Purchaser fully executed originals of the following closing documents:
1. This Agreement, in two counterparts;
2. Custodial Account Letter Agreement, in the form of Exhibit B
of this Agreement;
3. Escrow Account Letter Agreement, in the form of Exhibit C of
this Agreement; and
4. Officer's Certificate, in substantially the form of Exhibit J,
and attached thereto the Resolutions of the Company, in the
form of Exhibit K hereto, together with copies of the charter,
by-laws and a Certificate of Good Standing of the Company; and
5. Sub-Servicing Agreement in substantially the form of Exhibit O
hereto.
(b) The closing documents for the Mortgage Loans to be purchased on
each Closing Date shall consist of fully executed originals of the following
documents:
1. The related Mortgage Loan Documents required pursuant to
Section 2.04 of this Agreement;
2. The related Mortgage Loan Schedule, one copy to be attached to
each counterpart of this Agreement;
3. If requested by the Purchaser, an Officer's Certificate, in
the form of Exhibit J, and attached thereto the Resolutions of
the Company, in the form of Exhibit K hereto, together with
copies of the charter and by-laws of the Company, or a
statement from the Company that the Company's charter and by-
laws have not changed since the last Closing Date;
4. Security Release Certification, in substantially the form of
Exhibit L executed by any other person as requested by
Purchaser if any of the Mortgage Loans have at any time been
subject to any security interest, pledge or hypothecation for
the benefit of such person;
5. The related Commitment Letter, to be attached hereto as
Exhibit N, and the related Confirmation;
6. Assignment and Conveyance, in the form of Exhibit E;
7. Certificate or other evidence of merger or change of name,
signed or stamped by the applicable regulatory authority, if
any of the Mortgage Loans were acquired by the Company by
merger or acquired or originated by the Company while
conducting business under a name other than its present name;
and
8. The Initial Certification of the Custodian in the form annexed
to the Custodial Agreement.
Section 3.06 Costs.
-----
The Purchaser will pay any commissions due its salesmen and the legal
fees and expenses of its attorneys. All other costs and expenses incurred in
connection with the transfer
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and delivery of the Mortgage Loans, including fees for title policy endorsements
and continuations and the Company's attorney's fees, shall be paid by the
Company.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 4.01 Company to Act as Servicer.
--------------------------
The Company, as independent contract servicer, 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 Company may deem necessary or desirable and consistent
with the terms of this Agreement.
Consistent with the terms of this Agreement, the Company 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, provided, however, that (unless the Mortgagor is in default with
respect to the Mortgage Loan, or such default is, in the judgment of the
Company, imminent, and the Company has the consent of the Purchaser) the Company
may not permit any modification with respect to any Mortgage Loan that would
change the Mortgage Interest Rate (except for any change made pursuant to the
adjustment provisions, if any, of the related Mortgage Note), defer or forgive
the payment of any principal or interest, change the outstanding principal
amount, make any future advances or extend the final maturity date on such
Mortgage Loan. Without limiting the generality of the foregoing, the Company
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 the Mortgaged Properties.
If reasonably required by the Company, the Purchaser shall furnish the Company
with any powers of attorney and other documents necessary or appropriate to
enable the Company to carry out its servicing and administrative duties under
this Agreement.
In servicing and administering the Mortgage Loans, the Company shall
employ Customary Servicing Procedures.
Section 4.02 Liquidation of Mortgage Loans.
-----------------------------
In the event that any payment due under any Mortgage Loan 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 Company shall take
such action as it shall deem to be in the best interest of the Purchaser. In
the event that any payment due under any Mortgage Loan remains delinquent for a
period of 60 days or more, the Company shall exercise reasonable efforts to
foreclose upon or otherwise comparably convert (which may include an REO
Disposition) the ownership of properties securing such of the Mortgage Loans as
come into and continue in default and as to which no satisfactory arrangements
can be made for collection of delinquent payments. The
-32-
Company shall use reasonable efforts to realize upon such defaulted Mortgage
Loans in such manner as will maximize the receipt of principal and interest by
the Purchaser, taking into account, among other things, the timing of
foreclosure proceedings.
In such connection, the Company shall from its own funds make all
necessary and proper Servicing Advances if it is deemed to increase the proceeds
to the Purchaser or is necessary to preserve the lien of the related Mortgage.
Section 4.03 Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the date hereof until the principal and interest on
all Mortgage Loans are paid in full, the Company will proceed diligently to
collect all payments due under each of the Mortgage Loans when the same shall
become due and payable and will take special care in ascertaining and estimating
annual ground rents, taxes, assessments, water rates, fire and hazard insurance
premiums, mortgage insurance premiums, and all other charges that, as provided
in any Mortgage, will become due and payable 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 4.04 Establishment of Custodial Account; Deposits in Custodial
---------------------------------------------------------
Account.
-------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan separate and apart from any of its own funds and
general assets and shall establish and maintain one or more Custodial Accounts
(collectively, the "Custodial Account"), in the form of time deposit or demand
accounts, which may be interest bearing, titled "Long Beach Mortgage Company, in
trust for the Purchaser - Fixed Rate and Adjustable Rate Mortgage Loans, Flow
Delivery Program". Such Custodial Account shall be established with a
commercial bank, a national bank, a national banking association, a mutual
savings bank or a savings and loan association. Funds in the Custodial Account
shall be fully insured by the FDIC, or such account shall be a trust account,
and in either case may be drawn on by the Company. The creation of any
Custodial Account shall be evidenced by a letter agreement substantially in the
form of Exhibit B hereto. A copy of such letter agreement shall be furnished to
the Purchaser upon request.
The Company shall deposit, without duplication, in the Custodial Account
on a daily basis within one day of receipt of good funds or as otherwise
required by this Agreement, and retain therein the following payments and
collections due and received or made by it subsequent to the related Cut-off
Date:
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(i) all payments on account of principal, including Principal
Prepayments on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Loan Remittance Rate;
(iii) all Liquidation Proceeds and other amounts required to be
deposited pursuant to Section 4.02;
(iv) all proceeds received by the Company under any title,
hazard, primary mortgage guaranty or other insurance policy, including amounts
required to be deposited pursuant to Section 4.10, 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 Customary
Servicing Procedures;
(v) all awards or settlements in respect of condemnation
proceedings or eminent domain affecting any Mortgaged Property which are not
released to the Mortgagor in accordance with Customary Servicing Procedures;
(vi) any amount required to be deposited in the Custodial Account
pursuant to Sections 5.03 and 6.02;
(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan pursuant to Section 3.03, and all amounts required to be
deposited by the Company in connection with shortfalls in principal amount of
Qualified Substitute Mortgage Loans pursuant to Section 3.03;
(viii) any amounts payable in connection with Prepayment Interest
Shortfalls pursuant to Section 5.04; and
(ix) any amount required to be deposited in the Custodial Account
pursuant to Section 4.12.
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges and assumption
fees, to the extent permitted by Section 6.01, in addition to Prepayment
Interest Excess and prepayment penalties other than Prepayment Charges, need not
be deposited by the Company in the Custodial Account.
-34-
Section 4.05 Withdrawals From the Custodial Account.
--------------------------------------
The Company 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 5.01;
(ii) to reimburse itself for unreimbursed Servicing Advances, any
unpaid Servicing Fees and for unreimbursed P&I Advances, the Company's right
to reimburse itself pursuant to this subclause (ii) being limited to related
Liquidation Proceeds, condemnation proceeds, amounts representing proceeds of
insurance policies covering the related Mortgaged Property, late payments of
principal and/or interest and such other amounts as may be collected by the
Company from the Mortgagor or otherwise relating to the Mortgage Loan, it
being understood that, in the case of any such reimbursement, the Company's
right thereto shall be prior to the rights of the Purchaser unless the Company
is required to repurchase a Mortgage Loan pursuant to Section 3.03, in which
case the Company's right to such reimbursement shall be subsequent to the
payment to the Purchaser of the repurchase price pursuant to Section 3.03 and
all other amounts required to be paid to the Purchaser with respect to such
Mortgage Loan;
(iii) to reimburse itself for expenses incurred by and reimbursable
to it pursuant to Section 9.01;
(iv) to pay to itself any interest earned on funds deposited in
the Custodial Account and to pay itself any unpaid Servicing Compensation,
such withdrawal to be made monthly not later than the Remittance Date;
(v) to reimburse itself for any P&I Advance previously made which
the Company has determined to be a Nonrecoverable Advance;
(vi) to utilize any excess funds on deposit to make any advance
pursuant to the last sentence of Section 5.03, provided that such withdrawal
does not reduce the amount that would otherwise be available pursuant to
clauses (i) through (v), inclusive, of this Section 4.05 in respect of the
current or future Determination Dates;
(vii) to clear and terminate the Custodial Account upon the
termination of this Agreement and to distribute funds therein at such time to
the Purchaser, exclusive of funds therein payable to the Company pursuant to
this Agreement; and
(viii) to withdraw any amounts deposited in the Custodial Account in
error.
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On each Remittance Date, the Company shall withdraw all funds from the
Custodial Account except for those amounts which the Company is not obligated to
remit on such Remittance Date. The Company may use such withdrawn funds only
for the purposes described in this Section 4.05.
Section 4.06 Establishment of Escrow Account; Deposits in Escrow
---------------------------------------------------
Account.
-------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts (collectively, the "Escrow Account"), in
the form of time deposit or demand accounts, which may be interest bearing,
titled "Long Beach Mortgage Company, in trust for the Purchaser of Fixed Rate
and Adjustable Rate Mortgage Loans, Flow Delivery Program". The Escrow Account
shall be established with a commercial bank, a national bank, a national banking
association, a mutual savings bank or a savings and loan association. Funds in
the Escrow Account shall be fully insured by the FDIC, or such account shall be
a trust account, and in either case may be drawn on by the Company. The
creation of any Escrow Account shall be evidenced by a letter agreement
substantially in the form of Exhibit C hereto. A copy of such letter agreement
shall be furnished to the Purchaser upon request.
The Company shall deposit in the Escrow Account on a daily basis, 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 proceeds of
any hazard insurance policy which are to be applied to the restoration or repair
of any Mortgaged Property. The Company shall make withdrawals therefrom only in
accordance with Section 4.07 hereof. To the extent required by law, the Company
shall pay, without right of reimbursement, interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account may not bear interest.
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Section 4.07 Withdrawals From Escrow Account.
-------------------------------
Withdrawals from the Escrow Account shall be made by the Company only
(a) to effect timely payments of taxes, assessments, water rates, fire and
hazard insurance premiums or other items constituting Escrow Payments for the
related Mortgage, (b) to refund to any Mortgagor any funds found to be in excess
of the amounts required under the terms of the related Mortgage Loan, (c) for
application to restoration or repair of the Mortgaged Property, (d) to pay to
the Mortgagor, to the extent required by law, any interest due on the funds
deposited in the Escrow Account, (e) to pay to itself any interest earned on
funds deposited in the Escrow Account (and not required to be paid to the
Mortgagor), such withdrawal to be made monthly not later than the Remittance
Date, (f) to withdraw any amounts deposited in the Escrow Account in error, (g)
to reimburse the Company for any Servicing Advance made by the Company with
respect to a related Mortgage Loan but only from amounts received on the related
Mortgage Loan which represent late payments or collections of Escrow Payments
thereunder or (h) to clear and terminate the Escrow Account upon the termination
of this Agreement.
Section 4.08 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
With respect to each Mortgage Loan, the Company shall maintain accurate
records reflecting the status of taxes, assessments, water rates and other
charges 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
and at a time appropriate for securing maximum discounts allowable, employing
for such purpose deposits of the Mortgagor in the Escrow Account which shall
have been estimated and accumulated by the Company 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 Company shall determine that
any such payments are made by the Mortgagor at the time they first become due.
The Company assumes full responsibility for the timely payment of all such bills
and shall effect timely payments of all such bills irrespective of the
Mortgagor's faithful performance in the payment of same or the making of the
Escrow Payments and shall make advances from its own funds to effect such
payments.
Section 4.09 Transfer of Accounts.
--------------------
With prior written notice to the Purchaser, the Company may transfer the
Custodial Account or the Escrow Account to a different depository institution
satisfying the requirements of Section 4.04 or 4.06, respectively.
Section 4.10 Maintenance of Hazard Insurance.
-------------------------------
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The Servicer shall maintain or cause to be maintained for each Mortgage
Loan and REO Property with insurance companies satisfactory to FNMA or FHLMC
primary hazard insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the replacement value of the
improvements, as determined by the insurance company, on such Mortgaged
Property. Pursuant to Section 4.04, any amounts collected by the Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the property subject to the related Mortgage or amounts released to the
Mortgagor in accordance with Customary Servicing Procedures) shall be deposited
in the Custodial Account, subject to withdrawal pursuant to Section 4.05. Any
cost incurred by the Servicer in maintaining any such insurance shall not, for
the purpose of calculating monthly distributions to the Purchaser, be added to
the unpaid principal balance of the related Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor or
maintained on property acquired in respect of a Mortgage Loan, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
or REO Property is located at the time of origination of the Mortgage Loan in a
federally designated special flood hazard area, the Servicer will cause to be
maintained flood insurance in respect thereof. Such flood insurance shall be in
an amount equal to the lesser of (i) the replacement value of the improvements
which are part of such Mortgaged Property, (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (regardless of whether the area in which such Mortgaged
Property is located is participating in such program) and (iii) the original
face value of the Mortgage Loan securing such Mortgaged Property. All such
policies shall be endorsed with standard mortgagee clauses with loss payable to
the Company, or upon request to the Purchaser, and shall provide for at least
thirty days prior written notice of any cancellation, reduction in the amount
of, or material change in, coverage to the Company. The Company shall not
interfere with the Mortgagor's freedom of choice in selecting either his
insurance carrier or agent, provided, however, that the Company shall not accept
any such insurance policies from insurance companies unless such companies
currently reflect a General Policy Rating of A:VI or better in Best's Key Rating
Guide and are licensed to do business in the state wherein the property subject
to the policy is located.
In the event that the Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on all of the Mortgage Loans in an amount
consistent with Customary Servicing Procedures, it shall conclusively be deemed
to have satisfied its obligations as set forth in the first sentence of this
Section 4.10, it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property or REO Property
a policy complying with the first sentence of this Section 4.10, and there shall
have been one or more losses which would have been covered by such policy,
deposit from its own funds in the Custodial Account the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer
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agrees to prepare and present, on behalf of itself and the Purchaser, claims
under any such blanket policy in a timely fashion in accordance with the terms
of such policy. Upon request of the Purchaser, the Company 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 days prior written notice to the Purchaser.
Section 4.11 Fidelity Bond; Errors and Omissions Insurance.
---------------------------------------------
The Company 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 ("Company Employees"). Any such fidelity bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Company against losses, including
forgery, theft, embezzlement, fraud, errors and omissions, failure to maintain
any insurance policies required pursuant to this Agreement, and negligent acts
of such Company Employees. Such fidelity bond shall also protect and insure the
Company 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 4.11 requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve the Company from
its duties and obligations as set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be at least equal to the
corresponding amounts required by FNMA in the FNMA MBS Selling and Servicing
Guide or by FHLMC in the FHLMC Sellers' & Servicer's Guide, as amended or
restated from time to time. Upon the request of the Purchaser, the Company shall
cause to be delivered to the Purchaser a certified true copy of such fidelity
bond and insurance policy and a statement from the surety and the insurer that
such fidelity bond and insurance policy shall in no event be terminated or
materially modified without 30 days prior written notice to the Purchaser.
Section 4.12 Title, Management and Disposition of REO Property.
-------------------------------------------------
In the event that title to the 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 its designee of record on the
date of acquisition of title.
The Company shall manage, conserve, protect and operate each REO
Property in trust for the Purchaser solely for the purpose of its prompt
disposition and sale. The Company shall either itself or through an agent
selected by the Company, 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 Company shall
attempt to sell the same (and
-39-
may temporarily rent the same) on such terms and conditions as the Company deems
to be in the best interest of the Purchaser. Notwithstanding anything to the
contrary in this Section 4.12, the Company shall not be required to advance any
of its own funds pursuant to this Section 4.12 if such advance would be a
Nonrecoverable Advance.
With respect to each REO Property, the Company shall hold all funds
collected and received in connection with the operation of the REO Property
separate and apart from its own funds or general assets and shall establish and
maintain with respect to all REO Property a REO Account or Accounts, in the form
of a demand account, titled "Long Beach Mortgage Company, in trust for the
Purchaser as of [date of acquisition of title] of Fixed Rate and Adjustable Rate
Mortgage Loans, Flow Delivery Program" unless an Opinion of Counsel is obtained
by the Company to the effect that the classification for federal income tax
purposes of the arrangement under which the Mortgage Loans and the REO Property
are held will not be adversely affected by holding such funds in another manner
specified in such Opinion of Counsel. Such REO Accounts shall be established
with a commercial bank, a national bank, a national banking association, a
mutual savings bank or a savings and loan association. Funds in the REO Account
shall be fully insured by the FDIC, or such account shall be a trust account,
and in either case may be drawn on by the Company. The creation of any REO
Account shall be evidenced by a letter agreement substantially in the form of
Exhibit D hereto. A copy of such letter agreement shall be furnished to the
Purchaser upon request.
The Company shall cause to be deposited on a daily basis in each REO
Account all revenues received with respect to the conservation and disposition
of the related REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of the REO Property, including the
cost of maintaining any hazard insurance pursuant to Section 4.10 hereof and the
fees of any managing agent acting on behalf of the Company. The Company shall
not be entitled to retain interest paid or other earnings, if any, on funds
deposited in such REO Account.
The Company 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 two years
after title has been taken to such REO Property, unless (i) a REMIC election has
not been made with respect to the arrangement under which the REO Property is
held, and (ii) the Company determines, and gives an appropriate notice to the
Purchaser, that a longer period is necessary for the orderly liquidation of such
REO Property. If a period longer than two years is permitted under this
Agreement and is necessary to sell any REO Property, (i) the Company shall
report monthly to the Owners as to the progress being made in selling such REO
Property and (ii) if, with the written consent of the Purchaser, a purchase
money mortgage is taken in connection with such sale, such purchase money
mortgage shall name the Company as mortgagee, and a participation agreement
among the Company and the Purchaser shall be entered into with respect to such
purchase money mortgage.
The disposition of REO Property shall be carried out by the Company only
with the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld or
-40-
delayed) and shall be made at such price, and upon such terms and conditions, as
the Company deems to be in the best interests of the Purchaser. The proceeds of
sale of the REO Property shall be promptly deposited in the REO Account and, as
soon as practical thereafter, the expenses of such sale shall be paid. Prior to
each Remittance Date, the Company shall deposit in the Custodial Account all
funds in the REO Accounts, net of unreimbursed Servicing Advances, accrued and
unpaid Servicing Fees and unreimbursed advances made pursuant to Section 5.03
which shall be retained by the Company with respect to the related Mortgage
Loan.
Upon request, with respect to any REO Property, the Company shall
furnish to the Purchaser a statement covering the Company's efforts in
connection with the sale of that REO Property and any rental of the REO Property
incidental to the sale thereof for the previous month (together with an
operating statement). That statement shall be accompanied by such other
information as the Purchaser shall reasonably request.
Section 4.13 Liquidation Reports.
-------------------
The Company shall submit to the Purchaser monthly, at the time of the
remittance report required pursuant to Section 5.02, a liquidation report with
respect to each Mortgaged Property sold in a foreclosure sale as of the related
Record Date and not previously reported.
Section 4.14 Delivery of Documents in Possession of Custodian.
------------------------------------------------
The Purchaser shall cause the Custodian to deliver to the Company, on a
timely basis, those Mortgage Files that the Company may request from the
Custodian from time to time. Should the Custodian fail to deliver requested
Mortgage Files on a timely basis, the Company shall not be liable for any
related loss and any Event of Default which is attributable to the failure to
deliver, or the untimely delivery of, the requested Mortgage Files shall be
deemed to have not occurred.
Section 4.15 Notification of Adjustments.
---------------------------
On each Adjustment Date, the Company shall make interest rate
adjustments for each Mortgage Loan in compliance with the requirements of the
related Mortgage and Mortgage Note. The Company shall execute and deliver the
notices required by each Mortgage and Mortgage Note regarding interest rate
adjustments. The Company shall also provide timely notification to the Purchaser
of all applicable data and information regarding such interest rate adjustments
and the Company's methods of implementing such interest rate adjustments. Upon
the discovery by the Company or the Purchaser that the Company has failed to
adjust a Mortgage Interest Rate or a Monthly Payment pursuant to the terms of
the related Mortgage Note and Mortgage, the Company shall immediately deposit in
the Custodial Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor.
-41-
ARTICLE V
PAYMENTS TO THE PURCHASER
-------------------------
Section 5.01 Distributions.
-------------
On each Remittance Date the Company shall remit by wire transfer of
immediately available funds to the account designated in writing by the
Purchaser the Available Remittance Amount.
Section 5.02 Statements to the Purchaser.
---------------------------
Not later than each Remittance Date, the Company will furnish to the
Purchaser a statement in a computer readable format setting forth the following
information with respect to the related remittance:
(i) the amount of such remittance allocable to principal
(including a separate breakdown of any Principal Prepayments, including the
date of such prepayment);
(ii) the amount of such distribution allocable to interest;
(iii) the amount of Servicing Compensation received by the Company
during the prior Due Period;
(iv) the aggregate Stated Principal Balance of the Mortgage Loans
as of the close of business on the related Determination Date;
(v) the aggregate of any expenses reimbursed to the Company
during the prior distribution period pursuant to Section 9.01;
(vi) the weighted average maturity of the Mortgage Loans as of
the close of business on the applicable Determination Date;
(vii) in the event the Mortgage Loans bear different Mortgage
Interest Rates, the weighted average Mortgage Interest Rate and Mortgage Loan
Remittance Rate of the Mortgage Loans as of the close of business on the
applicable Determination Date;
(viii) the number and aggregate principal balances of Mortgage
Loans (a) delinquent (1) 31 days, (2) 61 days, (3) 91 days or more, (b) as to
which foreclosure has commenced, and (c) as to which REO Property has been
acquired;
-42-
(ix) the aggregate amount of advances made pursuant to Section
5.03 included in such distribution, and the aggregate amount of such advances
outstanding as of the close of business on such Remittance Date;
(x) the amount of all Liquidation Proceeds;
(xi) the amount of all proceeds received by the Company under any
title, hazard, primary mortgage guaranty or other insurance policy, including
amounts required to be deposited pursuant to Section 4.10, 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
Customary Servicing Procedures;
(xii) the amount of all awards or settlements in respect of
condemnation proceedings or eminent domain affecting any Mortgaged Property
which are not released to the Mortgagor in accordance with Customary Servicing
Procedures;
(xiii) the amounts, if any, required to be deposited in the
Custodial Account pursuant to Sections 4.12, 5.03, 5.04 and 6.02; and
(xiv) the amounts, if any, payable in connection with the
repurchase of any Mortgage Loan pursuant to Section 3.03, and all amounts
required to be deposited by the Company in connection with shortfalls in
principal amount of Qualified Substitute Mortgage Loans pursuant to Section
3.03.
Within 60 days after the end of each calendar year, the Company will
furnish a report to the Purchaser. Such report shall state the aggregate of
amounts reported pursuant to (i) through (iii) and (v) above for such calendar
year. Such obligation of the Company shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Company pursuant to any requirements of the Internal Revenue Code of 1986 as
from time to time in force.
The Company shall prepare and file 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
Company 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 5.03 Advances by the Company.
-----------------------
On the second Business Day preceding each Remittance Date, the Company
shall deposit in the Custodial Account an amount equal to all Monthly Payments
(with interest adjusted to the Mortgage Loan Remittance Rate) which were due on
the Mortgage Loans on the
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Due Date in the month of the Remittance Date and not received by the close of
business on the immediately preceding Determination Date. The Company's
obligation to make such advances as to any Mortgage Loan will continue until the
liquidation thereof, an REO Disposition in connection therewith or the purchase
or repurchase thereof. Notwithstanding anything to the contrary, the obligation
of the Company to make such advances pursuant to this Section 5.03 is mandatory,
except that no advance shall be required to be made hereunder that would, if
made, constitute a Nonrecoverable Advance. The Company may pay all or a portion
of any advance out of excess amounts on deposit in the Custodial Account and
held for future distribution on the date such advance is made; any such excess
amounts so used shall be replaced by the Company by deposit to the Custodial
Account on or before the next succeeding Determination Date.
Section 5.04 Prepayment Interest Shortfalls.
------------------------------
Prior to each Remittance Date, the Servicer shall either deposit in the
Custodial Account from its own funds and without any right of reimbursement
therefor, or leave on deposit in the Custodial Account to the extent not
previously retained or withdrawn, a total amount equal to the aggregate of the
Prepayment Interest Shortfalls for such Remittance Date; provided that the
Servicer's obligations under this Section on any Remittance Date shall not be
more than the total amount of Servicing Fee paid to or retained by the Servicer
since the preceding Remittance Date.
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ARTICLE VI
GENERAL SERVICING PROCEDURE
---------------------------
Section 6.01 Assumption Agreements.
---------------------
The Company will use its best efforts 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, and whether or not the
Mortgagor remains liable on the Mortgage and the Mortgage Note. When the
Mortgaged Property has been or will be conveyed by the Mortgagor, the Company
will, 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, provided, however, the Company will not exercise such rights
if prohibited by law from doing so. If the Company reasonably believes it is
unable under applicable law to enforce such "due-on-sale" clause, the Company
will obtain the written permission of the Purchaser (which consent shall not be
unreasonably withheld or delayed) prior to entering into 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, to the
extent permitted by applicable law, the Mortgagor remains liable thereon. If an
assumption fee is collected by the Company for entering into an assumption
agreement the entire such fee will be retained by the Company as additional
Servicing Compensation. In connection with any such assumption, the outstanding
principal amount, the Monthly Payment and (except pursuant to the adjustable
rate provisions, if any, of the Mortgage Loan) the Mortgage Interest Rate of the
related Mortgage Note shall not be changed, and the term of the Mortgage Loan
will not be increased or decreased. If an assumption is allowed pursuant to this
Section 6.01, the Company with the prior consent of the primary mortgage
guaranty insurer, if any, is authorized to enter into 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.
Section 6.02 Satisfaction of Mortgages and Release of Mortgage Files.
-------------------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the
Company of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Company will obtain the portion of the Mortgage
File that is in the possession of the Custodian, prepare and process any
required satisfaction or release of the Mortgage and notify the Purchaser. No
expense incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Custodial Account or the Purchaser.
-45-
Immediately after the payment in full of such Mortgage Loan, the Company
shall give prompt written notice to the Purchaser of such payment in full.
In the event the Company grants a satisfaction or release of a Mortgage
without having obtained payment in full of the indebtedness secured by the
Mortgage or should the Company otherwise prejudice any right the Purchaser may
have under the mortgage instruments, the Company shall remit to the Purchaser
the Stated Principal Balance of the related Mortgage Loan by deposit thereof in
the Custodial Account including Prepayment Interest Shortfall, if any. The
Company shall maintain the Fidelity Bond as provided for in Section 4.11
insuring the Company against any loss it may sustain with respect to any
Mortgage Loan not satisfied in accordance with the procedures set forth herein.
Section 6.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Company shall be
entitled to retain from interest payments on the Mortgage Loans the Company's
Servicing Fee. Additional servicing compensation in the form of assumption fees
and other administrative fees and late payment charges shall be retained by the
Company. The Company also shall be entitled to receive from the Custodial
Account as additional servicing compensation interest or other income earned on
deposits therein, as well as any Prepayment Interest Excess and prepayment
penalties other than Prepayment Charges. The Company shall be required to pay
all expenses incurred by it in connection with its servicing activities
hereunder and shall not be entitled to reimbursement therefor except as
specifically provided for herein.
Section 6.04 Annual Statement as to Compliance.
---------------------------------
The Company will deliver to the Purchaser, on or before April 15 of each
year beginning April 15, 1998, an Officer's Certificate stating that (i) the
Company has fully complied with the provisions of Article IV, (ii) a review of
the activities of the Company during the preceding calendar year and of
performance under this Agreement has been made under such officer's supervision,
and (iii) to the best of such officer's knowledge, based on such review, the
Company has fulfilled all its obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof and the action being taken by the Company to cure such default.
Section 6.05 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
On or before the later of (i) April 15 of each year beginning April 15,
1998, or (ii) within 30 days of the issuance of the annual audited Financial
Statements beginning with the audit for the period ending December 31, 1997, the
Company at its expense shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Purchaser to the effect that based on an examination
of
-46-
certain specified documents and records relating to the servicing of the
Company's mortgage loan portfolio conducted substantially in compliance with the
audit program for mortgages serviced for FNMA and FHLMC, the United States
Department of Housing and Urban Development Mortgage Audit Standards, or the
Uniform Single Attestation Program for Mortgage Bankers (the "Applicable
Accounting Standards"), such firm is of the opinion that such servicing has been
conducted in compliance with the Applicable Accounting Standards except for (a)
such exceptions as such firm shall believe to be immaterial and (b) such other
exceptions as shall be set forth in such statement.
Section 6.06 Option to Acquire Servicing; Continuation of Company as
-------------------------------------------------------
Servicer.
--------
If so provided in the related Commitment Letter, the Purchaser shall
have the right to purchase the servicing rights for the related Mortgage Loans,
in accordance with the terms set forth in such Commitment Letter.
Subject to exercise of the option, if any, to acquire servicing as
described above, the Purchaser hereby agrees that any agreement entered into by
the Purchaser in connection with any Pass-Through Transfer shall provide for the
continuation of the Company as the servicer of the Mortgage Loans pursuant to
the related Reconstitution Agreement without diminution of the Company's rights
hereunder.
Section 6.07 Purchaser's Right to Examine Company Records.
--------------------------------------------
The Purchaser shall have the right, at all reasonable times and as often
as reasonably required, to examine and audit any and all of the books, records
or other information of the Company, whether held by the Company or by another
on behalf of the Company, which may be relevant to the performance or observance
by the Company of the terms, covenants or conditions of this Agreement.
-47-
ARTICLE VII
REPORTS TO BE PREPARED BY COMPANY
---------------------------------
Section 7.01 Company Shall Provide Access and Information as Reasonably
----------------------------------------------------------
Required.
--------
The Company shall provide to the Purchaser access to any documentation
regarding the Mortgage Loans which is required by applicable regulations. Such
access shall be afforded without charge, but only upon reasonable request,
during normal business hours and at the offices of the Company.
In addition, the Company shall furnish to the Purchaser upon request,
during the term of this Agreement, 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 purposes of this Agreement and the
applicable regulations. All such reports or information shall be provided by and
in accordance with all reasonable instructions and directions the Purchaser may
require. The Company agrees to execute and deliver all such instruments and take
all such action as the Purchaser, from time to time, may reasonably request in
order to effectuate the purposes and to carry out the terms of this Agreement.
Section 7.02 Financial Statements.
--------------------
Upon written request of the Purchaser, the Company shall provide a
Consolidated Statement of Income of the Company for the most recently completed
three fiscal years respecting which such statements are available, as well as a
Consolidated Balance Sheet at the end of the last two fiscal years covered by
such Consolidated Statement of Income, and any comparable interim statements, to
the extent any such statements have been prepared by the Company (and are
available upon request to members or stockholders of the Company, or to the
public at large).
Upon reasonable request, during normal business hours and at the offices
of the Company, the Company also agrees to make available to the Purchaser or
prospective purchaser of the Mortgage Loans a knowledgeable financial or
accounting officer for the purpose of answering questions respecting recent
developments affecting the Company or the financial statements of the Company
and to permit the Purchaser or prospective purchaser of the Mortgage Loans to
inspect the Company's servicing facilities for the purpose of satisfying the
Purchaser or prospective purchaser of the Mortgage Loans that the Company has
the ability to service the Mortgage Loans in accordance with this Agreement.
Notwithstanding the preceding sentence, the Company shall not be required to
provide any information that it deems confidential.
-48-
ARTICLE VIII
REMOVAL OF MORTGAGE LOANS FROM INCLUSION UNDER THE AGREEMENT UPON A WHOLE LOAN
- ------------------------------------------------------------------------------
TRANSFER OR A PASS-THROUGH TRANSFER ON ONE OR MORE RECONSTITUTION DATES
- -----------------------------------------------------------------------
Section 8.01 Removal of Mortgage Loans from Inclusion Under this
Agreement Upon a Whole Loan Transfer or a Pass-Through
Transfer on One or More Reconstitution Dates. Removal of
-------------------------------------
Mortgage Loans from Inclusion Under this Agreement Upon a
---------------------------------------------------------
Whole Loan Transfer or a Pass-Through Transfer on One or
--------------------------------------------------------
More Reconstitution Dates.
-------------------------
Company and Purchaser agree that with respect to some or all of the
Mortgage Loans, within 12 months from the respective Closing Date, the Purchaser
shall effect either:
(1) one or more Whole Loan Transfers; and/or
(2) one or more Pass-Through Transfers;
provided, however, that no Mortgage Loan shall be the subject of more than one
Whole Loan Transfer or one Pass-Through Transfer hereunder. The Company and
Purchaser agree that in no event will the Company be required to remit funds or
send remittance reports to more than four (4) persons at any given time with
respect to any Whole Loan Transfer or Pass-Through Transfer.
With respect to each Whole Loan Transfer or Pass-Through Transfer, as
the case may be, entered into by Purchaser, Company agrees:
(1) to cooperate fully with Purchaser and any prospective purchaser with
respect to all reasonable requests and due diligence procedures;
(2) to execute all Reconstitution Agreements and such ancillary
documents (including a Custodial Agreement) that are standard in the
industry provided that each of the Company and the Purchaser is
given an opportunity to review and reasonably negotiate in good
faith the content of such documents not specifically referenced or
provided for herein; and provided, further, that any such agreement
entered into in connection with a Whole Loan Transfer or Pass-
Through Transfer, servicing retained, shall permit the related
Mortgage Loans to be sub-serviced by the Sub-Servicer
-49-
and master serviced by the Company in accordance with the Sub-
Servicing Agreement attached hereto as Exhibit O;
(3) with respect to any Whole Loan Transfer or Pass-Through Transfer
occurring within 6 months (unless otherwise specified in the related
Confirmation) of the Final Closing Date, the Company shall make the
representations and warranties regarding the Company and the
Mortgage Loans as of the date of the Whole Loan Transfer or Pass-
Through Transfer, modified to the extent necessary to accurately
reflect the pool statistics of the Mortgage Loans as of the date of
such Whole Loan Transfer or Pass-Through Transfer;
(4) to deliver to the Purchaser for inclusion in any prospectus or other
offering material such publicly available information regarding the
Company, its financial condition and its mortgage loan delinquency,
foreclosure and loss experience, underwriting standards, lending
activities and loan sales, production, and servicing and collection
practices, generally as is set forth in prospectus supplements
previously delivered in connection with public offerings of pass-
through securities backed by mortgage loans similar to the Mortgage
Loans and sold by the Company, and to deliver to the Purchaser any
similar nonpublic, unaudited financial information, in which case
the Purchaser shall bear the cost of having such information audited
by certified public accountants if the Purchaser desires such an
audit, or as is otherwise reasonably requested by the Purchaser and
which the Company is capable of providing without unreasonable
effort or expense, and to indemnify the Purchaser and its affiliates
for material misstatements contained in such information;
(5) to deliver to the Purchaser and to any Person designated by the
Purchaser, at the Purchaser's expense, such statements and audit
letters of reputable, certified public accounts pertaining to
information provided by the Company pursuant to clause 4 above as
shall be reasonably requested by the Purchaser;
(6) to deliver to the Purchaser, and to any Person designated by the
Purchaser, such in-house opinions of counsel as are customarily
delivered by originators or servicers, as the case may be, in
connection with Whole Loan Transfers or Pass-Through Transfers, as
the case may be, it being understood that the cost of any opinions
of outside special counsel that may be required for a Whole Loan
Transfer or Pass-Through Transfer, as the case may be, shall be the
responsibility of the Purchaser; and
-50-
(7) to cooperate fully with the Purchaser and any prospective
purchaser with respect to the preparation of Mortgage Loan
Documents and other documents with respect to servicing
requirements reasonably requested by the rating agencies and
credit enhancers.
All Mortgage Loans not sold or transferred pursuant to a Whole Loan
Transfer or Pass-Through Transfer shall be subject to this Agreement and shall
continue to be serviced in accordance with the terms of this Agreement and with
respect thereto this Agreement shall remain in full force and effect.
-51-
ARTICLE IX
THE COMPANY
-----------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
The Company agrees to indemnify and hold harmless the Purchaser against
any and all claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments, and any other costs, fees and expenses that the
Purchaser may sustain in any way related to the failure of the Company to
perform its duties and service the Mortgage Loans in strict compliance with the
terms of this Agreement. The Company shall immediately notify the Purchaser if
a claim is made by a third party with respect to this Agreement or the Mortgage
Loans, and the Company shall assume the defense of any such claim and advance
all expenses in connection therewith, including counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Company or the Purchaser in respect of such claim. The Purchaser shall promptly
reimburse the Company for all amounts advanced by it pursuant to the preceding
sentence except when the claim in any way relates to the Company's failure to
service and administer the Mortgage Loans in strict compliance with the terms of
this Agreement.
Section 9.02 Merger or Consolidation of the Company.
--------------------------------------
The Company will keep in full effect its existence, rights and
franchises as a corporation, 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 Company may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Company shall be a party, or any Person succeeding to substantially all of the
business of the Company (whether or not related to loan servicing), shall be the
successor of the Company 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 (i) having a GAAP net worth of not less than
$15,000,000, (ii) the deposits of which are insured by the FDIC or which is a
HUD-approved mortgagee whose primary business is in origination and servicing of
mortgage loans comparable to the Mortgage Loans and (iii) who is a FNMA approved
seller/servicer in good standing.
-52-
Section 9.03 Limitation on Liability of the Company and Others.
-------------------------------------------------
The Company and any director, officer, employee or agent of the Company
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01,
the Company shall have no obligation to appear with respect to, prosecute or
defend any legal action which is not incidental to the Company's duty to service
the Mortgage Loans in accordance with this Agreement.
Section 9.04 Company Not to Resign.
---------------------
The Company shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Company and the Purchaser or upon the determination that the Company's duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be readily cured by the Company without additional expenses. Any such
determination permitting the resignation of the Company shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser. No such
resignation shall become effective until a successor which satisfies the
requirements of Section 9.02 has assumed the Company's responsibilities and
obligations hereunder in accordance with Section 13.01.
Section 9.05 No Transfer of Servicing; Sub-Servicing Agreement.
-------------------------------------------------
With respect to the retention of the Company to service the Mortgage
Loans hereunder, the Company acknowledges that the Purchaser has acted in
reliance upon the Company's independent status, the adequacy of its servicing
facilities, plant, personnel, records and procedures, its integrity, reputation
and financial standing and the continuance thereof. Without in any way limiting
the generality of this Section, and subject to Section 6.06 and this 9.05, the
Company shall not either assign this Agreement or the servicing hereunder or
delegate its rights or duties hereunder or any portion thereof.
Notwithstanding the foregoing, the Company may enter into the Sub-
Servicing Agreement with the Sub-Servicer for the servicing and administration
of the Mortgage Loans.
Notwithstanding any Sub-Servicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Company and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Company shall remain obligated and primarily liable to the Purchaser for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 4.01 without diminution of such obligation or liability by
virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the Sub-Servicer and to the same extent and under the same
terms and conditions as if the Company alone were servicing and administering
the Mortgage Loans. The
-53-
Company shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Company by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Company alone, and the Purchaser shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
Sub-Servicer except as set forth in the Sub-Servicing Agreement. The Company
shall be solely liable for all fees owed by it to any Sub-Servicer, irrespective
of whether the Company's compensation pursuant to this Agreement is sufficient
to pay such fees.
-54-
ARTICLE X
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
In case one or more of the following Events of Default by the Company
shall occur and be continuing, that is to say:
(i) any failure by the Company to remit to the Purchaser any
payment required to be made under the terms of this Agreement which continues
unremedied for a period of 5 days after the date upon which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Company by the Purchaser; or
(ii) failure by the Company to duly observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Company as set forth in this Agreement which failure continues unremedied for
a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company by the
Purchaser; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Company and such decree or order shall
have remained in force, undischarged or unstayed for a period of 60 days; or
(iv) the Company shall consent to the appointment of a receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Company or relating
to all or substantially all of the Company's property; or
(v) the Company shall admit in writing its inability to pay its
debts 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
(vi) any failure of the Company to make any advance when required
to be made pursuant to Section 5.03 that continues unremedied for a period of
one Business Day after the date on which telecopied notice of such failure,
requiring the same to be remedied, shall have been given to the Company by the
Purchaser (followed by written notice delivered within one Business Day
thereafter);
-55-
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Purchaser, by notice in writing to the Company, may, in
addition to whatever rights the Purchaser may have at law or equity to damages,
including injunctive relief and specific performance, commence termination of
all the rights and obligations of the Company under this Agreement and in and to
the Mortgage Loans and the proceeds thereof. Upon receipt by the Company of a
second written notice from the Purchaser stating that they intend to terminate
the Company as a result of such Event of Default, all authority and power of the
Company 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 13.01. Upon receipt of such second written notice, the Company shall
prepare, execute and deliver to a successor any and all documents and other
instruments, place in such successor's possession all Mortgage Files and do or
cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the Mortgage Loans and related
documents to the successor, all at the Company's sole expense. The Company
agrees to cooperate with the Purchaser and such successor in effecting the
termination of the Company's responsibilities and rights hereunder, including,
without limitation, the transfer to such successor for administration by it of
all amounts which shall at the time be credited or should have been credited by
the Company to the Custodial Account or Escrow Account or REO Account or
thereafter received with respect to the Mortgage Loans.
Section 10.02 Waiver of Defaults.
------------------
The Purchaser may waive any default by the Company in the performance of
its obligations hereunder and its consequences. Upon any 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 thereto except to the extent expressly so waived.
Section 10.03 Servicer to Retain Previous Entitlement.
---------------------------------------
Notwithstanding any termination of the activities of the Servicer
hereunder pursuant to Section 10.01, the Servicer shall be entitled to receive,
out of any late collection of a Monthly Payment on a Mortgage Loan which was due
prior to the notice terminating the Servicer's rights and obligations as
Servicer hereunder and received after such notice, that portion thereof to which
the Servicer would have been entitled pursuant to Section 4.05, and any other
amounts payable to the Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder.
-56-
ARTICLE XI
TERMINATION
-----------
Section 11.01 Termination.
-----------
This Agreement shall terminate upon either: (i) the later of the
distribution to the Purchaser of final payment or liquidation with respect to
the last Mortgage Loan (or advances of same by the Company), or the disposition
of all property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last Mortgage Loan and the remittance of all funds due hereunder;
(ii) the mutual consent of the Company and the Purchaser in writing; or (iii)
the acquisition of all servicing pursuant to Section 6.06 hereof.
-57-
ARTICLE XII
MANDATORY DELIVERY; GRANT OF A SECURITY INTEREST
------------------------------------------------
Section 12.01 Mandatory Delivery; Grant of Security Interest.
----------------------------------------------
The sale and delivery on the related Closing Date of the Mortgage Loans
described on the related Mortgage Loan Schedule is mandatory from and after the
date of the execution of the related Confirmation unless otherwise noted on the
Confirmation, it being specifically understood and agreed that each Mortgage
Loan is unique and identifiable on the date thereof and that an award of money
damages would be insufficient to compensate the Purchaser for the losses and
damages incurred by the Purchaser (including damages to prospective purchasers
of the Mortgage Loans) in the event of the Company's failure to deliver (i) each
of the related Mortgage Loans or (ii) one or more Qualified Substitute Mortgage
Loans or (iii) one or more Mortgage Loans otherwise acceptable to the Purchaser
on or before the related Closing Date. As of the date of each mandatory
delivery Confirmation, the Company hereby grants to the Purchaser a lien on and
a continuing security interest in each related Mortgage Loan and each document
and instrument evidencing each such Mortgage Loan to secure the performance by
the Company of its obligation to deliver the Mortgage Loans on the Closing Date
therefor, and the Company agrees that it holds such Mortgage Loans in custody
for the Purchaser subject to the Purchaser's (i) right to reject any Mortgage
Loan (or Qualified Substitute Mortgage Loan) under the terms of this Agreement
and to require another Mortgage Loan (or Qualified Substitute Mortgage Loan) to
be substituted therefor, and (ii) obligation to pay the Purchase Price for the
Mortgage Loans.
The Company intends that the conveyance of the Company's right, title
and interest in and to the Mortgage Loans to the Purchaser shall constitute a
sale and not a pledge of security for a loan. If such conveyance is deemed to
be a pledge of security for a loan, however, the Company intends that the rights
and obligations of the parties to such loan shall be established pursuant to the
terms of the Agreement. The Company also intends and agrees that, in such
event, (i) the Company shall be deemed to have granted to the Purchaser and its
assigns a first priority security interest in the Company's entire right, title
and interest in and to the Mortgage Loans, all principal and interest received
or receivable with respect to the Mortgage Loans, all amounts held from time to
time in the accounts mentioned pursuant to this Agreement and all reinvestment
earnings on such amounts, together with all of the Company's right, title and
interest in and to the proceeds of any title, hazard or other insurance policies
related to such Mortgage Loans and (ii) the Agreement shall constitute a
security agreement under applicable law. All rights and remedies of the
Purchaser under this Agreement are distinct from, and cumulative with, any other
rights or remedies under this Agreement or afforded by law or equity and all
such rights and remedies may be exercised concurrently, independently or
successively.
-58-
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
Section 13.01 Successor to the Company.
------------------------
Prior to termination of the Company's responsibilities and duties under
this Agreement pursuant to Sections 9.04, 10.01 or 11.01, the Purchaser shall
(i) succeed to and assume all of the Company's responsibilities, rights, duties
and obligations under this Agreement, or (ii) appoint a successor having the
characteristics set forth in Section 9.02 hereof and which shall succeed to all
rights and assume all of the responsibilities, duties and liabilities of the
Company under this Agreement prior to the termination of the Company'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 Company's duties,
responsibilities and liabilities under this Agreement should be terminated
pursuant to the aforementioned Sections, the Company 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 the Company
pursuant to the aforementioned Sections shall not become effective until a
successor shall be appointed pursuant to this Section and shall in no event
relieve the Company of the representations and warranties made pursuant to
Sections 3.01 and 3.02 or its obligations under Section 9.01 and the remedies
available to the Purchaser under Section 3.03, it being understood and agreed
that the provisions of such Sections 3.01, 3.02, 3.03 and 9.01 shall be
applicable to the Company notwithstanding any such resignation or termination of
the Company, or the termination of this Agreement. In addition, notwithstanding
any such resignation or termination, the Company shall cooperate with all
reasonable requests for information by the Purchaser in connection with a Whole
Loan Transfer or a Pass-Through Transfer occurring within 180 days of such
termination; provided such information is in the possession of the Company and
the Purchaser pays for all out-of-pocket expenses of the Company incurred in
providing the same.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Company 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
Company, with like effect as if originally named as a party to this Agreement.
Any termination or resignation of the Company or this Agreement pursuant to
Section 9.04, 10.01 or 11.01 shall not affect any claims that the Purchaser may
have against the Company arising prior to any such termination or resignation.
-59-
The Company shall promptly deliver to the successor the funds in the
Custodial Account, Escrow Account and REO Account and all Mortgage Files and
related documents and statements held by it hereunder and the Company shall
account for all funds and shall execute and deliver such instruments and do such
other things as may reasonably be required to more fully and definitively vest
in the successor all such rights, powers, duties, responsibilities, obligations
and liabilities of the Company, all at the Company's sole expense.
Section 13.02 Amendment.
---------
This Agreement may be amended from time to time by the Company and the
Purchaser by written agreement signed by the Company and the Purchaser.
Section 13.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement 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
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Company at the Company's expense upon direction of the Purchaser, but only when
such direction is accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the Purchaser
or is necessary for the administration or servicing of the Mortgage Loans.
Section 13.04 Recordation of Assignment of Mortgages.
--------------------------------------
As provided in the Custodial Agreement, each Assignment of Mortgage
shall be in a form acceptable for recording in all appropriate public offices
for real property records in the jurisdiction in which the Mortgaged Property
recited in each such Assignment of Mortgage is situated.
Section 13.05 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 13.06 Governing Law.
-------------
This Agreement shall be construed in accordance with the laws of the
State of New York, except to the extent preempted by Federal law, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Section 13.07 General Interpretive Principles.
-------------------------------
-60-
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Agreement;
(d) a reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
Section 13.08 Reproduction of Documents.
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by any party at the closing, and (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties agree that
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 13.09 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail, postage prepaid, to (a) in the case of the Company, Long
Beach Mortgage Company, 1100 Town and Country Road, Orange, California 92868,
Attention: General Counsel, or such other address as may hereafter be furnished
to the Purchaser in writing by the Company and (b) in the case of the
-61-
Purchaser, Salomon Brothers Realty Corp., Seven World Trade Center, New York,
New York 10048, Attention: Susan Mills.
Section 13.10 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. If the invalidity of any part, provision, representation or
warranty of this Agreement shall deprive any party of the economic benefit
intended to be conferred by this Agreement, the parties shall negotiate in good-
faith to develop a structure the economic effect of which is nearly as possible
the same as the economic effect of this Agreement without regard to such
invalidity.
Section 13.11 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create a co-
partnership or joint venture between the parties hereto and the services of the
Company shall be rendered as an independent contractor and not as agent for the
Purchaser.
Section 13.12 Execution; Successors and Assigns.
---------------------------------
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 Section 7.04, Section 10.01
and Section 11.01, this Agreement shall inure to the benefit of and be binding
upon the Company and the Purchaser and their respective successors and assigns.
IN WITNESS WHEREOF, the Company and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
SALOMON BROTHERS REALTY CORP.,
Purchaser
By:_________________________
Name:___________________
Title:______________________
LONG BEACH MORTGAGE COMPANY,
Company
By:_________________________
Name:___________________
Title:______________________