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EXHIBIT 10.7
FORM OF SALE AND SERVICING AGREEMENT
Dated as of , 19
by and between
FIRSTPLUS HOME LOAN OWNER TRUST 19 -
(Issuer)
FIRSTPLUS INVESTMENT CORPORATION
(Seller)
and
FIRSTPLUS FINANCIAL, INC.
(Transferor and Servicer)
FIRSTPLUS HOME LOAN OWNER TRUST 19 __-__
ASSET-BACKED NOTES AND CERTIFICATES
SERIES 19 __-__
2
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions.........................................................................................1
Addition Notice..........................................................................................1
Agreement................................................................................................1
Assignment of Mortgage...................................................................................1
Assumed Pool Principal Balance...........................................................................1
Available Collection Amount..............................................................................1
Business Day.............................................................................................2
Capitalized Interest Account.............................................................................2
Capitalized Interest Account Deposit.....................................................................2
Capitalized Interest Account Requirement.................................................................2
Capitalized Interest Amount..............................................................................2
Capitalized Interest Excess..............................................................................2
Certificate(s)...........................................................................................2
Certificateholder........................................................................................2
Certificateholders' Distributable Amount.................................................................2
Certificateholders' Interest Carry-Forward Amount........................................................3
Certificateholders' Interest Distributable Amount........................................................3
Certificateholders' Monthly Interest Distributable Amount................................................3
Certificateholders' Monthly Principal Distributable Amount...............................................3
Certificateholders' Principal Distributable Amount.......................................................3
Certificateholders' Principal Carry-Forward Amount.......................................................3
Certificate Principal Balance............................................................................4
Class ................................................................................................4
Class A-1 Note...........................................................................................4
Class A-2 Note...........................................................................................4
Class A-3 Note...........................................................................................4
Class A-4 Note...........................................................................................4
Class A-5 Note...........................................................................................4
Class Pool Factor........................................................................................4
Class Principal Balance..................................................................................4
Closing Date.............................................................................................4
Code ................................................................................................4
Collection Account.......................................................................................4
Completion Certificate...................................................................................4
Combination Loan.........................................................................................4
Credit Support Reduction Date............................................................................4
Custodial Agreement......................................................................................5
Custodian................................................................................................5
Custodian Fee............................................................................................5
Cut-Off Date.............................................................................................5
Debt Consolidation Loan..................................................................................5
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Defaulted Home Loan......................................................................................5
Defective Home Loan......................................................................................5
Deficiency Amount........................................................................................5
Deleted Home Loan........................................................................................7
Determination Date.......................................................................................7
Distribution Date........................................................................................7
DTC ................................................................................................7
Due Date ................................................................................................7
Due Period...............................................................................................7
Eligible Account.........................................................................................7
Eligible Servicer........................................................................................7
Event of Default.........................................................................................7
Excess Overcollateralization Amount......................................................................7
Excess Reserve Account Amount............................................................................7
Excess Servicing Fee.....................................................................................7
Excess Spread............................................................................................8
Expected Loan Losses.....................................................................................8
FDIC ................................................................................................8
FHLMC ................................................................................................8
Fidelity Note............................................................................................8
FNMA ................................................................................................8
Foreclosure Property.....................................................................................8
Funding Period...........................................................................................8
Guaranteed Payment.......................................................................................8
Guaranty Insurance Premium...............................................................................8
Guaranty Policy..........................................................................................8
Guaranty Policy Proceeds.................................................................................8
HUD ................................................................................................8
Home Improvement Loan....................................................................................9
Home Loan................................................................................................9
Home Loan Interest Rate..................................................................................9
Home Loan Pool...........................................................................................9
Home Loan Schedule.......................................................................................9
Indenture................................................................................................9
Indenture Trustee........................................................................................9
Indenture Trustee Fee....................................................................................9
Initial Overcollateralization Level......................................................................9
Initial Home Loan........................................................................................9
Initial Pool Principal Balance...........................................................................9
Insurance Agreement.....................................................................................10
Insurance Proceeds......................................................................................10
Insured Securities......................................................................................10
Interest Distribution Amount............................................................................10
Interest Shortfall......................................................................................10
Interest Shortfall Rate.................................................................................10
Issuer's Home Loan File.................................................................................10
Liquidated Home Loan....................................................................................10
Liquidation Proceeds....................................................................................11
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Loan Sale Agreement.....................................................................................11
Majority Securityholders................................................................................11
Modified Home Loan......................................................................................11
Monthly Payment.........................................................................................11
Mortgage ...............................................................................................11
Mortgaged Property......................................................................................11
Mortgaged Property States...............................................................................11
Net Liquidation Proceeds................................................................................11
Net Loan Losses.........................................................................................12
Net Principal Loan Losses...............................................................................12
Non-United States Person................................................................................12
Note(s) ...............................................................................................12
Note Distribution Account...............................................................................12
Noteholder..............................................................................................12
Noteholders' Distributable Amount.......................................................................12
Noteholders' Interest Carry-Forward Amount..............................................................12
Noteholders' Interest Distributable Amount..............................................................13
Noteholders' Monthly Interest Distributable Amount......................................................13
Noteholders' Monthly Principal Distributable Amount.....................................................13
Noteholders' Principal Distributable Amount.............................................................13
Noteholders' Principal Carry-Forward Amount.............................................................13
Note Interest Rate......................................................................................13
Obligor ...............................................................................................14
Officer's Certificate...................................................................................14
Original Certificate Principal Balance..................................................................14
Original Class Principal Balance........................................................................14
Overcollateralization Level.............................................................................14
Overcollateralization Reduction Amount..................................................................14
Overcollateralization Stepdown Date.....................................................................14
Ownership Interest......................................................................................14
Owner Trustee...........................................................................................14
Owner Trustee Fee.......................................................................................14
Pass-Through Rate.......................................................................................15
Permitted Investments...................................................................................15
Person ...............................................................................................16
Pool Principal Balance..................................................................................16
Post Liquidation Proceeds...............................................................................16
Preference Amount.......................................................................................16
Pre-Funded Amount.......................................................................................16
Pre-Funding Account.....................................................................................16
Pre-Funding Account Deposit.............................................................................17
Pre-Funding Account Weighted Average Balance............................................................17
Pre-Funding Termination Distribution Date...............................................................17
Principal Balance.......................................................................................17
Principal Prepayment....................................................................................17
Projected Interest Shortfall............................................................................17
Prospectus..............................................................................................17
Purchase Price..........................................................................................17
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Qualified Substitute Home Loan..........................................................................18
Rating Agency or Rating Agencies........................................................................18
Ratings ...............................................................................................18
Realized Losses.........................................................................................18
Record Date.............................................................................................18
Regular Principal Distribution Amount...................................................................18
Released Mortgaged Property Proceeds....................................................................19
Required Credit Support Multiple........................................................................19
Reserve Account.........................................................................................20
Reserve Account Initial Deposit.........................................................................20
Required Overcollateralization Level....................................................................21
Reserve Account Requirement.............................................................................21
Residual Interest:......................................................................................21
Responsible Officer.....................................................................................21
Securities..............................................................................................21
Securities Insurer......................................................................................21
Securities Insurer Commitment...........................................................................21
Securities Insurer Default..............................................................................22
Securities Insurer Reimbursement Amount.................................................................22
Securityholder..........................................................................................22
Seller ...............................................................................................22
Series or Series 1996-3.................................................................................22
Servicer ...............................................................................................22
Servicer's Fiscal Year..................................................................................22
Servicer's Monthly Remittance Report....................................................................22
Servicer's Monthly Statement............................................................................22
Servicer's Home Loan File...............................................................................22
Servicing Advances......................................................................................22
Servicing Compensation..................................................................................22
Servicing Fee...........................................................................................23
Servicing Officer.......................................................................................23
Subsequent Home Loan....................................................................................23
Subsequent Purchase Price...............................................................................23
Subsequent Transfer Agreement...........................................................................23
Subsequent Transfer Date................................................................................23
Subservicer.............................................................................................23
Subservicing Account....................................................................................23
Subservicing Agreement..................................................................................23
Substitution Adjustment.................................................................................24
Superior Lien...........................................................................................24
Termination Price.......................................................................................24
Transferor..............................................................................................24
Trust ...............................................................................................24
Trust Account Property..................................................................................24
Trust Accounts..........................................................................................24
Trust Agreement.........................................................................................24
Trust Fees and Expenses.................................................................................24
Underwriters............................................................................................24
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Weighted Average Interest Rate..........................................................................24
Section 1.02 Other Definitional Provisions......................................................................25
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans...............................................................26
Section 2.02 Conveyance of the Subsequent Home Loans............................................................26
Section 2.03 Ownership and Possession of Home Loan Files........................................................29
Section 2.04 Books and Records..................................................................................29
Section 2.05 Delivery of Home Loan Documents....................................................................29
Section 2.06 Acceptance by Issuer of the Home Loans; Certain Substitutions;
Certification by Issuer........................................................................32
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller.......................................................34
Section 3.02 Representations, Warranties and Covenants of the Servicer
and Transferor.................................................................................35
Section 3.03 Individual Home Loans..............................................................................37
Section 3.04 Subsequent Home Loans..............................................................................41
Section 3.05 Purchase and Substitution..........................................................................42
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer.............................................................................44
Section 4.02 Liquidation of Home Loans..........................................................................46
Section 4.03 Fidelity Bond; Errors and Omission Insurance.......................................................47
Section 4.04 Title, Management and Disposition of Foreclosure Property..........................................47
Section 4.05 Access to Certain Documentation and Information Regarding the Home Loans...........................48
Section 4.06 Superior Liens.....................................................................................48
Section 4.07 Subservicing.......................................................................................48
Section 4.08 Successor Servicers................................................................................50
Section 4.09 Title, Management and Disposition of Foreclosure Property..........................................50
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
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Section 5.01 Establishment of Collection Accounts; Deposits in Collection Accounts;
Withdrawals from the Collection Account.................................................................51
Section 5.02 Initial Collection Account; Transfer of Collection Account.........................................53
Section 5.03 Pre-Funding Account................................................................................53
Section 5.04 Capitalized Interest Account.......................................................................54
Section 5.05 Establishment of Note Distribution Account; Investment of Funds Held in Note
Distribution Account...........................................................................55
Section 5.06 Reserve Account....................................................................................56
Section 5.07 Trust Account Property.............................................................................58
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements..........................................................................................59
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged Property.......................................62
Section 6.03 Specification of Certain Tax Matters...............................................................62
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements..............................................................................63
Section 7.02 Satisfaction of Mortgages and Release of Home Loan Files...........................................63
Section 7.03 Servicing Compensation.............................................................................65
Section 7.04 Quarterly Statements as to Compliance..............................................................65
Section 7.05 Annual Independent Public Accountants' Servicing Report............................................65
Section 7.06 Right to Examine Servicer Records..................................................................66
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements....................................66
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements...............................................................................66
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims................................................................67
Section 9.02 Merger or Consolidation of the Servicer............................................................68
Section 9.03 Limitation on Liability of the Servicer and Others.................................................69
Section 9.04 Servicer Not to Resign; Assignment.................................................................69
Section 9.05 Relationship of Servicer to Owner Trustee and the Indenture Trustee................................69
ARTICLE X
DEFAULT
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Section 10.01 Events of Default.................................................................................70
Section 10.02 Indenture Trustee to Act; Appointment of Successor................................................72
Section 10.03 Waiver of Defaults................................................................................73
Section 10.04 Accounting Upon Termination of Servicer...........................................................73
ARTICLE XI
TERMINATION
Section 11.01 Termination.......................................................................................74
Section 11.02 Optional Termination by Holder of Residual Interest or the Securities Insurer.....................74
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders...........................................................................75
Section 12.02 Amendment.........................................................................................75
Section 12.03 Recordation of Agreement..........................................................................76
Section 12.04 Duration of Agreement.............................................................................76
Section 12.05 Governing Law.....................................................................................76
Section 12.06 Notices...........................................................................................77
Section 12.07 Severability of Provisions........................................................................77
Section 12.08 No Partnership....................................................................................77
Section 12.09 Counterparts......................................................................................77
Section 12.10 Successors and Assigns............................................................................78
Section 12.11 Headings..........................................................................................78
Section 12.12 Actions of Securityholders........................................................................78
Section 12.13 Reports to Rating Agencies........................................................................78
Section 12.14 Securities Insurer Deemed Owner...................................................................79
Section 12.15 Third Party Beneficiary...........................................................................79
Section 12.16 Suspension and Termination of Securities Insurer's Rights.........................................79
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C Contents of Home Loan File
EXHIBIT D Form of Subsequent Transfer Agreement
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This Sale and Servicing Agreement is entered into effective as of , 19
, among FIRSTPLUS Home Loan Trust 19 - , a Delaware business trust (the "Issuer"
or the "Trust"), FIRSTPLUS INVESTMENT CORPORATION, a Nevada corporation, as
Seller (the "Seller"), and FIRSTPLUS FINANCIAL, INC., a Texas corporation
("FFI"), as Transferor (in such capacity, the "Transferor") and Servicer (in
such capacity, the "Servicer").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Home Loans which were
originated or purchased by the Transferor and sold to the Seller in the ordinary
course of business of the Transferor;
WHEREAS, the Seller is willing to sell such Home Loans to the Issuer;
and
WHEREAS, the Servicer is willing to service such Home Loans in
accordance with the terms of this agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Addition Notice: With respect to the transfer of Subsequent Home Loans
to the Trust pursuant to Section 2.02 of this Agreement, notice of the Seller's
designation of Subsequent Home Loans to be sold to the Issuer and the aggregate
Principal Balance of such Subsequent Home Loans as of the related Cut-Off Date,
which shall be given to the Indenture Trustee and to the Securities Insurer not
later than three Business Days prior to the related Subsequent Transfer Date.
Agreement: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect of record the sale of the related Home Loan to the Issuer for
the benefit of the Securityholders and the Securities Insurer.
Assumed Pool Principal Balance: On the Closing Date, the amount equal
to the sum of the Initial Pool Principal Balance, plus the Pre-Funding Account
Deposit, which amount is $____________.
Available Collection Amount: An amount equal to the sum of (i) all
amounts received on the Home Loans or required to be paid by the Servicer, the
Transferor or the Seller (exclusive of amounts not required to be deposited in
the Collection Account and amounts permitted to be
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 1
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withdrawn by the Servicer from the Collection Account pursuant to the Sale and
Servicing Agreement, including without limitation the Servicing Fee) during the
related Due Period (or, in the case of amounts paid by the Transferor in
connection with the purchase or substitution of a Defective Home Loan) as
reduced by any portion thereof that may not be withdrawn therefrom pursuant to
an order of a United States bankruptcy court of competent jurisdiction imposing
a stay pursuant to Section 362 of the United States Bankruptcy Code, (ii) in the
case of a Distribution Date relating to a Due Period that occurs prior to the
end of the Funding Period, an amount from the Capitalized Interest Account
sufficient to fund any shortfall in the Interest Remittance Amount attributable
to the amounts in the Pre-Funding Account, (iii) in the case of the Distribution
Date following the Due Period in which the Funding Period ends, amounts, if any,
remaining in the Pre-Funding Account at the end of the Funding Period (net of
reinvestment income which must be transferred to the Capitalized Interest
Account), (iv) with respect to the final Distribution Date, an early retirement
of the Offered Securities by the Servicer or the Securities Insurer, the
Termination Price, and (v) any and all income or gain from investments in the
Collection Account.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in New York City or in the city in which the
corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
Capitalized Interest Account: The account established pursuant to
Section 5.04, which account shall contain the Capitalized Interest Amount.
Capitalized Interest Account Deposit: An amount equal to
$______________.
Capitalized Interest Account Requirement: On the Closing Date, the
Capitalized Interest Account Requirement will equal the Capitalized Interest
Account Deposit. Thereafter, as determined by the Servicer pursuant to Section
5.04 on any Business Day prior to , 19 , the Capitalized
Interest Account Requirement will equal the Projected Interest Shortfall.
Capitalized Interest Amount: The amount on deposit in the Capitalized
Interest Account as of any date of determination, after giving effect to (i)
amounts to be transferred to the Distribution Account on the next Distribution
Date pursuant to Section 5.04(a), (ii) amounts released to the Seller pursuant
to Section 5.04(d), (iii) any amounts available under any letter of credit
deposited with the Indenture Trustee pursuant to Section 5.04(c) and (iv) any
income and gain, if any, on funds held in the Capitalized Interest Account and
any income and gain, if any, transferred to the Capitalized Interest Account
from funds held in the Pre-Funding Account pursuant to Section 5.03(b).
Capitalized Interest Excess: As determined by the Servicer pursuant to
Section 5.04, the amount of excess funds on deposit in the Capitalized Interest
Account; on any Business Day occurring prior to , 19 , the
Capitalized Interest Excess shall equal the greater of (i) zero and (ii) the
Capitalized Interest Amount less the Capitalized Interest Account Requirement.
Certificate(s): Any one or more certificate(s) issued pursuant to the
Trust Agreement.
Certificateholder: A holder of any Certificate.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 2
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Certificateholders' Distributable Amount: With respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
Certificateholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carry-Forward Amount on such preceding Distribution
Date, over the amount in respect of interest that is actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Pass Through
Rate for the related Interest Period.
Certificateholders' Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carry-Forward Amount for such Distribution Date.
Certificateholders' Monthly Interest Distributable Amount: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Pass Through Rate on the Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all payments allocable to the reduction of the Certificate Balance made on or
prior to such Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date).
Certificateholders' Monthly Principal Distributable Amount: With
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, the sum
of (i) the Regular Principal Distribution Amount (less, on the Distribution Date
on which the Notes are paid in full, the portion thereof payable on the Notes),
plus (ii) until the Overcollateralization Amount equals the Required
Overcollateralization Amount, the Excess Spread, if any.
Certificateholders' Principal Distributable Amount: With respect to any
Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carry-Forward Amount as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Final
Scheduled Distribution Date, the principal required to be distributed to
Certificateholders will include the lesser of (a) any scheduled payments of
principal due and remaining unpaid on each Home Loan in the Trust as of the
Final Scheduled Maturity Date or (b) the portion of the amount required to be
advanced under clause (a) above that is necessary (after giving effect to the
other amounts to be deposited in the Certificate Distribution Account on such
Distribution Date and allocable to principal) to reduce the Certificate Balance
to zero, and, in the case of clauses (a) and (b), remaining after any required
distribution in respect of the Notes.
Certificateholders' Principal Carry-Forward Amount: As of the close of
any Distribution Date, the excess of the Certificateholders' Monthly Principal
Distributable Amount and any outstanding Certificateholders' Principal
Carry-Forward Amount from the preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account.
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Certificate Principal Balance: As of any date of determination, the
Original Certificate Principal Balance of the Certificates reduced by all
amounts previously distributed to the Certificateholders in reduction of the
principal balance of the Certificates on all previous Distribution Dates
pursuant Section of the Trust Agreement.
Class: With respect to the Notes, all Notes bearing the same class
designation.
Class A-1 Note: Any Class A-1 Note in the form attached to the
Indenture as Exhibit ___.
Class A-2 Note: Any Class A-2 Note in the form attached to the
Indenture as Exhibit ___.
Class A-3 Note: Any Class A-3 Note in the form attached to the
Indenture as Exhibit ___.
Class A-4 Note: Any Class A-4 Note in the form attached to the
Indenture as Exhibit ___.
Class A-5 Note: Any Class A-5 Note in the form attached to the
Indenture as Exhibit ___.
Class Pool Factor: With respect to each Class of Notes and as of any
date of determination, the then applicable Class Principal Balance of the
respective Class of Notes divided by the Original Class Principal Balance of
such Class. With respect to the Certificates and as of any date of
determination, the then applicable Certificate Principal Balance of the
respective Certificates divided by the Original Certificate Principal Balance of
the Certificates.
Class Principal Balance: With respect to each Class of Notes and as of
any date of determination, the Original Class Principal Balance of each such
Class reduced by all amounts previously distributed to Noteholders of such Class
in reduction of the principal balance of such Class on all previous Distribution
Dates pursuant to Section __, of the Indenture.
Closing Date: ____________________, 19__.
Code: The Internal Revenue Code of 1986, as amended.
Collection Account: The account established and maintained by the
Servicer in accordance with Section 5.01.
Completion Certificate: With respect to a Home Improvement Loan, a
certificate executed by the related Obligor wherein such Obligor states the
related contractor or seller of the property improvement has completed to such
Obligor's satisfaction the improvements for which the related Home Loan was
obtained.
Combination Loan: A Home Loan, the proceeds of which were used by the
Obligor in combination to finance property improvements and for debt
consolidation or other purposes, and which are marketed to by the Transferor
under the name "Buster(TM) Loans."
Credit Support Reduction Date: The Distribution Date occurring on the
later of: (i) the _______ (___) Distribution Date; or (ii) the Distribution Date
on which the Pool Principal Balance is equal to or less than ___ percent
(___%) of the aggregate Principal Balances as of the applicable Cut-Off Dates
of all the Home Loans.
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Custodial Agreement: The custodial agreement dated , 19
by and between the Seller, FFI, as the Transferor and the Servicer, the Issuer,
and Bank One, Texas, National Association, as the Custodian, and any subsequent
custodial agreement, in similar form and substance, providing for the retention
of the Home Loan Files by the Custodian on behalf of the Owner Trustee.
Custodian: Any custodian acceptable to the Securities Insurer and
appointed by the Issuer pursuant to the Custodial Agreement, which shall not be
affiliated with the Servicer, the Transferor, any Subservicer, or the Seller.
, shall be the initial Custodian pursuant to the terms of
the Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
calculated and payable monthly on each Distribution Date equal to the per annum
percentage (as set forth in the Custodian Fee Agreement) of the Pool Principal
Balance as of the immediately preceding Determination Date, except with respect
to the first Distribution Date, when such monthly fee shall be pro rated based
on four (4) days for the first Due Period.
Cut-Off Date: With respect to the Initial Home Loans, the close of
business on , 19 and with respect to each Subsequent Home Loan,
the close of business on the date specified as such in the applicable
Subsequent Transfer Agreement.
Debt Consolidation Loan: A Home Loan, the proceeds of which were
primarily used by the related Obligor for debt consolidation purposes or
purposes other than to finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing
the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to the calculation of the Required
Credit Support Multiple, during a Due Period, any Home Loan, including without
limitation any Liquidated Home Loan, with respect to which any of the following
occurs: (a) foreclosure proceedings have been commenced; (b) any portion of a
Monthly Payment becomes days past due; or (c) the Servicer or any
Subservicer has determined in good faith and in accordance with customary
servicing practices that such Home Loan is uncollectible.
Defective Home Loan: As defined in Section 3.05 hereof.
Deficiency Amount: As of any Distribution Date, the amount by which the
sum of the Required Distribution Amount exceeds the Available Collection Amount
for distribution in respect of the Securities for such Distribution Date.
Delivery: When used with respect to Trust Account Property means: (a)
with respect to bankers' acceptances, commercial paper, negotiable certificates
of deposit and other obligations that constitute "instruments" within the
meaning of Section 9-105(1)(i) of the UCC and are susceptible of physical
delivery, transfer thereof to the Indenture Trustee or its nominee or custodian
by physical delivery to the Indenture Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Indenture Trustee or its nominee
or custodian or endorsed in blank, and, with respect to a certificated security
(as defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of
such
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certificated security endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank to a financial
intermediary (as defined in Section 8-313 of the UCC) and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of a confirmation of
the purchase of such certificated security by the Indenture Trustee or its
nominee or custodian, or (ii) by delivery thereof to a "clearing corporation"
(as defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the nominee of
either subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its nominee or
custodian (all of the foregoing, "Physical Property"), and, in any event, any
such Physical Property in registered form shall be in the name of the Indenture
Trustee or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect the complete transfer
of ownership of any such Trust Account Property (as defined herein) to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary that is also a "depository" pursuant to
applicable federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry securities; the
making by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations as belonging to the Indenture Trustee
or its nominee or custodian and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or custodian.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 6
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Deleted Home Loan: A Home Loan replaced by or to be replaced by a
Qualified Substitute Home Loan pursuant to Section 3.05 hereof.
Determination Date: The day of each month which is five (5) Business
Days prior to the related Distribution Date.
Distribution Date: The 20th day of any month or if such 20th day is not
a Business Day, the first Business Day immediately following such day,
commencing on ______________, 19__.
DTC: The Depository Trust Company.
Due Date: The day of the month on which the Monthly Payment is due from
the Obligor on a Home Loan.
Due Period: With respect to each Distribution Date, the calendar month
preceding the month in which such Distribution Date occurs.
Eligible Account: At any time, an account which is any of the
following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating Agency
in one of their two highest long-term rating categories, or (B) the short-term
debt obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee and
the Owner Trustee, which depository institution or trust company shall have
capital and surplus of not less than $ _________; or (iv) an account that will
not cause any Rating Agency to downgrade or withdraw its then-current rating(s)
assigned to the Notes or the Certificates, as evidenced in writing by such
Rating Agency. (Each reference in this definition of "Eligible Account" to the
Rating Agency shall be construed as a reference to ___________________________.)
Eligible Servicer: A Person who is qualified to act as Servicer of the
Home Loans under applicable federal and state laws and regulations.
Event of Default: As described in Section 10.01 hereof.
Excess Overcollateralization Amount: As calculated on any Determination
Date, the excess of, if any, (x) the Overcollateralization Level on such
Distribution Date over (y) the Required Overcollateralization Level on such
Distribution Date.
Excess Reserve Account Amount: As defined in Section 5.06(c).
Excess Servicing Fee: With respect to each Distribution Date on which
the Excess Overcollateralization Amount equals or exceeds zero, then as to each
Home Loan (including any Home Loan as to which the related Mortgaged Property
has become a Foreclosure Property, but excluding any Liquidated Home Loan), the
excess servicing fee payable monthly to the Servicer on
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 7
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each Distribution Date, which shall be the product of ___% (___ basis points)
and the Principal Balance of such Home Loan as of the beginning of the
immediately preceding Due Period, divided by 12.
Excess Spread: With respect to any Distribution Date, an amount equal
to the portion, if any, of the Total Distribution Amount for the related Due
Period that remains after payment of (a) the Trust Fees and Expenses; (b) the
Noteholders' Interest Distributable Amount; (c) the Regular Principal
Distribution Amount; and (d) the Certificateholders' Interest Distributable
Amount.
Expected Loan Losses: As defined in Section 10.01(a)(vii).
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Note: As described in Section 4.03 hereof.
FNMA: The Federal National Mortgage Association and any successor
thereto.
Foreclosure Property: Any real property or personal property securing a
Home Loan that has been acquired by the Servicer through foreclosure, deed in
lieu of foreclosure or similar proceedings in respect of the related Home Loan.
Funding Period: The period beginning on the Closing Date and ending on
the earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is reduced below $__________ and the Transferor directs that the Funding
Period end, (b) the close of business on _________________, 19__ ; provided,
however, that the Funding Period shall end on such earlier date as determined
pursuant to Section 5.04(c), or (c) an Event of Default occurs.
Guaranteed Payment: With respect to the Guaranty Policy and as of any
Distribution Date, the sum of (i) any Deficiency Amount and (ii) any unpaid
Preference Amount.
Guaranty Insurance Premium: The premium, payable monthly, that is
specified in the Commitment Letter issued by the Securities Insurer with respect
to the Notes.
Guaranty Policy: That certain guaranty insurance policy for the Insured
Securities, number ______, dated _________, 19__ and issued by the Securities
Insurer to the Indenture Trustee guaranteeing payment on each Distribution Date
of the Required Distribution Amount and any unpaid Preference Amounts in
connection with the Insured Securities.
Guaranty Policy Proceeds: With respect to the Insured Securities, the
proceeds, if any, received by the Indenture Trustee from the Securities Insurer
pursuant to the Guaranty Policy. Such Guaranty Policy Proceeds shall be applied
solely to the Insured Securities pursuant to Section 6.01(b) in the event of a
shortfall with respect to the payment of any Required Distribution Amount in
respect of the Insured Securities on any Distribution Date.
HUD: The United States Department of Housing and Urban Development and
any successor thereto.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 8
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Home Improvement Loan: A Home Loan, the proceeds of which were used by
the Obligor to finance property improvements.
Home Loan: A Home Improvement Loan, Debt Consolidation Loan or
Combination Loan that is included in the Home Loan Pool. As applicable, Home
Loan shall be deemed to refer to the related Debt Instrument, Mortgage, and any
related Foreclosure Property.
Home Loan Interest Rate: The fixed annual rate of interest borne by a
Debt Instrument, as shown on the related Home Loan Schedule.
Home Loan Pool: The pool of Initial Home Loans and Subsequent Home
Loans.
Home Loan Schedule: The schedule of Initial Home Loans attached hereto
as Exhibit A, as amended or supplemented from time to time, including any
schedules of Subsequent Home Loans attached as exhibits to any Subsequent
Transfer Agreement, such schedules identifying each Home Loan by address of the
related Mortgaged Property, if any, and the name(s) of each Obligor and setting
forth as to each Home Loan the following information: (i) the Principal Balance
as of the applicable Cut-Off Date, (ii) the account number, (iii) the original
principal amount, (iv) the Due Date, (v) the Home Loan Interest Rate, (vi) the
first date on which a Monthly Payment is due under the related Note, (vii) the
Monthly Payment, (viii) the maturity date of the related Debt Instrument, and
(ix) the remaining number of months to maturity as of the applicable Cut-Off
Date.
Indenture: The Indenture, dated as of __________, 19__ , between the
Issuer and the Indenture Trustee.
Indenture Trustee: The Person acting as indenture trustee under the
Indenture, its successors in interest and any successor indenture trustee under
the Indenture.
Indenture Trustee Fee: The annual fee payable to the Indenture Trustee,
calculated and payable monthly on each Distribution Date, equal to the per annum
percentage (as set forth in the Indenture Trustee Fee Agreement) the Pool
Principal Balance as of the immediately preceding Determination Date, except
with respect to the first Distribution Date such monthly amount shall be pro
rated based on ____(__) days for the first Due Period.
Initial Overcollateralization Level: On the Closing Date, the amount
equal to the excess of the Assumed Pool Principal Balance over the Original
Class Principal Balance of the Notes, which excess shall initially equal the
Original Class Principal Balance of the Certificates.
Initial Home Loan: An individual Home Loan that is conveyed to the
Issuer pursuant to this Agreement on the Closing Date, together with the rights
and obligations of a holder thereof and payments thereon and proceeds therefrom,
the Initial Home Loans subject to this Agreement being identified on the Home
Loan Schedule annexed hereto as Exhibit A.
Initial Pool Principal Balance: $_____________, which is the Pool
Principal Balance as of the ___________________, 19__ Cut-Off Date.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 9
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Insurance Agreement: The Insurance and Indemnification Agreement, dated
as of _______, 19 __, between the Seller, the Indenture Trustee, the Transferor,
the Servicer, RAC Financial Group, Inc. and the Securities Insurer.
Insurance Proceeds: With respect to any Home Loan, the proceeds paid to
the Servicer by any insurer pursuant to any insurance policy covering a Home
Loan, Mortgaged Property or Foreclosure Property or any other insurance policy
that relates to a Home Loan, net of any expenses which are incurred by the
Servicer in connection with the collection of such proceeds and not otherwise
reimbursed to the Servicer, other than Guaranty Policy Proceeds and proceeds of
any insurance policy that are to be applied to the restoration or repair of the
Mortgaged Property or released to the Obligor in accordance with customary
mortgage loan servicing procedures applicable to the respective loan type,
including Home Improvement Loans, Debt Consolidation Loans and Combination
Loans.
Insured Securities: Each of the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes and the
Certificates.
Interest Distribution Amount: On any Distribution Date and for the
Notes will be calculated on the basis of a 360 day year consisting of twelve 30
day months at the respective Interest Rate for such Class on the outstanding
Class Principal Balance of such Class immediately prior to such Distribution
Date. The Interest Distribution Amount on any Distribution Date and for the
Certificates will be calculated on the basis of a 360 day year consisting of
twelve 30 day months at the Pass Through Rate on the outstanding Certificate
Principal Balance of the Certificates immediately prior to such Distribution
Date.
Interest Shortfall: As to any Distribution Date prior to the end of the
Pre-Funding Period, the amount of the shortfall in interest on the Securities
arising as a result of the utilization of the Pre- Funding Account for the
purchase by the Issuer of Subsequent Home Loans after the Closing Date. With
respect to the ______________Distribution Date, the Interest Shortfall is equal
to four (4) days' interest on the Pre-Funding Account Deposit computed at a per
annum rate equal to the Weighted Average Interest Rate, based on the respective
Class Principal Balances of each Class of Securities on the Closing Date. With
respect to the ____________Distribution Date and the ______________Distribution
Date, the Interest Shortfall will be equal to 30 days' interest on the average
daily balance in the Pre-Funding Account (net of interest and investment
earnings) during the related Due Period, computed at a per annum rate equal to
the Weighted Average Interest Rate as of the immediately preceding Distribution
Date (after taking into account the distributions made on such Distribution
Date).
Interest Shortfall Rate: The per annum rate equal to ____%, such rate
having been derived as follows: (a) the [Class A-5 Note Interest Rate] minus (b)
____%.
Issuer's Home Loan File: The documents delivered to the Owner Trustee
or the Custodian as its designated agent pursuant to Section 2.05.
Liquidated Home Loan: Any Home Loan or Foreclosure Property in respect
of a Home Loan on which a Monthly Payment is in excess of 30 days past due and
as to which the Servicer has determined that all amounts which it reasonably and
in good faith expects to collect have been recovered from or on account of such
defaulted Home Loan or the related Foreclosure Property;
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 10
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provided that, in any event, such defaulted Home Loan or the related Foreclosure
Property shall be deemed uncollectible and therefore deemed a Liquidated Home
Loan upon the earlier of: (a) the liquidation of the related Foreclosure
Property, (b) the determination by the Servicer in accordance with customary
servicing practices that no further amounts are collectible from the Home Loan
and any related Mortgaged Property, or (c) the date on which any portion of a
Monthly Payment on any Home Loan is in excess of 300 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition, and
any other amounts required to be deposited in the Collection Account pursuant to
Section 4.09, in each case other than Insurance Proceeds and Released Mortgaged
Property Proceeds.
Loan Sale Agreement: Each loan sale agreement entered into by the
Transferor, as purchaser, pursuant to which the Transferor has acquired any of
the Home Loans and which shall include all of the rights and benefits of the
Transferor thereunder, subject to any limitations thereunder regarding
assignment by the Transferor.
Majority Securityholders: (i) Until such time as the sum of the Class
Principal Balances of all Classes of Notes have been reduced to zero, the holder
or holders of in excess of ___% of the Class Principal Balance of all Classes of
Notes (accordingly, the holders of the Certificates shall be excluded from any
rights or actions of the Majority Securityholders during such period); and (ii)
thereafter, the holder or holders of in excess of ___% of the Certificate
Principal Balance of the Certificates.
Modified Home Loan: A Home Loan with respect to which the Servicer has
deferred delinquent interest and has modified the terms thereof to increase the
principal amount of such Home Loan, both pursuant to Section 4.01(c).
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The property (real, personal or mixed) encumbered
by the Mortgage which secures the Debt Instrument evidencing a secured Home
Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing an Initial Home Loan is located as set forth in the Home Loan Schedule,
and any other state wherein a Mortgaged Property securing any Subsequent Home
Loan may be located as set forth in the applicable Home Loan Schedule.
Net Liquidation Proceeds: Liquidation Proceeds net of any
reimbursements to the Servicer made therefrom for any unreimbursed Servicing
Advances made and any other fees and expenses paid in connection with the
foreclosure, conservation and liquidation of the related Home Loan or
Foreclosure Property pursuant to Sections 4.02 and 4.09 hereof.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 11
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Net Loan Losses: On each Distribution Date, with respect to the
Liquidated Home Loans occurring or becoming such during the immediately
preceding Due Period, an amount (but not less than zero) determined as of the
related Determination Date equal to the sum of (i) the Net Principal Loan
Losses, plus (ii) any accrued and unpaid interest on such Liquidated Home Loan,
minus the amount of any recoveries with respect to such Liquidated Home Loans
attributable to interest from whatever source received during any Due Period,
including any subsequent Due Period
Net Principal Loan Losses: On each Distribution Date, with respect to
the Liquidated Home Loans occurring or becoming such during the immediately
preceding Due Period, an amount (but not less than zero) determined as of the
related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such
Liquidated Home Loans immediately prior to the date of
liquidation and without the application of any amounts
included in clause (ii) below, minus
(ii) the aggregate amount of any recoveries attributable to
principal from whatever source received during any Due Period,
with respect to such Liquidated Home Loans, including any
subsequent Due Period, and including any Net Liquidation
Proceeds, any Insurance Proceeds, any Released Mortgaged
Property Proceeds, any payments from the related Obligor and
any payments made pursuant to Section 3.05;
provided, however, that for purposes of determining the Required Credit Support
Multiple, all of the preceding references to "Liquidated Home Loans" shall be
replaced with "Defaulted Home Loans".
Non-United States Person: Any Person other than a United States Person.
Note(s): One or more of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes or the Class A-5 Notes.
Note Distribution Account: The account established and maintained by
the Servicer with the Indenture Trustee pursuant to Section 5.05.
Noteholder: A holder of a Note.
Noteholders' Distributable Amount: With respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Noteholders'
Interest Carry-Forward Amount on such preceding Distribution Date, over the
amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the respective Interest Rates borne by
each class of the Notes for the related Due Period.
Noteholders' Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carry-Forward
Amount for such Distribution Date.
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Noteholders' Monthly Interest Distributable Amount: With respect to any
Distribution Date, interest accrued for the related Due Period on each Class of
Notes at the respective Interest Rate for such Class on the outstanding
principal balance of the Notes of such Class on the immediately preceding
Distribution Date after giving effect to all payments of principal to the
Noteholders of such class on or prior to such Distribution Date (or, in the case
of the first Distribution Date, on the Closing Date).
Noteholders' Monthly Principal Distributable Amount: With respect to
each Distribution Date, the sum of (i) the Regular Principal Distribution
Amount, plus (ii) until the Overcollateralization Amount equals the Required
Overcollateralization Amount, the Excess Spread, if any.
Noteholders' Principal Distributable Amount: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carry-Forward
Amount as of the close of the preceding Distribution Date; provided, however,
that the Noteholders' Principal Distributable Amount shall not exceed the
outstanding principal balance of the Notes; and provided, further, that (i) the
Noteholders' Principal Distributable Amount on the Class A-1 Final Scheduled
Distribution Date shall not be less than the Amount that is necessary (after
giving effect to other amounts to be deposited in the Note Distribution Account
on such Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-1 Notes to zero; (ii) the Noteholders'
Principal Distributable Amount on the Class A-2 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-2 Notes to zero; (iii) the Noteholders'
Principal Distributable Amount on the Class A-3 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-3 Notes to zero; (iv) the Noteholders'
Principal Distributable Amount on the Class A-4 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-4 Notes to zero; and (v) the Noteholders'
Principal Distributable Amount on the Class A-5 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-5 Notes to zero.
Noteholders' Principal Carry-Forward Amount: As of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carry-Forward
Amount from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
Note Interest Rate: With respect to each Class of Notes, the per annum
rate of interest payable to the holders of such Class of Notes. The Note
Interest Rate with respect to the Class A-1 Notes is equal to ____%; the Note
Interest Rate with respect to the Class A-2 Notes is equal to _____%; the Note
Interest Rate with respect to the Class A-3 Notes is equal to ____%; the Note
Interest Rate with respect to the Class A-4 Notes is equal to ____%; and the
Note Interest Rate with respect to the Class A-5 Notes is equal to ____%.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 13
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Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture Trustee
or the Owner Trustee signed by the President or a Vice President or an Assistant
Vice President of the Seller or the Servicer, in each case, as required by this
Agreement.
Original Certificate Principal Balance: $______________.
Original Class Principal Balance: In the case of the Class A-1 Notes,
$__________; in the case of the Class A-2 Notes, $__________; in the case of the
Class A-3 Notes, $___________; in the case of the Class A-4 Notes, $__________;
and in the case of the Class A-5 Notes, $______________.
Overcollateralization Level: As to any Determination Date, the amount
(exclusive of any distributions of Overcollateralization Reduction Amounts)
equal to the excess of (A) the sum of (i) the Pool Principal Balance and (ii)
the amount on deposit in the Pre-Funding Account, if any, over (B) the sum of
the Class Principal Balances of the Notes and the Certificate Principal Balance
of the Certificates.
Overcollateralization Reduction Amount: With respect to any
Distribution Date prior to an Overcollateralization Stepdown Date, zero; with
respect to any Distribution Date on an Overcollateralization Stepdown Date, the
lesser of (x) the Excess Overcollateralization Amount on such Distribution Date
and (y) the sum of the Regular Principal Distribution Amount, the Noteholders'
Principal Carry-Forward Amount and the Certificateholders' Principal
Carry-Forward Amount on such Distribution Date.
Overcollateralization Stepdown Date: Any Distribution Date with respect
to which the Required Overcollateralization Level is reduced as a result of a
reduction in the Required Credit Support Multiple.
Ownership Interest: As to any Security, any ownership or security
interest in such Security, including any interest in such Security as the holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial, as owner or as pledgee.
Owner Trustee: The Person acting as owner trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
Owner Trustee Fee: The annual fee payable to the Owner Trustee,
calculated and payable monthly on each Distribution Date, equal to the per annum
percentage (as set forth in the Owner Trustee Fee Agreement) the Pool Principal
Balance as of the immediately preceding Determination Date, except with respect
to the first Distribution Date such monthly amount shall be pro rated based on
four (4) days for the first Due Period.
Pass-Through Rate: With respect to the Certificates, the per annum rate
of interest with respect to the Certificates.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 14
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Permitted Investments: Each of the following:
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(ii) a repurchase agreement that satisfies the following
criteria and is acceptable to the Securities Insurer: (1) must be
between the Indenture Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the two
highest categories for long-term unsecured debt obligations by each
Rating Agency, or (b) banks rated in one of the two highest categories
for long-term unsecured debt obligations by each Rating Agency; and (2)
the written repurchase agreement must include the following: (a)
securities which are acceptable for the transfer and are either (I)
direct U.S. governments obligations, or (II) obligations of a Federal
agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for
any repurchase transaction; (c) the collateral must be delivered to the
Indenture Trustee or a third party custodian acting as agent for the
Indenture Trustee by appropriate book entries and confirmation
statements, with a copy to the Securities Insurer, and must have been
delivered before or simultaneous with payment (i.e., perfection by
possession of certificated securities); and (d) the securities sold
thereunder must be valued weekly, marked-to-market at current market
price plus accrued interest and the value of the collateral must be
equal to at least % of the amount of cash transferred by the Indenture
Trustee under the repurchase agreement and if the value of the
securities held as collateral declines to an amount below % of the cash
transferred by the Indenture Trustee plus accrued interest (i.e. a
margin call), then additional cash and/or acceptable securities must be
transferred to the Indenture Trustee to satisfy such margin call;
provided, however, that if the securities used as collateral are
obligations of FNMA or FHLMC, then the value of the securities held as
collateral must equal at least 105% of the cash transferred by the
Indenture Trustee under such repurchase agreement;
(iii) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state,
including the Indenture Trustee; provided that the debt obligations of
such depository institution or trust company at the date of the
acquisition thereof have been rated by each Rating Agency in one of its
two highest long-term rating categories;
(iv) deposits, including deposits with the Indenture Trustee,
which are fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, as the case may be;
(v) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Indenture Trustee, which at the date of acquisition
is rated by each Rating Agency in its highest short-term rating
category and which has an original maturity of not more than 365 days;
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 15
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(vi) debt obligations rated by each Rating Agency at the time
at which the investment is made in its highest long-term rating
category (or those investments specified in (iii) above with depository
institutions which have debt obligations rated by each Rating Agency in
one of its two highest long-term rating categories);
(vii) money market funds which are rated by each Rating Agency
at the time at which the investment is made in its highest long-term
rating category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(viii) any other demand, money market or time deposit
obligation, security or investment as may be acceptable to each Rating
Agency and the Securities Insurer at the time at which the investment
is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than % of the yield to maturity at par of the underlying
obligations; and provided, further, that no instrument described in the
foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to .
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: The aggregate Principal Balances of the Home
Loans as of any Determination Date.
Post Liquidation Proceeds: As defined in Section 4.02(b).
Preference Amount: Any amount previously distributed to the holder of
an Insured Security that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code, in accordance with a final, non-appealable order of a court having
competent jurisdiction.
Pre-Funded Amount: With respect to any Distribution Date, the amount
then on deposit in the Pre-Funding Account.
Pre-Funding Account: The account established and maintained by the
Trustee pursuant to Section 5.03.
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Pre-Funding Account Deposit: An amount equal to $______________.
Pre-Funding Account Weighted Average Balance: For purposes of computing
the Projected Interest Shortfall, on any date of determination, with respect to
the calculation of the weighted average balance of the amount on deposit on a
daily basis in the Pre-Funding Account for the Due Period in which such date of
determination occurs, (x) the total of (A) the sum of the actual amount on
deposit in the Pre-Funding Account on each day in such Due Period prior to such
date of determination plus (B) the product of (i) the amount on deposit in the
Pre-Funding Account on such date of determination and (ii) the number of days
remaining in such Due Period including the date of determination (but assuming a
30 day month), divided by (y) thirty (30) days or, with respect to the first Due
Period, four (4) days.
Pre-Funding Termination Distribution Date: The first Distribution Date
following the Due Period in which the Funding Period ends.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the applicable Cut-Off Date, the outstanding principal balance
of the Home Loan as of such Cut-Off Date and (ii) with respect to any Due Period
after such Cut-Off Date, the outstanding principal balance of the Home Loan as
of the first day of such Due Period (after giving effect to all payments
received thereon and the reclassification of any Home Loan as a Liquidated Home
Loan during the immediately preceding Due Period), without giving effect to
amounts received in respect of such Home Loan or related Foreclosure Property
after such day. Any Liquidated Home Loan shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and with respect to
any Due Period, any principal amount received on a Home Loan in excess of the
scheduled principal amount included in the Monthly Payment due on the Due Date
in such Due Period.
Projected Interest Shortfall: In connection with the calculation of the
Capitalized Interest Account Requirement pursuant to Section 5.04 as determined
by the Servicer on any Business Day prior to __________, 19__, the Projected
Interest Shortfall shall be the amount equal to the sum of (A) with respect to
the Due Period in which such date of determination occurs the Interest Shortfall
Rate, multiplied by the Pre-Funding Account Weighted Average Balance, multiplied
by the number of days in such Due Period (except for the first Due Period,
multiplied by ____ (__) days), and divided by 360 days, plus (B) with respect to
any Due Period thereafter ending on or before __________, 19__, the Interest
Shortfall Rate, multiplied by the balance in the Pre-Funding Account as of such
date of determination, multiplied by the number of days in such Due Period
thereafter ending on or before __________, 19__, and divided by 360 days;
assuming in the case of each Due Period other than the first Due Period, a
360-day year consisting of twelve 30-day months.
Prospectus: The final Prospectus, dated as of __________, 19__, as
supplemented by the related Prospectus Supplement, dated as of __________, 19__,
prepared by the Transferor and the Seller in connection with the issuance and
sale of the Securities.
Purchase Price: As defined in Section 3.05 herein.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 17
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Qualified Substitute Home Loan: A home loan or home loans substituted
for a Deleted Home Loan pursuant to Section 2.06 or 3.05, which (i) has or have
an interest rate or rates of not less than (and not more than two percentage
points more than) the Home Loan Interest Rate for the Deleted Home Loan, (ii)
matures or mature not more than one year later than and not more than one year
earlier than the Deleted Home Loan, (iii) has or have a principal balance or
principal balances (after application of all payments received on or prior to
the date of substitution) equal to or less than the Principal Balance of the
Deleted Home Loan as of such date, (iv) has or have a lien priority no lower
than the Deleted Home Loan, and (v) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.03.
For purposes of determining whether multiple mortgage loans proposed to be
substituted for one or more Deleted Home Loans pursuant to Section 2.06 or 3.05
are in fact "Qualified Substitute Home Loans" as provided above, the criteria
specified in clauses (i), (ii) and (iii) above may be considered on an aggregate
or weighted average basis, rather than on a loan-by-loan basis (e.g., so long as
the weighted average Home Loan Interest Rate of any loans proposed to be
substituted is not less than (and not more than two percentage points more than)
the Home Loan Interest Rate for the designated Deleted Home Loan or Home Loans,
the requirements of clause (i) above would be deemed satisfied).
Rating Agency or Rating Agencies: Either or both of _________ provided
that when the terms Rating Agency or Rating Agencies are used in reference to
the Insured Securities, such terms shall mean one or both of _______________.
Ratings: The ratings initially assigned to the Notes and the
Certificates by the Rating Agencies, as evidenced by letters from the Rating
Agencies.
Realized Losses: The excess of the principal balance of any Liquidated
Home Loans over the related Liquidation Proceeds to the extent attributable to
principal.
Record Date: The close of business on the last Business Day of the
month immediately preceding the month in which a Distribution Date occurs.
Regular Principal Distribution Amount: On each Distribution Date, an
amount equal to the lesser of (A) the sum of the aggregate Class Principal
Balance of the Notes and the Certificate Principal Balance of the Certificates
immediately prior to such Distribution Date and (B) the greater of (1) the sum
of (i) each scheduled payment of principal collected by the Servicer in the
related Due Period, (ii) all partial and full principal prepayments applied by
the Servicer during such related Due Period, (iii) the principal portion of all
Net Liquidation Proceeds, Insurance Proceeds and Released Mortgaged Property
Proceeds received during the related Due Period, (iv) (a) that portion of the
purchase price of any repurchased Home Loan which represents principal and (b)
the principal portion of any Substitution Adjustments required to be deposited
in the Collection Account as of the related Determination Date, and (v) upon the
reduction of the Reserve Fund and the Overcollateralization Amount to zero, the
principal portion of any Net Loan Losses for the preceding Due Period; and (2)
the amount by which (i) the aggregate principal balance of the Offered
Securities as of the preceding Distribution Date (after giving effect to all
payments of principal on such preceding Distribution Date) exceeds (ii) the Pool
Principal Balance plus funds on deposit in the Pre-Funding Account, each as of
the immediately preceding Determination Date. Notwithstanding clauses (B)(1)(v)
or (B)(2) of the definition of Regular Principal Distribution Amount, if on the
final Distribution Date the funds available for distribution are not sufficient
to provide for the distribution of the Regular Principal Distribution Amount and
the applicable Noteholders' Principal
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 18
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Carry-Forward Amount or Certificateholders' Principal Carry-Forward Amount, in
full, then the holders of the Notes or the Certificates, as applicable, will not
be distributed such portion of the Regular Principal Distribution Amount and
Noteholders' Principal Carry-Forward Amount or Certificateholders' Principal
Carryforward Amount attributable to such insufficiency, in which event the
amount of such insufficiency will be written-off and the Class Principal Balance
of all Classes of the Notes and the Certificate Principal Balance of the
Certificates will be reduced to zero without the distribution of funds to fully
pay the Notes and the Certificates. If prior to the final Distribution Date, the
Reserve Fund and the Overcollateralization Amount are reduced to zero, the
principal portion of any Net Loan Losses will be included within the Regular
Principal Distribution Amount for the related Distribution Date. However, no
corresponding proceeds of principal from the Home Loans will be included in the
Regular Principal Distribution Amount to provide funds for the distribution of
the portion of the Regular Principal Distribution Amount attributable to such
Net Loan Losses, and the distribution of this portion of the Regular Principal
Distribution Amount to the holders of the Offered Securities will be dependent
upon the receipt of funds from, first, the Excess Spread, if any, and, second,
if such Excess Spread does not provide sufficient funds, then from the
withdrawal of any available funds from the Reserve Account up to the Reserve
Account Requirement and, third, if such Excess Spread and withdrawal from the
Reserve Account do not provide sufficient funds, from any Guaranteed Payment
received by the Indenture Trustee or the Owner Trustee, as applicable. If
sufficient funds for the distribution of this portion of the Regular Principal
Distribution Amount are not provided from the Excess Spread, the Reserve Account
and/or the Guaranteed Payment on the applicable Distribution Date, then the
amount of such insufficiency would become a Noteholders' Principal Carry-Forward
Amount or Certificateholders' Principal Carry-Forward Amount, as applicable,
which would ultimately be subject to the write-off on the final Distribution
Date to the extent that sufficient funds are not available for distribution on
such final Distribution Date, including funds distributable to pay such
Noteholders' Principal Carry-Forward Amount or Certificateholders' Principal
Carry-Forward Amount from the receipt of Excess Spread and/or Guaranteed
Payments on or before such final Distribution Date.
Released Mortgaged Property Proceeds: With respect to any Home Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which in either
case are not released to the Obligor in accordance with applicable law,
customary second mortgage servicing procedures and this Agreement.
Required Credit Support Multiple: On each Distribution Date, as of the
related Determination Date the amount calculated as follows: (i) if less than
____% (by Principal Balance) of the Home Loans are more than 30 days delinquent,
and if less than ___% (by Principal Balance) of the Home Loans are more than 60
days delinquent, and if less than ___% (by Principal Balance) of the Home Loans
have become Defaulted Home Loans, then such amount will be 1.0; (ii) if less
than ___% (by Principal Balance) of the Home Loans are more than 30 days
delinquent, and if less than ___% (by Principal Balance) of the Home Loans are
more than 60 days delinquent, and if less than ___% (by Principal Balance) of
the Home Loans have become Defaulted Home Loans, then such amount will be 1.25;
(iii) if less than ____% (by Principal Balance) of the Home Loans are more than
30 days delinquent, and if less than ___% (by Principal Balance) of the Home
Loans are more than 60 days delinquent, and if less than ___% (by Principal
Balance) of the Home Loans have become Defaulted Home Loan, then such amount
will be 1.5; (iv) if ____% or more (by Principal Balance) of the Home Loans are
more than 30 days delinquent, or if ____% or more (by Principal Balance) of the
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 19
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Home Loans are more than 60 days delinquent, or if ___% or more (by Principal
Balance) of the Home Loans have become Defaulted Home Loans then such amount
will be 2.5; or (v) if ___% or more (based on Net Principal Loan Losses) of the
Home Loans have become Defaulted Home Loans on a cumulative basis on or prior to
the first anniversary of the , 19 Cut-Off Date, or if ____% or more (based on
Net Principal Loan Losses) of the Home Loans have become Defaulted Home Loans on
a cumulative basis on or prior to the second anniversary of the __________, 19__
Cut-Off Date, or if ___% or more (based on Net Principal Loan Losses) of the
Home Loans have become Defaulted Home Loans on a cumulative basis on or prior to
the third anniversary of the __________, 19__ Cut-Off Date, or if ____% or more
(based on Net Principal Loan Losses) of the Home Loans have become Defaulted
Home Loans on a cumulative basis on or prior to the fourth anniversary of the ,
19 Cut-Off Date and thereafter, then such amount will be 2.5; provided, however,
that such 2.5 multiple in clause (v) shall be reduced to an amount equal to
1.25, if the Home Loans (based on Net Principal Loan Losses) that have become
Defaulted Home Loans on a cumulative basis are determined to be less than the
foregoing percentages of ___%, ___%, ___% and ___% during the relevant time
periods in such clause (v) and if the rolling three month delinquency and
default multiple in clauses (i) through (iv) results in an amount of either 1.0
or 1.25. Except with respect to the calculations on a cumulative basis in clause
(v) and the proviso clause of the preceding sentence, the above delinquency
percentages for clauses (i) through (iv) will be calculated as the average of
the ratios for the immediately preceding three Due Periods based on the
outstanding aggregate Principal Balances for all Home Loans which are 30 or 60
days or more delinquent, respectively, over the outstanding aggregate Principal
Balance for all Home Loans, and such default percentages will be calculated on
an annualized basis as the average of the ratios for the immediately preceding
three Due Periods where such ratio equals the quotient of (A) 12 times the
aggregate Net Principal Loan Losses for such Home Loans that became Defaulted
Home Loans, over (B) the aggregate outstanding Principal Balance of such Home
Loans as of the beginning of the related Due Period. The cumulative default
percentages for clause (v) and the proviso clause above shall be calculated
after giving effect to any recovery of proceeds received by the Servicer with
respect to such Defaulted Home Loans in accordance with the definition of Net
Principal Loan Losses. Notwithstanding the preceding, in the event that the
Subsequent Home Loans violate or fail to conform or comply in all material
respects with the conditions and requirements for delivery thereof as set forth
herein and in the Securities Insurer Commitment, then, upon written notice to
each of the other parties hereto and the Rating Agencies, the Securities
Insurer, in its sole discretion, may modify the preceding definition, without
the requirement of an amendment of this Agreement, for a sixty (60) day period
after the last day of the Due Period in which the Funding Period ends.
Reserve Account: The account established and maintained by the Servicer
with the Indenture Trustee pursuant to Section 5.06 hereof.
Reserve Account Initial Deposit: With respect to the Closing Date, an
amount equal to the Specified Reserve Account Balance on the Closing Date (which
is equal to $_________) and, with respect to each Subsequent Transfer Date after
the Closing Date, an amount equal to % of the Principal Balance of the
Subsequent Home Loans transferred to the Issuer on such Subsequent Transfer
Date.
Required Distribution Amount: As of any Distribution Date, the sum of
the Interest Distribution Amount and the Regular Principal Distribution Amount.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 20
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Required Overcollateralization Level: On each Distribution Date, as of
the related Determination Date the amount equal to the greater of (1) ____% of
the sum of the aggregate Principal Balances as of the applicable Cut-Off Dates
of the Home Loans (the "Required OC Floor"), and (2) the product of (x) the
Required Credit Support Multiple and (y) _____% of the aggregate Principal
Balances as of the applicable Cut-Off Dates of the Home Loans; provided,
however, that on each Distribution Date on or after the Credit Support Reduction
Date on which the rolling three month delinquency and default multiple set forth
in clause (i) of the definition of the Required Credit Support Multiple is equal
to 1.0, as of the related Determination Date, the amount equal to the greater of
(1) the Required OC Floor, and (2) the product of (x) the Required Credit
Support Multiple and (y) the lesser of (A) ____% of the aggregate Principal
Balances as of the applicable Cut-Off Dates of the Home Loans and (B) ____% of
the aggregate outstanding Principal Balances of the Home Loans; provided
further, however, that the Required OC Level shall not be reduced pursuant to
the preceding proviso clause if the rolling three month delinquency and default
multiple in clauses (i) through (iv) of the definition of Required Credit
Support Multiple results in an amount greater than 1.0 and the cumulative
default multiple in clause (v) and the proviso of such definition results in an
amount greater than 1.25. Notwithstanding the preceding, in the event that the
Subsequent Home Loans violate or fail to conform or comply in all material
respects with the conditions and requirements for delivery thereof as set forth
herein and in the Securities Insurer Commitment, then, upon written notice to
each of the other parties hereto and the Rating Agencies, the Securities
Insurer, in its sole discretion, may modify the preceding definition, without
the requirement of an amendment of this Agreement, for a sixty (60) day period
after the last day of the Due Period in which the Funding Period ends.
Reserve Account Requirement: An amount initially equal to ___________.
The Reserve Account Requirement is subject to reduction as described in Section
5.06.
Residual Interest: The interest which represents the right to receive
the remaining assets in the Trust after all required distributions have been
made on the Notes and the Certificates on each Distribution Date.
Responsible Officer: When used with respect to the Indenture Trustee,
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Owner Trustee, any officer in
the Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Owner Trustee. When used with respect to the Seller, the
Transferor, the Servicer, or the Custodian, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
Securities: The Notes and/or the Certificates, as applicable.
Securities Insurer: MBIA Insurance Corporation, as issuer of the
Guaranty Policy, and its successors and assigns.
Securities Insurer Commitment: As defined in Section 3.04(a) hereof.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 21
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Securities Insurer Default: The failure of the Securities Insurer to
make payments under the Guaranty Policy, if such failure has not been remedied
with ten (10) days of notice thereof, or the entry of an order or decree with
respect to the Securities Insurer in any insolvency or bankruptcy proceedings
which remain unstayed or undischarged for 90 days.
Securities Insurer Reimbursement Amount: At any time, an amount owed to
the Securities Insurer as reimbursement for any Guaranteed Payments made under
the Guaranty Policy, together with interest thereon at the rate specified in the
Insurance Agreement and any other amounts then owing to the Securities Insurer
under the Insurance Agreement, which have not previously been reimbursed.
Securityholder: A holder of a Note or Certificate, as applicable.
Seller: FIRSTPLUS INVESTMENT CORPORATION, a Nevada corporation, and any
successor thereto.
Series or Series 19 - : FIRSTPLUS Asset-Backed Certificates, Series
19___ .___
Servicer: FFI, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer's Fiscal Year:____________________________ through
__________________________ of each year.
Servicer's Monthly Remittance Report: A report prepared and computed by
the Servicer in substantially the form of Exhibit B attached hereto.
Servicer's Monthly Statement: As defined in Section 6.02.
Servicer's Home Loan File: As described in Exhibit C.
Servicing Advances: Subject to Section 4.01(b), all reasonable and
customary "out of pocket" costs and expenses advanced or paid by the Servicer
with respect to the Home Loans in accordance with the performance by the
Servicer of its servicing obligations hereunder, including, but not limited to,
the costs and expenses for (i) the preservation, restoration and protection of
the Mortgaged Property, including without limitation advances in respect of real
estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to Section 4.02, (iii) the conservation, management and
sale or other disposition of an Foreclosure Property pursuant to Section 4.09,
(iv) the preservation of the security for a Home Loan if a Superior Lien has
accelerated or intends to accelerate its obligations pursuant to Section 4.06;
provided that such Servicing Advances are reimbursable to the Servicer to the
extent provided in the applicable clause of Section 6.01(b) or deducted or
retained in calculating Net Liquidation Proceeds hereunder.
Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Sections 7.01 and 7.03 and under the
circumstances set forth herein, the Excess Servicing Fee.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 22
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Servicing Fee: As to each Home Loan (including any Home Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the product of % ( basis points) times the
Principal Balance of such Home Loan as of the beginning of the immediately
preceding Due Period, divided by 12; provided that with respect to the first
Distribution Date, such monthly fee attributable to the performance of its
servicing functions commencing on the Closing Date shall be pro rated based on
four (4) days for the first Due Period. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer which fees shall be paid from the
Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved
in, or responsible for, the administration and servicing of the Home Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Owner Trustee and the Indenture Trustee, on behalf of the
Securityholders and the Securities Insurer, as such list may from time to time
be amended.
Subsequent Home Loan: An individual Home Improvement Loan, Debt
Consolidation Loan or Combination Loan that is conveyed to the Issuer on a
Subsequent Transfer Date, pursuant to a Subsequent Transfer Agreement, together
with the rights and obligations of a holder thereof and payments thereon and
proceeds therefrom, the Subsequent Home Loans subject to this Agreement will be
identified on a schedule attached as an exhibit to the related Subsequent
Transfer Agreement.
Subsequent Purchase Price: The Principal Balance of any Subsequent Home
Loans as of the applicable Cut-Off Date.
Subsequent Transfer Agreement: With respect to any Subsequent Home
Loan, the agreement pursuant to which Subsequent Home Loans are transferred to
the Trust by the Seller, substantially in the form of Exhibit D hereto.
Subsequent Transfer Date: The date specified in each Subsequent
Transfer Agreement, but no later than ________, 19__.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made available,
along with any modifications thereto, to the Owner Trustee, the Indenture
Trustee and to the Securities Insurer.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.06 or 3.05, the amount, if any, by which (a) the sum of
the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute Home
Loans as of the date of substitution plus any accrued interest thereon that is
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 23
32
scheduled to be paid during the Due Period in which such substitution occurs, is
less than (b) the sum of the aggregate of the Principal Balances, together with
accrued and unpaid interest thereon to the date of substitution, of the related
Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by other
than a first priority lien, the home loan(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
Termination Price: With respect to the Notes, as of any date of
determination, an amount equal to the sum of (i) the aggregate Class Principal
Balance of the Notes as of such date, and (ii) the sum of any outstanding
Noteholders' Interest Carry-Forward Amount and 30 days' interest on the
aggregate Class Principal Balance of the Notes as of such date, computed at the
weighted average Home Loan Interest Rate of the Home Loans (including
Foreclosure Properties) then outstanding. With respect to the Certificates, as
of any date of determination, an amount equal to the sum of (i) the Certificate
Principal Balance of the Certificates as of such date, and (ii) the sum of any
outstanding Certificateholders' Interest Carry-Forward Amount and 30 days'
interest on the Certificate Principal Balance of the Certificates as of such
date, computed at the weighted average Home Loan Interest Rate of the Home Loans
(including Foreclosure Properties) then outstanding.
Transferor: FFI, in its capacity as the transferor hereunder.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Collection Account,
the Reserve Account, the Pre-Funding Account or the Capitalized Interest
Account.
Trust Agreement: The Trust Agreement dated as of _________________ ,
19____, among the Seller, and the Owner Trustee.
Trust Fees and Expenses: As of each Distribution Date, an amount equal
to the Guaranty Insurance Premium, the Indenture Trustee Fee, the Owner Trustee
Fee and the Custodian Fee.
Underwriters: ___________________________ pursuant to an Underwriting
Agreement dated as of ___________, 19__ with the Transferor and the Seller.
Weighted Average Interest Rate: As of any particular date of
determination, the sum of:
(i) the product of (A) the Class Principal Balance of the
Class A-1 Notes divided by the sum of (x) the aggregate Class Principal
Balances of the Notes plus (y) the Certificate Principal Balance of the
Certificates, and (B) the Note Interest Rate for such Class A-1 Notes;
(ii) the product of (A) the Class Principal Balance of the
Class A-2 Notes divided by the sum of (x) the aggregate Class Principal
Balances of the Notes plus (y) the Certificate
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 24
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Principal Balance of the Certificates, and (B) the Note Interest Rate
for such Class A-2 Notes;
(iii) the product of (A) the Class Principal Balance of the
Class A-3 Notes divided by the sum of (x) the aggregate Class Principal
Balances of the Notes plus (y) the Certificate Principal Balance of the
Certificates, and (B) the Note Interest Rate for such Class A-3 Notes;
(iv) the product of (A) the Class Principal Balance of the
Class A-4 Notes divided by the sum of (x) the aggregate Class Principal
Balances of the Notes plus (y) the Certificate Principal Balance of the
Certificates, and (B) the Note Interest Rate for such Class A-4 Notes;
(v) the product of (A) the Class Principal Balance of the
Class A-5 Notes divided by the sum of (x) the aggregate Class Principal
Balances of the Notes plus (y) the Certificate Principal Balance of the
Certificates, and (B) the Note Interest Rate for such Class A-5 Notes;
(vi) the product of (A) the Certificate Principal Balance of
the Certificates divided by the sum of (x) the aggregate Class
Principal Balances of the Notes and (y) the Certificate Principal
Balance of the Certificates, and (B) the Pass-Through Rate for the
Certificates.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 25
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(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans.
(a) In consideration of the Issuer's delivery to or upon the order of
the Seller of $_______________, less the Reserve Account Initial Deposit as of
the Closing Date (other than any portion thereof attributable to the conveyance
of Subsequent Home Loans on the Closing Date), the Seller, as of the Closing
Date and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Seller in and to the Initial Home Loans
(including all interest and principal thereon received after the related CutOff
Date), the Pre-Funding Account Deposit, the Capitalized Interest Account
Deposit, the Reserve Account Initial Deposit and the proceeds of any and all of
the foregoing. The foregoing sale, transfer, assignment, set over and conveyance
does not and is not intended to result in a creation or an assumption by the
Issuer of any obligation of the Seller, the Transferor or any other person in
connection with the Home Loans or under any agreement or instrument relating
thereto except as specifically set forth herein.
(b) The Issuer acknowledges the conveyance to it of the Initial Home
Loans, the Pre- Funding Account Deposit, the Capitalized Interest Account
Deposit and the Reserve Account Initial Deposit, receipt of which is hereby
acknowledged. Concurrently with such delivery and in exchange therefor, the
Issuer has pledged the Initial Home Loans and the Trust Account Property to the
Indenture Trustee and the Indenture Trustee, pursuant to the written request of
the Seller, has executed and caused to be authenticated and delivered to or upon
the order of the Seller, the Notes. In addition, concurrently with such delivery
and in exchange therefor, the Owner Trustee, pursuant to the written request of
the Seller, has executed (not in its individual capacity, but solely as Owner
Trustee on behalf of the Issuer) and caused to be authenticated and delivered to
or upon the order of the Seller, the Certificates and the Residual Interest.
Section 2.02 Conveyance of the Subsequent Home Loans.
(a) On or before the last day of the Funding Period, the Seller shall
convey to the Issuer, and the Issuer shall purchase pursuant to this Section
2.02 the lesser of: (i) all Home Loans then in its possession that satisfy the
requirements of this Section 2.02 or (ii) the maximum principal balance of Home
Loans that satisfies the requirements of this Section 2.02, with respect to
which the aggregate Subsequent Purchase Price does not exceed the Pre-Funding
Account Deposit. Subject to the conditions set forth in this Section 2.02, in
consideration of the Issuer's delivery on the related Subsequent Transfer Dates
to or upon the order of the Seller of the Subsequent Purchase Price of the
related Subsequent Home Loans from amounts on deposit in the Pre-Funding
Account, the Seller shall, from time to time, on any Subsequent Transfer Date
sell, transfer, assign, set over and
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otherwise convey to the Issuer, without recourse, but subject to the other terms
and provisions of this Agreement, all of the right, title and interest of the
Seller in and to each Subsequent Home Loan (including all interest and principal
thereon received after the related Cut-Off Date) identified on the Home Loan
Schedule attached to the related Subsequent Transfer Agreement and delivered by
the Seller on such Subsequent Transfer Date and all items in the related Owner
Trustee's Home Loan File. The sale, transfer, assignment, set over, conveyance
and grant by the Seller of the Subsequent Home Loans to the Issuer does not and
is not intended to result in a creation or an assumption by the Issuer of any
obligation of the Seller, the Transferor or any other person in connection with
the Subsequent Home Loans or under any agreement or instrument relating thereto
except as specifically set forth herein.
(b) The amount released from the Pre-Funding Account on any Subsequent
Transfer Date in connection with any conveyance of Subsequent Home Loans shall
be equal to the aggregate of the Subsequent Purchase Prices for such Subsequent
Home Loans, which amount shall not exceed the amount then on deposit in the
Pre-Funding Account. If the Subsequent Purchase Price for such Subsequent Home
Loans is less than the amount required to obtain the release of the interest of
any third party (including any lienholder therein), then the Transferor or the
Seller shall cause the delivery of immediately available funds equal to such
insufficiency to the Issuer in escrow (which funds shall not be property of the
Trust) and the Issuer, in turn, shall remit such immediately available funds,
together with funds from the Pre-Funding Account equal to the Subsequent
Purchase Price, to the third party designated by the Transferor or the Seller
that is releasing its interest in such Subsequent Home Loans.
On the related Subsequent Transfer Date, the Seller shall transfer to
the Issuer the Subsequent Home Loans and the other property and rights related
thereto described in (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Subsequent Home Loans to be conveyed on a given
Subsequent Transfer Date must have an aggregate Principal Balance as of
the related Cut-Off Date of not less than $__________ except in the
case of the final Subsequent Transfer Date when no minimum Principal
Balance requirement shall be applicable;
(ii) the Transferor and/or Seller shall provide the Owner
Trustee, the Indenture Trustee and the Securities Insurer with an
Addition Notice and shall provide any information reasonably requested
by the Owner Trustee, the Indenture Trustee or the Securities Insurer
with respect to the Subsequent Home Loans;
(iii) the Seller shall deliver to the Owner Trustee, the
Indenture Trustee and the Securities Insurer a duly executed Subsequent
Transfer Agreement, including all exhibits listed therein;
(iv) the Transferor shall deposit in the Collection Account
all collections in respect of the Subsequent Home Loans received on or
after the related Cut-Off Date;
(v) the Transferor and the Seller shall certify to the
Securities Insurer, the Indenture Trustee and the Owner Trustee that,
as of the Subsequent Transfer Date, the Transferor and the Seller,
respectively, was not insolvent nor was made insolvent by such transfer
nor is aware of any pending insolvency;
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(vi) the Transferor and the Seller shall certify that such
addition of Subsequent Home Loans will not result in a material adverse
tax consequence to the Issuer or the Securityholders;
(vii) the Funding Period shall not have terminated; and
(viii) the Transferor shall make the representations and
warranties set forth in Section 3.02 and Section 3.04(a) hereof and
shall reconfirm the accuracy of the representations and warranties set
forth in Section 3.03 hereof.
(c) In addition, the Transferor and/or Seller will provide the
Securities Insurer, the Indenture Trustee and the Owner Trustee with data
regarding all Subsequent Home Loans transferred to the Issuer on the related
Subsequent Transfer Date, which data shall be delivered at least three Business
Days prior to such Subsequent Transfer Date. No later than the end of the
Funding Period, the following conditions shall have been satisfied with respect
to all Subsequent Home Loans transferred to the Issuer on any Subsequent
Transfer Date:
(i) the Transferor and Seller shall have delivered to the
Owner Trustee, the Indenture Trustee and the Securities Insurer an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this Section 2.02 and in the related Subsequent
Transfer Agreements;
(ii) the Transferor and/or Seller shall have delivered to the
Securities Insurer, the Indenture Trustee and the Owner Trustee
opinions of counsel with respect to the transfer of all of the
Subsequent Home Loans to the Issuer on any Subsequent Transfer Date
substantially in the form of the opinions of counsel delivered to the
Owner Trustee, the Indenture Trustee and the Securities Insurer on the
Closing Date (as to certain bankruptcy, corporate, securities and tax
law matters);
(iii) the Owner Trustee shall deliver to the Securities
Insurer and the Seller an opinion of counsel with respect to each of
the Subsequent Transfer Agreements substantially in the form of the
opinion of counsel delivered to the Seller and the Securities Insurer
on the Closing Date;
(iv) the Transferor and Seller shall make the representations
and warranties set forth in Section 3.04(b) hereof; and
(v) the Securities Insurer shall deliver to the Seller, the
Indenture Trustee and the Owner Trustee a written notice confirming the
Securities Insurer's consent and approval to the addition of all
Subsequent Home Loans purchased by the Issuer on any Subsequent
Transfer Date.
(d) On or prior to the Closing Date, the Seller and the Transferor
shall provide to the Owner Trustee, the Indenture Trustee and the Securities
Insurer a schedule of the home loans (the "Subsequent Home Loan Schedule") that
are expected to be Subsequent Home Loans, and Subsequent Home Loans transferred
to the Issuer shall only be taken from such Subsequent Home Loan Schedule;
provided, however, if any such identified home loans do not satisfy the
requirements of Subsequent Home Loans as set forth in this Section 2.02 or if
any such home loans are rejected
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as Subsequent Home Loans by the Securities Insurer, home loans acceptable to the
Securities Insurer may be substituted for such defective or rejected home loans
only from a secondary schedule of home loans (the "Secondary Subsequent Home
Loan Schedule") that is identified as such, and delivered to, the Owner Trustee,
the Indenture Trustee and Securities Insurer on the Closing Date. The Transferor
and Seller shall certify that the Subsequent Home Loans will be transferred to
the Issuer in accordance with the foregoing and that all home loans identified
in both the Subsequent Home Loan Schedule and the Secondary Subsequent Home Loan
Schedule satisfy the requirements of Subsequent Home Loans as set forth in this
Section 2.02 as of the Closing Date.
Section 2.03 Ownership and Possession of Home Loan Files. Upon the
issuance of the Securities, with respect to the Initial Home Loans, and upon
payment of the related Subsequent Purchase Price, with respect to the Subsequent
Home Loans, the ownership of each Debt Instrument, the related Mortgage and the
contents of the related Servicer's Home Loan File and the Issuer's Home Loan
File shall be vested in the Issuer for the benefit of the Securityholders and
the Securities Insurer, although possession of the Servicer's Home Loan Files
(other than items required to be maintained in the Issuer's Home Loan Files)
shall remain with the Servicer, or Custodian, if applicable, as contemplated in
Section 3.02.
Section 2.04 Books and Records.
The sale of each Home Loan shall be reflected on the Seller's balance
sheets and other financial statements as a sale of assets by the Seller. The
Servicer shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Home Loan which shall be clearly marked to
reflect the ownership of each Home Loan by the Issuer for the benefit of the
Securityholders and the Securities Insurer.
Section 2.05 Delivery of Home Loan Documents.
(a) With respect to each Initial Home Loan, on the Closing Date the
Transferor and the Seller have delivered or caused to be delivered, and with
respect to each Subsequent Home Loan, on the related Subsequent Transfer Dates,
the Transferor and the Seller will deliver or will cause to be delivered, to the
Custodian each of the following documents:
(i) The original Debt Instrument, endorsed "PAY TO THE ORDER
OF ___________________, AS OWNER TRUSTEE, FOR THE FIRSTPLUS HOME LOAN
OWNER TRUST 19__-__, WITHOUT RECOURSE" and signed, by facsimile or
manual signature, in the name of the Seller by a Responsible Officer
thereof, together with all intervening endorsements that evidence a
complete chain of title from the originator thereof to the Transferor;
provided that any of the foregoing endorsements may be contained on an
allonge which shall be firmly affixed to such Debt Instrument;
(ii) With respect to each Debt Instrument, either: (A) the
original Mortgage, with evidence of recording thereon, (B) a copy of
the Mortgage certified as a true copy by a Responsible Officer of the
Transferor or by the closing attorney, if the original has been
transmitted for recording but has not, at the time of delivery of this
Agreement, been returned or (C) a copy of the Mortgage certified by the
public recording office in those instances where the original recorded
Mortgage has been lost or has been retained by the public recording
office;
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(iii) With respect to each Debt Instrument, either (A) the
original Assignment of Mortgage assigned to "__________________, AS
OWNER TRUSTEE FOR THE FIRSTPLUS HOME LOAN OWNER TRUST 19__-__" and
signed in the name of the Transferor by a Responsible Officer with
evidence of recording thereon, (B) a copy of the Assignment of
Mortgage, certified as a true copy by a Responsible Officer of the
Transferor where the original has been transmitted for recording but
has not, at the time of delivery of this Agreement, been returned or
(C) a copy of the Assignment of Mortgage certified by the public
recording office in those instances where the original recorded
Assignment of Mortgage has been lost or has been retained by the public
recording office (provided, however, that where the original Assignment
of Mortgage is not being delivered to the Custodian, such Responsible
Officer may complete one or more blanket certificates attaching copies
of one or more Assignments of Mortgage relating thereto); provided that
any such Assignments of Mortgage may be made by blanket assignments for
Home Loans secured by Mortgaged Properties located in the same county,
if permitted by applicable law; provided, however, that the recordation
of such Assignment of Mortgage shall not be required in the States (i)
in which a legal opinion is delivered to the Owner Trustee and the
Securities Insurer in accordance with subsection (c) below and (ii)
that are approved by the Rating Agencies.
(iv) With respect to each Debt Instrument, either: (A)
originals of all intervening assignments of the Mortgage, with evidence
of recording thereon, (B) if the original intervening assignments have
not yet been returned from the recording office, a copy of the
originals of such intervening assignments together with a certificate
of a Responsible Officer of the Transferor or the closing attorney
certifying that the copy is a true copy of the original of such
intervening assignments or (C) a copy of the intervening assignment
certified by the public recording office in those instances where the
original recorded intervening assignment has been lost or has been
retained by the public recording office; provided that the chain of
intervening recorded assignments shall not be required to match the
chain of intervening endorsements of the Debt Instrument, so long as
the chain of intervening recorded assignments, if applicable, evidences
one or more assignments of the Mortgage from the original mortgage
ultimately to the person who has executed the Assignment of Mortgage
referred to in clause (iii) above; and
(v) Originals of all assumption and modification agreements,
if any, or a copy certified as a true copy by a Responsible Officer of
the Transferor if the original has been transmitted for recording until
such time as the original is returned by the public recording office.
(b) The Seller agrees to deliver or cause to be delivered on or before
the applicable Subsequent Transfer Date to the Custodian each of the documents
identified in paragraphs (i) through (v) of subsection (a) above with respect to
any Subsequent Home Loans.
(c) The Transferor shall, within five Business Days after the receipt
thereof, and in any event, within nine (9) months of the Closing Date (in the
case of the Initial Home Loans) or the related Subsequent Transfer Date (in the
case of the Subsequent Home Loans), deliver or cause to be delivered to the
Custodian: (i) the original recorded Mortgage in those instances where a copy
thereof certified by the Transferor was delivered to the Custodian; (ii) the
original recorded Assignment of Mortgage, except in the States in which a legal
opinion is delivered to the Owner
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39
Trustee, the Indenture Trustee and Securities Insurer as provided below and that
are approved by the Rating Agencies; (iii) any original recorded intervening
assignments of Mortgage in those instances where copies thereof certified by the
Transferor were delivered to the Custodian; and (iv) the original recorded
assumption and modification agreement in those instances in which a copy was
delivered. Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage or, if applicable, the Assignment of Mortgage, the intervening
assignments of the Mortgage or the original recorded assumption and modification
agreement after it has been recorded, or where any such original has been lost
or destroyed, the Seller and Transferor shall be deemed to have satisfied their
respective obligations hereunder upon delivery to the Custodian of a copy, as
certified by the public recording office to be a true copy of the recorded
original of such Mortgage or, if applicable, the Assignment of Mortgage,
intervening assignments of Mortgage or assumption and modification agreement,
respectively. With respect to the States of Arizona, California, Colorado,
Florida, Georgia, Nevada, Texas, Utah and Washington the Transferor and the
Seller shall have the right to deliver to the Owner Trustee, the Indenture
Trustee and the Securities Insurer a legal opinion for each State providing that
the recordation of the Assignment of Mortgage in such State is not necessary to
transfer the related Home Loans secured by Mortgaged Properties in such State,
provided such legal opinion is in a form that is reasonably acceptable to the
Owner Trustee and the Securities Insurer and such legal opinion is delivered on
or before , 19 . Upon the delivery and acceptance by the Owner Trustee
and Securities Insurer of the foregoing legal opinion for each such State and
the approval of the Rating Agencies, the Transferor and the Seller shall not be
required to record Assignment of Mortgages for the related Home Loans secured by
Mortgaged Properties located in such State and the delivery of the Assignments
of Mortgages for such State to the Custodian in recordable form on the Closing
Date or Subsequent Transfer Date, as applicable, shall constitute full
compliance with subsection (a)(iii) above. If the foregoing legal opinion is not
delivered and accepted by the Owner Trustee, the Indenture Trustee and
Securities Insurer for any of the foregoing States, then the Assignments of
Mortgage relating to any such State shall be recorded in accordance with the
first sentence of this subsection (c). Notwithstanding the preceding provisions
allowing for the non- recordation of Assignments of Mortgage in certain States,
if a an Event of Default occurs pursuant to clause (vii) of Section 10.01 or the
Transferor, as the Servicer, is terminated hereunder, then the Transferor, in
its capacity as the Servicer or predecessor Servicer, shall be required to
record all Assignments of Mortgage in those States in which the Transferor had
previously been allowed not to record such Assignments of Mortgage.
(d) All Home Loan documents held by the Custodian on behalf of the
Issuer are referred to herein as the "Issuer's Home Loan File." All recordings
required pursuant to this Section 2.05 shall be accomplished by and at the
expense of the Transferor.
Section 2.06 Acceptance by Issuer of the Home Loans; Certain
Substitutions; Certification by Issuer.
(a) The Owner Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Issuer's Home
Loan File for each Initial Home Loan, and the Owner Trustee agrees to cause the
Custodian to execute and deliver on any Subsequent Transfer Date an
acknowledgment of receipt of the Issuer's Home Loan File for each Subsequent
Home Loan. The Owner Trustee declares that it will cause the Custodian to hold
such documents and any amendments, replacements or supplements thereto, as well
as any other assets included in the Trust and delivered to the Custodian in
trust, upon and subject to the conditions set
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forth herein for the benefit of the Securityholders and the Securities Insurer.
The Owner Trustee agrees, for the benefit of the Securityholders and the
Securities Insurer, to cause the Custodian to review each Issuer's Home Loan
File within 45 days after the Closing Date (or, with respect to any Qualified
Substitute Home Loan or Subsequent Home Loan, within 45 days after the receipt
by the Custodian thereof) and to cause the Custodian to deliver to the
Transferor, the Seller, the Indenture Trustee, the Owner Trustee, the Securities
Insurer and the Servicer a certification to the effect that, as to each Home
Loan listed in the Home Loan Schedule and as to each Subsequent Home Loan Listed
in a Subsequent Home Loan Schedule (other than any Home Loan paid in full or any
Home Loan specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to the Issuer
pursuant to this Agreement are in its possession or in the possession of the
Custodian on its behalf (other than as expressly permitted by Section
2.05(a)(ii) or 2.05(c)), (ii) all documents delivered by the Seller and the
Transferor to the Custodian pursuant to Section 2.05 have been reviewed by the
Custodian and have not been mutilated or damaged and appear regular on their
face (handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan, (iii)
based on the examination of the Custodian on behalf of the Issuer, and only as
to the foregoing documents, the information set forth on the Home Loan Schedule
accurately reflects the information set forth in the Issuer's Home Loan File and
(iv) each Debt Instrument has been endorsed as provided in Section 2.05. Neither
the Owner Trustee nor the Custodian shall be under any duty or obligation (i) to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, or appropriate for
the represented purpose or that they are other than what they purport to be on
their face or (ii) to determine whether any Issuer's Home Loan File should
include any of the documents specified in Section 2.05(a)(v).
(b) If the Custodian, during the process of reviewing the Issuer's Home
Loan Files, finds any document constituting a part of a Issuer's Home Loan File
which is not executed, has not been received, is unrelated to any Home Loan
identified in the Home Loan Schedule, does not conform to the requirements of
Section 2.05 or does not conform, in all material respects, to the description
thereof as set forth in the Home Loan Schedule, then the Custodian shall
promptly so notify the Transferor, the Servicer, the Indenture Trustee, the
Owner Trustee, the Securities Insurer and the Seller. In performing any such
review, the Custodian may conclusively rely on the Seller and the Transferor as
to the purported genuineness of any such document and any signature thereon. It
is understood that the scope of the Custodian's review of the Issuer's Home Loan
Files is limited solely to confirming that the documents listed in Section 2.05
have been received and further confirming that any and all documents delivered
pursuant to Section 2.05 have been executed and relate to the Home Loans
identified in the Home Loan Schedule and to the Subsequent Home Loans listed in
the Subsequent Home Loan Schedule. Neither the Owner Trustee nor the Custodian
shall have any responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form, whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment is
permitted in any applicable jurisdiction. If a material defect in a document
constituting part of a Issuer's Home Loan File is discovered, then the Seller
and Transferor shall comply with the cure, substitution and repurchase
provisions of Section 3.05 hereof.
(c) Within the three month period beginning on the Closing Date and
ending on _______, 19__, each of the Seller and the Transferor shall
have the option, exercisable in its sole
discretion, to remove a Home Loan from the Trust and substitute therefor a
Qualified Substitute Home Loan in the manner and subject to the conditions set
forth in Section 3.05 applicable to
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substitutions made by the Transferor and subject to the further conditions that
(i) the Seller and/or the Transferor may only effect substitutions under this
Section 2.06(c) which, in the aggregate, amount to (A) not more than ___% of the
aggregate Cut-Off Date Principal Balances of the Home Loans (as measured by the
aggregate Principal Balance of the Deleted Home Loans) on the Determination Date
immediately preceding the substitution date, without Securities Insurer approval
and (B) not more than ___% of the aggregate Cut-Off Date Principal Balances of
the Home Loans (as measured by the aggregate Principal Balance of the Deleted
Home Loans) on the Determination Date immediately preceding the substitution
date, with Securities Insurer approval, and (ii) no such substitution shall be
undertaken unless and until (A) the Owner Trustee and the Indenture Trustee
shall have received written assurances from each Rating Agency that such
substitution once effected would not result in the ratings assigned to any Class
of the Securities being downgraded and an Officer's Certificate from the
Transferor or the Seller, as applicable, stating that the substitution is not
being effected for the primary purpose of recognizing gains or decreasing losses
resulting from market value changes in the Deleted Home Loans and Qualified
Substitute Home Loans included in such substitution, and (B) the Owner Trustee,
the Indenture Trustee and the Securities Insurer shall have received an opinion
of counsel, which opinion of counsel shall be acceptable to the Owner Trustee,
that such substitution once effected would not cause the Trust to become an
"investment company" as defined under the Investment Company Act of 1940.
(d) Upon receipt by the Owner Trustee of a certification of a Servicing
Officer to the effect that such substitution has occurred and that the
Substitution Adjustment has been credited to the Collection Account pursuant to
Section 3.05 and remitted to the Indenture Trustee for deposit into the
Distribution Account, the Owner Trustee shall (i) release (or cause the
Custodian to release) to the Servicer for release to the Seller or the
Transferor, as the case may be, the related Issuer's Home Loan File for each
Deleted Home Loan and (ii) execute, without recourse, representation or
warranty, and deliver such instruments of transfer presented to it by the
Servicer as shall be necessary to transfer such Deleted Home Loan to the Seller
or the Transferor, as the case may be.
(e) On the Distribution Date in ______________of each year commencing
in 19__, the Owner Trustee shall deliver (or cause the Custodian to deliver) to
the Seller, the Securities Insurer, the Indenture Trustee and the Servicer a
certification listing all Issuer's Home Loan Files held by the Custodian on
behalf of the Issuer on such Distribution Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants with and to the
Owner Trustee, the Indenture Trustee, the Servicer, the Securities Insurer and
the Securityholders as of the Closing Date:
(a) The Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Seller and perform its obligations as Seller
hereunder; the Seller has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the
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execution, delivery and performance of this Agreement (including all instruments
of transfer to be delivered pursuant to this Agreement) by the Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action of the Seller; this Agreement evidences the
valid, binding and enforceable obligation of the Seller; and all requisite
action has been taken by the Seller to make this Agreement valid, binding and
enforceable upon the Seller in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium and other, similar laws
relating to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Seller makes no such representation or warranty) that
are necessary in connection with the purchase and sale of the Securities and the
execution and delivery by the Seller of this Agreement and the other related
documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either the
time within which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and such other documents on the part of the
Seller and the performance by the Seller of its obligations as Seller under this
Agreement and such other documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the Articles of
Incorporation or Bylaws of the Seller, (ii) the breach of any term or provision
of, or conflict with or constitute a default under or result in the acceleration
of any obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Seller, or its property is
subject, or (iii) the violation of any law, rule, regulation, order, judgment or
decree to which the Seller or its respective property is subject;
(d) Neither this Agreement nor the Prospectus nor any statement, report
or other document prepared by the Seller and furnished or to be furnished
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Seller's knowledge, threatened against the Seller which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted, or in any
material liability on the part of the Seller or which would draw into question
the validity of this Agreement or the Home Loans or of any action taken or to be
taken in connection with the obligations of the Seller contemplated herein, or
which would be likely to impair materially the ability of the Seller to perform
under the terms of this Agreement;
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(f) The Seller is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder;
(g) As of the Closing Date, the Issuer will have good and marketable
title to each Initial Home Loan and such other items comprising the corpus of
the Trust free and clear of any lien, mortgage, pledge, charge, security
interest or other encumbrance;
(h) As of any Subsequent Transfer Date, the Issuer will have good and
marketable title to each Subsequent Home Loan transferred on such date and such
other items comprising the corpus of the Trust free and clear of any lien,
mortgage, pledge, charge, security interest or other encumbrance; and
(i) The transfer, assignment and conveyance of the Home Loans, the Debt
Instruments and the Mortgages by the Seller pursuant to this Agreement or any
Subsequent Transfer Agreement are not subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction.
(j) The Seller shall provide each Rating Agency and the Securities
Insurer with notice and a copy of any amendment to the Articles of Incorporation
of the Seller promptly after the filing thereof.
Section 3.02 Representations, Warranties and Covenants of the Servicer
and Transferor.
The Servicer as such and in its capacity as the Transferor hereby
represents, warrants and covenants with and to the Seller, the Owner Trustee,
the Indenture Trustee, the Securities Insurer and the Securityholders as of the
Closing Date:
(a) The Servicer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Texas and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Servicer and perform its obligations as Servicer
hereunder; the Servicer has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action of the Servicer; this Agreement evidences the valid,
binding and enforceable obligation of the Servicer; and all requisite action has
been taken by the Servicer to make this Agreement valid, binding and enforceable
upon the Servicer in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other, similar laws
relating to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 35
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be, by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state securities laws,
real estate syndication or "Blue Sky" statutes, as to which the Servicer makes
no such representation or warranty) that are necessary in connection with the
execution and delivery by the Servicer of this Agreement and the other related
documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either the
time within which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and such other documents on the part of the
Servicer and the performance by the Servicer of its obligations as Servicer
under this Agreement and such other documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the charter or
by-laws of the Servicer, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit agreement
or other material instrument to which the Servicer or its property is subject,
or (iii) the violation of any law, rule, regulation, order, judgment or decree
to which the Servicer or its property is subject;
(d) Neither this Agreement nor the Prospectus nor any statement, report
or other document prepared by the Servicer and furnished or to be furnished
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Servicer's knowledge, threatened against the Servicer which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Servicer or in any material impairment of the right or ability of
the Servicer to carry on its business substantially as now conducted, or in any
material liability on the part of the Servicer or which would draw into question
the validity of this Agreement or the Home Loans or of any action taken or to be
taken in connection with the obligations of the Servicer contemplated herein, or
which would be likely to impair materially the ability of the Servicer to
perform under the terms of this Agreement;
(f) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder;
(g) So long as FFI is the Servicer of the Home Loans hereunder, the
Servicer's Home Loan Files will be maintained at 1250 Mockingbird Lane, Dallas,
Texas 75247-4902, or, if FFI is no longer the Servicer hereunder or if FFI
changes the location of the Servicer's Home Loan Files, the Servicer's Home Loan
Files shall be maintained at such address as may be indicated on an Officer's
Certificate executed by a Servicing Officer and delivered to the Owner Trustee,
the Indenture Trustee, the Securities Insurer and the Seller;
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(h) The Servicer shall not solicit any refinancing of any of the Home
Loans; provided, that this covenant shall not prevent or restrict the Servicer
from making general solicitations, by mail, advertisement or otherwise of the
general public or persons on a targeted list, so long as the list was not
generated from the Home Loan Schedule; and
(i) The Servicer shall not sell, transfer, assign or otherwise dispose
of a customer or similar list comprised of the names of the Obligors under the
Home Loans to any third party.
Section 3.03 Individual Home Loans.
The Transferor hereby represents and warrants to the Seller, the Owner
Trustee, the Indenture Trustee, the Securities Insurer and the Securityholders,
with respect to each Initial Home Loan, as of the Closing Date and, with respect
to each Subsequent Home Loan, as of the related Subsequent Transfer Date:
(a) Home Loan Information. The information with respect to each Home
Loan set forth in the Home Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date.
(b) Delivery of Home Loan Documents. All of the original or certified
documentation required to be delivered to the Owner Trustee or to the Custodian
on or prior to the Closing Date or the Subsequent Transfer Date, as applicable,
or as otherwise provided in this Agreement has or will be so delivered.
(c) Payments Current. As of the applicable Cut-off Date, no more than
___% (by aggregate Cut-off Date Principal Balance) of the Home Loans are more
than 30 days but not more than 60 days delinquent, based on the terms under
which the related Mortgages and Debt Instruments have been made and none of the
Home Loans are more than 60 days delinquent. The Transferor has not advanced
funds, or induced, solicited or knowingly received any advance of funds from a
party other than the related Obligor, directly or indirectly, for the payment of
any amount required by any Home Loan.
(d) No Waiver or Modification. The terms of each Debt Instrument and
Mortgage have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Issuer's Home Loan File and no
provision of any Mortgage or Debt Instrument has been "whited out" or erased
unless such modification has been initialed by each of the parties to the
related Home Loan. No instrument of waiver, alteration, modification or
assumption has been executed except for the instruments that are part of the
Issuer's Home Loan File and the terms of which are reflected in the Issuer's
Home Loan File.
(e) No Defenses. No Debt Instrument or Mortgage is subject to any
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of any Debt Instrument or Mortgage, or the
exercise of any right thereunder, render such Debt Instrument or 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 in any
proceeding or was asserted in any state or federal bankruptcy or insolvency
proceeding at the time the related Home Loan was originated.
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 37
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(f) Compliance with Laws. Any and all requirements of any federal,
state or local law applicable to each Home Loan have been complied with
including, without limitation, all consumer, usury, truth-in-lending, consumer
credit protection, equal credit opportunity or disclosure laws applicable to
each Home Loan; each Home Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in connection
therewith.
(g) No Satisfaction or Release of Lien. No Mortgage has been satisfied,
canceled, subordinated or rescinded, in whole or in part. No Mortgaged Property
has been released from the lien of the related Mortgage, in whole or in part,
nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission, other than the subordination of the
lien of a Mortgage securing a Home Loan with respect to which a related Superior
Lien was released in connection with the refinancing of the mortgage loan
relating to such Superior Lien.
(h) Valid Lien. With respect to each Debt Instrument that is secured by
a Mortgage, such Mortgage is or creates a valid, subsisting and enforceable lien
on the related Mortgaged Property, including, in the case of a Mortgage securing
a Home Improvement Loan, the land and all buildings on the related Mortgaged
Property.
(i) Validity of Home Loan Documents. Each Debt Instrument and each
Mortgage is genuine and each is the legal, valid and binding obligation of the
Obligor thereof, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting creditors' rights in general and by general
principles of equity. All parties to each Debt Instrument and each Mortgage had
legal capacity at the time to enter into the related Home Loan and to execute
and deliver such Debt Instrument and Mortgage, and such Debt Instrument and
Mortgage have been duly and properly executed by such parties.
(j) Full Disbursement of Proceeds. As of the applicable Cut-Off Date,
the proceeds of each Home Loan have been fully disbursed and there is no
requirement for future advances thereunder, all costs, fees and expenses
incurred in making or closing each Home Loan and the recording of the Mortgage
were disbursed, the Obligor is not entitled to any refund of any amounts paid or
due under the Debt Instrument or any related Mortgage and any and all
requirements set forth in the related Home Loan documents have been complied
with.
(k) Ownership. Immediately prior to the conveyance thereof to the
Seller, the Transferor had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, was the sole owner thereof and had full right to sell
each Home Loan, Debt Instrument and Mortgage to the Seller and upon the
conveyance thereof by the Transferor to the Seller, the Seller became the sole
owner of each Home Loan, Debt Instrument and Mortgage free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest.
(l) Ownership of Mortgaged Property. With respect to each Home Loan
that is secured by a Mortgaged Property, the related Servicer's Home Loan File
contains a title document reflecting that title to such Mortgaged Property is
held at least ____% by the Obligor under such Home Loan.
(m) No Defaults. Except with respect to any delinquent scheduled
payment set forth in subsection (c) above, there is no default, breach,
violation or event of acceleration existing under any Mortgage or any Debt
Instrument and, to the best of the Transferor's knowledge, there is no event
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 38
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which, with the passage of time or with notice and/or the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event of acceleration and neither the Transferor nor its predecessors have
waived any such default, breach, violation or event of acceleration, except as
set forth in an instrument of waiver, alteration, modification or assumption
that is included in the Issuer's Home Loan File.
(n) No Condemnation or Damage. To the best of the Transferor's
knowledge, the physical condition of each Mortgaged Property has not
deteriorated since the date of origination of the related Home Loan (normal wear
and tear excepted) and there is no proceeding pending for the total or partial
condemnation of any Mortgaged Property.
(o) Mortgage Remedies Adequate. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.
(p) Underwriting of Home Loans. Each Home Loan has been underwritten by
the originator thereof in accordance with such originator's then current
underwriting guidelines.
(q) Terms of Home Loans. Each Home Loan is a fixed rate loan; each Debt
Instrument has an original term to maturity of not less than 24 months nor more
than 20 years and 32 days from the date of origination; each Debt Instrument is
payable in monthly installments of principal and interest, with interest payable
in arrears, and requires a monthly payment which is sufficient to amortize the
original principal balance over the original term and to pay interest at the
related Home Loan Interest Rate; and no Debt Instrument provides for any
extension of the original term.
(r) Security. No Debt Instrument is, or has been, secured by any
collateral except the lien of the related Mortgage.
(s) Deed of Trust. If a Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves as such and is named in the Mortgage, or a
valid substitution of trustee has been recorded or may be recorded and no
extraordinary fees or expenses are, or will become, payable by the Transferor to
the trustee under the deed of trust, except in connection with default
proceedings and a trustee's sale after default by the related Obligor.
(t) Types of Home Loans. Each Home Loan is either (i) a Home
Improvement Loan, (ii) a Debt Consolidation Loan, (iii) a Combination Loan, or
(iv) a first or junior lien purchase money loan. No Home Loan was originated for
the express purpose of purchasing a manufactured home.
(u) Completion of Improvements. With respect to all Home Loans that are
Home Improvement Loans (except for such Home Loans that are first lien or junior
lien purchase money loans, the proceeds of which have been used in part to
acquire the related Mortgaged Property), all improvements to be made to each
Mortgaged Property with the proceeds of the related Home Loan have been
completed and, except as to Home Loans that are such purchase money loans or
that were
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made by the originator thereof directly to the owner of the property being
improved, the related Servicer's Home Loan File contains a Completion
Certificate.
(v) Origination Practices. The origination practices used by each
originator of the Home Loans and the servicing and collection practices used by
the Transferor with respect to each Home Loan have been in all material respects
legal, proper, prudent and customary with respect to the loan origination and
servicing business as applicable to the respective loan type.
(w) Servicing Practices. Each Home Loan has been serviced in
accordance with all applicable laws and, to the best of the Transferor's
knowledge, no fraud or misrepresentation was committed by any Person in
connection therewith.
(x) No Bulk Transfer. The sale, transfer, assignment, conveyance and
grant of the Debt Instruments and the Mortgages by the Transferor to the Seller
were not subject to the bulk transfer laws or any similar statutory provisions
in effect in any applicable jurisdiction.
(y) Delinquencies. As of the ____________________, 19__ Cut-Off Date,
no more than _____% of the Initial Home Loans (by outstanding principal balance)
and no more than _____ of the Initial Home Loans (by number) were 31 days or
more delinquent.
(z) Relief Act Matters. No Obligor has notified the Transferor, and no
relief has been requested or allowed to an Obligor under the Soldiers' and
Sailors' Civil Relief Act of 1940.
(aa) Selection Criteria. The Home Loans were not selected by the
Transferor for sale to the Seller or the Issuer on any basis intended to
adversely affect the Seller or the Issuer.
(bb) Superior Lien Delinquencies. No Superior Lien was more than 30
days past due at the time of origination of the related Home Loan.
(cc) Aggregate Principal Balances of the Home Loans. The aggregate
outstanding principal balances of the Home Loans as of each Cut-Off Date will
not represent more than 80% of the Pool Principal Balance.
(dd) Good Repair. The related Mortgaged Property described in each Debt
Instrument is, to the best of the Transferor's knowledge, free of damage and in
good repair.
(ee) Simple Interest. Interest for each Home Loan is calculated at a
rate of interest computed by the simple interest method.
The Transferor has reviewed all of the documents constituting each
Servicer's Home Loan File and each Issuer's Home Loan File and has made such
inquiries as it deems necessary to make and confirm the accuracy of the
representations set forth herein.
Section 3.04 Subsequent Home Loans.
(a) The Transferor shall represent and warrant to the Seller, the
Owner Trustee, the Indenture Trustee, the Securities Insurer and the
Securityholders that as of each Subsequent Transfer Date:
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(i) No Subsequent Home Loan provides for negative amortization;
(ii) No Subsequent Home Loan has a Cut-Off Date or a Subsequent
Transfer Date later than __________________, 19__ ;
(iii) No Subsequent Home Loan has a maturity date later than ,
____________________ 20__;
(iv) To the best of the Transferor's knowledge, the acquisition
of the Subsequent Home Loans as of such Subsequent Transfer Date will
not result in a downgrading in any rating of the Securities;
(v) The Subsequent Home Loans have not been acquired by the
Issuer for the primary purpose of recognizing gains or decreasing
losses resulting from market value changes in such Subsequent Home
Loans;
(vi) Each of the representations and warranties set forth in
Section 3.03 is true and correct with respect to each of the Subsequent
Home Loans being transferred to the Issuer; and
(vii) To the extent applicable to each Subsequent Home Loan being
transferred to the Issuer, the quantitative criteria set forth in
paragraphs 31 and 32 of that certain Commitment to Issue a Financial
Guaranty Insurance Policy (Application No.__________) dated as of
__________, 19__ (the "Securities Insurer Commitment") issued by the
Securities Insurer have been satisfied.
(b) The Transferor shall represent and warrant to the Seller, the
Owner Trustee, the Indenture Trustee, the Securities Insurer and the
Securityholders that as of the end of the Funding Period:
(i) The Home Loans have a weighted average Home Loan Interest
Rate of at least ____% and a Home Loan Interest Rate of at least ____%;
(ii) The Home Loans have a weighted average original term to
stated maturity of not more than _____ years;
(iii) No Home Loans have a Principal Balance as of the related
Cut-Off Date of greater than $___________;
(iv) There is not a concentration of Home Loans in a single
postal zip code in excess of ____% of the Pool Principal Balance;
(v) No more than ___% of the Home Loans by Principal Balance as
of the respective Cut-Off Dates shall be Combination Loans in which
less than 40% of the proceeds from each such loan have been used for
the improvement of the related Mortgaged Property; and
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(vi) The other quantitative criteria set forth in paragraphs
31 and 32 of the Securities Insurer Commitment (as defined in (a)(vii)
above) have been satisfied.
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and
warranties set forth in Sections 3.03 and 3.04, shall survive the conveyance of
the Home Loans to the Issuer and the delivery of the Securities to the
Securityholders. Upon discovery by the Seller, the Servicer, the Transferor, the
Custodian, the Owner Trustee, the Indenture Trustee, the Securities Insurer or
any Securityholder of a breach of any of such representations and warranties
which materially and adversely affects the value of the Home Loans or the
interest of the Securityholders or the Securities Insurer, or which materially
and adversely affects the interests of the Securityholders or the Securities
Insurer in the related Home Loan in the case of a representation and warranty
relating to a particular Home Loan (notwithstanding that such representation and
warranty was made to the Transferor's best knowledge), the party discovering
such breach shall give prompt written notice to the others. The Transferor shall
within 60 days of the earlier of its discovery or its receipt of notice of any
breach of a representation or warranty, promptly cure such breach in all
material respects. If, however, within 60 days after the notice to the
Transferor respecting such breach the Transferor has not remedied the breach and
the breach materially and adversely affects the interests of the Securityholders
or the Securities Insurer generally or in the related Home Loan (the "Defective
Home Loan"), the Seller shall cause the Transferor on or before the
Determination Date next succeeding the end of such 60 day period either (i) to
remove such Defective Home Loan from the Trust (in which case it shall become a
Deleted Home Loan) and substitute one or more Qualified Substitute Home Loans in
the manner and subject to the conditions set forth in this Section 3.05 or (ii)
to purchase such Defective Home Loan at a purchase price equal to the Purchase
Price (as defined below) by depositing such Purchase Price in the Collection
Account; provided any such substitution may be effected not later than the date
which is two years after the Startup Day. In the event the Seller or the
Transferor is notified that any Mortgage Property is not free of damage or not
in good repair, regardless of the Transferor's knowledge, the Seller shall cause
the Transferor to (x) substitute or purchase the related Home Loan in accordance
with clauses (i) and (ii), respectively, above or (y) repair any such Mortgaged
Property such that such Mortgaged Property is free of damage and in good repair.
The Transferor shall provide the Servicer, the Securities Insurer, the Indenture
Trustee and the Owner Trustee with a certification of a Responsible Officer on
the Determination Date next succeeding the end of such 60 day period indicating
whether the Transferor is purchasing the Defective Home Loan or substituting in
lieu of such Defective Home Loan a Qualified Substitute Home Loan. With respect
to the purchase of a Defective Home Loan pursuant to this Section, the "Purchase
Price" shall be equal to the Principal Balance of such Defective Home Loan as of
the date of purchase, plus all accrued and unpaid interest on such Defective
Home Loan to but not including the Due Date in the Due Period most recently
ended prior to such Determination Date computed at the applicable Home Loan
Interest Rate, plus the amount of any unreimbursed Servicing Advances made by
the Servicer with respect to such Defective Home Loan, which Purchase Price
shall be deposited in the Collection Account (after deducting therefrom any
amounts received in respect of such repurchased Defective Home Loan and being
held in the Collection Account for future distribution to the extent such
amounts represent recoveries of principal not yet applied to reduce the related
Principal Balance or interest (net of the Servicing Fee) for the period from and
after the Due Date in the Due Period most recently ended prior to such
Determination Date).
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Any substitution of Home Loans pursuant to this Section 3.05(a) and
Section 2.06(c) shall be accompanied by payment by the Transferor of the
Substitution Adjustment, if any, to be deposited in the Collection Account. For
purposes of calculating the Available Remittance Amount for any Distribution
Date, amounts paid by the Transferor pursuant to this Section 3.05 in connection
with the repurchase or substitution of any Defective Home Loan that are on
deposit in the Collection Account as of the Determination Date for such
Distribution Date shall be deemed to have been paid during the related Due
Period and shall be transferred to the Distribution Account pursuant to Section
5.01(c)(i) on the Determination Date for such Distribution Date.
As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Owner Trustee (i) a certification executed by
a Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and remitted to the
Indenture Trustee for deposit into the Distribution Account, and (ii) the
documents constituting the Issuer's Loan File for such Qualified Substitute Home
Loan or Loans.
In addition to the preceding repurchase obligations, each of the Seller
and the Transferor shall have the option, exercisable in its sole discretion at
any time, to repurchase any Home Loan from the Issuer in the event that such
Home Loan is in foreclosure, default or imminent default; provided that any
repurchase pursuant to this paragraph is conducted in the same manner as the
repurchase of a Defective Home Loan pursuant to this Section 3.05.
(b) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans after
the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Home Loans on or before the date of substitution will be
retained by the Transferor. The Issuer will be entitled to all payments received
on the Deleted Home Loan on or before the date of substitution, and the
Transferor shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Home Loan. The Transferor shall give written
notice to the Owner Trustee, the Servicer (if the Transferor is not then acting
as such), the Indenture Trustee and the Securities Insurer that such
substitution has taken place and shall amend the Home Loan Schedule to reflect
(i) the removal of such Deleted Home Loan from the terms of this Agreement and
(ii) the substitution of the Qualified Substitute Home Loan. The Transferor
shall promptly deliver to the Owner Trustee, the Servicer (if the Transferor is
not then acting as such), the Indenture Trustee and the Securities Insurer a
copy of the amended Home Loan Schedule. Upon such substitution, such Qualified
Substitute Home Loan or Loans shall be subject to the terms of this Agreement in
all respects, and the Transferor shall be deemed to have made with respect to
such Qualified Substitute Home Loan or Loans, as of the date of substitution,
the covenants, representations and warranties set forth in Section 3.03. On the
date of such substitution, the Transferor will deposit into the Collection
Account an amount equal to the Substitution Adjustment, if any.
(c) It is understood and agreed that the obligations of the Transferor
set forth in this Section 3.05 to cure, purchase or substitute for a Defective
Home Loan constitute the sole remedies of the Issuer, the Owner Trustee, the
Indenture Trustee, the Securityholders and the Securities Insurer hereunder
respecting a breach of the representations and warranties contained in Sections
3.03 and 3.04. Any cause of action against the Seller relating to or arising out
of a defect in a Issuer's Home Loan File as contemplated by Section 2.06 or
against the Transferor relating to or arising out of a breach of any
representations and warranties made in Sections 3.03 or 3.04 shall
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accrue as to any Home Loan upon (i) discovery of such defect or breach by any
party and notice thereof to the Seller or the Transferor, as applicable, or
notice thereof by the Transferor or the Seller, as applicable, to the Owner
Trustee, (ii) failure by the Transferor or the Seller, as applicable, to cure
such defect or breach or purchase or substitute such Home Loan as specified
above, and (iii) demand upon the Transferor or the Seller, as applicable, by the
Owner Trustee or the Majority Securityholders for all amounts payable in respect
of such Home Loan.
(d) Neither the Owner Trustee nor the Indenture Trustee shall have any
duty to conduct any affirmative investigation other than as specifically set
forth in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Home Loan pursuant to this Section or the
eligibility of any Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor,
shall service and administer the Home 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 Servicer may deem necessary or desirable
and consistent with the terms of this Agreement. Notwithstanding anything to the
contrary contained herein, the Servicer, in servicing and administering the Home
Loans, shall employ or cause to be employed procedures (including collection,
foreclosure, liquidation and Foreclosure Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with accepted servicing practices of prudent
lending institutions and servicers of loans of the same type as the Home Loans
and giving due consideration to the Securityholders' and the Securities
Insurer's reliance on the Servicer. The Servicer has and shall maintain the
facilities, procedures and experienced personnel necessary to comply with the
servicing standard set forth in this subsection (a) and the duties of the
Servicer set forth in this Agreement relating to the servicing and
administration of the Home Loans. Consistent with the terms of this Agreement,
the Servicer may, with the prior written consent of the Owner Trustee and the
Indenture Trustee, with respect to any material obligations hereunder which
consent shall not be unreasonably withheld, employ or retain agents or contract
with third parties to aid in the performance of the Servicer's obligations
hereunder; provided, however, that the Servicer shall remain obligated for all
actions taken by such agents or third parties.
(b) Servicing Advances. In accordance with the preceding general
servicing standard, the Servicer, or any Subservicer on behalf of the Servicer,
shall make all reasonable and necessary Servicing Advances in connection with
the servicing of each Home Loan hereunder. Notwithstanding any provision to the
contrary herein, neither the Servicer, nor any Subservicer on behalf of the
Servicer, shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy or
keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Securityholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect
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to a Home Loan, before making any Servicing Advance that is material in relation
to the outstanding principal balance thereof, the Servicer shall assess the
reasonable likelihood of (i) recovering such Servicing Advance and any prior
Servicing Advances for such Home Loan, and (ii) recovering any amounts
attributable to outstanding interest and principal owing on such Home Loan for
the benefit of the Securityholders and the Securities Insurer in excess of the
costs, expenses and other deductions to obtain such recovery, including without
limitation any Servicing Advances therefor and, if applicable, the outstanding
indebtedness of all Superior Liens. The Servicer shall only make a Servicing
Advance with respect to a Home Loan to the extent that the Servicer determines
in its reasonable, good faith judgment that such Servicing Advance would likely
be recovered as aforesaid.
(c) Waivers, Modifications and Extensions. Consistent with the terms of
this Agreement, the Servicer may waive, modify or vary any provision of any Home
Loan or consent to the postponement of strict compliance with any such provision
or in any manner grant indulgence to any Obligor if in the Servicer's reasonable
determination such waiver, modification, postponement or indulgence is not
materially adverse to the interests of the Securityholders or the Securities
Insurer; provided, however, unless the Obligor is in default with respect to the
Home Loan, or such default is, in the judgment of the Servicer, reasonably
foreseeable, the Servicer may not permit any modification with respect to any
Home Loan that would change the Home Loan Interest Rate, defer (subject to the
following paragraph) or forgive the payment of any principal or interest (unless
in connection with the liquidation of the related Home Loan) or extend the final
maturity date on the Home Loan. The Servicer may grant a waiver or enter into a
subordination agreement with respect to the refinancing of a Superior Lien on
the related Mortgaged Property, provided that the Obligor is in a better
financial or cash flow position as a result of such refinancing, which may
include a reduction in the Obligor's scheduled monthly payment on the
indebtedness secured by such Superior Lien. The Servicer shall notify the Owner
Trustee and the Indenture Trustee of any modification, waiver or amendment of
any provision of any Home Loan and the date thereof, and shall deliver to the
Custodian for deposit in the related Issuer's Home Loan File, an original
counterpart of the agreement relating to such modification, waiver or amendment
promptly following the execution thereof. Notwithstanding the preceding
provisions of this subsection (c), if the Home Loans that have been waived,
modified or varied, in the aggregate, equal or exceed two percent (2%) of the
aggregate Principal Balances of the Initial Home Loans as of the related Cut-Off
Date, then any waiver, modification or variance of any Home Loan thereafter
shall be subject to the prior written consent of the Securities Insurer.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of each Home Loan and the related Debt
Instrument and Mortgage, if applicable. Consistent with the foregoing, the
Servicer may in its discretion waive or permit to be waived any late payment
charge, prepayment charge or assumption fee or any other fee or charge which the
Servicer would be entitled to retain hereunder as Servicing Compensation and
extend the due date for payments due on a Debt Instrument for a period (with
respect to each payment as to which the due date is extended) not greater than
90 days after the initially scheduled due date for such payment, provided that
such extension would not result in an extension of the final maturity date of
such Debt Instrument.
(d) Instruments of Satisfaction or Release. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered to
execute and deliver on behalf of the Issuer, the Owner Trustee, the Indenture
Trustee, each Securityholder and the Securities Insurer, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other
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comparable instruments, with respect to the Home Loans and with respect to the
related Mortgaged Properties. If reasonably required by the Servicer, the Owner
Trustee shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
Section 4.02 Liquidation of Home Loans.
(a) In the event that any payment due under any Home Loan and not
postponed pursuant to Section 4.01(c) is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Home Loan and such failure continues beyond any applicable
grace period, the Servicer shall take such action as it shall deem to be in the
best interest of the Securityholders and the Securities Insurer. Without
limiting the generality of the preceding sentence, the Servicer shall, in
accordance with the standard of care specified in Section 4.01(a), take such
other action as the Servicer shall deem to be in the best interests of the
Securityholders and the Securities Insurer (including the resale or substitution
of such Home Loan pursuant to Section 3.05, or, if no Superior Liens exist on
the related Mortgaged Property, foreclose or otherwise comparably effect
ownership in such Mortgaged Property in the name of the Issuer for the benefit
of Securityholders and the Securities Insurer). The Servicer shall give the
Indenture Trustee and the Owner Trustee notice of the election of remedies made
pursuant to this Section 4.02. The Servicer shall not be required to satisfy the
indebtedness secured by any Superior Liens on the related Mortgaged Property or
to advance funds to keep the indebtedness secured by such Superior Liens
current. In connection with any collection or foreclosure activities, the
Servicer shall exercise collection or foreclosure procedures with the same
degree of care and skill as it would exercise or use under the circumstances in
the conduct of its own affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account any
proceeds received by it with respect to such Liquidated Home Loan or the related
Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the Servicer
shall promptly prepare and forward to the Owner Trustee, the Indenture Trustee,
the Securities Insurer and, upon request of any Securityholder, to such
Securityholder a Liquidation Report detailing the following: (i) the Net
Liquidation Proceeds, Insurance Proceeds or Released Mortgaged Property Proceeds
received in respect of such Liquidated Home Loan; (ii) expenses incurred with
respect thereto; (iii) any Net Principal Loan Losses incurred in connection
therewith; and (iv) any Post Liquidation Proceeds.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, the FHA
and the FHLMC, 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 Home Loans ("Servicer Employees"). Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts (including acts relating to the
origination and servicing of loans of the same type as the Home Loans) of such
Servicer Employees. Such fidelity bond shall also protect and insure the
Servicer against
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losses in connection with the release or satisfaction of a Home Loan without
having obtained payment in full of the indebtedness secured thereby. In the
event of any loss of principal or interest on a Home Loan for which
reimbursement is received from the Servicer's fidelity bond or errors and
omissions insurance, the proceeds from any such insurance will be deposited in
the Collection Account. No provision of this Section 4.03 requiring such
fidelity bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. Upon
the request of the Owner Trustee, the Indenture Trustee or the Securities
Insurer, the Servicer shall cause to be delivered to requesting party a
certified true copy of such fidelity bond and insurance policy. On the Closing
Date, such fidelity bond and insurance is maintained by the Servicer with
Reliance Insurance Company of Illinois.
Section 4.04 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Issuer for the
benefit of the Securityholders.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Issuer, the Securityholders and the Securities
Insurer solely for the purpose of its prudent and prompt disposition and sale.
The Servicer shall, either itself or through an agent selected by the Servicer,
manage, conserve, protect and operate the Foreclosure Property in the same
manner that it manages, conserves, protects and operates other foreclosure
property for its own account, and in the same manner that similar property in
the same locality as the Foreclosure Property is managed. The Servicer shall
attempt to sell the same (and may temporarily lease the same) on such terms and
conditions as the Servicer deems to be in the best interest of the
Securityholders and the Securities Insurer.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Issuer, the Securityholders and the
Securities Insurer and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The Net Liquidation Proceeds or Post Liquidation Proceeds,
as applicable, from the conservation, disposition and sale of the Foreclosure
Property shall be promptly deposited by the Servicer in the Collection Account
for distribution to the Securityholders in accordance with the Indenture or the
Trust Agreement, as applicable, which Net Liquidation Proceeds or Post
Liquidation Proceeds, as applicable, shall equal all cash amounts received with
respect thereto less the amounts retained and withdrawn by the Servicer for any
related unreimbursed Servicing Advances and any other fees and expenses incurred
in connection with such Foreclosure Property.
Section 4.05 Access to Certain Documentation and Information Regarding
the Home Loans.
The Servicer shall provide to the Owner Trustee, the Indenture Trustee,
the Securityholders, the Securities Insurer and the supervisory agents and
examiners of each of the foregoing access to the documentation regarding the
Home Loans required by applicable state and federal regulations, such access
being afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
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Section 4.06 Superior Liens.
(a) The Servicer shall file (or cause to be filed) of record a request
for notice of any action by a lienholder under a Superior Lien for the
protection of the Issuer's interest, where permitted by local law and whenever
applicable state law does not require that a junior lienholder be named as a
party defendant in foreclosure proceedings in order to foreclose such junior
lienholder's equity of redemption.
(b) If the Servicer is notified that any lienholder under a Superior
Lien has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the related
mortgage or promissory note secured thereby, or has filed or intends to file an
election to have any Mortgaged Property sold or foreclosed, the Servicer shall
take, on behalf of the Trust, all reasonable actions that are necessary to
protect the interests of the Securityholders and the Securities Insurer, and/or
to preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall immediately notify the Owner Trustee and the
Indenture Trustee of any such action or circumstances. Any Servicing Advances by
the Servicer pursuant to its obligations in this Section 4.06 shall comply with
requirements set forth in Section 4.01(b) hereof.
Section 4.07 Subservicing.
(a) The Servicer may, with the prior written consent of the Owner
Trustee and the Indenture Trustee, enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer. The
Servicer shall give prior written notice to the Owner Trustee, the Indenture
Trustee and the Securities Insurer of the appointment of any Subservicer. The
Servicer shall be entitled to terminate any Subservicing Agreement in accordance
with the terms and conditions of such Subservicing Agreement and to either
directly service the related Home Loans or enter into a Subservicing Agreement
with a successor subservicer which qualifies hereunder. Each of the Owner
Trustee, the Indenture Trustee and Securities Insurer hereby acknowledge and
consent to each Person identified as a Subservicer in the definition of such
term as of the Closing Date.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the Owner
Trustee, the Indenture Trustee, the Securities Insurer and Securityholders for
the servicing and administering of the Home Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Home Loans. For purposes of this Agreement, the Servicer shall be deemed to
have received payments on Home Loans when the Subservicer has actually received
such payments and, unless the context otherwise requires, references in this
Agreement to actions taken or to be taken by the Servicer in servicing the Home
Loans include actions taken or to be taken by a Subservicer on behalf of the
Servicer. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer by such Subservicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
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(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Owner Trustee, the Indenture Trustee and the Securityholders
pursuant to Section 4.08, shall thereupon assume all of the rights and
obligations of the Servicer under each Subservicing Agreement that the Servicer
may have entered into, unless the successor Servicer elects to terminate any
Subservicing Agreement in accordance with its terms. The successor Servicer
shall be deemed to have assumed all of the Servicer's interest therein and to
have replaced the Servicer as a party to each Subservicing Agreement to the same
extent as if the Subservicing Agreements had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under the Subservicing Agreements. The Servicer at its expense
and without right of reimbursement therefor, shall, upon request of the
successor Servicer, deliver to the assuming party all documents and records
relating to each Subservicing Agreement and the Home Loans then being serviced
and an accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Owner Trustee, the Indenture Trustee, the Securities Insurer
and the Securityholders, shall enforce the obligations of each Subservicer under
the related Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Home Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Home Loan or
(ii) from a specific recovery of costs, expenses or attorneys fees against the
party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer in
its capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone and none of the Owner Trustee, the Indenture
Trustee, the Securityholders or the Securities Insurer shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
Section 4.07(c) above.
Section 4.08 Successor Servicers. In the event that the Servicer is
terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section 9.04
hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Indenture Trustee will become the successor servicer or will
appoint a successor servicer in accordance with the provisions of Section 10.02
hereof; provided that any successor servicer, including the Indenture Trustee,
shall satisfy the requirements of an Eligible Servicer and shall be approved by
the Rating Agencies.
Section 4.09 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (each, a "Foreclosure Property"),
the deed or certificate of sale shall be taken in the name of the Issuer for the
benefit of the Securityholders and the Securities Insurer.
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The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Securityholders and the Securities Insurer solely
for the purpose of its prudent and prompt disposition and sale. The Servicer
shall, either itself or through an agent selected by the Servicer, manage,
conserve, protect and operate the Foreclosure Property in the same manner that
it manages, conserves, protects and operates other foreclosure property for its
own account, and in the same manner that similar property in the same locality
as the Foreclosure Property is managed. The Servicer shall attempt to sell the
same (and may temporarily rent the same) on such terms and conditions as the
Servicer deems to be in the best interest of the Securityholders and the
Securities Insurer.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Securityholders and the Securities
Insurer and, as soon as practicable thereafter, the expenses of such sale shall
be paid. The Net Liquidation Proceeds or Post Liquidation Proceeds, as
applicable, from the conservation, disposition and sale of the Foreclosure
Property shall be promptly deposited by the Servicer in the Collection Account
for distribution in accordance with Section 5.01(c), which Net Liquidation
Proceeds or Post Liquidation Proceeds, as applicable, shall equal all cash
amounts received with respect thereto less the amounts retained and withdrawn by
the Servicer for any related unreimbursed Servicing Advances and any other fees
and expenses incurred in connection with such Foreclosure Property.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Establishment of Collection Accounts; Deposits in
Collection Accounts; Withdrawals from the Collection Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause
to be established and maintained one or more Collection Accounts, which shall be
Eligible Accounts, which may be interest-bearing, entitled "FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, IN TRUST FOR THE BENEFICIAL OWNERS OF
FIRSTPLUS HOME LOAN OWNER TRUST 19 - ASSET-BACKED NOTES AND ASSET-BACKED
CERTIFICATES, SERIES 19 - , COLLECTION ACCOUNT". The Collection Account may be
maintained with the Indenture Trustee or any other depository institution which
satisfies the requirements set forth in the definition of Eligible Account. The
creation of any Collection Account other than one maintained with the Indenture
Trustee shall be evidenced by a letter agreement between the Servicer and the
depository institution. A copy of such letter agreement shall be furnished to
the Owner Trustee, Indenture Trustee, the Securities Insurer and, upon request
of any Securityholder, to such Securityholder.
(b) The Servicer shall use its best efforts to deposit or cause to be
deposited (without duplication) within one (1) Business Day, and shall in any
event deposit within two (2) Business Days, of receipt thereof in the Collection
Account and retain therein:
(i) all payments on account of principal on the Home Loans
collected after the applicable Cut-Off Date;
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(ii) all payments on account of interest on the Home Loans
collected after the applicable Cut-Off Date;
(iii) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to Sections 4.02 or 4.07;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of
any Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06 and 3.05;
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any fidelity bond or
errors and omission insurance under Section 4.03 or the deposit of the
Termination Price under Section 11.02; and
(viii) interest and gains on funds held in the Collection Account.
The foregoing requirements for deposit in the Collection Account shall
be exclusive.
(c) On the Business Day prior to each Distribution Date, the Servicer
(based on the information contained in the Servicer's Monthly Remittance Report
for such Distribution Date) shall make or cause to be made the following
deposits and distributions from the Collection Account by 11:00 a.m. (New York
City time), to the extent of the Available Collection Amount, in the following
order of priority:
(i) to the Securities Insurer, an amount equal to the Guaranty
Insurance Premium;
(ii) in the following order: (a) to the Indenture Trustee, an
amount equal to the Indenture Trustee Fee and all unpaid Indenture
Trustee Fees from prior Due Periods, (b) to the Owner Trustee, an
amount equal to the Owner Trustee Fee and all unpaid Owner Trustee Fees
from prior Due Periods, and (c) to the Custodian, an amount equal to
the Custodian Fee and all unpaid Custodian Fees from prior Due Periods;
(iii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii) above, the Noteholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii) above, the Noteholders' Principal Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv) above, the Certificateholders' Interest Distributable
Amount;
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(vi) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (v) above, the Certificateholders' Principal Distributable
Amount;
(vii) to the holder of the Residual Interest, the Total
Distribution Amount, if any, remaining after the application of clauses
(i) through (vi) above.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
(d) The Servicer shall also make or cause to be made the following
investments in and/or withdrawals from the Collection Account, in no particular
order of priority:
(i) to invest amounts on deposit in the Collection Account in
Permitted Investments pursuant to Section 5.07 hereof;
(ii) to pay itself Servicing Compensation pursuant to Section
7.03 hereof and to pay itself any accrued but unpaid Servicing Fees;
(iii) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error; and
(iv) to clear and terminate the Collection Account in connection
with the termination of this Agreement.
The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be considered
transferred to the Note Distribution Account on a first-in, first-out basis.
(e) So long as no Event of Default shall have occurred and be
continuing, the funds held in the Collection Account may be invested (to the
extent practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed to the Servicer in writing or by telephone or
facsimile transmission confirmed in writing by the Seller. In any case, funds in
the Collection Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, not
later than one Business Day immediately preceding the Distribution Date next
following the date of such investment and shall not be sold or disposed of prior
to its maturity. All interest and any other investment earnings on amounts or
investments held in the Collection Account shall be deposited into the
Collection Account immediately upon receipt by the Servicer. All Permitted
Investments in which funds in the Collection Account are invested must be held
by or registered in the name of "FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION, IN TRUST FOR THE BENEFICIAL OWNERS OF FIRSTPLUS HOME LOAN OWNER
TRUST 19_-_ ASSET-BACKED NOTES AND ASSET-BACKED CERTIFICATES, SERIES 19_-_".
Section 5.02 Initial Collection Account; Transfer of Collection
Account.
Pursuant to Section 5.01, the Collection Account shall be established,
as of the Closing Date, with __________________________, as an Eligible Account
pursuant to the definition thereof. The
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Collection Account may, upon written notice to the Owner Trustee and the
Indenture Trustee, be transferred to a different depository institution so long
as such transfer is to an Eligible Account.
Section 5.03 Pre-Funding Account.
(a) No later than the Closing Date, the Servicer, for the benefit of
the Securityholders, shall establish and maintain with the Indenture Trustee one
or more Eligible Accounts entitled "PRE- FUNDING ACCOUNT, FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE FOR THE BENEFICIAL OWNERS
OF THE FIRSTPLUS HOME LOAN OWNER TRUST 19__-__ ASSET-BACKED NOTES AND
ASSET-BACKED CERTIFICATES, SERIES 19__-__". On the Closing Date, the Owner
Trustee, on behalf of the Seller, shall cause the Pre-Funding Account Deposit to
be deposited into the Pre- Funding Account from the proceeds of the sale of the
Securities. On any Subsequent Transfer Date, the Servicer shall instruct the
Indenture Trustee to: (i) withdraw from the Pre-Funding Account an amount equal
to the Subsequent Purchase Price for the Subsequent Home Loans sold to the
Issuer on such Subsequent Transfer Date pursuant to a Subsequent Transfer
Agreement; and (ii) pay such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.02 of this Agreement with
respect to such transfer.
(b) So long as no Event of Default shall have occurred and be
continuing, amounts held in the Pre-Funding Account shall be invested in
Permitted Investments of the type specified in clause (vii) of the definition of
Permitted Investments, which Permitted Investments shall mature on the Business
Day following the purchase date of such investments or upon demand. The
Indenture Trustee shall not be liable for any losses on amounts invested in
accordance with the provisions hereof (except to the extent that the Indenture
Trustee is the obligor and has defaulted on such investments). Any losses
realized in connection with any such investment shall be for the account of the
Seller, and the Seller shall deposit the amount of such loss (to the extent not
offset by income from other investments) in the Pre-Funding Account immediately
upon the realization of such loss. All interest and any other investment
earnings on amounts held in the Pre-Funding Account shall be taxed to the Seller
and for federal and state income tax purposes the Seller shall be deemed to be
the owner of the Pre-Funding Account. All interest and any other investment
earnings on amounts or investments held in the Pre-Funding Account shall be
deposited into the Capitalized Interest Account on each Distribution Date.
(c) If the Pre-Funding Account has not been reduced to zero by the
close of business on the date on which the Funding Period ends, the Servicer
shall direct the Indenture Trustee to deposit any amounts remaining in the
Pre-Funding Account (net of reinvestment earnings which shall be transferred to
the Capitalized Interest Account) into the Note Distribution Account and the
Certificate Distribution Account on the Business Day immediately preceding the
Pre-Funding Termination Distribution Date for distribution to the
Securityholders pro rata based on the Class Principal Balance of the Note and
the Certificate Principal Balance of the Certificates. Amounts that are
transferred to the Note Distribution Account or the Certificate Distribution
Account from the Pre-Funding Account pursuant to this Section 5.03(c) may not be
invested in Permitted Investments or other investments after being transferred
into the Note Distribution Account or the Certificate Distribution Account.
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Section 5.04 Capitalized Interest Account.
(a) No later than the Closing Date, the Servicer, for the benefit of
the Securityholders, shall establish and maintain with the Indenture Trustee one
or more Eligible Accounts entitled "CAPITALIZED INTEREST ACCOUNT, FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE FOR FIRSTPLUS HOME LOAN
OWNER TRUST 19___-___ ASSET-BACKED NOTES AND ASSET- BACKED CERTIFICATES, SERIES
19 ___-___ ". On the Closing Date, the Owner Trustee, on behalf of the Seller,
shall cause the Capitalized Interest Account Deposit to be deposited into the
Capitalized Interest Account from the proceeds of the sale of the Securities.
The Indenture Trustee shall hold the Capitalized Interest Account Deposit for
the benefit of the Securityholders and the Securities Insurer. On the Business
Day preceding each Distribution Date during the Funding Period and on the first
Distribution Date occurring after the Due Period in which the Funding Period
ends, the Servicer shall instruct the Indenture Trustee to withdraw from the
Capitalized Interest Account and deposit into the Note Distribution Account
and/or the Certificate Distribution Account the Interest Shortfall, if any, with
respect to such Distribution Date.
(b) So long as no Event of Default shall have occurred and be
continuing, amounts held in the Capitalized Interest Account shall be invested
in Permitted Investments of the type specified in clause (vii) of the definition
of Permitted Investments, which Permitted Investments shall mature no later than
the third Business Day prior to the Distribution Date. The Indenture Trustee
shall not be liable for any losses on amounts invested in accordance with the
provisions hereof (except to the extent that the Indenture Trustee is the
obligor and has defaulted on such investments). All interest and other
investment earnings on amounts held in the Capitalized Interest Account shall be
retained by the Indenture Trustee in the Capitalized Interest Account until
distributed pursuant to this Section and for federal and state income tax
purposes the Seller shall be deemed to be the owner of the Capitalized Interest
Account including, for such purposes, the recognition of income from such
earnings. Any losses realized in connection with any such investment shall be
for the account of the Seller, and the Seller and the Transferor shall deposit
into the Capitalized Interest Account an amount in cash equal to the amount of
any such loss (to the extent not offset by income from other investments)
immediately upon the realization of such loss. All amounts earned on amounts on
deposit in the Capitalized Interest Account shall be taxed to the Seller.
(c) On any Business Day occurring prior to the last Business Day of
each Due Period that occurs prior to __________________, 19__ the Transferor and
the Seller may deposit with the Indenture Trustee a letter of credit issued by a
financial institution, and in a form, approved by the Securities Insurer and the
Rating Agencies in an amount equal to any positive difference between the
Capitalized Interest Account Requirement and the Capitalized Interest Amount as
of any date of determination occurring prior to such Business Day, and the
Indenture Trustee shall notify the Securities Insurer of the receipt of such
letter of credit. The failure to deposit such letter of credit in respect of any
such difference before the close of business on the last Business Day of each
Due Period that occurs prior to __________________, 19__ will cause the Funding
Period to end as of the last day of such Due Period. On any Business Day
occurring prior to the last Business Day of each Due Period that occurs prior to
__________________, 19__, the Transferor and the Seller may request the Servicer
to calculate the Capitalized Interest Account Requirement as of such Business
Day; provided that if no such request has been received during a Due Period then
the Servicer shall calculate the Capitalized Interest Account Requirement on the
last Business Day of such Due Period to determine whether the Funding Period
will end pursuant to the preceding sentence. Any amounts
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remaining in the Capitalized Interest Account at the end of the Funding Period
and not used as described above will be distributed to the Seller, including any
net reinvestment income thereon.
(d) On any Business Day occurring prior to the last Business Day of
each Due Period that occurs prior to ________________, 19__ , the Transferor and
the Seller may request the Servicer to calculate the amount, if any, of the
Capitalized Interest Excess. If the Capitalized Interest Excess is greater than
zero on any such Business Day prior to ________________, 19__ , such Capitalized
Interest Excess will be released to the Seller on the following Distribution
Date. On the Distribution Date following the Due Period in which the Funding
Period ends, the Servicer shall instruct the Indenture Trustee to release and
distribute to the Seller the Capitalized Interest Amount, if any, that remains
after the distribution of any Interest Shortfall on such Distribution Date.
Section 5.05 Establishment of Note Distribution Account; Investment of
Funds Held in Note Distribution Account.
(a) No later than the Closing Date, the Servicer, for the benefit of
the Securityholders, will establish and maintain with the Indenture Trustee one
or more Eligible Accounts entitled "NOTE DISTRIBUTION ACCOUNT, FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE FOR FIRSTPLUS HOME LOAN
OWNER TRUST 19 ___-___ ASSET-BACKED NOTES AND ASSET-BACKED CERTIFICATES, SERIES
19 ___-___ ". On each Distribution Date, the Indenture Trustee shall distribute
the Noteholders' Distributable Amount from the Note Distribution Account in
accordance with Section ___ of the Indenture.
(b) So long as no Event of Default shall have occurred and be
continuing, the funds held in the Note Distribution Account may be invested (to
the extent practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed to the Indenture Trustee in writing or by
telephone or facsimile transmission confirmed in writing by the Servicer. In any
case, funds in the Note Distribution Account must be available for withdrawal
without penalty, and any Permitted Investments must mature or otherwise be
available for withdrawal, not later than one Business Day immediately preceding
the Distribution Date next following the date of such investment and shall not
be sold or disposed of prior to its maturity. All interest and other investment
earnings on amounts or investments held in the Note Distribution Account shall
be deposited into the Note Distribution Account immediately upon receipt by the
Indenture Trustee. All Permitted Investments in which funds in the Distribution
Account are invested must be held by or registered in the name of "FIRST TRUST
OF CALIFORNIA, NATIONAL ASSOCIATION, IN TRUST FOR THE BENEFICIAL OWNERS OF
FIRSTPLUS HOME LOAN OWNER TRUST 19 ___-___ ASSET-BACKED NOTES AND ASSET-BACKED
CERTIFICATES, SERIES 19 ___-___ ".
Section 5.06 Reserve Account.
(a) No later than the Closing Date, the Servicer, for the benefit of
the Securityholders, will establish and maintain with the Indenture Trustee one
or more Eligible Accounts entitled "RESERVE ACCOUNT, FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, IN TRUST FOR FIRSTPLUS HOME LOAN OWNER TRUST 19 ___-___
ASSET BACKED NOTES AND ASSET BACKED CERTIFICATES, SERIES 19 ___-___ ". On the
Closing Date, the Owner Trustee will deposit, on behalf of the Seller, the
Reserve Account Initial Deposit into the Reserve Account from the net proceeds
of the sale of the Notes and the Certificates. On the Closing Date, the Reserve
Account Initial Deposit will be equal to the Reserve Account Requirement. So
long as no Event of Default shall have occurred and be
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continuing, the funds held in the Reserve Account may be invested (to the extent
practicable and consistent with any requirements of the Code) in Permitted
Investments, as directed to the Indenture Trustee in writing or by telephone or
facsimile transmission confirmed in writing by the Servicer. In any case, funds
in the Reserve Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, not
later than one Business Day immediately preceding the Distribution Date next
following the date of such investment and shall not be sold or disposed of prior
to its maturity. All interest and other investment earnings on amounts or
investments held in the Reserve Account shall be deposited into the Reserve
Account immediately upon receipt by the Indenture Trustee.
(b) On any Business Day occurring after _________________, 19__ , the
Transferor and the Seller may deposit with the Indenture Trustee a limited
guaranty issued by an affiliate of the Transferor and the Seller or a letter of
credit issued by a financial institution in an amount equal to any positive
difference between the Reserve Account Requirement and the Reserve Account
Amount as of any date of determination occurring prior to such Business Day,
provided that such limited guaranty or such letter of credit is in a form
approved by the Securities Insurer and the Rating Agencies. The Indenture
Trustee shall notify the Securities Insurer of the receipt of any such limited
guaranty or letter of credit.
(c) If the amount on deposit in the Reserve Account on any Distribution
Date (after giving effect to all deposits thereto or withdrawals therefrom on
such Distribution Date) is greater than the Reserve Account Requirement for such
Distribution Date (such amount "the Excess Reserve Account Amount"), the
Servicer shall first instruct the Indenture Trustee to cause a reduction in the
amount available under the limited guaranty or letter of credit, if any, until
(A) the Excess Reserve Account Amount is reduced to zero or (B) the amount
available under the limited guaranty or letter of credit is reduced to zero.
After any limited guaranty or letter of credit has been reduced to zero, the
Servicer shall instruct the Indenture Trustee to distribute any Excess Reserve
Account Amount to the holder of the residual interest until the Excess Reserve
Account Amount is reduced to zero.
(d) The Servicer shall cause the amount of the Reserve Account
Requirement to be reduced incrementally (i.e., dollar-for-dollar) each time the
Overcollateralization Level is increased as a result of the application of
Excess Spread to the principal amount of the Securities until the
Overcollateralization Level equals the Required Overcollateralization Level and
the Reserve Fund Requirement is reduced to zero. Once the Reserve Account
Requirement is reduced to zero, the Servicer shall direct the Indenture Trustee
to distribute any amounts remaining in the Reserve Account to the holder of the
Residual Interest.
(e) If the Servicer determines pursuant to Section 4.01(b) that it is
required to make an Advance on a Determination Date and does not do so from its
own funds, the Servicer shall instruct the Indenture Trustee to withdraw funds
from the Reserve Account and deposit them in the Collection Account to cover any
shortfall. Such payment shall be deemed to have been made by the Servicer
pursuant to Section 4.01(b) for purposes of making distributions pursuant to
this Agreement, but shall not otherwise satisfy the Servicer's obligation to
deliver the amount of the Advances, and the Servicer shall within two Business
Days replace any funds in the Reserve Account so used.
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(f) (i) In the event that the Required Distribution Amount for a
Distribution Date exceeds the Available Collection Amount on such
Distribution Date, the Servicer shall instruct the Indenture
Trustee to withdraw from the Reserve Account on such Distribution
Date an amount equal to the Deficiency Amount, to the extent of
funds available therein and deposit such amount into the Note
Distribution Account and/or the Certificate Distribution Account,
as applicable.
(ii) In the event that the Total Distribution Amount on the
Final Scheduled Distribution Date for a Class of Notes or the
Certificates exceeds the amount deposited into the Note
Distribution Account and/or the Certificate Distribution Account
pursuant to Section 5.01(c) on such Distribution Date, the
Servicer shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Distribution Date an amount equal to such
excess, to the extent of funds available therein and deposit such
amount into the Note Distribution Account and/or the Certificate
Distribution Account, as applicable.
(g) Following the payment in full of the aggregate outstanding
Principal Balance of the Notes and the Certificates and of all other amounts
owing or to be distributed hereunder or under the Indenture or the Trust
Agreement to the Securityholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the holder
of the Residual Interest and any Permitted Investments in the Reserve Account
shall be transferred to the holder of the Residual Interest.
Section 5.07 Trust Account Property.
(a) The Indenture Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon) and all such funds, investments,
proceeds and income shall be part of the Trust Account Property. The Trust
Accounts shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Noteholders, the Owner Trustee and the
Certificateholders, as the case may be. If, at any time, any of the Trust
Accounts ceases to be an Eligible Account, the Indenture Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Trust Account as an Eligible Account and shall transfer any cash
and/or any investments to such new Trust Account.
(b) If any amounts are needed for disbursement from any Trust Account
held by or on behalf of the Indenture Trustee and sufficient uninvested funds
are not available to make such disbursement, the Indenture Trustee shall cause
to be sold or otherwise converted to cash a sufficient amount of the investments
in such Trust Account. The Indenture Trustee shall not be liable for any
investment loss or other charge resulting therefrom unless the Indenture
Trustee's failure to perform in accordance with this Section 5.07 is the cause
of such loss or charge.
(c) Subject to Section 12.01 hereof, the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in any Account held by
the Indenture Trustee resulting from any investment loss on any Permitted
Investment included therein (except to the extent that the Indenture Trustee is
the obligor and has defaulted thereon).
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(d) With respect to the Trust Account Property, the Indenture Trustee
agrees, by its acceptance hereof, that:
(i) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject to
the last sentence of Section 5.07(a); and each such Eligible
Account shall be subject to the exclusive custody and control of
the Indenture Trustee, and the Indenture Trustee shall have sole
signature authority with respect thereto;
(ii) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be
held, pending maturity or disposition, solely by the Indenture
Trustee or a financial intermediary (as such term is defined in
Section 8-313(4) of the UCC) acting solely for the Indenture
Trustee;
(iii) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulations shall be delivered in accordance
with paragraph (b) of the definition of "Delivery" and shall be
maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph; and
(iv) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed
by clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the Trust
Accounts for the purpose of permitting the Servicer or the Owner Trustee to
carry out its respective duties hereunder or permitting the Indenture Trustee to
carry out its duties under the Indenture.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee and the Securities Insurer, by facsimile, the receipt
and legibility of which shall be confirmed telephonically, and with hard copy
thereof to be delivered no later than one (1) Business Day after
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such Determination Date, the Servicer's Monthly Remittance Report, setting forth
the date of such Report (day, month and year), the name of the Issuer (i.e.
"FIRSTPLUS Home Loan Owner Trust 19___-___"), the Series designation of the
Securities (i.e. "Series 19___-___"), and the date of this Agreement.
Furthermore, no later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Home Loans
during the related Due Period as the Indenture Trustee may reasonably require.
(b) On each Distribution Date, the Servicer shall prepare and the
Indenture Trustee shall distribute a monthly statement (the "Servicer's Monthly
Statement") to the Seller, the Securityholders, the Beneficial Owners (who have
notified the Indenture Trustee by delivery of an Investment Letter to the
Indenture Trustee), the Securities Insurer and the Rating Agencies, stating the
date of original issuance of the Securities (day, month and year), the name of
the Issuer (i.e. "FIRSTPLUS Home Loan Owner Trust 19___-___"), the series
designation of the Certificates (i.e. "Series 19___-___"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Required Distribution
Amount for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes, the
Certificate Principal Balance of the Certificates, and the Pool
Principal Balance (including, until the Funding Period ends, the amount
remaining in the Pre-Funding Account and the Capitalized Interest
Account as of such Distribution Date) as of the first day of the
related Due Period and after giving effect to distributions made to the
holders of such Securities on such Distribution Date;
(iii) the Class Pool Factor with respect to each Class of Notes
then outstanding and the Certificate Pool Factor with respect to the
Certificates then outstanding;
(iv) the amount of principal and interest received on the Home
Loans during the related Due Period;
(v) the Noteholders' Distributable Amount and the
Certificateholders' Distributable Amount;
(vi) the amount, if any, of the Excess Overcollateralization
Amount and, if applicable, the Overcollateralization Reduction Amount
or any other amount to be distributed to the Securityholders or the
holder of the Residual Interest on such Distribution Date;
(vii) the Servicing Fee, the Indenture Trustee Fee, the Owner
Trustee Fee, the Custodian Fee, if any, and the Guaranty Insurance
Premium for such Distribution Date;
(viii) the Overcollateralization Level on such Distribution
Date, the Required Overcollateralization Level as of such Distribution
Date, the Net Principal Loan Losses incurred during the related Due
Period and the cumulative Net Principal Loan Losses as of such
Distribution Date;
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(ix) the Reserve Account Requirement and the amount remaining
on deposit in the Reserve Account on such Distribution Date after
giving effect to the distributions made to Securityholders on such
Distribution Date;
(x) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans;
(xi) certain performance information, including delinquency
and foreclosure information with respect to the Home Loans, as set
forth in the Servicer's Monthly Remittance Report;
(xii) the amount of any Guaranteed Payment included in the
amounts distributed to the Noteholders on such Distribution Date;
(xiii) as identified with respect to the each Insured Security,
the amount of any Securities Insurer Reimbursement Amount to be
distributed to the Securities Insurer on such Distribution Date and the
amount of any Securities Insurer Reimbursement Amount remaining
unsatisfied following such distribution;
(xiv) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings (other than any Home Loans described
in clause (xv)) and the percent of the aggregate Principal Balances of
such Home Loans to the aggregate Principal Balances of all Home Loans,
all as of the close of business on the first day of the related Due
Period;
(xv) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings (other than any Home Loans
described in clause (xvi)) and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvi) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such
Foreclosure Properties and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvii) the aggregate Principal Balance of Home Loans that became
Defaulted Home Loans and the aggregate Principal Balance of Home Loans
that became Liquidated Home Loans during the related Due Period,
including the foregoing amounts by loan type (i.e. Combination Loans,
Debt Consolidation Loans and Home Improvement Loans);
(xviii) the cumulative aggregate Principal Balance of Home Loans
that became Defaulted Home Loans and the cumulative aggregate Principal
Balance of Home Loans that became Liquidated Home Loans from the
Closing Date through the most current Due Period, including the
foregoing amounts by loan type (i.e. Combination Loans, Debt
Consolidation Loans and Home Improvement Loans); and
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(xix) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period.
All reports prepared by the Servicer of the withdrawals from and
deposits in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the Indenture
Trustee may fully rely upon and shall have no liability with respect to such
information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and direct the Indenture Trustee to distribute
to each Person who at any time during the calendar year was a Securityholder,
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (b)(iv) and (v)
above, aggregated for such calendar year or applicable portion thereof during
which such Person was a Securityholder. Such obligation of the Indenture Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Servicer to the Securityholders
pursuant to any requirements of the Code as are in force from time to time.
(d) On each Distribution Date, the Indenture Trustee shall forward to
the holder of the Residual Interest a copy of the Servicer's Monthly Statement
in respect of such Distribution Date and a statement setting forth the amounts
actually distributed to such holder of the Residual Interest on such
Distribution Date, together with such other information as the Indenture Trustee
deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and direct the Indenture Trustee to distribute
to each Person who at any time during the calendar year was a holder of Residual
Interest, if requested in writing by such Person, such information as is
reasonably necessary to provide to such Person a statement containing the
information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
holder of Residual Interest. Such obligation of the Indenture Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer to the holder of Residual Interest
pursuant to any requirements of the Code as are in force from time to time.
(f) Upon reasonable advance notice in writing, the Servicer will
provide to each Securityholder which is a savings and loan association, bank or
insurance company access to information and documentation regarding the Home
Loans sufficient to permit such Securityholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to
investment in such Securities.
(g) The Servicer or its agent shall furnish to the Indenture Trustee,
who in turn shall forward to each Securityholder and the holder of Residual
Interest, during the term of this Agreement, such periodic, special, or other
reports, including information tax returns or reports required with respect to
the Securities and the Residual Interest, including Internal Revenue Service
Forms 1099 and (if instructed in writing by the Seller on the basis of the
advice of legal counsel) Form 1066, Schedule Q and other similar reports that
are required to be filed by the Servicer or its agent and the holder of Residual
Interest, whether or not provided for herein, as shall be necessary, reasonable,
or appropriate with respect to the Securityholders or the holder of Residual
Interest, or otherwise with respect to the purposes of this Agreement, all such
reports or information to be
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provided by and in accordance with such applicable instructions and directions
as the Securityholders or the holder of Residual Interest may reasonably
require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and of
proprietary nature, and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Seller or the Servicer or for any
other purpose except as set forth in this Agreement.
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
Property.
Each year beginning in 19 the Servicer, at its expense, shall make
the reports of foreclosures and abandonments of any Mortgaged Property required
by Section 6050J of the Code. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by such Section
6050J of the Code.
Section 6.03 Specification of Certain Tax Matters.
Each Securityholder shall provide the Indenture Trustee with a
completed and executed Form W-9 prior to purchasing a Security. The Indenture
Trustee shall comply with all requirements of the Code, and applicable state and
local law, with respect to the withholding from any distributions made to any
Securityholder of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
Obligor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Loan under any "due-on-sale" clause contained in the related
Mortgage or Debt Instrument; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. In such event or in the
event the related Mortgage and Debt Instrument do not contain a "due-on-sale"
clause, the Servicer shall enter into an assumption and modification agreement
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Debt Instrument and,
unless prohibited by applicable law or the Mortgage Documents, the Obligor
remains liable thereon. The Servicer is also authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Obligor is released from liability and such person is substituted as
Obligor and becomes liable under the Debt Instrument. The Servicer shall notify
the Custodian that any such substitution or assumption agreement has been
completed by forwarding to the Custodian the original of such substitution or
assumption agreement, which original shall be added by the Custodian to the
related Issuer's Home Loan File and shall, for all purposes, be considered a
part of such Issuer's Home Loan
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File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any assumption or substitution agreement
entered into pursuant to this Section 7.01, the Servicer shall not change the
Home Loan Interest Rate or the Monthly Payment, defer or forgive the payment of
principal or interest, reduce the outstanding principal amount or extend the
final maturity date on such Home Loan. Any fee collected by the Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional Servicing
Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02 Satisfaction of Mortgages and Release of Home Loan Files.
Subject to the provisions of Sections 4.01 and 4.02, the Servicer shall
not grant a satisfaction or release of a Mortgage without having obtained
payment in full of the indebtedness secured by the Mortgage or otherwise
prejudice any right the Securityholders or the Securities Insurer may have under
the mortgage instruments. The Servicer shall maintain the fidelity bond and
errors and omissions insurance as provided for in Section 4.03 insuring the
Servicer against any loss it may sustain with respect to any Home Loan not
satisfied in accordance with the procedures set forth herein.
Upon the payment in full of any Home Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Custodian
by an Officers' Certificate (which certificate shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 5.01(b) have been or will be so deposited) of a Servicing Officer and
shall request delivery to it of the Issuer's Home Loan File. Upon receipt of
such certification and request, the Custodian shall promptly release the related
Issuer's Home Loan File to the Servicer. Expenses incurred in connection with
any instrument of satisfaction or deed of reconveyance shall be payable only
from and to the extent of Servicing Compensation and shall not be chargeable to
the Collection Account or the Distribution Account. Upon receipt by the
Custodian of the certification of a Servicing Officer with respect to the
release of the Issuer's Home Loan File for any Home Loan or any documents
included therein, the Custodian shall release to the Servicer such Issuer's Home
Loan File and shall deliver such instruments of transfer presented to it by the
Servicer as shall be necessary or appropriate for the release of such Issuer's
Home Loan File in accordance with such certification of the Servicing Officer;
provided that in the case of a release of the related Issuer's Home Loan File in
connection with a substitution or repurchase of any Home Loan pursuant to
Section 2.06(c) and (d), Section 3.05 or Section 11.02 or a release for other
servicing reasons, such release of the Issuer's Home Loan File by the Custodian
shall be subject to the prior approval of the Indenture Trustee.
The Owner Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Obligor on the Debt Instrument or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Debt Instrument or Mortgage or otherwise available at law
or in equity.
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Together with such documents or pleadings, the Servicer shall deliver to the
Owner Trustee a certificate of a Servicing Officer requesting that such
pleadings or documents be executed by the Owner Trustee and certifying as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Owner Trustee will not invalidate or otherwise affect
the lien of the Mortgage, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale. The Owner Trustee shall, upon
receipt of a written request from a Servicing Officer, execute any document
provided to the Owner Trustee by the Servicer or take any other action requested
in such request that is, in the opinion of the Servicer as evidenced by such
request, required by any state or other jurisdiction to discharge the lien of a
Mortgage upon the satisfaction thereof and the Owner Trustee will sign and post,
but will not guarantee receipt of, any such documents to the Servicer, or such
other party as the Servicer may direct, within five Business Days, or more
promptly if needed, of the Owner Trustee's receipt of such certificate or
documents. Such certificate or documents shall establish to the Owner Trustee's
satisfaction that the related Home Loan has been paid in full by or on behalf of
the Obligor and that such payment has been deposited in the Collection Account.
Subject to any other applicable terms and conditions of this Agreement,
the Owner Trustee and Servicer shall be entitled to approve an assignment in
lieu of satisfaction with respect to any Home Loan, provided the obligee with
respect to such Home Loan following such proposed assignment provides the Owner
Trustee and Servicer with a "Certification for Assignment of Home Loan" in form
and substance satisfactory to the Owner Trustee and Servicer, providing the
following: (i) that the Home Loan is secured by Mortgaged Property located in a
jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with or facilitate a refinancing under the laws of such jurisdiction;
(ii) that the substance of the assignment is, and is intended to be, a
refinancing of such Home Loan and that the form of the transaction is solely to
comply with or facilitate the transaction under such local laws; (iii) that the
Home Loan following the proposed assignment will have a rate of interest at
least 0.25 percent below or above the rate of interest on such Home Loan prior
to such proposed assignment; and (iv) that such assignment is at the request of
the borrower under the related Home Loan. Upon approval of an assignment in lieu
of satisfaction with respect to any Home Loan, the Servicer shall receive cash
in an amount equal to the unpaid principal balance of and accrued interest on
such Home Loan and the Servicer shall treat such amount as a Principal
Prepayment with respect to such Home Loan for all purposes hereof.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to withdraw from the Collection Account, the Servicing Fee out of which
the Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of assumption and other
administrative fees, amounts remitted pursuant to Section 7.01 and late payment
charges shall be retained by or remitted to the Servicer to the extent not
required to be remitted to the Indenture Trustee for deposit in the Distribution
Account.
The Servicer 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. The Servicer
also agrees to pay (i) all reasonable costs and expenses incurred by the
Indenture Trustee, the Owner Trustee or the Seller in investigating the
Servicer's activities hereunder when, in the reasonable opinion of the Indenture
Trustee, the Owner
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Trustee or the Seller, such investigation is warranted on the basis of adverse
information about the Servicer obtained from a reasonably reliable source, (ii)
all reasonable costs and expenses incurred by any successor servicer or the
Indenture Trustee in replacing the Servicer in the event of a default by the
Servicer in the performance of its duties under the terms and conditions of this
Agreement, and (iii) the annual Rating Agency monitoring fees.
Section 7.04 Quarterly Statements as to Compliance.
Not later than the last day of the second month following the end of
each quarter of the Servicer's Fiscal Year, beginning in , 19 , the
Servicer will deliver to the Indenture Trustee, the Owner Trustee, the
Securities Insurer and to each Securityholder, an Officer's Certificate stating
that (i) the Servicer has fully complied with the provisions of Articles V and
VII, (ii) a review of the activities of the Servicer during the preceding
quarter and of performance under this Agreement has been made under such
officer's supervision, and (iii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such quarter, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof and the action being taken by the
Servicer to cure such default.
Section 7.05 Annual Independent Public Accountants' Servicing Report.
On or before 120 days after the end of each of the Servicer's fiscal
years elapsing during the term of its appointment under this Agreement,
beginning with the first fiscal year ending after the Closing Date, the
Servicer, at its expense, shall furnish to the Seller, the Indenture Trustee,
the Owner Trustee, the Securityholders, the Securities Insurer and the Rating
Agencies (i) an opinion by a firm of independent certified public accountants on
the financial position of the Servicer at the end of the relevant fiscal year
and the results of operations and changes in financial position of the Servicer
for such year then ended on the basis of an examination conducted in accordance
with generally accepted auditing standards, and (ii) if the Servicer is then
servicing any Home Loans, a statement from such independent certified public
accountants to the effect that based on an examination of certain specified
documents and records relating to the servicing of the Servicer's loan portfolio
conducted substantially in compliance with the audit program for mortgages
serviced for 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 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Owner Trustee, the
Securities Insurer and each of their respective agents shall have the right upon
reasonable prior notice, during normal business hours and as often as reasonably
required, to examine, audit and copy, at the expense of the Person making such
examination, any and all of the books, records or other information of the
Servicer (including without limitation any Subservicer to the extent provided in
the related Subservicing Agreement) whether held by the Servicer or by another
on behalf of the Servicer, which may be relevant to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement. Each Securityholder, the Indenture Trustee, the Owner Trustee and
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the Securities Insurer agree that any information obtained pursuant to the terms
of this Agreement shall be held confidential.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee, the Securities Insurer and to each Majority
Securityholder a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the preceding
Record Date and showing, for the period covered by such statement, the aggregate
of deposits into the Collection Account for each category of deposit specified
in Section 5.01(b), the aggregate of withdrawals from the Collection Account for
each category of withdrawal specified in Section 5.01(c) and (d) and the
aggregate amount of permitted withdrawals not made in the related Due Period in
each case, for the related Due Period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to the
Beneficial Owners and/or Securityholders and to prospective Beneficial Owners
and/or Securityholders annual audited financial statements of the Servicer for
one or more of the most recently completed five fiscal years for which such
statements are available, which request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Beneficial Owners and/or Securityholders, and any prospective Beneficial Owners
and/or Securityholder a knowledgeable financial or accounting officer for the
purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
the Beneficial Owners and/or Securityholders and any prospective Beneficial
Owners and/or Securityholder to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Beneficial Owners
and/or Securityholders and such prospective Beneficial Owners and/or
Securityholder that the Servicer has the ability to service the Home Loans in
accordance with this Agreement.
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Indenture Trustee,
the Owner Trustee, the Seller, the Securities Insurer and each Securityholder
harmless from and against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indenture Trustee, the Owner Trustee, the Seller, the
Securities Insurer or any Securityholder may sustain directly resulting from the
negligence or willful
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misconduct of the Servicer in the performance of its duties hereunder or in the
servicing of the Home Loans in compliance with the terms of this Agreement. IT
IS THE EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE
INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF THE SERVICER SET FORTH IN THE
PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS
OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE
SERVICER. The Servicer shall not be liable or responsible for any of the
representations, covenants, warranties, responsibilities, duties or liabilities
of any prior Servicer. The Servicer shall immediately notify the Indenture
Trustee, the Owner Trustee, the Seller, the Securities Insurer and each
Securityholder if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Indenture
Trustee and the Owner Trustee) the defense of any such claim and advance all
expenses in connection therewith, including reasonable counsel fees, and
promptly advance funds to pay, discharge and satisfy any judgment or decree
which may be entered against the Servicer, the Indenture Trustee, the Owner
Trustee, the Seller, the Securities Insurer and/or any Securityholder in respect
of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee, the
Owner Trustee, the Servicer, the Securities Insurer and each Securityholder
harmless from and against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indenture Trustee, the Owner Trustee, the Servicer, the
Securities Insurer or any Securityholder may sustain directly resulting from the
negligence or willful misconduct of the Seller in the performance of its duties
hereunder or in compliance with the terms of this Agreement. IT IS THE EXPRESS
INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND HOLD
HARMLESS OBLIGATIONS OF THE SELLER SET FORTH IN THE PRECEDING SENTENCE SHALL
APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT MAY
CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE SELLER. The Seller shall
immediately notify the Indenture Trustee, the Owner Trustee, the Servicer, the
Securities Insurer and each Securityholder if a claim is made by a third party
with respect to this Agreement, and the Seller shall assume (with the consent of
the Indenture Trustee and the Owner Trustee) the defense of any such claim and
advance all expenses in connection therewith, including reasonable counsel fees,
and promptly advance funds to pay, discharge and satisfy any judgment or decree
which may be entered against the Seller, the Servicer, the Indenture Trustee,
the Owner Trustee, the Securities Insurer and/or any Securityholder in respect
of such claim.
(c) The Transferor agrees to indemnify and hold the Indenture Trustee,
the Owner Trustee, the Servicer, the Securities Insurer and each Securityholder
harmless from and against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indenture Trustee, the Owner Trustee, the Servicer, the
Securities Insurer or any Securityholder may sustain directly resulting from the
negligence or willful misconduct of the Transferor in the performance of its
duties hereunder or in compliance with the terms of this Agreement. IT IS THE
EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND
HOLD HARMLESS OBLIGATIONS OF THE TRANSFEROR SET FORTH IN THE PRECEDING SENTENCE
SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT
MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE TRANSFEROR. The Transferor
shall immediately notify the Indenture Trustee, the Owner Trustee, the Servicer,
the Securities Insurer and each Securityholder if a claim is made by a third
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party with respect to this Agreement, and the Transferor shall assume (with the
consent of the Indenture Trustee and the Owner Trustee) the defense of any such
claim and advance all expenses in connection therewith, including reasonable
counsel fees, and promptly advance funds to pay, discharge and satisfy any
judgment or decree which may be entered against the Transferor, the Servicer,
the Indenture Trustee, the Owner Trustee, the Securities Insurer and/or any
Securityholder in respect of such claim.
(d) The obligations of the Servicer, the Seller and the Transferor
under this Section 9.01 shall survive the termination of this Agreement.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall 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 and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable 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. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee, the Owner
Trustee and the Securities Insurer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the
Servicer 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 herein, the Servicer shall have no obligation to appear with
respect to, prosecute or defend any legal action which is not incidental to the
Servicer's duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
(a) The Servicer shall not resign from the obligations and duties
hereby imposed on it except by mutual consent of the Servicer, the Seller, the
Indenture Trustee, the Owner Trustee, the Securities Insurer and the Majority
Securityholders, or upon the determination that the Servicer's duties hereunder
are no longer permissible under applicable law and such incapacity cannot be
cured by the Servicer. Any such determination permitting the resignation of the
Servicer shall be evidenced by a written opinion of counsel (who may be an
employee of the Servicer) to such effect delivered to the Indenture Trustee, the
Owner Trustee, the Securities Insurer and the Seller, which opinion of counsel
shall be in form and substance acceptable to the Indenture Trustee, the Owner
Trustee and the Securities Insurer. No such resignation shall become effective
until the Indenture Trustee or a successor servicer has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 10.02.
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(b) The Servicer shall not assign this Agreement or any of its
obligations, rights and duties hereunder without the prior written consent the
Seller, the Indenture Trustee, the Owner Trustee, the Securities Insurer and the
Majority Securityholders; provided, however, the Servicer may assign this
Agreement without the prior written consent of the Seller, the Indenture
Trustee, the Owner Trustee, the Securities Insurer and the Majority
Securityholders to (i) the Indenture Trustee or (ii) any Person that (A) is
satisfactory to the Indenture Trustee, the Owner Trustee, the Securities Insurer
and the Majority Securityholders, (B) services not less than $25,000,000 in
aggregate outstanding principal amount of loans similar in type to the Home
Loans, (C) has a net worth of not less than $ , (D) has a blanket
fidelity bond and errors and omissions insurance coverage satisfying the
requirements set forth in Section 4.03 and (E) will not cause any rating of any
Class of the Securities in effect immediately prior to such assignment to be
qualified, downgraded or withdrawn, as evidenced by a letter from each Rating
Agency to such effect. Any such assignment to a successor servicer (other than
the Indenture Trustee) shall be effective only upon delivery to the Indenture
Trustee, the Owner Trustee and the Securities Insurer of an agreement, duly
executed by the Servicer and such successor servicer in a form reasonably
satisfactory to the Indenture Trustee and the Owner Trustee, in which such
successor servicer shall assume the due and punctual performance of each
covenant and condition to be performed or observed by the Servicer hereunder.
Section 9.05 Relationship of Servicer to Owner Trustee and the
Indenture Trustee.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Owner Trustee and the Indenture Trustee
under this Agreement is intended by the parties hereto to be that of an
independent contractor and not of a joint venturer, agent or partner of the
Owner Trustee or the Indenture Trustee.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to (1) deposit in the
Collection Account in accordance with Section 5.01(b) any payments in
respect of the Home Loans received by the Servicer no later than the
fourth Business Day following the day on which such payments were
received or (2) remit to the Indenture Trustee the amounts required to
be remitted to the Distribution Account on any Distribution Date
hereunder no later than the first Business Day after receipt from the
Indenture Trustee of notice of such failure; or
(ii) failure by the Servicer duly to observe or perform, in
any material respect, any other covenants, obligations or agreements of
the Servicer 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 and stating
that such notice is a "Notice of Default" hereunder, shall have been
given (a) to the Servicer by the Indenture
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Trustee or the Owner Trustee, or (b) to the Servicer, the Indenture
Trustee or the Owner Trustee by any Securityholder or the Securities
Insurer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings of
or relating to the Servicer or of or relating to all or substantially
all of the Servicer's property; or
(v) the Servicer 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) the Majority Securityholders or the Securities Insurer (A)
shall receive notice from the Servicer that the Servicer is no longer
able to discharge its duties under this Agreement or (B) shall
determine, in their reasonable judgment and based upon published
reports (including wire services), which they reasonably believe in
good faith to be reliable, that the Servicer
(1) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
(2) has defaulted on any of its material obligations, or
(3) has ceased to conduct its business in the ordinary
course; or
(vii) as of any Determination Date, the total Expected Loan
Losses (as defined below) exceed (1) commencing in ___________________
up to the fifth (5th) anniversary of the ____________________, 19__
Cut-Off Date, ___% of the sum of the Initial Pool Principal Balance and
the aggregate Principal Balance as of the applicable Cut-Off Dates of
all Subsequent Home Loans conveyed to the Issuer, or (2) thereafter up
to the tenth (10th) anniversary of the ____________________, 19__
Cut-Off Date, ___% of the sum of the Initial Pool Principal Balance and
the aggregate Principal Balance as of the applicable Cut-Off Dates of
all Subsequent Home Loans conveyed to the Issuer (where the "Expected
Loan Losses" shall be the sum of (A) the cumulative Net Loan Losses,
plus (B) ___% of the aggregate Principal Balance of the Home Loans
which are then more than 30 but less than 60 days delinquent, plus (C)
___% of the aggregate Principal Balance of the Home Loans which are
then more than 60 but less than 90 days delinquent, plus (B) ___% of
the aggregate Principal Balance of the Home Loans which are then more
than 90 days delinquent).
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(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Securityholders, the
Securities Insurer, the Indenture Trustee or the Owner Trustee by notice in
writing to the Servicer may, in addition to whatever rights such Person may have
at law or equity to damages, including injunctive relief and specific
performance, and with the consent of the Securities Insurer (which consent shall
not be unreasonably withheld), terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Home Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Home Loans or otherwise, shall, subject to Section
10.02, pass to and be vested in a successor servicer acceptable to the
Securities Insurer, or the Indenture Trustee if a successor servicer cannot be
retained in a timely manner, and the successor servicer, or Indenture Trustee,
as applicable, is hereby authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments 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
Home Loans and related documents. The Servicer agrees to cooperate with the
successor servicer in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the successor servicer for administration by it of all amounts which
shall at the time be credited by the Servicer to each Collection Account or
thereafter received with respect to the Home Loans.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as servicer pursuant to
this Article X, then, subject to Section 4.08, the Indenture Trustee shall
appoint a successor servicer acceptable to the Securities Insurer to be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the successor servicer shall not be liable for any actions of any servicer
prior to it; provided further, however, that if a successor servicer cannot be
retained in a timely manner, the Indenture Trustee shall act as successor
servicer. In the event the Indenture Trustee assumes the responsibilities of the
Servicer pursuant to this Section 10.02, the Indenture Trustee will make
reasonable efforts consistent with applicable law to become licensed, qualified
and in good standing in each Mortgaged Property State the laws of which require
licensing or qualification, in order to perform its obligations as Servicer
hereunder or, alternatively, shall retain an agent who is so licensed, qualified
and in good standing in any such Mortgaged Property State. The successor
servicer shall be obligated to make Servicing Advances hereunder. As
compensation therefor, the successor servicer appointed pursuant to the
following paragraph, shall be entitled to all funds relating to the Home Loans
which the Servicer would have been entitled to receive from the Collection
Account pursuant to Section 5.01(c) and from the Distribution Account pursuant
to the applicable provisions of Section 6.01(b) if the Servicer had continued to
act as servicer hereunder, together with other servicing compensation in the
form of assumption fees, late payment charges or otherwise as provided in
Sections 7.01 and 7.03. The Servicer shall not be entitled to any termination
fee if it is terminated pursuant to Section 10.01, but shall be entitled to any
accrued and unpaid Servicing Fee to the date of termination.
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Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fees, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth in Section 9.04(b)(ii) above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the Servicing Fees and Servicing Compensation provided for
herein. Within thirty days after any such public announcement, the Indenture
Trustee shall negotiate and effect the sale, transfer and assignment of the
servicing rights and responsibilities hereunder to the qualified party
submitting the highest qualifying bid. The Indenture Trustee shall deduct from
any sum received by the Indenture Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances made by the Indenture Trustee. After such deductions, the
remainder of such sum shall be paid by the Indenture Trustee to the Servicer at
the time of such sale, transfer and assignment to the Servicer's successor. The
Indenture Trustee, the Owner Trustee, any Custodian, the Servicer and any such
successor servicer shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. The Servicer agrees to
cooperate with the Indenture Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Indenture Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Indenture Trustee or such successor servicer, as applicable, all amounts
which then have been or should have been deposited in the Collection Account by
the Servicer or which are thereafter received with respect to the Home Loans.
Neither the Indenture Trustee nor any other successor servicer shall be held
liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Indenture Trustee to each Securityholder, the
Owner Trustee, the Seller and the Securities Insurer and, except in the case of
the appointment of the Indenture Trustee as successor to the Servicer (when no
consent shall be required), the Seller, the Majority Securityholders, the Owner
Trustee and the Securities Insurer shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act as servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor servicer out of
payments on the Home Loans as it and such successor servicer shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 7.03, together with other Servicing
Compensation in the form of assumption fees, late payment charges or otherwise
as provided in this Agreement.
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Section 10.03 Waiver of Defaults.
The Majority Securityholders may with the prior consent of the
Securities Insurer, on behalf of all Securityholders, waive any events
permitting removal of the Servicer as servicer pursuant to this Article X,
provided, however, that the Majority Securityholders may not waive a default in
making a required distribution on a Security or Residual Interest without the
consent of the related Securityholder or holder of the Residual Interest. 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 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee the funds in any Collection Account;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee all Home Loan Files and related documents and
statements held by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Owner Trustee, the Securities Insurer and the
Securityholders a full accounting of all funds, including a statement showing
the Monthly Payments collected by it and a statement of monies held in trust by
it for payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a) the later of the distribution to Securityholders of the final
payment or collection with respect to the last Home Loan, or the disposition of
all funds with respect to the last Home Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the Indenture
Trustee, the Owner Trustee, the Custodian and the Securities Insurer or (b)
mutual consent of the Servicer, the Seller, the Transferor, the Securities
Insurer and all Securityholders in writing.
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Section 11.02 Optional Termination by Holder of Residual Interest or
the Securities Insurer
The holder of the Residual Interest may, at its option, effect an early
redemption or termination of the Offered Securities on or after any Distribution
Date on which the Pool Principal Balance declines to ____% or less of the Pool
Principal Balance of the Initial Home Loans and Subsequent Home Loans conveyed
to the Trust as of the respective Cut-Off Dates. In addition, the holder of the
Residual Interest may, at its option, effect an early redemption or termination
of the Offered Securities on or after any Distribution Date on which the Pool
Principal Balance declines to ____% or less of the Pool Principal Balance of the
Initial Home Loans and Subsequent Home Loan conveyed to the Trust as of the
respective Cut-Off Dates. In connection with any such optional termination, to
the extent that sufficient proceeds are not available from the sale of the Home
Loans or the termination of the Trust, the holder of the Residual Interest will
pay the outstanding fees and expenses, if any, of the Indenture Trustee, the
Owner Trustee, the Securities Insurer, the Custodian, and the Servicer.
In addition, subject to Section 11.03, on any date on or after which
(i) ____% or more (based on Net Principal Loan Losses) of the Home Loans have
become Defaulted Home Loans on a cumulative basis and (ii) the
Overcollateralization Level has been reduced to zero or an amount less than
zero, then the Securities Insurer may, at its option, effect an early retirement
of the Securities and termination of this Agreement.
Any such early retirement and termination by the holder of the Residual
Interest, the Servicer or the Securities Insurer, as applicable, shall be
accomplished by depositing into the Collection Account on the Determination Date
immediately preceding the Distribution Date on which the purchase is to occur
the amount of the Termination Price together with an amount equal to the fees
and expenses of the Indenture Trustee, the Owner Trustee, the Servicer, the
Securities Insurer and any Custodian to be paid pursuant to the preceding
paragraph. On the same day that the Termination Price is deposited into the
Collection Account, the Termination Price and any amounts then on deposit in the
Collection Account (other than any amounts not required to have been deposited
therein pursuant to Section 5.01(b) and any amounts withdrawable therefrom by
the Servicer pursuant to Section 5.01(c)(ii)) shall be transferred to the Note
Distribution Account and/or the Certificate Distribution Account for
distribution to Securityholders on the final Distribution Date; and any amounts
received with respect to the Home Loans and Foreclosure Properties subsequent to
such transfer shall belong to the Servicer or the Securities Insurer, as
applicable. For purposes of calculating the Required Distribution Amount for the
final Distribution Date, amounts transferred to the Note Distribution Account or
the Certificate Distribution Account pursuant to the immediately preceding
sentence on the Determination Date immediately preceding such final Distribution
Date shall in all cases be deemed to have been received during the related Due
Period, and such transfer shall be made pursuant to Section 5.01(c).
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
retirement of the Securities shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section _____ of the Indenture or (ii) by the
Owner Trustee to the Certificateholders in accordance with Section _____ of the
Trust Agreement.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders.
Except as otherwise specifically provided herein, whenever
Securityholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Seller, the
Servicer, the Transferor and the Owner Trustee by written agreement with notice
thereof to the Securityholders, without the consent of any of the
Securityholders, but with the consent of the Securities Insurer, to cure any
error or ambiguity, to correct or supplement any provisions hereof which may be
defective or inconsistent with any other provisions hereof or to add any other
provisions with respect to matters or questions arising under this Agreement;
provided, however, that such action will not adversely affect in any material
respect the interests of the Securityholders. An amendment described above shall
be deemed not to adversely affect in any material respect the interests of the
Securityholders if either (i) an opinion of counsel is obtained to such effect,
or (ii) the party requesting the amendment obtains a letter from each of the
Rating Agencies confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by the respective Rating
Agency to any Class of Securities then outstanding. Notwithstanding the
preceding, the Securities Insurer shall have the right to modify the definitions
relating to the calculation of the Required Overcollateralization Level without
the requirement of an amendment to this Agreement.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer, the Transferor and the Owner Trustee by written agreement, with
the prior written consent of the Majority Securityholders and the Securities
Insurer, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Loans or distributions which are required to be
made on any Security, without the consent of the holders of % of each Class of
Notes or the Certificates affected thereby and the Securities Insurer, (ii)
adversely affect in any material respect the interests of the holders of any
Class of Notes or Certificates in any manner other than as described in (i),
without the consent of the holders of % of such Class of Notes or the
Certificates, or (iii) reduce the percentage of any Class of Notes or the
Certificates, the holders of which are required to consent to any such
amendment, without the consent of the holders of % of such Class of Notes
or the Certificates and the Securities Insurer.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
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Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an opinion of counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Securityholders' expense on direction of the Majority Securityholders or the
Securities Insurer, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Securityholders or is necessary for the administration or servicing of
the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 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 overnight mail, certified mail or registered mail, postage prepaid, to (i)
the Seller, FIRSTPLUS INVESTMENT CORPORATION, 3773 Howard Hughes Parkway, Suite
300N, Las Vegas, Nevada 89109, Attention: Michael Orendorf, or such other
addresses as may hereafter be furnished to the Certificateholders and the other
parties hereto in writing by the Seller, (ii) in the case of the Owner
Trustee,__________________________________, Attention: _____________________, or
such other address as may hereafter be furnished to the Securityholders and the
other parties hereto, (iii) in the case of the Transferor and the Servicer,
FIRSTPLUS FINANCIAL, INC., 1250 Mockingbird Lane, Dallas, Texas 75247-4902,
Attention: Chris Gramlich, or such other address as may hereafter be furnished
to the Securityholders and the other parties hereto in writing by the Servicer
or the Transferor, (iv) in the case of a claim under the Guaranty Policy,
___________________, Attention:______________________, or such other address as
may be furnished to the Securityholders and the other parties hereto in writing
by such Fiscal Agent or the Securities Insurer, (v) in the case of the
Securities Insurer, _________________________,
Attention:_______________________, and (vii) in the case of the Securityholders,
as set forth in the applicable Note Register and Certificate Register. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the
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receipt of such notice by such party, except that notices to the Securityholders
shall be effective upon mailing or personal delivery.
Section 12.07 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 covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
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.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Seller, the Owner Trustee and the Securityholders
and their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Seller, the Servicer or the Owner Trustee. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Seller, the Servicer and the Owner Trustee if made in the manner provided in
this Section.
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(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Seller, the Servicer or the Owner Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Seller, the Servicer, the Owner Trustee or the Securities Insurer in
reliance thereon, whether or not notation of such action is made upon such
Security.
(d) The Seller, the Servicer or the Owner Trustee may require
additional proof of any matter referred to in this Section 12.12 as it shall
deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Servicer shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared by the
Servicer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession, merger
or consolidation of either the Servicer, any Custodian or the Owner
Trustee;
(iv) notice of final payment on the Notes and the Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 7.05, and copies of any compliance reports
delivered by the Servicer hereunder including Section 7.04; and
(vii) copies of any Servicer's Monthly Statement pursuant to
Section 6.02(b); and
(b) With respect to the requirement of the Servicer to provide
statements, reports and notices to the Rating Agencies such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to_________________________, Attention:___________________,
(ii) if to_________________________, Attention:___________________, or (iii) if
to_________________________, Attention:___________________.
Section 12.14 Securities Insurer Deemed Owner. Unless a Securities
Insurer Default shall be continuing, the Securities Insurer shall be deemed to
be the holder of % of the outstanding Insured Securities for purpose of
exercising the rights, including the voting rights subject to the provisions of
Section 12.02(b), of the holders of the Insured Securities under this Agreement.
The rights of the Securities Insurer to direct certain actions and consent to
certain actions of the Majority Securityholders hereunder will terminate at such
time as the Class Principal Balances of all Classes of Notes and the Certificate
Principal Balance of the Certificates have been reduced to zero and the
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Securities Insurer has been reimbursed for all Guaranteed Payments and any other
amounts owed under the Guaranty Policy and the Securities Insurer has no further
obligation under the Guaranty Policy.
Section 12.15 Third Party Beneficiary. The parties hereto acknowledge
that the Securities Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually a
party hereto.
Section 12.16 Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default, rights
granted or reserved to the Securities Insurer hereunder shall vest instead in
the Majority Certificateholders; provided that the Securities Insurer shall be
entitled to any distributions in reimbursement of the Securities Insurer
Reimbursement Amount.
(b) At such time as either (i) the Class Principal Balances of each
Class of Notes or the Certificate Principal Balance of the Certificates have
been reduced to zero or (ii) the Guaranty Policy has been terminated following a
Securities Insurer Default, and in either case of (i) or (ii) the Securities
Insurer has been reimbursed for all Guaranteed Payments and any other amounts
owed under the Guaranty Policy and the Insurance Agreement (and the Securities
Insurer no longer has any obligation under the Guaranty Policy, except for
breach thereof by the Securities Insurer), then the rights and benefits granted
or reserved to the Securities Insurer hereunder (including the rights to direct
certain actions and receive certain notices) shall terminate and the
Securityholders (including in certain instances the Majority Securityholders)
shall be entitled to the exercise of such rights and to receive such benefits of
the Securities Insurer following such termination to the extent that such rights
and benefits are applicable to the Securityholders (including the Majority
Securityholders).
IN WITNESS WHEREOF, the Servicer, the Transferor, the Owner Trustee and
the Seller have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to this
SALE AND SERVICING AGREEMENT .
FIRSTPLUS HOME LOAN OWNER TRUST 19_-____,
By: ___________________________, as Owner Trustee
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
FIRSTPLUS INVESTMENT CORPORATION, as
Seller
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By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
FIRSTPLUS FINANCIAL, INC., as Transferor and
Servicer
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
SALE AND SERVICING AGREEMENT (Series 19 - ) - Page 80
89
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________________, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS HOME LOAN
OWNER TRUST 19 ___-___, as Issuer, and that he executed the same as the act of
such corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of
___________________, 19__.
______________________________________________
Notary Public, State of New York
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________________, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS INVESTMENT
CORPORATION, as the Seller, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of
____________________, 19___.
______________________________________________
Notary Public, State of New York
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THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ________________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, as the Transferor and Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of
____________________, 19___.
______________________________________________
Notary Public, State of New York
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