Exhibit 10.1
SALE AND SERVICING AGREEMENT
Dated as of March 1, 1998
Among
FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-1A,
as Issuer,
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller,
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
Dated as of March 1, 1998
FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-1A
ADJUSTABLE RATE MORTGAGE LOAN ASSET BACKED NOTES, SERIES 1998-1A
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION............................................................... 1
1.1. Definitions.............................................................................. 1
1.2. Use of Words and Phrases................................................................. 17
1.3. Captions; Table of Contents.............................................................. 18
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SERVICER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS...................................................... 18
2.1. Representations and Warranties of the Seller............................................. 18
2.2. Representations and Warranties of the Servicer........................................... 20
2.3. Representations and Warranties of the Seller with Respect to the Mortgage Loans.......... 23
2.4. Covenants of the Seller to Take Certain Actions with Respect to the Mortgage
Loans In Certain Situations.............................................................. 25
2.5. Conveyance of the Mortgage Loans......................................................... 25
2.6. Acceptance by Indenture Trustee; Certain Substitutions of Mortgage Loans;
Certification by Indenture Trustee....................................................... 29
2.7. Cooperation Procedures................................................................... 30
2.8. Conveyance of the Subsequent Mortgage Loans.............................................. 30
2.9. Books and Records........................................................................ 32
ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES............................................................. 33
3.1. Collection of Money...................................................................... 33
3.2. Establishment of Accounts................................................................ 33
3.3. The Note Insurance Policy................................................................ 33
3.4 Pre-Funding Account and Capitalized Interest Account..................................... 34
3.5. Flow of Funds............................................................................ 35
3.6. Investment of Accounts................................................................... 36
3.7. Eligible Investments..................................................................... 37
3.8. Reports by Indenture Trustee............................................................. 38
3.9. Additional Reports by Indenture Trustee.................................................. 40
ARTICLE IV
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS................................................... 40
4.1. Servicer and Sub-Servicers............................................................... 40
4.2. Collection of Certain Mortgage Loan Payments............................................. 41
4.3. Sub-Servicing Agreements Between Servicer and Sub-Servicers.............................. 42
4.4. Successor Sub-Servicers.................................................................. 42
4.5. Liability of Servicer.................................................................... 42
4.6. No Contractual Relationship Between Sub-Servicer and Indenture Trustee
or the Owners............................................................................ 42
4.7. Assumption or Termination of Sub-Servicing Agreement by Indenture Trustee................ 42
4.8. Principal and Interest Account........................................................... 43
4.9. Delinquency Advances, Compensating Interest and Servicing Advances....................... 44
4.10. Purchase of Mortgage Loans............................................................... 45
4.11. Maintenance of Insurance................................................................. 45
4.12. Due-on-Sale Clauses; Assumption and Substitution Agreements.............................. 46
4.13. Realization Upon Defaulted Mortgage Loans................................................ 46
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4.14. Indenture Trustee to Cooperate; Release of Files......................................... 47
4.15. Servicing Compensation................................................................... 48
4.16. Annual Statement as to Compliance........................................................ 48
4.17. Annual Independent Certified Public Accountants' Reports................................. 49
4.18. Access to Certain Documentation and Information Regarding the Mortgage Loans............. 49
4.19. Assignment of Agreement.................................................................. 49
4.20. Events of Servicing Termination.......................................................... 49
4.21. Resignation of Servicer and Appointment of Successor..................................... 52
4.22. Waiver of Past Events of Servicing Termination........................................... 54
4.23. Inspections by Note Insurer; Errors and Omissions Insurance.............................. 54
4.24. Merger, Conversion, Consolidation or Succession to Business of Servicer.................. 54
4.25. Notices of Material Events............................................................... 55
4.26. Monthly Servicing Report and Servicing Certificate....................................... 55
4.27. Indemnification by the Seller............................................................ 57
4.29. Administration of the Issuer............................................................. 57
4.28. Indemnification by the Servicer.......................................................... 57
ARTICLE V
TERMINATION...................................................................................... 58
5.1. Termination.............................................................................. 58
5.2. Termination Upon Option of Majority Certificateholders................................... 58
5.3 Redemption of Notes...................................................................... 58
5.4. Disposition of Proceeds.................................................................. 59
5.5. Netting of Amounts....................................................................... 59
ARTICLE VI
MISCELLANEOUS.................................................................................... 59
6.1 Acts of Owners........................................................................... 59
6.2 Recordation of Agreement. .............................................................. 59
6.3 Duration of Agreement. ................................................................. 59
6.4 Successors and Assigns................................................................... 59
6.5 Severability. .......................................................................... 59
6.6. Benefits of Agreement.................................................................... 59
6.7. Legal Holidays........................................................................... 59
6.8. Governing Law............................................................................ 60
6.9. Counterparts............................................................................. 60
6.10. Amendment................................................................................ 60
6.11. Specification of Certain Tax Matters. .................................................. 61
6.12. The Note Insurer......................................................................... 61
6.13. Third Party Rights....................................................................... 61
6.14. Usury.................................................................................... 61
6.15. No Petition.............................................................................. 61
6.16. Notices.................................................................................. 61
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EXHIBIT A -- Mortgage Loan Schedule
EXHIBIT B -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Cut-Off Date
EXHIBIT C -- Form of Initial Certification
EXHIBIT D -- Form of Final Certification
EXHIBIT E -- Form of Monthly Report
EXHIBIT F -- Form of Request for Release
EXHIBIT G -- Form of Subsequent Transfer Agreement
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SALE AND SERVICING AGREEMENT, dated as of March 1, 1998 Among, by and
among FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-1A, a Delaware business trust (the
"Issuer" or the "Trust"), FIRST ALLIANCE MORTGAGE COMPANY, a California
corporation in its capacity as the Seller and the Servicer (respectively, the
"Seller" and the "Servicer"), and THE CHASE MANHATTAN BANK, a New York banking
corporation, in its capacity as Indenture Trustee (the "Indenture Trustee").
WHEREAS, the Issuer desires to purchase a pool of Mortgage Loans which
were originated or purchased by the Seller in the ordinary course of its
business;
WHEREAS, the Servicer has agreed to service the Mortgage Loans, in
accordance with the terms of this Agreement;
WHEREAS, all things necessary to make this Agreement a valid agreement,
in accordance with their and its terms, have been done;
WHEREAS, The Chase Manhattan Bank is willing to serve in the capacity
of Indenture Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Note Insurer") is intended to
be a third party beneficiary of this Agreement and is hereby recognized by the
parties hereto to be a third-party beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Seller, the Servicer and the Indenture Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section 3.2,
3.10(a) or 4.8 hereof.
"Addition Notice": With respect to a transfer of Subsequent Mortgage
Loans to the Issuer pursuant to Section 2.8 hereof, notice given not less than
two Business Days prior to the related Subsequent Transfer Date of the Seller's
designation of Subsequent Mortgage Loans to be sold to the Issuer and the
aggregate Loan Balance of such Subsequent Mortgage Loans.
"Agreement": This Sale and Servicing Agreement, as it may be amended
from time to time, and including the Exhibits hereto.
"Amortized Subordinated Amount Requirement": As of any date of
determination, the product of (x) 1.75% and (y) the Maximum Collateral Amount.
"Appraised Value": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase money
mortgage, the sales price of the Property at such time of origination, if such
sales price is less than such appraised value.
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"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Seller and the
Servicer, initially including those individuals whose names appear on the lists
of Authorized Officers delivered on the Closing Date, and with respect to the
Indenture Trustee, any Vice President, Assistant Vice President, Assistant
Treasurer or Assistant Secretary of the Indenture Trustee.
"Available Funds": As defined in Section 3.3(a) hereof.
"Available Funds Cap": As of any Payment Date (x) the weighted average
of the Coupon Rates on the Mortgage Loans less (y) the sum of (a) the sum of (i)
the Servicing Fee Rate, (ii) the Indenture Trustee Fee Rate and (iii) the Owner
Trustee Fee (expressed as a per annum percentage), (b) beginning on the third
Payment Date and thereafter, the Premium Percentage and (c) beginning on the
seventh Payment Date and thereafter, 0.50% per annum.
"Available Funds Cap Carry-Forward Amortization Amount": As of any
Payment Date, any amount distributed from the Available Funds Cap Carry-Forward
Amount Account on such Payment Date pursuant to Section 3.5(c) hereof.
"Available Funds Cap Carry-Forward Amount": As of any Payment Date, the
excess, if any, of (x) the sum of (i) the excess, if any, equal to (a) the
aggregate amount of interest due on the Notes on all prior Payment Dates,
calculated at the Formula Note Rate applicable to each such Payment Date over
(b) the aggregate amount of interest due on the Notes on all prior Payment
Dates, calculated at the Note Rate applicable to each such Payment Date, (ii)
the amount, if any, described in clause (iii) hereof as of the immediately
preceding Payment Date and (iii) the product of (a) one-twelfth of the Formula
Note Rate on such Payment Date and (b) the sum of the amounts described in
clauses (i) and (ii) preceding over (y) all Available Funds Cap Carry-Forward
Amortization Amounts actually funded on all prior Payment Dates.
"Available Funds Cap Carry-Forward Amount Account": The Available Funds
Cap Carry-Forward Amount Account established in accordance with Section 3.2
hereof and maintained by the Indenture Trustee.
"Available Funds Shortfall": As defined in Section 3.5(b)(ii)(A).
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the States of New York or California or
in the city in which the Corporate Trust Office is located or the city in which
the principal office of the Note Insurer is located are authorized or obligated
by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 3.2(b) hereof and maintained by the
Indenture Trustee.
"Capitalized Interest Requirement": $30,606.24.
"Certificate": Any one of the Certificates issued pursuant to the Trust
Agreement.
"Certificate Distribution Account": The Certificate Distribution
Account established in accordance with the Trust Agreement.
"Closing Date": March 27, 1998.
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"Code": The Internal Revenue Code of 1986, as amended and any successor
statute.
"Compensating Interest": As defined in Section 4.9(b) hereof.
"Corporate Trust Office": The principal office of the Indenture Trustee
at 450 West 33rd Street, 15th Floor, New York, New York 10001, attention: First
Alliance Mortgage Loan Trust 1998-1A or any other office of the Indenture
Trustee designated as such hereunder.
"Coupon Rate": The annual rate of interest borne by each Mortgage Note.
"Current Interest": With respect to interest accruing after the Cut-Off
Date and as of any Payment Date, the sum of (i) the aggregate amount of interest
accrued on the Note Principal Balance immediately prior to such Payment Date
during the related Interest Accrual Period at the Note Rate and (ii) any
Interest Carry-Forward Amount for such Payment Date.
"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Remittance Period as part of a payment that is in
excess of the amount of the monthly payment due for such Remittance Period and
which is not a Prepaid Installment or made in respect of a Paid-in-Full Mortgage
Loan, nor is intended to cure a delinquency.
"Custodial Agreement": The Custodial Agreement, dated as of March 1,
1998, among the Custodian, the Indenture Trustee, the Seller and the Servicer.
"Custodian": The Bank of New York, a New York banking corporation, as
Custodian on behalf of the Indenture Trustee pursuant to the Custodial
Agreement, or any successor thereto.
"Cut-Off Date": March 1, 1998.
"Delinquency Advance": As defined in Section 4.9(a) hereof.
"Delinquent": A Mortgage Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such payment has
not been received by the close of business on the second day of the month
immediately succeeding the month in which such payment was due. Similarly for
"60 days Delinquent," "90 days Delinquent" and so on.
"Designated Depository Institution": With respect to the Principal and
Interest Account or the Note Account, an institution whose deposits are insured
by the Bank Insurance Fund or the Savings Association Insurance Fund of the
FDIC, the long-term deposits of which shall be rated (x) A or better by Standard
& Poor's and (y) A2 or better by Moody's and in one of the highest short-term
rating categories, unless otherwise approved in writing by the Note Insurer and
each of Moody's and Standard & Poor's, and which is any of the following: (i) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the Note
Insurer, Moody's and Standard & Poor's and, in each case acting or designated by
the Servicer as the depository institution for the Principal and Interest
Account; provided, however, that any such institution or association shall have
combined capital, surplus and undivided profits of at least $100,000,000.
Notwithstanding the foregoing, the Principal and Interest Account or the Note
Account may be held by (a) the Indenture Trustee or (b) an institution otherwise
meeting the preceding requirements except that the only applicable rating
requirement shall be that the
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unsecured and uncollateralized debt obligations thereof shall be rated Baa3 or
better by Moody's if such institution has trust powers and the Principal and
Interest Account is held by such institution in its trust capacity and not in
its commercial capacity.
"Determination Date": The 12th day of each month, or if such day is not
a Business Day, the next succeeding Business Day.
"Due Date": The first day of the month of the related Payment Date.
"Due Period": With respect to any Payment Date, the period commencing
on the second day of the month preceding the month of such Payment Date (or,
with respect to the first Due Period, the day following the Cut-Off Date) and
ending on the related Due Date.
"Eligible Investments": Those investments so designated pursuant to
Section 3.7 hereof.
"Event of Servicing Termination": Any event as described in Section
4.20 hereof.
"Excess Subordinated Amount": With respect to any Payment Date, the
excess, if any, of (x) the Subordinated Amount that would apply on such Payment
Date after taking into account the payment of the Monthly Payment Amount on such
Payment Date (except for any distributions of Subordination Reduction Amount on
such Payment Date) over (y) the Specified Subordinated Amount for such Payment
Date.
"Fannie Mae": Fannie Mae, a federally-chartered and privately-owned
corporation existing under the Federal National Mortgage Association Charter
Act, as amended, or any successor thereof.
"Fees and Expenses": With respect to any Payment Date, the sum of (a)
the Premium Amount, (b) the Indenture Trustee Fee for such Payment Date and (c)
the Owner Trustee Fee for such Payment Date.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Custodian, on behalf of the
Indenture Trustee pursuant to Section 2.5 hereof pertaining to a particular
Mortgage Loan and any additional documents required to be added to the mortgage
file pursuant to this Agreement.
"Final Certification": The final certification in the form set forth as
Exhibit D hereto and delivered by the Custodian, on behalf of the Indenture
Trustee to the Seller within 90 days after the Closing Date pursuant to Section
2.6 hereof.
"Final Payment Date": April 20, 2028.
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Formula Note Rate": The rate determined by clause (x) of the
definition of "Note Rate."
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"Funding Period": The period commencing on the Closing Date and ending
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre- Funding Account Earnings) is less
than $100,000 and (ii) March 31, 1998.
"Highest Lawful Rate": As defined in Section 6.14.
"Indemnification Agreement": The Indemnification Agreement dated as of
March 10, 1998, among the Note Insurer, the Seller, the Issuer and the
Underwriter.
"Indenture": The Indenture, dated March 1, 1998, between the Issuer and
the Indenture Trustee.
"Indenture Trustee": The Chase Manhattan Bank located on the date of
execution of this Agreement at 450 West 33rd Street, New York, New York 10001,
not in its individual capacity but solely as Indenture Trustee under the
Indenture, and any successor thereunder.
"Indenture Trustee Fee": The amount payable monthly to the Indenture
Trustee on each Payment Date, in an amount equal to the product of (x)
one-twelfth of the Indenture Trustee Fee Rate and (y) the Note Principal Balance
immediately prior to such Payment Date.
"Indenture Trustee Fee Rate": 0.02% per annum.
"Initial Certification": The initial certification in the form set
forth as Exhibit C hereto and delivered by the Custodian, on behalf of the
Indenture Trustee, to the Seller on the Closing Date pursuant to Section 2.6
hereof.
"Initial Mortgage Loans": The Mortgage Loans to be sold to the Issuer
by the Seller on the Closing Date.
"Initial Premium": The initial premium (covering three months) payable
by the Seller on behalf of the Trust to the Note Insurer in consideration of the
delivery to the Indenture Trustee of the Note Insurance Policy.
"Initial Specified Subordinated Amount": $0.
"Insurance Agreement": The Insurance Agreement dated as of March 1,
1998, among the Seller, the Servicer, the Issuer, the Indenture Trustee and the
Note Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Mortgage Loan.
"Insured Payment": As defined in the Note Insurance Policy.
"Interest Accrual Period": With respect to the Notes and any Payment
Date, the period commencing on the immediately preceding Payment Date (or in the
case of the first Payment Date, the Closing Date) and ending on the day
immediately preceding the current Payment Date. All calculations of interest on
the Notes will be made on the basis of the actual number of days elapsed in the
related Interest Accrual Period and in a year of 360 days.
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"Interest Carry-Forward Amount": With respect to any Payment Date, the
sum of (x) the amount, if any, by which (i) the Current Interest as of the
immediately preceding Payment Date exceeded (ii) the amount of the actual
payments of interest made on such immediately preceding Payment Date and (y) 30
days' interest on such amount, calculated at the Note Rate.
"Interest Determination Date": With respect to any Interest Accrual
Period, the second London Business Day preceding such Interest Accrual Period.
"Interest Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) all scheduled interest collected by the Servicer
during the related Due Period, with respect to the Mortgage Loans, (ii) all
Delinquency Advances relating to interest made by the Servicer on such
Remittance Date and (iii) all Compensating Interest paid by the Servicer on such
Remittance Date.
"Issuer" or "Trust": First Alliance Mortgage Loan Trust 1998-1A, a
Delaware business trust.
"Late Payment Rate": For any Payment Date, the rate of interest, as it
is publicly announced by Citibank, N.A. at its principal office in New York, New
York as its prime rate (any change in such prime rate of interest to be
effective on the date such change is announced by Citibank, N.A.) plus 3%. The
Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period, the rate
determined by the Indenture Trustee on the related Interest Determination Date
on the basis of the offered rates of the Reference Banks for one-month U.S.
dollar deposits, as such rates appear on Telerate Page 3750, as of 11:00 a.m.
(London time) on such Interest Determination Date. On each Interest
Determination Date, LIBOR for the related Interest Accrual Period will be
established by the Indenture Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounded upwards if necessary to the
nearest whole multiple of 0.0625%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the
related Interest Accrual Period shall be the higher of (i)
LIBOR as determined on the previous Interest Determination
Date and (ii) the Reserve Interest Rate.
"Liquidated Loan": As defined in Section 4.13(b) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 2.4, 2.6 or 4.10
hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan, such expenses,
including, without limitation, legal fees and expenses, and any unreimbursed
Servicing Advances expended by the Servicer pursuant to Sections 4.9(c) and 4.13
with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, as of any
date of determination, any amounts (including the proceeds of any Insurance
Policy) recovered by the Servicer in connection with such Liquidated Loan,
whether through Indenture Trustee's sale, foreclosure sale or otherwise.
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"Loan Balance": With respect to a Mortgage Loan, the principal balance
thereof on the CutOff Date, less any Principal Remittance Amounts relating to
such Mortgage Loan included in previous related Monthly Remittance Amounts that
were received by the Servicer or any Sub-Servicer whether or not delivered to
the Indenture Trustee, provided, that the Loan Balance for any Mortgage Loan
which has become a Liquidated Loan shall be zero as of the first day of the
Remittance Period following the Remittance Period in which such Mortgage Loan
becomes a Liquidated Loan, and at all times thereafter.
"Loan Purchase Price": With respect to any Mortgage Loan purchased from
the Trust on a Remittance Date pursuant to Section 2.4, 2.6 or 4.10 hereof, an
amount equal to the Loan Balance of such Mortgage Loan as of the date of
purchase, plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the preceding Remittance Period computed at the Coupon Rate
less the Servicing Fee Rate, if any, together with, without duplication, the
aggregate amount of (i) all delinquent interest, all Delinquency Advances and
Servicing Advances theretofore made with respect to such Mortgage Loan and not
subsequently recovered from the related Mortgage Loan and (ii) all Delinquency
Advances which the Servicer or any Sub-Servicer has theretofore failed to remit
with respect to such Mortgage Loan.
"Loan-to-Value Ratio": The percentage equal to the Original Principal
Amount of the related Mortgage Note divided by the Appraised Value of the
related Property.
"London Business Day": A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"Majority Certificateholders": The holders of Certificates exceeding,
in the aggregate, a 50% Percentage Interest in the Certificates.
"Maximum Collateral Amount": $54,600,000.
"Monthly Exception Report": The monthly report delivered by the
Servicer to the Indenture Trustee on each Remittance Date pursuant to Section
4.8(d)(ii). Each Monthly Exception Report shall cover the immediately preceding
Remittance Period and shall consist of (i) an activity report of the Mortgage
Loans setting forth the Loan Balance of Mortgage Loans as of the first day of
the related Remittance Period, scheduled payments due, Prepayments, Liquidated
Loan balances, and the resulting Loan Balance of the Mortgage Loans as of the
last day of the related Remittance Period and (ii) separate reports of (a)
payoffs, Curtailments, foreclosures and bankruptcies such reports to provide the
payment details for each Mortgage Loan covering the immediately preceding
Remittance Period and any Prepayments not previously reported from a prior
Remittance Period, and (b) Prepayments and delinquencies, such reports to
reflect the current status of each Mortgage Loan with payment details as of the
last day of the related Remittance Period.
"Monthly Payment Amount": With respect to a Payment Date, the sum of
(x) the Principal Payment Amount payable to the Owners of the Notes pursuant to
Section 3.5(b)(iv)(C) on such Payment Date and (y) the Current Interest payable
to the Owners of the Notes pursuant to Section 3.5(b)(iv)(B) on such Payment
Date.
"Monthly Remittance Amount": As of any Remittance Date, the sum of (i)
the Interest Remittance Amount for such Remittance Date and (ii) the Principal
Remittance Amount for such Remittance Date.
"Monthly Servicing Report": As defined in Section 4.26.
"Moody's": Moody's Investors Service, Inc., and any successor thereto.
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"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple interest in real property securing a
Mortgage Note.
"Mortgage Loans": Such of the mortgage loans (including Initial
Mortgage Loans and Subsequent Mortgage Loans) transferred and assigned to the
Trust pursuant to Section 2.5(a) hereof, together with any Qualified Replacement
Mortgages substituted therefor in accordance with this Agreement, as from time
to time are held as a part of the Trust Estate, the Mortgage Loans originally so
held being identified in the Schedule of Mortgage Loans. The term "Mortgage
Loan" includes any Mortgage Loan which is Delinquent, which relates to a
foreclosure or which relates to a Property which is REO Property prior to such
Property's disposition by the Trust. Any mortgage loan which, although intended
by the parties hereto to have been, and which purportedly was, transferred and
assigned to the Trust by the Seller, in fact was not transferred and assigned to
the Trust for any reason whatsoever shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement.
"Mortgage Note": The Mortgage Note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Servicing Fees through the date of liquidation relating to such Liquidated Loan.
In no event shall Net Liquidation Proceeds with respect to any Liquidated Loan
be less than zero.
"Net Monthly Excess Cashflow": As defined in Section 3.5(b)(iii)
hereof.
"Note": Any one of the Notes substantially in the form attached to the
Indenture as Exhibit A.
"Note Account": The Note Account established in accordance with Section
3.2(a) hereof and maintained by the Indenture Trustee; provided that the funds
in such account shall not be commingled with any other funds held by the
Indenture Trustee.
"Note Insurance Policy": The certificate guaranty insurance policy
(number 26040) dated March 27, 1998 issued by the Note Insurer to the Indenture
Trustee for the benefit of the Owners of the Notes.
"Note Insurer": MBIA Insurance Corporation or any successor thereto, as
issuer of the Note Insurance Policy.
"Note Insurer Default": The existence and continuance of any of the
following:
(a) the Note Insurer fails to make a payment required under the Note
Insurance Policy in accordance with its terms; or
(b)(i) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Note Insurer in an involuntary
case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, rehabilitation, reorganization or other similar law or
(B) a decree or order adjudging the Note Insurer as bankrupt or insolvent, or
approving as properly filed a petition seeking
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reorganization, rehabilitation, arrangement, adjustment or composition of or in
respect of the Note Insurer under any applicable United States, federal or state
law, or appointing a custodian, receiver, liquidator, rehabilitator, assignee,
trustee, sequestrator or other similar official of any substantial part of the
Note Insurer's property, or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90 consecutive
days; or
(ii) the commencement by the Note Insurer of a voluntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent of the
Note Insurer to the entry of a decree or order for relief in respect of the Note
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency case or proceeding against the Note
Insurer, or the filing by the Note Insurer to the filing of such petition or to
the appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Note
Insurer of any substantial part of its property, or the failure of the Note
Insurer to pay debts generally as they become due, or the admission by the Note
Insurer in writing of its inability to pay its debts generally as they become
due.
"Note Principal Balance": As of any time of determination, the Original
Note Principal Balance of the Notes less any amounts actually distributed on
account of the Principal Payment Amount pursuant to Section 3.5(b)(iv)(C) hereof
with respect to principal thereon on all prior Payment Dates.
"Note Rate": For the initial Payment Date, 5.8975%. As of any Payment
Date thereafter, the lesser of (x) LIBOR plus, in the case of any Payment Date
on or prior to the Redemption Date, 0.21% per annum, or in the case of any
Payment Date thereafter, 0.42% per annum and (y) the Available Funds Cap for
such Payment Date.
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Indenture
Trustee.
"Operative Documents": Collectively, this Agreement, the Note Insurance
Policy, the Notes, the Insurance Agreement, the Underwriting Agreement, the
Custodial Agreement, the Trust Agreement, the Indenture, any Sub-Servicing
Agreement, the Registration Statement and the Indemnification Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Mortgage Loans as of the Cut-Off Date, i.e., $42,199,745.53.
"Original Note Principal Balance": $54,600,000.
"Original Pre-Funded Amount": $12,400,254.47.
"Original Principal Amount": With respect to each Mortgage Note, the
principal amount of such Mortgage Note on the date of origination thereof.
"Originator": The Seller and any entity from which the Seller acquires
Mortgage Loans.
"Overfunded Interest Amount": With respect to each Subsequent Transfer
Date, the excess of (i) the product of (x) a fraction, the numerator of which is
the aggregate Loan Balances of the Subsequent Mortgage Loans acquired by the
Issuer on such Subsequent Transfer Date and the denominator of which is the
Original Pre-Funded Amount and (y) the amount in the Capitalized Interest
Account on such Subsequent
9
Transfer Date over (ii) the Capitalized Interest Requirement after taking into
account any transfers described in Section 3.5 hereof.
"Owner": The Person in whose name a Note is registered in the Register,
to the extent described in the Indenture.
"Owner Trustee Fee": As defined in the Trust Agreement.
"Paid-in-Full Mortgage Loan": With respect to any Payment Date, a
Mortgage Loan on which the entire obligation of the related Mortgagor has been
satisfied and the lien on the property may be removed during the related
Remittance Period.
"Payment Date": Any date on which the Indenture Trustee is required to
make distributions to the Owners, which shall be the 20th day of each month, or
if such day is not a Business Day, the next succeeding Business Day, commencing
in the month following the Closing Date.
"Percentage Interest": As to the Notes, that percentage, expressed as a
fraction, the numerator of which is the Note Principal Balance set forth on such
Note as of the Cut-Off Date and the denominator of which is the Original Note
Principal Balance of all Notes as of the Cut-Off Date. With respect to the
Certificates, the portion evidenced thereby, expressed as a percentage, as
stated on the face of such Certificate, all of which shall total 100% with
respect to the Certificates.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Expected Losses": With respect to any period, the sum
of (i) all Realized Losses with respect to the Mortgage Loans experienced during
such period and (ii) the product of (A) 0.43 and (B) with respect to any date of
determination, the sum of (x) 25% of the Loan Balances of all Mortgage Loans
which are greater than 30 days Delinquent and less than 60 days Delinquent, (y)
50% of the Loan Balances of all Mortgage Loans which are greater than 60 days
Delinquent and less than 90 days Delinquent, and (z) 100% of the Loan Balances
of all Mortgage Loans which are greater than 90 days Delinquent (including REO
Properties).
"Pool Cumulative Realized Losses": With respect to any period, the sum
of all Realized Losses experienced since the Closing Date with respect to the
Mortgage Loans.
"Pool Delinquency Rate": With respect to any Remittance Period, the
fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Mortgage Loans 90 or more days Delinquent (including
foreclosures and REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": With respect to any date of determination
thereof, the principal balances of the Mortgage Loans as of such date of
determination.
"Pool Rolling Three Month Delinquency Rate": As of any Payment Date,
the fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates) immediately preceding Remittance Periods.
"Preference Amount": As defined in the Note Insurance Policy.
10
"Pre-Funded Amount": With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 3.2(b) hereof and maintained by the Indenture Trustee.
"Pre-Funding Account Earnings": With respect to the initial Payment
Date, the actual investment earnings earned during the period from the Closing
Date through March 31, 1998 (inclusive) on the Pre-Funding Account during such
period as calculated by the Trustee pursuant to Section 2.8(d) hereof.
"Premium Amount": As to any Payment Date beginning with the third
Payment Date, the product of one-twelfth of (x) the Premium Percentage and (y)
the Note Principal Balance on such Payment Date (before taking into account any
distributions of principal to be made to the Owners of the Notes on such Payment
Date).
"Premium Percentage": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such
Mortgage Loan.
"Prepayment": A Curtailment or a Paid-in-Full Mortgage Loan.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal and
interest account created by the Servicer pursuant to Section 4.8(a) hereof, or
pursuant to any Sub-Servicing Agreement.
"Principal Carry-Forward Amount": With respect to any Payment Date, the
amount, if any, by which (i) the Principal Payment Amount as of the immediately
preceding Payment Date exceeded (ii) the amount of the actual payment of
principal made to the Owners of the Notes on such immediately preceding Payment
Date.
"Principal Payment Amount": With respect to the Notes on the first
Payment Date, the Initial Specified Subordinated Amount, if any and for the
first Payment Date and for any Payment Date thereafter, the lesser of:
(x) the Total Available Funds plus any Insured Payment minus the
Current Interest and Fees and Expenses for such Payment Date;
and
(y) the excess, if any, of (i) the sum, without duplication of:
(a) the Principal Carry-Forward Amount for such
Payment Date,
(b) the principal portion of all scheduled
monthly payments on the Mortgage Loans due
on or prior to the related Due Date during
the related Due Period, to the extent
actually received by the Indenture Trustee
on or prior
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to the related Remittance Date or to the
extent advanced by the Servicer on or prior
to the related Remittance Date and the
principal portion of any Prepayments made by
the respective Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage Loan that
either was repurchased by the Seller or an
Originator or purchased by the Servicer on
the related Remittance Date, to the extent
such Loan Balance is actually received by
the Indenture Trustee on or prior to the
related Remittance Date,
(d) any Substitution Amounts delivered by the
Seller or an Originator on the related
Remittance Date in connection with a
substitution of a Mortgage Loan (to the
extent such Substitution Amounts relate to
principal), to the extent such Substitution
Amounts are actually received by the
Indenture Trustee on or prior to the related
Remittance Date,
(e) all Net Liquidation Proceeds actually
collected by the Servicer with respect to
the Mortgage Loans during the related
Remittance Period (to the extent such Net
Liquidation Proceeds relate to principal) to
the extent actually received by the
Indenture Trustee on or prior to the related
Remittance Date,
(f) the amount of any Subordination Deficit for
such Payment Date,
(g) the proceeds received by the Indenture
Trustee with respect to any liquidation of
the Trust Estate, as set forth in Article V
hereof (to the extent such proceeds related
to principal),
(h) any moneys released from the Pre-Funding
Account as a prepayment of the Notes on the
Payment Date which immediately follows the
end of the Funding Period; and
(i) the amount of any Subordination Increase
Amount for such Payment Date, to the extent
of any Net Monthly Excess Cashflow available
for such purpose;
over
(ii) the amount of any Subordination Reduction Amount for
such Payment Date.
"Principal Remittance Amount": As of any Remittance Date, the sum,
without duplication, of (i) the scheduled principal actually collected by the
Servicer with respect to Mortgage Loans during the related Due Period, (ii)
Prepayments collected in the related Remittance Period and relating to
principal, (iii) the Loan Balance of each such Mortgage Loan that either was
repurchased by an Originator or by the Seller or purchased by the Servicer on
such Remittance Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Seller in connection with a substitution of a Mortgage Loan, to the extent
such Substitution Amounts relate to principal and were actually deposited in the
Principal and Interest Account on such Remittance Date, (v) all Net Liquidation
Proceeds actually collected by the Servicer with respect to such Mortgage Loans
during the related Due Period (to the extent such Liquidation Proceeds related
to principal), (vi) all Delinquency
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Advances relating to principal made by the Servicer on such Remittance Date and
(vii) the amount of any investment losses required to be deposited by the Seller
or the Servicer pursuant to Sections 3.6(e) or 4.8(b).
"Projected Net Monthly Excess Cashflow": As of any date of calculation,
Net Monthly Excess Cashflow (other than any Subordination Reduction Amount
included therein), as calculated pursuant to Section 3.5(b)(iii) hereof on the
Payment Date immediately preceding such date of calculation.
"Property": The underlying property securing a Mortgage Loan.
"Prospectus": The Seller's Prospectus dated March 10, 1998.
"Prospectus Supplement": The First Alliance Mortgage Loan Trust 1998-1A
Prospectus Supplement dated March 10, 1998 to the Prospectus.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 2.4 or 2.6 hereof, which (i) bears a variable rate
of interest, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced (which shall mean a Mortgage Loan having the same
interest rate index, a margin over such index and a maximum interest rate at
least equal to those applicable to the Mortgage Loan being replaced), (iii) is
of the same or better property type and the same or better occupancy status as
the replaced Mortgage Loan, (iv) shall be of the same or better credit quality
classification (determined in accordance with the Originators' credit
underwriting guidelines) as the Mortgage Loan being replaced, (v) shall mature
no later than March 1, 2028, (vi) has a Loan-to-Value Ratio as of the Cut-Off
Date, no higher than the Loan-to-Value Ratio of the replaced Mortgage Loan at
such time, (vii) has a Loan Balance as of the related Replacement Cut-Off Date
equal to or less than the Loan Balance of the replaced Mortgage Loan as of such
Replacement Cut-Off Date, (viii) is of the same lien status or better lien
status (ix) is not Delinquent, (x) meets the representations and warranties set
out in Section 2.3 hereof and (xi) is a valid variable rate Mortgage Loan. In
the event that one or more mortgage loans are proposed to be substituted for one
or more mortgage loans, the Note Insurer may allow the foregoing tests to be met
on a weighted average basis or other aggregate basis acceptable to the Note
Insurer, as evidenced by a written approval delivered to the Indenture Trustee
by the Note Insurer, except that the requirement of clause (vi) hereof must be
satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Moody's and Standard & Poor's or any successors
thereto.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"Redemption Date": The first Payment Date on which the outstanding
aggregate Loan Balance of the Mortgage Loans has declined to $5,460,000 or less.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Indenture Trustee which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, (ii) not controlling, under the control
of or under common control with the Seller or any affiliate thereof, (iii) whose
quotations appear on the Telerate Page 3750 on the relevant Interest
Determination Date and (iv) which have been designated as such by the Indenture
Trustee.
"Register": The register maintained by the Indenture Trustee in
accordance with Section 2.3 of the Indenture, in which the names of the Owners
are set forth.
13
"Registrar": The Indenture Trustee, acting in its capacity as Indenture
Trustee appointed pursuant to the Indenture, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Seller with the Securities and Exchange Commission (Registration Statement
Number 333-44585), including all amendments thereto and including the Prospectus
and Prospectus Supplement constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously received by the Indenture Trustee and not previously
repaid to the Note Insurer pursuant to Section 3.5(b)(ii)(B) hereof plus (ii)
interest accrued on each such Insured Payment not previously repaid calculated
at the Late Payment Rate from the date the Indenture Trustee received the
related Insured Payment to, but not including, such Payment Date and (y)(i) any
amounts then due and owing to the Note Insurer under the Insurance Agreement
plus (ii) interest on such amounts at the Late Payment Rate. The Note Insurer
shall notify the Indenture Trustee and the Seller of the amount of any
Reimbursement Amount.
"Remittance Date": Any date on which the Servicer is required to remit
moneys on deposit in the Principal and Interest Account to the Note Account,
which shall be the day two Business Days prior to the related Payment Date,
commencing two days prior to the first Payment Date.
"Remittance Period": The period (inclusive) beginning on the first day
of the calendar month immediately preceding the month in which a Remittance Date
occurs and ending on the last day of such immediately preceding calendar month.
"REO Property": A Property acquired by the Servicer or any Sub-Servicer
on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure in
connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Request for Release": The request for release in the form set forth as
Exhibit F hereto.
"Reserve Interest Rate": With respect to any Interest Determination
Date, the rate per annum that the Indenture Trustee determines to be either (i)
the arithmetic mean (rounded upwards if necessary to the nearest whole multiple
of 0.0625%) of the one-month U.S. dollar lending rates which New York City banks
selected by the Indenture Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
which New York City banks selected by the Indenture Trustee are quoting on such
Interest Determination Date to leading European banks.
"Residual Net Monthly Excess Cashflow": With respect to any Payment
Date, the Net Monthly Excess Cashflow for such Payment Date, if any, remaining
after the making of all applications described in Sections 3.5(b)(i), (ii),
(iii) and (iv) hereof.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans with
respect to the Mortgage Loans listing each Mortgage Loan to be conveyed on the
Closing Date. Such Schedule of Mortgage Loans shall identify each Mortgage Loan
by the Servicer's loan number and address (including the state) of the Property
and shall set forth as to each Mortgage Loan the lien status, the Loan-to-Value
Ratio, the Loan Balance as of the Cut-Off Date, the Coupon Rate, the index, the
margin, the current scheduled monthly payment of principal and interest and the
maturity of the related Mortgage Note, the
14
property type, occupancy status, Appraised Value and the Originator of the
Mortgage Loan, all as delivered to the Indenture Trustee in physical and
computer readable form and delivered to the Note Insurer in physical form.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": First Alliance Mortgage Company, a California corporation,
and its permitted successors and assigns.
"Servicer": First Alliance Mortgage Company, a California corporation,
and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 4.9(c) and Section 4.13
hereof.
"Servicing Certificate": A certificate completed by and executed by an
Authorized Officer of the Indenture Trustee as attached hereto in the form of
Exhibit E.
"Servicing Fee": As to any Payment Date, the product of (x) one-twelfth
of the Servicing Fee Rate and (y) the aggregate Loan Balances of the Mortgage
Loans as of the opening of business on the first day of the related Remittance
Period. Such Servicing Fee is retained by the Servicer pursuant to Sections
4.8(c)(i) and 4.15 hereof.
"Servicing Fee Rate": 0.50% per annum.
"Six Month LIBOR Loans": Mortgage Loans whose interest rates adjust
semi-annually based on the London interbank offered rate for six-month United
States Dollar deposits in the London Market and as published in The Wall Street
Journal.
"Specified Subordinated Amount": Means (a) for any Payment Date
occurring during the period commencing on the Closing Date and ending on the
later of (i) the date by which principal equal to one-half of the Maximum
Collateral Amount has been received and (ii) the 30th Payment Date following the
Closing Date, the greater of (A) the Amortized Subordinated Amount Requirement
and (B) two (2) times the excess, if any, of (x) one-half of the aggregate Loan
Balances of all Mortgage Loans which are 90 or more days Delinquent (including
REO Properties) over (y) five times the Projected Net Monthly Excess Cashflow as
of such Payment Date; and (b) for any Payment Date occurring after the end of
the period in clause (a) above, the greatest of (i) the lesser of (A) the
Amortized Subordinated Amount Requirement and (B) two (2) times the Amortized
Subordinated Amount Requirement stated as a percentage of the Original Note
Principal Balance times the current Note Principal Balance, (ii) two (2) times
the excess of (A) one-half of the aggregate Loan Balances of all Mortgage Loans
which are 90 or more days Delinquent (including REO Properties) over (B) three
times the Projected Net Monthly Excess Cashflow as of such Payment Date and
(iii) an amount equal to 0.50% of the Maximum Collateral Amount; provided,
however, notwithstanding the above, in the event that any Insured Payment is
made by the Note Insurer, the amount described in this clause (b) shall remain
equal to the Amortized Subordinated Amount Requirement. The Specified
Subordinated Amount may be reduced or eliminated by the Note Insurer in its sole
discretion. Prior to any such reduction or elimination, the Servicer and the
Note Insurer shall give written notice to the Rating Agencies.
15
"Standard & Poor's": Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, and any successor thereto.
"Subordinated Amount": As of any Payment Date, the difference, if any,
between (x) the sum of (i) the aggregate Loan Balances of the Mortgage Loans as
of the close of business on the last day of the related Remittance Period and
(ii) any amount on deposit in the Pre-Funding Account less any Pre- Funding
Account earnings at such time and (y) the Note Principal Balance as of such
Payment Date (after taking into account the payment of the Monthly Payment
Amount (except for any portion thereof related to an Insured Payment) on such
Payment Date).
"Subordination Deficit": With respect to any Payment Date, the amount,
if any, by which (x) the Note Principal Balance, after taking into account the
payment of the Monthly Payment Amount on such Payment Date (except any payment
to be made as to principal from the proceeds of the Note Insurance Policy),
exceeds (y) the aggregate Loan Balances of the Mortgage Loans as of the close of
business on the last day of the related Due Period; provided that for the
purpose of calculating Loan Balances to determine if a Subordination Deficit
exists, the aggregate amount of the principal component of all unreimbursed
Delinquency Advances shall be deducted from the related actual Loan Balances.
"Subordination Deficiency Amount": With respect to any Payment Date,
the excess, if any, of (i) the Specified Subordinated Amount applicable to such
Payment Date over (ii) the Subordinated Amount applicable to such Payment Date
prior to taking into account the payment of any Subordination Increase Amount on
such Payment Date.
"Subordination Increase Amount": With respect to any Payment Date, the
lesser of (i) the Subordination Deficiency Amount as of such Payment Date (after
taking into account the payment of the Monthly Payment Amount on such Payment
Date (except for any Subordination Increase Amount)) and (ii) the aggregate
amount of Net Monthly Excess Cashflow to be allocated pursuant to Section
3.5(b)(iii)(A) on such Payment Date.
"Subordination Reduction Amount": With respect to any Payment Date, an
amount equal to the lesser of (x) the Excess Subordinated Amount for such
Payment Date and (y) the Principal Remittance Amount for the related Remittance
Period.
"Subsequent Cut-Off Date": The beginning of business on the date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Mortgage Loans which are transferred and assigned to the Trust pursuant to the
related Subsequent Transfer Agreement.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the Issuer
pursuant to Section 2.8 hereof, which shall be listed on the Schedules of
Mortgage Loans attached to a Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
dated as of the related Subsequent Transfer Date executed by the Indenture
Trustee and the Seller substantially in the form of Exhibit G hereto, by which
Subsequent Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": With respect to any Subsequent Transfer
Agreement, the date so specified in such Subsequent Transfer Agreement.
16
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
4.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Mortgage Loans as permitted by Section 4.3.
"Substitution Amount": In connection with the delivery of any Qualified
Replacement Mortgage, if the outstanding principal amount of such Qualified
Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than
the Loan Balance of the Mortgage Loan being replaced as of such Replacement
Cut-Off Date, an amount equal to such difference together with accrued and
unpaid interest on such amount calculated at the Coupon Rate (net of the
Servicing Fee Rate) of the Mortgage Loan being replaced.
"Telerate Page 3750": The display designated as page "3750" on the Dow
Jones Telerate Capital Markets Report (or such other page as may replace page
3750 on that report for the purpose of displaying London interbank offered rates
of major banks).
"Termination Price": As defined in Section 5.2(a) hereof.
"Total Available Funds": As defined in Section 3.3(a) hereof.
"Total Available Funds Shortfall": As defined in Section 3.3(b) hereof.
"Total Monthly Excess Cashflow": As defined in Section 3.5(b)(ii)
hereof.
"Total Monthly Excess Spread": With respect to any Payment Date, the
difference between (i) the interest which is collected on the Mortgage Loans
during the related Remittance Period, (less the Servicing Fee) plus the interest
portion of any Delinquency Advances and Compensating Interest paid by the
Servicer for such Remittance Period and (ii) the sum of (x) the interest due on
the Notes on such Payment Date and (y) the Fees and Expenses, if any, for such
Payment Date.
"Trust" or "Issuer": First Alliance Mortgage Loan Trust 1998-1A, a
Delaware business trust.
"Trust Agreement": The Trust Agreement dated as of March 1, 1998
between the Seller and the Owner Trustee.
"Trust Estate": As defined in the Indenture.
"Underwriter": Prudential Securities Incorporated.
"Underwriting Agreement": The Underwriting Agreement dated as of March
10, 1998 between the Underwriter and the Seller.
Section 1.2. Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used. The definitions set forth in Section 1.1 hereof
include both the singular and the plural. Whenever used in this Agreement, any
pronoun shall be deemed to include both singular and plural and to cover all
genders.
17
Section 1.3. Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SERVICER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS
Section 2.1. Representations and Warranties of the Seller. The Seller
hereby represents, warrants and covenants to the Indenture Trustee, the Owner
Trustee, the Issuer, the Note Insurer and to the Owners as of the Closing Date
that:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased
by it, make such qualification necessary. The Seller has all requisite
corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be
conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its
performance and compliance with the terms of this Agreement and of the
other Operative Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the Seller
and will not violate the Seller's Articles of Incorporation or Bylaws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Seller is a party or by which the Seller is bound, or violate
any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Seller or
any of its properties.
(c) This Agreement and the other Operative Documents to which
the Seller is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Seller, enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) 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 governmental agency, which 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 or under the other Operative Documents to which it is a
party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Seller's knowledge, threatened against the
Seller which, individually or in the aggregate, might have
18
consequences that would prohibit the Seller from entering into this
Agreement or any other Operative Document to which it is a party or
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 the validity or
enforceability of Mortgage Loans or the Seller's performance hereunder
or under the other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Seller
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report
not misleading.
(g) The statements contained in the Registration Statement
which describe the Seller or matters or activities for which the Seller
is responsible in accordance with the Operative Documents or which are
attributed to the Seller therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue
statement of a material fact with respect to the Seller or omit to
state a material fact required to be stated therein or necessary in
order to make the statements contained therein with respect to the
Seller not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Seller's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(h) 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 or advisable in connection with the purchase and sale of the
Notes and the execution and delivery by the Seller of the Operative
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 on the
Closing Date, 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 the other Operative
Documents on the part of the Seller and the performance by the Seller
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Seller.
(j) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans.
(k) The Seller did not sell any interest in any Mortgage Loan
with any intent to hinder, delay or defraud any of its creditors.
(l) The Seller is solvent and the Seller will not be rendered
insolvent as a result of the sale of the Mortgage Loans.
(m) On the Closing Date, the Issuer will have good title to
each Mortgage Loan and such other items comprising the corpus of the
Trust Estate free and clear of any lien.
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(n) There has been no material adverse change in any
information submitted by the Seller in writing to the Note Insurer.
(o) To the best knowledge of the Seller, no event has occurred
which would allow any purchaser of the Notes not to be required to
purchase the Notes on the Closing Date.
(p) To the best knowledge of the Seller, no document submitted
by or on behalf of the Seller to the Note Insurer contains any untrue
or misleading statement of a material fact or fails to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading.
(q) To the best knowledge of the Seller, no material adverse
change affecting any security for the Notes has occurred prior to
delivery of and payment for the Notes.
(r) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would
materially adversely impact the financial condition or operations of
the Seller or legal documents associated with the transaction
contemplated in this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 2.1 shall survive delivery of the Mortgage Loans to the
Issuer.
Section 2.2. Representations and Warranties of the Servicer. The
Servicer hereby represents, warrants and covenants to the Issuer, the Owner
Trustee, the Indenture Trustee, the Note Insurer and to the Owners as of the
Closing Date that:
(a) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Servicer is in compliance with the laws of each state
in which any Property is located to the extent necessary to enable it
to perform its obligations hereunder and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it, make such
qualification necessary. The Servicer has all requisite corporate power
and authority to own and operate its properties, to carry out its
business as presently conducted and as proposed to be conducted and to
enter into and discharge its obligations under this Agreement and the
other Operative Documents to which it is a party. The Servicer has
equity of at least $20,000,000, as determined in accordance with
generally accepted accounting principles.
(b) The execution and delivery of this Agreement by
the Servicer and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of
the Servicer and will not violate the Servicer's Articles of
Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Servicer is a party or by which the
Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Servicer or any of its properties.
(c) This Agreement and the other Operative Documents
to which the Servicer is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each constitutes
a valid, legal and binding obligation of the Servicer, enforceable
against it in
20
accordance with the terms hereof and thereof, except as the enforcement
hereof and thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).
(d) 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 governmental agency which 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 or under the other Operative
Documents to which the Servicer is a party.
(e) No action, suit, proceeding or investigation is
pending or, to the best of the Servicer's knowledge, threatened against
the Servicer which, individually or in the aggregate, might have
consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or 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 the validity or
the enforceability of the Mortgage Loans or the Servicer's performance
hereunder or under the other Operative Documents to which the Servicer
is a party.
(f) No certificate of an officer, statement furnished
in writing or report delivered pursuant to the terms hereof by the
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading.
(g) The statements contained in the Registration
Statement which describe the Servicer or matters or activities for
which the Servicer is responsible in accordance with the Operative
Documents or which are attributed to the Servicer therein are true and
correct in all material respects, and the Registration Statement does
not contain any untrue statement of a material fact with respect to the
Servicer or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein with respect to
the Servicer not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Servicer's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
(h) 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 Servicer makes no such representation or
warranty), that are necessary or advisable in connection with the
execution and delivery by the Servicer of the Operative 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 on the date hereof, 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 the other Operative Documents on the part of the Servicer
and the performance by the Servicer of its obligations under this
Agreement and such of the other Operative Documents to which it is a
party.
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(i) The collection practices used by the Servicer
with respect to the Mortgage Loans directly serviced by it have been,
and are in all material respects, legal, proper, prudent and customary
in the mortgage loan servicing business.
(j) The transactions contemplated by this Agreement
are in the ordinary course of business of the Servicer.
(k) There are no Sub-Servicers as of the Closing
Date.
(l) The Servicer covenants that it will terminate any
Sub-Servicer within ninety (90) days after being directed by the Note
Insurer to do so.
(m) There has been no material adverse change in any
information submitted by the Servicer in writing to the Note Insurer.
(n) To the best knowledge of the Servicer, no event
has occurred which would allow any purchaser of the Notes not to be
required to purchase the Notes on the Closing Date.
(o) To the best knowledge of the Servicer, no
document submitted by or on behalf of the Servicer to the Note Insurer
contains any untrue or misleading statement of a material fact or fails
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
(p) To the best knowledge of the Servicer, no
material adverse change affecting any security for the Notes has
occurred prior to delivery of and payment for the Notes.
(q) The Servicer is not in default under any
agreement involving financial obligations or on any outstanding
obligation which would materially and adversely impact the financial
condition or operations of the Servicer or legal documents associated
with the transaction contemplated in this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 2.2 shall survive delivery of the Mortgage Loans to the
Issuer.
Upon discovery by any of the Originators, the Servicer, the Seller, the
Issuer, the Custodian, any Sub-Servicer, the Note Insurer, the Owner Trustee or
the Indenture Trustee of a breach of any of the representations and warranties
set forth in this Section 2.2 or in Section 2.1 hereof which materially and
adversely affects the interests of the Owners or of the Note Insurer, without
regard to any limitation set forth in such representation or warranty concerning
the knowledge of the party making such representation or warranty as to the
facts stated therein, the party discovering such breach shall give prompt
written notice to the other parties hereto and the Note Insurer. Within 30 days
of its discovery or its receipt of notice of breach, the breaching party shall
cure such breach in all material respects and, if such breaching party is the
Servicer and upon the Servicer's continued failure to cure such breach, the
Servicer may be removed by the Indenture Trustee or the Note Insurer pursuant to
Section 4.20 hereof; provided, however, that if the Servicer can demonstrate to
the reasonable satisfaction of the Note Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written approval
of the Note Insurer.
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Section 2.3. Representations and Warranties of the Seller with Respect
to the Mortgage Loans.
(a) The Seller makes the following representations and warranties as to
the Mortgage Loans on which the Note Insurer relies in issuing the Note
Insurance Policy. Such representations and warranties speak as of the Closing
Date (with respect to the Initial Mortgage Loans) and as of the respective
Subsequent Cut-Off Date (with respect to the Subsequent Mortgage Loans) but
shall survive the sale, transfer, and assignment of the related Mortgage Loans
to the Issuer:
(i) The information with respect to each Initial
Mortgage Loan and Subsequent Mortgage Loan set forth in the related
Schedule of Mortgage Loans is true and correct as of the CutOff Date
(or in the case of the Subsequent Mortgage Loans, as of the related
Subsequent Cut-Off Date); the Original Aggregate Loan Balance in the
Trust as of the Cut-Off Date is $42,199,745.53.
(ii) All of the original or certified documentation set
forth in Section 2.5 (including all material documents related thereto)
with respect to each Initial Mortgage Loan has been or will be
delivered to the Indenture Trustee on the Closing Date (or in the case
of the Subsequent Mortgage Loans, as of the related Subsequent Transfer
Date) or as otherwise provided in Section 2.5;
(iii) Each Mortgage Loan is being serviced by the
Servicer or a Servicer Affiliate;
(iv) The Mortgage Note related to each Initial Mortgage
Loan bears a current Coupon Rate of at least 6.990% per annum;
(v) No more than 1.04% of the Initial Mortgage Loans
were 30 or more days Delinquent;
(vi) As of the Cut-Off Date, no more than 0.844% of the
Original Aggregate Loan Balance of the Mortgage Loans is secured by
Properties located within any single zip code area;
(vii) Each Mortgage Loan conforms, and all such Mortgage
Loans in the aggregate conform, in all material respects, to the
description thereof set forth in the Registration Statement;
(viii) As of the Cut-Off Date, no more than 2.26% of the
Original Aggregate Loan Balance is secured by condominiums, townhouses,
or planned unit developments;
(ix) As of the Cut-Off Date, no more than 4.78% Original
Aggregate Loan Balance is secured by investor-owned Properties;
(x) The credit underwriting guidelines applicable to
each Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus;
(xi) All of the Mortgage Loans are actuarial loans;
(xii) All of the Mortgage Loans are First Mortgage
Loans.
(xiii) As of the Cut-Off Date, substantially all of the
Mortgage Loans had interest rates which were not fully indexed;
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(xiv) The gross margin range for Six Month LIBOR Loans
is 3.650% to 8.490% and, the gross margin for all Six Month LIBOR Loans
when added to the current index, creates the fully- indexed range;
(xv) No Mortgage Loan has a remaining term in excess
of months;
(xvi) With respect to each Mortgage Loan, each
Mortgagor's debt-to-income ratio will qualify for the related
Originator's underwriting guidelines for a similar credit grade
borrower when the related Mortgage Loan is at a rate equal to the
applicable initial Coupon Rate plus 2%;
(xvii) There is no proceeding pending or to the best of
the Seller's knowledge threatened for the total or partial condemnation
of any Property. No Property is damaged by waste, fire, earthquake or
earth movement, windstorm, flood, other types of water damage, tornado,
or other casualty so as to affect adversely the value of such Property
as security for the Mortgage Loans or the use for which the premises
were intended and each Property is in good repair;
(xviii) Each Mortgage Loan complies in all material
respects with all applicable federal and state laws including without
limitation the Truth-in-Lending Act, as amended;
(xix) Each Mortgage Loan is secured by a Property having
an appraised value of less than $600,000;
(xx) The first Due Date of each Mortgage Loan is no
later than July 1, 1998; and
(xxi) On the Closing Date with respect to each Initial
Mortgage Loan and on each Subsequent Transfer Date with respect to each
Subsequent Mortgage Loan, the Issuer will have good title to each
Mortgage Loan transferred on such date.
(b) Upon the discovery by the Issuer, the Seller, the Servicer, the
Custodian, the Note Insurer, the Owner Trustee or the Indenture Trustee of a
breach of any of the representations and warranties made herein in respect of
any Mortgage Loan, without regard to any limitation set forth in such
representation or warranty concerning the knowledge of the Seller or any related
Originator as to the facts stated therein, which materially and adversely
affects the interests of the Owners or of the Note Insurer in such Mortgage Loan
the party discovering such breach shall give prompt written notice to the other
parties hereto and the Note Insurer, as their interests may appear. The Servicer
shall promptly notify the related Originator of such breach and request that
such Originator cure such breach or take the actions described in Section 2.4(b)
hereof within the time periods required thereby, and if such Originator does not
cure such breach in all material respects, the Seller shall cure such breach or
take such actions. Except as set forth in Section 2.4, the obligations of the
Seller or Servicer, as the case may be, shall be limited to the remedies for
cure set forth in Section 2.4 with respect to any Mortgage Loan as to which such
a breach has occurred and is continuing; the remedies set forth in Section 2.4
shall constitute the sole remedy with respect to such breach available to the
Owners, the Indenture Trustee and the Note Insurer.
The Seller acknowledges that a breach of any representation or warranty
(x) relating to marketability of title sufficient to transfer unencumbered title
to a Mortgage Loan and (y) relating to enforceability of the Mortgage Loan
against the related Mortgagor or Property is a priori the breach of a
representation or warranty which "materially and adversely affects the interests
of the Owners or of the Note Insurer" in such Mortgage Loan.
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Section 2.4. Covenants of the Seller to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations. (a) With the provisos and
limitations as to remedies set forth in this Section 2.4, upon the discovery by
any Originator, the Seller, the Issuer, the Servicer, the Note Insurer, any
Sub-Servicer, the Owner Trustee, the Custodian or the Indenture Trustee that the
representations and warranties set forth in Section 2.3 of this Agreement were
untrue in any material respect as of the Closing Date (or in the case of the
Subsequent Mortgage Loans, the Subsequent Transfer Date), and that such breach
of the representations and warranties materially and adversely affects the
interests of the Owners or of the Note Insurer, the party discovering such
breach shall give prompt written notice to the other parties hereto and to the
Note Insurer.
(b) Upon the earliest to occur of the Seller's discovery, its receipt
of notice of breach from any one of the other parties hereto or from the Note
Insurer or such time as a breach of any representation and warranty materially
and adversely affects the interests of the Owners or of the Note Insurer as set
forth above, the Seller hereby covenants and warrants that it shall promptly
cure such breach in all material respects or it shall (or shall cause an
affiliate of the Seller to or an Originator to), subject to the further
requirements of this paragraph, on the second Remittance Date next succeeding
such discovery, receipt of notice or such other time (i) substitute in lieu of
each Mortgage Loan which has given rise to the requirement for action by the
Seller a Qualified Replacement Mortgage and deliver the Substitution Amount
applicable thereto, together with the aggregate amount of all Delinquency
Advances and Servicing Advances theretofore made with respect to such Mortgage
Loan, to the Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan from the Trust at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the Servicer
for deposit in the Principal and Interest Account. It is understood and agreed
that the obligation of the Seller to cure the defect, or substitute for or
purchase any Mortgage Loan as to which a representation or warranty is untrue in
any material respect and has not been remedied shall constitute the sole remedy
available to the Owners, the Indenture Trustee and the Note Insurer.
(c) In the event that any Qualified Replacement Mortgage is delivered
by an Originator or by the Seller to the Trust pursuant to this Section 2.4 or
Section 2.6 hereof, the related Originator and the Seller shall be obligated to
take the actions described in Section 2.4(b) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners, the Seller, the
Issuer, the Servicer, the Note Insurer, any Sub-Servicer, the Owner Trustee, the
Custodian or the Indenture Trustee that any of the representations and
warranties set forth in Section 2.3 above are untrue in any material respect on
the date such Qualified Replacement Mortgage is conveyed to the Trust such that
the interests of the Owners or the Note Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided, however,
that for the purposes of this subsection (c) the representations and warranties
in Section 2.3 above referring to items "as of the Cut-Off Date" or "as of the
Closing Date" shall be deemed to refer to such items as of the date such
Qualified Replacement Mortgage is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 2.4 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgages) to the Issuer.
(e) The Indenture Trustee shall have no 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
Mortgage Loan pursuant to this section or the eligibility of any Mortgage Loan
for purposes of this Agreement.
Section 2.5. Conveyance of the Mortgage Loans. (a) The Seller,
concurrently with the execution and delivery hereof, hereby transfers, assigns,
sets over and otherwise conveys without recourse,
25
to the Issuer, all right, title and interest of the Seller in and to each
Initial Mortgage Loan listed on the Schedule of Mortgage Loans delivered by the
Seller on the Closing Date, all right, title and interest in and to principal
and interest due on each such Mortgage Loan after the Cut-Off Date (other than
payments of principal due and interest accrued on or before the Cut-Off Date)
and all its right, title and interest in and to all Insurance Policies;
provided, however, that the Seller reserves and retains all its right, title and
interest in and to principal (including Prepayments) collected and principal and
interest due on each Initial Mortgage Loan on or prior to the Cut-Off Date. The
transfer by the Seller of the Initial Mortgage Loans set forth on the Schedules
of Mortgage Loans and the Subsequent Mortgage Loans is absolute and is intended
by the Owners and all parties hereto to be treated as a sale by the Seller.
Pursuant to the Indenture, the Issuer will pledge the Trust Estate to the
Indenture Trustee to be held on behalf of the Owners of the Notes.
It is intended that the sale, transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans conveying good title
thereto free and clear of any liens and encumbrances from the Seller to the
Issuer and that the Mortgage Loans not be part of the Seller's estate in the
event of an insolvency. In the event that any such conveyance or a conveyance
pursuant to Section 2.8 and any Subsequent Transfer Agreement is deemed to be a
loan, the parties intend that the Seller shall be deemed to have granted to the
Issuer a security interest of first priority in all of the Seller's right, title
and interest in the Mortgage, Mortgage Note and the File, and that this
Agreement shall constitute a security agreement under applicable law.
In connection with the sale, transfer, assignment, and conveyance, from
the Seller to the Issuer, the Seller has filed, in the appropriate office or
offices in the States of California and Delaware, a UCC-1 financing statement
executed by the Seller as debtor, naming the Issuer as secured party and listing
the Mortgage Loans (both Initial Mortgage Loans and Subsequent Mortgage Loans)
and the other property described above as collateral. The characterization of
the Seller as a debtor and the Issuer as the secured party in such financing
statements is solely for protective purposes and shall in no way be construed as
being contrary to the intent of the parties that this transaction be treated as
a sale of the Seller's entire right, title and interest in the Mortgage Loans
and the related Files to the Issuer. In connection with such filing, the Seller
shall cause to be filed all necessary continuation statements thereof and to
take or cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Issuer's and the Owners' interests in the
Mortgage Loans and the related Files.
In connection with the pledge of the Trust Estate by the Issuer to the
Indenture Trustee, on behalf of the Owners of the Notes, the Issuer has filed,
in the appropriate office or offices in the State of Delaware, a UCC-1 Financing
Statement executed by the Issuer as debtor, naming the Indenture Trustee, on
behalf of the Owners of the Notes, as the secured party and listing the Mortgage
Loans (both Initial Mortgage Loans and Subsequent Mortgage Loans) and the other
property described above as collateral. In connection with such filing, the
Issuer agrees that it shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Indenture Trustee's
interest in the Trust Estate on behalf of the Owners of the Notes.
(b) In connection with the transfer and assignment of the Mortgage
Loans, the Seller agrees to:
(i) cause to be delivered, on or prior to the Closing
Date (except as otherwise stated below) without recourse to the
Custodian, on behalf of the Indenture Trustee, on the Closing Date with
respect to each Initial Mortgage Loan listed on the Schedule of
Mortgage Loans or on each Subsequent Transfer Date with respect to each
Subsequent Mortgage Loan:
26
(a) the original Mortgage Notes or certified
copies thereof, endorsed without recourse by the related Originator,
"Pay to the order of ______________________________, without recourse"
or "Pay to the order of The Chase Manhattan Bank, as Indenture Trustee
for the First Alliance Adjustable Rate Mortgage Loan Asset Backed
Notes, Series 1998-1A, without recourse." In the event that the
Mortgage Loan was acquired by the related Originator in a merger, the
endorsement must be by the "(related Originator), successor by merger
to (name of predecessor)"; and in the event that the Mortgage Loan was
acquired or originated by the related Originator while doing business
under another name, the endorsement must be by the "(related
Originator), formerly known as (previous name)";
(b) originals of all intervening assignments,
showing a complete chain of assignment from origination to the related
Originator, if any, including warehousing assignments, with evidence of
recording thereon (or, if an original intervening assignment has not
been returned from the recording office, a certified copy thereof, the
original to be delivered to the Custodian, on behalf of the Indenture
Trustee forthwith after return);
(c) originals of all assumption and modification
agreements, if any (or, if an original assumption and/or modification
agreement has not been returned from the recording office, a certified
copy thereof, the original to be delivered to the Custodian, on behalf
of the Indenture Trustee forthwith after return);
(d) either (A) the original Mortgage with evidence
of recording thereon or a certified copy of the Mortgage as recorded,
or (B) if the original Mortgage has not yet been returned from the
recording office, a certified copy of the Mortgage, together with a
receipt from the recording office or from a title insurance company or
a certificate of an Authorized Person of the related Originator
indicating that such Mortgage has been delivered for recording;
(e) the original assignment of Mortgage for each
Mortgage Loan conveying the Mortgage to "The Chase Manhattan Bank, as
Indenture Trustee of the First Alliance Adjustable Rate Mortgage Loan
Asset Backed Notes, Series 1998-1A," which assignment shall be in form
and substance acceptable for recording in the state or other
jurisdiction where the mortgaged property is located and, within 75
Business Days following the Closing Date, with respect to the Initial
Mortgage Loans, or within 75 Business Days of each Subsequent Transfer
Date with respect to the Subsequent Mortgage Loans, a recorded
assignment of each such Mortgage; provided that in the event that the
Mortgage Loan was acquired by the related Originator in a merger, the
assignment of Mortgage must be by the "(related Originator), successor
by merger to (name of predecessor)"; and in the event that the Mortgage
Loan was acquired or originated by the related Originator while doing
business under another name, the assignment of Mortgage must be by the
"(related Originator), formerly known as (previous name)" (subject to
the foregoing, and where permitted under the applicable laws of the
jurisdiction where the mortgaged property is located, the assignments
of Mortgage may be made by blanket assignments for Mortgage Loans
covering mortgaged properties situated within the same county or other
permitted governmental subdivision); and
(f) evidence of title insurance with respect to
the mortgaged property in the form of a binder or commitment.
27
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set forth below
("Assignment Opinions"), cause, as soon as possible but no more than 75
Business Days following the Closing Date, with respect to the Initial
Mortgage Loans, or within 75 Business Days of each Subsequent Transfer
Date with respect to the Subsequent Mortgage Loans, the Originators to
deliver to the Custodian, on behalf of the Indenture Trustee, copies of
all Mortgage assignments submitted for recording, together with a list
of (x) all Mortgages for which no Mortgage assignment has yet been
submitted for recording by the related Originator (y) reasons why the
related Originator has not yet submitted such Mortgage assignments for
recording; provided, however, that with respect to Mortgage Loans
relating to Properties located in the states of Arizona, California,
Colorado, District of Columbia, Georgia, Illinois, Maryland,
Massachusetts, Ohio, Oregon, Pennsylvania, Virginia and Washington an
Originator shall not be required to record an assignment of a Mortgage
if the Seller furnishes to the Indenture Trustee and the Note Insurer,
on or before the Closing Date with respect to the Initial Mortgage
Loans, or on each Subsequent Transfer Date with respect to the
Subsequent Mortgage Loans, at the Seller's expense, the Assignment
Opinions for the relevant jurisdictions which opine that recording is
not necessary to perfect the rights of the Indenture Trustee in the
related Mortgage (in form satisfactory to the Note Insurer, Moody's and
Standard & Poor's); provided further, however, notwithstanding the
delivery of any legal opinions, each assignment of mortgage shall be
recorded upon the earliest to occur of: (i) the instructions by the
Note Insurer to so record such assignments (such instructions shall be
given by the Note Insurer using reasonable discretion) or (ii) the
occurrence of an Event of Servicing Termination. With respect to any
Mortgage assignment set forth on the aforementioned list which has not
been submitted for recording for a reason other than a lack of original
recording information or with respect to Mortgages not covered by the
Assignment Opinions, the Custodian, on behalf of the Indenture Trustee
shall make an immediate demand on the Seller to cause such Mortgage
assignments to be prepared and shall inform the Note Insurer of the
Seller's failure to cause such Mortgage assignments to be prepared.
Thereafter, the Custodian and the Indenture Trustee shall cooperate in
executing any documents prepared by the Note Insurer and submitted to
the Custodian and the Indenture Trustee in connection with this
provision. Following the expiration of the 75-Business Day period
following the Closing Date with respect to the Initial Mortgage Loans,
or within 75 Business Days of each Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans and except with respect to
Mortgages covered by the Assignment Opinions, the Seller shall cause to
be prepared a Mortgage assignment for any Mortgage for which original
recording information is subsequently received by the related
Originator and shall promptly deliver a copy of such Mortgage
assignment to the Custodian, on behalf of the Indenture Trustee.
All recording required pursuant to this Section 2.5 shall be
accomplished at the expense of the Originators or of the Seller. Notwithstanding
anything to the contrary contained in this Section 2.5, in those instances where
the public recording office retains the original Mortgage, the assignment of a
Mortgage or the intervening assignments of the Mortgage after it has been
recorded, the Seller shall be deemed to have satisfied its obligations hereunder
upon delivery to the Custodian, on behalf of the Indenture Trustee, of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Custodian, on behalf
of the Indenture Trustee shall be kept in the related File.
(c) In the case of Mortgage Loans which have been prepaid in full on or
after the Cut-Off Date and prior to the Closing Date, the Seller, in lieu of the
foregoing, will deliver within 15 Business Days after the Closing Date to the
Indenture Trustee a certification of an Authorized Officer in the form set forth
in Exhibit B.
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(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Issuer all right, title and interest of the Seller in
and to any Qualified Replacement Mortgage delivered to the Custodian, on behalf
of the Indenture Trustee, on behalf of the Issuer by the Seller pursuant to
Section 2.4 or Section 2.6 hereof and all its right, title and interest to
principal and interest due on such Qualified Replacement Mortgage after the
applicable Replacement Cut-Off Date; provided, however, that the Seller shall
reserve and retain all right, title and interest in and to payments of principal
and interest due on such Qualified Replacement Mortgage on and prior to the
applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the lien of the Indenture in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Custodian, on behalf of the Indenture Trustee will transfer, assign, set over
and otherwise convey without recourse, on the Seller's order, all of its right,
title and interest in and to such released Mortgage Loan and all the Issuer's
right, title and interest to principal and interest due on such released
Mortgage Loan after the applicable Replacement Cut-Off Date; provided, however,
that the Issuer shall reserve and retain all right, title and interest in and to
payments of principal and interest due on such released Mortgage Loan on and
prior to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Issuer, the Seller agrees to cause to be delivered
to the Custodian, on behalf of the Indenture Trustee, the items described in
Section 2.5(b) on the date of such transfer and assignment or if a later
delivery time is permitted by Section 2.5(b) then no later than such later
delivery time.
(g) As to each Mortgage Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage the Custodian, on behalf of
the Indenture Trustee, shall deliver on the date of conveyance of such Qualified
Replacement Mortgage, and on the order of the Seller (i) the original Mortgage
Note, or the certified copy, relating thereto, endorsed without recourse, to the
Seller and (ii) such other documents as constituted the File with respect
thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Seller shall prepare a substitute assignment or cure such defect, as the
case may be, and thereafter cause each such assignment to be duly recorded.
Section 2.6. Acceptance by Indenture Trustee; Certain Substitutions of
Mortgage Loans; Certification by Indenture Trustee.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver to the Seller, the Issuer, the Servicer and the Note Insurer on the
Closing Date an Initial Certification in the form annexed hereto as Exhibit C to
the effect that, as to each Mortgage Loan listed in the Schedule of Mortgage
Loans (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
this Agreement with respect to such Mortgage Loan are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan and (iii) based on its examination and only as to
the foregoing documents, the information set forth on the Schedule of Mortgage
Loans as to loan number and address accurately reflects information set forth in
the File. Neither the Indenture Trustee nor the Custodian, on behalf of the
Indenture Trustee, shall be under any duty or obligation to inspect, review or
examine said documents, instruments, Notes or other papers to determine that the
same are genuine, enforceable or appropriate for the represented purpose or that
they have actually been recorded or that they are other than what they purport
to be on their face. Within 90 days of the Closing Date (or, with respect to any
document delivered after the Closing Date, within 45 days of receipt thereof and
with respect to any Subsequent Mortgage Loan or Qualified Replacement Mortgage,
within 45 days after the assignment
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thereof) the Indenture Trustee shall cause the Custodian to deliver to the
Issuer, the Seller, Note Insurer and the Servicer a Final Certification in the
form annexed hereto as Exhibit D evidencing the completeness of the Files, with
any applicable exceptions noted thereon.
(b) If in the process of reviewing the Files and preparing the
certifications referred to above the Custodian, on behalf of the Indenture
Trustee, finds any document or documents constituting a part of a File which is
not properly executed, has not been received within the specified period or is
unrelated to the Mortgage Loans identified in the Schedules of Mortgage Loans,
or that any Mortgage Loan does not conform as to loan number and address as set
forth in the Schedules of Mortgage Loans, the Custodian, on behalf of the
Indenture Trustee shall promptly notify the Seller and the Note Insurer. The
Seller shall use reasonable efforts to cure any such defect within 60 days from
the date on which the Seller was notified of such defect, and if the Seller does
not cure such defect in all material respects during such period, the Seller
will (or will cause the related Originator or an affiliate of the Seller to) on
the next succeeding Remittance Date (i) substitute in lieu of such Mortgage Loan
a Qualified Replacement Mortgage and deliver the Substitution Amount applicable
thereto to the Servicer for deposit in the Principal and Interest Account or
(ii) purchase such Mortgage Loan at a purchase price equal to the Loan Purchase
Price thereof, which purchase price shall be delivered to the Servicer for
deposit in the Principal and Interest Account.
Section 2.7. Cooperation Procedures. (a) The Seller shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Custodian, on behalf of the Indenture Trustee, provide the Indenture Trustee
with the information set forth in the Schedule of Mortgage Loans with respect to
such Qualified Replacement Mortgage.
(b) The Seller, the Issuer, the Servicer and the Indenture Trustee
covenant to provide each other with all data and information required to be
provided by them hereunder at the times required hereunder, and additionally
covenant reasonably to cooperate with each other in providing any additional
information required to be obtained by any of them in connection with their
respective duties hereunder.
(c) The Servicer shall maintain such accurate and complete accounts,
records and computer systems pertaining to each File as shall enable it and the
Indenture Trustee to comply with this Agreement. In performing its recordkeeping
duties the Servicer shall act in accordance with the servicing standards set
forth in this Agreement. The Servicer shall conduct, or cause to be conducted,
periodic audits of its accounts, records and computer systems as set forth in
Sections 4.16 and 4.17 hereof. The Servicer shall promptly report to the
Indenture Trustee any failure on its part to maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(d) The Seller further confirms to the Indenture Trustee that it has
caused the portions of the electronic ledger relating to the Mortgage Loans to
be clearly and unambiguously marked to indicate that such Mortgage Loans have
been sold, transferred, assigned and conveyed to the Issuer and constitute part
of the Trust Estate in accordance with the terms of the trust created hereunder
and that the Seller will treat the transaction contemplated by such sale,
transfer, assignment and conveyance as a sale for accounting purposes.
Section 2.8. Conveyance of the Subsequent Mortgage Loans. (a) Subject
to the satisfaction of the conditions set forth in Section 2.5 and paragraphs
(b), (c) and (d) below (based on the Custodian's review of such conditions) in
consideration of the Indenture Trustee's delivery on the relevant Subsequent
Transfer Dates to or upon the order of the Seller of all or a portion of the
balance of funds in the Pre-Funding Account, the Seller shall on any Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without
recourse, to the Indenture Trustee, all of the Seller's right, title and
interest in and to each Subsequent Mortgage Loan listed on the related Schedule
of Mortgage Loans (other than any
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principal and interest payments due thereon on or prior to the relevant
Subsequent Cut-Off Date) which the Seller is causing to be delivered to the
Custodian on behalf of the Indenture Trustee herewith (and all substitutions
therefor as provided by Sections 2.4 and 2.6) together with the related
Subsequent Mortgage Loan documents and the Seller's interest in any Property
which secured a Subsequent Mortgage Loan but which has been acquired by
foreclosure or deed in lieu of foreclosure, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Subsequent Mortgage Loans, cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables which at any time constitute all or part of or are included in the
proceeds of any of the foregoing).
The transfer by the Seller of the Subsequent Mortgage Loans set forth
on the related Schedule of Mortgage Loans to the Indenture Trustee shall be
absolute and shall be intended by the Owners and all parties hereto to be
treated as a sale by the Seller to the Indenture Trustee. The amount released
from the Pre-Funding Account shall be one hundred percent (100%) of the
aggregate principal balances of the Subsequent Mortgage Loans so transferred.
Upon the transfer by the Seller of the Subsequent Mortgage Loans hereunder, such
Subsequent Mortgage Loans (and all principal and interest due thereon subsequent
to the Subsequent Cut-Off Date) and all other rights and interests with respect
to such Subsequent Mortgage Loans transferred pursuant to a Subsequent Transfer
Agreement shall be deemed for all purposes hereunder to be part of the Trust
Estate. The Seller hereby covenants and agrees to use its best efforts to ensure
that a sufficient amount of Subsequent Mortgage Loans will be transferred to the
Issuer during the Funding Period to reduce the Pre-Funded Amount to less than
$100,000.
(b) The obligation of the Indenture Trustee to accept the transfer of
the Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Indenture Trustee
and the Note Insurer with an Addition Notice and shall have
provided any information reasonably requested by any of the
foregoing with respect to the Subsequent Mortgage Loans;
(ii) the Seller shall have delivered to the Indenture
Trustee a duly executed Subsequent Transfer Agreement
(including an acceptance by the Indenture Trustee) in
substantially the form of Exhibit G, which shall include a
Schedule of Mortgage Loans, listing the Subsequent Mortgage
Loans and any other exhibits listed thereon;
(iii) the Seller shall have deposited in the Principal
and Interest Account all principal collected and interest due
in respect of such Subsequent Mortgage Loans on or after the
related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, the Seller is
not insolvent, nor will it be made insolvent by such transfer,
nor is it aware of any pending insolvency;
(v) the Funding Period shall not have ended;
(vi) the Seller shall have delivered to the Indenture
Trustee and the Note Insurer an Officer's Certificate
confirming the satisfaction of each condition precedent
specified in items (i) through (v) of this paragraph (b) and
paragraphs (c) and (d) below and in the related Subsequent
Transfer Agreement;
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(vii) the Seller shall have delivered to the Indenture
Trustee, the Rating Agencies and the Note Insurer opinions of
counsel with respect to the transfer of the Subsequent
Mortgage Loans substantially in the form of the opinions of
counsel delivered to the Note Insurer and the Indenture
Trustee on the Closing Date with respect to the Initial
Mortgage Loans (bankruptcy, corporate and tax); and
(viii) the Note Insurer retains the right to adjust the
loss coverage requirements, including, but not limited to the
Specified Subordinated Amount, if the final pool of Mortgage
Loans differs materially from the Initial Mortgage Loan pool.
Prior to any such adjustment, the Note Insurer shall give
written notice to the Rating Agencies.
(c) The obligation of the Issuer to purchase Subsequent Mortgage Loans
on a Subsequent Transfer Date is subject to the following requirements: (i) such
Subsequent Mortgage Loan may not be 30 or more days contractually delinquent as
of the related Subsequent Cut-Off Date; (ii) the remaining term to maturity of
such Subsequent Mortgage Loan may not exceed 30 years; (iii) such Subsequent
Mortgage Loan will have a Loan-to-Value Ratio of not more than 85%; and (iv)
following the purchase of such Subsequent Mortgage Loans by the Issuer, the
Mortgage Loans (including the Subsequent Mortgage Loans) (a) will have a
weighted average coupon rate of at least 8.76%; (b) will have a weighted average
Loan-to-Value Ratio of not more than 57.94%; and (c) will have an average
current loan balance not greater than $109,619 and not more than 10% of the
Mortgage Loans may have a principal balance in excess of $200,000 and (d) will
satisfy the representations and warranties set forth in Section 2.3 hereof. In
addition, the final pool of Mortgage Loans shall conform to the guidelines set
forth in paragraph 28 of the "Commitment to Issue a Financial Guaranty Insurance
Policy dated March 27, 1998 from the Note Insurer to the Seller relating to the
Note Insurance Policy."
(d) In connection with each Subsequent Transfer Date and on the Payment
Date occurring in April 1998, the Indenture Trustee shall determine: (i) the
amount and correct dispositions of the Capitalized Interest Requirement,
Overfunded Interest Amount, Pre-Funding Account Earnings and the Pre-Funded
Amount and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and of the Capitalized Interest
Account. In the event that any amounts are released as a result of an error in
calculation to the Owners or the Seller from the Pre-Funding Account or from the
Capitalized Interest Account, such Owners or the Seller shall immediately repay
such amounts to the Trustee.
Section 2.9. Books and Records.
The sale of each Mortgage Loan shall be reflected in the Seller's
balance sheets and other financial statements as a sale of assets by the Seller
under generally accepted accounting principles.
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ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 3.1. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee shall demand payment or delivery of all
money and other property payable to or receivable by the Indenture Trustee
pursuant to this Agreement, including (a) all payments due on the Mortgage Loans
in accordance with the respective terms and conditions of such Mortgage Loans
and required to be paid over to the Indenture Trustee by the Servicer or by any
Sub-Servicer and (b) Insured Payments. The Indenture Trustee shall hold all such
money and property received by it as part of the Trust Estate and shall apply it
as provided in this Agreement.
Section 3.2. Establishment of Accounts. (a) The Seller shall cause to
be established, and the Indenture Trustee shall maintain, at the Corporate Trust
Office, a Note Account and an Available Funds Cap Carry-Forward Amount Account
each to be held by the Indenture Trustee so long as the Indenture Trustee
qualifies as a Designated Depository Institution and if the Indenture Trustee
does not so qualify, then by any Designated Depository Institution in the name
of the Indenture Trustee for the benefit of the Owners of the First Alliance
Adjustable Rate Mortgage Loan Asset Backed Notes, Series 1998-1A and the Note
Insurer, as their interests may appear.
(b) The Seller shall cause to be established, and the Indenture Trustee
shall maintain, at the corporate trust office of the Indenture Trustee, a
Pre-Funding Account and a Capitalized Interest Account to be held by the
Indenture Trustee in the name of the Indenture Trustee for the benefit of the
Owners of the First Alliance Adjustable Rate Mortgage Loan Asset Backed Notes,
Series 1998-1A and the Note Insurer, as their interests may appear.
Section 3.3. The Note Insurance Policy. (a) On the Business Day prior
to each Payment Date the Indenture Trustee shall determine with respect to the
immediately following Payment Date, the amount on deposit in the Note Account on
such Payment Date and available to be distributed to the Owners on such Payment
Date (disregarding the sum of (x) the amount of any Insured Payments and (y) the
amount of any expected investment earnings) and equal to the sum of (A) such
amount excluding the amount of any Total Monthly Excess Cashflow included in
such amount plus (B) any amount of Total Monthly Excess Cashflow to be applied
on such Payment Date. The amount described in clause (A) of the preceding
sentence with respect to each Payment Date is the "Available Funds"; the sum of
the amounts described in clauses (A) and (B) of the preceding sentence with
respect to each Payment Date is the "Total Available Funds."
(b) If (i) the Current Interest for any Payment Date exceeds the Total
Available Funds for such Payment Date after deducting amounts payable therefrom,
if any, for the Premium Amount and the Indenture Trustee Fee due on such Payment
Date and/or (ii) a Subordination Deficit exists for such Payment Date (any such
event being a "Total Available Funds Shortfall"), the Indenture Trustee shall
complete a Notice in the form of Exhibit A to the Note Insurance Policy and
submit such notice to the Note Insurer no later than 12:00 noon New York City
time on the Business Day preceding such Payment Date as a claim for an Insured
Payment in an amount equal to such Total Available Funds Shortfall.
(c) The Note Insurer shall forward to the Indenture Trustee Insured
Payments at such time and in the manner specified in the Note Insurance Policy.
Upon receipt of Insured Payments from the Note Insurer on behalf of Owners, the
Indenture Trustee shall deposit such Insured Payments in the Note Account and
shall distribute such Insured Payments, or the proceeds thereof, in accordance
with Section 3.5(b)(iv) to the Owners of the Notes.
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(d) The Indenture Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Notes receiving any Insured Payment from
the Note Insurer and (ii) disburse such Insured Payment to the Owners of Notes
as set forth in Section 3.5(b)(iv). Insured Payments disbursed by the Indenture
Trustee from proceeds of the Note Insurance Policy shall not be considered
payment by the Trust nor shall such payments discharge the obligation of the
Trust with respect to the Notes, and the Note Insurer shall be entitled to
receive the Reimbursement Amount pursuant to Sections 3.5(b)(ii)(B) hereof. Each
Owner of Notes by its acceptance thereof recognizes that to the extent the Note
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Indenture Trustee), to the Owners of such Notes the Note Insurer
will be entitled to receive the Reimbursement Amount pursuant to Section
3.5(b)(ii)(B) hereof.
(e) On (i) the Final Payment Date, and (ii) the first Payment Date
following an acceleration of the Notes, the Indenture Trustee shall make a claim
against the Note Insurance Policy in an amount sufficient after the application
of Total Available Funds for such Payment Date to reduce the Note Principal
Balance to zero and to pay any accrued interest on the Notes.
Section 3.4 Pre-Funding Account and Capitalized Interest Account (a) On
the Closing Date, the Seller will deposit, on behalf of the Owners of the Notes,
in the Pre-Funding Account the Original Pre-Funded Amount, from the proceeds of
the sale of the Notes.
(b) On any Subsequent Transfer Date, the Seller shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Loan Balances of the Subsequent Mortgage Loans sold to the
Issuer on such Subsequent Transfer Date and pay such amount to or upon the order
of the Seller upon satisfaction of the conditions set forth in Sections 2.5 and
2.8 hereof with respect to such transfer. In no event shall the Seller be
permitted to instruct the Indenture Trustee to release from the Pre-Funding
Account to the Note Account with respect to Subsequent Mortgage Loans an amount
in excess of the Original Pre-Funded Amount.
(c) On or before the April 1998 Payment Date, the Indenture Trustee
shall withdraw from the Pre-Funding Account the amount (exclusive of any related
Pre-Funding Account Earnings still on deposit therein) remaining in the
Pre-Funding Account and deposit such amount to the Note Account, for the benefit
of the Owners of the Notes.
(d) On or before the April 1998 Payment Date, the Indenture Trustee
shall transfer from the Pre-Funding Account to the Capitalized Interest Account,
the Pre-Funding Account Earnings, if any, applicable to such Payment Date.
(e) On or before the April 1998 Payment Date the Trustee shall transfer
from the Capitalized Interest Account to the Note Account, the Capitalized
Interest Requirement for such Payment Date.
(f) On each Subsequent Transfer Date the Indenture Trustee shall
distribute from the Capitalized Interest Account the Overfunded Interest Amount
(calculated by the Indenture Trustee on the day prior to such Subsequent
Transfer Date) to the Seller and on the Payment Date in April 1998, the
Indenture Trustee shall distribute to the Seller any amounts remaining in the
Capitalized Interest Account after taking into account the transfers on such
Payment Date described in clause (e) above. Thereafter, the Capitalized Interest
Account shall be closed. All amounts, if any, remaining in the Capitalized
Interest Account on such day shall be transferred to the Seller on the first
Business Day immediately following the end of the Funding Period.
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Section 3.5. Flow of Funds. (a) The Indenture Trustee shall deposit to
the Note Account, without duplication, (i) upon receipt, any Insured Payments,
the proceeds of any liquidation of the assets of the Trust, the Monthly
Remittance Amount remitted by the Servicer or any Sub-Servicer, together with
any Substitution Amounts and any Loan Purchase Price amounts received by the
Indenture Trustee.
(b) With respect to the Note Account, on each Payment Date, the
Indenture Trustee shall make the following allocations, disbursements and
transfers from amounts deposited therein pursuant to subsection (a), in the
following order of priority, and each such allocation, transfer and disbursement
shall be treated as having occurred only after all preceding allocations,
transfers and disbursements have occurred:
(i) first, on each Payment Date from amounts then on deposit
in the Note Account (A) to the Indenture Trustee, the Indenture Trustee
Fee and to the Owner Trustee, the Owner Trustee Fee and (B) commencing
on the third Payment Date following the Closing Date and each Payment
Date thereafter, to the Note Insurer, from amounts then on deposit in
the Note Account, the Premium Amount for such Payment Date;
(ii) second, on each Payment Date, the Indenture Trustee shall
allocate an amount equal to the sum of (x) the Total Monthly Excess
Spread with respect to such Payment Date plus (y) any Subordination
Reduction Amount with respect to such Payment Date (such sum being the
"Total Monthly Excess Cashflow" with respect to such Payment Date) in
the following order of priority:
(A) first, such Total Monthly Excess Cashflow shall be
allocated to the payment of the Monthly Payment
Amount pursuant to clause (iv) below on such Payment
Date in an amount equal to the difference, if any,
between (x) the Monthly Payment Amount (calculated
only with respect to clause (y) of Principal Payment
Amount and without any Subordination Increase Amount)
for such Payment Date and (y) the Available Funds for
such Payment Date (the amount of such difference
being the "Available Funds Shortfall"); and
(B) second, any portion of the Total Monthly Excess
Cashflow remaining after the allocations described in
clause (A) above shall be allocated to the Note
Insurer in respect of amounts owed on account of any
Reimbursement Amount pursuant to clause
(b)(iv)(A)(I).
(iii) third, the amount, if any, of the Total Monthly Excess
Cashflow on a Payment Date remaining after the allocations described in
clause (ii) above is the "Net Monthly Excess Cashflow" for such Payment
Date; such Net Monthly Excess Cashflow is required to be allocated in
the following order of priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the allocation of a
Subordination Increase Amount to the payment of the
Monthly Payment Amount pursuant to clause (iv)(C)
below, any Subordination Deficiency Amount as of such
Payment Date;
(B) second, an amount equal to the lesser of (i) any
portion of the Net Monthly Excess Cashflow remaining
after the applications described in clause (A) above
and (ii) the excess of (a) the Available Funds Cap
Carry-Forward Amount for such Payment Date over (b)
the amount then on deposit in the Available Funds Cap
Carry-Forward Amount Account shall be allocated to
the Available Funds Cap Carry-Forward Amount Account;
and
35
(C) third, any Net Monthly Excess Cashflow remaining
after the applications described in clauses (A) and
(B) above shall be allocated to the Servicer pursuant
to clause (iv)(A)(II) below to the extent of any
unreimbursed Delinquency Advances, unreimbursed
Servicing Advances and accrued and unpaid Servicing
Fees, in each case as certified to the Indenture
Trustee by the Servicer to be owing to it as of such
Payment Date;
(iv) fourth, following the making by the Indenture Trustee of
all allocations, transfers and disbursements described above under
Section 3.3 hereof and the prior clauses of this Section 3.5, from
amounts (including any related Insured Payment which shall be paid only
to the Owners of the Notes) then on deposit in the Note Account, the
Indenture Trustee shall:
(A) distribute (I) to the Note Insurer the amounts
described in clause (ii)(B) above and (II) to the
Servicer the amounts described in clause (iii)(B)
above;
(B) retain in the Note Account, the Current Interest for
such Payment Date (including the proceeds of any
Insured Payments relating to interest made by the
Note Insurer);
(C) retain in the Note Account, the Principal Payment
Amount for such Payment Date (including the proceeds
of any Insured Payments relating to principal made by
the Note Insurer);
(D) distribute to the Indenture Trustee, for the
reimbursement of expenses of the Indenture Trustee
not reimbursed pursuant to clause (b)(i) above which
expenses were incurred in connection with its duties
and obligations hereunder; and
(v) fifth, following the making by the Indenture Trustee of
all allocations, transfers and disbursements described above under
Section 3.3 hereof and the prior clauses of this Section 3.5, from
amounts remaining on deposit in the Note Account, the Indenture Trustee
shall distribute to the Certificate Distribution Account, the Residual
Net Monthly Excess Cashflow, if any, for such Payment Date.
(c) On each Payment Date the Indenture Trustee shall distribute to the
Owners the amount, if any, then on deposit in the Available Funds Cap
Carry-Forward Amount Account.
(d) Notwithstanding clause (b)(iv) above, the aggregate amounts
distributed on all Payment Dates to the Owners of the Notes on account of
principal shall not exceed the Original Note Principal Balance.
Section 3.6. Investment of Accounts. (a) So long as no event described
in Sections 4.20(a) or (b) hereof shall have occurred and be continuing, and
consistent with any requirements of the Code, all or a portion of the Accounts
held by the Indenture Trustee shall be invested and reinvested by the Indenture
Trustee for the benefit of the Owners and the Note Insurer, as their interests
may appear, directed in writing by the Servicer on the Closing Date and from
time to time thereafter, in one or more Eligible Investments bearing interest or
sold at a discount. During the continuance of an event described in Sections
4.20(a) or (b) hereof and following any removal of the Servicer, the Note
Insurer shall direct such investments. No investment in any Account shall mature
later than the second Business Day preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any Account held by
the Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee
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shall cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such Account. No investments will be liquidated prior to maturity
unless the proceeds thereof are needed for disbursement.
(c) Subject to the terms of the Indenture, 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 loss on any Eligible Investment
included therein.
(d) The Indenture Trustee shall hold funds in the Accounts held by the
Indenture Trustee uninvested upon the occurrence of either of the following
events:
(i) the Servicer or the Note Insurer, as the case may be,
shall have failed to give investment directions to the Indenture
Trustee within ten days after receipt of a written request for such
directions from the Indenture Trustee; or
(ii) the Servicer or the Note Insurer, as the case may be,
shall have failed to give investment directions to the Indenture
Trustee with respect to any investment by the Indenture Trustee that
shall mature during the ten-day period described in clause (i).
(e) For purposes of investment, the Indenture Trustee shall aggregate
all amounts on deposit in each Account. All income or other gain from
investments in any Account shall be deposited in such Account immediately on
receipt, and any loss resulting from such investments shall be charged to the
Seller, and upon request by the Indenture Trustee, the Seller shall reimburse
the Trust Estate for such losses.
(f) Each institution at which the Note Account is maintained shall
invest the funds therein in Eligible Investments, which shall mature not later
than the Business Day next preceding the related Payment Date (except that if
such Eligible Investment is an obligation of the institution that maintains such
account, then such Eligible Investment shall mature not later than such Payment
Date) and, in each case, shall not be sold or disposed of prior to its maturity.
All such Eligible Investments shall be made in the name of the Indenture
Trustee, for the benefit of the Owners and the Note Insurer. All income and gain
(net of any losses) realized from any such investment of funds on deposit in the
Note Account shall be for the benefit of the Servicer as servicing compensation
and shall be remitted to it monthly as provided herein. The amount of any
realized losses in the Note Account incurred in any such account in respect of
any such investments shall promptly be deposited by the Servicer in the Note
Account or paid to the Indenture Trustee as applicable. The Indenture Trustee in
its fiduciary capacity shall not be liable for the amount of any loss incurred
in respect of any investment or lack of investment of funds held in the Note
Account and made in accordance with this Section 3.6(f).
(g) The Servicer shall give notice to the Indenture Trustee, the
Seller, the Issuer, each Rating Agency, and the Note Insurer of any proposed
change of the location of the Note Account not later than 30 days and not more
than 45 days prior to any change thereof.
Section 3.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the obligations
of any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(b) Federal funds, Notes of deposit, time and demand deposits, and
bankers' acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated A-1
or better by Standard & Poor's and P-1 by Moody's.
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(c) Investment agreements approved by the Note Insurer provided:
1. The agreement is with a bank or insurance company
which has an unsecured, uninsured and unguaranteed obligation
(or claims-paying ability) rated Aa2 or better by Moody's and
AA or better by Standard & Poor's,
2. Moneys invested thereunder may be withdrawn
without any penalty, premium or charge upon not more than one
day's notice (provided such notice may be amended or canceled
at any time prior to the withdrawal date),
3. The agreement is not subordinated to any other
obligations of such insurance company or bank,
4. The same guaranteed interest rate will be paid on
any future deposits made pursuant to such agreement, and
5. The Indenture Trustee and the Note Insurer receive
an opinion of counsel that such agreement is an enforceable
obligation of such insurance company or bank.
(d) Commercial paper (having original maturities of not more than 365
days) rated A-1 or better by Standard & Poor's and P-1 or better by Moody's.
(e) Investments in no load money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa by Moody's.
(f) Investments approved in writing by the Note Insurer and acceptable
to Moody's and Standard & Poor's.
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par.
Section 3.8. Reports by Indenture Trustee. (a) On each Payment Date the
Indenture Trustee shall provide to each Owner, the Owner Trustee, the Servicer,
the Note Insurer, the Underwriter, the Servicer, Standard & Poor's and Moody's a
written report (based solely upon the information contained in the Monthly
Servicing Report) in substantially the form set forth as Exhibit E hereto, as
such form may be revised by the Indenture Trustee, the Servicer, Moody's and
Standard & Poor's from time to time, but in every case setting forth the
information requested on Exhibit E hereto and the following information:
(i) the amount of the distribution with respect to
the Notes and the Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments or Prepaid Installments of principal included therein and
any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to
interest;
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(iv) the Note Principal Balance for the Notes as of
such Payment Date together with the principal amount of such Notes
(based on a Note in an original principal amount of $1,000) then
outstanding, in each case after giving effect to any payment of
principal on such Payment Date;
(v) the amount of any Insured Payment included in
the amounts distributed with respect to the Notes on such Payment Date;
(vi) information to the extent and in the form
furnished by the Seller pursuant to Section 6049(d)(7)(C) of the Code
and the regulations promulgated thereunder to assist the Owners in
computing their market discount;
(vii) the total of any Substitution Amounts and any
Loan Purchase Price amounts included in such distribution;
(viii) the amount of any Subordination Reduction
Amount;
(ix) the amounts, if any, of any Realized Losses for
the related Remittance Period and the cumulative amount of Realized
Losses since the Closing Date;
(x) for the related Remittance Period and
cumulatively since the Closing Date, the number and aggregate Loan
Balance of Mortgage Loans bought back by the Servicer or the Seller
pursuant to Sections 2.4, 2.6 and 4.10 (identified separately for each
such section); and
(xi) the amount of any Available Funds Cap
Carry-Forward Amount.
Items (i) through (iii) above shall be presented on the basis of a Note
having a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Notes are outstanding, the Indenture Trustee
shall furnish a report to each Owner of record at any time during each calendar
year as to the aggregate of amounts reported pursuant to (i), (ii) and (iii)
with respect to the Notes for such calendar year.
(b) In addition, on each Payment Date the Indenture Trustee will
distribute to each Owner, the Owner Trustee, the Note Insurer, the Underwriter,
the Servicer, the Seller, Standard & Poor's and Moody's, together with the
information described in Subsection (a) preceding, the following information as
of the last day of the related Remittance Period, which is hereby required to be
prepared by the Servicer and furnished to the Indenture Trustee for such purpose
on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans and the
aggregate Loan Balances thereof, and the percentage (based on the
aggregate Loan Balances of the Mortgage Loans) (a) 30-59 days
Delinquent, (b) 60-89 days Delinquent and (c) 90 or more days
Delinquent;
(ii) the number and aggregate Loan Balances of all
Mortgage Loans and percentage (based on the aggregate Loan Balances of
the Mortgage Loans) in foreclosure proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described in
the foregoing clause (i));
(iii) the number, aggregate Loan Balances of all
Mortgage Loans and percentage (based on the aggregate Loan Balances of
the Mortgage Loans) relating to Mortgagors in bankruptcy
39
proceedings (and whether any such Mortgage Loans are also included in
any of the statistics described in the foregoing clause (i));
(iv) the number, aggregate Loan Balances of all
Mortgage Loans and percentage (based on the aggregate Loan Balances of
the Mortgage Loans) relating to REO Properties (and whether any such
Mortgage Loans are also included in any of the statistics described in
the foregoing clause (i));
(v) the aggregate Loan Balance of all Mortgage Loans,
after giving effect to any payment of principal on such Payment Date;
and
(vi) the book value of any REO Property.
Section 3.9. Additional Reports by Indenture Trustee. (a) The Indenture
Trustee shall report to the Owner Trustee, the Seller, the Servicer, Standard &
Poor's, Moody's and the Note Insurer with respect to the amount then held in
each Account (including investment earnings accrued or scheduled to accrue) held
by the Indenture Trustee and the identity of the investments included therein,
as the Seller, the Servicer or the Note Insurer may from time to time request.
(b) Not later than 20 days after each Payment Date, the Indenture
Trustee shall forward to the Seller, the Servicer and the Note Insurer a
statement, setting forth the status of the Note Account as of the close of
business on the last Business Day of the related Remittance Period showing, for
the period covered by such statement, the aggregate of deposits into and
withdrawals from the Note Account.
ARTICLE IV
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 4.1. Servicer and Sub-Servicers. (a) Acting directly or through
one or more Sub-Servicers as provided in Section 4.3, the Servicer, as servicer,
shall service and administer the Mortgage Loans in accordance with this
Agreement and with reasonable care, and using that degree of skill and attention
that the Servicer exercises with respect to comparable mortgage loans that it
services for itself or others, and shall have full power and authority, acting
alone, to do or cause to be done any and all things in connection with such
servicing and administration which it may deem necessary or desirable.
(b) The duties of the Servicer shall include collecting and posting of
all payments, responding to inquiries of Mortgagors or by federal, state or
local government authorities with respect to the Mortgage Loans, investigating
delinquencies, reporting tax information to Mortgagors in accordance with its
customary practices and accounting for collections, furnishing monthly and
annual statements to the Indenture Trustee with respect to distributions, paying
Compensating Interest and making Delinquency Advances and Servicing Advances
pursuant hereto. The Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. The Servicer shall cooperate
with the Indenture Trustee and furnish to the Indenture Trustee with reasonable
promptness information in its possession as may be necessary or appropriate to
enable the Indenture Trustee to perform its tax reporting duties hereunder. The
Indenture 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 hereunder.
(c) Without limiting the generality of the foregoing, the Servicer (i)
shall continue, and is hereby authorized and empowered by the Indenture Trustee,
to execute and deliver, on behalf of itself, the
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Owners, the Issuer and the Indenture Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the related Properties; (ii) may consent to any
modification of the terms of any Mortgage Note not expressly prohibited hereby
if the effect of any such modification will not be to affect materially and
adversely the security afforded by the related Property, the timing of receipt
of any payments required hereby or the interests of the Note Insurer.
(d) The Servicer may, and is hereby authorized to, perform any of its
servicing responsibilities with respect to all or certain of the Mortgage Loans
through a Sub-Servicer as it may from time to time designate but no such
designation of a Sub-Servicer shall serve to release the Servicer from any of
its obligations under this Agreement. Such Sub-Servicer shall have all the
rights and powers of the Servicer with respect to such Mortgage Loans under this
Agreement.
(e) Without limiting the generality of the foregoing, but subject to
Sections 4.13 and 4.14, the Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Indenture Trustee to execute and deliver, on
behalf of itself, the Owners, the Issuer and the Indenture Trustee or any of
them, (i) any and all instruments of satisfaction or cancellation or of partial
or full release or discharge and all other comparable instruments with respect
to the Mortgage Loans and with respect to the Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property on behalf of the Indenture Trustee and (iii) to hold
title to any Property upon such foreclosure or deed in lieu of foreclosure on
behalf of the Indenture Trustee; provided, however, that Section 4.14(a) shall
constitute a power of attorney from the Issuer and the Indenture Trustee to the
Servicer to execute an instrument of satisfaction (or assignment of mortgage
without recourse) with respect to any Mortgage Loan paid in full (or with
respect to which payment in full has been escrowed). Subject to Sections 4.13
and 4.14, the Indenture Trustee shall execute a power of attorney to the
Servicer and any Sub-Servicer and furnish them with any other documents as the
Servicer or such Sub-Servicer shall reasonably request to enable the Servicer
and such Sub-Servicer to carry out their respective servicing and administrative
duties hereunder.
(f) The Servicer shall give prompt notice to the Indenture Trustee, the
Issuer and the Note Insurer of any action, of which the Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(g) Servicing Advances incurred by the Servicer or any Sub-Servicer in
connection with the servicing of the Mortgage Loans (including any penalties in
connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Servicer or such Sub-Servicer to the
extent described in Section 4.9(c) and in Section 3.5(b)(iii)(B) hereof.
Section 4.2. Collection of Certain Mortgage Loan Payments. (a) The
Servicer shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any applicable Insurance Policies
follow such collection procedures as it follows from time to time with respect
to mortgage loans in its servicing portfolio that are comparable to the Mortgage
Loans; provided that the Servicer shall always at least follow collection
procedures that are consistent with or better than standard industry practices.
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan; provided, however, the
Servicer shall not reschedule the payment of delinquent payments more than one
time in any twelve (12) consecutive months with respect to any Mortgagor or
(iii) modify payments of monthly principal
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and interest on any Mortgage Loan becoming subject to the terms of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended, in accordance with the
Servicer's general policies of the comparable mortgage loans subject to such
Act.
(b) The Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the related
Mortgage Note.
Section 4.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is
acceptable to the Note Insurer and which is in compliance with the laws of each
state necessary to enable it to perform its obligations under such Sub-Servicing
Agreement and (x) has (i) been designated an approved seller-servicer by FHLMC
or Fannie Mae for Mortgage Loans and (ii) has equity of at least $5,000,000, as
determined in accordance with generally accepted accounting principles or (y) is
a Servicer Affiliate. The Servicer shall give notice to the Note Insurer, the
Rating Agencies and the Indenture Trustee of the appointment of any Sub-Servicer
and shall furnish to the Note Insurer and the Indenture Trustee a copy of such
Sub-Servicing Agreement. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. Any such Sub-Servicing Agreement shall be consistent
with and not violate the provisions of this Agreement.
Section 4.4. Successor Sub-Servicers. The Servicer may terminate any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and either itself directly service the related Mortgage
Loans or enter into a Sub-Servicing Agreement with a successor Sub-Servicer that
qualifies under Section 4.3.
Section 4.5. Liability of Servicer. The Servicer shall not be relieved
of its obligations under this Agreement notwithstanding any Sub-Servicing
Agreement or any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer and a Sub-Servicer or otherwise, and the
Servicer shall be obligated to the same extent and under the same terms and
conditions as if it alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer by such Sub-Servicer and nothing contained
in such Sub-Servicing Agreement shall be deemed to limit or modify this
Agreement. The Trust shall not indemnify the Servicer for any losses due to the
Servicer's negligence.
Section 4.6. No Contractual Relationship Between Sub-Servicer and
Indenture Trustee or the Owners. Any Sub-Servicing Agreement and any other
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
shall be deemed to be between the Sub-Servicer and the Servicer alone and the
Note Insurer, the Indenture Trustee and the Owners shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to any Sub-Servicer except as set forth in Section 4.7.
Section 4.7. Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Indenture Trustee pursuant to Section 4.20, it is understood
and agreed that the Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Servicer and a Sub-Servicer may be assumed
or terminated by the Indenture Trustee at its option without the payment of a
fee notwithstanding any contrary provision in any Sub-Servicing Agreement.
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The Servicer shall, upon reasonable request of the Indenture Trustee,
but at the expense of the Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party.
Section 4.8. Principal and Interest Account.
(a) The Servicer shall establish in the name of the Trust for the
benefit of the Owners of the Notes and the Note Insurer and maintain at one or
more Designated Depository Institutions the Principal and Interest Account. The
funds held in the Principal and Interest Account shall not be commingled with
any other funds.
Subject to Subsection (c) below, the Servicer and any Sub-Servicer
shall deposit all receipts related to the Mortgage Loans into the Principal and
Interest Account on a daily basis (but no later than the first Business Day
after receipt).
Subject to Subsection (c) below, within one Business Day following the
Closing Date, the Seller and/or the Servicer shall deposit into the Principal
and Interest Account all receipts related to the related Mortgage Loans received
after the Cut-Off Date.
(b) Any investment of funds in the Principal and Interest Account shall
mature or be withdrawable at par on or prior to the immediately succeeding
Remittance Date. All funds in the Principal and Interest Account may only be
held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in trust
in the name of the Trust and for the benefit of the Owners of the Notes. Any
investment earnings on funds held in the Principal and Interest Account shall be
for the account of the Servicer and may only be withdrawn from the Principal and
Interest Account by the Servicer on the second Business Day of the month for the
investment earnings for the previous calendar month. The Servicer shall withdraw
from the Principal and Interest Account, on the second Business Day of the
month, investment earnings for the previous calendar month. The Servicer shall
deposit into the Principal and Interest Account the amount of all losses on
investment of funds in the Principal and Interest Account. Any references herein
to amounts on deposit in the Principal and Interest Account shall refer to
amounts net of investment earnings.
(c) The Servicer shall deposit to the Principal and Interest Account
all principal and interest collections on the Mortgage Loans received after the
Cut-Off Date, including any Prepayments and Net Liquidation Proceeds, all Loan
Purchase Prices and Substitution Amounts received or paid by the Servicer with
respect to the Mortgage Loans, other recoveries or amounts related to the
Mortgage Loans received by the Servicer, Compensating Interest and Delinquency
Advances together with any amounts which are reimbursable from the Principal and
Interest Account but net of (i) the Servicing Fee with respect to each Mortgage
Loan and other servicing compensation to the Servicer as permitted by Section
4.15 hereof, (ii) principal (including Prepayments) due on the related Mortgage
Loans on or prior to the Cut-Off Date, (iii) interest accruing on the related
Mortgage Loans on or prior to the Cut-Off Date and (iv) Net Liquidation Proceeds
to the extent such Net Liquidation Proceeds exceed the Loan Balance of the
related Mortgage Loan.
(d) (i) The Servicer may make withdrawals from the Principal and
Interest Account only for the following purposes:
(A) to effect the timely remittance to the Indenture
Trustee of the Monthly Remittance Amount due on the
Remittance Date;
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(B) to reimburse itself pursuant to Section 4.9(a) hereof
for unrecovered Delinquency Advances and Servicing
Advances;
(C) to withdraw investment earnings on amounts on deposit
in the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest
Account following the termination of the Trust
pursuant to Article V hereof.
(ii) On the Determination Date of each month, commencing in April 1998
the Servicer shall send to the Indenture Trustee the Monthly Exception Report
detailing the payments on the Mortgage Loans during the prior Remittance Period
and certifying the amounts and purpose of withdrawals permitted pursuant to (d)
above from the Principal and Interest Account. Such report shall contain the
specified data, as described in Section 4.26 hereof, and shall be in the form
and have the specifications as may be agreed to between the Servicer, the Note
Insurer and the Indenture Trustee from time to time.
(iii) On each Remittance Date, commencing in April 1998 the Servicer
shall remit to the Indenture Trustee by wire transfer, or otherwise make funds
available in immediately available funds for deposit to the Note Account, the
Interest Remittance Amount for such Remittance Date and the Principal Remittance
Amount for such Remittance Date.
Section 4.9. Delinquency Advances, Compensating Interest and Servicing
Advances. (a) The Servicer is required, not later than each Remittance Date, to
deposit into the Principal and Interest Account an amount equal to the sum of
(i) the interest due (net of the Servicing Fees due) but not collected and (ii)
scheduled principal due, but not collected, with respect to Delinquent Mortgage
Loans during the related Due Period but only if, in its good faith business
judgment, the Servicer reasonably believes that such amount will ultimately be
recovered from the related Mortgage Loan. Such amounts are "Delinquency
Advances".
The Servicer shall be permitted to fund its payment of Delinquency
Advances on any Remittance Date and to reimburse itself for any Delinquency
Advances paid from the Servicer's own funds, from collections on any Mortgage
Loan deposited to the Principal and Interest Account subsequent to the related
Due Period and shall deposit into the Principal and Interest Account with
respect thereto (i) collections from the Mortgagor whose Delinquency gave rise
to the shortfall which resulted in such Delinquency Advance (ii) on the
Remittance Date in April 1998, interest accrued on each Subsequent Mortgage Loan
transferred to the Issuer during the Funding Period and (iii) Net Liquidation
Proceeds recovered on account of the related Mortgage Loan to the extent of the
amount of aggregate Delinquency Advances related thereto. If not thereto
recovered from the related Mortgagor or the related Net Liquidation Proceeds,
Delinquency Advances shall be recoverable pursuant to Section 3.5(b)(iii)(B).
(b) On or prior to each Remittance Date, the Servicer shall deposit in
the Principal and Interest Account with respect to any Paid-in-Full Mortgage
Loan during the related Remittance Period out of its own funds without any right
of reimbursement therefor an amount equal to the difference between (x) 30 days'
interest at such Mortgage Loan's Coupon Rate (less the Servicing Fee Rate) on
the Loan Balance of such Mortgage Loan as of the first day of the related
Remittance Period and (y) to the extent not previously advanced, the interest
(less the Servicing Fee) paid by the Mortgagor with respect to the Mortgage Loan
during such Remittance Period (any such amount paid by the Servicer,
"Compensating Interest"). The Servicer shall in no event be required to pay
Compensating Interest with respect to any Remittance Period
44
in an amount in excess of the aggregate Servicing Fee received by the Servicer
with respect to all Mortgage Loans for such Remittance Period. Further, the
Servicer is not obligated to cover shortfalls in collections in interest due to
Curtailments.
(c) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Servicer reasonably believes such costs and expenses will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such amount
so paid will constitute a "Servicing Advance". The Servicer may recover
Servicing Advances (x) from the Mortgagors to the extent permitted by the
Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of the
related Mortgage Loan, and (y) as provided in Section 3.5(b)(iii)(B) hereof. In
no case may the Servicer recover Servicing Advances from principal and interest
payments on any Mortgage Loan or from any amounts relating to any other Mortgage
Loan except as provided pursuant to Section 3.5(b)(iii)(B) hereof.
Section 4.10. Purchase of Mortgage Loans. The Servicer may, but is not
obligated to, purchase for its own account any Mortgage Loan which becomes
Delinquent, in whole or in part, as to four consecutive monthly installments or
any Mortgage Loan as to which enforcement proceedings have been brought by the
Servicer or by any Sub-Servicer pursuant to Section 4.13. Any such Loan so
purchased shall be purchased by the Servicer not later than the related
Remittance Date at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be deposited in the Principal and Interest Account.
Section 4.11. Maintenance of Insurance. (a) The Servicer shall cause to
be maintained with respect to each Mortgage Loan a hazard insurance policy with
a generally acceptable carrier that provides for fire and extended coverage, and
which provides for a recovery by the Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan in an amount not less than the
least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the
minimum amount required to compensate for damage or loss on a replacement cost
basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Servicer will cause to be
maintained with respect thereto a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable carrier in an amount representing coverage, and
which provides for a recovery by the Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the least of
(i) the outstanding principal balance of the Mortgage Loan, (ii) the minimum
amount required to compensate for damage or loss on a replacement cost basis and
(iii) the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973. The Servicer shall indemnify the Trust and the Note
Insurer out of the Servicer's own funds for any loss to the Trust and the Note
Insurer resulting from the Servicer's failure to maintain the insurance required
by this Section.
(c) In the event that the Servicer shall obtain and maintain a blanket
policy insuring against fire, flood and hazards of extended coverage on all of
the Mortgage Loans, then, to the extent such policy names the Servicer as loss
payee and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Mortgage Loans without co-insurance and otherwise complies with
the requirements of this Section 4.11, the Servicer shall be deemed conclusively
to have satisfied its obligations with respect to fire and hazard insurance
coverage under this Section 4.11, it being understood and agreed that such
blanket policy may contain a deductible clause, in which case the Servicer
shall, in the event that there shall not have been maintained on the related
Property a policy complying with the preceding paragraphs of this
45
Section 4.11, and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the Servicer's
own funds the difference, if any, between the amount that would have been
payable under a policy complying with the preceding paragraphs of this Section
4.11 and the amount paid under such blanket policy. Upon the request of the
Indenture Trustee or the Note Insurer, the Servicer shall cause to be delivered
to the Indenture Trustee or the Note Insurer a certified true copy of such
policy.
Section 4.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, 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 Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if (i) the "due-on-sale" clause, in the reasonable
belief of the Servicer, is not enforceable under applicable law or (ii) the
Servicer reasonably believes that to permit an assumption of the Mortgage Loan
would not materially and adversely affect the interest of the Owners or of the
Note Insurer. In such event, 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
Mortgage Note and, unless prohibited by applicable law or the related Mortgage
Loan documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Mortgage Note; provided, however, that to
the extent any such substitution of liability agreement would be delivered by
the Servicer outside of its usual procedures for mortgage loans held in its own
portfolio the Servicer shall, prior to executing and delivering such agreement,
obtain the prior written consent of the Note Insurer. The Mortgage Loan, as
assumed, shall conform in all respects to the requirements, representations and
warranties of this Agreement. The Servicer shall notify the Indenture Trustee
that any such assumption or substitution agreement has been completed by
forwarding to the Indenture Trustee the original copy of such assumption or
substitution agreement, which copy shall be added by the Indenture Trustee to
the related File and which shall, for all purposes, be considered a part of such
File to the same extent as all other documents and instruments constituting a
part thereof. The Servicer shall be responsible for recording any such
assumption or substitution agreements. In connection with any such assumption or
substitution agreement, the required monthly payment on the related Mortgage
Loan shall not be changed but shall remain as in effect immediately prior to the
assumption or substitution, the stated maturity or outstanding principal amount
of such Mortgage Loan shall not be changed nor shall any required monthly
payments of principal or interest be deferred or forgiven. Any fee collected by
the Servicer or the Sub-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
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 4.13. Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Properties relating to defaulted Mortgage Loans as to
which no satisfactory arrangements can be made for collection of Delinquent
payments and which the Servicer has not purchased pursuant to Section 4.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise such of the rights and powers vested in it hereunder, and use the same
degree of care and skill in its exercise or use as prudent mortgage lenders
would exercise or use under the circumstances in the conduct of their own
affairs, including, but not limited to,
46
advancing funds for the payment of taxes and insurance premiums. Any amounts so
advanced shall constitute "Servicing Advances" within the meaning of Section
4.9(c) hereof. The Servicer shall sell any REO Property within 35 months of its
acquisition by the Trust, unless the Servicer obtains for the Indenture Trustee
and the Note Insurer an opinion of counsel experienced in federal income tax
matters and reasonably acceptable to the Note Insurer, addressed to the
Indenture Trustee, the Note Insurer and the Servicer, to the effect that the
holding by the Trust of such REO Property for any greater period will not result
in the imposition of taxes on the Trust.
Pursuant to its efforts to sell such REO Property, the Servicer shall
either itself or through an agent selected by the Servicer protect and conserve
such REO Property in the same manner and to such extent as is customary in the
locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof, as the Servicer deems to be in the best interest of the Owners
for the period prior to the sale of such REO Property. The Servicer shall take
into account the existence of any hazardous substances, hazardous wastes or
solid wastes, as such terms are defined in the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental legislation, on a
Property in determining whether to foreclose upon or otherwise comparably
convert the ownership of such Property.
(b) The Servicer shall determine, with respect to each defaulted
Mortgage Loan, when it has recovered, whether through Indenture Trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
Section 4.14. Indenture Trustee to Cooperate; Release of Files. (a)
Upon the payment in full of any Mortgage Loan (including the repurchase of any
Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure or
otherwise) 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 shall
deliver to the Indenture Trustee a Request for Release. Upon receipt of such
Request for Release, the Custodian, on behalf of the Indenture Trustee, shall
promptly release the related File, in trust to (i) the Servicer, (ii) an escrow
agent or (iii) any employee, agent or attorney of the Indenture Trustee, in each
case pending its release by the Servicer, such escrow agent or such employee,
agent or attorney of the Indenture Trustee, as the case may be. Upon any such
payment in full or the receipt of such notification that such funds have been
placed in escrow, the Servicer is authorized to give, as attorney-in-fact for
the Indenture Trustee and the mortgagee under the Mortgage which secured the
Mortgage Note, an instrument of satisfaction (or assignment of Mortgage without
recourse) regarding the Property relating to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of payment in full, it
being understood and agreed that no expense incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Principal and Interest Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Servicer may prepare and
submit to the Indenture Trustee a satisfaction (or assignment without recourse,
if requested by the Person or Persons entitled thereto) in form for execution by
the Indenture Trustee with all requisite information completed by the Servicer;
in such event, the Indenture Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Custodian, on behalf of the Indenture Trustee shall (except in the
case of the payment or liquidation pursuant to which the related File is
released to an escrow agent or an
47
employee, agent or attorney of the Indenture Trustee), upon request of the
Servicer and delivery to the Custodian of a Request for Release, release the
related File to the Servicer and shall execute such documents as shall be
necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the
Servicer; provided that there shall not be released and unreturned at any one
time more than 10% of the entire number of Files. The Indenture Trustee shall
complete in the name of the Indenture Trustee any endorsement in blank on any
Mortgage Note prior to releasing such Mortgage Note to the Servicer. Such
receipt shall obligate the Servicer to return the File to the Custodian when the
need therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated in which case, upon receipt of the liquidation information, in
physical or electronic form, the Request for Release shall be released by the
Indenture Trustee to the Servicer.
(c) The Servicer shall have the right to approve applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages. No
application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Mortgage Note and Mortgage have been complied with;
(y) the Loan-to-Value Ratio (which may, for this purpose, be determined at the
time of any such action in a manner reasonably acceptable to the Note Insurer)
after any release does not exceed the Loan-to-Value Ratio as of the Cut-Off Date
or Subsequent Cut-Off Date, as the case may be, and the Mortgagor's
debt-to-income ratio after any release does not exceed the debt-to-income ratio
as of the Cut-Off Date and in no event exceeds the maximum debt- to-income
levels under the related Originator's underwriting guidelines for a similar
credit grade borrower and (z) the lien priority of the related Mortgage is not
adversely affected. Upon receipt by the Indenture Trustee of an Officer's
Certificate executed on behalf of the Servicer setting forth the action proposed
to be taken in respect of a particular Mortgage Loan and certifying that the
criteria set forth in the immediately preceding sentence have been satisfied,
the Indenture Trustee shall execute and deliver to the Servicer the consent or
partial release so requested by the Servicer. A proposed form of consent or
partial release, as the case may be, shall accompany any Officer's Certificate
delivered by the Servicer pursuant to this paragraph.
(d) No costs associated with the procedures described in this Section
4.14 shall be an expense of the Trust.
Section 4.15. Servicing Compensation. As compensation for its
activities hereunder, the Servicer shall be entitled to retain the amount of the
Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, prepayment penalties, any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 4.8(c)(iv) and similar
items shall, to the extent collected from Mortgagors, be retained by the
Servicer.
Section 4.16. Annual Statement as to Compliance. (a) The Servicer, at
its own expense, will deliver to the Indenture Trustee, the Note Insurer,
Standard & Poor's and Moody's, on or before the last day of March of each year,
commencing in 1999, an Officer's Certificate stating, as to each signer thereof,
that (i) a review of the activities of the Servicer during such preceding
calendar year and of performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the Servicer has fulfilled all its obligations under this Agreement
for such year, or, if there has been a default in the fulfillment of all such
obligations, specifying each such default known to such officers and the nature
and status thereof including the steps being taken by the Servicer to remedy
such defaults.
(b) The Servicer shall deliver to the Issuer, the Indenture Trustee,
the Note Insurer, the Owners and the Rating Agencies, promptly after having
obtained knowledge thereof but in no event later
48
than five Business Days thereafter, written notice by means of an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Servicing Termination.
Section 4.17. Annual Independent Certified Public Accountants' Reports.
On or before the last day of March of each year, commencing in 1999, the
Servicer, at its own expense, shall cause to be delivered to the Indenture
Trustee, the Note Insurer, Standard & Poor's and Moody's a letter or letters of
a firm of independent, nationally- recognized certified public accountants
reasonably acceptable to the Note Insurer stating that such firm has, with
respect to the Servicer's overall servicing operations during the preceding
calendar year, examined such operations in accordance with the requirements of
the Uniform Single Audit Program for Mortgage Bankers, and in either case
stating such firm's conclusions relating thereto.
Section 4.18. Access to Certain Documentation and Information Regarding
the Mortgage Loans. The Servicer shall provide to the Indenture Trustee, the
Note Insurer, the FDIC and the supervisory agents and examiners of each of the
foregoing access to the documentation regarding the Mortgage 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.
Upon any change in the format of the computer tape maintained by the
Servicer in respect of the Mortgage Loans, the Servicer shall deliver a copy of
such computer tape to the Indenture Trustee and in addition shall provide a copy
of such computer tape to the Indenture Trustee, and the Note Insurer at such
other times as the Indenture Trustee or the Note Insurer may reasonably request.
Section 4.19. Assignment of Agreement. The Servicer may not assign its
obligations under this Agreement, in whole or in part, unless it shall have
first obtained the written consent of the Indenture Trustee and the Note
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 4.21(f) hereof for a successor servicer. Notice of any such assignment
shall be given by the Servicer to the Indenture Trustee, the Issuer, the Note
Insurer and the Rating Agencies.
Section 4.20. Events of Servicing Termination. (a) The Indenture
Trustee or the Note Insurer (or the Owners with the consent of the Note Insurer)
may remove the Servicer (including any successor entity serving as the Servicer)
upon the occurrence of any of the following events:
(i) The Servicer shall fail to deliver to the
Indenture Trustee any proceeds or required payment, which failure
continues unremedied for five Business Days following written notice to
an Authorized Officer of the Servicer from the Indenture Trustee or
from any Owner;
(ii) The Servicer shall (I) apply for or consent to
the appointment of a receiver, Indenture Trustee, liquidator or
custodian or similar entity with respect to itself or its property,
(II) admit in writing its inability to pay its debts generally as they
become due, (III) make a general assignment for the benefit of
creditors, (IV) be adjudicated a bankrupt or insolvent, (V) commence a
voluntary case under the federal bankruptcy laws of the United States
of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief or
seeking to take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed against it in
any bankruptcy, reorganization or insolvency proceeding or (VI) take
corporate action for the purpose of effecting any of the foregoing;
(iii) If without the application, approval or consent
of the Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
49
insolvency, reorganization or relief of debtors, seeking in respect of
the Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of
a Indenture Trustee, receiver, liquidator, custodian or similar entity
with respect to the Servicer or of all or any substantial part of its
assets, or other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by the
Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B)
continue undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days;
(iv) The Servicer shall fail to perform any one or
more of its obligations hereunder (other than the obligations set out
in (i) above) and shall continue in default thereof for a period of
sixty (60) days after the earlier of (x) notice by the Indenture
Trustee or the Note Insurer of said failure or (y) actual knowledge of
an officer of the Servicer; provided, however, that if the Servicer can
demonstrate to the reasonable satisfaction of the Note Insurer that it
is diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Note Insurer; or
(v) The Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 2.2 which
materially and adversely affects the interests of the Owners or Note
Insurer for a period of sixty (60) days after the Servicer's discovery
or receipt of notice thereof; provided, however, that if the Servicer
can demonstrate to the reasonable satisfaction of the Note Insurer that
it is diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Note Insurer.
(b) The Note Insurer may remove the Servicer upon the occurrence of any
of the following events:
(i) a Total Available Funds Shortfall; provided,
however, that the Note Insurer shall have no right to remove the
Servicer under this clause (i) if the Servicer can demonstrate to the
reasonable satisfaction of the Note Insurer that such event was due to
circumstances beyond the control of the Servicer;
(ii) the failure by the Servicer to make any required
Servicing Advance;
(iii) the failure by the Servicer to perform any one
or more of its obligations hereunder, which failure materially and
adversely affects the interests of the Note Insurer, and the
continuance of such failure for a period of 30 days or such longer
period as agreed to in writing by the Note Insurer.
(iv) the failure by the Servicer to make any required
Delinquency Advance or to pay any Compensating Interest;
(v) if on any Payment Date the Pool Rolling Three
Month Delinquency Rate exceeds 7.0%;
(vi) if on any Payment Date occurring in March of any
year, commencing in March 1999, the aggregate Pool Cumulative Realized
Losses over the prior twelve month period exceed 2.0% of the average
Pool Principal Balance as of the close of business on the last day of
each of the twelve preceding Remittance Periods; or
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(vii) (a) if on any of the first 60 Payment Dates
from the Closing Date the aggregate Pool Cumulative Expected Losses for
all prior Remittance Periods since the Closing Date exceed 5.0% of the
Pool Principal Balance as of the Cut-Off Date and (b) if on any Payment
Date thereafter the aggregate Pool Cumulative Expected Losses for all
prior Remittance Periods from the Closing Date exceed 6.5% of the Pool
Principal Balance as of the Cut-Off Date, provided, however, with
respect to clauses (v), (vi) and (vii), if the Servicer can demonstrate
to the reasonable satisfaction of the Note Insurer that any such event
was due to circumstances beyond the control of the Servicer, such event
shall not be considered an event of termination of the Servicer.
Upon the Indenture Trustee's determination that a required Delinquency
Advance or payment of Compensating Interest has not been made by the Servicer,
the Indenture Trustee shall so notify in writing an Authorized Officer of the
Servicer and the Note Insurer as soon as is reasonably practical.
(c) In the case of clauses (i), (ii), (iii), (iv) or (v) of Subsection
(b) the Owners of Notes evidencing not less than 33 1/3% of the aggregate Note
Principal Balance (with the consent of the Note Insurer) by notice then given in
writing to the Servicer (and a copy to the Indenture Trustee) may terminate all
of the rights and obligations of the Servicer under this Agreement; provided,
however, that the responsibilities and duties of the initial Servicer with
respect to the repurchase of Mortgage Loans pursuant to Section 2.4 shall not
terminate. The Indenture Trustee shall mail a copy of any notice given by it
hereunder to the Rating Agencies. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes or the Mortgage Loans or otherwise,
shall without further action pass to and be vested in the Indenture Trustee (for
this purpose, the term includes an affiliate thereof) or such successor Servicer
as may be appointed hereunder, and, without limitation, the Indenture Trustee is
hereby authorized and empowered (which authority and power are coupled with an
interest and are irrevocable) to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments and to do or accomplish all other acts or things necessary
or appropriate to effect the purposes of such notice or termination, whether to
complete the transfer and endorsement of the Mortgage Loans and related
documents or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer or the Indenture Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement
including the transfer to the successor Servicer or to the Indenture Trustee for
administration by it of all cash accounts that shall at the time be held by the
predecessor Servicer for deposit or shall thereafter be received with respect to
a Mortgage Loan. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 4.20 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
(d) If any event described in subsections (a) or (b) above occurs and
is continuing, during the 30 day period following receipt of notice, the
Indenture Trustee and the Note Insurer shall cooperate with each other to
determine if the occurrence of such event is more likely than not the result of
the acts or omissions of the Servicer or more likely than not the result of
events beyond the control of the Servicer. If the Indenture Trustee and the Note
Insurer conclude that the event is the result of the latter, the Servicer may
not be terminated, unless and until some other event set forth in subsection (a)
or (b) has occurred and is continuing. If the Indenture Trustee and the Note
Insurer conclude that the event is the result of the former, the Note Insurer
may terminate the Servicer in accordance with this Section, and the Indenture
Trustee shall act as successor Servicer.
If the Indenture Trustee and the Note Insurer cannot agree,
and the basis for such disagreement is not arbitrary or unreasonable, as to the
cause of the event, the decision of the Note Insurer shall control; provided,
however, that if the Note Insurer decides to terminate the Servicer, the
Indenture
51
Trustee shall be relieved of its obligation to assume the servicing or to
appoint a successor, which shall be the exclusive obligation of the Note
Insurer.
The Note Insurer agrees to use its best efforts to inform the Indenture
Trustee of any materially adverse information regarding the Servicer's servicing
activities that comes to the attention of the Note Insurer from time to time.
Section 4.21. Resignation of Servicer and Appointment of Successor. (a)
Upon the Servicer's receipt of notice of termination pursuant to Section 4.20 or
the Servicer's resignation in accordance with the terms of this Section 4.21,
the predecessor Servicer shall continue to perform its functions as Servicer
under this Agreement, in the case of termination, only until the date specified
in such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation, until
the earlier of (x) the date 45 days from the delivery to the Note Insurer and
the Indenture Trustee of written notice of such resignation (or written
confirmation of such notice) in accordance with the terms of this Agreement and
(y) the date upon which the predecessor Servicer shall become unable to act as
Servicer, as specified in the notice of resignation and accompanying opinion of
counsel. All collections then being held by the predecessor Servicer prior to
its removal and any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly and immediately to the Indenture Trustee or the successor Servicer. In
the event of the Servicer's resignation or termination hereunder, the Indenture
Trustee shall appoint a successor Servicer and the successor Servicer shall
accept its appointment by a written assumption in form acceptable to the
Indenture Trustee and the Note Insurer, with copies to the Note Insurer and the
Rating Agencies. Pending such appointment, the Indenture Trustee shall act as
the Servicer hereunder.
(b) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except (i) upon determination that its duties hereunder
are no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer at the date of this Agreement or (ii) upon written
consent of the Note Insurer and the Indenture Trustee. Any such determination
permitting the resignation of the Servicer shall be evidenced by an opinion of
counsel to such effect which shall be delivered to the Indenture Trustee and the
Note Insurer.
(c) No removal or resignation of the Servicer shall become effective
until the Indenture Trustee or a successor Servicer shall have assumed the
Servicer's responsibilities and obligations in accordance with this Section.
(d) Upon removal or resignation of the Servicer, the Servicer also
shall promptly deliver or cause to be delivered to a successor Servicer or the
Indenture Trustee all the books and records (including, without limitation,
records kept in electronic form) that the Servicer has maintained for the
Mortgage Loans, including all tax bills, assessment notices, insurance premium
notices and all other documents as well as all original documents then in the
Servicer's possession.
(e) Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly and immediately to the Indenture Trustee, or the successor Servicer.
(f) Upon removal or resignation of the Servicer, the Indenture Trustee
(x) shall solicit bids for a successor Servicer as described below and (y)
pending the appointment of a successor Servicer as a result of soliciting such
bids, shall serve as Servicer. The Indenture Trustee shall, if it is unable to
obtain a qualifying bid and is prevented by law from acting as Servicer, (I)
appoint, or petition a court of competent
52
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution which has been designated as an approved
seller-servicer by Fannie Mae or FHLMC for second mortgage loans and having
equity of not less than $15,000,000 or such lower level as may be acceptable to
the Note Insurer as determined in accordance with generally accepted accounting
principles as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder and (II) give notice thereof to the Note Insurer and Rating Agencies.
The compensation of any successor Servicer (including, without limitation, the
Indenture Trustee) so appointed shall be the Servicing Fee, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 4.8 and 4.15; provided, however,
that if the Indenture Trustee acts as successor Servicer, then the former
Servicer agrees to pay to the Indenture Trustee at such time that the Indenture
Trustee becomes such successor Servicer a set-up fee of fifteen dollars ($15.00)
for each Mortgage Loan then included in the Trust Estate. The Indenture Trustee
shall be obligated to serve as successor Servicer whether or not the fee
described in the preceding sentence is paid by the Seller, but shall in any
event be entitled to receive, and to enforce payment of, such fee from the
former Servicer.
(g) In the event the Indenture Trustee solicits bids as provided above,
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 above. Such public announcement shall specify that
the successor Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 4.8 and 4.15. 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 satisfactory bid as to the price
they will pay to obtain such servicing. 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. After such deductions, the remainder of
such sum shall be paid by the Indenture Trustee to the Servicer at the time of
such sale.
(h) The Indenture Trustee and such successor shall take such action
consistent with this Agreement as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors of the transfer of
servicing if such notification is not done by the Servicer as required by
subsection (j) below. 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 Principal and Interest Account by the
Servicer or which are thereafter received with respect to the Mortgage 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 delivery, cash, documents or records to it
or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer.
(i) The Indenture Trustee or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Servicer has
theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Indenture Trustee is acting as successor Servicer, the
Indenture Trustee shall only be required to make Delinquency Advances (including
the Delinquency Advances described in this clause (i)) if, in the
53
Indenture Trustee's reasonable good faith judgment, such Delinquency Advances
will ultimately be recoverable from the Mortgage Loans.
(j) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors and to the Rating Agencies of the transfer of the
servicing to the successor Servicer.
(k) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities of the predecessor Servicer including,
but not limited to, the maintenance of the hazard insurance policy(ies), the
fidelity bond and an errors and omissions policy pursuant to Section 4.23 and
shall be entitled to the Monthly Servicing Fee and all of the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement. The
appointment of a successor Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as Servicer (including, without limitation, any deductible under an
insurance policy) nor shall any successor Servicer be liable for any acts or
omissions of the predecessor Servicer or for any breach by such Servicer of any
of its representations or warranties contained herein or in any related document
or agreement.
(l) The Indenture Trustee shall give notice to the Note Insurer,
Moody's and Standard & Poor's and the Owners of the occurrence of any event
specified in Section 4.20 of which the Indenture Trustee has actual knowledge.
Section 4.22. Waiver of Past Events of Servicing Termination. Subject
to the rights of the Note Insurer pursuant to Section 4.20 to terminate all of
the rights and obligations of the Servicer under this Agreement, the Owners of
at least 51% of the Note Principal Balance may, on behalf of all Owners of
Notes, waive any default by the Servicer in the performance of its obligations
hereunder and its consequences, except a default in making any required deposits
to or payments from the Principal and Interest Account in accordance with this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Event of Servicing Termination arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
Section 4.23. Inspections by Note Insurer; Errors and Omissions
Insurance. (a) At any reasonable time and from time to time upon reasonable
notice, the Note Insurer, the Indenture Trustee, or any agents or
representatives thereof may inspect the Servicer's servicing operations and
discuss the servicing operations of the Servicer with any of its officers or
directors. The costs and expenses incurred by the Servicer or its agents or
representatives in connection with any such examinations or discussions shall be
paid by the Servicer.
(b) The Servicer agrees to maintain errors and omissions coverage and a
fidelity bond, each at least to the extent generally maintained by prudent
mortgage loan servicers having servicing portfolios of a similar size.
Section 4.24. Merger, Conversion, Consolidation or Succession to
Business of Servicer. Any corporation into which the Servicer may be merged or
converted or with which it may be consolidated, or corporation resulting from
any merger, conversion or consolidation to which the Servicer shall be a party
or any corporation succeeding to all or substantially all of the business of the
Servicer shall be the successor of the Servicer hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto provided that such corporation meets the qualifications set forth in
Section 4.21(f).
54
Section 4.25. Notices of Material Events. The Servicer shall give
prompt notice to the Note Insurer, the Indenture Trustee, the Issuer, the Owner
Trustee, Moody's and Standard & Poor's of the occurrence of any of the following
events:
(a) Any default or any fact or event which results, or which with
notice or the passage of time, or both, would result in the occurrence of a
default by the Seller, any Originator or the Servicer under any Operative
Document or would constitute a material breach of a representation, warranty or
covenant under any Operative Document;
(b) The submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation against the Seller or the
Servicer in any federal, state or local court or before any governmental body or
agency or before any arbitration board or any such proceedings threatened by any
governmental agency, which, if adversely determined, would have a material
adverse effect upon any the Seller's or the Servicer's ability to perform its
obligations under any Operative Document;
(c) The commencement of any proceedings by or against the Seller or the
Servicer under any applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, Indenture Trustee or other similar official
shall have been, or may be, appointed or requested for the Seller or the
Servicer; and
(d) The receipt of notice from any agency or governmental body having
authority over the conduct of any of the Seller's or the Servicer's business
that the Seller or the Servicer is to cease and desist, or to undertake any
practice, program, procedure or policy employed by the Seller or the Servicer in
the conduct of the business of any of them, and such cessation or undertaking
will materially and adversely affect the conduct of the Seller's or the
Servicer's business or its ability to perform under the Operative Documents or
materially and adversely affect the financial affairs of the Seller or the
Servicer.
Section 4.26. Monthly Servicing Report and Servicing Certificate. (a)
The Servicer shall, not later than the related Determination Date, deliver to
the Indenture Trustee, the Rating Agencies and the Note Insurer a Monthly
Servicing Report relating to the Mortgage Loans stating the following:
(i) As to the related Due Period, the Interest
Remittance Amount (in both cases specifying the (a) scheduled interest
collected; (b) Delinquency Advances relating to interest; and (c)
Compensating Interest paid) and the Principal Remittance Amount (in
both cases specifying the (1) scheduled principal collected; (2)
Delinquency Advance relating to Mortgage principal; (3) Prepayments;
(4) Loan Balance of Loans repurchased; (5) Substitution Amounts; and
(6) Net Liquidation Proceeds (related to principal));
(ii) With respect to the related Remittance Period,
the Servicing Fee payable to the Servicer;
(iii) With respect to the related Remittance
Period, the net scheduled principal and interest payments remitted by
the Servicer to the Principal and Interest Account;
(iv) The scheduled principal and interest payments
on the Mortgage Loans that were not made by the related Mortgagors as
of the last day of the related Remittance Period;
(v) The number and aggregate Loan Balances
(computed in accordance with the terms of the Mortgage Loans) and the
percentage of the total number of Mortgage Loans and of the Loan
Balance which they represent of Mortgage Loans Delinquent, if any, (i)
30-59 days, (ii)
55
60-89 days and (iii) 90 days or more, respectively, as of the last day
of the related Remittance Period;
(vi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in foreclosure and the book value (within the
meaning of 12 Code of Federal Regulations Section 571.13 or any
comparable provision) of any real estate acquired through foreclosure
or deed in lieu of foreclosure, including REO Properties as of the last
day of the related Remittance Period;
(vii) The Loan Balances (immediately prior to being
classified as Liquidated Mortgage Loans) of Liquidated Mortgage Loans
as of the last day of the related Remittance Period;
(viii) Liquidation Proceeds received during the
related Remittance Period;
(ix) The amount of any Liquidation Expenses being
deducted from Liquidation Proceeds or otherwise being charged to the
Principal and Interest Account with respect to such Determination Date;
(x) Liquidation Expenses incurred during the related
Remittance Period which are not being deducted from Liquidation
Proceeds or otherwise being charged to the Principal and Interest
Account with respect to such Determination Date;
(xi) Net Liquidation Proceeds as of the last day of
the related Remittance Period;
(xii) Insurance payments received from Insurance
Policies during the related Remittance Period;
(xiii) The number of Mortgage Loans and the
aggregate scheduled Loan Balances as of the last day of the Due Period
relating to the Payment Date;
(xiv) The Total Available Funds for each Remittance
Date;
(xv) The number and aggregate Loan Balances and Loan
Purchase Prices of Mortgage Loans required to be repurchased by the
Seller or purchased by the Servicer as of the Replacement Cut-Off Date
occurring during the Remittance Period preceding such Date;
(xvi) The number and aggregate Loan Balances of
Mortgage Loans (at the time they became Defaulted Mortgage Loans) which
are being carried as REO Properties;
(xvii) The amount of any Delinquency Advances made
by the Servicer during the related Remittance Period and any
unreimbursed Delinquency Advances as of such Payment Date;
(xviii) The weighted average Coupon Rates of the
Mortgage Loans;
(xix) The Monthly Exception Report;
(xx) The amount of any Substitution Amounts
delivered by the Seller;
(xxi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in bankruptcy proceedings as of the last day of
related Remittance Period;
56
(xxii) The amount of unreimbursed Delinquency
Advances made by the Servicer;
(xxiii) The amounts, if any, of the Realized Losses
for the related Remittance Period and the cumulative amount of Realized
Losses since the Closing Date.
(xxiv) The amount of unreimbursed Servicing Advances
made by the Servicer;
(xxv) Unpaid Servicing Fees;
(xxvi) The amount of Compensating Interest to be
paid by the Servicer during the related Remittance Period;
(xxvii) The weighted average net Coupon Rate of the
Mortgage Loans;
(xxviii) For the related Remittance Period and
cumulatively since the Closing Date, the number and aggregate Loan
Balance of Mortgage Loans bought back by the Servicer or the Seller
pursuant to Section 2.4, 2.6 and 4.10 hereof (identified separately for
each such section).
(xxix) Any other information reasonably requested by
the Note Insurer or the Indenture Trustee; and
(xxx) The aggregate actual Loan Balance as of the
last day of the Due Period relating to the Payment Date.
(b) On each Payment Date, the Indenture Trustee shall provide to the
Note Insurer, the Underwriter, the Seller, Standard & Poor's and Moody's a
written report in substantially the form set forth as Exhibit E hereto (the
"Servicing Certificate"), as such form may be revised by the Indenture Trustee,
the Servicer, Moody's and Standard & Poor's from time to time, but in every case
setting forth the information required under Section 3.8 hereof, based solely on
information contained in the Monthly Servicing Report.
Section 4.27. Indemnification by the Seller. The Seller agrees to
indemnify and hold the Indenture Trustee, the Note Insurer and each Owner
harmless 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 Note Insurer and any Owner may sustain in any
way related to the failure of the Seller to perform its duties under this
Agreement. A party against whom a claim is brought shall immediately notify the
other parties and the Rating Agencies if a claim is made by a third party with
respect to this Agreement, and the Seller shall assume (with the consent of the
Note Insurer and the Indenture Trustee) the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Note Insurer, the Servicer, the Seller, the Indenture Trustee and/or
Owner in respect of such claim. In addition, the Servicer agrees to indemnify
the Owner Trustee pursuant to Article VIII of the Trust Agreement.
Section 4.29. Administration of the Issuer. The Servicer agrees to
perform the administrative duties of the Issuer hereunder and under the
Indenture.
Section 4.28. Indemnification by the Servicer. The Servicer agrees to
indemnify and hold the Indenture Trustee, the Note Insurer and each Owner
harmless 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 Note Insurer and any Owner may sustain in any
way related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this
57
Agreement. A party against whom a claim is brought shall immediately notify the
other parties and the Rating Agencies 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) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Note Insurer, the Servicer, the Indenture Trustee and/or Owner in respect of
such claim.
ARTICLE V
TERMINATION
Section 5.1. Termination. This Agreement will terminate upon notice to
the Indenture Trustee of either: (a) the later of (i) the satisfaction and
discharge of the Indenture pursuant to Section 4.1 of the Indenture or (ii) the
disposition of all funds with respect to the last Mortgage 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 Issuer, the Custodian
and the Note Insurer; or (b) the mutual consent of the Servicer, the Seller, the
Note Insurer and all Owners in writing.
Section 5.2. Termination Upon Option of Majority Certificateholders.
(a) On any Payment Date on or after the Redemption Date, the Majority
Certificateholders shall have the option to purchase all of the Mortgage Loans
by paying the Termination Price to the Issuer and by providing notice thereof to
the Indenture Trustee, Owner Trustee and Note Insurer. Such holders may purchase
the Mortgage Loans at a price equal to the sum of (i) the then outstanding Note
Principal Balance plus all accrued and unpaid interest thereon (and any
Available Funds Cap Carry-Forward Amount), (ii) any Fees and Expenses due and
unpaid on such date, (iii) the payment of all amounts owed to the Note Insurer
and (iv) any unreimbursed Delinquency Advances and Servicing Advances (such
amount, the "Termination Price"). In connection with such purchase, the Servicer
shall remit to the Indenture Trustee all amounts then on deposit in the
Principal and Interest Account for deposit to the Note Account, which deposit
shall be deemed to have occurred immediately preceding such purchase. The
proceeds from such sale will be distributed first, to the payment of any
outstanding Fees and Expenses, second, to the Note Insurer, all amounts owed
thereto, third, to the Servicer for unreimbursed Servicing Advances and
Delinquency Advances, fourth, to the Owners of the Notes in an amount equal to
the then outstanding Note Principal Balance plus all accrued and unpaid interest
thereon (plus any Available Funds Cap Carry-Forward Amount) and, fifth, to the
holders of the Certificates, the remainder. Provided, however, that no such
termination shall occur unless the Owners of the Note have received an amount
equal to the then outstanding Note Principal Balance plus all accrued and unpaid
interest on the Notes.
(b) Promptly following any such purchase, the Indenture Trustee will
release the Files to the Servicer, or otherwise upon their order, in a manner
similar to that described in Section 4.14 hereof.
(c) If the Majority Certificateholders do not exercise their option
pursuant to this Section 5.2 with respect to the Trust Estate, then the Note
Insurer may do so on the same terms.
Section 5.3 Redemption of Notes. Upon any purchase described in Section
5.2 by either the Majority Certificateholders or the Note Insurer, the Issuer
shall use the proceeds it receives to redeem the Notes, in whole and not in
part, and terminate the Indenture. The Notes will be redeemed upon payment of
the Termination Price, and the payment of the amount set forth in clause (i) of
the definition of Termination Price set forth in Section 5.2 to the Owners of
the Notes shall be in lieu of the payment otherwise required to be made to the
Owners on such Payment Date in respect of the Notes.
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Section 5.4. Disposition of Proceeds. The Indenture Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article V to the Note Account; provided, however, that any
amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Servicer from the
Servicer's own funds shall be paid by the Indenture Trustee to the Servicer from
the proceeds of the Trust Estate.
Section 5.5. Netting of Amounts. If any Person paying the Termination
Price would receive a portion of the amount so paid, such Person may net any
such amount against the Termination Price otherwise payable.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Acts of Owners. Except as otherwise specifically provided
herein, whenever Owner 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 Owners if the Owners of
the majority of the Percentage Interest of the Notes agree to take such action
or give such consent or approval.
Section 6.2 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 Properties are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the Owners' expense on direction of the Owners of the majority of
the Percentage Interest of the Notes or the Note Insurer, but only when
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Owners or is necessary
for the administration or servicing of the Mortgage Loans.
Section 6.3 Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 6.4 Successors and Assigns. All covenants and agreements in
this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
Section 6.5 Severability. In case any provision in this Agreement or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 6.6. Benefits of Agreement. Nothing in this Agreement or in the
Notes, expressed or implied, shall give to any Person, other than the Owners,
the Note Insurer and the parties hereto and their successors hereunder, any
benefit or any legal or equitable right, remedy or claim under this Agreement.
Section 6.7. Legal Holidays. In any case where the date of any
Remittance Date, any Payment Date, any other date on which any distribution to
any Owner is proposed to be paid or any date on which a notice is required to be
sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Notes or this
Agreement) payment or mailing need not be made on such date but may be made on
the next succeeding Business Day with the same force and effect as if made or
mailed on the nominal date of any such Remittance Date, such Payment Date or
such
59
other date for the payment of any distribution to any Owner or the mailing of
such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 6.8. Governing Law. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Note shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed therein, without regard to the conflicts of
law principles thereof.
Section 6.9. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.10. Amendment. (a) The Indenture Trustee, the Seller, the
Issuer and the Servicer, may at any time and from time to time, with the prior
approval of the Note Insurer but without the giving of notice to or the receipt
of the consent of the Owners, amend this Agreement for the purposes of (i)
curing any ambiguity; (ii) correcting or supplementing any provisions of this
Agreement which are inconsistent with any other provisions of this Agreement or
adding provisions to this Agreement which are not inconsistent with the
provisions of this Agreement; (iii) adding any other provisions with respect to
matters or questions arising under this Agreement; or (iv) for any other
purpose, provided that in the case of clause (iv), (A) prior to the
effectiveness of such amendment, the Seller delivers an opinion of counsel
acceptable to the Indenture Trustee and the Note Insurer that such amendment
will not adversely affect in any material respect the interest of the Owners and
the Note Insurer and (B) delivers a letter from each Rating Agency stating that
such amendment will not result in a withdrawal or reduction of the rating of the
Notes without regard to the Note Insurance Policy. Notwithstanding anything to
the contrary, no such amendment shall (a) change in any manner the amount of, or
delay the timing of, payments which are required to be distributed to any Owner
without the consent of the Owner of such Note, (b) change the percentages of
Percentage Interest which are required to consent to any such amendments,
without the consent of the Owners of all Notes affected then outstanding or (c)
which affects in any manner the terms or provisions of the Note Insurance
Policy.
(b) This Agreement may be amended from time to time by the Servicer,
the Seller, the Issuer and the Indenture Trustee with the consent of the Note
Insurer (which consent shall not be withheld if, in an opinion of counsel
addressed to the Indenture Trustee and the Note Insurer, failure to amend would
adversely affect the interests of the Owners) and the Owners of 66 2/3% of the
Notes 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 Owners; provided, however, that no such amendment shall
be made that no such amendment shall reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Notes without the consent of the Owner of such Notes or
reduce the percentage for each Class the Owners of which are required to consent
to any such amendment without the consent of the Owners of 100% of the Notes.
(c) The Note Insurer, the Owners, Moody's and Standard & Poor's shall
be provided with copies of any amendments to this Agreement, together with
copies of any opinions or other documents or instruments executed in connection
therewith.
60
Section 6.11. Specification of Certain Tax Matters. Each Owner shall
provide the Indenture Trustee with a completed and executed From W-9 prior to
purchasing a Note. 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 Owner of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith.
Section 6.12. The Note Insurer. Any right conferred to the Note Insurer
shall be suspended during any period in which there exists a Note Insurer
Default. During any period of suspension the Note Insurer's rights hereunder
shall vest in the Owners of the Notes and shall be exercisable by the Owners of
at least a majority in Percentage Interest of the Notes then Outstanding. At
such time as the Notes are no longer outstanding hereunder and the Note Insurer
has been reimbursed for all Insured Payments to which it is entitled hereunder,
the Note Insurer's rights hereunder shall terminate.
Section 6.13. Third Party Rights. The Indenture Trustee, the Seller,
the Issuer, the Servicer, and the Owners agree that the Note Insurer shall be
deemed a third-party beneficiary of this Agreement as if it were a party hereto.
Section 6.14. Usury. The amount of interest payable or paid on any Note
under the terms of this Agreement shall be limited to an amount which shall not
exceed the maximum nonusurious rate of interest allowed by the applicable laws
of the State of New York or any applicable law of the United States permitting a
higher maximum nonusurious rate that preempts such applicable New York laws,
which could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Note exceeds the Highest
Lawful Rate, the Trust stipulates that such excess amount will be deemed to have
been paid to the Owner of such Note as a result of an error on the part of the
Indenture Trustee acting on behalf of the Trust and the Owner receiving such
excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Indenture Trustee on behalf of the Trust, refund the amount of
such excess or, at the option of such Owner, apply the excess to the payment of
principal of such Note, if any, remaining unpaid. In addition, all sums paid or
agreed to be paid to the Indenture Trustee for the benefit of Owners of Notes
for the use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such Notes.
Section 6.15. No Petition. The Indenture Trustee, the Seller and the
Servicer, by entering into this Agreement, and each Owner, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Seller, the Servicer or the Issuer, or join in any institution against the
Seller, the Servicer or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Agreement or any of the Operative
Documents.
Section 6.16. Notices. All notices hereunder shall be given as follows,
until any superseding instructions are given to all other Persons listed below:
The Indenture Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Diane Wallace,
Structured FinanceServices
Tel: (212) 946-8583
Fax: (212) 946-8552
The Seller: First Alliance Mortgage Company
17305 Von Karman Avenue
61
Irvine, California 92614-6203
Attention: Director, Secondary Marketing
Tel: (714) 224-8357
Fax: (714) 224-8366
The Issuer: First Alliance Mortgage Loan Trust 1998-1A
---------- c/o Wilmington Trust Company,
as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Tel: (302) 651-8775
Fax: (302) 651-1576
The Servicer: First Alliance Mortgage Company
------------ 17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Manager, Investor Reporting
Tel: (714) 224-8357
Fax: (714) 224-8366
The Note Insurer: MBIA Insurance Corporation
---------------- 113 King Street
Armonk, New York 10504
Attention: First Alliance Mortgage
Loan Trust 1998-1A
Tel: (212) 273-4545
Fax: (212) 765-3919
Moody's: Moody's Investors Service
------- 99 Church Street
New York, New York 10007
Attention: The Home Equity Monitoring
Department
Standard & Poor's: Standard & Poor's, A Division of
----------------- The McGraw-Hill Companies
25 Broadway
New York, New York 10004
Attention: Residential Mortgage
Surveillance Dept.
Underwriter: Prudential Securities Incorporated
----------- Mortgage and Asset-backed Capital Divisions
One New York Plaza, 15th Floor
New York, New York 10292
Attention: First Alliance Mortgage
Loan Trust 1998-1A
Tel: (212) 778-1000
Fax: (212) 778-7401
62
IN WITNESS WHEREOF, the Seller, the Servicer and the Indenture Trustee
have caused this Agreement to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-1A,
By: WILMINGTON TRUST COMPANY
as Owner Trustee
By: /s/ Patricia A. Evans
---------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller
By: /s/ Mark Mason
--------------------------------
Name: Mark Mason
Title: Executive Vice President/CFO
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
By: /s/ Mark Mason
--------------------------------
Name: Mark Mason
Title: Executive Vice President/CFO
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By: /s/ Norma Catone
--------------------------------
Name: Norma Catone
Title: Vice President
63
STATE OF Delaware )
: ss.:
COUNTY OF New Castle )
On the 25th day of March, 1998, before me personally came Patricia A.
Evans, to me known, who, being by me duly sworn did depose and say that he/she
resides in Wilmington, Delaware; that he/she is a Financial Services Officer of
Wilmington Trust Company, a Delaware banking corporation described in and that
executed the above instrument as Owner Trustee; and that he/she signed his/her
name thereto by order of the Board of Directors of said Delaware banking
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
/s/ Patricia Pierce
- - - --------------------
Notary Public
STATE OF New York )
: ss.:
COUNTY OF New York )
On the 25th day of March, 1998, before me, personally appeared Norma
Catone, to me known, who being by me duly sworn did depose and say that his
office is located at 450 W. 33rd St., NY, NY; that he is a Vice President of The
Chase Manhattan Bank, the New York banking corporation described herein and that
he executed the above instrument as Indenture Trustee; and that he signed his
name thereto under the authority granted by the Board of Directors of said
________________ corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Margaret M. Price
---------------------
Notary Public
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 27th day of March, 1998, before me, a Notary Public, personally
appeared Mark Mason, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
[NOTARIAL SEAL]
/s/ Sharon Anderson
- - - -------------------
Notary Public
EXHIBIT B
CERTIFICATE RE: PREPAID LOANS
I, ______________, ______________ of First Alliance Mortgage Company, a
California corporation, (the "Seller"), hereby certify that between the "Cut-Off
Date" (as defined in the Sale and Servicing Agreement dated as of March 1, 1998
among the Seller the Seller in its capacity as servicer (the "Servicer") and The
Chase Manhattan Bank, a New York banking corporation, in its capacity as
indenture trustee (the "Indenture Trustee")) and the "Closing Date" the
following schedule of "Mortgage Loans" have been prepaid in full.
Dated:____________________
By: _____________________________
Name:____________________________
Title:___________________________
B-1
EXHIBIT C
INITIAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of The Bank of New
York, a New York banking corporation, acting in its capacity as custodian (the
"Custodian") on behalf of The Chase Manhattan Bank, a New York banking
corporation acting in its capacity as indenture trustee (the "Indenture
Trustee") of a certain pool of mortgage loans (the "Pool") heretofore conveyed
in trust to the Custodian, on behalf of the Indenture Trustee, pursuant to that
certain Sale and Servicing Agreement dated as of March 1, 1998 (the "Sale and
Servicing Agreement") by and among First Alliance Mortgage Loan Trust 1998-1A, a
Delaware business trust (the "Issuer"), First Alliance Mortgage Company, a
California corporation (the "Seller"), the Seller, in its capacity as servicer
(the "Servicer") and the Indenture Trustee;
WHEREAS, the Custodian, on behalf of the Indenture Trustee, is
required, pursuant to Section 2.6 of the Sale and Servicing Agreement, to review
the Files relating to the Pool on or before the Closing Date; and
WHEREAS, Section 2.6 of the Sale and Servicing Agreement requires the
Custodian, on behalf of the Indenture Trustee, to deliver this Initial
Certification upon the satisfaction of certain conditions set forth therein.
NOW, THEREFORE, the Custodian, on behalf of the Indenture Trustee,
hereby certifies with respect to each Mortgage Loan listed in the Schedule of
Mortgage Loans (other than any Mortgage Loan paid in full), which is attached
hereto, that all documents required to be delivered to it pursuant to the Sale
and Servicing Agreement are in its possession, such documents have been reviewed
by it and appear regular on their face and relate to such Mortgage Loan and
based on its examination and only as to the foregoing documents, the information
set forth on the Schedule of Mortgage Loans as to loan number and address
accurately reflects information set forth in the File, except as attached
thereto.
THE BANK OF NEW YORK,
as Custodian
Name:__________________________
Title:_________________________
Dated:____________________
[Attached Exception List]
C-1
EXHIBIT D
FINAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of The Bank of New
York, a New York banking corporation, acting in its capacity as custodian (the
"Custodian) on behalf of the indenture trustee (the "Indenture Trustee") of a
certain pool of mortgage loans (the "Pool") heretofore conveyed in trust to the
Custodian, on behalf of the Indenture Trustee, pursuant to that certain Sale and
Servicing Agreement dated as of March 1, 1998 (the "Sale and Servicing
Agreement") by and among First Alliance Mortgage Loan Trust 1998-1A, a Delaware
business trust (the "Issuer"), First Alliance Mortgage Company, a California
corporation (the "Seller"), the Seller, in its capacity as servicer (the
"Servicer") and the Indenture Trustee;
WHEREAS, the Custodian, on behalf of the Indenture Trustee, is
required, pursuant to Section 2.6 of the Sale and Servicing Agreement, to review
the Files relating to the Pool within a specified period following the Closing
Date and to notify the Seller promptly of any defects with respect to the Pool,
and the Seller is required to remedy such defects or take certain other action,
all as set forth in Section 2.6 of the Sale and Servicing Agreement; and
WHEREAS, Section 2.6 of the Sale and Servicing Agreement requires the
Custodian, on behalf of the Indenture Trustee, to deliver this Final
Certification upon the satisfaction of certain conditions set forth therein.
NOW, THEREFORE, the Custodian, on behalf of the Indenture Trustee,
hereby certifies that it has determined that all required documents (or
certified copies of documents listed in Section 2.5 of the Sale and Servicing
Agreement) have been executed or received, and that such documents relate to the
Mortgage Loans identified in the Schedule of Mortgage Loans pursuant to Section
2.5(a) of the Sale and Servicing Agreement or, in the event that such documents
have not been executed and received or do not so relate to such Mortgage Loans,
any remedial action by the Seller pursuant to Section 2.6 of the Sale and
Servicing Agreement has been completed. The Custodian makes no certification
hereby, however, with respect to any intervening assignments or assumption and
modification agreements.
THE BANK OF NEW YORK,
as Custodian
Name:______________________________
Title:_____________________________
Dated:_____________________
D-1
EXHIBIT E
FORM OF
MONTHLY REPORT
FIRST ALLIANCE MORTGAGE COMPANY
MORTGAGE LOAN ASSET BACKED NOTES
SERIES 1998-1A
E-1
EXHIBIT F
FORM OF REQUEST FOR RELEASE
To:_____________________
_____________________
_____________________
Attn: First Alliance Mortgage Loan Trust 1998-1A
Date: _______________
In connection with the administration of the mortgage loans held by you
as Custodian under a certain Sale and Servicing Agreement dated as of March 1,
1998 and by and among First Alliance Mortgage Loan Trust 1998-1A, as Issuer,
First Alliance Mortgage Company, the Seller in its capacity as servicer (the
"Servicer"), and The Chase Manhattan Bank, in its capacity as Indenture Trustee
(the "Agreement"), the Servicer hereby requests a release of the File held by
you as Custodian, on behalf of the Indenture Trustee, with respect to the
following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:________
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Servicer hereby certifies that all amounts received
in connection with the loan have been or will be credited
to the Note Account (whichever is applicable) pursuant to
the Agreement.)
_______ 2. Mortgage Loan repurchased pursuant to Section 2.4, 2.6(b)
or 4.10 of the Agreement.
(The Servicer hereby certifies that the Loan Purchase
Price has been or will be paid to the Note Account
pursuant to the Agreement.)
_______ 3. Mortgage Loan substituted.
(The Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to you along with the related File pursuant to
the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe).
F-1
The undersigned acknowledges that the above File will be held by the
undersigned in accordance with the provisions of the Agreement and will be
returned to you, except if the Mortgage Loan has been paid in full, or
repurchased or substituted for by a Qualified Replacement Mortgage (in which
case the File will be retained by us permanently) and except if the Mortgage
Loan is being foreclosed (in which case the File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
FIRST ALLIANCE MORTGAGE COMPANY
By: __________________________
Name: __________________________
Title: __________________________
F-2
EXHIBIT G
SUBSEQUENT TRANSFER AGREEMENT
First Alliance Mortgage Company in its capacities as seller (the
"Seller") and as servicer (the "Servicer") and First Alliance Mortgage Loan
Trust 1998-1A, as the "Purchaser", pursuant to the Sale and Servicing Agreement
dated as of March 1, 1998, (the "Sale and Servicing Agreement") among the
Seller, the Servicer, the Purchaser and The Chase Manhattan Bank, a New York
banking corporation, in its capacity as Indenture Trustee (the "Indenture
Trustee"), hereby confirm their understanding with respect to the sale by the
Seller and the purchase by the Purchaser of those Mortgage Loans (the
"Subsequent Mortgage Loans") listed on the attached Schedule of Mortgage Loans.
Conveyance of Subsequent Mortgage Loans. As of ___________ __, 1998
(the "Subsequent Transfer Date"), the Seller does hereby irrevocably transfer,
assign, set over and otherwise convey to the Purchaser, without recourse (except
as otherwise explicitly provided for herein) all of its right, title and
interest in and to any and all benefits accruing from the Subsequent Mortgage
Loans which are delivered to The Bank of New York, as custodian, on behalf of
the Indenture Trustee herewith (and all substitutions therefor as provided by
Sections 2.3, 2.4 and 2.6 of the Sale and Servicing Agreement), together with
the related Subsequent Mortgage Loan documents and the interest in any Property
which secured a Subsequent Mortgage Loan but which has been acquired by
foreclosure or deed in lieu of foreclosure, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing; and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Subsequent Mortgage Loans, cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables which at any time constitute all or part of or are included in the
proceeds of any of the foregoing). The Seller shall deliver the original
Mortgage or mortgage assignment with evidence of recording thereon (except as
otherwise provided by the Sale and Servicing Agreement) and other required
documentation in accordance with the terms set forth in Sections 2.5 and 2.8 of
the Sale and Servicing Agreement.
The costs relating to the delivery of the documents specified in this
Subsequent Transfer Agreement and the Sale and Servicing Agreement shall be
borne by the Seller.
The Seller hereby affirms the representations and warranties set forth
in the Sale and Servicing Agreement that relate to the Seller and the Subsequent
Mortgage Loans as of the date hereof. The Seller hereby delivers notice and
confirms that each of the conditions set forth in Section 2.8(b), 2.8(c) and
2.8(d) to the Sale and Servicing Agreement are satisfied as of the date hereof.
Pursuant to Section 2.8(a) of the Sale and Servicing Agreement, the
Seller instructs the Indenture Trustee to release one-hundred percent of the
aggregate principal balances of the Subsequent Mortgage Loans so transferred
from the Pre-Funding Account ($______________) pursuant to this Subsequent
Transfer Agreement.
C-1
All terms and conditions of the Sale and Servicing Agreement are hereby
ratified, confirmed and incorporated herein, provided that in the event of any
conflict the provisions of this Subsequent Transfer Agreement shall control over
the conflicting provisions of the Sale and Servicing Agreement.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Sale and Servicing Agreement.
FIRST ALLIANCE MORTGAGE THE CHASE MANHATTAN BANK,
COMPANY, as Seller as Indenture Trustee for
First Alliance Mortgage Loan
Trust 1998-1A
By: _____________________ By: ___________________________
Name: Mark Mason Name:__________________________
Title: Executive Vice President Title: ________________________
FIRST ALLIANCE MORTGAGE
COMPANY, as Servicer
By: _____________________
Name: Mark Mason
Title: Executive Vice President
C-2