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Fieldstone Mortgage Investment CORP
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8-K
Aug 17, 11:01 AM ET
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Fieldstone Mortgage Investment CORP 8-K
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Contents
633
Section 1.01. Definitions. The following words and phrases, unless the context otherwise requires, shall have the following meanings:
(i) An institution whose:
(1) commercial paper, short-term debt obligations, or other short-term deposits are rated at least “A-1+” or long-term unsecured debt obligations are rated at least “Aa-” by S&P (or assigned comparable ratings by the other Rating Agencies), if the amounts on deposit are to be held in the account for no more than 365 days; or
(2) commercial paper, short-term debt obligations, demand deposits, or other short-term deposits are rated at least “A-2” by S&P (or assigned comparable ratings by the other Rating Agencies), if the amounts on deposit are to be held in the account for no more than 30 days and are not intended to be used as credit enhancement. Upon the loss of the required rating set forth in this clause (ii), the accounts shall be transferred immediately to accounts which have the required rating. Furthermore, commingling by the Servicer is acceptable at the A-2 rating level if the Servicer is a bank, thrift or depository and provided the Servicer has the capability to immediately segregate funds and commence remittance to an Eligible Deposit Account upon a downgrade; or
(ii) the corporate trust department of a federal depositor institution or state-chartered depositor institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the U.S. Code of Federal Regulation Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity.
(i) direct obligations of, and obligations fully guaranteed as to timely payment of principal and interest by, the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America (“Direct Obligations”);
(iii) federal funds, or demand and time deposits in, certificates of deposits of, or bankers’ acceptances issued by, any depository institution or trust company (including U.S. subsidiaries of foreign depositories and the Indenture Trustee or any agent of the Indenture Trustee, acting in its respective commercial capacity) incorporated or organized under the laws of the United States of America or any state thereof and subject to supervision and examination by federal or state banking authorities, so long as at the time of investment or the contractual commitment providing for such investment the commercial paper or other short-term debt obligations of such depository institution or trust company (or, in the case of a depository institution or trust company which is the principal subsidiary of a holding company, the commercial paper or other short-term debt or deposit obligations of such holding company or deposit institution, as the case may be) have been rated by each Rating Agency in its highest short-term rating category or one of its two highest long-term rating categories;
(iv) repurchase agreements collateralized by Direct Obligations or securities guaranteed by GNMA, Fannie Mae or FHLMC with any registered broker/dealer subject to Notes Investors’ Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated by each Rating Agency in its highest short-term rating category;
(v) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof which have a credit rating from each Rating Agency, at the time of investment or the contractual commitment providing for such investment, at least equal to one of the two highest long-term credit rating categories of each Rating Agency; provided, however, that securities issued by any particular corporation will not be Eligible Investments to the extent that investment therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Trust Estate to exceed 20% of the sum of the Aggregate Loan Balance and the aggregate principal amount of all Eligible Investments in the Collection Account; provided, further, that such securities will not be Eligible Investments if they are published as being under review with negative implications from any Rating Agency;
(vi) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than 180 days after the date of issuance thereof) rated by each Rating Agency in its highest short-term rating category;
(vii) a Qualified GIC;
(viii) certificates or receipts representing direct ownership interests in future interest or principal payments on obligations of the United States of America or its agencies or instrumentalities (which obligations are backed by the full faith and credit of the United States of America) held by a custodian in safekeeping on behalf of the holders of such receipts; and
(ix) any other demand, money market, common trust fund or time deposit or obligation, or interest-bearing or other security or investment (including those managed or advised by the Indenture Trustee, the Master Servicer, the Trust Administrator, or any Affiliate thereof), (A) rated in the highest rating category by each Rating Agency or (B) that would not adversely affect the then current rating assigned by each Rating Agency of any of the Notes. Such investments in this subsection (viii) may include money market mutual funds or common Trust Estates, including any fund for which Wells Fargo Bank, N.A. (the “Bank”) in its capacity other than as the Master Servicer, the Trust Administrator or an affiliate thereof serves as an investment advisor, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (x) the Bank, the Indenture Trustee, the Master Servicer or any affiliate thereof charges and collects fees and expenses from such funds for services rendered, (y) the Bank, the Indenture Trustee, the Trust Administrator, the Master Servicer or any affiliate thereof charges and collects fees and expenses for services rendered pursuant to this Agreement, and (z) services performed for such funds and pursuant to this Agreement may converge at any time. The Indenture Trustee specifically authorizes the Bank or an affiliate thereof to charge and collect from the Indenture Trustee such fees as are collected from all investors in such funds for services rendered to such funds (but not to exceed investment earnings thereon);
(b) If on such a LIBOR Determination Date, the BBA’s Interest Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m. (London time), or if the Telerate Page 3750 is not available on such date, the Trust Administrator will determine such rate on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rates appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such LIBOR Determination Date.
(c) If LIBOR is determined under clause (b) above, on each LIBOR Determination Date, LIBOR for the related Accrual Period for the Notes will be established by the Trust Administrator as follows:
(1) If on such LIBOR Determination Date two or more Reference Banks provide such offered quotations, LIBOR for the related Accrual Period for the Notes shall be the arithmetic mean of such offered quotations (rounded upwards if necessary to the nearest whole multiple of 0.03125%).
(2) If on such LIBOR Determination Date fewer than two Reference Banks provide such offered quotations, LIBOR for the related Accrual Period shall be the higher of (x) LIBOR as determined on the previous LIBOR Determination Date and (y) the Reserve Interest Rate.
(d) The establishment of LIBOR by the Trust Administrator and the Trust Administrator’s subsequent calculation of the Interest Rate applicable to the LIBOR Notes for the relevant Accrual Period, in the absence of manifest error, will be final and binding.
(i) be an obligation of an insurance company or other corporation whose long-term debt is rated by each Rating Agency in one of its two highest rating categories or, if such insurance company has no long term debt, whose claims paying ability is rated by each Rating Agency in one of its two highest rating categories, and whose short-term debt is rated by each Rating Agency in its highest rating category;
(ii) provide that the Indenture Trustee may exercise all of the rights under such contract or surety bond without the necessity of taking any action by any other Person;
(iii) provide that if at any time the then current credit standing of the obligor under such guaranteed investment contract is such that continued investment pursuant to such contract of funds would result in a downgrading of any rating of the Notes, the Indenture Trustee shall terminate such contract without penalty and be entitled to the return of all funds previously invested thereunder, together with accrued interest thereon at the interest rate provided under such contract to the date of delivery of such funds to the Indenture Trustee;
(iv) provide that the Indenture Trustee’s interest therein shall be transferable to any successor trustee hereunder; and
(v) provide that the funds reinvested thereunder and accrued interest thereon be returnable to the Collection Account not later than the Business Day prior to any Payment Date.
Section 1.02. Calculations With Respect to the Mortgage Loans. Calculations required to be made pursuant to this Agreement with respect to any Mortgage Loan in the Trust Estate shall be made based upon current information as to the terms of the Mortgage Loans and reports of payments received from the Mortgagor on such Mortgage Loans provided by the Servicer or the Subservicer to the Master Servicer. Payments to be made by the Trust Administrator shall be based on information provided by the Master Servicer. The Trust Administrator shall not be required to recompute, verify or recalculate the information supplied to it by the Master Servicer, the Servicer or the Subservicer.
Section 1.03. Calculations With Respect to Accrued Interest. Accrued interest, if any, on any LIBOR Note shall be calculated based upon a 360-day year and the actual number of days in each Accrual Period. Accrued interest, if any, on any Class A-IO Notes or Class M10 Notes shall be calculated based upon a 360-day year consisting of twelve 30-day months.
ARTICLE II CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Creation and Declaration of Trust Estate; Conveyance of Initial Mortgage Loans.
(a) Mortgage Loans. As of the Closing Date, in consideration of the Issuer’s delivery of the Notes to the Depositor or its designee, and concurrently with the execution and delivery of this Agreement, the Depositor does hereby transfer, assign, set over, deposit with and otherwise convey to the Issuer, without recourse, subject to Section 3.01, in trust, all the right, title and interest of the Depositor in and to the Initial Mortgage Loans. Such conveyance includes, without limitation, the right to all payments of principal and interest received on or with respect to the Initial Mortgage Loans on and after the Initial Cut-off Date (other than payments of principal and interest due on or before such date), and all such payments due after such date but received prior to such date and intended by the related Mortgagors to be applied after such date together with all of the Depositor’s right, title and interest in any REO Property and the proceeds thereof, the Depositor’s rights under any Insurance Policies related to the Mortgage Loans, the Depositor’s security interest in any collateral pledged to secure the Mortgage Loans, including the Mortgaged Properties and any proceeds of the foregoing, to have and to hold, in trust; and the Indenture Trustee declares that, subject to the review provided for in Section 2.02, it has received and shall hold the Trust Estate, as Indenture Trustee, in trust, for the benefit and use of the Noteholders and the Swap Counterparty and for the purposes and subject to the terms and conditions set forth in this Agreement, and, concurrently with such receipt, the Issuer has issued and delivered the Notes to or upon the order of the Depositor, in exchange for the Mortgage Loans and the other property of the Trust Estate.
(b) In connection with such transfer and assignment, the Depositor does hereby deliver to, and deposit with, or cause to be delivered to and deposited with, the Indenture Trustee, and/or the Custodian acting on the Indenture Trustee’s behalf, the following documents
(i) the original Mortgage Note, endorsed either (A) in blank or (B) in the form of the Form of Endorsement set forth in Exhibit A-4 hereto (or Exhibit B-6 to the Custodial Agreement), or with respect to any lost Mortgage Note, an original Lost Note Affidavit, in the form set forth in Exhibit C hereto (or Exhibit B-5 to the Custodial Agreement), stating that the original Mortgage Note was lost, misplaced or destroyed, together with a copy of the related Mortgage Note;
(ii) the original of any guarantee executed in connection with the Mortgage Note assigned to the Indenture Trustee;
(iii) the original Mortgage with evidence of recording thereon, and the original recorded power of attorney, if the Mortgage was executed pursuant to a power of attorney, with evidence of recording thereon or, if such Mortgage or power of attorney has been submitted for recording but has not been returned from the applicable public recording office, has been lost or is not otherwise available, a copy of such Mortgage or power of attorney, as the case may be, certified by an Officer’s Certificate of the Seller to be a true and complete copy of the original submitted for recording, together with a written Opinion of Counsel acceptable to the Indenture Trustee and the Depositor that an original recorded Mortgage is not required to enforce the Indenture Trustee’s interest in the Mortgage Loan;
(iv) with respect to each Non-MERS Mortgage Loan, an original Assignment of Mortgage, in form and substance acceptable for recording. The Mortgage shall be assigned either (A) in blank, without recourse, or (B) to “HSBC Bank USA, National Association,” as Indenture Trustee of the Fieldstone Mortgage Investment Trust, Series 2005-2”, without recourse or (C) to the order of the Indenture Trustee;
(v) an original copy of any intervening assignment of Mortgage showing a complete chain of assignments or, in the case of an intervening assignment that has been lost, a written Opinion of Counsel for the Seller acceptable to the Indenture Trustee that such original intervening assignment is not required to enforce the Indenture Trustee’s interest in the Mortgage Loans;
(vi) the original or a certified copy of lender’s title insurance policy (or, in lieu thereof, a commitment to issue such title insurance policy, with an original or a certified copy of such title insurance policy to follow as soon after the Closing Date as reasonably practicable);
(vii) the original or copies of each assumption, modification, written assurance or substitution agreement, if any, or as to any such agreement which cannot be delivered prior to the Closing Date because of a delay caused by the public recording office where such assumption, modification or substitution agreement has been delivered for recordation, a photocopy of such assumption, modification or substitution agreement, pending delivery of the original thereof, together with an Officer’s Certificate of the Seller certifying that the copy of such assumption, modification or substitution agreement delivered to the Custodian is a true
(viii) the original of any security agreement or equivalent instrument executed in connection with the Mortgage or as to any security agreement or equivalent instrument that cannot be delivered on or prior to the Closing Date because of a delay caused by the public recording office where such document has been delivered for recordation, a photocopy of such document, pending delivery of the original thereof, together with an Officer’s Certificate of the Seller certifying that the copy of such security agreement, chattel mortgage or their equivalent delivered to the Custodian is a true copy and that the original of such document has been forwarded to the public recording office.
(c) MERS is the record owner of all of the Initial Mortgage Loans. The Seller shall, or shall cause the Servicer or the Subservicer, at the expense of the Seller, to take such actions as are necessary to cause the Indenture Trustee to be clearly identified as the owner of each such Mortgage Loan on the records of MERS for purposes of the system of recording transfers of beneficial ownership of mortgages maintained by MERS. With respect to each Cooperative Loan, the Seller shall, or at its expense, shall cause the Servicer or the Subservicer to, take such actions as are necessary under applicable law in order to perfect the interest of the Indenture Trustee in the related Mortgaged Property. Assignments of Mortgage with respect to each Non- MERS Mortgage Loan shall be recorded; provided, however, that such Assignments need not be recorded if, on or prior to the Closing Date, the Seller delivers an Opinion of Counsel (which must be Independent counsel) acceptable to the Indenture Trustee and the Rating Agencies, to the effect that recording in such states is not required to protect the Indenture Trustee’s interest in the related Non-MERS Mortgage Loans; provided, further, that notwithstanding the delivery of any Opinion of Counsel, the Servicer shall submit each Assignment of Mortgage for recording upon the occurrence of a bankruptcy, insolvency or foreclosure relating to the Mortgagor under the related Mortgage. Subject to the preceding sentence, as soon as practicable after the Closing Date (but in no event more than three months thereafter except to the extent delays are caused by the applicable recording office), the Servicer, at the expense of the Seller shall cause to be properly recorded in each public recording office where the related Mortgages are recorded each Assignment of Mortgage referred to in subsection (b)(iv) above with respect to each Non-MERS Mortgage Loan.
(d) In instances where a Title Insurance Policy is required to be delivered to the Indenture Trustee or the Custodian on behalf of the Indenture Trustee under clause (b)(vii) above and is not so delivered, the Seller will provide a copy of such Title Insurance Policy to the Indenture Trustee, or to the Custodian on behalf of the Indenture Trustee, as promptly as practicable after the execution and delivery hereof, but in any case within 180 days of the Closing Date.
(e) For Initial Mortgage Loans (if any) that have been prepaid in full after the Cut-off Date and prior to the Closing Date, the Depositor, in lieu of delivering the above documents, herewith delivers to the Indenture Trustee, or to the Custodian on behalf of the Indenture Trustee, an Officer’s Certificate of the Seller which shall include a statement to the effect that all amounts received in connection with such prepayment that are required to be deposited in the Collection Account pursuant to Section 5.07 have been so deposited. All original documents that are not delivered to the Indenture Trustee or the Custodian on behalf of the Indenture Trustee shall be held by the Servicer or the Subservicer in trust for the benefit of the Indenture Trustee and the Noteholders and the Swap Counterparty.
Section 2.02. Acceptance of Trust Estate; Review of Documentation.
(a) Subject to the provisions of Section 2.01, the Issuer acknowledges receipt of the assets transferred by the Depositor of the assets included in the Trust Estate and has directed that the documents referred to in Section 2.01 and all other assets included in the definition of “Trust Estate” be delivered to the Indenture Trustee (or the Custodian) on its behalf.
(b) Within 45 days after the Closing Date, the Indenture Trustee or the Custodian on behalf of the Indenture Trustee, will, for the benefit of Noteholders and the Swap Counterparty, review each Mortgage File to ascertain that all required documents set forth in Section 2.01 have been received and appear on their face to contain the requisite signatures by or on behalf of the respective parties thereto, and shall deliver to the Depositor, the Master Servicer, the Servicer and the Subservicer (and the Indenture Trustee if delivered by the Custodian) an Interim Certification in the form annexed hereto as Exhibit A-2 (or in the form annexed to the Custodial Agreement as Exhibit A-2, as applicable) to the effect that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan prepaid in full or any specifically identified in such certification as not covered by such certification), (i) all of the applicable documents specified in Section 2.01(b) are in its possession and (ii) such documents have been reviewed by it and appear to relate to such Mortgage Loan. The Indenture Trustee, or the Custodian on behalf of the Indenture Trustee, shall determine whether such documents are executed and endorsed, but shall be under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to determine that the same are valid, binding, legally effective, properly endorsed, genuine, enforceable or appropriate for the represented purpose or that they have actually been recorded or are in recordable form or that they are other than what they purport to be on their face. Neither the Indenture Trustee nor the Custodian shall have any responsibility for verifying the genuineness or the legal effectiveness of or authority for any signatures of or on behalf of any party or endorser.
(c) If, in the course of the review described in paragraph (b) above or paragraph (d) below, the Indenture Trustee or the Custodian discovers any document or documents constituting a part of a Mortgage File that is missing, does not appear regular on its face (i.e., is mutilated, damaged, defaced, torn or otherwise physically altered) or appears to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule, as applicable (each, a “Material Defect”), the Indenture Trustee, or the Custodian on behalf of the Indenture Trustee, discovering such Material Defect shall identify the Mortgage Loan to which such Material Defect relates in the Interim Certification delivered to the Depositor and the Master Servicer. Within 90 days of its receipt of such notice, the Seller shall be required to cure such Material Defect (and, in such event, the Seller shall provide the Indenture Trustee with an Officer’s Certificate confirming that such cure has been effected). If the Seller does not so cure such Material Defect, if a loss has been incurred with respect to such Mortgage Loan that would, if such Mortgage Loan were not purchased from the Trust Estate, constitute a Realized Loss, and such loss is attributable to the failure of the Seller to cure such Material Defect, the Seller shall repurchase the related Mortgage Loan from the Trust Estate at the Purchase Price. A loss shall be deemed to be attributable to the failure of the Seller to cure a Material Defect if, as determined by the Seller, upon mutual agreement with the Indenture Trustee each acting in good faith, absent such Material Defect, such loss would not have been incurred. The Seller may, in lieu of repurchasing a Mortgage Loan pursuant to this Section 2.02, substitute for such Mortgage Loan a Qualifying Substitute Mortgage Loan subject to the provisions of Section 3.03. The failure of the Indenture Trustee or the Custodian to deliver the Interim Certification within 45 days after the Closing Date shall not affect or relieve the Seller of its obligation to repurchase any Mortgage Loan pursuant to this Section 2.02 or any other Section of this Agreement requiring the repurchase of Mortgage Loans from the Trust Estate.
(d) Within 180 days following the Closing Date, the Indenture Trustee, or the Custodian, shall deliver to the Depositor, the Master Servicer, the Servicer and the Subservicer (and the Indenture Trustee if delivered by the Custodian) a Final Certification substantially in the form attached as Exhibit A-3 (or in the form annexed to the Custodial Agreement as Exhibit A-3, as applicable) evidencing the completeness of the Mortgage Files in its possession or control, with any exceptions noted thereto.
(e) Nothing in this Agreement shall be construed to constitute an assumption by the Trust Estate, the Indenture Trustee, the Custodian or the Noteholders of any unsatisfied duty, claim or other liability on any Mortgage Loan or to any Mortgagor.
(f) Notwithstanding anything to the contrary contained herein, each of the parties hereto acknowledges that the Custodian shall perform the applicable review of the Mortgage Loans and respective certifications thereof as provided in the Custodial Agreement.
(g) Upon execution of this Agreement, the Depositor hereby delivers to the Indenture Trustee and the Indenture Trustee acknowledges a receipt of the Mortgage Loan Purchase Agreement.
Section 2.03. Grant Clause.
(a) It is intended that the conveyance by the Depositor to the Issuer of the Mortgage Loans, as provided for in Section 2.01 be construed as a sale by the Depositor to the Issuer of the Mortgage Loans and other assets in the Trust Estate for the benefit of the Noteholders and the Swap Counterparty. Further, it is not intended that any such conveyance be deemed to be a pledge of the Mortgage Loans by the Depositor to the Issuer to secure a debt or other obligation of the Depositor. However, in the event that the Mortgage Loans are held to be property of the Depositor or if for any reason this Agreement is held or deemed to create a security interest in the Mortgage Loans and other assets in the Trust Estate, then it is intended that (a) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the New York UCC (or the Relevant UCC if not the New York UCC); (b) the conveyances provided for in Section 2.01 shall be deemed to be (1) a grant by the Depositor to the Issuer of a security interest in all of the Depositor’s right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to (A) the Mortgage Loans, including the Mortgage Notes, the Mortgages, any related insurance policies and all other documents in the related Mortgage Files, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof and (C) any and all general intangibles consisting of, arising from or relating to any of the foregoing, and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all Liquidation Proceeds, all Insurance Proceeds, all amounts from time to time held or invested in the Collection Account, whether in the form of cash, instruments, securities or other property and (2) an assignment by the Depositor to the Issuer of any security interest in any and all of the Depositor’s right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to the property described in the foregoing clauses (1)(A) through (C); (c) the possession by the Indenture Trustee or any other agent of the Issuer of Mortgage Notes, and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party,” or possession by a purchaser or a person designated by such secured party, for purposes of perfecting the security interest pursuant to the New York UCC and any other Relevant UCC (including, without limitation, Section 9-313, 8-313 or 8-321 thereof); and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Issuer for the purpose of perfecting such security interest under applicable law.
(b) The Depositor and, at the Depositor’s direction, the Issuer shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property of the Trust Estate, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. Without limiting the generality of the foregoing, the Depositor shall prepare and file any UCC financing statements that are necessary to perfect the Indenture Trustee’s security interest in or lien on the Mortgage Loans, as evidenced by an Officer’s Certificate of the Depositor, and furnish a copy of each such filed financing statement to the Trust Administrator. The Trust Administrator shall prepare and file, at the expense of the Issuer, all filings necessary to maintain the effectiveness of any original filings necessary under the Relevant UCC to perfect the Indenture Trustee’s security interest in or lien on the Mortgage Loans, including without limitation (x) continuation statements, and (y) to the extent that a Responsible Officer of the
(c) The Depositor shall not take any action inconsistent with the sale by the Depositor of all of its right, title and interest in and to the Trust Estate and shall indicate or shall cause to be indicated in its records and records held on its behalf that ownership of each Mortgage Loan and the other property of the Issuer is held by the Issuer. In addition, the Depositor shall respond to any inquiries from third parties with respect to ownership of a Mortgage Loan or any other property of the Trust Estate by stating that it is not the owner of such Mortgage Loan and that ownership of such Mortgage Loan or other property of the Trust Estate is held by the Issuer on behalf of the Noteholders and the Swap Counterparty.
Section 2.04. Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in paragraph (b) below and pursuant to the terms of each Subsequent Transfer Agreement, in consideration of the Trust Administrator’s delivery, on behalf of the Trust, on the related Subsequent Transfer Date to or upon the order of the Seller of the purchase price therefor, (i) the Seller or the Transferor (if applicable) shall on any Subsequent Transfer Date sell, transfer, assign, set over and otherwise convey without recourse to the Depositor and (ii) the Depositor shall sell, transfer, assign, set over and otherwise convey without recourse to the Trust, all right, title and interest of the Seller or the Transferor (if applicable) and the Depositor, as applicable, in and to each Subsequent Mortgage Loan transferred pursuant to such Subsequent Transfer Agreement, including (i) the related Stated Principal Balance as of the Subsequent Cut-Off Date after giving effect to payments of principal due on or before the Subsequent Cut-Off Date; (ii) all collections in respect of interest and principal received after the Subsequent Cut-Off Date (other than principal and interest due on or before such Subsequent Cut-off Date); (iii) property which secured such Subsequent Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iv) its interest in any insurance policies in respect of such Subsequent Mortgage Loan; and (v) all proceeds of any of the foregoing. The transfers by the Seller or the Transferor (if applicable) to the Depositor and by the Depositor to the Trust of the Subsequent Mortgage
(b) The Seller or the Transferor (if applicable) shall transfer and deliver to the Indenture Trustee or the Custodian on behalf of the Indenture Trustee the Subsequent Mortgage Loans and the other property and rights related thereto described in paragraph (a) of this Section 2.04 only upon the satisfaction of each of the following conditions on or prior to the applicable Subsequent Transfer Date:
(i) The Seller or the Transferor (if applicable) shall have provided the Servicer, the Indenture Trustee, the Depositor, the Trust Administrator, the Master Servicer, the Subservicer and the Rating Agencies with an Addition Notice, which notice shall be given not less than two Business Days prior to the applicable Subsequent Transfer Date and shall designate the Subsequent Mortgage Loans to be sold to the Trust and the aggregate Stated Principal Balance of such Mortgage Loans and the Rating Agencies shall have informed the Seller, the Transferor (if applicable), the Depositor, the Indenture Trustee, the Trust Administrator, the Master Servicer, the Servicer or the Subservicer prior to the applicable Subsequent Transfer Date that the inclusion of such Subsequent Mortgage Loans will not result in the downgrade or withdrawal of the ratings assigned to the Notes;
(ii) The Seller or the Transferor (if applicable) shall have delivered to the Indenture Trustee, the Depositor, the Trust Administrator, the Master Servicer, the Subservicer
(iii) The Seller or the Transferor (if applicable) shall have delivered to the Trust Administrator for deposit in the Collection Account all principal collected and interest collected to the extent accrued and due after the Subsequent Cut-off Date;
(iv) As of each Subsequent Transfer Date, the Seller or the Transferor (if applicable) was not insolvent, the Seller or the Transferor (if applicable) will not be made insolvent by such transfer and the Seller or the Transferor (if applicable) is not aware of any pending insolvency;
(v) Such addition will not result in a material adverse tax consequence to any Noteholder;
(vi) The Pre-Funding Period shall not have terminated;
(vii) The Seller or the Transferor (if applicable) shall have provided the Indenture Trustee, the Trust Administrator, the Depositor and the Rating Agencies with an Opinion of Counsel relating to the sale (i.e., “True Sale Opinion”) of the Subsequent Mortgage Loans from the Seller or the Transferor (if applicable) to the Depositor and the enforceability of the Subsequent Transfer Agreement with respect to the Seller and the Depositor, which matters may be covered in the opinions delivered on the Closing Date;
(viii) The Depositor shall have provided the Indenture Trustee, the Trust Administrator and the Rating Agencies with an Opinion of Counsel relating to the sale (i.e., “True Sale Opinion”) of the Subsequent Mortgage Loans from the Depositor to the Trust, the enforceability of the Subsequent Transfer Agreement with respect to the Depositor and to the effect that the transfer of such Subsequent Mortgage Loans will not adversely affect the tax status of the Notes, which matters may be covered in the opinions delivered on the Closing Date;
(ix) The aggregate Stated Principal Balance of Subsequent Mortgage Loans does not exceed the amount deposited in the Pre-Funding Account as of the Closing Date;
(x) The conditions specified in Exhibit J hereto shall be met; and
(xi) On the last Subsequent Transfer Date, the Indenture Trustee and the Trust Administrator shall have received an accountant’s letter confirming that the characteristics of the Mortgage Loans (including the Subsequent Mortgage Loans), satisfy the parameters set forth in Exhibit J hereto.
(c) Each party hereto shall comply with their respective obligations set forth in Sections 2.01, 2.02, 3.01, 3.02 and 3.03 with respect to the Subsequent Mortgage Loans delivered on each Subsequent Transfer Date. References in such Sections to the Initial Mortgage Loans or Mortgage Loans shall be deemed to refer to the Subsequent Mortgage Loans and references to the Initial Cut-Off Date or the Closing Date, as applicable, shall be deemed to refer to the applicable related Subsequent Cut-Off Date or Subsequent Transfer Date, respectively,
Section 2.05. Option to Contribute Derivative Instrument.
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor and the Seller.
(a) The Depositor hereby represents and warrants to the Issuer, the Indenture Trustee for the benefit of Noteholders and the Swap Counterparty, the Trust Administrator, the Master Servicer, the Servicer and the Subservicer as of the Closing Date or such other date as is specified, that:
(i) This Agreement constitutes a legal, valid and binding obligation of the Depositor, enforceable against the Depositor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity);
(ii) Immediately prior to the transfer by the Depositor to the Trust Estate of each Mortgage Loan, the Depositor had good and equitable title to each Initial Mortgage Loan (insofar as such title was conveyed to it by the Seller) subject to no prior lien, claim, participation interest, mortgage, security interest, pledge, charge or other encumbrance or other interest of any nature;
(iii) As of the Closing Date, the Depositor has transferred all right, title and interest in the Initial Mortgage Loans to the Trust Estate;
(iv) The Depositor has not transferred the Initial Mortgage Loans to the Trust Estate with any intent to hinder, delay or defraud any of its creditors;
(v) The Depositor has been duly organized and is validly existing as a corporation in good standing under the laws of Delaware, with full power and authority to own its assets and conduct its business as presently being conducted; and
(b) The Seller hereby represents and warrants to the Issuer, the Indenture Trustee for the benefit of Noteholders and the Swap Counterparty, the Trust Administrator, the Master
(i) the Seller is a Maryland corporation, duly organized validly existing and in good standing under the laws of the State of Maryland, and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or any properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Seller;
(ii) the Seller has the corporate power and authority to make, execute, deliver and perform this Agreement and all of the transactions contemplated under the Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. When executed and delivered, this Agreement will constitute the legal, valid and binding obligation of the Seller enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies;
(iii) the Seller is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for such consent, license, approval or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be, prior to the Closing Date;
(iv) the execution, delivery and performance of this Agreement by the Seller will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Seller or any provision of the articles of incorporation or bylaws of the Seller, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Seller is a party or by which the Seller may be bound;
(v) no litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Seller threatened, against the Seller or any of its properties or with respect to this Agreement which in the opinion of the Seller has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement; and
(vi) the Seller has been organized in conformity with the requirements for qualification as a REIT and currently qualifies as a REIT; the Seller has filed an election to be treated as a REIT for federal income tax purposes; and the Seller has operated in a manner and will continue to operate in a manner that will enable it to continue to maintain its current qualification as a REIT.
(c) The Seller hereby represents and warrants to the Issuer, the Indenture Trustee for the benefit of Noteholders and the Swap Counterparty, the Trust Administrator, the Master Servicer, the Subservicer and the Depositor as of the Closing Date or such other date as is
(d) To the extent that any fact, condition or event with respect to a Mortgage Loan constitutes a breach of a representation or warranty of the Seller under subsection (c) above or the Mortgage Loan Purchase Agreement, the only right or remedy of the Indenture Trustee or any Certificateholder hereunder shall be their rights to enforce the obligations of the Seller under any applicable representation or warranty made by it. The Indenture Trustee acknowledges that the Depositor shall have no obligation or liability with respect to any breach of any representation or warranty with respect to the Mortgage Loans (except as set forth in Section 3.01(a)(ii)) under any circumstances.
Section 3.02. Discovery of Breach. It is understood and agreed that the representations and warranties (i) of the Depositor set forth in Section , (ii) of the Seller set forth in Section 4.05 and 3.01(b) and (iii) of the Servicer and the Subservicer pursuant to Section 4.05 of this Agreement, shall each survive delivery of the Mortgage Files and the Assignment of Mortgage of each Mortgage Loan to the Indenture Trustee and shall continue throughout the term of this Agreement. With respect to the representations and warranties which are made to the best of the Seller’s knowledge, if it is discovered by the Depositor, the Seller, the Trust Administrator, the Indenture Trustee, the Master Servicer, the Underwriters, the Servicer or the Subservicer that the substance of such representation and warranty is inaccurate and such inaccuracy materially and adversely affects the value of the Mortgage Loans or the interests of the Noteholders or the Indenture Trustee therein, notwithstanding such Seller’s lack of knowledge with respect to the substance of such representation or warranty, remedies for breach will apply to such inaccuracy. Any breach of the representation and warranty set forth in clauses (xxi), (xxxiv), (lxxii), (lxxiv), (lxxv), (lxxvi), (lxxxv), (lxxxvi), (lxxxvii) and (lxxxviii) of Section 3.2 of the Mortgage Loan Purchase Agreement shall be deemed to materially and adversely affect the interest of the Trust in that Mortgage Loan, notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation and warranty. Upon discovery by any of the Depositor, the Master Servicer, the Trust Administrator or the Indenture Trustee of a breach of any of such representations and warranties made by the Seller that adversely and materially affects the value of the related Mortgage Loan, the party discovering such breach shall give prompt written notice to the other parties. Within 60 days of the discovery by the Seller of a breach of any representation or warranty given to the Indenture Trustee by the Seller or the Seller’s receipt of written notice of such a breach, the Seller shall either (a) cure such breach in all material respects, (b) repurchase such Mortgage Loan or any property acquired in respect thereof from the Indenture Trustee at the Purchase Price or (c) substitute a Qualifying Substitute Mortgage Loan for the affected Mortgage Loan.
Section 3.03. Repurchase, Purchase or Substitution of Mortgage Loans.
(a) With respect to any Mortgage Loan repurchased by the Seller pursuant to Section 3.02(b) of this Agreement, or any Mortgage Loan purchased by the Servicer pursuant to Section 4.02(b) of this Agreement, the principal portion of the funds in respect of such repurchase or purchase of a Mortgage Loan will be considered a Principal Prepayment and the Purchase Price shall be deposited in the Collection Account. Upon receipt by the Trust Administrator of the full amount of the Purchase Price for a Deleted Mortgage Loan, or upon receipt of notification from
(b) With respect to each Qualifying Substitute Mortgage Loan to be delivered to the Indenture Trustee (or its custodian) in exchange for a Deleted Mortgage Loan: (i) the Depositor , the Seller, or the Servicer, as applicable, must deliver to the Indenture Trustee (or a Custodian) the Mortgage File for the Qualifying Substitute Mortgage Loan containing the documents set forth in Section 2.01(b) along with a written certification certifying as to the delivery of such Mortgage File and containing the granting language set forth in Section 2.01(a); and (ii) the Seller and the Depositor will be deemed to have made, with respect to such Qualifying Substitute Mortgage Loan, each of the representations and warranties made by it with respect to the related Deleted Mortgage Loan. As soon as practicable after the delivery of any Qualifying Substitute Mortgage Loan hereunder, the Indenture Trustee, at the expense of the Depositor and at the direction and with the cooperation of the Servicer shall (i) with respect to a Qualifying Substitute Mortgage Loan that is a Non-MERS Mortgage Loan, cause the Assignment of Mortgage to be recorded by the Servicer if required pursuant to Section 2.01(c), or (ii) with respect to a Qualifying Substitute Mortgage Loan that is a MERS Mortgage Loan, cause to be taken such actions as are necessary to cause the Indenture Trustee (on behalf of the Issuer) to be clearly identified as the owner of each such Mortgage Loan on the records of MERS if required pursuant to Section 2.01(c).
ARTICLE IV ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS BY THE SERVICER
Section 4.01. Seller’s Engagement of Servicer to Perform Servicing Responsibilities.
(a) Contract for Servicing; Possession of Servicing Files. The Seller, as the owner of the servicing rights, by execution and delivery of this Agreement, does hereby contract with the Servicer and the Subservicer, each subject to the terms of this Agreement, for the servicing of the Mortgage Loans for the benefit of the Issuer and the Indenture Trustee. The Servicer or Subservicer shall maintain a Servicing File with respect to each Mortgage Loan in order to service such Mortgage Loans pursuant to this Agreement and each Servicing File delivered to the Servicer or Subservicer shall be held in trust by the Servicer or Subservicer for the benefit of the Issuer and the Indenture Trustee; provided, however, that neither the Servicer nor the Subservicer shall have any liability for any Servicing Files (or portions thereof) not delivered by the Seller. The Servicer’s or Subservicer’s possession of any portion of the Mortgage Loan documents shall
(b) Books and Records. All rights arising out of the Mortgage Loans shall be vested in the Indenture Trustee, subject to the Servicer’s and the Subservicer’s rights to service and administer the Mortgage Loans hereunder in accordance with the terms of this Agreement. All funds received on or in connection with a Mortgage Loan, other than the Master Servicing Fee, the Servicing Administration Fee and other compensation and reimbursement to which the Servicer, the Subservicer and the Master Servicer are entitled as set forth herein, including but not limited to Sections 4.04 and 4.21 below, shall be received and held by them in trust for the benefit of the Indenture Trustee pursuant to the terms of this Agreement.
Section 4.02. Servicing of the Mortgage Loans.
(a) Servicer and Subservicer to Service. The Servicer shall service and administer the Mortgage Loans from and after the Closing Date and, except where prior consent or approval of the Master Servicer is required under this Agreement, shall have full power and authority, acting alone, to do any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable, consistent with the terms of this Agreement and with Servicing Standards. The Servicer hereby delegates to the Subservicer such power and authority, but only to the extent provided in this Section 4.02(a). The Subservicer, in turn, shall be permitted to delegate any and all such power and authority to subservice the Mortgage Loans to its affiliate, Chase Home Finance LLC, but only to the extent provided in this Section 4.02(a) and provided that, notwithstanding anything to the contrary contained herein, the Subservicer shall remain responsible hereunder for all obligations of the Subservicer hereunder irrespective of any delegation to Chase Home Finance LLC, as fully as if such acts and omissions were those of the Subservicer. Beginning on the Closing Date, the Subservicer shall perform all of the obligations of the Servicer under this Agreement relating to the servicing of the Mortgage Loans,
(b) Delinquent and Defaulted Mortgage Loans; FSC Discretion. FSC, in its capacity as Servicer, may, at any time either (i) purchase any delinquent Mortgage Loan in consideration of the Purchase Price of such Mortgage Loan or (ii) substitute a defaulted Mortgage Loan with a Qualifying Substitute Mortgage Loan. Any purchase or substitution effected by FSC in reliance on this Section 4.02(b) shall be performed in accordance with the terms specified in Section 3.03 hereof.
(c) Collection and Liquidation of Mortgage Loans. Continuously from the Closing Date, until the date each Mortgage Loan ceases to be subject to this Agreement, the Servicer shall proceed diligently to collect all payments due under each of the Mortgage Loans when the same shall become due and payable and shall take special care in ascertaining and estimating Escrow Payments and all other charges that will become due and payable with respect to the Mortgage Loans and each related Mortgaged Property, to the end that the installments payable by the Mortgagors will be sufficient to pay such charges as and when they become due and payable.
(d) Establishment of and Deposits to Custodial Account.
(i) The Servicer shall segregate and hold all funds collected and received pursuant to the Mortgage Loans separate and apart from any of its own funds and general assets and shall initially establish and maintain one or more Custodial Accounts, in the form of time deposit or demand accounts, each of which accounts shall be titled “Fieldstone Servicing Corp. (or JPMorgan Chase Bank, National Association, as Subservicer) in trust for HSBC Bank USA, National Association, as Indenture Trustee, for the Fieldstone Mortgage Investment Trust, Series 2005-2 Mortgage-Backed Notes” and referred to herein as a “Custodial Account.” Each Custodial Account shall be an Eligible Account. Any funds deposited in the Custodial Account may be invested in Eligible Investments subject to the provisions of Section 4.02(j) hereof. Funds deposited in the Custodial Account may be drawn on by the Servicer in accordance with Section 4.02(e) hereof. The creation of any Custodial Account shall be evidenced by a letter agreement in the form of Exhibit E hereto. A copy of such certification or letter agreement shall be furnished to the Indenture Trustee, the Master Servicer and, upon request, to any subsequent owner of the Mortgage Loans.
(ii) The Servicer shall deposit in the Custodial Account on a daily basis, but not more than two (2) Business Days after receipt by the Servicer and retain therein, the following collections received by the Servicer and payments made by the Servicer after the related Cut-off Date (other than scheduled payments of principal and interest due on or before the related Cut-off Date), as applicable:
(A) all payments on account of principal on the Mortgage Loans, including all Principal Prepayments;
(B) all payments on account of interest on the Mortgage Loans adjusted to the Mortgage Loan Remittance Rate;
(C) all Liquidation Proceeds (net of Liquidation Expenses);
(D) all Insurance Proceeds including amounts required to be deposited pursuant to Section 4.02(k) (other than proceeds to be held in the Escrow Account and applied to the restoration and repair of the Mortgaged Property or released to the Mortgagor in accordance with the related Mortgage Loan documents and Servicing Standards);
(E) all Condemnation Proceeds that are not applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the related Mortgage Loan documents and Servicing Standards;
(F) with respect to each Principal Prepayment in full or in part, the Prepayment Interest Shortfall Amount, if any, for the month of payment. Such deposit shall be made from the Servicer’s own funds, without reimbursement therefore, up to a maximum amount per month in the aggregate of the Servicing Administration Fee, actually received for such month for the Mortgage Loans;
(G) all Advances made by the Servicer pursuant to Section 4.03(c);
(H) any amounts received from the Seller, the Depositor or any other person giving representations and warranties with respect to the Mortgage Loans, in connection with the repurchase of any Mortgage Loan;
(I) any amounts required to be deposited by the Servicer pursuant to Section 4.03(k) in connection with the deductible clause in any blanket hazard insurance policy;
(J) any amounts received with respect to or related to any REO Property or REO Disposition Proceeds pursuant to Section 4.02(p); and
(K) any other amounts required to be deposited in the Custodial Account pursuant to this Agreement.
(e) Permitted Withdrawals from Custodial Account.
(1) to make payments to the Master Servicer in the amounts and in the manner provided for in Section 4.03(a);
(2) in the event the Servicer has elected not to retain the Servicing Administration Fee out of any Mortgagor payments on account of interest or other recovery of interest with respect to a particular Mortgage Loan (including late
collections of interest on such Mortgage Loan, or interest portions of Insurance Proceeds, Liquidation Proceeds or Condemnation Proceeds) prior to the deposit of such Mortgagor payment or recovery into the Custodial Account, to pay to itself the related Servicing Administration Fee from all such Mortgagor payments on account of interest or other such recovery for interest with respect to that Mortgage Loan;
(3) to reimburse itself for unreimbursed Advances and Servicing Advances, the Servicer’s right to reimburse itself pursuant to this subclause (3) with respect to any Mortgage Loan being limited to related Liquidation Proceeds (net of Liquidation Expenses), Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and other amounts received in respect of the related REO Property, and such other amounts as may be collected by the Servicer from the Mortgagor or otherwise relating to such Mortgage Loan, it being understood that, in the case of any such reimbursement, the Servicer’s right thereto shall be prior to the rights of the Noteholders;
(4) to reimburse itself for any previously unreimbursed Advances or Servicing Advances that it determines are Nonrecoverable Advances, it being understood, in the case of each such reimbursement, that the Servicer’s right thereto shall be prior to the rights of the Noteholders;
(5) to pay itself investment earnings on funds deposited in the Custodial Account;
(6) to transfer funds to another Eligible Account in accordance with Section 4.02(j) hereof;
(7) to invest funds in certain Eligible Investments in accordance with Section 4.02(d)(i) and Section 4.02(i) hereof;
(8) to withdraw funds deposited in error;
(9) to clear and terminate the Custodial Account upon the termination of this Agreement; and
(10) to pay itself any Prepayment Interest Excess Amount.
(f) Establishment of and Deposits to Escrow Account. The Servicer shall segregate and hold all funds collected and received pursuant to a Mortgage Loan constituting Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more Escrow Accounts, in the form of time deposit or demand accounts, titled “Fieldstone Servicing Corp. (or JPMorgan Chase Bank, National Association, as Subservicer) in trust for HSBC Bank USA, National Association, as Indenture Trustee, for the Fieldstone Mortgage Investment Trust, Series 2005-2.” The Escrow Accounts shall be established with an Eligible Institution in a manner that shall provide maximum available insurance thereunder. Nothing herein shall require the Servicer to compel a Mortgagor to establish an Escrow Account in violation of applicable law. Funds deposited in the Escrow Account may be drawn on by the
(i) all Escrow Payments collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation Proceeds which are to be applied to the restoration or repair of any Mortgaged Property.
(g) Permitted Withdrawals from Escrow Account. Withdrawals from the Escrow Account or Accounts may be made by the Servicer only:
(i) to effect timely payments of ground rents, taxes, assessments, water rates, mortgage insurance premiums, condominium charges, fire and hazard insurance premiums or other items constituting Escrow Payments for the related Mortgage;
(ii) to reimburse the Servicer for any Servicing Advance of an Escrow Payment made by the Servicer with respect to a related Mortgage Loan, but only from amounts received on the related Mortgage Loan which represent late collections of Escrow Payments thereunder;
(iii) to refund to any Mortgagor any funds found to be in excess of the amounts required to be escrowed under the terms of the related Mortgage Loan;
(iv) to the extent permitted by applicable law, for transfer to the Custodial Account and application to reduce the principal balance of the Mortgage Loan in accordance with the terms of the related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the Mortgaged Property in accordance with Section 4.02(o);
(vi) to pay to the Servicer, or any Mortgagor to the extent required by law, any interest paid on the funds deposited in the Escrow Account; and
(vii) to clear and terminate the Escrow Account on the termination of this Agreement.
(h) Notification of Adjustments. With respect to each Mortgage Loan, the Servicer shall adjust the Mortgage Rate on the related interest rate adjustment date and shall adjust the Scheduled Payment on the related mortgage payment adjustment date, if applicable, in compliance with the requirements of applicable law and the related Mortgage and Mortgage Note. The Servicer shall execute and deliver any and all necessary notices required under applicable law and the terms of the related Mortgage Note and Mortgage regarding the Mortgage Rate and Scheduled Payment adjustments. The Servicer shall promptly, upon written request therefor, deliver to the Master Servicer such notifications and any additional applicable data regarding such adjustments and the methods used to calculate and implement such adjustments. Upon the discovery by the Servicer or the receipt of notice from the Master Servicer that the Servicer has failed to adjust a Mortgage Rate or Scheduled Payment in accordance with the terms of the related Mortgage Note, the Servicer shall immediately deposit in the Custodial Account from its own funds the amount of any interest loss or deferral caused the Seller thereby.
(i) Payment of Taxes, Insurance and Other Charges.
(i) With respect to each Mortgage Loan which provides for Escrow Payments, the Servicer shall maintain accurate records reflecting the status of ground rents, taxes, assessments, water rates, sewer rents, and other charges which are or may become a lien upon the Mortgaged Property and the status of fire and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) (“Property Charges”) and shall effect payment thereof prior to the applicable penalty or termination date, employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Mortgage. The Servicer shall effect timely payment of all such charges irrespective of each Mortgagor’s faithful performance in the payment of the same or the making of the Escrow Payments.
(ii) To the extent that a Mortgage does not provide for Escrow Payments, the Servicer shall make Servicing Advances from its own funds to effect payment of all Property Charges upon receipt of notice of any failure to pay on the part of the Mortgagor, or at such other time as the Servicer determines to be in the best interest of the Trust; provided, that in any event
(j) Protection of Accounts. The Servicer may transfer the Custodial Account or the Escrow Account to a different Eligible Institution from time to time. Such transfer shall be made only upon obtaining the consent of the Master Servicer, which consent shall not be withheld unreasonably, and the Servicer shall give notice to the Master Servicer, the Indenture Trustee and the Swap Counterparty of any change in the location of the Custodial Account.
(k) Maintenance of Hazard Insurance. The Servicer shall cause to be maintained for each Mortgage Loan hazard insurance such that all buildings upon the Mortgaged Property are insured by a generally acceptable insurer acceptable under Servicing Standards against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located, in an amount which is at least equal to the lesser of (i) the replacement value of the improvements securing such Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of the Mortgage Loan and (b) an amount such that the proceeds thereof shall be sufficient to prevent the Mortgagor or the loss payee from becoming a co-insurer.
(l) Maintenance of Mortgage Impairment Insurance. In the event that the Servicer shall obtain and maintain a blanket policy insuring against losses arising from fire and hazards covered under extended coverage on all of the Mortgage Loans, then, to the extent such policy provides coverage in an amount equal to the amount required pursuant to Section 4.02(k) and otherwise complies with all other requirements of Section 4.02(k), it shall conclusively be deemed to have satisfied its obligations as set forth in Section 4.02(k). Any amounts collected by the Servicer under any such policy relating to a Mortgage Loan shall be deposited in the Custodial Account subject to withdrawal pursuant to Section 4.02(e). Such policy may contain a deductible clause, in which case, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with Section 4.02(k), and there shall have been a loss which would have been covered by such policy, the Servicer shall deposit in the Custodial Account at the time of such loss the amount not otherwise payable under the blanket policy because of such deductible clause, such amount to deposited from the Servicer’s funds, without reimbursement therefor. Upon request of the Master Servicer or the Indenture Trustee, the Servicer shall cause to be delivered to such person a certified true copy of such policy and a statement from the insurer thereunder that such policy shall in no event be terminated or materially modified without 30 days’ prior written notice to the Master Servicer and the Indenture Trustee.
(m) Maintenance of Fidelity Bond and Errors and Omissions Insurance. The Servicer shall maintain with responsible companies, at its own expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy, with broad coverage on all officers, employees or other persons acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Mortgage Loans (“Servicer Employees”). Any such Fidelity Bond and Errors and Omissions Insurance Policy shall be in the form of the Mortgage Banker’s Blanket Bond and shall protect and insure the Servicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such Servicer Employees. Such Fidelity Bond and Errors and Omissions Insurance Policy also shall protect and insure the Servicer against losses in connection with the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby. No provision of this Section 4.02(m) requiring such Fidelity Bond and Errors and Omissions Insurance Policy shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement. The minimum coverage under any such bond and insurance policy shall be at least equal to the coverage amounts which are acceptable for the Servicer as determined by Fannie Mae and Freddie Mac. Upon the request of the Master Servicer or the Indenture Trustee, the Servicer shall cause to be delivered to such party a certified true copy of such fidelity bond and insurance
(n) Inspections. The Servicer shall inspect the Mortgaged Property as often as deemed necessary by the Servicer to assure itself that the value of the Mortgaged Property is being preserved. In addition, the Servicer shall inspect the Mortgaged Property and/or take such other actions as may be necessary or appropriate in accordance with Servicing Standards or as may be required by the primary mortgage guaranty insurer. The Servicer shall keep a written report of each such inspection.
(o) Restoration of Mortgaged Property. The Servicer need not obtain the approval of the Master Servicer or the Indenture Trustee prior to releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be applied to the restoration or repair of the Mortgaged Property if such release is in accordance with Servicing Standards. At a minimum, the Servicer shall comply with the following conditions in connection with any such release of Insurance Proceeds or Condemnation Proceeds:
(i) the Servicer shall receive satisfactory independent verification of completion of repairs and issuance of any required approvals with respect thereto;
(ii) the Servicer shall take all steps necessary to preserve the priority of the lien of the Mortgage, including, but not limited to requiring waivers with respect to mechanics’ and materialmen’s liens; and
(iii) pending repairs or restoration, the Servicer shall place the Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
(p) Title, Management and Disposition of REO Property. In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Indenture Trustee or its nominee in trust for the benefit of the Noteholders and the Swap Counterparty, or in the event the Indenture Trustee is not authorized or permitted to hold title to real property in the state where the REO Property is located, or would be adversely affected under the “doing business” or tax laws of such state by so holding title, the deed or certificate of sale shall be taken in the name of such Person or Persons as shall be consistent with an Opinion of Counsel obtained by the Servicer (with a copy delivered to the Indenture Trustee) from any attorney duly licensed to practice law in the state where the REO Property is located. The Person or Persons holding such title other than the Indenture Trustee shall acknowledge in writing that such title is being held as nominee for the Indenture Trustee.
(q) Real Estate Owned Reports. Together with the statement furnished pursuant to Section 4.03(b), the Servicer shall furnish to the Master Servicer on or before the 10th calendar day in each month a statement with respect to any REO Property covering the operation of such REO Property for the previous month and the Servicer’s efforts in connection with the sale of such REO Property and any rental of such REO Property incidental to the sale thereof for the
(r) Liquidation Reports. Upon the foreclosure sale of any Mortgaged Property or the acquisition thereof by the Indenture Trustee pursuant to a deed in lieu of foreclosure, the Servicer shall submit to the Indenture Trustee and the Master Servicer a monthly liquidation report with respect to such Mortgaged Property.
(s) Reports of Foreclosures and Abandonments of Mortgaged Property. Following the foreclosure sale or abandonment of any Mortgaged Property, the Servicer shall report such foreclosure or abandonment as required pursuant to Section 6050J of the Code.
(t) Prepayment Premiums. All Prepayment Premiums collected shall be payable to the Servicer, or any successor servicer, as Ancillary Income and shall not be available to make payments to the Noteholders or the Swap Counterparty hereunder.
(u) Compliance with Safeguarding Customer Information Requirements. The Servicer has implemented and will maintain security measures designed to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information published in final form on February 1, 2001, 66 Fed. Reg. 8616, and the rules promulgated thereunder, as amended from time to time (the “Guidelines”).
(v) Presentment of Claims and Collection of Proceeds. The Servicer shall prepare and present on behalf of the Indenture Trustee and the Noteholders all claims under the Insurance Policies with respect to the Mortgage Loans, and take such actions (including the negotiation, settlement, compromise or enforcement of the insured’s claim) as shall be necessary to realize recovery under such policies. Any proceeds disbursed to the Servicer in respect of such policies or bonds shall be promptly deposited in the Custodial Account upon receipt, except that any amounts realized that are to be applied to the repair or restoration of the related Mortgaged Property as a condition requisite to the presentation of claims on the related Mortgage Loan to the insurer under any applicable Insurance Policy need not be so deposited (or remitted).
Section 4.03. Payments To the Master Servicer.
(a) Remittances. On each Servicer Remittance Date, the Servicer shall remit on a scheduled/scheduled basis by wire transfer of immediately available funds to the Master Servicer (a) all amounts deposited in the Custodial Account as of the close of business on the last day of the related Due Period (net of charges against or withdrawals from the Custodial Account pursuant to Section 4.02(e)), plus (b) all Advances, if any, which the Servicer is obligated to make pursuant to Section 4.03(c), minus (c) any amounts attributable to Principal Prepayments, Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds or REO Disposition Proceeds received after the applicable Prepayment Period, which amounts shall be remitted on the following Servicer Remittance Date, together with any additional interest required to be deposited in the Custodial Account in connection with such Principal Prepayment in accordance with Section 4.02(d)(ii)(G) and Section 4.04(c), and minus (d) any amounts attributable to Scheduled Payments collected but due on a Due Date or Due Dates subsequent to the first day of
(b) Statements to Master Servicer and Trust Administrator. On the 10th day of each calendar month (or, if such 10th day is not a Business Day, then on the next succeeding Business Day), the Servicer shall furnish to the Master Servicer (i) a monthly remittance advice in the format set forth in Exhibit G-1 hereto, a monthly defaulted loan report in the format set forth in Exhibit G-2 hereto and a realized loss report in the format set forth in Exhibit G-3 hereto (or in such other format mutually agreed to between the Servicer and the Master Servicer) relating to the period ending on the last day of the preceding calendar month and (ii) all such information required pursuant to clause (i) above on a magnetic tape or other similar media reasonably acceptable to the Master Servicer. No later than three Business Days after the fifteenth day of each calendar month, the Servicer shall furnish to the Master Servicer a monthly report containing such information regarding prepayments of Mortgage Loans during the applicable Prepayment Period and in a format as mutually agreed to between the Servicer and the Master Servicer.
(c) Advances by Servicer. On the Business Day immediately preceding each Servicer Remittance Date, the Servicer shall deposit in the Custodial Account from its own funds or from amounts held for future payment, or a combination of both, an amount equal to all Scheduled Payments (with interest adjusted to the Mortgage Loan Remittance Rate) which were due on the Mortgage Loans during the applicable Due Period and which were delinquent at the close of business on the immediately preceding Determination Date. Any amounts held for future payment and so used shall be replaced by the Servicer by deposit in the Custodial Account on or before any future Servicer Remittance Date if funds in the Custodial Account on such Servicer Remittance Date shall be less than remittances to the Master Servicer required to be made on such Servicer Remittance Date. The Servicer shall keep appropriate records of such amounts and will provide such records to the Master Servicer upon request.
(d) Due Dates Other Than the First of the Month. Mortgage Loans having Due Dates other than the first day of a month shall be accounted for as described in this Section 4.03(d). Any Scheduled Payment due on a day other than the first day of each month shall be considered due on the first day of the month following the month in which that payment is due as if such payment were due on the first day of that month. For example, a Scheduled Payment due on August 15 shall be considered to be due on September 1. Any Scheduled Payment due and collected on a Mortgage Loan after the Cut-off Date shall be deposited in the Custodial Account. For Mortgage Loans with Due Dates on the first day of a month, deposits to the Custodial Account begin with the Scheduled Payment due on the first of the month following the Cut-off Date.
(e) Credit Reporting. For each Mortgage Loan, in accordance with its current servicing practices, the Servicer will accurately and fully report its underlying borrower credit files to each of the following credit repositories or their successors: Equifax Credit Information Services, Inc., Trans Union, LLC and Experian Information Solution, Inc., on a monthly basis in a timely manner. In addition, with respect to any Mortgage Loan serviced for a Fannie Mae pool, the Servicer shall transmit full credit reporting data to each of such credit repositories in accordance with Fannie Mae Guide Announcement 95-19 (November 11, 1995), a copy of which is attached hereto as Exhibit K, reporting each of the following statuses, each month with respect to a Mortgage Loan in a Fannie Mae pool: New origination, current, delinquent (30-60-90-days, etc), foreclosed or charged off.
Section 4.04. General Servicing Procedures.
(a) Transfers of Mortgaged Property. The Servicer shall use its best efforts to enforce any “due-on-sale” provision contained in any Mortgage or Mortgage Note and to deny assumption by the person to whom the Mortgaged Property has been or is about to be sold whether by absolute conveyance or by contract of sale, and whether or not the Mortgagor remains liable on the Mortgage and the Mortgage Note. When the Mortgaged Property has been conveyed by the Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance, exercise its rights to accelerate the maturity of such Mortgage Loan under the “due-on-sale” clause applicable thereto; provided, however, that the Servicer shall not exercise such rights if prohibited by law from doing so.
(b) Satisfaction of Mortgages and Release of Mortgage Files. Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Servicer shall notify the Master
(c) Servicing Compensation. As consideration for servicing the Mortgage Loans subject to this Agreement, the Servicer and the Subservicer shall be paid in the aggregate the relevant Servicing Administration Fee for each Mortgage Loan remaining subject to this Agreement during any month or part thereof. Such Servicing Administration Fee shall be payable monthly and retained by the Servicer or the Subservicer, as applicable. Additional servicing compensation in the form of Ancillary Income shall be retained by the Subservicer only and is not required to be deposited in the Custodial Account. The obligation of the Issuer to pay the Servicing Administration Fee is limited to, and the Servicing Administration Fee is payable from, the interest portion (including recoveries with respect to interest from Liquidation Proceeds) of such Scheduled Payment collected by the Servicer, or as otherwise provided in Section 4.02(e)(2).
(d) Annual Audit Report. The Subservicer shall, at its own expense, cause a firm of independent public accountants (who may also render other services to the Subservicer), which is a member of the American Institute of Certified Public Accountants, to furnish, as soon as practicable in each year beginning with 2006, but in no event later than March 15 of each calendar year, to the Seller, the Master Servicer, the Indenture Trustee and the Sarbanes Certifying Party (i) year-end audited (if available) financial statements of the Subservicer and (ii) a statement to the effect that such firm has examined certain documents and records for the preceding fiscal year (or during the period from the date of commencement of such Subservicer’s
(e) Annual Compliance Certifications.
(i) No later than March 15 of each calendar year, commencing with the year 2006, the Subservicer shall, at its own expense, deliver to the Seller, the Master Servicer, the Indenture Trustee, the Trust Administrator and the Servicer a servicer’s certificate stating, as to each signer thereof, that (i) a review of the activities of the Subservicer during such preceding fiscal 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 Subservicer 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 Subservicer to remedy such default.
(ii) For so long as a certificate under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), is required to be given on behalf of the Issuer, no later than March 15 of each calendar year, commencing with the year 2006, or at any other time that the Master Servicer provides a certification pursuant to Sarbanes-Oxley and upon thirty (30) days written request of such parties, an officer of the Subservicer shall execute and deliver an Officer’s Certificate to the Depositor, the Master Servicer, the Trust Administrator and the Servicer for the benefit of the Issuer and the Sarbanes Certifying Party and its officers, directors and affiliates, in the form of Exhibit H hereto.
(iii) The Subservicer shall indemnify and hold harmless the Issuer, the Depositor, the Indenture Trustee, the Owner Trustee, the Trust Administrator, the Servicer and the Master Servicer and their respective officers, directors, agents and affiliates from and against any losses, damages, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments and other costs and expenses arising out of or based upon a breach by the Subservicer or any of its officers, directors, agents or affiliates of its obligations under this Section 4.04(e) for the negligence, fraud, bad faith or willful misconduct of the Subservicer in connection therewith. If the indemnification provided for herein is unavailable or insufficient to hold harmless any of the foregoing parties, then the Subservicer agrees that it shall contribute to the amount paid or payable by the Master Servicer as a result of the losses, claims, damages or liabilities of the Master Servicer in such proportion as is appropriate to reflect the relative fault of the Master Servicer on the one hand and the Subservicer on the other in connection with a breach of the Subservicer’s obligations under this Section 4.04(e) or the Subservicer’s negligence, fraud, bad faith or willful misconduct in connection therewith.
(iv) In addition, the Servicer shall provide the certifications and reports specified in this Section 4.04(e) (with the exception of the certification required by Section 4.04(e)(ii))
(f) Inspection. The Servicer shall provide the Indenture Trustee and the Master Servicer, upon five (5) Business Days’ advance notice, during normal business hours, access to all records maintained by the Servicer in respect of its rights and obligations hereunder and access to officers of the Servicer responsible for such obligations. Upon request, the Servicer shall furnish to the Indenture Trustee and the Master Servicer its most recent publicly available financial statements and such other information relating to its capacity to perform its obligations under this Agreement.
Section 4.05. Representations, Warranties and Agreements.
(a) Representations, Warranties and Agreements of FSC. FSC, in its capacity as Servicer, as a condition to the consummation of the transactions contemplated hereby, hereby makes the following representations and warranties to the Master Servicer, the Subservicer, the Swap Counterparty, the Depositor and the Indenture Trustee and the Trust Administrator, as of the Closing Date:
(i) Due Organization and Authority. FSC is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all licenses necessary to carry on its business as now being conducted; FSC has the full corporate power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by FSC and the consummation of the transactions contemplated hereby have been duly and validly authorized; this Agreement evidences the valid, binding and enforceable obligation of FSC (except to the extent bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws affect the enforcement of creditor’s rights generally) and all requisite corporate action has been taken by FSC to make this Agreement valid and binding upon FSC in accordance with its terms;
(ii) Ordinary Course of Business. The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of FSC;
(iii) No Conflicts. Neither the execution and delivery of this Agreement, the acquisition of the servicing responsibilities by FSC or the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, will (a) conflict with or result in a breach of any of the terms, conditions or provisions of FSC’s charter or by-laws or any legal restriction or any agreement or instrument to which FSC is now a party or by which it is bound, (b) constitute a default under any of the foregoing, (c) result in an acceleration under any of the foregoing, (d) result in the violation of any law, rule, regulation, order, judgment or decree to which FSC or its property is subject or (e) impair the ability of FSC to act as Servicer hereunder with respect to the Mortgage Loans, or impair the value of the Mortgage Loans;
(iv) Ability to Perform. FSC does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement;
(v) No Litigation Pending. There is no action, suit, proceeding or investigation pending or, to FSC’s knowledge, threatened against FSC which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of FSC, or in any material impairment of the right or ability of FSC to carry on its business substantially as now conducted, or in any material liability on the part of FSC, or which would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of FSC contemplated herein, or which would be likely to impair materially the ability of FSC to perform under the terms of this Agreement;
(vi) No Consent Required. No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by FSC of or compliance by FSC with this Agreement, or if required, such approval has been obtained prior to the Closing Date;
(vii) No Default. FSC is not in default, and no event or condition exists that after the giving of notice or lapse of time or both, would constitute an event of default under any material mortgage, indenture, contract, agreement, judgment, or other undertaking, to which FSC is a party or which purports to be binding upon it or upon any of its assets, which default could impair materially the ability of FSC to perform under the terms of this Agreement;
(viii) Ability to Service. FSC or an affiliate is an approved seller/servicer of conventional residential mortgage loans for Fannie Mae and Freddie Mac, with the facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same type as the Mortgage Loans. FSC or an affiliate is in good standing to service mortgage loans for either Fannie Mae or Freddie Mac, and no event has occurred, including but not limited to a change in insurance coverage, which would make FSC or an affiliate unable to comply with either Fannie Mae or Freddie Mac eligibility requirements or which would require notification to either of Fannie Mae or Freddie Mac;
(ix) No Untrue Information. Neither this Agreement nor any statement, report or other document furnished or to be furnished pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading; and
(x) No Commissions to Third Parties. FSC has not dealt with any broker or agent or anyone else who might be entitled to a fee or commission in connection with this transaction other than the Seller.
(b) Representations, Warranties and Agreements of the Subservicer. The Subservicer, as a condition to the consummation of the transactions contemplated hereby, hereby makes the following representations and warranties to the Servicer, the Master Servicer, the Swap Counterparty, the Depositor and the Issuer, the Indenture Trustee and the Trust Administrator, as of the Closing Date:
(i) Due Organization and Authority. The Subservicer is validly existing and in good standing as a federally chartered national banking association with full power and authority to transact any business contemplated by this Agreement and to execute, deliver and comply with its obligations under the terms of this Agreement, the execution, delivery and performance of which have been duly authorized by all necessary corporate action on the part of the Subservicer;
(ii) Ordinary Course of Business. The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Subservicer;
(iii) No Conflicts. Neither the execution and delivery of this Agreement, the acquisition of the servicing responsibilities by the Subservicer or the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, will (a) conflict with or result in a breach of any of the terms, conditions or provisions of the Subservicer’s charter or any legal restriction or any agreement or instrument to which the Subservicer is now a party or by which it is bound, (b) constitute a material default under any of the foregoing, (c) result in an acceleration under any of the foregoing, (d) result in the violation of any law, rule, regulation, order, judgment or decree to which the Subservicer or its property is subject or (e) impair the ability of the Subservicer to service the Mortgage Loans, or impair the value of the Mortgage Loans;
(iv) Ability to Perform. The Subservicer does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement;
(v) No Litigation Pending. There is no action, suit, proceeding or investigation pending or, to the Subservicer’s knowledge, threatened against the Subservicer which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of the Subservicer, or in any material impairment of the right or ability of the Subservicer to carry on its business substantially as now conducted, or in any material liability on the part of the Subservicer, or which would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of the Subservicer contemplated herein, or which would be likely to impair materially the ability of the Subservicer to perform under the terms of this Agreement;
(vi) No Consent Required. No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Subservicer of or compliance by the Subservicer with this Agreement, or if required, such approval has been obtained prior to the Closing Date;
(vii) No Default. The Subservicer is not in default, and no event or condition exists that after the giving of notice or lapse of time or both, would constitute an event of default under any material mortgage, indenture, contract, agreement, judgment, or other undertaking, to which the Subservicer is a party or which purports to be binding upon it or upon any of its assets, which default could impair materially the ability of the Subservicer to perform under the terms of this Agreement;
(viii) Ability to Service. The Subservicer is an approved seller/Subservicer of conventional residential mortgage loans for Fannie Mae and Freddie Mac, with the facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same type as the Mortgage Loans. The Subservicer is in good standing to service mortgage loans for either Fannie Mae or Freddie Mac, and no event has occurred, including but not limited to a change in insurance coverage, which would make the Subservicer unable to comply with either Fannie Mae or Freddie Mac eligibility requirements or which would require notification to either of Fannie Mae or Freddie Mac; and
(ix) No Commissions to Third Parties. The Subservicer has not dealt with any broker or agent or anyone else who might be entitled to a fee or commission in connection with this transaction other than the Seller.
(c) Remedies for Breach of Representations and Warranties of FSC and the Subservicer. It is understood and agreed that the representations and warranties set forth in Sections 4.05(a) and Section 4.05(b) shall survive the engagement of each Representing Party to perform the servicing responsibilities as of the Closing Date hereunder and the delivery of the Servicing Files to the Servicer and the Subservicer, as applicable, and shall inure to the benefit of the Master Servicer and the Indenture Trustee. Upon discovery by either the Servicer, the Subservicer, the Master Servicer or the Indenture Trustee of a breach of any of the foregoing representations and warranties which materially and adversely affects the ability of the such Representing Party to perform its duties and obligations under this Agreement or otherwise materially and adversely affects the value of the Mortgage Loans, the Mortgaged Property or the priority of the security interest on such Mortgaged Property or the interests of the Master Servicer or the Indenture Trustee, the party discovering such breach shall give prompt written notice to the other parties.
(d) Additional Indemnification by FSC. FSC shall indemnify the Master Servicer, the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee, and the Trust Administrator and hold each of them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses (collectively, the “Liabilities”) that the indemnified party may sustain in any way related to the failure of FSC to perform its duties and service the Mortgage Loans in accordance with the terms of this Agreement. FSC shall immediately notify the Master Servicer, the Depositor, the Indenture Trustee, the Owner Trustee and the Trust Administrator if a claim is made by a third party with respect to this Agreement or the Mortgage Loans that may result in such Liabilities, and FSC shall assume (with the prior written consent of the indemnified party) the defense of any such claim and pay all expenses in connection therewith, including counsel fees, promptly pay, discharge and satisfy any judgment or decree which may be entered against it or any indemnified party in respect of such claim and follow any written instructions received from such indemnified party in connection with such claim. FSC shall be reimbursed promptly from the Trust Fund for all amounts advanced by it pursuant to the preceding sentence except when the claim is in any way related to FSC’s indemnification pursuant to this Section 4.05(d), or the failure of FSC to service and administer the Mortgage Loans in accordance with the terms of this Agreement.
(e) Additional Indemnification by the Subservicer. The Subservicer shall indemnify the Master Servicer, the Servicer, the Depositor, the Indenture Trustee, the Owner Trustee, the Issuer and the Trust Administrator and hold each of them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses (collectively, the “Liabilities”) that the indemnified party may sustain in any way related to the failure of the Subservicer to perform its duties and service the Mortgage Loans in accordance with the terms of this Agreement. The Subservicer shall immediately notify the Master Servicer, the Servicer, the Depositor, the Indenture Trustee, the Owner Trustee and the Trust Administrator if a claim is made by a third party with respect to this Agreement or the Mortgage Loans that may result in such Liabilities, and the Subservicer shall assume (with the prior written consent of the indemnified party) the defense of any such claim and pay all expenses in connection therewith, including counsel fees, promptly pay, discharge and satisfy any judgment or decree which may be entered against it or any indemnified party in respect of such claim and follow any written instructions received from the such indemnified party in connection with such claim. The Subservicer shall be reimbursed promptly from the Trust Fund for all amounts advanced by it pursuant to the preceding sentence except when the claim is in any way related to the Subservicer’s indemnification pursuant to this Section 4.05(e), or the failure of the Subservicer to service and administer the Mortgage Loans in accordance with the terms of this Agreement.
Section 4.06. The Servicer and the Subservicer.
(a) Merger or Consolidation of FSC. FSC shall keep in full effect its existence, rights and franchises as a corporation, and shall obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement or any of the Mortgage Loans and to perform its duties under this Agreement.
(b) Limitation on Liability of FSC and Others. Neither FSC nor any of the directors, officers, employees or agents of FSC shall be under any liability to the Master Servicer, the Depositor, the Issuer, the Indenture Trustee or the Trust Administrator for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect FSC or any such person against any breach of warranties or representations made herein, or failure to perform its obligations in strict compliance with any standard of care set forth in this Agreement, or any liability which would otherwise be imposed by reason of any breach of the terms and conditions of this Agreement. FSC and any director, officer, employee or agent of FSC may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. FSC shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Mortgage Loans in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that FSC may undertake any such action which it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto. In such event, FSC shall be entitled to reimbursement from the Trust Fund for the reasonable legal expenses and costs of such action.
(c) Limitation on Resignation and Assignment by FSC. This Agreement has been entered into with FSC in reliance upon the independent status of FSC, and the representations as to the adequacy of its servicing facilities, plant, personnel, records and procedures, its integrity, reputation and financial standing, and the continuance thereof. Therefore, except as expressly provided in this Section 4.06(c) and Section 4.02(a), FSC shall neither assign its rights under this Agreement or the servicing hereunder nor delegate its duties hereunder or any portion thereof, or sell or otherwise dispose of all or substantially all of its property or assets without, in each case, the prior written consent of the Seller, the Indenture Trustee, the Master Servicer and the Trust Administrator, which consent, in the case of an assignment of rights or delegation of duties, shall be granted or withheld in the discretion of the Seller, the Indenture Trustee, the Master Servicer and the Trust Administrator; provided, that in each case, there must be delivered to the Seller, the Master Servicer, the Indenture Trustee and the Trust Administrator a letter from each Rating
(d) Merger or Consolidation of the Subservicer. The Subservicer shall keep in full effect its existence, rights and franchises as a national banking association as shall be necessary to protect the validity and enforceability of this Agreement or any of the Mortgage Loans and to perform its duties under this Agreement.
(e) Limitation on Liability of the Subservicer and Others. Neither the Subservicer nor any of the directors, officers, employees or agents of the Subservicer shall be under any liability to the Master Servicer, the Depositor, the Issuer, Indenture Trustee or the Trust Administrator for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Subservicer or any such person against any breach of warranties or representations made herein, or failure to perform its obligations in strict compliance with any standard of care set forth in this Agreement, or any liability which would otherwise be imposed by reason of any breach of the terms and conditions of this Agreement. The Subservicer and any director, officer, employee or agent of the Subservicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters
(f) Limitation on Resignation and Assignment by the Subservicer. This Agreement has been entered into with the Subservicer in reliance upon the independent status of the Subservicer, and the representations as to the adequacy of its servicing facilities, plant, personnel, records and procedures, its integrity, reputation and financial standing, and the continuance thereof. Therefore, except as expressly provided in this Section 4.06(f) and Section 4.02(a), the Subservicer shall neither assign its rights under this Agreement or the servicing hereunder nor delegate its duties hereunder or any portion thereof, without the prior written consent of the Seller, the Indenture Trustee, the Master Servicer and the Trust Administrator, which consent, in the case of an assignment of rights or delegation of duties, shall be granted or withheld in the discretion of the Seller, the Indenture Trustee, the Master Servicer and the Trust Administrator, and which consent, in the case of a sale or disposition of all or substantially all of the property or assets of the Subservicer, shall not be unreasonably withheld by any of them; provided, that in each case, there must be delivered to the Seller, the Master Servicer, the Indenture Trustee and the Trust Administrator a letter from each Rating Agency to the effect that such transfer of servicing or sale or disposition of assets will not result in a qualification, withdrawal or downgrade of the then-current rating of any of the Notes.
(g) Successor Servicers. The provisions of Sections 4.06(a), (b), and (c) shall apply to any successor to FSC as Servicer hereunder other than the Subservicer.
Section 4.07. Termination for Cause.
(1) any failure by the Servicer or the Subservicer, as applicable, to remit to the Master Servicer any payment required to be made under the terms of this Agreement which continues unremedied for a period of two Business Days after the date upon which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or the Subservicer, as applicable, and the Swap Counterparty, by the Master Servicer or the Servicer; or
(2) failure by the Servicer or the Subservicer, as applicable, duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Servicer or the Subservicer, as applicable, set forth in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or the Subservicer, as applicable, and the Swap Counterparty by the Master Servicer or the Servicer; or
(3) failure by the Servicer or the Subservicer, as applicable, to maintain its license to do business or service residential mortgage loans in any jurisdiction where the Mortgaged Properties are located except where the failure to so maintain such license does not have a material adverse effect on the Servicer’s or the Subservicer’s, as applicable, ability to service the Mortgage Loans; or
(4) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, including bankruptcy, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer or the Subservicer, as applicable, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or
(5) the Servicer or the Subservicer, as applicable, shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or the Subservicer, as applicable, or of or relating to all or substantially all of its property; or
(6) the Servicer or the Subservicer, as applicable, shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors, voluntarily suspend payment
of its obligations or cease its normal business operations for three Business Days; or
(7) the Servicer or the Subservicer, as applicable, ceases to meet the qualifications of a Fannie Mae or Freddie Mac lender/servicer;
(8) the Servicer or the Subservicer, as applicable, attempts to assign the servicing of the Mortgage Loans or its right to servicing compensation hereunder or the Servicer or the Subservicer, as applicable, or attempts to assign this Agreement or the servicing responsibilities hereunder or to delegate its duties hereunder or any portion thereof in a manner not permitted under this Agreement;
(9) if (x) any of the Rating Agencies reduces or withdraws the rating of any of the Notes due to a reason attributable to the Subservicer or (y) the Subservicer’s residential primary servicer rating for servicing of subprime loans issued by any of the Rating Agencies is reduced below its rating in effect on the Closing Date or withdrawn; provided that if the Subservicer’s rating by any Rating Agency is reduced by not more than two levels, the Subservicer shall have 180 days to cure such default by having the applicable Rating Agency restore the Subservicer’s rating to its level in effect on the Closing Date; or
(10) the net worth of the Servicer or the Subservicer, as applicable, shall be less than $15,000,000; or
(11) failure by the Servicer or Subservicer, as applicable, to duly perform, within the required time period, its obligations under Sections 4.04(e) or 4.04(d) which failure continues unremedied for a period of 7 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer and the Swap Counterparty,by the Master Servicer or to the Subservicer by the Servicer, as applicable.
Section 4.08. Successor to Servicer and Subservicer, Miscellaneous Provisions.
(a) Successor to the Servicer. Simultaneously with the termination of the Servicer’s responsibilities and duties under this Agreement pursuant to Sections 4.05, 4.06, or 4.07, the Master Servicer shall (i) within 90 days of the Servicer’s notice of such termination, succeed to and assume all of the Servicer’s responsibilities, rights, duties and obligations under this Agreement, or (ii) appoint a successor having the characteristics set forth in clauses (i) and (ii) of Section 4.06(d) and which shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Servicer under this Agreement simultaneously with the termination of the Servicer’s responsibilities, duties and liabilities under this Agreement. Any successor to the Servicer shall be subject to the approval of the Master Servicer, the Indenture Trustee and the Trust Administrator. Any approval of a successor servicer by the Master Servicer, the Indenture Trustee and the Trust Administrator, shall, if the successor servicer is not at that time a servicer of other Mortgage Loans for the Trust, be conditioned upon the receipt by the Master Servicer, the Seller, the Indenture Trustee and the Trust Administrator of a letter from each Rating Agency to the effect that such transfer of servicing will not result in a qualification, withdrawal or
(b) Successor to the Subservicer. Notwithstanding anything to the contrary in Section 4.08(a), any successor to the Subservicer (but not the Servicer acting as successor to the Subservicer, in which case the Servicer shall be governed by Section 4.08(a)) shall be governed by this Section 4.08(b). Simultaneously with the termination of the Subservicer’s responsibilities and duties under this Agreement pursuant to Sections 4.05, 4.06 or 4.07, the Servicer shall (i) within 90 days of the Subservicer’s notice of such termination, succeed to and assume all of the Subservicer’s responsibilities, rights, duties and obligations under this Agreement, or (ii) appoint a successor having the characteristics set forth in clauses (i) and (ii) of Section 4.06(d) and which shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Subservicer under this Agreement simultaneously with the termination of the Subservicer’s responsibilities, duties and liabilities under this Agreement. Any successor to the Subservicer pursuant to (i) or (ii) above, in either case shall be subject to the approval of the Master Servicer, the Indenture Trustee and the Trust Administrator. Any approval of a successor Subservicer by the Servicer, the Master Servicer, the Indenture Trustee and the Trust Administrator, shall, if the successor Subservicer is not at that time a Subservicer of other Mortgage Loans for the Trust, be conditioned upon the receipt by the Master Servicer, the Seller, the Indenture Trustee and the Trust Administrator of a letter from each Rating Agency to the effect that such transfer of servicing will not result in a qualification, withdrawal or downgrade of the then-current rating of any of the Notes. In connection with such appointment and assumption, the Servicer, as applicable, may make such arrangements for the compensation of such successor out of payments on Mortgage Loans as it and such successor shall agree, provided, however, that no such compensation shall be in excess of that permitted the Subservicer under this Agreement. In the event that the Subservicer’s duties, responsibilities and liabilities under this Agreement should be terminated pursuant to the aforementioned sections, the Subservicer shall discharge such duties and responsibilities during the period from the date it acquires knowledge of such termination until the effective date thereof with the same degree of diligence and prudence which it is obligated to exercise under this Agreement, and shall take no action whatsoever that might impair or prejudice the rights or financial condition of its successor. The resignation or removal of the Subservicer pursuant to the aforementioned sections shall not become effective until a successor shall be appointed pursuant to this Section 4.08(b) and shall in no event relieve the Subservicer of the representations and warranties made pursuant to Sections 4.05 and the remedies available to the Servicer, the Master Servicer, the Indenture Trustee, the Trust Administrator and the Seller under Sections 4.05(c), 4.05(d) and 4.05(e), it being understood and agreed that the provisions of such Sections 4.05(c), 4.05(d) and 4.05(e) shall be applicable to the Subservicer notwithstanding any such resignation or termination of the Subservicer, or the termination of this Agreement. Neither the Servicer, in its capacity as successor Subservicer, nor
(c) Costs. The Seller shall pay the legal fees and expenses of its attorneys. Costs and expenses incurred in connection with the transfer of the servicing responsibilities, including fees for delivering Servicing Files, shall be paid by (i) the terminated or resigning Servicer if such termination or resignation is a result of an occurrence of a termination event under Sections 4.05(c) or 4.07, and (ii) in all other cases by the Trust.
Section 4.09. Miscellaneous Servicing Provisions.
(a) Protection of Confidential Information. The Servicer shall keep confidential and shall not divulge to any party, without the Seller’s prior written consent, any nonpublic information pertaining to the Mortgage Loans or any borrower thereunder, except to the extent that it is appropriate for the Servicer to do so in working with legal counsel, subservicers, special servicers, auditors, taxing authorities or other governmental agencies.
(b) No Personal Solicitation. For so long as either the Servicer or the Subservicer services the Mortgage Loans, each covenants that it will not, and that it will ensure that its affiliates and agents, will not, directly solicit or provide information for any other party to solicit for prepayment or refinancing of any of the Mortgage Loans by the related mortgagors. It is understood that promotions undertaken by the Servicer and the Subservicer which are directed to the general public at large, or certain segments thereof, shall not constitute solicitation as that term is used in this Section 4.09(b).
(c) Intention of the Parties. It is the intention of the Seller, Servicer and Subservicer that the Seller is conveying, and the Servicer is receiving only a contract for servicing the Mortgage Loans. Accordingly, the parties hereby acknowledge that the Trust remains the sole and absolute owner of the Mortgage Loans (other than the servicing rights) and all rights related thereto, subject to the lien of the Indenture.
ARTICLE V ADMINISTRATION AND MASTER SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER AND THE TRUST ADMINISTRATOR
Section 5.01. Duties of the Master Servicer; Representations and Warranties.
(a) For and on behalf of the Issuer, the Swap Counterparty, the Indenture Trustee and the Noteholders, the Master Servicer shall master service the Mortgage Loans from and after the Closing Date in accordance with the provisions of this Article V. The Master Servicer hereby represents and warrants to the Depositor, the Issuer, the Swap Counterparty, the Indenture Trustee, the Trust Administrator, the Servicer and the Subservicer, as of the Closing Date, that:
(i) it is validly existing and in good standing as a federally chartered national banking association and as Master Servicer has full power and authority to transact any and all business contemplated by this Agreement and to execute, deliver and comply with its obligations under the terms of this Agreement, the execution, delivery and performance of which have been duly authorized by all necessary corporate action on the part of the Master Servicer;
(ii) the execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement will not (A) violate the Master Servicer’s charter or bylaws, (B) violate any law or regulation or any administrative decree or order to which it is subject or (C) 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 Master Servicer is a party or by which it is bound or
(iii) this Agreement constitutes, assuming due authorization, execution and delivery hereof by the other respective parties hereto, a legal, valid and binding obligation of the Master Servicer, enforceable against it in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law);
(iv) the Master Servicer is not in default with respect to any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency to the extent that any such default would materially and adversely affect its performance hereunder;
(v) the Master Servicer is not a party to or bound by any agreement or instrument or subject to any charter provision, bylaw or any other corporate restriction or any judgment, order, writ, injunction, decree, law or regulation that may materially and adversely affect its ability as Master Servicer to perform its obligations under this Agreement or that requires the consent of any third person to the execution of this Agreement or the performance by the Master Servicer of its obligations under this Agreement;
(vi) no litigation is pending or, to the best of the Master Servicer’s knowledge, threatened against the Master Servicer which would prohibit its entering into this Agreement or performing its obligations under this Agreement;
(vii) the Master Servicer, or an affiliate thereof the primary business of which is the servicing of conventional residential mortgage loans, is a Fannie Mae- or FHLMC-approved seller/servicer;
(viii) no consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Master Servicer of or compliance by the Master Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement, except for such consents, approvals, authorizations and orders (if any) as have been obtained;
(ix) the consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Master Servicer;
(x) the Master Servicer has obtained an Errors and Omissions Insurance Policy and a Fidelity Bond in accordance with Section 5.02 each of which is in full force and effect, and each of which provides at least such coverage as is required hereunder; and
(xi) the information about the Master Servicer under the heading “The Master Servicer” in the Offering Documents relating to the Master Servicer does not include an untrue statement of a material fact and does not omit to state a material fact, with respect to the statements made, necessary in order to make the statements in light of the circumstances under which they were made not misleading.
(b) It is understood and agreed that the representations and warranties set forth in this Section 5.01 shall survive the execution and delivery of this Agreement. The Master Servicer shall indemnify the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee, the Trust Administrator, the Servicer and the Subservicer and hold them harmless against any loss, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a breach of the Master Servicer’s representations and warranties contained in this Section 5.01. It is understood and agreed that the enforcement of the obligation of the Master Servicer set forth in this Section to indemnify the foregoing parties as provided in this Section constitutes the sole remedy (other than as set forth in Section 8.01) of such parties respecting a breach of the foregoing representations and warranties. Such indemnification shall survive any termination of the Master Servicer as Master Servicer hereunder, and any termination of this Agreement.
Section 5.02. Master Servicer Fidelity Bond and Master Servicer Errors and Omissions Insurance Policy.
(a) The Master Servicer, at its expense, shall maintain in effect a Master Servicer Fidelity Bond and a Master Servicer Errors and Omissions Insurance Policy, affording coverage with respect to all directors, officers, employees and other Persons acting on such Master Servicer’s behalf, and covering errors and omissions in the performance of the Master Servicer’s obligations hereunder. The Master Servicer Errors and Omissions Insurance Policy and the Master Servicer Fidelity Bond shall be in such form and amount that would be consistent with coverage customarily maintained by master servicers of mortgage loans similar to the Mortgage Loans and shall by its terms not be cancelable without thirty days’ prior written notice to the Indenture Trustee. The Master Servicer shall provide the Depositor and the Indenture Trustee, upon request, with a copy of such policy and fidelity bond. The Master Servicer shall (i) require the Servicer to maintain an Errors and Omissions Insurance Policy and a Servicer Fidelity Bond in accordance with the provisions of Section 4.02(m) of this Agreement, (ii) cause the Servicer to provide to the Master Servicer certificates evidencing that such policy and bond is in effect and to furnish to the Master Servicer any notice of cancellation, non-renewal or modification of the policy or bond received by it, as and to the extent provided in Section 4.02(m) of the Agreement, and (iii) furnish copies of such policies and of the certificates and notices referred to in clause (ii) to the Indenture Trustee upon request.
(b) The Master Servicer shall promptly report to the Indenture Trustee and the Trust Administrator any material changes that may occur in the Master Servicer’s Fidelity Bond or the Master Servicer Errors and Omissions Insurance Policy and shall furnish either such party, on request, certificates evidencing that such bond and insurance policy are in full force and effect.
Section 5.03. Master Servicer’s Financial Statements and Related Information. For each year this Agreement is in effect, the Master Servicer shall deliver to the Trust Administrator, the Indenture Trustee, each Rating Agency and the Depositor a copy of its annual unaudited financial statements on or prior to May 31 of each year, beginning May 31, 2005. Such financial statements shall include a balance sheet, income statement, statement of retained earnings, statement of additional paid-in capital, statement of changes in financial position and all related notes and schedules and shall be in comparative form, certified by a nationally recognized firm of Independent Accountants to the effect that such statements were examined and prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding year.
Section 5.04. Power to Act; Procedures.
(a) The Master Servicer shall master service the Mortgage Loans, provided that the Master Servicer shall not take, or knowingly permit the Servicer to take, any action that is inconsistent with or prejudices the interests of the Issuer, the Indenture Trustee or the Noteholders in any Mortgage Loan or the rights and interests of the Depositor, the Issuer, the Indenture Trustee and the Noteholders under this Agreement and the Indenture. The Master Servicer shall represent and protect the interests of the Issuer, the Indenture Trustee and the Noteholders in the same manner as it protects its own interests in mortgage loans in its own portfolio in any claim, proceeding or litigation regarding a Mortgage Loan. Without limiting the generality of the foregoing, the Master Servicer in its own name, and the Servicer, to the extent such authority is delegated to such Servicer under this Agreement, is hereby authorized and empowered by the Indenture Trustee when the Master Servicer or such Servicer, as the case may be, believes it appropriate in its best judgment and in accordance with Servicing Standards, to execute and deliver, on behalf of itself and the Noteholders, the Trust Administrator, 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 Mortgaged Properties. The Indenture Trustee (or the Trust Administrator acting for the Indenture Trustee) shall furnish the Master Servicer, upon request, with any powers of attorney empowering the Master Servicer or the Servicer to execute and deliver instruments of satisfaction or cancellation, or of partial or full release or discharge, and to foreclose upon or otherwise liquidate Mortgaged Property, and to appeal, prosecute or defend in any court action relating to the Mortgage Loans or the Mortgaged Property, in accordance with this Agreement, and the Indenture Trustee shall execute and deliver such other
(b) In master servicing and administering the Mortgage Loans, the Master Servicer shall employ procedures and exercise the same care that it customarily employs and exercises in master servicing and administering loans for its own account, giving due consideration to Servicing Standards where such practices do not conflict with this Agreement. Consistent with the foregoing, the Master Servicer may, and may permit the Servicer to, in its discretion (i) waive any late payment charge and (ii) extend the due dates for payments due on a Mortgage Note for a period not greater than 120 days; provided, however, that the maturity of any Mortgage Loan shall not be extended past the date on which the final payment is due on the latest maturing Mortgage Loan as of the Cut-off Date. In the event of any extension described in clause (ii) above, the Master Servicer shall make or cause the Servicer to make Advances on the related Mortgage Loan in accordance with the provisions of Section 4.03 on the basis of the amortization schedule of such Mortgage Loan without modification thereof by reason of such extension.
Section 5.05. Enforcement of Servicer’s and Master Servicer’s Obligations.
(a) The Master Servicer shall not be required to (i) take any action with respect to the servicing of any Mortgage Loan that the Servicer is not required to take under this Agreement and (ii) cause the Servicer to take any action or refrain from taking any action if this Agreement does not require the Servicer to take such action or refrain from taking such action.
(b) The Master Servicer, for the benefit of the Issuer, the Swap Counterparty, the Indenture Trustee and the Noteholders, shall enforce the obligations of the Servicer hereunder, and shall, in the event that the Servicer fails to perform its obligations in accordance herewith, terminate the rights and obligations of the Servicer hereunder and either act as servicer of the related Mortgage Loans or cause other parties hereto to either assume the obligations of the
Section 5.06. [Reserved].
Section 5.07. Collection Account.
(a) On the Closing Date, the Trust Administrator shall open and shall thereafter maintain a segregated account held in trust in the name of the Securities Intermediary (the “Collection Account”), entitled “Collection Account, HSBC Bank USA, National Association, as Indenture Trustee, in trust for Holders of the Fieldstone Mortgage Investment Trust, Series 2005-2, Mortgage-Backed Notes.” The Collection Account shall relate solely to the Notes issued by the Issuer, and funds deposited in the Collection Account shall not be commingled with any other monies.
(b) The Collection Account shall be an Eligible Account. If an existing Collection Account ceases to be an Eligible Account, the Trust Administrator shall establish a new Collection Account that is an Eligible Account within 10 days and transfer all funds and investment property on deposit in such existing Collection Account into such new Collection Account.
(c) The Trust Administrator shall give to the Master Servicer and the Indenture Trustee prior written notice of the name and address of the depository institution at which the Collection Account is maintained and the account number of such Collection Account. The Trust Administrator shall take such actions as are necessary to cause the depository institution holding the Collection Account to hold such account in the name of the Indenture Trustee. On each Payment Date, the entire amount on deposit in the Collection Account relating to the Mortgage Loans (subject to permitted withdrawals set forth in Section 5.08), other than amounts not included in Interest Funds or Principal Funds to be paid to Noteholders for such Payment Date, shall be applied to make the requested payment of principal and/or interest on each Class of Notes.
(d) The Master Servicer shall deposit or cause to be deposited into the Collection Account, no later than the Business Day following the Closing Date, any amounts received with respect to the Mortgage Loans representing Scheduled Payments on the Mortgage Loans due after the Cut-off Date and unscheduled payments received on or after the Cut-off Date and on or before the Closing Date. Thereafter, the Master Servicer shall deposit or cause to be deposited in
(i) all remittances from the Custodial Account to the Master Servicer pursuant to Section 4.03;
(ii) all Advances made by the Servicer or the Master Servicer pursuant to Section 6.05 hereof and any payment in respect of Prepayment Interest Shortfalls paid by the Master Servicer pursuant to Section 5.21 hereof;
(iii) the Purchase Price of any Mortgage Loan repurchased by the Depositor or the Seller during the related Prepayment Period or any other Person and any Substitution Amount related to any Qualifying Substitute Mortgage Loan; and
(iv) any Corridor Receipts, Net Swap Receipts or any swap breakage costs (as reported to the Trust Administrator by the Swap Counterparty) received by the Trust Administrator.
(e) Funds in the Collection Account may be invested by the Trust Administrator in Eligible Investments selected by and at the written direction of the Trust Administrator, which shall mature not later than one Business Day prior to the next Payment Date (or on the Payment Date with respect to any Eligible Investment of the Trust Administrator or any other fund managed or advised by it or any Affiliate) and any such Eligible Investment shall not be sold or disposed of prior to its maturity. All such Eligible Investments shall be made in the name of the Master Servicer in trust for the benefit of the Indenture Trustee and the Noteholders and the Swap Counterparty. All income and gain realized from any Eligible Investment shall be for the benefit of the Master Servicer and shall be subject to its withdrawal or order from time to time, subject to Section 5.08 and shall not be part of the Trust Estate. The amount of any losses incurred in respect of any such investments shall be deposited in such Collection Account by the Master Servicer out of its own funds, without any right of reimbursement therefor, immediately as realized. The foregoing requirements for deposit in the Collection Account are exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments of interest on funds in the Collection Account and payments in the nature of late payment charges, assumption fees and other incidental fees and charges relating to the Mortgage Loans need not be deposited by the Master Servicer in the Collection Account and may be retained by the Master Servicer or the Servicer, as applicable, as additional servicing compensation. If the Master Servicer deposits in the Collection Account any amount not required to be deposited therein, it may at any time withdraw such amount from such Collection Account.
Section 5.08. Application of Funds in the Collection Account. The Trust Administrator may, from time to time, make, or cause to be made, withdrawals from the Collection Account for the following purposes:
(i) to reimburse the Master Servicer or the Servicer, as applicable, for any previously unreimbursed Advances or Servicing Advances made by any such party, such right to
(ii) to reimburse the Master Servicer or the Servicer following a final liquidation of a Mortgage Loan for any previously unreimbursed Advances made by any such party (A) that such party determines in good faith will not be recoverable from amounts representing late recoveries of payments of principal or interest respecting the particular Mortgage Loan as to which such Advance was made or from Liquidation Proceeds or Insurance Proceeds with respect to such Mortgage Loan and/or (B) to the extent that such unreimbursed Advances exceed the related Liquidation Proceeds or Insurance Proceeds, it being understood, in the case of each such reimbursement, that the Master Servicer’s or Servicer’s right thereto shall be prior to the rights of the Noteholders;
(iii) to reimburse the Master Servicer or the Servicer from Liquidation Proceeds for Liquidation Expenses and for amounts expended by it pursuant to Section 4.02(o) in good faith in connection with the restoration of damaged property and, to the extent that Liquidation Proceeds after such reimbursement exceed the unpaid principal balance of the related Mortgage Loan, together with accrued and unpaid interest thereon at the applicable Mortgage Rate less the applicable Servicing Administration Fee Rate and Master Servicing Fee Rate for such Mortgage Loan to the Due Date next succeeding the date of its receipt of such Liquidation Proceeds, to pay to the Master Servicer or the Servicer out of such excess the amount of any unpaid assumption fees, late payment charges or other Mortgagor charges on the related Mortgage Loan and to retain any excess remaining thereafter as additional servicing compensation, it being understood, in the case of any such reimbursement or payment, that such Master Servicer’s or Servicer’s right thereto shall be prior to the rights of the Noteholders;
(iv) to pay to the Depositor or the Seller or any other Person, as applicable, with respect to each Mortgage Loan or REO Property acquired in respect thereof that has been purchased pursuant to this Agreement, all amounts received thereon and not paid on the date on which the related repurchase was effected, and to pay to the applicable party any Advances and Servicing Advances to the extent specified in the definition of Purchase Price;
(v) to the extent not paid by the Servicer, to pay any Insurance Premium with respect to a Mortgage Loan;
(vi) to pay to the Master Servicer income earned on the investment of funds on deposit in the Collection Account;
(vii) on each Payment Date, to make payment to the Noteholders in the amounts and in the manner provided for in Section 6.02 for the related Payment Date (to the extent collected by the Master Servicer or the Servicer);
(viii) on each Payment Date, to the extent not previously collected and retained by the Servicer, to make payment to the Servicer, all Prepayment Premiums received during the immediately preceding Prepayment Period;
(ix) to make payment to itself, the Master Servicer, the Servicer, the Subservicer, the Indenture Trustee, the Custodian, the Owner Trustee and others pursuant to any provision of this Agreement, the Trust Agreement, the Indenture or the Custodial Agreement;
(x) to withdraw funds deposited in error in the Collection Account;
(xi) to clear and terminate the Collection Account pursuant to Article IX;
(xii) to reimburse a successor master servicer (solely in its capacity as successor master servicer), for any fee or advance occasioned by a termination of the Master Servicer, and the assumption of such duties by the Indenture Trustee or a successor master servicer appointed by the Indenture Trustee pursuant to Section 8.01, in each case to the extent not reimbursed by the terminated Master Servicer, it being understood, in the case of any such reimbursement or payment, that the right of the Master Servicer or the Indenture Trustee thereto shall be prior to the rights of the Noteholders;
(xiii) to pay the Swap Counterparty any Net Swap Payments and any swap termination payments (as reported to the Trust Administrator by the Swap Counterparty) two Business Days prior to each applicable Payment Date; and
(xiv) to make payment to the Owner Trustee, the Owner Trustee Fee for such Payment Date, if any.
Section 5.09. Reports to Indenture Trustee and Noteholders.
(a) On each Payment Date, the Trust Administrator shall make available to the Indenture Trustee and each Noteholder and the Swap Counterparty, a report setting forth the following information (on the basis of Mortgage Loan level information obtained from the Servicer or Subservicer and information provided by the Swap Counterparty):
(i) the aggregate amount of the payment to be made on such Payment Date to the Holders of each Class of Notes other than any Class of Notional Notes, to the extent applicable, allocable to principal on the Mortgage Loans, including Liquidation Proceeds and Insurance Proceeds, stating separately the amount attributable to scheduled principal payments and unscheduled payments in the nature of principal;
(ii) the aggregate amount of the payment to be made on such Payment Date to the Holders of each Class of Notes allocable to interest and the calculation thereof;
(iii) the amount, if any, of any payment to the Holder of the Ownership Certificate;
(iv) (A) the aggregate amount of any Advances required to be made by or on behalf of the Servicer (or the Master Servicer) with respect to such Payment Date, (B) the aggregate amount of such Advances actually made, and (C) the amount, if any, by which (A) above exceeds (B) above;
(v) the total number of Mortgage Loans, the aggregate Stated Principal Balance of all the Mortgage Loans as of the close of business on the last day of the related Due Period, after giving effect to payments allocated to principal reported under clause (i) above;
(vi) the Class Principal Amount (or Class Notional Amount) of each Class of Notes, to the extent applicable, as of such Payment Date after giving effect to payments allocated to principal reported under clause (i) above;
(vii) the amount of all Prepayment Premiums paid to the Servicer;
(viii) the amount of any Realized Losses incurred with respect to the Mortgage Loans (x) in the applicable Prepayment Period and (y) in the aggregate since the Cut-off Date;
(ix) the amount of the Owner Trustee Fee, Master Servicing Fee and Servicing Administration Fee paid during the Due Period to which such payment relates;
(x) the number and aggregate Stated Principal Balance of Mortgage Loans, as reported to the Trust Administrator by the Servicer or Subservicer, (a) remaining outstanding, (b) delinquent 30 to 59 days on a contractual basis, (c) delinquent 60 to 89 days on a contractual basis, (d) delinquent 90 or more days on a contractual basis, (e) as to which foreclosure proceedings have been commenced as of the close of business on the last Business Day of the calendar month immediately preceding the month in which such Payment Date occurs, (f) in bankruptcy and (g) that are REO Properties;
(xi) the number and aggregate Stated Principal Balance as of the related Determination Date of any Mortgage Loans with respect to which the related Mortgaged Property became an REO Property as of the close of business on the last Business Day of the calendar month immediately preceding the month in which such Payment Date occurs;
(xii) with respect to substitution of Mortgage Loans in the preceding calendar month, the Stated Principal Balance of each Deleted Mortgage Loan and of each Qualifying Substitute Mortgage Loan;
(xiii) whether a Trigger Event or a Class 1-A2 Trigger Event has occurred;
(xiv) the Interest Rate applicable to such Payment Date with respect to each Class of Notes;
(xv) the Interest Funds and the Principal Funds applicable to such Payment Date;
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(xvi) if applicable, the amount of any shortfall (i.e., the difference between the aggregate amounts of principal and interest which Noteholders would have received if there were sufficient available amounts in the Collection Account and the amounts actually paid);
(xvii) the amount of any Overcollateralization Deficiency after giving effect to the payments made on such Payment Date;
(xviii) LIBOR with respect to such Payment Date;
(xix) the Available Funds Shortfall of each Class of Notes (other than the Class A-IO Notes), if any; and
(xx) to the extent such information is provided to the Master Servicer by the Servicer or the Subservicer, the number of Mortgage Loans with respect to which (a) a reduction in the Mortgage Rate has occurred or (b) the related Mortgagor’s obligation to repay interest on a monthly basis has been suspended or reduced pursuant to the Civil Relief Act or the California Military and Veterans Code, as amended; and the amount of interest not required to be paid with respect to any such Mortgage Loans during the related Due Period as a result of such reductions, in the aggregate and with respect to the Group 1 Mortgage Loans and the Group 2 Mortgage Loans.
(b) Upon the reasonable advance written request of any Noteholder that is a savings and loan, bank or insurance company, which request, if received by the Indenture Trustee shall be forwarded promptly to the Trust Administrator, the Trust Administrator shall provide, or cause to be provided (or, to the extent that such information or documentation is not required to be provided by the Servicer, shall use reasonable efforts to obtain such information and documentation from the Servicer, and provide), to such Noteholder such reports and access to information and documentation regarding the Mortgage Loans as such Noteholder may reasonably deem necessary to comply with applicable regulations of the Office of Thrift Supervision or its successor or other regulatory authorities with respect to an investment in the Notes; provided, however, that the Trust Administrator shall be entitled to be reimbursed by such Noteholder for actual expenses incurred in providing such reports and access.
(c) Within 90 days, or such shorter period as may be required by statute or regulation, after the end of each calendar year, the Trust Administrator shall have prepared and shall make available to each Person who at any time during the calendar year was a Noteholder of record, and make available to Security Owners (identified as such by the Clearing Agency) in accordance with applicable regulations, a report summarizing the items provided to the Noteholders pursuant to Section 5.09(a) on an annual basis as may be required to enable such Holders to prepare their federal income tax returns; provided, however, that this Section 5.09(c) shall not be applicable where relevant reports or summaries are required elsewhere in this Agreement. Such information shall include the amount of original issue discount accrued on each Class of Notes and information regarding the expenses of the Issuer. The Trust Administrator shall be deemed to have satisfied such requirement if it forwards such information in any other format permitted by the Code. The Master Servicer shall provide the Trust Administrator with such information as is necessary for the Indenture Trustee to prepare such reports.
(d) The Trust Administrator shall furnish any other information that is required by the Code and regulations thereunder to be made available to Noteholders. The Master Servicer shall provide the Trust Administrator with such information as is necessary for the Trust Administrator to prepare such reports (and the Trust Administrator may rely solely upon such information).
Section 5.10. Termination of Servicer or Subservicer; Successor Servicers.
(a) The Master Servicer shall be entitled to terminate the rights and obligations of the Servicer or Subservicer, as applicable, upon the occurrence of a Servicer Event of Default as set forth in Section 4.07; provided, however, that in the event of termination of the Servicer or of both the Servicer and the Subservicer by the Master Servicer, the Master Servicer shall provide for the servicing of the Mortgage Loans by a successor servicer as provided in Section 4.08.
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(b) If the Master Servicer acts as a successor Servicer, it shall not assume liability for the representations and warranties of the Servicer that it replaces. The Master Servicer shall use reasonable efforts to have the successor Servicer assume liability for the representations and warranties made by the terminated Servicer and in the event of any such assumption by the successor servicer, the Master Servicer may, in the exercise of its business judgment, release the terminated Servicer from liability for such representations and warranties.
(c) If the Master Servicer acts as a successor Servicer, it will have no obligation to make an Advance if it determines in its reasonable judgment that such Advance would constitute a Nonrecoverable Advance.
Section 5.11. Master Servicer Liable for Enforcement. The Master Servicer shall use commercially reasonable efforts to ensure that the Mortgage Loans are serviced in accordance with the provisions of this Agreement and shall use commercially reasonable efforts to enforce the provisions of Article IV for the benefit of the Noteholders and the Swap Counterparty. The Master Servicer shall be entitled to enter into any agreement with any Servicer for indemnification of the Master Servicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification. Except as expressly set forth herein, the Master Servicer shall have no liability for the acts or omissions of either the Servicer or Subservicer in the performance by such Servicer of its obligations under Article IV.
Section 5.12. Assumption of Master Servicing by Indenture Trustee.
(a) In the event the Master Servicer shall for any reason no longer be the Master Servicer (including by reason of any Master Servicer Event of Default under Section 8.01 of this Agreement), the Indenture Trustee shall thereupon assume all of the rights and obligations of such Master Servicer hereunder. The Indenture Trustee, its designee or any successor master servicer appointed by the Indenture Trustee shall be deemed to have assumed all of the Master Servicer’s interest herein, except that the Master Servicer shall not thereby be relieved of any liability or obligations of the Master Servicer accruing prior to its replacement as Master Servicer, and shall be liable to the Indenture Trustee, and hereby agrees to indemnify and hold harmless the Indenture Trustee from and against all costs, damages, expenses and liabilities (including reasonable attorneys’ fees) incurred by the Indenture Trustee as a result of such liability or obligations of the Master Servicer and in connection with the Indenture Trustee’s assumption (but not its performance, except to the extent that costs or liability of the Indenture Trustee are created or increased as a result of negligent or wrongful acts or omissions of the
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Master Servicer prior to its replacement as Master Servicer) of the Master Servicer’s obligations, duties or responsibilities thereunder.
(b) The Master Servicer that has been terminated shall, upon request of the Indenture Trustee but at the expense of such Master Servicer, deliver to the assuming party all documents and records relating to the Mortgage Loans and an accounting of amounts collected and held by it and otherwise use its best efforts to effect the orderly and efficient transfer of master servicing to the assuming party.
Section 5.13. [Reserved].
Section 5.14. Release of Mortgage Files.
(a) Upon (i) becoming aware of the payment in full of any Mortgage Loan or (ii) the receipt by the Master Servicer of a notification that payment in full has been or will be escrowed in a manner customary for such purposes, the Master Servicer will, or will cause the Servicer to, promptly notify the Indenture Trustee (or the Custodian) by a certification (which certification shall include a statement to the effect that all amounts received in connection with such payment that are required to be deposited in the Collection Account maintained by the Trust Administrator pursuant to Section 5.07 have been or will be so deposited) of a Servicing Officer and shall request (on the form attached to the Custodial Agreement) the Indenture Trustee or the Custodian, to deliver to the Servicer or Subservicer the related Mortgage File. Upon receipt of such certification and request, the Indenture Trustee or the Custodian (with the consent, and at the direction of the Indenture Trustee), shall promptly release the related Mortgage File to the Servicer and the Indenture Trustee shall have no further responsibility with regard to such Mortgage File. Upon any such payment in full, the Master Servicer is authorized, and the Servicer is authorized, to give, as agent for the Indenture Trustee, as the mortgagee under the Mortgage that secured the Mortgage Loan, an instrument of satisfaction (or assignment of mortgage without recourse) regarding the Mortgaged Property subject to the 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 such payment, it being understood and agreed that no expenses incurred in connection with such instrument of satisfaction or assignment, as the case may be, shall be chargeable to the Collection Account.
(b) From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan, the Indenture Trustee shall execute such documents as shall be prepared and furnished to the Indenture Trustee by the Master Servicer, or by the Servicer, as applicable, (in form reasonably acceptable to the Indenture Trustee) and as are necessary to the prosecution of any such proceedings. The Indenture Trustee or the Custodian, shall, upon request of the Master Servicer or of the Servicer, as applicable, and delivery to the Indenture Trustee or the Custodian, of a trust receipt signed by a Servicing Officer substantially in the form attached to the Custodial Agreement, release the related Mortgage File held in its possession or control to the Master Servicer (or the Servicer, as applicable). Such trust receipt shall obligate the Master Servicer or the Servicer, as applicable, to return the Mortgage File to the Indenture Trustee or the Custodian, as applicable, when the need therefor by the Master Servicer or the Servicer, as applicable, no longer exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt of a certificate of a Servicing Officer similar to that hereinabove specified, the trust receipt shall be
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released by the Indenture Trustee or the Custodian, as applicable, to the Master Servicer or the Servicer as applicable.
Section 5.15. Documents, Records and Funds in Possession of Master Servicer To Be Held for Indenture Trustee.
(a) The Master Servicer shall transmit, or cause the Servicer to transmit, to the Indenture Trustee such documents and instruments coming into the possession of the Master Servicer or the Servicer from time to time as are required by the terms hereof to be delivered to the Indenture Trustee or the Custodian. Any funds received by the Master Servicer or by the Servicer in respect of any Mortgage Loan or which otherwise are collected by the Master Servicer or the Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any Mortgage Loan shall be held for the benefit of the Indenture Trustee and the Noteholders and the Swap Counterparty subject to the Master Servicer’s right to retain or withdraw amounts provided in this Agreement and to the right of the Servicer to retain its Servicing Administration Fee and other amounts as provided herein. The Master Servicer shall, and shall cause the Servicer to, provide access to information and documentation regarding the Mortgage Loans to the Indenture Trustee, their respective agents and accountants at any time upon reasonable request and during normal business hours, and to Noteholders that are savings and loan associations, banks or insurance companies, the Office of Thrift Supervision, the FDIC and the supervisory agents and examiners of such Office and Corporation or examiners of any other federal or state banking or insurance regulatory authority if so required by applicable regulations of the Office of Thrift Supervision or other regulatory authority, such access to be afforded without charge but only upon reasonable request in writing and during normal business hours at the offices of the Master Servicer designated by it. In fulfilling such a request the Master Servicer shall not be responsible for determining the sufficiency of such information.
(b) All Mortgage Files and funds collected or held by, or under the control of, the Master Servicer or the Servicer, in respect of any Mortgage Loans, whether from the collection of principal and interest payments or from Liquidation Proceeds or Insurance Proceeds, shall be held by the Master Servicer or by the Servicer for and on behalf of the Indenture Trustee as the Indenture Trustee’s agent and bailee for purposes of perfecting the Indenture Trustee’s security interest therein as provided by relevant Uniform Commercial Code or laws; provided, however, that the Master Servicer and the Servicer shall be entitled to setoff against, and deduct from, any such funds any amounts that are properly due and payable to the Master Servicer or the Servicer under this Agreement and shall be authorized to remit such funds to the Indenture Trustee in accordance with this Agreement.
(c) The Master Servicer hereby acknowledges that concurrently with the execution of this Agreement, the Indenture Trustee shall own or, to the extent that a court of competent jurisdiction shall deem the conveyance of the Mortgage Loans from either (1) the Seller to the Depositor or (2) the Transferor to the Depositor not to constitute a sale, the Indenture Trustee shall have a security interest in the Mortgage Loans and in all Mortgage Files representing such Mortgage Loans and in all funds and investment property now or hereafter held by, or under the control of, the Servicer or the Master Servicer that are collected by the Servicer or the Master Servicer in connection with the Mortgage Loans, whether as scheduled installments of principal and interest or as full or partial prepayments of principal or interest or as Liquidation Proceeds or
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Insurance Proceeds or otherwise, and in all proceeds of the foregoing and proceeds of proceeds (but excluding any fee or other amounts to which the Servicer or the Master Servicer is entitled to hereunder); and the Master Servicer agrees that so long as the Mortgage Loans are assigned to and held by the Indenture Trustee or the Custodian, all documents or instruments constituting part of the Mortgage Files, and such funds relating to the Mortgage Loans which come into the possession or custody of, or which are subject to the control of, the Master Servicer or the Servicer shall be held by the Master Servicer or the Servicer for and on behalf of the Indenture Trustee as the Indenture Trustee’s agent and bailee for purposes of perfecting the Indenture Trustee’s security interest therein as provided by the applicable Uniform Commercial Code or other applicable laws.
(d) The Master Servicer agrees that it shall not, and shall not authorize the Servicer to, create, incur or subject any Mortgage Loans, or any funds that are deposited in any Custodial Account, Escrow Account or the Collection Account, or any funds that otherwise are or may become due or payable to the Indenture Trustee, to any claim, lien, security interest, judgment, levy, writ of attachment or other encumbrance, nor assert by legal action or otherwise any claim or right of setoff against any Mortgage Loan or any funds collected on, or in connection with, a Mortgage Loan.
Section 5.16. Opinion. On or before the Closing Date, the Master Servicer shall cause to be delivered to the Depositor, the Seller, the Indenture Trustee, the Issuer, the Trust Administrator, the Swap Counterparty, the Servicer and the Subservicer one or more Opinions of Counsel, dated the Closing Date, in form and substance reasonably satisfactory to the Depositor and a representative of the Underwriters, as to the due authorization, execution and delivery of this Agreement by the Master Servicer and the enforceability thereof.
Section 5.17. [Reserved].
Section 5.18. [Reserved].
Section 5.19. [Reserved].
Section 5.20. Indenture Trustee To Retain Possession of Certain Insurance Policies and Documents. The Indenture Trustee (or the Custodian on behalf of the Indenture Trustee) shall retain possession and custody of the originals of the primary mortgage insurance policies or certificate of insurance if applicable and any certificates of renewal as to the foregoing as may be issued from time to time as contemplated by this Agreement. Until all amounts payable in respect of the Notes have been paid in full and the Master Servicer otherwise has fulfilled its obligations under this Agreement, the Indenture Trustee (or the Custodian) shall also retain possession and custody of each Mortgage File in accordance with and subject to the terms and conditions of this Agreement. The Master Servicer shall promptly deliver or cause the Servicer to deliver to the Indenture Trustee (or the Custodian), upon the execution or receipt thereof the originals of the primary mortgage insurance policies and any certificates of renewal thereof, and such other documents or instruments that constitute portions of the Mortgage File that come into the possession of the Master Servicer or the Servicer or Subservicer from time to time.
Section 5.21. Compensation to the Master Servicer. As compensation for its services hereunder, the Master Servicer shall be entitled to retain all income and gain realized from any investment of funds in the Collection Account pursuant to Section 5.07(e) and the Master Servicing Fee (together, the “Master Servicing Compensation”). Notwithstanding the foregoing, the Master Servicer shall deposit in the Collection Account, on or before the related Payment Date, an amount equal to the lesser of (i) its master servicing compensation with respect to such Payment Date and (ii) the amount of any Compensating Interest Payment required to be paid by the Servicer with respect to such Payment Date pursuant to this Agreement, but which is not paid by the Servicer or by the Subservicer on its behalf. The Master Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder and shall not be entitled to reimbursement therefor except as provided in this Agreement.
Section 5.22. [Reserved].
Section 5.23. Reports to the Indenture Trustee.
(a) Not later than 30 days after each Payment Date, the Trust Administrator shall, upon request, forward to the Indenture Trustee a statement, deemed to have been certified by a officer of the Trust Administrator, setting forth the status of the Collection Account maintained by the Trust Administrator as of the close of business on the related Payment Date, indicating that all payments required by this Agreement to be made by the Trust Administrator have been made (or if any required payment has not been made by the Trust Administrator, specifying the nature and status thereof) and showing, for the period covered by such statement, the aggregate of deposits into and withdrawals from the Collection Account maintained by the Trust Administrator. Copies of such statement shall be provided by the Trust Administrator, upon request, to the Depositor, Attention: Contract Finance and any Noteholders (or by the Indenture Trustee at the Trust Administrator’s expense if the Trust Administrator shall fail to provide such copies to the Noteholders, unless (i) the Trust Administrator shall have failed to provide the Indenture Trustee with such statement or (ii) the Indenture Trustee shall be unaware of the Trust Administrator’s failure to provide such statement).
(b) Not later than two Business Days following each Payment Date, the Trust Administrator shall deliver to one Person designated by the Depositor, in a format consistent with other electronic loan level reporting supplied by the Master Servicer in connection with similar transactions, “loan level” information with respect to the Mortgage Loans as of the related Determination Date, to the extent that such information has been provided to the Master Servicer by the Servicer or Subservicer or by the Depositor.
(c) All information, reports and statements prepared by the Master Servicer under this Agreement shall be based on information supplied to the Master Servicer by the Servicer without independent verification thereof and the Master Servicer shall be entitled to rely on such information.
Section 5.24. Annual Officer’s Certificate as to Compliance.
(a) The Master Servicer shall deliver to the Indenture Trustee no later than five Business Days after the 15th of March of each calendar year, commencing in March 2006, an
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Officer’s Certificate, certifying that with respect to the period ending on the immediately preceding December 31: (i) such Servicing Officer has reviewed the activities of such Master Servicer during the preceding calendar year or portion thereof and its performance under this Agreement, (ii) to the best of such Servicing Officer’s knowledge, based on such review, such Master Servicer has performed and fulfilled its duties, responsibilities and obligations under this Agreement in all material respects throughout such year, or, if there has been a default in the fulfillment of any such duties, responsibilities or obligations, specifying each such default known to such Servicing Officer and the nature and status thereof, (iii) nothing has come to the attention of such Servicing Officer to lead such Servicing Officer to believe that the Servicer has failed to perform any of its duties, responsibilities and obligations set forth in Article IV hereunder in all material respects throughout such year, or, if there has been a material default in the performance or fulfillment of any such duties, responsibilities or obligations, specifying each such default known to such Servicing Officer and the nature and status thereof, and (iv) the Master Servicer has received from the Servicer an annual certificate of compliance and a copy of such Servicer’s or Subservicer’s annual audit report, or, if any such certificate or report has not been received by the Master Servicer, the Master Servicer is using its best reasonable efforts to obtain such certificate or report.
(b) Copies of such statements shall be provided to any Noteholder upon request, by the Master Servicer or by the Indenture Trustee at the Master Servicer’s expense if the Master Servicer failed to provide such copies (unless (i) the Master Servicer shall have failed to provide the Indenture Trustee with such statement or (ii) the Indenture Trustee shall be unaware of the Master Servicer’s failure to provide such statement).
Section 5.25. Annual Independent Accountants’ Servicing Report. If the Master Servicer (or any of its Affiliates) has, during the course of any fiscal year, directly serviced, as a successor Servicer, any of the Mortgage Loans, then the Master Servicer at its expense shall cause a nationally recognized firm of independent certified public accountants to furnish a statement to the Indenture Trustee and the Depositor no later than five Business Days after the fifteenth of March of each calendar year, commencing in March 2006 to the effect that, with respect to the most recently ended calendar year, such firm has examined certain records and documents relating to the Master Servicer’s performance of its servicing obligations under this Agreement and pooling and servicing and trust agreements in material respects similar to this Agreement and to each other and that, on the basis of such examination conducted substantially in compliance with the audit program for mortgages serviced for FHLMC or the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the opinion that the Master Servicer’s activities have been conducted in compliance with this Agreement, or that such examination has disclosed no material items of noncompliance except for (i) such exceptions as such firm believes to be immaterial, (ii) such other exceptions as are set forth in such statement and (iii) such exceptions that the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for Mortgages Serviced by FHLMC requires it to report. Copies of such statements shall be provided to any Noteholder upon request by the Master Servicer, or by the Indenture Trustee at the expense of the Master Servicer if the Master Servicer shall fail to provide such copies. If such report discloses exceptions that are material, the Master Servicer shall advise the Indenture Trustee whether such exceptions have been or are susceptible of cure, and will take prompt action to do so.
Section 5.26. Merger or Consolidation. Any Person into which the Master Servicer may be merged or consolidated, or any Person resulting from any merger, conversion, other change in form or consolidation to which the Master Servicer shall be a party, or any Person succeeding to the business of the Master Servicer, shall be the successor to the Master Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the successor or resulting Person to the Master Servicer shall be a Person that shall be qualified and approved (or that have an Affiliate that is qualified and approved) to service mortgage loans for Fannie Mae or FHLMC and shall have a net worth of not less than $15,000,000.
Section 5.27. Resignation of Master Servicer. Except as otherwise provided in Sections 5.26 and this Section 5.27 hereof, the Master Servicer shall not resign from the obligations and duties hereby imposed on it unless it or the Indenture Trustee determines that the Master Servicer’s 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 and cannot be cured. Any such determination permitting the resignation of the Master Servicer shall be evidenced by an Opinion of Counsel that shall be Independent to such effect delivered to the Indenture Trustee. No such resignation shall become effective until the Indenture Trustee shall have assumed, or a successor master servicer shall have been appointed by the Indenture Trustee and until such successor shall have assumed, the Master Servicer’s responsibilities and obligations under this Agreement. Notice of such resignation shall be given promptly by the Master Servicer and the Depositor to the Indenture Trustee.
Section 5.28. Assignment or Delegation of Duties by the Master Servicer. Except as expressly provided herein, the Master Servicer shall not assign or transfer any of its rights, benefits or privileges hereunder to any other Person, or delegate to or subcontract with, or authorize or appoint any other Person to perform any of the duties, covenants or obligations to be performed by the Master Servicer hereunder, unless the Indenture Trustee and the Depositor shall have consented to such action; provided, however, that the Master Servicer shall have the right without the prior written consent of the Indenture Trustee or the Depositor to delegate or assign to or subcontract with or authorize or appoint an Affiliate of the Master Servicer to perform and carry out any duties, covenants or obligations to be performed and carried out by the Master Servicer hereunder. In no case, however, shall any such delegation, subcontracting or assignment to an Affiliate of the Master Servicer relieve the Master Servicer of any liability hereunder. Notice of such permitted assignment shall be given promptly by the Master Servicer to the Depositor and the Indenture Trustee. If, pursuant to any provision hereof, the duties of the Master Servicer are transferred to a successor master servicer, the entire amount of compensation payable to the Master Servicer pursuant hereto, including amounts payable to or permitted to be retained or withdrawn by the Master Servicer pursuant to Section 5.21 hereof, shall thereafter be payable to such successor master servicer.
Section 5.29. Limitation on Liability of the Master Servicer and Others.
(a) The Master Servicer undertakes to perform such duties and only such duties as are specifically set forth in this Agreement.
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(b) No provision of this Agreement shall be construed to relieve the Master Servicer from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that the duties and obligations of the Master Servicer shall be determined solely by the express provisions of this Agreement, the Master Servicer shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement; no implied covenants or obligations shall be read into this Agreement against the Master Servicer and, in absence of bad faith on the part of the Master Servicer, the Master Servicer may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Master Servicer and conforming to the requirements of this Agreement.
(c) Neither the Master Servicer nor any of the directors, officers, employees or agents of the Master Servicer shall be under any liability to the Indenture Trustee or the Noteholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Master Servicer or any such person against any liability that would otherwise be imposed by reason of willful misfeasance, fraud, bad faith or negligence in its performance of its duties or by reason of reckless disregard for its obligations and duties under this Agreement. The Master Servicer and any director, officer, employee or agent of the Master Servicer shall be entitled to indemnification by the Trust Estate and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Notes other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of his or its duties hereunder or by reason of reckless disregard of his or its obligations and duties hereunder. The Master Servicer and any director, officer, employee or agent of the Master Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Master Servicer shall be under no obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to master service the Mortgage Loans in accordance with this Agreement and that in its opinion may involve it in any expenses or liability; provided, however, that the Master Servicer may in its sole discretion undertake any such action that it may deem necessary or desirable in respect to this Agreement and the rights and duties of the parties hereto and the interests of the Noteholders hereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Issuer and the Master Servicer shall be entitled to be reimbursed therefor out of the Collection Account it maintains as provided by Section 5.08.
Section 5.30. Indemnification; Third-Party Claims. The Master Servicer agrees to indemnify the Depositor, the Issuer and the Indenture Trustee, the Owner Trustee, the Swap Counterparty, the Servicer and the Subservicer and hold them harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, liability, fees and expenses that the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee, the Swap Counterparty, the Servicer or Subservicer may sustain as a result of the failure of the Master Servicer to perform its duties and master service the Mortgage Loans in compliance with the terms of this Agreement. The Depositor, the Issuer, the Indenture Trustee, the Owner Trustee, the Servicer and the Subservicer shall immediately notify the Master Servicer if a claim is made by a third party with respect to this Agreement, the Mortgage Loans entitling the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee, the Servicer or Subservicer
to indemnification under this Section 5.30, whereupon the Master Servicer shall assume the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it or them in respect of such claim.
Section 5.31. Alternative Index. In the event that the Index for any Mortgage Loan, as specified in the related Mortgage Note, becomes unavailable for any reason, the Master Servicer shall select an alternative index in accordance with the terms of such Mortgage Note or, if such Mortgage Note does not make provision for the selection of an alternative index in such event, the Master Servicer shall, subject to applicable law, select an alternative index based on information comparable to that used in connection with the original Index and, in either case, such alternative index shall thereafter be the Index for such Mortgage Loan.
Section 5.32. Transfer of Servicing. The Seller agrees that it shall provide written notice to the Master Servicer and the Indenture Trustee and the Swap Counterparty thirty days prior to any proposed transfer or assignment by the Seller of the servicing of the Mortgage Loans other than transfer or assignment to the Subservicer. In addition, the ability of the Seller to transfer or assign the servicing hereunder to a successor servicer shall be subject to the following conditions:
(i) receipt of written consent of the Master Servicer and Indenture Trustee to such transfer;
(ii) Such successor servicer must be qualified to service loans for FNMA or FHLMC, and must be a member in good standing of MERS;
(iii) Such successor servicer must satisfy the servicer eligibility standards set forth in Section 4.06(d);
(iv) Such successor servicer must execute and deliver to the Indenture Trustee an agreement, in form and substance reasonably satisfactory to the Indenture Trustee, that contains an assumption by such successor servicer of the due and punctual performance and observance of each covenant and condition to be performed and observed by the Servicer;
(v) If the successor servicer is not a Servicer of Mortgage Loans at the time of the transfer, there must be delivered to the Indenture Trustee a letter from each Rating Agency to the effect that such transfer of servicing will not result in a qualification, withdrawal or downgrade of the then-current rating of any of the Notes; and
(vi) The Seller shall, at its cost and expense, take such steps, or cause the terminated Servicer to take such steps, as may be necessary or appropriate to effectuate and evidence the transfer of the servicing of the Mortgage Loans to such successor servicer, including, but not limited to, the following: (A) to the extent required by the terms of the Mortgage Loans and by applicable federal and state laws and regulations, the Seller shall cause the prior Servicer to timely mail to each obligor under a Mortgage Loan any required notices or disclosures describing the transfer of servicing of the Mortgage Loans to the successor servicer; (B) prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to transmit to any related insurer notification of such transfer of servicing; (C) on or
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prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to deliver to the successor servicer all Mortgage Loan Documents and any related records or materials; (D) on or prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to transfer to the successor servicer, or, if such transfer occurs after a Servicer Remittance Date but before the next succeeding Payment Date, to the Indenture Trustee, all funds held by the prior Servicer in respect of the Mortgage Loans; (E) on or prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to, after the effective date of the transfer of servicing to the successor servicer, continue to forward to such successor servicer, within one Business Day of receipt, the amount of any payments or other recoveries received by the prior Servicer, and to notify the successor servicer of the source and proper application of each such payment or recovery; and (F) the Seller shall cause the prior Servicer to, after the effective date of transfer of servicing to the successor servicer, continue to cooperate with the successor servicer to facilitate such transfer in such manner and to such extent as the successor servicer may reasonably request. Notwithstanding the foregoing, the prior Servicer shall be obligated to perform the items listed above to the extent provided in the applicable Servicing Agreement.
ARTICLE VI DEPOSITS AND PAYMENTS TO HOLDERS
Section 6.01. The Collection Account.
(a) The Trust Administrator shall establish and maintain in the name of the Securities Intermediary the Collection Account as provided in Section 5.07, which account shall be pledged to the Indenture Trustee for the benefit of the Noteholders and the Swap Counterparty.
(b) The Trust Administrator shall make withdrawals from the Collection Account only for the purposes set forth in Section 5.08.
Section 6.02. Payments from the Collection Account.
(a) On each Payment Date, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall withdraw from the Collection Account the Total Remittance Amount (to the extent such amount is on deposit in the Collection Account) and shall pay such amount as specified in this Section. All allocations and payments made between and with respect to Group 1 and Group 2 in this Section shall be made concurrently.
(b) On each Payment Date, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay the Interest Funds for Group 1 for such date in the following order of priority in accordance with the report of the Trust Administrator:
(i) to the Swap Counterparty, to the extent not previously paid from the Collection Account, the Group 1 Percentage of any Net Swap Payment for such Payment Date and swap termination amounts payable to the Swap Counterparty in the event that the Trust is a defaulting party or an affected party under the terms of the Swap Agreement;
(ii) pro rata, to the Class 1-A1 Notes, the Class 1-A2 Notes and the A-IO(1) Component, Current Interest thereon for such Payment Date;
(iii) pro rata, to the Class 2-A1 Notes, the Class 2-A2 Notes, the Class 2-A3 Notes and the A-IO(2) Component, Current Interest thereon (after giving effect to the payment of the Interest Funds for Group 2) for such Payment Date;
(iv) to the Class M1 Notes, Current Interest for such Class for such Payment Date;
(v) to the Class M2 Notes, Current Interest for such Class for such Payment Date;
(vi) to the Class M3 Notes, Current Interest for such Class for such Payment Date;
(vii) to the Class M4 Notes, Current Interest for such Class for such Payment Date;
(viii) to the Class M5 Notes, Current Interest for such Class for such Payment Date;
(ix) to the Class M6 Notes, Current Interest for such Class for such Payment Date;
(x) to the Class M7 Notes, Current Interest for such Class for such Payment Date;
(xi) to the Class M8 Notes, Current Interest for such Class for such Payment Date;
(xii) to the Class M9 Notes, Current Interest for such Class for such Payment Date;
(xiii) to the Class M10 Notes, Current Interest for such Class for such Payment Date;
(xiv) to the Indenture Trustee, the Owner Trustee, the Master Servicer, the Trust Administrator, the Servicer and the Subservicer, previously unreimbursed extraordinary costs, liabilities and expenses to the extent provided in this Agreement; and
(xv) for application as part of Monthly Excess Cashflow for such Payment Date, as provided in subsection (e) of this Section, any Group 1 Monthly Excess Interest for such Payment Date.
(c) On each Payment Date, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay the Interest Funds for Group 2 for such date in the following order of priority in accordance with the report of the Trust Administrator:
(i) to the Swap Counterparty, to the extent not previously paid from the Collection Account, the Group 2 Percentage of any Net Swap Payment for such Payment Date and swap termination amounts payable to the Swap Counterparty in the event that the Trust is a defaulting party or an affected party under the terms of the Swap Agreement;
(ii) pro rata, to Class 2-A1 Notes, Class 2-A2 Notes, Class 2-A3 Notes and the A-IO(2) Component, Current Interest thereon for such Payment Date;
(iii) pro rata, to the Class 1-A1 Notes, Class 1-A2 Notes and the A-IO(1) Component, Current Interest thereon (after giving effect to the payment of the Interest Funds for Group 1) for such Payment Date;
(iv) to the Class M1 Notes, Current Interest for such Class for such Payment Date;
(v) to the Class M2 Notes, Current Interest for such Class for such Payment Date;
(vi) to the Class M3 Notes, Current Interest for such Class for such Payment Date;
(vii) to the Class M4 Notes, Current Interest for such Class for such Payment Date;
(viii) to the Class M5 Notes, Current Interest for such Class for such Payment Date;
(ix) to the Class M6 Notes, Current Interest for such Class for such Payment Date;
(x) to the Class M7 Notes, Current Interest for such Class for such Payment Date;
(xi) to the Class M8 Notes, Current Interest for such Class for such Payment Date;
(xii) to the Class M9 Notes, Current Interest for such Class for such Payment Date;
(xiii) to the Class M10 Notes, Current Interest for such Class for such Payment Date;
(xiv) to the Indenture Trustee, the Owner Trustee, the Master Servicer, the Trust Administrator, the Servicer and the Subservicer, previously unreimbursed extraordinary costs, liabilities and expenses to the extent provided in this Agreement; and
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(xv) for application as part of Monthly Excess Cashflow for such Payment Date, as provided in subsection (e) of this Section, any Group 2 Monthly Excess Interest for such Payment Date.
(d) On each Payment Date, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay the Principal Funds for such date in accordance with the report of the Trust Administrator as follows:
(i) On each Payment Date (a) prior to the Stepdown Date or (b) with respect to which a Trigger Event is in effect, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall make the following payments to the extent of funds then in the Collection Account available therefor, concurrently:
(1) For Group 1: The Principal Payment Amount for Group 1 will be paid in the following order of priority:
(A) to the Swap Counterparty, to the extent not previously paid from the Collection Account, the Group 1 Percentage of swap termination amounts payable to the Swap Counterparty in the event that the Trust is a defaulting party or an affected party under the terms of the Swap Agreement;
(B) if no Trigger Event or Class 1-A2 Trigger Event has occurred and is continuing, pro rata, to the Class 1-A1 Notes and Class 1 -A2 Notes, until the respective Class Principal Amount of such Classes has been reduced to zero, or if a Trigger Event or Class 1-A2 Trigger Event has occurred and is continuing, then sequentially, to the Class 1-A1 Notes, until the Class Principal Amount of such Class has been reduced to zero, and then to the Class 1-A2 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(C) sequentially, to the Class 2-A1, Class 2-A2 and Class 2-A3 Notes, in that order, after giving effect to payments pursuant to subsection 6.02(d)(i)(2)(B), until the Class Principal Amount of each such Class has been reduced to zero;
(D) to the Class M1 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(E) to the Class M2 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(F) to the Class M3 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(G) to the Class M4 Notes, until the Class Principal Amount of such Class has been reduced to zero;
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(H) to the Class M5 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(I) to the Class M6 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(J) to the Class M7 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(K) to the Class M8 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(L) to the Class M9 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(M) to the Class M10 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(N) to the Swap Counterparty, to the extent not previously paid, the Group 1 Percentage of swap termination amounts payable to the Swap Counterparty in the event that the Swap Counterparty is a defaulting party or the sole affected party under the terms of the Swap Agreement; and
(O) for application as part of Monthly Excess Cashflow for such Payment Date, as provided for in subsection (e) of this Section, any such Principal Payment Amount for Group 1 remaining after application pursuant to clauses (A) through (N) above.
(2) For Group 2: The Principal Payment Amount for Group 2 will be paid in the following order of priority:
(A) to the Swap Counterparty, to the extent not previously paid from the Collection Account, the Group 2 Percentage of swap termination amounts payable to the Swap Counterparty in the event that the Trust is a defaulting party or an affected party under the terms of the Swap Agreement;
(B) sequentially, to the Class 2-A1, Class 2-A2 and Class 2-A3 Notes, until the Class Principal Amount of each such Class has been reduced to zero;
(C) if no Trigger Event or Class 1-A2 Trigger Event has occurred and is continuing, pro rata, to the Class 1-A1 Notes and Class 1-A2 Notes, after giving effect to payments pursuant to subsection 6.02(d)(i)(1)(B), until the respective Class Principal Amount of such Classes has been reduced zero, or if a Trigger Event or Class 1-A2 Trigger Event has occurred and is continuing, then sequentially, to the Class 1-A1 and the Class 1-A2 Notes in that order until the Class Principal Amount of
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each such Class has been reduced to zero, in each case after giving effect to payments pursuant to subsection 6.02(d)(i)(1)(B);
(D) to the Class M1 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(E) to the Class M2 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(F) to the Class M3 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(G) to the Class M4 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(H) to the Class M5 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(I) to the Class M6 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(J) to the Class M7 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(K) to the Class M8 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(L) to the Class M9 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(M) to the Class M10 Notes, until the Class Principal Amount of such Class has been reduced to zero;
(N) to the Swap Counterparty, to the extent not previously paid, the Group 2 Percentage of swap termination amounts payable to the Swap Counterparty in the event that the Swap Counterparty is a defaulting party or the sole affected party under the terms of the Swap Agreement; and
(O) for application as part of Monthly Excess Cashflow for such Payment Date, as provided for in subsection (e) of this Section, any such Principal Payment Amount for Group 2 remaining after application pursuant to clauses (A) through (N) above.
(ii) On each Payment Date (a) on or after the Stepdown Date and (b) with respect to which a Trigger Event is not in effect, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay the Principal Payment Amount for such date in the following order of priority:
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(1) to the Swap Counterparty, to the extent not previously paid from the Collection Account, swap termination amounts payable to the Swap Counterparty in the event that the Trust is a defaulting party or an affected party under the terms of the Swap Agreement;
(2) (a) so long as any Class M Note is outstanding, pro rata, to the Class 1-A1 and Class 1-A2 Notes (from amounts in Group 1 except as provided below) and, sequentially, to the Class 2-A1, Class 2-A2 and Class 2-A3 Notes (from amounts in Group 2 except as provided below), in that order, in each case, an amount equal to the lesser of (x) the Principal Payment Amount for the related Mortgage Group for such Payment Date and (y) the Related Senior Principal Payment Amount for such Mortgage Group for such Payment Date, in each case until the Class Principal Amount of each such Class or Classes has been reduced to zero; provided, however, to the extent that the Principal Payment Amount for a Mortgage Group exceeds the Related Senior Principal Payment Amount for such Mortgage Group, such excess shall be applied to the Class or Classes of Senior Principal Notes of the other Mortgage Group (with respect to the Class 1-A1 and Class 1-A2 Notes, pro rata, and with respect to the Class 2-A1, Class 2-A2 and Class 2-A3 Notes, sequentially, in that order), but in an amount not to exceed the Senior Principal Payment Amount for such Payment Date (as reduced by any payments pursuant to subclauses (x) and (y) of this Subsection (2)(a) on such Payment Date; or (b) otherwise to the Senior Principal Notes (with respect to the Class 1-A1 and Class 1-A2 Notes, pro rata, and with respect to the Class 2-A1, Class 2-A2 and Class 2-A3 Notes, pro rata), the Principal Payment Amount for the related Mortgage Group for such Payment Date;
(3) to the Class M1 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes on such Payment Date pursuant to clause (2) above, and (y) the M1 Principal Payment Amount for such Payment Date, until the Class Principal Amount of such Class has been reduced to zero;
(4) to the Class M2 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1 Notes on such Payment Date pursuant to clauses (2) and (3) above, respectively, and (y) the M2 Principal Payment Amount for such Payment Date, until the Class Principal Amount of such Class has been reduced to zero;
(5) to the Class M3 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1 and Class M2 Notes on such Payment Date pursuant to clauses (2), (3) and (4) above, respectively, and (y) the M3 Principal Payment
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Amount for such Payment Date, until the Class Principal Amount of such Class has been reduced to zero;
(6) to the Class M4 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2 and Class M3 Notes on such Payment Date pursuant to clauses (2), (3), (4) and (5) above, respectively, and (y) the M4 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero;
(7) to the Class M5 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3 and Class M4 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5) and (6) above, respectively, and (y) the M5 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero;
(8) to the Class M6 Notes, an amount equal to the lesser of (x) the excess of(a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3, Class M4 and Class M5 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5), (6) and (7) above, respectively, and (y) the M6 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero;
(9) to the Class M7 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3, Class M4, Class M5 and Class M6 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5), (6), (7) and (8) above, respectively, and (y) the M7 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero; and
(10) to the Class M8 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3, Class M4, Class M5, Class M6 and Class M7 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5), (6), (7), (8) and (9) above, respectively, and (y) the M8 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero; and
(11) to the Class M9 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and
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Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3, Class M4, Class M5, Class M6, Class M7 and Class M8 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5), (6), (7), (8), (9) and (10) above, respectively, and (y) the M9 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero; and
(12) to the Class M10 Notes, an amount equal to the lesser of (x) the excess of (a) the aggregate Principal Payment Amounts for each of Group 1 and Group 2 for such Payment Date over (b) the amount paid to the Senior Principal Notes and the Class M1, Class M2, Class M3, Class M4, Class M5, Class M6, Class M7, Class M8 and Class M9 Notes on such Payment Date pursuant to clauses (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) above, respectively, and (y) the M10 Principal Payment Amount for such Payment Date, until the Class Principal Amount of each such Class has been reduced to zero; and
(13) to the Swap Counterparty, to the extent not previously paid, swap termination amounts payable to the Swap Counterparty in the event that the Swap Counterparty is a defaulting party or the sole affected party under the terms of the Swap Agreement; and
(14) for application as part of Monthly Excess Cashflow for such Payment Date, as provided in subsection (e) of this Section, any Principal Payment Amount remaining after application pursuant to clauses (1) through (13) above.
(e) On each Payment Date, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay the Monthly Excess Cashflow for such date in accordance with the report of the Trust Administrator as follows:
(i) for each Payment Date occurring (a) before the Stepdown Date or (b) on or after the Stepdown Date but for which a Trigger Event is in effect:
(ii) for each Payment Date occurring on or after the Stepdown Date and for which a Trigger Event is not in effect, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall pay, in accordance with the report of the Trust Administrator, in the following order of priority:
Section 6.03. Net Swap Payments and Net Swap Receipts.
(a) On any Payment Date for which the Trust Administrator receives a Net Swap Receipt, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall deposit such amounts in the Basis Risk Reserve Account, and from the Basis Risk Reserve Account, apply the Group 1 Percentage of such Net Swap Receipt to pay any Available Funds Shortfalls, on the Notes and in the order and priority described in Section 6.02(e)(i)(b) or (e)(ii)(l), as applicable, but only after giving effect to Monthly Excess Cashflow available on such Payment Date. On any Payment Date, the Group 1 Percentage of such Net Swap Receipt that are not applied to the payment of Available Funds Shortfalls in the manner described in the preceding sentence shall be distributed from the Basis Risk Reserve Account by the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) to the holder of the Ownership Certificate.
(b) On any Payment Date for which the Trust Administrator receives a Net Swap Receipt, the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) shall deposit such amounts in the Basis Risk Reserve Account, and from the Basis Risk Reserve Account, apply the Group 2 Percentage of such Net Swap Receipt to pay any Available Funds Shortfalls, on the Notes and in the order and priority described in Section 6.02(e)(i)(b) or (e)(ii)(l), as applicable, but only after giving effect to Monthly Excess Cashflow available on such Payment Date. On any Payment Date, the Group 2 Percentage of such Net Swap Receipt that are not applied to the payment of Available Funds Shortfalls in the manner described in the preceding sentence shall be distributed from the Basis Risk Reserve Account by the Indenture Trustee (or the Paying Agent on behalf of the Indenture Trustee) to the holder of the Ownership Certificate.
Section 6.04. Control of the Trust Account and Deferred Interest.
(a) The Depositor, the Issuer and the Indenture Trustee hereby appoint the Trust Administrator as Securities Intermediary with respect to the Trust Account, and the Issuer has, pursuant to the Indenture, granted to the Indenture Trustee, for the benefit of the Noteholders and the Swap Counterparty, a security interest to secure all amounts due Noteholders and the Swap Counterparty hereunder in and to the Trust Account and the Security Entitlements to all Financial Assets credited to the Trust Account, including without limitation all amounts, securities, investments, Financial Assets, investment property and other property from time to time deposited in or credited to the Trust Account and all proceeds thereof. Amounts held from time to time in the Trust Account will continue to be held by the Securities Intermediary for the
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benefit of the Indenture Trustee, as collateral agent, for the benefit of the Noteholders and the Swap Counterparty. Upon the termination of the Issuer or the discharge of the Indenture, the Indenture Trustee shall inform the Securities Intermediary and the Swap Counterparty of such termination. By acceptance of their Notes or interests therein, the Noteholders shall be deemed to have appointed the Trust Administrator as Securities Intermediary. The Trust Administrator hereby accepts such appointment as Securities Intermediary.
(b) With respect to the Trust Account Property credited to the Trust Account, the Securities Intermediary agrees that:
(i) with respect to any Trust Account Property that is held in deposit accounts, each such deposit account shall be subject to the exclusive custody and control of the Securities Intermediary, and the Securities Intermediary shall have sole signature authority with respect thereto;
(ii) the sole assets permitted in the Trust Account shall be those as the Securities Intermediary agrees to treat as Financial Assets; and
(iii) any such Trust Account Property that is, or is treated as, a Financial Asset shall be physically delivered (accompanied by any required endorsements) to, or credited to an account in the name of, the Securities Intermediary or other eligible institution maintaining the Trust Account in accordance with the Securities Intermediary’s customary procedures such that the Securities Intermediary or such other institution establishes a Security Entitlement in favor of the Indenture Trustee with respect thereto over which the Securities Intermediary or such other institution has Control;
(c) The Securities Intermediary hereby confirms that (A) the Trust Account is an account to which Financial Assets are or may be credited, and the Securities Intermediary shall, subject to the terms of this Agreement, treat the Indenture Trustee, as collateral agent, as entitled to exercise the rights that comprise any Financial Asset credited to the Trust Account, (B) all Trust Account Property in respect of the Trust Account will be promptly credited by the Securities Intermediary to such account, and (C) all securities or other property underlying any Financial Assets credited to the Trust Account shall be registered in the name of the Securities Intermediary, endorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any Financial Asset credited to the Trust Account be registered in the name of the Depositor or the Issuer, payable to the order of the Depositor or the Issuer or specially endorsed to the Depositor or the Issuer, except to the extent the foregoing have been specially endorsed to the Securities Intermediary or in blank;
(d) The Securities Intermediary hereby agrees that each item of property (whether investment property, Financial Asset, security, instrument or cash) credited to the Trust Account shall be treated as a Financial Asset;
(e) If at any time the Securities Intermediary shall receive an Entitlement Order from the Indenture Trustee directing transfer or redemption of any Financial Asset relating to the Trust Account, the Securities Intermediary shall comply with such Entitlement Order without further
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consent by the Depositor, the Issuer or any other Person. If at any time the Indenture Trustee or the Trust Administrator notifies the Securities Intermediary in writing that the Issuer has been terminated or the Indenture discharged in accordance herewith and with the Trust Agreement or the Indenture, as applicable, and the security interest granted pursuant to the Indenture has been released, then thereafter if the Securities Intermediary shall receive any order from the Depositor or the Issuer directing transfer or redemption of any Financial Asset relating to the Trust Account, the Securities Intermediary shall comply with such Entitlement Order without further consent by the Indenture Trustee or any other Person;
(f) In the event that the Securities Intermediary has or subsequently obtains by agreement, operation of law or otherwise a security interest in the Trust Account or any Financial Asset credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Indenture Trustee. The Financial Assets credited to the Trust Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any Person other than the Indenture Trustee (except that the Securities Intermediary may set-off (i) all amounts due to it in respect of its customary fees and expenses for the routine maintenance and operation of the Trust Account and (ii) the face amount of any checks which have been credited to the Trust Account but are subsequently returned unpaid because of uncollected or insufficient funds);
(g) There are no other agreements entered into between the Securities Intermediary in such capacity and the Depositor or the Issuer with respect to the Trust Account. In the event of any conflict between this Agreement (or any provision of this Agreement) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail;
(h) The rights and powers granted under the Indenture and herein to the Indenture Trustee have been granted in order to perfect its security interest in the Trust Account and the Security Entitlements to the Financial Assets credited thereto, and are powers coupled with an interest and will neither be affected by the bankruptcy of the Depositor or the Issuer nor by the lapse of time. The obligations of the Securities Intermediary hereunder shall continue in effect until the security interest of the Indenture Trustee in the Trust Account, and in such Security Entitlements, has been terminated pursuant to the terms of this Agreement and the Indenture Trustee or the Issuer, as applicable, has notified the Securities Intermediary of such termination in writing; and
(i) Notwithstanding anything else contained herein, the Depositor and the Issuer agree that the Trust Account will be established only with the Securities Intermediary or another institution meeting the requirements of this Section, which by acceptance of its appointment as Securities Intermediary agrees substantially as follows: (1) it will comply with Entitlement Orders related to the Trust Account issued by the Indenture Trustee, as collateral agent, without further consent by the Depositor or the Issuer, without further consent by the Depositor; (2) until termination of the Issuer or discharge of the Indenture, it will not enter into any other agreement related to such accounts pursuant to which it agrees to comply with Entitlement Orders of any Person other than the Indenture Trustee, as collateral agent; and (3) all assets delivered or credited to it in connection with such account and all investments thereof will be promptly credited to the applicable account.
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(j) Notwithstanding the foregoing, the Issuer shall have the power, revocable by the Indenture Trustee or by the Owner Trustee with the consent of the Indenture Trustee, to instruct the Indenture Trustee, the Trust Administrator and the Master Servicer to make withdrawals and payments from the Trust Account for the purpose of permitting the Master Servicer, the Trust Administrator or the Owner Trustee to carry out its respective duties hereunder or permitting the Indenture Trustee to carry out its duties under the Indenture.
(k) Each of the Depositor and the Issuer agrees to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments (including, without limitation, any financing statements under the Relevant UCC or this Agreement) as may be necessary to perfect the interests created by this Section in favor of the Issuer and the Indenture Trustee and otherwise fully to effectuate the purposes, terms and conditions of this Section. The Depositor shall:
(i) promptly execute, deliver and file any financing statements, amendments, continuation statements, assignments, certificates and other documents with respect to such interests and perform all such other acts as may be necessary in order to perfect or to maintain the perfection of the Issuer’s and the Indenture Trustee’s security interest in the Trust Account Property; and
(ii) make the necessary filings of financing statements or amendments thereto within five days after the occurrence of any of the following: (1) any change in its corporate name or any trade name or its jurisdiction of organization; (2) any change in the location of its chief executive office or principal place of business; and (3) any merger or consolidation or other change in its identity or corporate structure and promptly notify the Issuer and the Indenture Trustee of any such filings.
(iii) Neither the Depositor nor the Issuer shall organize under the law of any jurisdiction other than the State under which each is organized as of the Closing Date (whether changing its jurisdiction of organization or organizing under an additional jurisdiction) without giving 30 days prior written notice of such action to its immediate and mediate transferee, including the Indenture Trustee. Before effecting such change, each of the Depositor or the Issuer proposing to change its jurisdiction of organization shall prepare and file in the appropriate filing office any financing statements or other statements necessary to continue the perfection of the interests of its immediate and mediate transferees, including the Indenture Trustee, in the Trust Account Property. In connection with the transactions contemplated by the Operative Agreements relating to the Trust Account Property, each of the Depositor and the Issuer authorizes its immediate or mediate transferee, including the Indenture Trustee, to file in any filing office any initial financing statements, any amendments to financing statements, any continuation statements, or any other statements or filings described in this Section 6.04.
Section 6.05. Advances by Master Servicer and Servicer.
(a) Subject to Section 4.03(c), Advances shall be made in respect of each Servicer Remittance Date as provided herein. If, on any Determination Date, the Servicer determines that any Scheduled Payments due during the related Due Period have not been received, such Servicer shall advance such amount to the extent provided in Section 4.03(c) hereof. If any Servicer fails to remit Advances required to be made under Section 4.03(c) hereof, the Master Servicer shall itself make, or shall cause the successor Servicer to make, such Advance on the Servicer Remittance Date immediately following such Determination Date. If the Master Servicer determines that an Advance is required, it shall on the Business Day immediately prior to the related Payment Date remit to the Trust Administrator from its own funds (or funds advanced by the applicable Servicer) for deposit in the Collection Account immediately available funds in an amount equal to such Advance. The Master Servicer and the Servicer shall be entitled to be reimbursed from the Collection Account, and the Servicer shall be entitled to be reimbursed from its respective Custodial Account, for all Advances made by it as provided in Section 4.02(e). Notwithstanding anything to the contrary herein, in the event the Master Servicer determines in its reasonable judgment that an Advance is a Nonrecoverable Advance, the Master Servicer shall be under no obligation to make such Advance.
(b) In the event that the Master Servicer or Servicer fails for any reason to make an Advance required to be made pursuant to this Section 6.05, the Indenture Trustee, as successor Master Servicer, shall, on or before the related Payment Date, deposit in the Collection Account an amount equal to the excess of (a) Advances required to be made by the Master Servicer or the Servicer that would have been deposited in such Collection Account over (b) the amount of any Advance made by the Master Servicer or the Servicer with respect to such Payment Date; provided, however, that the Indenture Trustee shall be required to make such Advance only if it is not prohibited by law from doing so and it has determined that such Advance would be recoverable from amounts to be received with respect to such Mortgage Loan, including late payments, Liquidation Proceeds, Insurance Proceeds, or otherwise. The Indenture Trustee shall be entitled to be reimbursed from the Collection Account for Advances made by it pursuant to this Section 6.05 as if it were the Master Servicer.
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Section 6.06. Pre-Funding Account.
(a) The Trust Administrator has heretofore established or caused to be established and shall hereafter maintain or cause to be maintained a separate account denominated the Pre-Funding Account, which is and shall continue to be an Eligible Account in the name of the Trust Administrator and shall be designated “Wells Fargo Bank, N.A., as Trust Administrator of the Fieldstone Mortgage Investment Trust, Series 2005-2 Pre-Funding Account.” Any investment earnings from the Pre-Funding Account will be paid to the Seller on the first Business Day of the month following each Payment Date during the Pre-Funding Period; provided, however, that if the final Subsequent Transfer Date occurs after the Payment Date in a month, on such Subsequent Transfer Date, the Trust Administrator shall (i) transfer the Excess Funding Amount from the Pre-Funding Account to the Collection Account, (ii) transfer any investment earnings to the Seller as soon as practicable and (iii) close the Pre-Funding Account. The amount on deposit in the related Subaccount of the Pre-Funding Account shall be invested in Eligible Investments at the direction of the Seller in accordance with the provisions of Section 4.02(j). All investment earnings on funds on deposit in the Pre-Funding Account will be treated as owned by, and will be taxable to, the Seller.
(b) On the Closing Date, the Seller will cause to be deposited (1) $108,456,874.15 in the Pool 1 Subaccount and (2) $133,111,288.78 in the Pool 2 Subaccount, in each case from the sale of the Notes.
(c) On each Subsequent Transfer Date, (i) the Seller shall instruct the Trust Administrator to withdraw from the Pre-Funding Account an amount equal to 100% of the aggregate Stated Principal Balances of the Subsequent Mortgage Loans sold to the Trust on such Subsequent Transfer Date and (ii) the Trust Administrator shall pay such amounts to or upon the order of the Seller with respect to such transfer.
(d) If at the end of the Pre-Funding Period amounts still remain in the Pre-Funding Account, the Trust Administrator shall withdraw such amounts, exclusive of investment income, from the Pre-Funding Account on the immediately following Payment Date and deposit such amounts in the Collection Account.
(e) Unless closed as provided in Section 6.07(a) above, the Pre-Funding Account shall be closed at the close of business on the Payment Date immediately following the end of the Pre-Funding Period.
Section 6.07. Establishment of Basis Risk Reserve Account; The Corridor Contract.
(a) The Trust Administrator shall establish and maintain an Eligible Account in its name in trust for the benefit of the Noteholders, the Basis Risk Reserve Account.
(b) The Trust Administrator shall deposit any Corridor Receipts or Net Swap Receipts received in respect of the Corridor Contract or Swap Agreement, respectively into the Basis Risk Reserve Account. Amounts on deposit in the Basis Risk Reserve Account shall remain uninvested.
(c) The Indenture Trustee shall terminate the Corridor Counterparty upon the occurrence of an event of default or termination event under the Corridor Contract of which a Responsible Officer of the Indenture Trustee has actual knowledge. In the event that the
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Corridor Contract is canceled or otherwise terminated for any reason (other than the exhaustion of the interest rate protection provided thereby), the Trust Administrator shall, at the direction of Noteholders evidencing Voting Rights not less than 50% of the Notes, and to the extent a replacement contract is available (from a counterparty designated by the Seller and acceptable to Noteholders evidencing Voting Rights not less than 50% of the Notes), execute a replacement contract that the Seller has determined comparable to such Corridor Contract providing interest rate protection which is equal to the then-existing protection provided by the Corridor Contract; provided however, that the cost of any such replacement contract providing the same interest rate protection may be reduced to a level such that the costs of such replacement contract shall not exceed the amount of any early termination payment received from the Corridor Counterparty.
(d) Subject to Section 6.07(e) hereof, on each Payment Date during which the Corridor Contract is in effect, the Trust Administrator shall withdraw from the Basis Risk Reserve Account any Corridor Receipts to make payments to the Notes, to the extent of any Available Funds Shortfalls on such Notes, in the order and priority described in Section 6.02(e)(i)(b) or (e)(ii)(l). Any Corridor Receipts that are not applied to the payment of Available Funds Shortfalls in the manner described in the preceding sentence shall be paid by the Trust Administrator to the holder of the Ownership Certificate.
(e) To the extent that the Trust Administrator receives both Net Swap Receipts and Corridor Receipts and in respect of the Swap Agreement and the Corridor Contract, respectively, for distribution on any Payment Date, the Trust Administrator shall apply any Net Swap Receipts pursuant to Section 6.03 for the payment of any Available Funds Shortfalls before any Corridor Receipts are so applied.
ARTICLE VII ADMINISTRATION OF THE AGREEMENTS
Section 7.01. Duties of the Trust Administrator.
(a) The Trust Administrator agrees to perform all of the duties of the Issuer under the Depository Agreement. In addition to its duties performed under the Depository Agreement, the Trust Administrator shall take all appropriate action that is the duty of the Issuer to take with respect to the following matters under the Trust Agreement, this Agreement and the Indenture:
(i) the duty to cause the Note Register to be kept if the Issuer assumes the duties of Note Registrar, and to give the Indenture Trustee notice of any appointment of a new Note Registrar and the location, or change in location, of the Note Register (Section 2.04 of the Indenture);
(ii) the duty to cause the Certificate Register to be kept if the Issuer assumes the duties of Certificate Registrar, and to give the Owner Trustee notice of any appointment of a new Certificate Registrar and the location, or change in location, of the Certificate Register (Section 3.03 of the Trust Agreement);
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(iii) causing the preparation of the Notes for execution by the Owner Trustee upon the registration of any transfer or exchange of the Notes (Sections 2.04 and 2.05 of the Indenture);
(iv) causing the preparation of Definitive Notes in accordance with the instructions of any Clearing Agency, the duty to attempt to locate a qualified successor to the Clearing Agency, if necessary, and the preparation of written notice to the Indenture Trustee of termination of the book-entry system through the Clearing Agency (Section 2.12 of the Indenture);
(v) the maintenance of an office for registration of transfer or exchange of Notes (Section 3.02 of the Indenture);
(vi) the maintenance of an office for registration of transfer or exchange of the Ownership Certificate (Section 3.03 of the Trust Agreement);
(vii) the calculation of accrual of original issue discount and the amortization of premium on the Notes (Section 3.03(v) of the Indenture);
(viii) upon written notice or actual knowledge thereof, the notification to the Indenture Trustee and each Rating Agency of a Servicer Event of Default or a Master Servicer Event of Default under this Agreement (Section 3.07(d) of the Indenture);
(ix) upon written notice or actual knowledge thereof, the delivery of notice to the Indenture Trustee and each Rating Agency of each Indenture Event of Default under the Indenture (Section 3.19 of the Indenture);
(x) the furnishing of the Indenture Trustee with the names and addresses of Holders of Notes during any period when the Indenture Trustee is not the Note Registrar (Section 7.01 of the Indenture);
(xi) causing the preparation of any financing statements and continuation statements necessary to protect the Collateral (Section 3.05 of the Indenture);
(xii) the preparation (but not the execution) of the annual Officer’s Certificate regarding the Issuer’s compliance with the terms of the Indenture (Section 3.09 of the Indenture);
(xiii) the delivery of notice to the Indenture Trustee and each Rating Agency of each Indenture Event of Default under the Indenture (Section 3.19);
(xiv) causing the preparation of an Officer’s Certificate and the obtaining of the Opinion of Counsel (which shall not be at the expense of the Trust Administrator) with respect to any request by the Issuer to the Indenture Trustee to take any action under the Indenture (Sections 4.01 and 11.01 of the Indenture);
(xv) the compliance with any directive of the Indenture Trustee with respect to the sale of the Collateral in a commercially reasonable manner if an Indenture Event of Default shall have occurred and be continuing under the Indenture (Section 5.04 of the Indenture);
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(xvi) causing the preparation of an Issuer Request and Officer’s Certificate (and executing the same on behalf of the Issuer) and the obtaining of an Opinion of Counsel (which shall not be at the expense of the Trust Administrator), if necessary, for the release of the Collateral, as defined in the Indenture (Section 8.03 of the Indenture);
(xvii) the mailing to the Noteholders of notices with respect to their consent to any supplemental indentures (Sections 9.01, 9.02, 9.03 and 9.06 of the Indenture); and
(xviii) any other duties expressly required to be performed by the Trust Administrator under the Indenture or the Trust Agreement.
(b) The Issuer will indemnify the Owner Trustee and the Trust Administrator, and their respective agents for, and hold them harmless against, any losses, liability or expense incurred without gross negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of the transactions contemplated by the Trust Agreement, this Agreement, the Corridor Contract or the Swap Agreement, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties under the Trust Agreement, the Indenture or this Agreement.
(c) Subject to the penultimate paragraph of this Section 7.01, and in accordance with the directions of the Owner Trustee, the Trust Administrator shall perform or supervise the performance of such other activities in connection with the Collateral (including the Operative Agreements) as are not covered by any of the foregoing provisions and as are expressly requested in writing by the Owner Trustee and are reasonably within the capability of the Trust Administrator.
(d) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Trust Administrator may enter into transactions with or otherwise deal with any of its Affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Trust Administrator’s opinion, no less favorable to the Issuer than would be available from unaffiliated parties.
Section 7.02. Duties of the Trust Administrator With Respect to the Indenture, the Trust Agreement and this Agreement.
(a) The Trust Administrator shall take all appropriate action that is the duty of the Indenture Trustee to take with respect to the following matters under the Indenture, the Trust Agreement and this Agreement:
(i) the duties of an authenticating agent for authentication of the Notes (Sections 2.01, 2.02 and 2.11 of the Indenture);
(ii) the duties of Note Registrar to be kept (Sections 2.03, 2.04, 2.05 and 2.07 of the Indenture);
(iii) to provide notices and instructions to the Clearing Agency (Section 2.10 of the Indenture);
(iv) the duties of Paying Agent (Sections 3.03, 4.01, 4.02 and 5.02 of the Indenture); and
(v) the duties of agent or attorney-in-fact for the purposes of filing financing and continuation statements for the Issuer (Section 3.05 of the Indenture).
(b) The Issuer will indemnify the Owner Trustee and the Trust Administrator, and their respective agents for, and hold them harmless against, any losses, liability or expense incurred without gross negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of the transactions contemplated by the Trust Agreement or this Agreement, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties under the Trust Agreement, the Indenture or this Agreement.
Section 7.03. Records. The Trust Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Issuer and the Depositor at any time during normal business hours.
Section 7.04. Compensation. The Trust Administrator will perform the duties and provide the services called for under Section 7.01 and 7.02 above for such compensation as shall be agreed upon between the Trust Administrator and the Master Servicer.
Section 7.05. Additional Information to be Furnished to the Issuer. The Depositor shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request.
Section 7.06. Independence of the Trust Administrator. For all purposes of this Agreement, the Trust Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Trust Administrator shall have no authority to act for or represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.
Section 7.07. No Joint Venture. Nothing contained in this Agreement (i) shall constitute the Trust Administrator or the Depositor, respectively, and either of the Issuer or the Owner Trustee, as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others.
Section 7.08. Other Activities of Trust Administrator and the Depositor. Nothing herein shall prevent the Trust Administrator, the Depositor or their respective Affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an Trust Administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Issuer or the Owner Trustee.
Section 7.09. Resignation and Removal of Trust Administrator.
(a) Subject to Section 7.09(d) hereof, the Trust Administrator may resign its duties hereunder by providing the Issuer with at least 60 days’ prior written notice.
(b) Subject to Section 7.09(d) hereof, the Issuer may remove the Trust Administrator without cause by providing the Trust Administrator with at least 60 days’ prior written notice.
(c) Subject to Section 7.09(d) hereof, the Issuer may remove the Trust Administrator immediately upon written notice of termination from the Issuer to the Trust Administrator if any of the following events shall occur:
(i) the Trust Administrator shall default in the performance of any of its duties under this Agreement and, after notice of such default, shall not cure such default within ten days (or, if such default cannot be cured in such time, shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer); or
(ii) a court having jurisdiction in the premises shall (x) enter a decree or order for relief, which decree or order shall not have been vacated within 60 days, in respect of the Trust Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or (y) appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Trust Administrator or any substantial
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part of its property, or (z) order the winding-up or liquidation of the Trust Administrator’s affairs; or
(iii) the Trust Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Trust Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.
(d) No resignation or removal of the Trust Administrator pursuant to this Section shall be effective until (i) a successor Trust Administrator shall have been appointed by the Issuer in accordance with the Trust Agreement and (ii) such successor Trust Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Trust Administrator is bound hereunder. If a successor Trust Administrator does not take office within 60 days after the retiring Trust Administrator resigns or is removed, the resigning or removed Trust Administrator or the Issuer may petition any court of competent jurisdiction for the appointment of a successor Trust Administrator.
(e) The appointment of any successor Trust Administrator shall be effective only after receipt of a letter from each Rating Agency to the effect that such proposed appointment will not cause a reduction or withdrawal of the then current ratings of the Notes.
(f) Subject to Sections 7.09(d) and 7.09(e) above, the Trust Administrator acknowledges that upon the appointment of a successor Master Servicer pursuant to Section 8.01, the Trust Administrator shall immediately resign and such successor Master Servicer shall automatically become the Trust Administrator under this Agreement. Any such successor Master Servicer shall be required to agree to assume the duties of the Trust Administrator under the terms and conditions of this Agreement and the other Operative Agreements in its acceptance of appointment as successor Master Servicer.
Section 7.10. Action upon Termination, Resignation or Removal of the Trust Administrator. Promptly upon the effective date of termination of this Agreement or the resignation or removal of the Trust Administrator pursuant to Section 7.09 hereof, the Trust Administrator shall be entitled to be paid all reimbursable expenses, including any reasonable out-of-pocket attorneys’ fees, accruing to it to the date of such termination, resignation or removal. The Trust Administrator shall forthwith upon such termination pursuant to Section 7.09 deliver to the successor Trust Administrator all property and documents of or relating to the Collateral then in the custody of the Trust Administrator, or if this Agreement has been terminated, to the Depositor. In the event of the resignation or removal of the Trust Administrator pursuant to Section 7.09, the Trust Administrator shall cooperate with the Issuer
and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Trust Administrator.
ARTICLE VIII MASTER SERVICER EVENTS OF DEFAULT
Section 8.01. Master Servicer Events of Default; Indenture Trustee To Act; Appointment of Successor.
(a) The occurrence of any one or more of the following events shall constitute a “Master Servicer Event of Default”:
(i) Any failure by the Master Servicer to furnish to the Trust Administrator the Mortgage Loan data sufficient to prepare the reports described in Section 5.09(a) which continues unremedied for a period of one (1) Business Day after the date upon which written notice of such failure shall have been given to such Master Servicer by the Indenture Trustee or the Trust Administrator or to such Master Servicer and the Indenture Trustee by the Holders of not less than 25% of the Class Principal Amount (or Class Notional Amount) of each Class of Notes affected thereby; or
(ii) Any failure on the part of the Master Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Master Servicer contained in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Indenture Trustee or the Trust Administrator or to the Master Servicer and the Indenture Trustee by the Majority Noteholders; or
(iii) A decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days or any Rating Agency reduces or withdraws or threatens to reduce or withdraw the rating of the Notes because of the financial condition or loan servicing capability of such Master Servicer; or
(iv) The Master Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to the Master Servicer or of or relating to all or substantially all of its property; or
(v) The Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or
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(vi) The Master Servicer shall be dissolved, or shall dispose of all or substantially all of its assets, or consolidate with or merge into another entity or shall permit another entity to consolidate or merge into it, such that the resulting entity does not meet the criteria for a successor servicer as specified in Section 5.26 hereof; or
(vii) If a representation or warranty set forth in Section 5.01 hereof shall prove to be incorrect as of the time made in any respect that materially and adversely affects the interests of the Noteholders, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or cured within 30 days after the date on which written notice of such incorrect representation or warranty shall have been given to the Master Servicer by the Indenture Trustee or the Trust Administrator, or to the Master Servicer and the Indenture Trustee by the Majority Noteholders; or
(viii) A sale or pledge of any of the rights of the Master Servicer hereunder or an assignment of this Agreement by the Master Servicer or a delegation of the rights or duties of the Master Servicer hereunder shall have occurred in any manner not otherwise permitted hereunder and without the prior written consent of the Indenture Trustee and the Majority Noteholders; or
(ix) The Master Servicer has notice or actual knowledge that the Servicer at any time is not either an FNMA- or FHLMC- approved Seller/Servicer, and the Master Servicer has not terminated the rights and obligations of such Servicer under this Agreement and replaced the Servicer with an FNMA- or FHLMC-approved servicer within 60 days of the date the Master Servicer receives such notice or acquires such actual knowledge; or
(x) Any failure of the Master Servicer to remit to the Trust Administrator any Advance required to be made to the Trust Administrator for the benefit of Noteholders under the terms of this Agreement, which failure continues unremedied as of the close of business on the Business Day prior to a Payment Date.
(b) On and after the time the Master Servicer receives a notice of termination from the Indenture Trustee pursuant to Section 8.01(a) or the Indenture Trustee receives the resignation of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section 5.27,
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the Indenture Trustee, unless another master servicer shall have been appointed, shall be the successor in all respects to the Master Servicer in its capacity as such under this Agreement and the transactions set forth or provided for herein and shall have all the rights and powers and be subject to all the responsibilities, duties and liabilities relating thereto and arising thereafter placed on the Master Servicer hereunder, including the obligation to make Advances; provided, however, that any failure to perform such duties or responsibilities caused by the Master Servicer’s failure to provide information required by this Agreement shall not be considered a default by the Indenture Trustee hereunder. In addition, the Indenture Trustee shall have no responsibility for any act or omission of the Master Servicer prior to the issuance of any notice of termination and shall have no liability relating to the representations and warranties of the Master Servicer set forth in Section 5.01. In the Indenture Trustee’s capacity as such successor, the Indenture Trustee shall have the same limitations on liability herein granted to the Master Servicer. As compensation therefor, the Indenture Trustee shall be entitled to receive all compensation payable to the Master Servicer under this Agreement.
(c) Notwithstanding the above, the Indenture Trustee may, if it shall be unwilling to continue to so act, or shall, if it is unable to so act, appoint, or petition a court of competent jurisdiction to appoint, any established housing and home finance institution servicer, master servicer, servicing or mortgage servicing institution having a net worth of not less than $15,000,000 and meeting such other standards for a successor master servicer as are set forth in this Agreement, as the successor to such Master Servicer in the assumption of all of the responsibilities, duties or liabilities of a master servicer, like the Master Servicer. Such successor Master Servicer may be an Affiliate of the Indenture Trustee; provided, however, that, unless such Affiliate meets the net worth requirements and other standards set forth herein for a successor master servicer, the Indenture Trustee, in its individual capacity shall agree, at the time of such designation, to be and remain liable to the Issuer and the Indenture Trustee for such Affiliate’s actions and omissions in performing its duties hereunder. In connection with such appointment and assumption, the Indenture Trustee may make such arrangements for the compensation of such successor out of payments on the Mortgage Loans as it and such successor shall agree; provided, however, that no such compensation shall be in excess of that permitted to the Master Servicer hereunder. The Indenture Trustee and such successor shall take such actions, consistent with this Agreement, as shall be necessary to effectuate any such succession and may make other arrangements with respect to the servicing to be conducted hereunder which are not inconsistent herewith. The Master Servicer shall cooperate with the Indenture Trustee and any successor master servicer in effecting the termination of the Master Servicer’s responsibilities and rights hereunder including, without limitation, notifying Servicers of the assignment of the master servicing functions and providing the Indenture Trustee and successor master servicer, as applicable, all documents and records in electronic or other form reasonably requested by it to enable it to assume the Master Servicer’s functions hereunder and the transfer to the Indenture Trustee or such successor master servicer, as applicable, all amounts or investment property which shall at the time be or should have been deposited by the Master Servicer in the Collection Account and any other account or fund maintained with respect to the Notes or thereafter be received with respect to the Mortgage Loans. Neither the Indenture Trustee nor any other successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any payment hereunder or any portion thereof caused by (i) the failure of the Master Servicer to deliver, or any delay in delivering, cash, documents or records to it, (ii) the failure of the Master Servicer to cooperate as required
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by this Agreement, (iii) the failure of the Master Servicer to deliver the Mortgage Loan data to the Indenture Trustee as required by this Agreement or (iv) restrictions imposed by any regulatory authority having jurisdiction over the Master Servicer.
Section 8.02. Additional Remedies of Indenture Trustee Upon Event of Default. During the continuance of any Master Servicer Event of Default, so long as such Master Servicer Event of Default shall not have been remedied, the Indenture Trustee, in addition to the rights specified in Section 8.01, shall have the right, in its own name and as trustee of an express trust, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Noteholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith). Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default.
Section 8.03. Waiver of Defaults. The Majority Noteholders may, on behalf of all Noteholders, waive any default or Master Servicer Event of Default by the Master Servicer in the performance of its obligations hereunder, except that a default in the making of any required deposit to the Collection Account that would result in a failure of the Indenture Trustee to make any required payment of principal of or interest on the Notes may only be waived with the consent of 100% of the affected Noteholders. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived.
Section 8.04. Notification to Holders. Upon termination of the Master Servicer or appointment of a successor to the Master Servicer, in each case as provided herein, the Indenture Trustee shall promptly mail notice thereof by first class mail to the Noteholders at their respective addresses appearing on the applicable Register. The Indenture Trustee shall also, within 45 days after the occurrence of any Master Servicer Event of Default known to the Indenture Trustee, give written notice thereof to Noteholders, unless such Event of Default shall have been cured or waived prior to the issuance of such notice and within such 45-day period.
Section 8.05. Directions by Noteholders and Duties of Indenture Trustee During Master Servicer Event of Default. During the continuance of any Master Servicer Event of Default, the Majority Noteholders may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Agreement; provided, however, that the Indenture Trustee shall be under no obligation to pursue any such remedy, or to exercise any of the trusts or powers vested in it by this Agreement (including, without limitation, (i) the conducting or defending of any administrative action or litigation hereunder or in relation hereto and (ii) the terminating of the Master Servicer or any successor master servicer from its rights and duties as master servicer hereunder) at the request, order or direction of any of the Noteholders, unless such Noteholders shall have offered to the Indenture Trustee reasonable security or indemnity against the cost,
expenses and liabilities which may be incurred therein or thereby; and, provided further, that, the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, in accordance with an Opinion of Counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith determines that the action or proceeding so directed would involve it in personal liability for which it is not indemnified to its satisfaction or be unjustly prejudicial to the non-assenting Noteholders.
Section 8.06. Action Upon Certain Failures of the Master Servicer and Upon Master Servicer Event of Default. In the event that a Responsible Officer of the Indenture Trustee or the Trust Administrator shall have actual knowledge of any action or inaction of the Master Servicer that would become a Master Servicer Event of Default upon the Master Servicer’s failure to remedy the same after notice, the Indenture Trustee or Trust Administrator, as applicable, shall give notice thereof to the Master Servicer.
Section 8.07. Preparation of Reports.
(a) The Depositor shall prepare or cause to be prepared the initial current report on Form 8-K. Thereafter, within 15 days after each Payment Date, the Trust Administrator shall, in accordance with industry standards customary for securities similar to the Notes as required by the Exchange Act and the rules and regulations of the Securities and Exchange Commission (the “Commission”), file with the Commission via the Electronic Data Gathering and Retrieval System (EDGAR), a Form 8-K with a copy of the statement to the Noteholders for such Payment Date as an exhibit thereto. Prior to January 30, 2006, the Trust Administrator shall, in accordance with industry standards applicable to the Notes, file a Form 15 Suspension Notification with respect to the Issuer, if applicable. Prior to March 31, 2006, and prior to March 31 in each succeeding year so long as a Form 15 Suspension Notification has not been filed for the prior calendar year, the Trust Administrator shall file (and the Master Servicer will execute) a Form 10-K, in substance conforming to industry standards applicable to the Notes, with respect to the Issuer. The Form 10-K shall include the certification required pursuant to Rule 13a-14 under the Exchange Act, as amended (the “Form 10-K Certification,” which Form 10-K Certification shall be signed by the Master Servicer). The Indenture Trustee and the Trust Administrator shall have no liability for any delay in filing the Form 10-K due to the failure of such party to timely sign the Form 10-K or Form 10-K Certification. The Depositor hereby grants to the Indenture Trustee, the Master Servicer and the Trust Administrator a limited power of attorney to execute and file each such document on behalf of the Depositor. Such power of attorney shall continue until either the earlier of (i) receipt by the Master Servicer and the Trust Administrator from the Depositor of written termination of such power of attorney and (ii) the termination of the Issuer. The Depositor agrees to promptly furnish to the Trust Administrator, from time to time upon request, such further information, reports, and financial statements within its control related to this Agreement and the Mortgage Loans as the Depositor reasonably deems appropriate to prepare and file all necessary reports with the Commission. The Trust Administrator shall have no responsibility to file any items other than those specified in this section.
(b) Each person (including their officers or directors) that signs any Form 10-K Certification shall be entitled to indemnification from the Trust Estate for any liability or expense incurred by it in connection with such certification, other than any liability or expense
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attributable to such Person’s own bad faith, negligence or willful misconduct. The provisions of this subsection shall survive any termination of this Agreement and the resignation or removal of such Person.
(c) To the extent that, following the Closing Date, the contents of Forms 8-K, 10-K or other Forms required by the Exchange Act and the Rules and Regulations of the Commission and the time by which such Forms are required to be filed, differs from the provisions of this Agreement, the parties hereto hereby agree that each shall reasonably cooperate to amend the provisions of this Agreement (in accordance with Section 10.03) in order to comply with such amended reporting requirements and such amendment of this Agreement. Any such amendment may result in the reduction of the reports filed by the Servicer under the Exchange Act. Notwithstanding the foregoing, neither the Master Servicer nor the Trust Administrator shall be obligated to enter into any amendment pursuant to this Section that adversely affects its obligations and immunities under this Agreement.
ARTICLE IX TERMINATION
Section 9.01. Termination. The respective obligations and responsibilities of the Master Servicer, the Trust Administrator, the Depositor, the Issuer, the Servicer, the Subservicer and the Indenture Trustee created hereby (other than obligations expressly stated to survive the termination of the Trust) shall terminate on the day after the day on which the Notes are paid in full (including payment pursuant to Section 9.02 below) (the “Termination Date”).
Section 9.02. Termination Prior to Maturity Date; and Optional Redemption. On any Payment Date on which the Aggregate Collateral Balance at the beginning of the Due Period related to that Payment Date is less than 20% of the sum of the Aggregate Collateral Balance as of the Closing Date, the Servicer acting directly or through one or more Affiliates, shall have the option to purchase the Mortgage Loans, any REO Property and any other property remaining in the Trust for a price equal to the Redemption Price. The Master Servicer, the Servicer and the Subservicer will be reimbursed from the Redemption Price for any outstanding Advances, Servicing Advances and unpaid Servicing Administration Fees and other amounts not previously reimbursed pursuant to the provisions of this Agreement, as applicable, and the Trust Administrator, the Owner Trustee and the Indenture Trustee shall be reimbursed for any previously unreimbursed amounts for which they are entitled to be reimbursed pursuant to this Agreement, the Indenture or the Trust Agreement, as applicable. If such option is exercised, the Trust will be terminated resulting in a mandatory redemption of the Notes. The Servicer shall deliver written notice of its intention to exercise such option to the Issuer, the Trust Administrator, the Indenture Trustee and the Master Servicer not less than 15 days prior to the applicable Payment Date. If the Servicer fails to exercise such option prior to the Stepup Date, the Interest Rate for each Class of Notes will be increased as set forth in the table in the Preliminary Statement herein beginning on the Stepup Date and for each Payment Date thereafter. The Servicer shall deliver written notice of its intention to exercise such option to the Issuer, the Indenture Trustee and the Master Servicer not less than ten days prior to the applicable Payment Date.
Section 9.03. Certain Notices upon Final Payment. The Master Servicer or the Trust Administrator, as applicable, shall give the Issuer, the Indenture Trustee, the Owner Trustee, each Rating Agency, each Noteholder and the Depositor at least 30 days’ prior written notice of the date on which the Trust is expected to terminate in accordance with Section 9.01, or the date on which the Notes will be redeemed in accordance with Section 9.02. Not later than the fifth Business Day in the Due Period in which the final payment in respect to the Notes is payable to the Noteholders, the Indenture Trustee shall mail to the Noteholders a notice specifying the procedures with respect to such final payment. The Trust Administrator on behalf of the Indenture Trustee shall give a copy of such notice to each Rating Agency at the time such notice is given to Noteholders. Following the final payment thereon, such Notes shall become void, no longer outstanding and no longer evidence any right or interest in the Mortgage Loans, the Mortgage Files or any proceeds of the foregoing.
Section 9.04. Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Noteholders, and their respective successors and permitted assigns. No other Person will have any right or obligation hereunder. Notwithstanding anything to the contrary herein, the Swap Counterparty is an express third party beneficiary of this Agreement.
ARTICLE X MISCELLANEOUS PROVISIONS
Section 10.01. Binding Nature of Agreement; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
Section 10.02. Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.
Section 10.03. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto and the Holder of the Ownership Certificate and with the prior written consent of the Swap Counterparty (but only to the extent such amendment materially adversely affects the amounts, priority or timing of payments under the Swap Agreement and for so long as the Swap Agreement is in
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effect), without notice to or the consent of any of the Holders of the Notes, (i) to cure any ambiguity, (ii) to cause the provisions herein to conform to or be consistent with or in furtherance of the statements made with respect to the Notes, the Trust or this Agreement in any Offering Document, or to correct or supplement any provision herein which may be inconsistent with any other provisions herein or in any other Operative Agreement, to make any other provisions with respect to matters or questions arising under this Agreement, (iii) to make any other provision with respect to matters or questions arising under this Agreement or (iv) to add, delete, or amend any provisions to the extent necessary or desirable to comply with any requirements imposed by the Code or ERISA and applicable regulations. No such amendment effected pursuant to the preceding sentence shall, as evidenced by an Opinion of Counsel (which shall be an expense of the party requesting such amendment and shall not be an expense of the Trust), adversely affect the status of the Notes as debt for federal income tax purposes and will not result in an entity level tax on the Trust nor shall such amendment effected pursuant to clause (iii) of such sentence adversely affect in any material respect the interests of any Holder, nor shall such amendment be with respect to Section 6.02 or the definitions of “Interest Funds,” “Principal Funds” or “Monthly Excess Cashflow” without the prior written consent of the Swap Counterparty; provided, however, that all outstanding payments under the Swap Agreement have been made. Prior to entering into any amendment without the consent of Holders pursuant to this paragraph, the Indenture Trustee may require an Opinion of Counsel (at the expense of the party requesting such amendment) to the effect that such amendment is permitted under this paragraph. Any such amendment shall be deemed not to adversely affect in any material respect any Holder, if the Indenture Trustee receives written confirmation from each Rating Agency that such amendment will not cause such Rating Agency to reduce the then current rating assigned to the Notes.
(b) This Agreement may also be amended from time to time by the parties hereto and with the prior written consent of the Swap Counterparty (but only to the extent such amendment materially adversely affects the amounts, priority or timing of payments under the Swap Agreement and for so long as the Swap Agreement is in effect), with the consent of the Noteholders representing 662/3% Voting Interests 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 Holders; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments which are required to be paid on any Class of Notes or under the Swap Agreement, without the consent of the Noteholders of such Class or the Swap Counterparty, respectively, or (ii) reduce the aforesaid percentages of Class Principal Amount of Notes, the Holders of which are required to consent to any such amendment without the consent of the Holders of 100% of the Class Principal Amount of the Notes. For purposes of this paragraph, references to “Holder” or “Holders” shall be deemed to include, in the case of Book-Entry Notes, the related Note Owners; provided further, however, that no such amendment may be made with respect to Section 6.02(b) or (c) or the definition of “Interest Funds” without the prior written consent of the Swap Counterparty but only for so long as the Swap Agreement is in effect.
(c) Promptly after the execution of any such amendment, the Indenture Trustee shall furnish written notification of the substance of such amendment to each Holder, the Depositor and to each Rating Agency.
(d) It shall not be necessary for the consent of Holders under this Section 10.03 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Holders shall be subject to such reasonable regulations as the Indenture Trustee may prescribe.
Section 10.04. Acts of Noteholders. Except as otherwise specifically provided herein, whenever Noteholder 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 Noteholders if the Majority Noteholders agree to take such action or give such consent or approval.
Section 10.05. 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 subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Depositor on direction and at the expense of Holders of not less than 66-2/3% of the Note Principal Balance of the Notes and of the Holder of the Ownership Certificate requesting such recordation, but only when accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Noteholders, or is necessary for the administration or servicing of the Mortgage Loans.
Section 10.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES APPLIED IN NEW YORK (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL APPLY HERETO).
Section 10.07. Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if mailed by overnight courier, addressed as follows or delivered by facsimile (or such other address as may hereafter be furnished to the other party by like notice):
(i) if to the Seller:
(ii) if to the Servicer:
(iii) if to the Subservicer:
(iv) if to the Master Servicer:
(v) if to the Trust Administrator:
(vi) if to the Indenture Trustee:
(vii) if to the Depositor:
(viii) if to the Issuer:
(ix) if to the Swap Counterparty:
Section 10.08. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Notes or the rights of the Holders thereof.
Section 10.09. Indulgences; No Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
Section 10.10. Headings Not To Affect Interpretation. The headings contained in this Agreement are for convenience of reference only, and they shall not be used in the interpretation hereof.
Section 10.11. Benefits of Agreement. Nothing in this Agreement or in the Notes, express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder and the Holders of the Notes, any benefit or any legal or equitable right, power, remedy or claim under this Agreement. Notwithstanding the foregoing, the Owner Trustee and the Swap Counterparty shall be an express third-party beneficiary of this Agreement.
Section 10.12. Special Notices to the Rating Agencies.
(a) The Seller shall give prompt notice to each Rating Agency and the Swap Counterparty of the occurrence of any of the following events of which it has notice:
(i) any amendment to this Agreement pursuant to Section 10.03; and
(ii) the making of a final payment hereunder.
(b) All notices to the Rating Agencies provided for by this Section shall be in writing and sent by first class mail, telecopy or overnight courier, as follows:
(c) The Trust Administrator shall make available to the Rating Agencies each report prepared pursuant to Section 5.09.
Section 10.13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument.
Section 10.14. Execution by the Issuer. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by U.S. Bank Trust National Association, not individually or personally but solely as Owner Trustee of the Issuer, in the exercise of the powers and authority conferred and vested in it as trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by U.S. Bank Trust National Association but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank Trust National Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under the parties hereto and (d) under no circumstances shall U.S. Bank Trust National Association be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Agreement or any other document.
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