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EXHIBIT 99.2
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CWABS, INC.
Owner
and
ECC CAPITAL CORPORATION
Servicer
SERVICING AGREEMENT
Dated as of March 1, 2005
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS 1
Section 1.01. DEFINED TERMS. 1
ARTICLE II SERVICING OF MORTGAGE LOANS; POSSESSION OF
SERVICING FILES; BOOKS AND RECORDS; DELIVERY OF
MORTGAGE LOAN DOCUMENTS 11
Section 2.01 SERVICING OF MORTGAGE LOANS 11
Section 2.02 MAINTENANCE OF SERVICING FILES 11
Section 2.04 TRANSFER OF MORTGAGE LOANS 12
Section 2.05 DELIVERY OF MORTGAGE LOAN DOCUMENTS 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SERVICER AND THE OWNER 12
ARTICLE IV ADMINISTRATION AND SERVICING OF MORTGAGE LOANS 14
Section 4.01 SERVICER TO ACT AS SERVICER 14
Section 4.02 COLLECTION OF MORTGAGE LOAN PAYMENTS 16
Section 4.03 REALIZATION UPON DEFAULTED MORTGAGE LOANS 16
Section 4.04 ESTABLISHMENT OF CUSTODIAL ACCOUNTS; DEPOSITS IN CUSTODIAL ACCOUNTS 17
Section 4.05 PERMITTED WITHDRAWALS FROM THE CUSTODIAL ACCOUNT 18
Section 4.06 ESTABLISHMENT OF ESCROW ACCOUNTS; DEPOSITS IN ESCROW ACCOUNTS 19
Section 4.07 PERMITTED WITHDRAWALS FROM ESCROW ACCOUNT 20
Section 4.08 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES, MAINTENANCE
OF PRIMARY MORTGAGE INSURANCE
POLICIES, COLLECTIONS THEREUNDER 20
Section 4.09 TRANSFER OF ACCOUNTS 21
Section 4.10 MAINTENANCE OF HAZARD INSURANCE 21
Section 4.11 BLANKET HAZARD INSURANCE 22
Section 4.12 FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE 23
Section 4.13 TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY 23
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Section 4.14 NOTIFICATION OF ADJUSTMENTS 24
Section 4.15 COMPLIANCE WITH APPLICABLE LAWS 24
Section 4.16 WAIVER OF PREPAYMENT PENALTIES 24
Section 4.17 REPORTS AND RETURNS TO BE FILED BY THE SERVICER 24
Section 4.18 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS BY THE SERVICER 24
Section 4.19 SPECIAL MORTGAGE LOAN REPURCHASE RIGHT OF THE SERVICER 24
Section 4.20 CLEAN-UP CALL RIGHT OF THE SERVICER 24
ARTICLE V PAYMENTS TO THE OWNER 26
Section 5.01 REMITTANCES 26
Section 5.02 STATEMENTS TO THE OWNER 27
Section 5.03 MONTHLY ADVANCES BY THE SERVICER 28
Section 5.04 LIQUIDATION REPORTS 28
ARTICLE VI GENERAL SERVICING PROCEDURES 28
Section 6.01 ASSUMPTION AGREEMENTS 28
Section 6.02 SATISFACTION OF MORTGAGES AND RELEASE OF MORTGAGE LOAN DOCUMENTS 29
Section 6.03 SERVICING COMPENSATION 30
Section 6.04 ANNUAL STATEMENT AS TO COMPLIANCE 30
Section 6.05 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING REPORT 31
Section 6.06 OWNER'S RIGHT TO EXAMINE SERVICER RECORDS 31
Section 6.07 COMPLIANCE WITH REMIC PROVISIONS 31
Section 6.08 NON-SOLICITATION 32
Section 6.09 ANNUAL CERTIFICATION AND INDEMNIFICATION 32
ARTICLE VII REPORTS TO BE PREPARED BY SERVICER 33
Section 7.01 SERVICER SHALL PROVIDE INFORMATION AS REASONABLY REQUIRED 33
ARTICLE VIII THE SERVICER 33
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Section 8.01 INDEMNIFICATION; THIRD PARTY CLAIMS 33
Section 8.02 MERGER OR CONSOLIDATION OF THE SERVICER 33
Section 8.03 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS 34
Section 8.04 SERVICER NOT TO RESIGN 34
Section 8.05 NO TRANSFER OF SERVICING 35
ARTICLE IX DEFAULT 35
Section 9.01 EVENTS OF DEFAULT 35
Section 9.02 WAIVER OF DEFAULTS 37
ARTICLE X TERMINATION 37
Section 10.01 TERMINATION 37
Section 10.02 REMOVAL OF MORTGAGE LOANS FROM INCLUSION
UNDER THIS AGREEMENT UPON A PASS-THROUGH TRANSFER 37
Section 10.03 SERVICER TERMINATION TRIGGER 37
ARTICLE XI MISCELLANEOUS PROVISIONS 38
Section 11.01 SUCCESSOR TO THE SERVICER 38
Section 11.02 AMENDMENT 39
Section 11.03 GOVERNING LAW 39
Section 11.04 NOTICES 40
Section 11.05 SEVERABILITY OF PROVISIONS 40
Section 11.06 EXHIBITS AND SCHEDULES 40
Section 11.07 GENERAL INTERPRETIVE PRINCIPLES 40
Section 11.08 REPRODUCTION OF DOCUMENTS 41
Section 11.09 CONFIDENTIALITY OF INFORMATION 41
Section 11.10 ASSIGNMENT BY THE OWNER 42
Section 11.11 NO PARTNERSHIP 42
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Section 11.12 COUNTERPARTS; SUCCESSORS AND ASSIGNS 42
Section 11.13 ENTIRE AGREEMENT 42
Section 11.14 FURTHER AGREEMENTS 42
Section 11.15 THE MASTER SERVICER AND THE INDENTURE TRUSTEE 42
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EXHIBITS
Exhibit A: Mortgage Loan Schedule
Exhibit B: Custodial Account Letter Agreement
Exhibit C: Escrow Account Letter Agreement
Exhibit D: Form of Request for Release of Documents
Exhibit E: Form of Sarbanes-Oxley Certification
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THIS IS A SERVICING AGREEMENT, dated as of March 1, 2005 (the "Agreement"), and
is executed between CWABS, Inc. (the "Owner") and ECC Capital Corporation (the
"Servicer").
W I T N E S S E T H:
WHEREAS, the Owner and the Servicer desire that, from and after the
related Effective Date, the Mortgage Loans which are subject to this Agreement
will be serviced by the Servicer on behalf of the Owner in accordance with the
terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Owner and the Servicer agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINED TERMS.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage
Loan, all applicable federal, state and local laws and regulations and the
standards employed by the Servicer in servicing similar mortgage loans for its
own account, giving due consideration to those mortgage servicing practices and
procedures (including collection practices and procedures) of mortgage banking
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located, giving due
consideration to customary and usual standards of practice of mortgage lenders
and loan servicers administering similar mortgage loans.
ADJUSTMENT DATE: As to each ARM Loan, the date on which the
Mortgage Interest Rate is adjusted in accordance with the terms of the related
Mortgage Note and Mortgage.
AGREEMENT: This Servicing Agreement including all exhibits
hereto, amendments hereof and supplements hereto.
ANCILLARY INCOME: All income derived from the Mortgage Loans
(other than the (i) Servicing Fee or (ii) prepayment charges attributable to the
Mortgage Loans), including but not limited to late charges, any interest paid on
funds deposited in the Custodial Account and Escrow Account (other than interest
on escrowed funds required by law to be paid to the Mortgagor), fees received
with respect to checks or bank drafts returned by the related bank for
non-sufficient funds, assumption fees, optional insurance administrative fees
and all other incidental fees and charges.
ARM LOAN: A first lien, conventional, 1-4 family residential
Mortgage Loan with an interest rate which adjusts from time to time in
accordance with the related Index and is
subject to a Periodic Rate Cap and a Lifetime Rate Cap and which may permit
conversion to a fixed interest rate.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or
(ii) a legal holiday in the State of New York or the jurisdiction in which the
Servicer conducts its servicing activities, or (iii) a day on which banking and
savings and loan institutions in the State of New York or the jurisdiction in
which the Servicer conducts its servicing activities are authorized or obligated
by law or executive order to be closed.
CODE: The Internal Revenue Code of 1986, as it may be amended
from time to time, or any successor statute thereto, and applicable U.S.
Department of the Treasury regulations issued pursuant thereto.
CONDEMNATION PROCEEDS: All awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
CUMULATIVE LOSS PERCENTAGE: On any Payment Date, the
percentage equivalent of a fraction, (x) the numerator of which is the aggregate
principal portion of realized losses on the Mortgage Loans from the Cut-off Date
to the end of the related Prepayment Period and (y) the denominator of which is
the Cut-off Date Principal Balance and the original Pre-Funding Amount.
CUSTODIAL ACCOUNT: The separate demand account or accounts
created and maintained pursuant to Section 4.04 which shall be entitled "ECC
Capital Corporation Custodial Account in trust for The Bank of New York, as
indenture trustee for the holders of Encore Credit Receivables Trust,
Asset-Backed Notes, Series 2005-1", or as otherwise provided in the Option One
Subservicing Agreement, and shall be established at a Qualified Depository.
CUT-OFF DATE: With respect to any Mortgage Loan initially
subject to this Agreement, the later of February 1, 2005 and the origination
date of such Mortgage Loan. With respect to additional Mortgage Loans to be
subject hereto from time to time, the later of the first day of the month of the
transfer and the date of origination of such Mortgage Loan.
DETERMINATION DATE: The 15th day of any month, or if such 15th
day is not a Business Day, the first Business Day immediately preceding such
15th day.
DUE DATE: With respect to any Mortgage Loan, each day on which
payments of principal and interest are required to be paid in accordance with
the terms of the related Mortgage Note, exclusive of any days of grace.
DUE PERIOD: With respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of such Remittance
Date and ending on the first day of the month of such Remittance Date.
EFFECTIVE DATE: With respect to the Mortgage Loans initially
subject hereto, March 1, 2005. With respect to additional Mortgage Loans to be
subject hereto from time to
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time, the date set forth in the related Transmission (which shall be the closing
date of any Pass-Through Transfer to which the related Mortgage Loans are
subject).
ESCROW ACCOUNT: The separate trust account or accounts created
and maintained pursuant to Section 4.06 which shall be entitled "ECC Capital
Corporation Escrow Account in trust for The Bank of New York, as indenture
trustee for the holders of Encore Credit Receivables Trust, Asset-Backed Notes,
Series 2005-1", or as otherwise provided in the Option One Subservicing
Agreement, and shall be established at a Qualified Depository.
ESCROW PAYMENTS: With respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other related
Mortgage Loan Document.
ESCROW MORTGAGE LOAN: The Mortgage Loans for which the
Servicer has established an Escrow Account for items constituting Escrow
Payments.
EVENT OF DEFAULT: Any one of the conditions or circumstances
enumerated in Section 9.01.
FANNIE MAE: Fannie Mae, or any successor thereto.
FANNIE MAE GUIDE: The Fannie Mae Selling Guide and the Fannie
Mae Servicing Guide and all amendments or additions thereto.
FIDELITY BOND: A fidelity bond to be maintained by the
Servicer pursuant to Section 4.12.
FREDDIE MAC: The Federal Home Loan Mortgage Corporation, or
any successor thereto.
FREDDIE MAC GUIDE: The Freddie Mac Selling Guide and the
Freddie Mac Servicing Guide and all amendments or additions thereto.
FULL PRINCIPAL PREPAYMENT: A Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.
GAAP: Generally accepted accounting principles and procedures,
consistently applied.
HUD: The United States Department of Housing and Urban
Development or any successor thereto.
INDENTURE: The indenture, dated as of March 18, 2005, between
the Issuer and the Indenture Trustee, relating to the Encore Credit Receivables
Trust, Asset-Backed Notes, Series 2005-1.
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INDENTURE TRUSTEE: The Bank of New York, a New York banking
association.
INDEX: With respect to each ARM Loan, the index, as specified
in the related Mortgage Note, used to determine the Mortgage Interest Rate on
each Adjustment Date on such ARM Loan.
INDEX RATE: With respect to each ARM Loan, on each Adjustment
Date, the rate per annum equal to the Index, calculated as provided in the
related Mortgage Note.
INSURANCE PROCEEDS: With respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
ISSUER: Encore Credit Receivables Trust 2005-1, a Delaware
statutory trust, or its successor in interest.
LIFETIME RATE CAP: With respect to each ARM Loan, the maximum
Mortgage Interest Rate over the term of such Mortgage Loan, as specified in the
related Mortgage Note.
LIQUIDATION PROCEEDS: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, other than
amounts received following the acquisition of an REO Property pursuant to
Section 4.13.
MARGIN: With respect to each ARM Loan, the fixed percentage
amount set forth in the related Mortgage Note which is added to the Index in
order to determine the related Mortgage Interest Rate.
MASTER SERVICER: Countrywide Home Loans Servicing LP, its
successors in interest and assigns, or such other Person thereto designated by
the Owner.
MASTER SERVICING AGREEMENT: The Servicing Agreement, dated as
of March 18, 2005, among the Issuer, the Master Servicer and the Indenture
Trustee.
MERS: Mortgage Electronic Registration Systems, Inc., a
Delaware corporation, or any successor in interest thereto.
MERS MORTGAGE LOAN: Any Mortgage Loan as to which the related
Mortgage, or an Assignment of Mortgage, has been or will be recorded in the name
of MERS, as nominee for the holder from time to time of the related Mortgage
Note.
MONTHLY ADVANCE: The portion of each Monthly Payment that is
delinquent with respect to each Mortgage Loan at the close of business on the
Determination Date required to be advanced by the Servicer pursuant to Section
5.03 on the Business Day immediately preceding the Remittance Date of the
related month.
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MONTHLY PAYMENT: With respect to each Mortgage Loan, the
scheduled monthly payment of principal and interest thereon which is payable by
the related Mortgagor under the related Mortgage Note.
MORTGAGE: The mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a lien on real property securing the
Mortgage Note.
MORTGAGE INTEREST RATE: The annual rate at which interest
accrues on any Mortgage Loan in accordance with the provisions of the related
Mortgage Note, and in the case of an ARM Loan, as adjusted from time to time on
each Adjustment Date for such Mortgage Loan to equal the Index Rate for such
Mortgage Loan plus the Margin for such Mortgage Loan, and subject to the
limitations on such interest rate imposed by the Periodic Rate Cap and the
Lifetime Rate Cap.
MORTGAGE LOAN: An individual Mortgage Loan described herein
and as further identified on the Mortgage Loan Schedule, as amended from time to
time, which Mortgage Loan includes without limitation the Mortgage Loan
Documents, the Monthly Payments, Principal Prepayments, Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and all
other rights, benefits, proceeds and obligations arising from or in connection
with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to each Mortgage Loan,
the original mortgage loan legal documents held by the Owner or by an Indenture
Trustee on the Owner's behalf.
MORTGAGE LOAN REMITTANCE RATE: With respect to each Mortgage
Loan, the annual rate of interest remitted to the Owner, which shall be equal to
the related Mortgage Interest Rate minus the Servicing Fee Rate.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans
attached hereto as EXHIBIT A, as supplemented from time to time in accordance
with the provisions hereof.
MORTGAGE NOTE: The note or other evidence of the indebtedness
of a Mortgagor secured by a Mortgage.
MORTGAGED PROPERTY: The underlying real property securing
repayment of the debt evidenced by a Mortgage Note.
MORTGAGOR: The obligor on a Mortgage Note.
NON-ESCROW MORTGAGE LOAN: Any Mortgage Loan which is not an
Escrow Mortgage Loan.
NONRECOVERABLE ADVANCE: Any Monthly Advance previously made by
the Servicer pursuant to Section 5.03 or any Servicing Advance which, in the
good faith judgment of the Servicer, will not be ultimately recoverable by the
Servicer from Liquidation Proceeds or other proceeds of the related Mortgage
Loan. The determination by the Servicer that is has made
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a Nonrecoverable Advance, shall be evidenced by an Officer's Certificate of the
Servicer delivered to the Owner detailing the reasons for such determination.
OFFICERS' CERTIFICATE: A certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President, a Vice President or an
Assistant Vice President or by the Treasurer or the Secretary or one of the
Assistant Treasurers or Assistant Secretaries of the Servicer, and delivered to
the Owner as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may be
an employee of the party on behalf of whom the opinion is being given,
reasonably acceptable to the other party.
OPTION ONE SUBSERVICING AGREEMENT: The Subservicing Agreement,
dated as of March 18, 2005, between the Servicer and Option One Mortgage
Corporation.
OWNER: CWABS, Inc., its successors in interest and assigns.
PARTIAL PRINCIPAL PREPAYMENT: A Principal Prepayment by a
Mortgagor in part but not in full of the outstanding principal balance of a
Mortgage Loan.
PASS-THROUGH TRANSFER: The sale or transfer of same or all of
the Mortgage Loans by the Owner to a trust to be formed as part of a publicly
issued or privately placed, rated or unrated mortgage-backed securities
transaction.
PAYMENT DATE: The 25th day of each month, or if such day is
not a Business Day, then the next Business Day.
PERIODIC RATE CAP: With respect to each ARM Loan, the maximum
number of percentage points by which the Mortgage Interest Rate may increase or
decrease on any Adjustment Date.
PERMITTED INVESTMENTS: Any one or more of the following
obligations or securities:
(i) direct obligations of, and obligations the timely payment
of which are fully guaranteed 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;
(ii) (a) demand or time deposits, federal funds or bankers'
acceptances issued by any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities,
provided that the commercial paper and/or the short-term
deposit rating and/or the long-term unsecured debt obligations
or deposits of such depository institution or trust company at
the time of such investment or contractual commitment
providing for such investment are rated in one of the two
highest rating categories by each Rating Agency and (b) any
other demand or time deposit or certificate of deposit that is
fully insured by the FDIC;
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(iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued
or guaranteed by an 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, in
either case entered into with a depository institution or
trust company (acting as principal) described in clause
(ii)(a) above;
(iv) 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 that are rated in the
highest rating categories by each Rating Agency at the time of
such investment or contractual commitment providing for such
investment; PROVIDED, HOWEVER, that securities issued by any
particular corporation will not be Permitted Investments to
the extent that investments therein will cause the then
outstanding principal amount of securities issued by such
corporation and held as Permitted Investments to exceed 10% of
the aggregate outstanding principal balances and amounts of
all the Permitted Investments;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable
on demand or on a specified date not more than one year after
the date of issuance thereof) which are rated in the highest
rating categories by each Rating Agency at the time of such
investment;
(vi) any other demand, money market or time deposit,
obligation, security or investment as may be acceptable to
each Rating Agency; and
(vii) any money market funds the collateral of which consists
of obligations fully guaranteed 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 (which may
include repurchase obligations secured by collateral described
in clause (i)) and which money market funds are rated in one
of the two highest rating categories by each Rating Agency;
PROVIDED, HOWEVER, that no instrument or security shall be a Permitted
Investment if such instrument or security evidences a right to receive only
interest payments with respect to the obligations underlying such instrument or
if such security provides for payment of both principal and interest with a
yield to maturity in excess of 120% of the yield to maturity at par; and
provided further that any such instrument or security must be payable on demand
or on a specified date not later than the Remittance Date on which amounts held
therein are required to be distributed.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof.
PREPAYMENT INTEREST EXCESS: With respect to any Remittance
Date, for each Mortgage Loan that was the subject of a Principal Prepayment in
full or in part during the portion
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of the related Prepayment Period occurring between the first day of the calendar
month in which such Remittance Date occurs and the Determination Date of the
calendar month in which such Remittance Date occurs, an amount equal to interest
(to the extent received) at the applicable Mortgage Loan Remittance Rate on the
amount of such Principal Prepayment for the number of days commencing on the
first day of the calendar month in which such Remittance Date occurs and ending
on the last date through which interest is collected from the related Mortgagor.
PREPAYMENT INTEREST SHORTFALL: With respect to any Remittance
Date, for each such Mortgage Loan that was the subject of a Principal Prepayment
during the portion of the related Prepayment Period occurring between the first
day of the related Prepayment Period and the last day of the calendar month
preceding the month in which such Remittance Date occurs, an amount equal to
interest (to be paid by the Servicer out of its own funds without reimbursement
therefor) at the applicable Mortgage Loan Remittance Rate on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment is applied and ending on the last day of the calendar month preceding
such Remittance Date.
PREPAYMENT PERIOD: As to any Remittance Date, the period
commencing on the 16th day of the month prior to the month in which the related
Remittance Date occurs and ending on the 15th day of the month in which such
Remittance Date occurs.
PRIMARY MORTGAGE INSURANCE POLICY: Each primary policy of
mortgage insurance, or any replacement policy therefor obtained by the Servicer
pursuant to Section 4.08.
PRIME RATE: The prime rate of U.S. money center banks as
published from time to time in The Wall Street Journal.
PRINCIPAL PREPAYMENT: Any payment or other recovery of
principal on a Mortgage Loan, full or partial, which is received in advance of
its scheduled Due Date, including any prepayment charge or premium thereon, and
which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.
QUALIFIED DEPOSITORY: (a) a depository, the accounts of which
are insured by the FDIC and the short term debt ratings and the long term
deposit ratings of which are rated in one of the two highest rating categories
by either of Moody's Investors Service, Inc. or Fitch, Inc., or (b) a
depository, the short-term debt obligations, or other short-term deposits of
which are rated at least `A-2' and the long-term unsecured debt obligations of
which are rated at least `AA-' by Standard & Poor's Ratings Service, a division
of The McGraw Hill Companies Inc.
QUALIFIED INSURER: An insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided.
RATING AGENCY: Standard & Poor's Ratings Service, a division
of The McGraw Hill Companies Inc., Moody's Investors Service, Inc. or Fitch,
Inc.
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REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC PROVISIONS: The provisions of the federal income tax law
relating to a REMIC, which appear at Section 860A through 860G of Subchapter M
of Chapter 1, Subtitle A of the Code, and related provisions, and regulations,
rulings or pronouncements promulgated thereunder, as the foregoing may be in
effect from time to time.
REMITTANCE DATE: The third Business Day after the 15th day of
any month and no later than the 20th of any month.
REO DISPOSITION: The final sale by the Servicer of any REO
Property.
REO DISPOSITION PROCEEDS: Amounts received by the Servicer in
connection with a related REO Disposition.
REO PROPERTY: A Mortgaged Property acquired by the Servicer on
behalf of the Owner as described in Section 4.13.
SERVICER: ECC Capital Corporation, or any of its successors in
interest or any successor under this Agreement appointed as herein provided.
SERVICER TERMINATION TRIGGER: A Servicer Termination Trigger
will have occurred on a Payment Date if either (a) the Three Month Rolling
Delinquency Percentage for the Mortgage Loans exceeds 45.00% or (b) the
Cumulative Loss Percentage exceeds 4.00% from April 2005 to March 2010, or 6.00%
from April 2010 to March 2015.
SERVICING ADVANCES: All customary, reasonable and necessary
"out-of-pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Servicer of its servicing
obligations relating to each Mortgage Loan, including the cost of (a) the
inspection, preservation, restoration and protection of the Mortgaged Property,
(b) any enforcement, administrative or judicial proceedings, or any legal work
or advice specifically related to servicing the Mortgage Loans, including
foreclosures, bankruptcies, condemnations, drug seizures, elections,
foreclosures by subordinate lienholders, and other legal actions incidental to
the servicing of the Mortgage Loans (provided that such expenses are reasonable
and that the Servicer specifies the Mortgage Loan(s) to which such expenses
relate), (c) the management and liquidation of the Mortgaged Property if the
Mortgaged Property is acquired in full or partial satisfaction of the Mortgage,
(d) taxes, assessments, water rates, sewer rates and other charges which are or
may become a lien upon the Mortgaged Property, and Primary Mortgage Insurance
Policy premiums and fire and hazard insurance coverage and (e) compliance with
the obligations under Section 4.08.
SERVICING FEE: With respect to each Mortgage Loan, the amount
of the annual fee the Owner shall pay to the Servicer, which shall, for a period
of one full month, be equal to one-twelfth of the product of (a) the applicable
Servicing Fee Rate and (b) the outstanding principal balance of such Mortgage
Loan. Such fee shall be payable monthly, computed on the basis of the same
principal amount and period respecting which any related interest payment on a
Mortgage Loan is computed. The obligation of the Owner to pay the Servicing Fee
is limited to,
Page 9
and the Servicing Fee is payable from the interest portion of such Monthly
Payments, Liquidation Proceeds, Insurance Proceeds, REO Disposition Proceeds and
Condemnation Proceeds collected by the Servicer or as otherwise provided under
Section 4.05.
SERVICING FEE RATE: 0.50%.
SERVICING FILE: The documents, records and other items
pertaining to a particular Mortgage Loan, and any additional documents relating
to such Mortgage Loan as are in, or as may from time to time come into, the
Servicer's possession.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Servicer to the
Owner upon request, as such list may from time to time be amended.
STATED PRINCIPAL BALANCE: As to each Mortgage Loan as of any
date of determination, (i) the principal balance of such Mortgage Loan at the
Cut-off Date after giving effect to payments of principal due on or before such
date, whether or not received, minus (ii) all amounts previously distributed to
the Master Servicer with respect to the Mortgage Loan representing payments or
recoveries of principal or advances in lieu thereof.
THREE-MONTH ROLLING DELINQUENCY PERCENTAGE: With respect to
the Mortgage Loans and any Payment Date, the average for the three most recent
calendar months of the fraction, expressed as a percentage, the numerator of
which is (x) the aggregate Stated Principal Balance of the Mortgage Loans that
are 60 or more days delinquent in payment of principal and interest for that
Payment Date, including Mortgage Loans in bankruptcy that are 60 or more days
delinquent, foreclosure and REO Properties, and the denominator of which is (y)
the sum of the Stated Principal Balances of the Mortgage Loans, in the case of
both (x) and (y), as of the close of business on the last Business Day of each
of the three most recent calendar months.
TRANSMISSION: A notice, dated as of the related Effective
Date, given by the Owner to the Servicer, from time to time, pursuant to which
additional Mortgage Loans, as described on the schedule attached thereto (which
schedule shall become part of the Mortgage Loan Schedule as of the related
Effective Date), are made subject to the terms of this Agreement.
TRUST AGREEMENT: Any trust agreement, pooling and servicing
agreement, indenture or comparable documents by and among some or all of CWABS,
Inc., ECC Capital Corporation, the Master Servicer and the Indenture Trustee
(and which may include other parties) creating a trust and/or otherwise
effectuating a pass-through transfer.
Any capitalized terms used and not defined herein shall have
the meanings ascribed to such terms in Appendix A to the Indenture.
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ARTICLE II
SERVICING OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES; BOOKS
AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS
Section 2.01 SERVICING OF MORTGAGE LOANS.
The Servicer does hereby agree to service the Mortgage Loans,
from and after the related Effective Date, pursuant to the terms of this
Agreement. The Mortgage Loans initially subject to this Agreement are described
in the Mortgage Loan Schedule attached hereto on the initial Effective Date.
Additional Mortgage Loans may be subject hereto pursuant to a Transmission to
the Servicer by the Owner, setting forth the Effective Date with respect
thereto.
Section 2.02 MAINTENANCE OF SERVICING FILES.
The Servicer shall maintain a Servicing File consisting of all
documents necessary to service the Mortgage Loans. The possession of each
Servicing File by the Servicer is for the sole purpose of servicing the related
Mortgage Loan, and such retention and possession by the Servicer is in a
custodial capacity only. The Servicer acknowledges that the ownership of each
Mortgage Loan is vested in the Owner. All rights arising out of the Mortgage
Loans including all funds received on or in connection with the Mortgage Loans
and all records or documents with respect to the Mortgage Loans prepared by or
which come into the possession of the Servicer shall be received and held by the
Servicer for the sole purpose of servicing the Mortgage Loans and such retention
and possession by the Servicer is in a custodial capacity only in trust for the
exclusive benefit of the Owner as the owner of the related Mortgage Loans. Any
portion of the related Servicing Files retained by the Servicer shall be
appropriately identified in the Servicer's computer system to reflect clearly
the ownership of the related Mortgage Loans by the Owner. The Servicer shall
release its custody of the contents of the related Servicing Files only in
accordance with written instructions of the Owner, except when such release is
required as incidental to the Servicer's servicing of the Mortgage Loans, such
written instructions shall not be required.
Section 2.03 BOOKS AND RECORDS.
The Servicer shall be responsible for maintaining, and shall
maintain, a complete set of books and records for the Mortgage Loans which shall
be appropriately identified in the Servicer's computer system to clearly reflect
the ownership of the Mortgage Loan by the Owner. In particular, the Servicer
shall maintain in its possession, available for inspection by the Owner, or its
designee and shall deliver to the Owner upon demand, evidence of compliance with
all federal, state and local laws, rules and regulations, and requirements of
Fannie Mae and Freddie Mac, as applicable, including documentation as to the
method used in determining the applicability of the provisions of the Flood
Disaster Protection Act of 1973, as amended, to the Mortgaged Property,
documentation evidencing insurance coverage and eligibility of any condominium
project for approval by Fannie Mae and periodic inspection reports as required
by Section 4.13. To the extent that original documents are not required for
purposes of realization of Liquidation Proceeds or Insurance Proceeds, documents
maintained by the Servicer may be in the form of microfilm or microfiche or such
other reliable means of recreating original documents, including optical imagery
techniques.
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The Servicer shall maintain with respect to each Mortgage Loan
and shall make available for inspection by the Owner or its designee, upon
reasonable prior notice, the related Servicing File (or copies thereof) during
the time the Owner retains ownership of a Mortgage Loan and thereafter in
accordance with applicable laws and regulations.
Section 2.04 RESERVED.
Section 2.05 DELIVERY OF MORTGAGE LOAN DOCUMENTS.
The Servicer shall forward to the Indenture Trustee on behalf
of the Owner original documents evidencing an assumption, modification,
consolidation or extension of any Mortgage Loan entered into in accordance with
Section 4.01 or 6.01 promptly after their execution; PROVIDED, HOWEVER, that the
Servicer shall provide the Indenture Trustee on behalf of the Owner with a
certified true copy of any such document submitted for recordation promptly
after its execution, and shall provide the original of any document submitted
for recordation or a copy of such document certified by the appropriate public
recording office to be a true and complete copy of the original promptly after
receipt thereof, but in no event later than 240 days after its execution,
PROVIDED, HOWEVER, that if delivery is not completed within 240 days solely due
to delays in making such delivery by reason of the fact that such documents
shall not have been returned by the appropriate recording office, the Servicer
shall continue to use its best efforts to obtain such documents and effect
delivery as soon as possible after its receipt thereof.
From time to time the Servicer may have a need for Mortgage
Loan Documents to be released by the Indenture Trustee. If the Servicer shall
require any of the Mortgage Loan Documents, the Servicer shall notify the
Indenture Trustee in writing of such request in the form of the request for
release attached hereto as EXHIBIT D. During the time that any such
documentation is held by the Servicer, such possession is in trust for the
benefit of the Owner, and the Servicer shall return such documentation to the
Indenture Trustee upon the request of the Owner or when the Servicer's need
therefore no longer exists.
Section 2.06 TAX SERVICE CONTRACTS.
In the event that a Mortgage Loan is not subject to a fully
assignable life of loan tax service contract with Fidelity National Real Estate
Tax Service which is assignable to the Servicer or any subsequent Servicer
without the payment of any cost or fee, the Servicer shall acquire a tax service
contract for any such Mortgage Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SERVICER AND THE OWNER
Section 3.01 Representations of the Servicer.
The Servicer hereby represents, warrants and covenants to the Owner
that, as of the Effective Date:
(a) The Servicer is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and
in good
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standing in each state where a Mortgaged Property is located
if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the
Servicer, and in any event the Servicer is in compliance with
the laws of any such state to the extent necessary to ensure
the enforceability of the related Mortgage Loan and the
servicing of such Mortgage Loan in accordance with the terms
of this Agreement; the Servicer has the full corporate power
and authority to execute and deliver this Agreement and to
perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the
Servicer and the consummation of the transactions contemplated
hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the
Servicer; and all requisite corporate action has been taken by
the Servicer to make this Agreement valid and binding upon the
Servicer in accordance with its terms;
(b) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the
Servicer;
(c) There is no action, suit, proceeding or investigation pending
or threatened against the Servicer which, either in any one
instance or in the aggregate, may result in any material
adverse change in the business, operations, financial
condition, properties or assets of the Servicer, or in any
material impairment of the right or ability of the Servicer to
carry on its business substantially as now conducted, or in
any material liability on the part of the Servicer, or which
would draw into question the validity of this Agreement or the
Mortgage Loans or of any action taken or to be contemplated
herein, or which would be likely to impair materially the
ability of the Servicer to perform under the terms of this
Agreement;
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution,
delivery and performance by the Servicer of or compliance by
the Servicer with this Agreement, or if required, such
approval has been obtained prior to the Effective Date;
(e) 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 fact or omits to state
a fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading; and
(f) The Servicer will not waive any prepayment charge unless it is
waived in accordance with the standard set forth in Section
4.16.
(g) The Servicer will fully furnish, in accordance with the Fair
Credit Reporting Act and its implementing regulations,
accurate and complete information (i.e., favorable and
unfavorable) on its borrower credit files to the three
national credit repositories on a monthly basis.
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Section 3.02 Representations of the Owner.
The Owner represents, warrants and covenants to the Servicer as of the
Effective Date:
(a) The Owner is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization;
(b) The Owner has the full power and authority to execute and
deliver this Agreement and to perform in accordance herewith;
the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered
pursuant to this Agreement) by the Owner and the consummation
of the transactions contemplated hereby have been duly and
validly authorized; this Agreement evidences the valid,
binding and enforceable obligation of the Owner; and all
requisite action has been taken by the Owner to make this
Agreement valid and binding upon the Owner in accordance with
its terms; and
(c) The Owner holds the entire legal and beneficial title to each
Mortgage Loan. The information provided to Servicer by Owner,
and each Mortgage File, is complete, true and accurate in all
material respects.
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 4.01 SERVICER TO ACT AS SERVICER.
The Servicer, as independent contract servicer, shall service
and administer the Mortgage Loans in accordance with this Agreement and with
Accepted Servicing Practices (giving due consideration to the Owner's reliance
on the Servicer), and shall have full power and authority, acting alone, to do
or cause to be done any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and with Accepted Servicing Practices. If
reasonably required by the Servicer, the Owner shall furnish the Servicer with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement.
Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of any such term or in any manner grant indulgence to any Mortgagor
if in the Servicer's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the Owner;
PROVIDED, HOWEVER, that unless the related Mortgagor is in default with respect
to the Mortgage Loan or such default is, in the judgment of the Servicer,
reasonably foreseeable, the Servicer shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Interest Rate,
forgive the payment of principal or interest, reduce or increase the outstanding
principal balance (except for actual payments of principal) or change the final
maturity date on such Mortgage Loan. In the event of any such modification which
permits the deferral of interest or principal payments on any Mortgage Loan, the
Servicer shall, on the
Page 14
Business Day immediately preceding the related Remittance Date in any month in
which any such principal or interest payment has been deferred, deposit in the
Custodial Account from its own funds, in accordance with Section 4.04 and
Section 5.03, the difference between (a) such month's principal and one month's
interest at the related Mortgage Loan Remittance Rate on the unpaid principal
balance of such Mortgage Loan and (b) the amount paid by the Mortgagor. The
Servicer shall be entitled to reimbursement for such advances to the same extent
as for all other advances pursuant to Section 4.05. Without limiting the
generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered, to prepare, execute and deliver, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties.
Notwithstanding anything in this Agreement to the contrary, if
a REMIC election is made, the Servicer shall not (unless the related Mortgagor
is in default with respect to the Mortgage Loan or such default is, in the
judgment of the Servicer, reasonably foreseeable) make or permit any
modification, waiver or amendment of any term of any Mortgage Loan that would
both (i) effect an exchange or reissuance of such Mortgage Loan under Section
1001 of the Code (or Treasury regulations promulgated thereunder) and (ii) cause
the related REMIC to fail to qualify as a REMIC under the Code or the imposition
of any tax on "prohibited transactions" or "contributions" after the "startup
date" of such REMIC under the REMIC Provisions.
The Servicer shall perform all of its servicing
responsibilities hereunder or may cause a subservicer to perform any such
servicing responsibilities on its behalf, but the use by the Servicer of a
subservicer shall not release the Servicer from any of its obligations hereunder
and the Servicer shall remain responsible hereunder for all acts and omissions
of each subservicer as fully as if such acts and omissions were those of the
Servicer. Any such subservicer must be a Fannie Mae approved seller/servicer or
a Freddie Mac approved seller/servicer in good standing and no event shall have
occurred, including but not limited to, a change in insurance coverage, which
would make it unable to comply with the eligibility requirements for
seller/servicers imposed by Fannie Mae or Freddie Mac, or which would require
notification to Fannie Mae or Freddie Mac. The Servicer shall pay all fees and
expenses of each subservicer from its own funds, and a subservicer's fee shall
not exceed the Servicing Fee.
At the cost and expense of the Servicer, without any right of
reimbursement from the Custodial Account, the Servicer shall be entitled to
terminate the rights and responsibilities of a subservicer and arrange for any
servicing responsibilities to be performed by a successor subservicer meeting
the requirements in the preceding paragraph; PROVIDED, HOWEVER, that nothing
contained herein shall be deemed to prevent or prohibit the Servicer, at the
Servicer's option, from electing to service the related Mortgage Loans itself.
In the event that the Servicer's responsibilities and duties under this
Agreement are terminated pursuant to Section 8.04, 9.01 or 10.01, and only if
requested to do so by the Owner or the Master Servicer, the Servicer shall at
its own cost and expense terminate the rights and responsibilities of each
subservicer effective as of the date of termination of the Servicer. The
Servicer shall pay all fees, expenses or penalties necessary in order to
terminate the rights and responsibilities of each subservicer from the
Servicer's own funds without reimbursement from the Owner. Each subservicing
agreement shall provide that a successor servicer shall have the option to
terminate such agreement with payment of any fees if the predecessor Servicer is
terminated or resigns.
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Notwithstanding any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and a subservicer or
any reference herein to actions taken through a subservicer or otherwise, the
Servicer shall not be relieved of its obligations to the Owner and shall be
obligated to the same extent and under the same terms and conditions as if it
alone were servicing and administering the Mortgage Loans. The Servicer shall be
entitled to enter into an agreement with a subservicer for indemnification of
the Servicer by the subservicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
Any subservicing agreement and any other transactions or
services relating to the Mortgage Loans involving a subservicer shall be deemed
to be between such subservicer and Servicer alone, and the Owner shall have no
obligations, duties or liabilities with respect to such Subservicer including no
obligation, duty or liability of Owner to pay such subservicer's fees and
expenses. For purposes of distributions and advances by the Servicer pursuant to
this Agreement, the Servicer shall be deemed to have received a payment on a
Mortgage Loan when a subservicer has received such payment.
Section 4.02 COLLECTION OF MORTGAGE LOAN PAYMENTS.
Continually from the date hereof until the date each Mortgage
Loan ceases to be subject to this Agreement, the Servicer shall proceed with
reasonable diligence and in accordance with Accepted Servicing Practices, to
collect all payments due under each Mortgage Loan when the same shall become due
and payable. Further, the Servicer shall take reasonable care in ascertaining
and estimating annual ground rents, taxes, assessments, water rates, fire and
hazard insurance premiums, mortgage insurance premiums, and all other charges
that, as provided in the Mortgage Loan Documents, will become due and payable to
the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
Section 4.03 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
The Servicer shall use its reasonable efforts, consistent with
Accepted Servicing Practices, to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 4.01. The Servicer shall
use its reasonable efforts to realize upon defaulted Mortgage Loans in such
manner as will maximize the receipt of principal and interest by the Owner,
taking into account, among other things, the timing of foreclosure proceedings.
The Servicer, on behalf of the Owner, may also, in its discretion, as an
alternative to foreclosure, sell defaulted Mortgage Loans at fair market value
to third-parties, if the Servicer reasonably believes that such sale would
maximize proceeds to the Owner (on a present value basis) with respect to each
such Mortgage Loan. The foregoing is subject to the provisions that, in any case
in which any Mortgaged Property shall have suffered damage, the Servicer shall
not be required to expend its own funds toward the restoration of such property
unless it shall determine in its discretion (i) that such restoration will
increase the proceeds of liquidation of the related Mortgage Loan to the Owner
after reimbursement to itself for such expenses, and (ii) that such expenses
will be recoverable by the Servicer through Insurance Proceeds or Liquidation
Proceeds from the related
Page 16
Mortgaged Property, as contemplated in Section 4.05. The Servicer shall be
responsible for all costs and expenses incurred by it in any such proceedings or
functions as Servicing Advances; PROVIDED, HOWEVER, that it shall be entitled to
reimbursement therefor as provided in Section 4.05. Notwithstanding anything to
the contrary contained herein, in connection with a foreclosure or acceptance of
a deed in lieu of foreclosure, in the event the Servicer has reasonable cause to
believe that a Mortgaged Property is contaminated by hazardous or toxic
substances or wastes, or if the Owner otherwise requests an environmental
inspection or review of such Mortgaged Property, such an inspection or review is
to be conducted by a qualified inspector. Upon completion of the inspection, the
Servicer shall promptly provide the Owner with a written report of the
environmental inspection. After reviewing the environmental inspection report,
the Owner shall direct the Servicer as to how the Servicer shall proceed with
respect to the Mortgaged Property, and the Servicer shall follow the Owner's
directions with respect thereto.
Section 4.04 ESTABLISHMENT OF CUSTODIAL ACCOUNTS; DEPOSITS IN
CUSTODIAL ACCOUNTS.
The Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan separate and apart from any of its own
funds and general assets and shall establish and maintain, or cause to be
established and maintained in accordance with the Option One Subservicing
Agreement, one or more Custodial Accounts. Any funds in a Custodial Account may
be invested in Permitted Investments for the benefit of the Owner (with any
income earned thereon for the benefit of the Servicer), provided that in the
event that amounts on deposit in the Custodial Account exceed the amount fully
insured by the FDIC (the "Insured Amount"), the Servicer shall be obligated to
invest the excess amount over the Insured Amount in Permitted Investments on the
same Business Day as such excess amount becomes present in the Custodial
Account. Any such Permitted Investment shall mature no later than the Business
Day immediately preceding the related Remittance Date. The amount of any losses
incurred in respect of any such Permitted Investments shall be deposited by the
Servicer in the Custodial Account out of the Servicer's own funds immediately as
realized. Funds deposited in the Custodial Account may be drawn on by the
Servicer only in accordance with Section 4.05. The creation of any Custodial
Account shall be evidenced by an account certification in the form shown in
EXHIBIT B hereto. The original of such account certification shall be furnished
to the Owner upon reasonable request. The Master Servicer and the Indenture
Trustee shall be notified of any change in the location of the Custodial
Account. The Servicer acknowledges and agrees that the Servicer shall bear any
losses incurred with respect to Permitted Investments. The amount of any such
losses shall be immediately deposited by the Servicer in the Custodial Account,
out of the Servicer's own funds, with no right to reimbursement therefor.
The Servicer shall deposit in the Custodial Account within two
(2) Business Days of Servicer's receipt, and retain therein, the following
collections:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the
Mortgage Loans adjusted to the related Mortgage Loan Remittance Rate;
(iii) all Liquidation Proceeds;
Page 17
(iv) any net amounts received by the Servicer in
connection with any REO Property pursuant to Section 4.13;
(v) all Insurance Proceeds including amounts required
to be deposited pursuant to Sections 4.08, 4.10 and 4.11, other than
proceeds to be held in a restricted escrow account and applied to the
restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with Accepted Servicing Practices, the Mortgage
Loan Documents or applicable law;
(vi) all Condemnation Proceeds affecting any
Mortgaged Property other than proceeds to be held in a restricted
escrow account and applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with
Accepted Servicing Practices, the Mortgage Loan Documents or applicable
law;
(vii) any Monthly Advances as provided in Section
5.03;
(viii) any amounts required to be deposited in the
Custodial Account pursuant to Sections 4.01, 4.14, 6.01 and 6.02; and
(ix) with respect to each full or partial Principal
Prepayment, any Prepayment Interest Shortfall, to the extent of one-half of the
Servicer's aggregate Servicing Fee received with respect to the related Due
Period.
The foregoing requirements for deposit in the Custodial
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of Servicing
Fees, Ancillary Income and any Prepayment Interest Excess need not be deposited
by the Servicer in the Custodial Account and may be retained by the Servicer as
compensation.
Section 4.05 PERMITTED WITHDRAWALS FROM THE CUSTODIAL ACCOUNT.
The Servicer may, from time to time, make withdrawals from the
Custodial Account for the following purposes:
(i) to make payments to the Owner in the amounts and in the
manner provided for in Section 5.01;
(ii) to reimburse itself for Monthly Advances, the Servicer's
right to reimburse itself pursuant to this subclause (ii) being limited to
amounts received on the related Mortgage Loan which represent late collections
(net of the related Servicing Fees) of principal and/or interest respecting
which any such Monthly Advance was made;
(iii) to reimburse itself for unreimbursed Servicing Advances
and Monthly Advances and unpaid Servicing Fees, the Servicer's right to
reimburse itself pursuant to this subclause (iii) with respect to any Mortgage
Loan being limited to Liquidation Proceeds, Condemnation Proceeds, and Insurance
Proceeds and REO Disposition Proceeds related to such Mortgage Loan;
Page 18
(iv) to pay to itself as servicing compensation (a) any
interest earned on funds in the Custodial Account (all such interest to be
withdrawn monthly not later than each Remittance Date) and (b) any Servicing Fee
to which the Servicer is entitled in accordance with the terms hereof to the
extent such Servicing Fee has not been paid to or retained by the Servicer;
(v) to reimburse itself for any Nonrecoverable Advances;
(vi) to transfer funds to another Qualified Depository in
accordance with Section 4.09 hereof;
(vii) to remove funds deposited in the Custodial Account in
error by the Servicer; and
(viii) to clear and terminate the Custodial Account upon the
termination of this Agreement.
Section 4.06 ESTABLISHMENT OF ESCROW ACCOUNTS;
DEPOSITS IN ESCROW ACCOUNTS.
The Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan which constitute Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain, or cause to be established and maintained in accordance
with the Option One Subservicing Agreement one or more Escrow Accounts. Any
funds deposited in an Escrow Account may be invested in Permitted Investments.
Funds deposited in an Escrow Account may be drawn on by the Servicer in
accordance with Section 4.07. The creation of any Escrow Account shall be
evidenced by an account certification in the form shown in EXHIBIT C. The
original of such account certification shall be furnished to the Owner upon
request. The Servicer acknowledges and agrees that the Servicer shall bear any
losses incurred with respect to Permitted Investments. The amount of any such
losses shall be immediately deposited by the Servicer in the Escrow Account out
of the Servicer's own funds, with no right to reimbursement therefor.
The Servicer shall deposit in the Escrow Account or Accounts
within two (2) Business Days of Servicer's receipt, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any items as are required
under the terms of this Agreement; and
(ii) all Servicing Advances for Mortgagors whose Escrow
Payments are insufficient to cover escrow disbursements.
The Servicer shall make withdrawals from an Escrow Account
only to effect such payments as are required under this Agreement, and for such
other purposes as shall be as set forth in and in accordance with Section 4.07.
Except as provided in Section 4.07, the Servicer shall be entitled to retain any
interest paid on funds deposited in an Escrow Account by the Qualified
Depository.
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Section 4.07 PERMITTED WITHDRAWALS FROM ESCROW ACCOUNT.
Withdrawals from the Escrow Account may be made by the
Servicer only:
(i) to effect timely payments of ground rents, taxes,
assessments, water rates, fire and hazard insurance premiums, Primary Mortgage
Insurance Policy premiums, if applicable, and comparable items;
(ii) to reimburse the Servicer for any Servicing Advance made
by the Servicer with respect to a related Mortgage Loan but only from amounts
received on the related Mortgage Loan which represent late payments or
collections of Escrow Payments thereunder;
(iii) to refund to the Mortgagor any funds as may be
determined to be overages;
(iv) for transfer to the Custodial Account in connection with
the liquidation of a Mortgage Loan or an acquisition of REO Property;
(v) to pay to the Servicer, or to the Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow Account;
(vi) to remove funds placed in an Escrow Account in error by
the Servicer; and
(vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
As part of its servicing duties, the Servicer shall pay to the
Mortgagors interest on funds in an Escrow Account, to the extent required by
law, and to the extent that interest earned on funds in the Escrow Account is
insufficient, shall pay such interest from its own funds, without any
reimbursement therefor.
Section 4.08 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES, MAINTENANCE
OF PRIMARY MORTGAGE INSURANCE POLICIES, COLLECTIONS THEREUNDER.
With respect to each Mortgage Loan, the Servicer shall
maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of Primary Mortgage Insurance Policy
premiums and fire and hazard insurance coverage and, with regard to Escrow
Mortgage Loans, shall obtain, from time to time, all bills for the payment of
such charges, including renewal premiums and shall effect payment thereof prior
to the applicable penalty or termination date and at a time appropriate for
securing maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in the Escrow Account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage or applicable law. To the extent that the Mortgage does
not provide for Escrow Payments, the Servicer shall use commercially reasonable
efforts consistent with Accepted Servicing Practices to determine that any such
payments are made by the Mortgagor when due. With regard to Escrow Mortgage
Loans, the Servicer assumes full
Page 20
responsibility for the timely payment of all such bills and shall effect timely
payments of all such bills irrespective of the Mortgagor's faithful performance
in the payment of same or the making of the Escrow Payments and shall make
advances from its own funds to effect such payments. With regard to Non-Escrow
Mortgage Loans, the Servicer shall make Servicing Advances to effect such
payments within such time period as to avoid the loss of the related Mortgaged
Property by foreclosure of a tax or other lien and to ensure that the Mortgaged
Property is not uninsured for any reason.
The Servicer shall maintain in full force and effect each
Primary Mortgage Insurance Policy, that as of the Effective Date, was in full
force and effect with respect to any Mortgage Loan. Such coverage will be
maintained and will not be waived by the Servicer except in accordance with
applicable law. The Servicer shall not cancel, except in accordance with
applicable law, or refuse to renew any Primary Mortgage Insurance Policy that is
in force as of the Effective Date unless a replacement Primary Mortgage
Insurance Policy for such canceled or nonrenewed policy is obtained from and
maintained with a Qualified Insurer. The Servicer shall not take any action
which would result in noncoverage under any applicable Primary Mortgage
Insurance Policy of any loss which, but for the actions of the Servicer would
have been covered thereunder. In connection with any assumption or substitution
agreement entered into or to be entered into pursuant to Section 6.01, the
Servicer shall promptly notify the insurer under the related Primary Mortgage
Insurance Policy, if any, of such assumption or substitution of liability in
accordance with the terms of such policy and shall take all actions which may be
required by such insurer as a condition to the continuation of coverage under
the Primary Mortgage Insurance Policy. If such Primary Mortgage Insurance Policy
is terminated as a result of such assumption or substitution of liability, the
Servicer shall obtain a replacement Primary Mortgage Insurance Policy as
provided above.
In connection with its activities as servicer, the Servicer
agrees to prepare and present, on behalf of itself and the Owner, claims to the
insurer under any Primary Mortgage Insurance Policy in a timely fashion in
accordance with the terms of such Primary Mortgage Insurance Policy and, in this
regard, to take such action as shall be necessary to permit recovery under any
Primary Mortgage Insurance Policy respecting a defaulted Mortgage Loan. Pursuant
to Section 4.04, any amounts collected by the Servicer under any Primary
Mortgage Insurance Policy shall be deposited in the Custodial Account, subject
to withdrawal pursuant to Section 4.05.
Section 4.09 TRANSFER OF ACCOUNTS.
The Servicer may transfer the Custodial Account or the Escrow
Account to a different Qualified Depository from time to time. The Servicer
shall notify the Owner of any such transfer.
Section 4.10 MAINTENANCE OF HAZARD INSURANCE.
The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is equal to the
lesser of (i) the maximum insurable value of the
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improvements securing such Mortgage Loan and (ii) the greater of (a) the
outstanding principal balance of the Mortgage Loan, and (b) the percentage such
that the proceeds thereof shall be sufficient to prevent the Mortgagor and/or
the mortgagee from becoming a co-insurer. If the Mortgaged Property is in an
area identified in the Federal Register by the Federal Emergency Management
Agency as being a special flood hazard area that has federally-mandated flood
insurance requirements, the Servicer will cause to be maintained a flood
insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable insurance carrier,
in an amount representing coverage not less than the least of (i) the
outstanding principal balance of the Mortgage Loan, (ii) the maximum insurable
value of the improvements securing such Mortgage Loan and (iii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. The Servicer shall also maintain on each REO Property, fire
and hazard insurance with extended coverage in an amount which is at least equal
to the maximum insurable value of the improvements which are a part of such
property, liability insurance and, to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended, flood insurance in an
amount as provided above. Any amounts collected by the Servicer under any such
policies other than amounts to be deposited in a restricted escrow account and
applied to the restoration or repair of the Mortgaged Property or REO Property,
or released to the Mortgagor in accordance with the Servicer's normal servicing
procedures, shall be deposited in the Custodial Account, subject to withdrawal
pursuant to Section 4.05. It is understood and agreed that no other additional
insurance need be required by the Servicer or the Mortgagor or maintained on
property acquired in respect of the Mortgage Loans, other than as provided for
under applicable state or federal laws and regulations as shall at any time be
in force and as shall require such additional insurance. All such policies shall
be endorsed with standard mortgagee clauses with loss payable to the Servicer
and its successors and/or assigns and shall provide for at least thirty days
prior written notice of any cancellation, reduction in the amount or material
change in coverage to the Servicer. The Servicer shall not interfere with the
Mortgagor's freedom of choice in selecting either his insurance carrier or
agent; PROVIDED, HOWEVER, that the Servicer shall not accept any such insurance
policies from insurance companies unless such companies currently reflect a
General Policy Rating in Best's Key Rating Guide of B:III or better and are
licensed to do business in the state wherein the property subject to the policy
is located. All insurance policies maintained pursuant to this Section 4.10
shall be maintained with a Qualified Insurer.
Section 4.11 BLANKET HAZARD INSURANCE.
In the event that the Servicer shall obtain and maintain a
blanket policy with a Qualified Insurer insuring against fire and hazards of
extended coverage on all of the Mortgage Loans and provides coverage in an
amount equal to the amount required under Section 4.10, and otherwise complies
with the requirements of Section 4.10, the Servicer shall be deemed conclusively
to have satisfied its obligations under Section 4.10, it being understood and
agreed that such blanket policy may contain a deductible clause, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Mortgaged Property a policy complying with Section 4.10, and there
shall have been a loss which would have been covered by such policy, deposit in
the Custodial Account the difference, if any, between the amount that would have
been payable under a policy complying with Section 4.10 and the amount paid
under such blanket policy. Upon the request of the Owner, the Servicer shall
cause to be delivered to
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the Owner 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 Owner.
Section 4.12 FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE.
The Servicer shall maintain, at its own expense, with a
Qualified Insurer, a blanket Fidelity Bond and an errors and omissions insurance
policy, with broad coverage with responsible companies that meet the
requirements of Fannie Mae on all officers, employees and other persons acting
in any capacity with regard to the Mortgage Loans and who handle funds, money,
documents and papers relating to the Mortgage Loans. The Fidelity Bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such persons. Such Fidelity Bond and errors and omissions insurance shall also
protect and insure the Servicer against losses in connection with the failure to
maintain any insurance policies required pursuant to this Agreement and the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 4.12
requiring the Fidelity Bond and errors and omissions insurance shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. The minimum coverage under any such Fidelity Bond and insurance
policy shall be at least equal to the corresponding amounts acceptable to Fannie
Mae in the Fannie Mae Guide or by Freddie Mac in the Freddie Mac Guide. The
Servicer shall, upon request of Owner, deliver to the Owner a certificate from
the surety and the insurer as to the existence of the Fidelity Bond and errors
and omissions insurance policy and shall obtain a statement from the surety and
the insurer that such Fidelity Bond or insurance policy shall in no event be
terminated or materially modified without thirty days prior written notice to
the Owner. The Servicer shall notify the Owner within five Business Days of
receipt of notice that such Fidelity Bond or insurance policy will be, or has
been, materially modified or terminated.
Section 4.13 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 Owner or its designee. Any such Person or
Persons holding such title other than the Owner shall acknowledge in writing
that such title is being held as nominee for the benefit of the Owner.
The Servicer shall assume the responsibility for marketing
each REO Property in accordance with Accepted Servicing Practices. Thereafter,
the Servicer shall continue to provide certain administrative services to the
Owner relating to such REO Property as set forth in this Section 4.13. The REO
Property must be sold within three years following the end of the calendar year
of the date of acquisition if a REMIC election has been made with respect to the
arrangement under which the Mortgage Loans and REO Property are held, unless (i)
the Servicer shall have delivered to the Owner an Opinion of Counsel acceptable
to the Owner, to the effect that the holding by the related trust of such
Mortgaged Property subsequent to such three-year period (and specifying the
period beyond such three-year period for which the Mortgaged Property may be
held) will not result in the imposition of taxes on "prohibited transactions" of
the related trust as defined in Section 860F of the Code, or cause the related
REMIC to fail to
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qualify as a REMIC, in which case the related trust may continue to hold such
Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel), or (ii) the Servicer shall have applied for, prior to the expiration
of such three-year period, an extension of such three-year period in the manner
contemplated by Section 856(e)(3) of the Code, in which case the three-year
period shall be extended by the applicable period. If a period longer than three
years is permitted under the foregoing sentence and is necessary to sell any REO
Property, the Servicer shall report monthly to the Owner as to progress being
made in selling such REO Property.
Notwithstanding any other provision of this Agreement, if a
REMIC election has been made, no Mortgaged Property held by a REMIC shall be
rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the related trust or sold in such a
manner or pursuant to any terms that would (i) cause such Mortgaged Property to
fail to qualify at any time as "foreclosure property" within a meaning of
Section 860G(a)(8) of the Code, (ii) subject the related trust to the imposition
of any federal or state income taxes on "net income from foreclosure property"
with respect to such Mortgaged Property within the meaning of Section 860G(c) of
the Code, or (iii) cause the sale of such Mortgaged Property to result in the
receipt by the related trust or any income from non-permitted assets as
described in Section 860F(a) (2)(B) of the Code, unless the Servicer has agreed
to indemnify and hold harmless the related trust with respect to the imposition
of any such taxes.
The Servicer shall, either itself or through an agent selected
by the Servicer and in accordance with Accepted Servicing Practices, manage,
conserve, protect and operate each REO Property. Each REO Disposition shall be
carried out by the Servicer at such price and upon such terms and conditions as
the Servicer deems to be in the best interest of the Owner and the related terms
and conditions are results of arm's-length negotiation. The REO Disposition
Proceeds from the sale of the REO Property shall be promptly deposited in the
Custodial Account. As soon as practical thereafter, the expenses of such sale
shall be paid and the Servicer shall reimburse itself for any related Servicing
Advances, Monthly Advances, made pursuant to Section 5.03, and unpaid Servicing
Fees.
The Servicer shall cause each REO Property to be inspected
promptly upon the acquisition of title thereto and shall cause each REO Property
to be inspected at a frequency consistent with Accepted Servicing Practices. The
Servicer shall make or cause the inspector to make a written report of each such
inspection. Such reports shall be retained in the Servicing File and copies
thereof shall, upon reasonable request, be forwarded by the Servicer to the
Owner.
Section 4.14 NOTIFICATION OF ADJUSTMENTS.
With respect to each Mortgage Loan, the Servicer shall adjust
the Mortgage Interest Rate on the related Interest Rate Adjustment Date in
compliance with requirements of applicable law and the related electronic data
received on the 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 electronic data received on the Mortgage Note and Mortgage
regarding the Mortgage Interest Rate adjustments. The Servicer shall promptly,
upon written
Page 24
request by the Owner, deliver to the Owner 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 Owner that the Servicer has failed to adjust a Mortgage Interest
Rate or a Monthly Payment in accordance with the terms of the related Mortgage
Note and Mortgage, the Servicer shall immediately deposit in the Custodial
Account from its own funds the amount of any interest loss or deferral caused to
the Owner thereby and shall indemnify the Owner in respect of any liability as a
result of such shortfall; PROVIDED, HOWEVER, that the Servicer shall not have an
obligation to pay any interest loss if the failure to appropriately adjust such
Mortgage Interest Rate or Monthly Payment is the direct result of inaccurate or
incomplete information in the electronic file provided by the Owner to the
Servicer.
Section 4.15 COMPLIANCE WITH APPLICABLE LAWS.
All requirements of any federal, state or local law applicable
to the servicing of the Mortgage Loans will be complied with by the Servicer in
all material respects.
Section 4.16 WAIVER OF PREPAYMENT CHARGES.
Except as provided below, the Servicer or any designee of the
Servicer shall not waive any prepayment charge with respect to any Mortgage
Loan. If the Servicer or its designee fails to collect a prepayment charge at
the time of the related prepayment of any Mortgage Loan subject to such
prepayment charge, the Servicer shall pay to the Owner at such time (by deposit
to the Custodial Account) an amount equal to the amount of the prepayment charge
not collected. The Owner warrants that the schedule of prepayment charges
provided to the Servicer shall be complete, true and accurate and may be relied
on by the Servicer in its calculation of prepayment charges. Notwithstanding the
above, the Servicer or its designee may waive a prepayment charge only if (i)
the related prepayment is not the result of a refinancing by the Servicer or its
designee, (ii) such waiver relates to a defaulted Mortgage Loan or a reasonably
foreseeable default, (iii) such waiver is standard and customary in servicing
similar mortgage loans to the Mortgage Loans, and (iv) such waiver, in the
reasonable judgment of the Servicer, would maximize recovery of total proceeds
from the Mortgage Loan, taking into account the amount of such prepayment charge
and the related Mortgage Loan. If a prepayment charge is waived as permitted by
meeting the standards described above, then the Servicer is required to pay the
amount of such waived prepayment charge, for the benefit of the Owner, by
depositing such amount into the Custodial Account together with and at the time
that the amount prepaid on the related Mortgage Loan is required to be deposited
into the Custodial Account.
Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of the representation or
covenant of the Servicer set forth in this Section 4.16 which materially and
adversely affects the interests of the Owner in any prepayment charge, the
Servicer shall remedy such breach as follows: if any of the covenants made by
the Servicer in this Section 4.16 is breached, the Servicer must pay the amount
of such waived prepayment charge, for the benefit of the Owner, by depositing
such amount into the Custodial Account.
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Section 4.17 REPORTS AND RETURNS TO BE FILED BY THE SERVICER.
The Servicer shall file information reports with respect to
the receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and information returns
relating to cancellation of indebtedness income with respect to any Mortgaged
Property as required by Sections 6050H, 6050J and 6050P of the Code. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
Section 4.18 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE
LOANS.
With respect to any Mortgage Loan which is delinquent in
payment by 90 days or more or is an REO Property, the Servicer shall have the
right to purchase such Mortgage Loan from the Trust Estate at a price equal to
the Repurchase Price.
Section 4.19. SPECIAL MORTGAGE LOAN REPURCHASE RIGHT OF
THE SERVICER.
The Servicer will have the option to purchase, at any one
time, 1.00% (and in any case, at least 5 Mortgage Loans) of the Mortgage Loans,
by aggregate Stated Principal Balance of the Mortgage Loans as of such date, at
a price equal to the Repurchase Price. The Mortgage Loans that may be purchased
by the Servicer pursuant to this paragraph will be selected by the Servicer in
its sole discretion. If at any time the Servicer exercises such option, it shall
immediately notify or cause to be notified the Indenture Trustee by a
certification in the form of Exhibit D of a Servicing Officer and shall request
delivery to it of the Mortgage File. Upon receipt of such certification and
request, the Indenture Trustee shall promptly release the related Mortgage Files
to the Servicer.
Section 4.20 CLEAN-UP CALL RIGHT OF THE SERVICER.
In the event that the Majority Holder of the Owner Trust
Certificates does not exercise its right to purchase all of the Mortgage Loans
and REO Properties remaining in the Trust Estate pursuant to Section 8.07 of the
Indenture and Section 9.01 of the Master Servicing Agreement within 90 days
after the Stated Principal Balance of the Mortgage Loans is in the aggregate ten
(10%) or less of the sum of the Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date, than the Servicer shall have the option to exercise such
right, subject to the provisions of Section 8.07 of the Indenture and Section
9.01 of the Master Servicing Agreement.
ARTICLE V
PAYMENTS TO THE OWNER
Section 5.01 REMITTANCES.
On each Remittance Date, the Servicer shall remit to the Owner
(i) all amounts credited to the Custodial Account as of the close of business on
the last day of the calendar month preceding the Determination Date, net of
charges against or withdrawals from
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the Custodial Account pursuant to Section 4.05, except (a) Principal Prepayments
received on or before the 15th day of the month in which a Remittance Date
occurs shall be remitted to the Owner on the Remittance Date of such month, and
(b) Principal Prepayments received after the 15th day of the month in which a
Remittance Date occurs shall be remitted to the Owner on the next following
Remittance Date, plus, to the extent not already deposited in the Custodial
Account, the sum of (ii) all Monthly Advances, if any, which the Servicer is
obligated to distribute pursuant to Section 5.03 and (iii) all Prepayment
Interest Shortfalls the Servicer is required to make up pursuant to Section
4.04, minus (iv) any amounts attributable to Monthly Payments collected after
the Cut-off Date but due on a Due Date or Dates subsequent to the last day of
the related Due Period, which amounts shall be remitted on the related
Remittance Date next succeeding the Due Period for such amounts. Notwithstanding
the foregoing, with respect to the first Remittance Date on March 18, 2005, the
Servicer shall not be obligated to remit any amounts in connection with those
Mortgage Loans set forth on Exhibit F hereto (the "March Mortgage Loans"). Each
remittance to the Master Servicer pursuant to this Section 5.01 shall be made by
wire transfer to the following account, or to such other account as shall be
designated by the Master Servicer from time to time:
Beneficiary Name: Countrywide Home Loans
Bank Name: Bank of America
City, State: Concord, California
Beneficiary Account: 12355-18698
ABA Routing No.: 121000358
Attn: Master Servicing Clearing Account
With respect to any remittance received by the Master Servicer
after the Business Day on which such payment was due, the Servicer shall pay to
the Master Servicer interest on any such late payment at an annual rate equal to
the Prime Rate, adjusted as of the date of each change, plus two percentage
points, but in no event greater than the maximum amount permitted by applicable
law. Such interest shall be deposited in the Custodial Account by the Servicer
on the date such late payment is made and shall cover the period commencing with
the day following such Business Day and ending with the Business Day on which
such payment is made, both inclusive. Such interest shall be remitted along with
the distribution payable on the next succeeding related Remittance Date. The
payment by the Servicer of any such interest shall not be deemed an extension of
time for payment or a waiver of any Event of Default by the Servicer.
Section 5.02 STATEMENTS TO THE OWNER.
Not later than the second Business Day following the 15th
calendar day of the month of the related Remittance Date, the Servicer shall
furnish to the Master Servicer, in an electronic format mutually agreed to by
the Servicer and Master Servicer, a monthly remittance advice as to the prior
calendar month, with a trial balance report attached thereto, and such other
loan level information reasonably available to the Servicer and requested by the
Master Servicer. Notwithstanding the foregoing, in connection with the first
Remittance Date on March 18, 2005, such monthly remittance advice shall not
include the March Mortgage Loans. The Servicer shall also furnish to the Master
Servicer (in such format mutually agreed to by the Servicer and the
Page 27
Master Servicer) a monthly report detailing loan level prepayment charges
collected and/or waived by the Servicer in accordance with Section 4.16.
Section 5.03 MONTHLY ADVANCES BY THE SERVICER.
On the Business Day immediately preceding each Remittance
Date, the Servicer shall deposit in the Custodial Account from its own funds or
from amounts held for future distribution an amount equal to all Monthly
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 or which were deferred pursuant to Section 4.01. Any amounts held for
future distribution and so used shall be replaced by the Servicer by deposit in
the Custodial Account on or before any future Remittance Date if funds in the
Custodial Account on such Remittance Date shall be less than payments to the
Owner required to be made on such Remittance Date. The Servicer's obligation to
make such Monthly Advances as to any Mortgage Loan will continue through the
last Monthly Payment due prior to the payment in full of the Mortgage Loan, or
through the last Remittance Date prior to the Remittance Date for the
distribution of all Liquidation Proceeds and other payments or recoveries
(including REO Disposition Proceeds, Insurance Proceeds and Condemnation
Proceeds) with respect to the Mortgage Loan; provided, however, that such
obligation shall cease if the Servicer determines, in its sole reasonable
opinion, that advances with respect to such Mortgage Loan are non-recoverable by
the Servicer from Liquidation Proceeds, Insurance Proceeds, Condemnation
Proceeds, or otherwise with respect to a particular Mortgage Loan. In the event
that the Servicer determines that any such advances are non-recoverable, the
Servicer shall provide the Owner with a certificate signed by an officer of the
Servicer evidencing such determination.
Section 5.04 LIQUIDATION REPORTS.
Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Owner pursuant to a deed-in-lieu of foreclosure, the
Servicer shall submit to the Master Servicer a liquidation report with respect
to such Mortgaged Property in such form as the Servicer and the Master Servicer
shall agree. The Servicer shall also provide reports on the status of REO
Property containing such information as Master Servicer may reasonably require.
ARTICLE VI
GENERAL SERVICING PROCEDURES
Section 6.01 ASSUMPTION AGREEMENTS.
The Servicer shall, to the extent it has knowledge of any
conveyance or prospective conveyance by any Mortgagor of a Mortgaged Property
(whether by absolute conveyance or by contract of, sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under any "due-on-sale" clause to the extent permitted by law; PROVIDED,
HOWEVER, that the Servicer shall not exercise any such rights if prohibited by
law or the terms of the Mortgage Note from doing so or if the exercise of such
rights would impair or threaten to impair any recovery under the related Primary
Mortgage Insurance Policy, if any. If
Page 28
the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, the Servicer shall enter into an assumption agreement
with the person to whom the Mortgaged Property has been conveyed or is proposed
to be conveyed, pursuant to which such person becomes liable under the Mortgage
Note and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. If an assumption is allowed pursuant to this Section 6.01, the
Servicer, with the prior consent of the primary mortgage insurer, if any, is
authorized to enter into a substitution of liability agreement with the person
to whom the Mortgaged Property has been conveyed or is proposed to be conveyed
pursuant to which the original mortgagor is released from liability and such
Person is substituted as mortgagor and becomes liable under the related Mortgage
Note. Any such substitution of liability agreement shall be in lieu of an
assumption agreement.
In connection with any such assumption or substitution of
liability, the Servicer shall follow its underwriting practices and procedures.
With respect to an assumption or substitution of liability, the Mortgage
Interest Rate borne by the related Mortgage Note and the amount of the Monthly
Payment may not be changed. The Servicer shall notify the Owner that any such
substitution of liability or assumption agreement has been completed by
forwarding to the Owner the original of any such substitution of liability or
assumption agreement, which document shall be added to the related Mortgage Loan
Documents and shall, for all purposes, be considered a part of such related
mortgage file to the same extent as all other documents and instruments
constituting a part thereof. All fees collected by the Servicer for entering
into an assumption or substitution of liability agreement shall belong to the
Servicer.
Notwithstanding the foregoing paragraphs of this section or
any other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan by operation of law or any assumption which
the Servicer may be restricted by law from preventing, for any reason
whatsoever. For purposes of this Section 6.01, the term "assumption" is deemed
to also include a sale of the Mortgaged Property subject to the Mortgage that is
not accompanied by an assumption or substitution of liability agreement.
Section 6.02 SATISFACTION OF MORTGAGES AND RELEASE OF
MORTGAGE LOAN DOCUMENTS.
Upon the payment in full of any Mortgage Loan, the Servicer
will immediately notify the Indenture Trustee with a certification and request
for release by a Servicing Officer, which certification shall include a
statement to the effect that all amounts received in connection with such
payment which are required to be deposited in the Custodial Account pursuant to
Section 4.04 have been so deposited, and a request for delivery to the Servicer
of the Mortgage Loan Documents held by the Indenture Trustee. Upon receipt of
such certification and request, the Owner shall, or shall cause the Indenture
Trustee to, release in accordance with the terms of the related Trust Agreement,
the related Mortgage Loan Documents to the Servicer and the Servicer shall
prepare and execute under the authority of a power of attorney delivered to the
Servicer by the Owner any satisfaction or release. No expense incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Custodial Account.
In the event the Servicer satisfies or releases a Mortgage
without having obtained payment in full of the indebtedness secured by the
Mortgage or should it otherwise prejudice any
Page 29
right the Owner may have under the mortgage instruments, the Servicer, upon
written demand, shall remit to the Owner within two Business Days the then
outstanding principal balance of the related Mortgage Loan by deposit thereof in
the Custodial Account. The Servicer shall maintain the Fidelity Bond and errors
and omissions insurance insuring the Servicer against any loss it may sustain
with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.
From time to time and as appropriate for the servicing or
foreclosure of the Mortgage Loans, including for the purpose of collection under
any Primary Mortgage Insurance Policy, upon request of the Servicer and delivery
to the Indenture Trustee of a servicing receipt signed by a Servicing Officer,
all as provided in the Indenture, the Servicer may request the Indenture Trustee
to release to the Servicer the portion of the Mortgage Loan Documents held by
the Indenture Trustee to the Servicer. Such servicing receipt shall obligate the
Servicer to promptly return the related Mortgage Loan Documents to the Indenture
Trustee, when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Custodial Account or such documents
have been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has promptly delivered to the
Owner or the Indenture Trustee a certificate of a Servicing Officer certifying
as to the name and address of the Person to which such documents were delivered
and the purpose or purposes of such delivery.
Section 6.03 SERVICING COMPENSATION.
As compensation for its services hereunder, the Servicer shall
be entitled to withdraw from the Custodial Account or to retain from interest
payments on the Mortgage Loans the amounts provided for as the Servicer's
Servicing Fee. Additional servicing compensation in the form of Ancillary Income
shall be retained by the Servicer. The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement therefor except as specifically
provided for.
Section 6.04 ANNUAL STATEMENT AS TO COMPLIANCE.
The Servicer shall deliver to the Owner and the Master
Servicer, on or before March 10, each year beginning March 10, 2006, an
Officer's Certificate in a form acceptable for filing with the Securities and
Exchange Commission as an exhibit to a form 10-K, stating that (i) a review of
the activities of the Servicer during the preceding calendar year and of
performance under this Agreement or similar agreements has been made under such
officer's supervision, and (ii) to the best of such officer's knowledge, based
on such review, the Servicer has fulfilled all its responsibilities and
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such responsibilities and obligation,
specifying each such default known to such officer and the nature and status
thereof and the action being taken by the Servicer to cure such default.
Page 30
Section 6.05 ANNUAL INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS' SERVICING REPORT.
On or before March 10th of each year beginning March 10, 2006,
the Servicer, at its expense, shall, or shall cause each related subservicer to,
cause a firm of independent public accountants which is a member of the American
Institute of Certified Public Accountants to furnish a statement in a form
acceptable for filing with the Securities and Exchange Commission as an exhibit
to a form 10-K to the Owner and the Master Servicer to the effect that such firm
has examined certain documents and records relating to the servicing of the
mortgage loans similar in nature and that such firm is of the opinion that the
provisions of this or similar Agreements have been complied with, and that, on
the basis of such examination conducted in compliance with the Uniform Single
Attestation Program for Mortgage Bankers, nothing has come to their attention
which would indicate that such servicing has not been conducted in compliance
therewith, except for (i) such exceptions as such firm shall believe to be
immaterial, and (ii) such other exceptions as shall be set forth in such
statement. By providing, or causing each related subservicer to provide, Owner
and the Master Servicer a copy of a Uniform Single Attestation Program Report
from their independent public accountant's on an annual basis, Servicer shall be
considered to have fulfilled its obligations under this Section 6.05.
Section 6.06 OWNER'S RIGHT TO EXAMINE SERVICER RECORDS.
The Owner or its designee shall have the right to examine and
audit, at its expense, upon reasonable notice to the Servicer, during business
hours or at such other times as might be reasonable under applicable
circumstances, any and all of the books, records, documentation or other
information of the Servicer, or held by another for the Servicer or on its
behalf or otherwise, which relate to the performance or observance by the
Servicer of the terms, covenants or conditions of this Agreement.
The Servicer shall provide to the Owner or its designee and
any supervisory agents or examiners representing a state or federal governmental
agency having jurisdiction over the Owner access to any documentation regarding
the Mortgage Loans in the possession of the Servicer which may be required by
any applicable regulations. Such access shall be afforded without charge, upon
reasonable request, during normal business hours and at the offices of the
Servicer, and in accordance with the applicable federal or state government
regulations.
Section 6.07 COMPLIANCE WITH REMIC PROVISIONS.
If a REMIC election has been made with respect to the
arrangement under which the Mortgage Loans and REO Property are held, the
Servicer shall not take any action, cause the REMIC to take any action or fail
to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of the REMIC as a REMIC or (ii) result in the imposition of a tax upon
the REMIC (including but not limited to the tax on "prohibited transactions" as
defined in Section 860F(a)(2) of the Code and the tax on "contribution" to a
REMIC set forth in Section 860G(d) of the Code unless the Servicer has received
an Opinion of Counsel (at the expense of the party seeking to take such actions)
to the effect that the contemplated action will not endanger such REMIC status
or result in the imposition of any such tax.
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Section 6.08 Non-solicitation.
The Servicer shall not conduct any solicitation targeted to
the Mortgagors for the purpose of inducing or encouraging the early prepayment
or refinancing of the related Mortgage Loans. It is understood and agreed that
promotions undertaken by the Servicer or any agent or affiliate of the Servicer
which are directed to the general public at large, including mass mailings based
on commercially acquired mailing lists, newspaper, radio and television
advertisements, shall not constitute solicitation under this Section 6.08 nor is
the Servicer prohibited from responding to unsolicited requests or inquiries
made by a Mortgagor or an agent of a Mortgagor. Nothing herein shall prevent the
Servicer or its agent or affiliate from soliciting Mortgagors for other credit
products.
Section 6.09 Annual Certification and Indemnification.
(a) With respect to any Mortgage Loans that are subject to a
pass-through transfer or other securitization (a "Securitization") in which the
filing of a Sarbanes-Oxley Certification directly with the Securities and
Exchange Commission is required, by March 10th of each year or in connection
with any additional Sarbanes-Oxley Certification required to be filed upon
thirty (30) days written request, an officer of the Servicer shall execute and
deliver an Officer's Certification substantially in the form attached hereto as
Exhibit E, to the Owner and the Master Servicer for the benefit of the Owner and
the Master Servicer and the Owner's and the Master Servicer's affiliates and the
officers, directors and agents of the Owner and the Master Servicer and the
Owner's and the Master Servicer's affiliates, and shall indemnify the Owner and
the Master Servicer or such persons arising out of any breach of Servicer's
obligations or representations relating thereto as provided in such Officer's
Certification.
(b) The Servicer shall indemnify and hold harmless each of the Owner
and the Master Servicer, and its 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 Servicer or any of its officers, directors, agents or
affiliates of its obligations under this Section 6.09, or the negligence, bad
faith or willful misconduct of the Servicer in connection therewith. If the
indemnification provided for herein is unavailable or insufficient to hold
harmless the Owner and the Master Servicer, then the Servicer agrees that it
shall contribute to the amount paid or payable by the Owner or the Master
Servicer as a result of the losses, claims, damages or liabilities of the Owner
or the Master Servicer in such proportion as is appropriate to reflect the
relative fault of the Owner or the Master Servicer on the one hand and the
Servicer on the other in connection with a breach of the Servicer's obligations
under this Section 6.09 or the Servicer's negligence, bad faith or willful
misconduct in connection therewith.
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ARTICLE VII
REPORTS TO BE PREPARED BY SERVICER
Section 7.01 Servicer Shall Provide Information as Reasonably Required.
The Servicer shall furnish to the Owner upon reasonable
request, during the term of this Agreement, such periodic, special or other
reports or information, whether or not provided for herein, as shall be
necessary, reasonable or appropriate with respect to the purposes of this
Agreement. The Servicer may negotiate with the Owner for a reasonable fee for
providing such report or information, unless (i) the Servicer is required to
supply such report or information pursuant to any other section of this
Agreement, or (ii) the report or information has been requested in connection
with Internal Revenue Service or other regulatory agency requirements. All such
reports or information shall be provided by and in accordance with all
reasonable instructions and directions given by the Owner. The Servicer agrees
to execute and deliver all such instruments and take all such action as the
Owner, from time to time, may reasonably request in order to effectuate the
purpose and to carry out the terms of this Agreement.
ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims.
The Servicer agrees to indemnify the Owner, its successors and
assigns, and any agent of the Owner (each an "Indemnified Person") and hold each
such Indemnified Person harmless from and against any and all claims, losses,
damages, penalties, fines, forfeitures, legal fees and related costs, judgments,
and any other costs, fees and expenses that such Indemnified Person may sustain
in any way related to the failure of the Servicer to perform its duties and
service the Mortgage Loans in strict compliance with the terms of this Agreement
and for breach of any representation, warranty or covenant of the Servicer
contained herein. The Servicer shall notify the Owner in accordance with Section
11.04 herein of any claim made by a third party against the Servicer, the Owner
or both, with respect to this Agreement, the Mortgage Loans and/or any alleged
act by Owner. The Owner shall assume the defense of any such claim and pay all
costs and expenses (including reasonable legal fees and expenses) of defending
the Servicer and itself against any such claim other than (i) any loss,
liability or expense related to the Servicer's failure to perform Servicer's
duties in strict compliance with this Agreement; and (ii) any loss, liability or
expense incurred by reason of the Servicer's willful misfeasance, bad faith or
negligence in the performance of its duties hereunder or by reason of reckless
disregard of its obligations and duties hereunder. The Owner shall promptly pay,
discharge and satisfy any judgment or decree that may be entered against it in
respect of such claim. If in any event, the Servicer incurred any expenses or
fees related to the above, the Servicer shall be entitled to reimbursement of
any such expenses or fees from funds in the Custodial Account, unless such claim
relates to a matter for which the Servicer is required to indemnify the Owner.
Section 8.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights
and franchises as a corporation under the laws of the state of its incorporation
except as permitted herein, and will
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obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement or any of the Mortgage
Loans and to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer whether or not related to loan servicing, shall
be the successor of the Servicer hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor or
surviving Person shall be an institution (i) having a GAAP net worth of not less
than $25,000,000 and (ii) the deposits of which are insured by the FDIC, or
which is a HUD-approved mortgagee whose primary business is in origination and
servicing of first lien 1-4 family mortgage loans. Furthermore, in the event the
Servicer transfers or otherwise disposes of all or substantially all of its
assets to an affiliate of the Servicer, such affiliate shall satisfy the
condition above, and shall also be fully liable to the Owner for all of the
Servicer's obligations and liabilities hereunder.
Section 8.03 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors, officers,
employees or agents of the Servicer shall be under any liability to the Owner
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 made in good faith;
provided, however, that this provision shall not protect the Servicer or any
such person against any breach of warranties or representations made herein, or
failure to perform its obligations in compliance with any standard of care set
forth in this Agreement, or any liability which would otherwise be imposed under
this Agreement. The Servicer and any director, officer, employee or agent of the
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 Servicer 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 expenses or liability; provided, however, that the Servicer may, with the
consent of the Owner, undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto. In such event, the reasonable legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities for which the Owner will be liable, the Owner shall reimburse the
Servicer within thirty days of receipt by the Owner of a billing statement from
the Servicer providing reasonable detail with respect thereto, unless the Owner
is disputing such charges, in which event the Owner shall reimburse the Company
as promptly as feasible upon resolution of such dispute.
Section 8.04 Servicer Not to Resign.
The Servicer shall not assign this Agreement or resign from
the obligations and duties hereby imposed on it except by mutual consent of the
Servicer and the Owner or upon the determination that its duties hereunder are
no longer permissible under applicable law and such incapacity cannot be cured
by the Servicer. Any such determination permitting the resignation
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of the Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Owner which Opinion of Counsel shall be in form and substance
acceptable to the Owner. No such resignation shall become effective until a
successor shall have assumed the Servicer's responsibilities and obligations
hereunder in the manner provided in Section 11.01. Notwithstanding the
foregoing, the Servicer, without the consent of the Owner, may retain
third-party contractors to perform certain servicing and loan administration
functions, including without limitation hazard insurance administration, tax
payment and administration, flood certification and administration, collection
services and similar functions, provided, however, that the retention of such
contractors by Servicer shall not limit the obligation of the Servicer to
service the Mortgage Loans pursuant to the terms and conditions of this
Agreement.
Section 8.05 No Transfer of Servicing.
With respect to the retention of the Servicer to service the
Mortgage Loans hereunder, the Servicer acknowledges that the Owner has acted in
reliance upon the Servicer's independent status, its integrity, reputation and
financial standing and the continuance thereof. Without in any way limiting the
generality of this section, the Servicer shall not either assign this Agreement
or the servicing hereunder or delegate its rights or duties hereunder or any
portion thereof, or sell or otherwise dispose of all or substantially all of its
property or assets, without the prior written approval of the Owner; provided,
however, that the Owner hereby approves the Subservicing Agreement, dated as of
March 1, 2005, between the Servicer and Option One Mortgage Corporation.
ARTICLE IX
DEFAULT
Section 9.01 Events of Default.
Each of the following shall constitute an Event of Default on
the part of the Servicer:
(i) any failure by the Servicer to remit to the Owner any
payment required to be made under the terms of this Agreement which continues
unremedied for a period of two (2) Business Days after written notice thereof
from the Owner (it being understood that this subparagraph shall not affect
Servicer's obligation pursuant to Section 5.01 to pay default interest on any
remittance received by the Owner after the Business Day on which such payment
was due); or
(ii) any failure by the Servicer duly to observe or perform in
any material respect any other of the covenants or agreements on the part of the
Servicer set forth in this Agreement (other than with respect to Sections 6.04,
6.05 and 6.09), the breach of which has a material adverse effect and which
continue unremedied for a period of sixty days (except that such number of days
shall be fifteen in the case of a failure to pay any premium for any insurance
policy required to be maintained under this Agreement and such failure shall be
deemed to have a material adverse effect) after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Owner; or
Page35
(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, bankruptcy, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for a
period of sixty days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property; or
(v) the 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, 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 two Business Days; or
(vi) the Servicer attempts to assign its right to servicing
compensation hereunder or the Servicer attempts, without the consent of the
Owner, to sell or otherwise dispose of all or substantially all of its property
or assets or to assign this Agreement or the servicing responsibilities
hereunder or to delegate its duties hereunder or any portion thereof except as
otherwise permitted herein;
(viii) the Servicer ceases to be qualified to transact
business in any jurisdiction where it is currently so qualified, but only to the
extent such non-qualification materially and adversely affects the Servicer's
ability to perform its obligations hereunder; or
(ix) failure by the Servicer to duly perform, within the
required time period, its obligations under Section 6.04, Section 6.05 or
Section 6.09 of this Agreement which failure continues unremedied for a period
of fifteen (15) days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by any
party to this Agreement or by any master servicer responsible for master
servicing the Mortgage Loans pursuant to a securitization of such Mortgage
Loans.
In each and every such case, so long as an Event of Default
shall not have been remedied, the Owner by notice in writing to the Servicer
may, in addition to whatever rights the Owner may have under Section 8.01 and at
law or equity to damages, including injunctive relief and specific performance,
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof without compensating
the Servicer for the same.
From and after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Mortgage Loans or otherwise, shall pass to and be vested in
the successor appointed pursuant to Section 11.01. Upon written request from the
Owner, the Servicer shall prepare, execute and deliver, any and all documents
and other instruments, place in such successor's possession all Servicing Files,
and do or accomplish all other acts or things reasonably necessary or
appropriate to effect the
Page36
purposes of such notice of termination, including, but not limited to,
notification to MERS at the Servicer's sole expense. The Servicer agrees to
cooperate with the Owner and such successor in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to such successor for administration by it of all cash amounts, net
of unreimbursed Servicing Advances and Monthly Advances, which shall at the time
be credited by the Servicer to the Custodial Account or Escrow Account or
thereafter received with respect to the Mortgage Loans.
Section 9.02 Waiver of Defaults.
The Owner may waive, only by written notice, any default by
the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon except
to the extent expressly so waived in writing.
ARTICLE X
TERMINATION
Section 10.01 Termination.
The respective obligations and responsibilities of the
Servicer shall terminate upon the earliest to occur of the following: (i) the
later of the final payment or other liquidation (or any advance with respect
thereto) of the last Mortgage Loan or the disposition of any REO Property and
the remittance of all funds due hereunder; (ii) by 30 days' written mutual
consent of the Servicer and the Owner; (iii) termination by the Owner pursuant
to Section 9.01; and (iv) upon resignation of the Servicer in accordance with
Section 8.04. Simultaneously with any such termination and, in the case of (ii),
(iii) or (iv) of the preceding sentence, the transfer of servicing hereunder,
the Servicer shall be entitled to be reimbursed for any outstanding Servicing
Advances and Monthly Advances. In no event shall the Servicer be entitled to any
termination fee or other compensation with respect to any termination of this
Agreement or the Servicer's rights hereunder, in whole or in part.
Section 10.02 Removal of Mortgage Loans from Inclusion Under this Agreement
Upon a Pass-Through Transfer.
The Servicer hereby acknowledges that the Owner intends to
effect a Pass-Through Transfer with respect to the Mortgage Loans, retaining the
Servicer as the servicer to service the Mortgage Loans in accordance with the
terms and provisions of this Agreement. The Servicer and the Owner hereby
acknowledge that Countrywide Securities Corporation and Wachovia Capital
Markets, LLC shall act as underwriters (the "Underwriters") in connection with
such Pass-Through Transfer.
The Servicer shall cooperate with each of the Underwriters and
the Owner in connection with such Pass-Through Transfer in accordance with this
Section 10.02. In connection therewith the Servicer shall:
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(a) make all representations and warranties with respect to the
Servicer itself as of the date of the related Pass-Through Transfer that conform
in all material respects to the representations and warranties in this
Agreement;
(b) provide as applicable:
(i) any and all information and appropriate verification of
information which may be reasonably available to the Servicer, including the
Servicer's applicable underwriting standards, whether through letters of its
auditors and counsel or otherwise, as the Underwriter and the Owner shall
reasonably request;
(ii) such additional opinions of counsel, letters from
auditors, and certificates of public officials or officers of the Servicer as
are reasonably believed necessary by the Indenture Trustee, any Rating Agency,
the Underwriter or the Owner, as the case may be, in connection with such
Pass-Through Transfer; and
(c) indemnify each of the Underwriters and the Owner for any material
misstatements or material omissions contained in the information provided
pursuant to (b) above.
Section 10.03 Servicer Termination Trigger.
In the event of a Servicer Termination Trigger, the Master
Servicer shall terminate the Servicer at the direction of the Owner. Following
such termination, the Master Servicer shall have the right to service such
Mortgage Loans or to engage a new Servicer acceptable to the Master Servicer
pursuant to a Servicing Agreement which is not in conflict with the terms of
this Agreement. Notwithstanding the foregoing, the Owner shall retain the
ownership of all servicing rights with respect to the related Mortgage Loans and
no such direction of termination of the Servicer shall be deemed to diminish
such ownership.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Successor to the Servicer.
Upon termination of the Servicer's responsibilities and duties
under this Agreement pursuant to Sections 8.04, 9.01 or 10.01, the Master
Servicer shall (i) 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 Section 8.02 and which shall succeed to
all rights and assume all of the responsibilities, duties and liabilities of the
Servicer under this Agreement prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement. In connection
with such appointment and assumption, the Master Servicer may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as the Master Servicer and such successor shall agree. In the event that
the Servicer's duties, responsibilities and liabilities under this Agreement
should be terminated pursuant to the aforementioned sections, the Servicer 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
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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 Servicer pursuant to the aforementioned sections
shall not become effective until a successor shall be appointed pursuant to this
section and shall in no event relieve the Servicer of the representations and
warranties made pursuant to Article III and the remedies available to the Owner
under Section 8.01, it being understood and agreed that the provisions of such
Article III and Section 8.01 shall be applicable to the Servicer notwithstanding
any such resignation or termination of the Servicer, or the termination of this
Agreement.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Servicer and to the Master Servicer an instrument
accepting such appointment, whereupon such successor shall become fully vested
with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer, with like effect as if originally named as a party
to this Agreement. Any termination or resignation of the Servicer or termination
of this Agreement pursuant to Section 8.04, 8.05, 9.01 or 10.01 shall not affect
any claims that the Owner may have against the Servicer arising prior to any
such termination or resignation.
The Servicer shall promptly deliver to the successor the funds
in the Custodial Account and the Escrow Account, net of unreimbursed Monthly
Advances and Servicing Advances, and the Servicing Files and related documents
and statements held by it hereunder and the Servicer shall account for all
funds. The Servicer shall execute and deliver such instruments and do such other
things as may reasonably be required to more fully and definitely vest and
confirm in the successor all such rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer. In addition, the Servicer shall
promptly take all other actions reasonably requested by the Master Servicer with
respect to MERS Mortgage Loans and MERS to effectuate and evidence the transfer
of servicing and/or ownership thereof in accordance with the terms of this
Agreement.
Upon a successor's acceptance of appointment as such, the
Master Servicer shall notify the Servicer of such appointment.
Section 11.02 Amendment.
This Agreement may be amended from time to time by the
Servicer and the Owner by written agreement signed by the Servicer and the
Owner.
Section 11.03 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS. THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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Section 11.04 Notices.
Any demands, notices or other communications permitted or
required hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered at or mailed by registered mail, postage prepaid,
and return receipt requested or transmitted by telecopier and confirmed by a
similar mailed writing, as follows:
(i) if to the Servicer with respect to servicing issues:
ECC Capital Corporation
1833 Alton Parkway
Irvine, California 92606
Attention: John Kohler
(ii) if to the Owner:
CWABS, Inc.
4500 Park Granada
Calabasas, California 91302
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice, or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
address (as evidenced, in the case of registered or certified mail, by the date
noted on the return receipt).
Section 11.05 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement.
Section 11.06 Exhibits and Schedules.
The exhibits, schedules and other addenda and supplements to
this Agreement are hereby incorporated and made a part hereof and are an
integral part of this Agreement.
Section 11.07 General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(i) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the other
gender;
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(ii) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(iii) references herein to "Articles," "Sections,"
"Subsections," "Paragraphs," and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(iv) a reference to a Subsection without further reference to
a Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(v) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision;
(vi) the term "include" or "including" shall mean without
limitation by reason of enumeration; and
(vii) to the extent that some, but not all, of the Mortgage
Loans are transferred pursuant to Section 11.10 hereof, this Agreement shall be
construed as a separate agreement with respect to such Mortgage Loans and
references to the rights of the Owner shall apply separately with respect to
each Owner.
Section 11.08 Reproduction of Documents.
This Agreement and all documents relating hereto, including,
without limitation, (i) consents, waivers and modifications which may hereafter
be executed, (ii) documents received by any party at the closing, and (iii)
financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 11.09 Confidentiality of Information.
Each party recognizes that, in connection with this Agreement,
it may become privy to non-public information regarding the financial condition,
operations and prospects of the other party. Except as required to be disclosed
by law, each party agrees to keep all non-public information regarding the other
party strictly confidential, and to use all such information solely in order to
effectuate the purpose of this Agreement. Additionally, with respect to each
Mortgage Loan and the related Mortgagor, the Servicer and the Owner shall comply
with Title V of the Gramm-Leach-Bliley Act of 1999 and all applicable
regulations promulgated thereunder.
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Section 11.10 Assignment by the Owner.
The Owner shall have the right, without the consent of the
Servicer but subject to the limits set forth in this Agreement hereof, to assign
its interest under this Agreement with respect to some or all of the Mortgage
Loans, and designate any person to exercise any rights of the Owner hereunder
and the assignee or designee shall accede to the rights and obligations
hereunder of the Owner with respect to such Mortgage Loans. The Servicer shall
not be obligated to recognize any such assignee or designee unless such person
executes an assignment and assumption agreement reasonably acceptable to the
Servicer. All references to the Owner in this Agreement shall be deemed to
include its assignees or designees. The parties hereto contemplate that the
Owner shall assign its interest under this Agreement with respect to the
Mortgage Loans to the Issuer, pursuant to that certain Assignment, Assumption
and Recognition Agreement, dated as of March 18, 2005, among the Owner, the
Servicer and the Issuer.
Section 11.11 No Partnership.
Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for Owner.
Section 11.12 Counterparts; Successors and Assigns.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement. Subject to Section 8.05, this Agreement
shall inure to the benefit of and be binding upon the Servicer and the Owner and
their respective successors and assigns.
Section 11.13 Entire Agreement.
Each of the Servicer and the Owner acknowledges that no
representations, agreements or promises were made to it by the other party or
any of its employees other than those representations, agreements or promises
specifically contained herein. This Agreement sets forth the entire
understanding between the parties hereto with respect to the matters set forth
herein, and shall be binding upon all successors of both parties.
Section 11.14 Further Agreements.
The Servicer and the Owner each agrees to execute and deliver
to the other such reasonable and appropriate additional documents, instruments
or agreements as may be necessary or appropriate to effectuate the purpose of
this Agreement.
Section 11.15 The Master Servicer and Indenture Trustee.
The Servicer, including any successor servicer hereunder,
shall be subject to the supervision of the Master Servicer, which Master
Servicer shall be obligated to ensure that the Servicer services the Mortgage
Loans in accordance with the provisions of this Agreement. The
Page42
Master Servicer, acting on behalf of the Owner, shall have the same rights as
the Owner to enforce the obligations of the Servicer under this Agreement. The
Master Servicer shall be entitled to terminate the rights and obligations of the
Servicer under this Agreement upon the failure of the Servicer to perform any of
its obligations under this Agreement if such failure constitutes an Event of
Default as provided in Article IX of this Agreement. Notwithstanding anything to
the contrary, in no event shall the Master Servicer assume any of the
obligations of the Owner under this Agreement.
For purposes of this Agreement, each of the Master Servicer
and the Indenture Trustee shall be considered a third party beneficiary to this
Agreement entitled to all the rights and benefits accruing to any Master
Servicer and Indenture Trustee herein as if it were a direct party to this
Agreement.
Page43
IN WITNESS WHEREOF, the Servicer and the Owner have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the date and year first above written.
ECC CAPITAL CORPORATION
By: /s/ Shadid S. Ashgar
Name: Shadid S. Ashgar
Title: President and Co-Chief Executive Officer
CWABS, INC.
By: /s/ Ruben Avilez
-----------------------------
Name: Ruben Avilez
Title: Vice President
Acknowledged:
COUNTRYWIDE HOME LOANS SERVICING LP
By: Countrywide GP, Inc., its General Partner
By: /s/ Ruben Avilez
-----------------------------
Name: Ruben Avilez
Title: Vice President
A-1
EXHIBIT A
MORTGAGE LOAN SCHEDULE
Available Upon Request
A-1
EXHIBIT B
FORMS OF CUSTODIAL ACCOUNT CERTIFICATIONS
CUSTODIAL ACCOUNT CERTIFICATION
_________________, 20___
ECC Capital Corporation hereby certifies that it has established the
account described below as a Custodial Account pursuant to Section 4.04 of the
Servicing Agreement, dated as of March 1, 2005.
Title of Account: ECC Capital Corporation in trust for the Purchaser
and/or subsequent purchasers of Mortgage Loans, and
various Mortgagors - P & I
Address of office or branch of the Servicer at which Account is maintained:
______________________________________
______________________________________
______________________________________
______________________________________
ECC CAPITAL CORPORATION
Servicer
By:___________________________________
Name:_________________________________
Title:________________________________
B-1
EXHIBIT C
FORMS OF ESCROW ACCOUNT CERTIFICATIONS
ESCROW ACCOUNT CERTIFICATION
_________________, 20___
ECC Capital Corporation hereby certifies that it has established the
account described below as an Escrow Account pursuant to Section 4.06 of the
Servicing Agreement, dated as of March 1, 2005.
Title of Account: ECC Capital Corporation in trust for the Purchaser
and/or subsequent purchasers of Mortgage Loans, and
various Mortgagors - T & I
Address of office or branch of the Servicer at which Account is maintained:
______________________________________
______________________________________
______________________________________
______________________________________
ECC CAPITAL CORPORATION
Servicer
By:___________________________________
Name:_________________________________
Title:________________________________
C-1
EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS
To: The Bank of New York
101 Barclay- 8W
New York, NY 10286
Attn: ________________
Re: Indenture dated as of ________, among Encore Credit
Receivables Trust 2005-1 as Issuer and The Bank of New York as
Indenture Trustee
In connection with the administration of the Mortgage Loans
held by you as Indenture Trustee for the Owner pursuant to the above-captioned
Indenture, we request the release, and hereby acknowledge receipt, of the
Indenture Trustee's Mortgage File for the Mortgage Loan described below, for the
reason indicated.
MORTGAGE LOAN NUMBER:
MORTGAGOR NAME, ADDRESS & ZIP CODE:
REASON FOR REQUESTING DOCUMENTS (check one):
_______ 1. Mortgage Paid in Full
_______ 2. Foreclosure
_______ 3. Substitution
_______ 4. Other Liquidation (Repurchases, etc.)
_______ 5. Nonliquidation [Reason:____________________________
Address to which Indenture Trustee should
deliver the Indenture Truestee's Mortgage File:_________________________________
_________________________________
_________________________________
By:______________________________
(authorized signer)
Issuer:_________________________________
Address:_________________________
Date:___________________________________
INDENTURE TRUSTEE
-----------------
The Bank of New York
Please acknowledge the execution of the above request by your signature and date
below:
________________________________________ ______________________
Signature Date
Documents returned to Indenture Trustee:
________________________________________ ______________________
Indenture Trustee
EXHIBIT E
---------
FORM OF SARBANES-OXLEY CERTIFICATION
I, __________________________, certify to each of CWABS, Inc., and its
officers, directors, agents and affiliates (the "Owner") and Countrywide Home
Loans Servcing LP, and its officers, directors, agents and affiliates (the
"Master Servicer"), and with the knowledge and intent that they will rely upon
this certification, that:
(i) Based on my knowledge, the information relating to the
Mortgage Loans and the servicing thereof submitted by the
Servicer to the Owner and the Master Servicer which is used in
connection with preparation of the reports on Form 8-K and the
annual report on Form 10-K filed with the Securities and
Exchange Commission with respect to the Securitization, taken
as a whole, does not contain any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under
which such statements were made, not misleading as of the date
of this certification;
(ii) The servicing information required to be provided to the Owner
and the Master Servicer by the Servicer under the Agreement
has been provided to the Owner and the Master Servicer;
(iii) I am responsible for reviewing the activities performed by the
Servicer and by each related subservicer under the Agreement
and based upon the review required by the Agreement, and
except as disclosed in the Annual Statement of Compliance, the
Annual Independent Public Accountant's Servicing Report and
all servicing reports, officer's certificates and other
information relating to the servicing of the Mortgage Loans
submitted to the Owner and the Master Servicer, the Servicer
and each related subservicer has, as of the date of this
certification, fulfilled its obligations under the Agreement;
and
(iv) I have disclosed to the Owner and the Master Servicer all
significant deficiencies relating to the Servicer's and/or
each related subservicer's compliance with the minimum
servicing standards in accordance with a review conducted in
compliance with the Uniform Single Attestation Program for
Mortgage Bankers or similar standard as set forth in the
Agreement.
Capitalized words not otherwise defined herein have the meaning
assigned to them in the Subservicing Agreement dated March 1, 2005 by
and between CWABS, Inc. as Owner and ECC Capital Corporation as
Servicer.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Servicer.
Dated:_____________________________ By:
Name:
Title:
EXHIBIT F
---------
MARCH MORTGAGE LOANS
Dates Referenced Herein and Documents Incorporated by Reference
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