EXECUTION COPY
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POOLING AND SERVICING AGREEMENT
Dated as of August 10, 1997
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)
and
EMERGENT MORTGAGE CORP.,
(Servicer)
and
FIRST UNION NATIONAL BANK
(Trustee)
Emergent Home Equity Loan Pass-Through Certificates,
Series 1997-3
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TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS.........................................................2
SECTION 1.01. DEFINED TERMS.................................................2
ARTICLE 2. CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES....32
SECTION 2.01. CONVEYANCE OF MORTGAGE LOANS.................................32
SECTION 2.02. PURCHASE AND SALE OF PRE-FUNDED MORTGAGE LOANS...............32
SECTION 2.03. MORTGAGE FILES AND DOCUMENTS.................................34
SECTION 2.04. ACCEPTANCE BY TRUSTEE........................................36
SECTION 2.05. REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS.................38
SECTION 2.06. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR..............40
SECTION 2.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER....41
SECTION 2.08. ISSUANCE OF CERTIFICATES.....................................43
ARTICLE 3. ADMINISTRATION AND SERVICING OF THE TRUST FUND.....................43
SECTION 3.01. SERVICER TO ACT AS SERVICER..................................43
SECTION 3.02. SUB-SERVICING AGREEMENTS BETWEEN SERVICER AND SUB-SERVICERS..45
SECTION 3.03. SUCCESSOR SUB-SERVICERS......................................46
SECTION 3.04. LIABILITY OF THE SERVICER....................................46
SECTION 3.05. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICERS AND
TRUSTEE OR CERTIFICATEHOLDERS................................47
SECTION 3.06. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENTS
BY TRUSTEE...................................................47
SECTION 3.07. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.................47
SECTION 3.08. SUB-SERVICING ACCOUNTS.......................................48
SECTION 3.09. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING ACCOUNTS...........................................48
SECTION 3.10. COLLECTION AND DISTRIBUTION ACCOUNTS.........................49
SECTION 3.11. WITHDRAWALS FROM THE COLLECTION ACCOUNT AND DISTRIBUTION
ACCOUNT......................................................51
SECTION 3.12. THE PRE-FUNDING ACCOUNT......................................53
SECTION 3.13. THE INTEREST COVERAGE ACCOUNT................................53
SECTION 3.14. INVESTMENT OF FUNDS IN THE INVESTMENT ACCOUNTS...............54
SECTION 3.15. [INTENTIONALLY OMITTED]......................................55
SECTION 3.16. MAINTENANCE OF HAZARD INSURANCE AND ERRORS AND OMISSIONS AND
FIDELITY COVERAGE.....................................................55
SECTION 3.17. ENFORCEMENT OF DUE-ON-SALE CLAUSES, ASSUMPTION AGREEMENTS....56
SECTION 3.18. REALIZATION UPON DEFAULTED MORTGAGE LOANS....................57
SECTION 3.19. TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES..............59
SECTION 3.20. SERVICING COMPENSATION.......................................60
SECTION 3.21. REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS........61
SECTION 3.22. STATEMENT AS TO COMPLIANCE...................................61
SECTION 3.23. INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.............62
SECTION 3.24. ACCESS TO CERTAIN DOCUMENTATION..............................62
SECTION 3.25. TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY............62
SECTION 3.26. OBLIGATIONS OF THE SERVICER IN RESPECT OF PREPAYMENT
INTEREST SHORTFALLS..........................................66
SECTION 3.27. EXPENSE ACCOUNT..............................................66
SECTION 3.28. OBLIGATIONS OF THE SERVICER IN RESPECT OF MONTHLY PAYMENTS...66
SECTION 3.29. REDEMPTION ACCOUNT...........................................67
ARTICLE 4. PAYMENTS TO CERTIFICATEHOLDERS.....................................67
SECTION 4.01. DISTRIBUTIONS................................................67
SECTION 4.02. STATEMENTS TO CERTIFICATEHOLDERS.............................72
SECTION 4.03. [RESERVED]; MONTHLY ADVANCES.................................75
SECTION 4.04. DETERMINATION OF REALIZED LOSSES.............................77
(i)
SECTION 4.05. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.....................77
ARTICLE 5. THE CERTIFICATES...................................................77
SECTION 5.01. THE CERTIFICATES.............................................77
SECTION 5.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES........79
SECTION 5.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES............84
SECTION 5.04. PERSONS DEEMED OWNERS........................................84
SECTION 5.05. CERTAIN AVAILABLE INFORMATION................................84
ARTICLE 6. THE DEPOSITOR AND THE SERVICER.....................................85
SECTION 6.01. LIABILITY OF THE DEPOSITOR AND THE SERVICER..................85
SECTION 6.02. MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE SERVICER.....85
SECTION 6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SERVICER
AND OTHERS...................................................85
SECTION 6.04. LIMITATION ON RESIGNATION OF THE SERVICER....................86
SECTION 6.05. RIGHTS OF THE DEPOSITOR AND OTHERS IN RESPECT OF
THE SERVICER.................................................87
ARTICLE 7. DEFAULT............................................................87
SECTION 7.01. SERVICER EVENTS OF DEFAULT...................................87
SECTION 7.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.....................90
SECTION 7.03. NOTIFICATION TO CERTIFICATEHOLDERS...........................92
SECTION 7.04. WAIVER OF SERVICER EVENTS OF DEFAULT.........................92
ARTICLE 8. CONCERNING THE TRUSTEE.............................................92
SECTION 8.01. DUTIES OF TRUSTEE............................................92
SECTION 8.02. CERTAIN MATTERS AFFECTING THE TRUSTEE........................94
SECTION 8.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS........95
SECTION 8.04. TRUSTEE MAY OWN CERTIFICATES.................................96
SECTION 8.05. TRUSTEE'S FEES AND EXPENSES..................................96
SECTION 8.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.........................96
SECTION 8.07. RESIGNATION AND REMOVAL OF THE TRUSTEE.......................97
SECTION 8.08. SUCCESSOR TRUSTEE............................................97
SECTION 8.09. MERGER OR CONSOLIDATION OF TRUSTEE...........................98
SECTION 8.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE................98
SECTION 8.11. APPOINTMENT OF OFFICE OR AGENCY..............................99
SECTION 8.12. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE...............100
ARTICLE 9. CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER.................101
SECTION 9.01. RIGHTS OF THE CERTIFICATE INSURER TO EXERCISE RIGHTS OF
CLASS A CERTIFICATEHOLDERS..................................101
SECTION 9.02. TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CERTIFICATE
INSURER.....................................................101
SECTION 9.03. TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF THE
CERTIFICATE INSURER.........................................102
SECTION 9.04. CLAIMS UPON THE POLICY; POLICY PAYMENTS ACCOUNT.............102
SECTION 9.05. EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION..104
SECTION 9.06. NOTICES TO THE CERTIFICATE INSURER..........................104
SECTION 9.07. THIRD-PARTY BENEFICIARY.....................................104
SECTION 9.08. TRUSTEE TO HOLD THE POLICY..................................105
SECTION 9.09. TERMINATION OF THE SERVICER.................................105
ARTICLE 10. TERMINATION......................................................105
SECTION 10.01. TERMINATION UPON REPURCHASE OR LIQUIDATION OF ALL
MORTGAGE LOANS..............................................105
SECTION 10.02. ADDITIONAL TERMINATION REQUIREMENTS.........................107
ARTICLE 11. REMIC PROVISIONS.................................................108
SECTION 11.01. REMIC ADMINISTRATION........................................108
SECTION 11.02. PROHIBITED TRANSACTIONS AND ACTIVITIES......................111
SECTION 11.03. SERVICER AND TRUSTEE INDEMNIFICATION........................111
ARTICLE 12. MISCELLANEOUS PROVISIONS.........................................112
(ii)
SECTION 12.01. AMENDMENT...................................................112
SECTION 12.02. RECORDATION OF AGREEMENT; COUNTERPARTS......................114
SECTION 12.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS..................114
SECTION 12.04. GOVERNING LAW...............................................115
SECTION 12.05. NOTICES.....................................................115
SECTION 12.06. SEVERABILITY OF PROVISIONS..................................116
SECTION 12.07. NOTICE TO RATING AGENCIES AND CERTIFICATE INSURER...........116
SECTION 12.08. ARTICLE AND SECTION REFERENCES..............................117
SECTION 12.09. CONFIRMATION OF INTENT......................................117
Exhibit A-1 Form of Class A-1 Certificate
Exhibit A-2 Form of Class A-2 Certificate
Exhibit A-3 Form of Class A-3 Certificate
Exhibit A-4 Form of Class A-4 Certificate
Exhibit A-5 Form of Class A-5 Certificate
Exhibit A-6 Form of Class A-6 Certificate
Exhibit A-7 Form of Class R Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Exhibit F-1 Form of 144A Transfer Letter
Exhibit F-2 Form of Transfer Affidavit and Agreement
Exhibit G Form of Pre-Funded Mortgage Loan Transfer Agreement
Schedule 1 Mortgage Loan Schedule
(iii)
This Pooling and Servicing Agreement, dated and effective as of August 10, 1997,
among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, as Depositor,
EMERGENT MORTGAGE CORP., as Servicer, and FIRST UNION NATIONAL BANK, as Trustee
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder.
As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the Mortgage Loans and certain other related assets
subject to this Agreement as a real estate mortgage investment conduit (a
"REMIC") for federal income tax purposes. The Class R Certificates will be the
sole class of "residual interests" in the REMIC for purposes of the REMIC
Provisions. The Class A Certificates will be the "regular interests" in the
REMIC.
The following table irrevocably sets forth the Pass-Through Rates,
initial Certificate Principal Balance and "latest possible maturity date" for
the Certificates.
Initial Certificate Latest Possible
Description Pass-Through Rate(1) Principal Balance Maturity Date(2)
----------- ----------------- ----------------- -------------
Class A-1 6.545% $45,000,000 9/20/07
Class A-2 6.540% $20,000,000 8/20/10
Class A-3 6.670% $25,000,000 9/20/12
Class A-4 6.925% $33,000,000 10/20/12
Class A-5 7.290% $30,000,000 10/20/28
Class A-6 6.930% $17,000,000 10/20/28
Class R N/A 0 N/A
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(1) Subject to Available Funds Cap Rate.
(2) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for the Class A Certificates.
As of their respective Cut-off Dates, the Initial Mortgage Loans and
the Additional Mortgage Loans had an aggregate Stated Principal Balance equal to
$131,121,432.01.
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer and the Trustee agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, including, without limitation, in
the Preliminary Statement hereto, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Unless otherwise specified, all calculations described herein shall be made on
the basis of a 360-day year consisting of twelve 30-day months.
"Accrued Certificate Interest": With respect to each Distribution
Date and any Class A Certificate, interest accrued during the related Interest
Accrual Period at the applicable Pass-Through Rate for such Class A Certificate
for such Distribution Date on the Certificate Principal Balance of such Class A
Certificate immediately prior to such Distribution Date. All distributions of
interest on the Class A Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Accrued Certificate Interest
with respect to each Distribution Date, as to any Class A Certificate, shall be
reduced by an amount equal to the portion allocable to such Certificate of the
aggregate amount of any Relief Act Interest Shortfall and/or Prepayment Interest
Shortfall, if any, for such Distribution Date.
"Additional Mortgage Loans": Any Mortgage Loans included in the
Mortgage Pool as of the Closing Date but not identified by the Originator before
the close of business on August 10, 1997, but excluding any Qualified Substitute
Mortgage Loans.
"Addition Notice": A written notice from the Seller to the
Depositor, the Trustee, the Rating Agencies and the Certificate Insurer that the
Seller desires to make a Pre-Funded Loan Transfer.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
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"Available Distribution Amount": With respect to any Distribution
Date, an amount equal to the excess of (i) the sum of (a) the aggregate of the
Monthly Payments, Liquidation Proceeds, Insurance Proceeds, Principal
Prepayments and other unscheduled recoveries of principal and interest in
respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.25, (c) the aggregate
of any amounts deposited in the Distribution Account by the Servicer in respect
of Prepayment Interest Shortfalls for such Distribution Date pursuant to Section
3.26, (d) the aggregate of any Monthly Advances made by the Servicer for such
Distribution Date pursuant to Section 4.03, (e) the aggregate of any advances
made by the Trustee for such Distribution Date pursuant to Section 7.02, (f) the
Stated Principal Balance of any Mortgage Loan that was purchased during the
related Collection Period pursuant to or as contemplated by Sections 2.05,
3.18(c) or 10.01 and the amount of any shortfall deposited into the Collection
Account in connection with the substitution of a Deleted Mortgage Loan pursuant
to Section 2.05 during the related Collection Period and (g) the aggregate of
any amounts deposited into the Distribution Account by the Trustee from the
Interest Coverage Account, the Pre-Funding Account and the Redemption Account
over (ii) the sum of (a) amounts reimbursable or payable to the Depositor, the
Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11
or Section 3.14 or otherwise payable in respect of extraordinary Trust Fund
expenses, (b) Stayed Funds, (c) amounts deposited in the Collection Account or
the Distribution Account, as the case may be, in error, (d) amounts reimbursable
to the Trustee for an advance made pursuant to Section 7.02(b) which advance the
Trustee has determined to be nonrecoverable from the Stayed Funds in respect of
which it was made, (e) the Certificate Insurer Premium payable to the
Certificate Insurer pursuant to Section 3.27(b), and (f) the Trustee Fee payable
from the Distribution Account pursuant to Section 8.05.
"Available Funds Cap Rate": For any Distribution Date, an amount,
expressed as a per annum rate, equal to (a) the aggregate amount of interest due
and collected (or advanced) on the Mortgage Loans for the related Collection
Period, minus the amounts reimbursable or payable to the Servicer or any
Sub-Servicer pursuant to Section 3.11 or Section 3.14 and the Certificate
Insurer Premium payable to the Certificate Insurer pursuant to Section 3.27(b),
divided by (b) the Stated Principal Balance of the Mortgage Loans immediately
prior to such Distribution Date.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": The final payment due on a Balloon Mortgage Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of
the United States Code), as amended.
3
"Book-Entry Certificate": The Class A Certificates for so long as
such Certificates shall be registered in the name of the Depository or its
nominee.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking or savings and loan institutions in the State of South Carolina,
or in the city in which the Certificate Insurer or the Corporate Trust Office of
the Trustee is located, are authorized or obligated by law or executive order to
be closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the proceeds of
which were more than $1000 in excess of the principal balance of any existing
first mortgage or subordinate mortgage on the related Mortgaged Property and
related closing costs.
"Certificate": Any one of the Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class A or Class R, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the Class Certificate Balance
of such Class of Certificates on such Distribution Date (after giving effect to
any distributions of principal in reduction of the Class Certificate Balance of
such Class of Certificates to be made on such Distribution Date), and the
denominator of which is the initial Class Certificate Balance of such Class of
Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance, Inc. a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) The Certificate Insurer fails to make a payment required
under the Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the New
York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i) appointing
a custodian, trustee, agent, or receiver for the Certificate Insurer or
for all or any material portion of its property or (ii) authorizing the
taking of possession by a custodian, trustee,
4
agent, or receiver of the Certificate Insurer of all or any material
portion of its property.
"Certificate Insurer Premium": The Policy premium payable pursuant
to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.18% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (as defined in Section 860E(e)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Servicer or any
Affiliate thereof shall be deemed not to be outstanding and the Voting Rights to
which it is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any such consent has
been obtained, except as otherwise provided in Section 12.01. The Trustee may
conclusively rely upon a certificate of the Servicer in determining whether a
Certificate is held by an Affiliate thereof. All references herein to "Holders"
or "Certificateholders" shall reflect the rights of Certificate Owners as they
may indirectly exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder"
only the Person in whose name a Certificate is registered in the Certificate
Register.
"Certificate Owner": With respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Certificate as reflected on the books
of the Depository or on the books of a Depository Participant or on the books of
an indirect participating brokerage firm for which a Depository Participant acts
as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate as of any date of determination, the Certificate Principal Balance
of such Class A Certificate on the Distribution Date immediately prior to such
date of determination, minus all distributions allocable to principal made
thereon on such immediately prior Distribution Date (or, in the case of any date
of determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Class A Certificate, as stated on the face
thereof). With respect to each Class R Certificate, as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Stated Principal
Balance of the Mortgage Loans over (B) the then aggregate Certificate Principal
Balance of all Class A Certificates then outstanding.
"Certificate Register" and "Certificate Registrar": The register
maintained and the registrar appointed pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the same
class designation.
5
"Class A Certificateholder": Any Holder of a Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 or Class A-6 Certificate.
"Class A Certificate Principal Balance": The sum of the Class A-1
Certificate Principal Balance, the Class A-2 Certificate Principal Balance, the
Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance, the Class A-5 Certificate Principal Balance and the Class A-6
Certificate Principal Balance.
"Class A-1 Certificate": Any one of the Class A-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-1 Certificate Principal Balance": The Class Certificate
Balance for the Class A-1 Certificates.
"Class A-1 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-1
Certificates.
"Class A-1 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.545% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-2 Certificate": Any one of the Class A-2 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-2 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-2 Certificate Principal Balance": The Class Certificate
Balance for the Class A-2 Certificates.
"Class A-2 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-2
Certificates.
"Class A-2 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.540% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-3 Certificate": Any one of the Class A-3 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-3 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-3 Certificate Principal Balance": The Class Certificate
Balance for the Class A-3 Certificates.
6
"Class A-3 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-3
Certificates.
"Class A-3 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.670% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-4 Certificate": Any one of the Class A-4 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-4 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-4 Certificate Principal Balance": The Class Certificate
Balance for the Class A-4 Certificates.
"Class A-4 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-4
Certificates.
"Class A-4 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.925% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-5 Certificate": Any one of the Class A-5 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-5 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-5 Certificate Principal Balance": The Class Certificate
Balance for the Class A-5 Certificates.
"Class A-5 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 7.290% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-5 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-5
Certificates.
"Class A-6 Certificate": Any one of the Class A-6 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-6 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-6 Certificate Principal Balance": The Class Certificate
Balance for the Class A-6 Certificates.
7
"Class A-6 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-6
Certificates.
"Class A-6 Lockout Distribution Amount": For any Distribution Date,
an amount equal to the product of (x) the applicable Class A-6 Lockout
Percentage for such Distribution Date and (y) the Class A-6 Lockout Pro-Rata
Distribution Amount for such Distribution Date.
"Class A-6 Lockout Percentage": For each Distribution Date, the
percentage specified below for the period in which such Distribution Date
occurs:
Distribution Date Lockout Percentage
----------------- ------------------
October 1997 - September 2000 0%
October 2000 - September 2002 45%
October 2002 - September 2003 80%
October 2003 - September 2004 100%
Subsequent to September 2004 300%
"Class A-6 Lockout Pro-Rata Distribution Amount": For any
Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-6 Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the Class A
Certificate Principal Balance immediately prior to such Distribution Date, and
(y) the Principal Distribution Amount for such Distribution Date.
"Class A-6 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.930% and the Available Funds Cap Rate for
such Distribution Date.
"Class Certificate Balance": As to any Class of Certificates and any
date of determination, the aggregate of the Certificate Principal Balances of
all Certificates of such Class as of such date of determination.
"Class R Certificate": Any one of the Class R Certificates executed
by the Trustee, and authenticated and delivered by the Certificate Registrar,
substantially in the form annexed hereto as Exhibit A-6 and evidencing the
Residual Interest in the REMIC Trust for purposes of the REMIC Provisions.
"Closing Date": September 24, 1997.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and maintained
by the Servicer pursuant to Section 3.10(a), which shall be entitled "Emergent
Mortgage Corp., as Servicer for First Union National Bank, as Trustee, in trust
for (A) registered
8
holders of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
"Collection Period": In the case of the initial Distribution Date,
the period from the close of business on August 10, 1997 through September 30,
1997 and, in the case of each subsequent Distribution Date, the calendar month
immediately preceding the calendar month in which such Distribution Date occurs.
"Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust
Department, or at such other address as the Trustee may designate from time to
time by notice to the Certificateholders, the Depositor, the Servicer and the
Certificate Insurer.
"Cumulative Insurance Payments": As of any time of determination,
the aggregate of all Insurance Payments previously made by the Certificate
Insurer plus interest thereon from the date such amount became due until paid in
full, at a rate of interest calculated as provided in the Insurance Agreement
minus all payments previously made to the Certificate Insurer pursuant to
Section 4.01 hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Original Pool Balance.
"Cut-off Date": With respect to each Initial Mortgage Loan, the
close of business on August 10, 1997; with respect to each Additional Mortgage
Loan and each Pre-Funded Mortgage Loan, the respective origination dates
thereof; and with respect to all Qualified Substitute Mortgage Loans, the first
day of the calendar month in which the substitution occurs. References herein to
the "Cut-off Date," when used with respect to more than one Mortgage Loan, shall
be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates as of
any Distribution Date (i) any shortfall in amounts available in the Distribution
Account to pay the Interest Distribution Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A
Certificates, (ii) the Remaining Overcollateralization Deficit, if any, for such
Distribution Date and (iii) without duplication of the amount specified in
clause (ii), the applicable Class A Certificate Principal Balance to the extent
unpaid on the final Distribution Date for each Class of
9
the Class A Certificates or the earlier termination of the Trust Fund pursuant
to the terms of this Agreement.
"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced
by a Qualified Substitute Mortgage Loan.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly Payment
due on a Due Date is not paid on or before the next succeeding Due Date, at
which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment due
on a Due Date is not paid on or before the second or third succeeding Due Date,
respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case may
be.
"Delinquency Percentage": As of the last day of any Collection
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 90 or
more days Delinquent, in foreclosure or converted to REO Properties as of such
last day of such Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Depositor": Prudential Securities Secured Financing Corporation, a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated at least
10
P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not
the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date": With respect to each Distribution Date, the
fifth Business Day prior to such Distribution Date.
"Directly Operate": With respect to any REO Property, the furnishing
or rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the Trust Fund other than
through an Independent Contractor; provided, however, that the Trustee (or the
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the Servicer on behalf of the
Trustee) establishes rental terms, chooses tenants, enters into or renews
leases, deals with taxes and insurance, or makes decisions as to repairs or
capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the United
States, any State or political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel that the
holding of an Ownership Interest in a Residual Certificate by such Person may
cause the Trust Fund or any Person having an Ownership Interest in any Class of
Certificates (other than such Person) to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Residual Certificate to such Person. The terms
"United States," "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b) which shall be entitled
"First Union National Bank, as Trustee, in trust for (A) registered holders of
Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3, and (B)
Financial Security Assurance, Inc." and which must be an Eligible Account.
11
"Distribution Date": The 20th day of any month, or if such 20th day
is not a Business Day, the Business Day immediately following such 20th day,
commencing in October 1997.
"Due Date": With respect to each Distribution Date, the day of the
month on which the Monthly Payment is due on a Mortgage Loan during the related
Collection Period, exclusive of any days of grace.
"Eligible Account": Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated at least P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's
and S&P are not the Rating Agencies) at the time any amounts are held on deposit
therein, (ii) an account or accounts the deposits in which are fully insured by
the FDIC or (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Escrow Payments": As defined in Section 3.09.
"Estate in Real Property": A fee simple estate in a parcel of land.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained pursuant
to Section 3.25.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the Servicer or the Certificate Insurer
pursuant to or as contemplated by Section 2.05, 3.18(c) or 10.01), a
determination made by the Servicer that all Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries which the Servicer, in its reasonable
good faith judgment, expects to be finally recoverable in respect thereof have
been so recovered. The Servicer shall maintain records, prepared by a Servicing
Officer, of each Final Recovery Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
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"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person, any
such Person who (a) is in fact independent of the Depositor, the Servicer and
their respective Affiliates, (b) does not have any direct financial interest in
or any material indirect financial interest in the Depositor or the Servicer or
any Affiliate thereof, and (c) is not connected with the Depositor or the
Servicer or any Affiliate thereof as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Depositor or the Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the REMIC
Trust within the meaning of Section 856(d)(3) of the Code if the REMIC Trust
were a real estate investment trust (except that the ownership tests set forth
in that section shall be considered to be met by any Person that owns, directly
or indirectly, 35 percent or more of any Class of Certificates), so long as the
REMIC Trust does not receive or derive any income from such Person and provided
that the relationship between such Person and the Trust Fund is at arm's-length,
all within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Initial Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the close of business on August 10, 1997, which Mortgage Loans
will have a Cut-off Date as of the close of business on August 10, 1997.
"Insurance Agreement": The Insurance and Indemnity Agreement, dated
as of August 10, 1997, among the Depositor, the Servicer, the Seller, Emergent
Group, Inc. and the Certificate Insurer, as amended or supplemented in
accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate Insurer
under the Policy with respect to the Class A Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the Servicer
would follow in servicing mortgage loans held for its own account, subject to
the terms and conditions of the related Mortgage Note and Mortgage.
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"Interest Accrual Period": With respect to any Distribution Date and
the Class A Certificates, the calendar month immediately preceding the month in
which such Distribution Date occurs.
"Interest Coverage Account": As defined in Section 3.13.
"Interest Distribution Amount": With respect to any Distribution
Date and the Class A Certificates, the aggregate Accrued Certificate Interest on
the Class A Certificates for such Distribution Date.
"Investment Account": As defined in Section 3.14.
"Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Collection Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan, or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.05, Section 3.18(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being purchased
pursuant to Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance Proceeds or
amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the Servicer in connection with (i) the taking of all
or a part of a Mortgaged Property by exercise of the power of eminent domain or
condemnation and (ii) the liquidation of a defaulted Mortgage Loan by means of a
trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Class R Certificateholder": Any single Holder of Class R
Certificates representing a greater than 50% Percentage Interest in such Class.
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"Monthly Advance": As to any Mortgage Loan or REO Property, any
advance made by the Servicer in respect of any Distribution Date pursuant to
Section 4.03.
"Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": ▇▇▇▇▇'▇ Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first lien on, or first priority security interest in, a Mortgaged Property
securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.03
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.01, Section 2.02 or Section 2.05(d) as from time
to time held as a part of the Trust Fund, the Mortgage Loans so held being
identified in the Mortgage Loan Schedule.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in the Trust Fund on such date. The Mortgage Loan Schedule shall set
forth following information with respect to each Mortgage Loan:
1. the Seller's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including the
state and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the Mortgaged
Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the Cut-off
Date based on the original amortization schedule;
15
8. the Loan-to-Value Ratio at origination;
9. (A) the date on which the first Monthly Payment was due on
the Mortgage Loan and, (B) if such date is not consistent with the Due
Date currently in effect, such Due Date;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due
Date on or after the Cut-off Date;
12. the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan as
of the close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if applicable;
21. whether the Mortgage Loan has a due-on-sale clause; and
22. the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this Agreement.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on the
Mortgage Loan Schedule from time to time, and any REO Properties acquired in
respect thereof.
16
"Mortgage Rate": With respect to each Mortgage Loan, the annual rate
at which interest accrues on such Mortgage Loan in accordance with the
provisions of the related Mortgage Note.
"Mortgaged Property": The underlying property securing a Mortgage
Loan, including any REO Property, consisting of an Estate in Real Property.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Distribution
Date, an amount equal to the excess of (x) the Available Distribution Amount for
such Distribution Date over (y) the sum for such Distribution Date of (A) the
amount described in Section 4.01(a)(i) hereof and (B) the amount described in
clauses (b)(i)-(iii) of the definition of Principal Distribution Amount minus
the amount of any Subordination Reduction Amount for the Class A Certificates
for such Distribution Date.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf of the
Trust Fund, including any lease renewed or extended on behalf of the Trust Fund
if the Trust Fund has the right to renegotiate the terms of such lease.
"Nonrecoverable Monthly Advance": Any Monthly Advance or Servicing
Advance previously made or proposed to be made in respect of a Mortgage Loan or
REO Property that, in the good faith business judgment of the Servicer, will not
or, in the case of a proposed Monthly Advance, would not be ultimately
recoverable from related late payments, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-United States Person": Any Person other than a United States
Person.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be salaried counsel for the Depositor or the Servicer acceptable to
the Trustee and the Certificate Insurer, except that any opinion of counsel
relating to (a) the qualification of the Trust Fund as a REMIC or (b) compliance
with the REMIC Provisions must be an opinion of Independent counsel.
"Original Pool Balance": An amount equal to the aggregate of the
Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
17
"Original Pre-Funded Amount": U.S. $38,878,567.99, being the amount
of cash to be deposited in the Pre-Funding Account on the Closing Date.
"Originator": Emergent Mortgage Corp.
"Overcollateralization Deficit": With respect to any Distribution
Date, the excess, if any, of (i) the Class A Certificate Principal Balance,
after taking into account the distribution of the Principal Distribution Amount
(other than any portion thereof constituting the Overcollateralization Deficit
or the Subordination Increase Amount) over (ii) the sum of the aggregate Stated
Principal Balances of the Mortgage Loans then outstanding;
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A-1 Certificates, the
Class A-1 Pass-Through Rate, with respect to the Class A-2 Certificates, the
Class A-2 Pass-Through Rate, with respect to the Class A-3 Certificates, the
Class A-3 Pass-Through Rate, with respect to the Class A-4 Certificates, the
Class A-4 Pass-Through Rate, with respect to the Class A-5 Certificates, the
Class A-5 Pass-Through Rate, and with respect to the Class A-6 Certificates, the
Class A-6 Pass-Through Rate.
"Percentage Interest": With respect to the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates and the Class A-6 Certificates, the
undivided percentage ownership in the related Class evidenced by such
Certificate, expressed as a percentage, the numerator of which is the initial
Certificate Principal Balance represented by such Certificate and the
denominator of which is the initial aggregate Certificate Principal Balance of
such Class. The Class A Certificates are issuable only in minimum Percentage
Interests corresponding to minimum initial Certificate Principal Balances of
$1,000 and increments of $1,000 in excess thereof. With respect to any Class R
Certificate, the undivided percentage ownership in such Class evidenced by such
Certificate, as set forth on the face of such Class R Certificate. The Class R
Certificates are issuable only in minimum Percentage Interests of 25%.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided such obligations are backed by
the full faith and credit of the United States; provided, however, that
any obligation of, or guaranteed by, FHLMC or FNMA, other than a senior
debt or a mortgage participation or pass-through certificate guaranteed by
FHLMC or FNMA shall be a Permitted Investment only if, at the time of
investment, such investment is acceptable to the Certificate Insurer;
18
(ii) demand and time deposits in, certificates of deposit of,
or bankers' acceptances issued by, any Depository Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository Institution
(acting as principal);
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each Rating
Agency in its highest long-term unsecured rating categories at the time of
such investment or contractual commitment providing for such investment;
(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 30 days after the date of acquisition
thereof) that is rated by each Rating Agency in its highest short-term
unsecured debt rating available at the time of such investment;
(vi) units of money market funds that have been rated "Aaa" by
▇▇▇▇▇'▇ and "AAA" by S&P; and
(vii) if previously confirmed in writing to the Trustee, any
other demand, money market or time deposit, or any other obligation,
security or investment, as may be acceptable to the Rating Agencies and
the Certificate Insurer as a permitted investment of funds backing
securities that have been rated "Aaa" by ▇▇▇▇▇'▇ and "AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual Certificate
other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The Financial Guaranty Insurance Policy (No. 50624-N)
issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Pre-Funded Loan Transfer": The transfer and assignment by the
Depositor to the Trust of the Pre-Funded Mortgage Loans pursuant to the terms
hereof.
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"Pre-Funded Loan Transfer Date": The Business Day on which a
Pre-Funded Loan Transfer occurs.
"Pre-Funded Mortgage Loans": As defined in Section 2.02.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 3.12 hereof and maintained by the Trustee.
"Pre-Funding Amount": With respect to any date, the amount on
deposit in the Pre-Funding Account.
"Pre-Funding Earnings": The actual investment earnings realized on
amounts deposited in the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Startup Date and
ending on November 1, 1997.
"Prepayment Assumption": The Prepayment Assumption assumes that the
pool of loans prepays in the first month at a constant annual prepayment rate of
1.7% and increases by an additional 1.7% each month thereafter until the tenth
month, where it remains at a constant annual prepayment rate equal to 17%.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Collection Period the
subject of a Principal Prepayment in full or in part that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Collection Period, an amount equal to
the excess of (i) interest at the applicable Net Mortgage 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 related Collection
Period over (ii) the amount, if any, of the interest paid by the Mortgagor in
connection with such Principal Prepayment. The obligations of the Servicer in
respect of any Prepayment Interest Shortfall are set forth in Section 3.26.
"Principal Distribution Amount": With respect to any Distribution
Date, the lesser of:
(a) the excess of the Available Distribution Amount over the amount
payable on the Class A Certificates pursuant to Section 4.01 (a)(i) and
4.01(g); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due during
the related Collection Period, to the extent received, on each Mortgage
Loan;
(ii) the Stated Principal Balance of any Mortgage Loan that
was purchased during the related Collection Period pursuant to or as
contemplated by Section 2.05, 3.18(c) or 10.01 and the amount of any
shortfall deposited in
20
the Collection Account in connection with the substitution of a Deleted
Mortgage Loan pursuant to Section 2.05 during the related Collection
Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds, payments pursuant to Section
3.28 and REO Principal Amortization) received during the related
Collection Period, net of any portion thereof that represents a recovery
of principal for which an advance was made by the Servicer pursuant to
Section 4.03 in respect of a preceding Distribution Date, and deposits
into the Distribution Account from the Pre-Funding Account pursuant to
Section 3.12(c) and the Redemption Account pursuant to Section 3.29, if
any, not required to be distributed pursuant to Section 4.01(g);
(iv) the amount of any Overcollateralization Deficit for such
Distribution Date; and
(v) the amount of any Subordination Increase Amount for the
Class A Certificates for such Distribution Date; minus:
(vi) the amount of any Subordination Reduction Amount for the
Class A Certificates for such Distribution Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase and Assignment Agreement": The Agreement dated as of
August 10, 1997 between the Originator and the Seller providing for the sale of
the Mortgage Loans from the Originator to the Seller.
"Purchase Price": With respect to any Mortgage Loan or REO Property
to be purchased pursuant to or as contemplated by Section 2.05, 3.18(c) or
10.01, and as confirmed by an Officers' Certificate from the Servicer to the
Trustee, an amount equal to the sum of (i) 100% of the Stated Principal Balance
thereof as of the date of purchase (or such other price as provided in Section
10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on such Stated
Principal Balance at the applicable Net Mortgage Rate in effect from time to
time from the Due Date as to which interest was last covered by a payment by the
Mortgagor or an advance by the Servicer, which payment or advance had as of the
date of purchase been distributed pursuant to Section 4.01, through the next
date corresponding to such Due Date which is on or after the date on which such
purchase is to be effected, and (y) an REO Property, the sum of (1) accrued
interest on such Stated Principal Balance at the applicable Net Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Servicer through the next
date corresponding to such Due Date which is on or after the date on which such
REO Property was acquired,
21
plus (2) REO Imputed Interest for such REO Property from such corresponding date
through the next such corresponding date which is on or after the date on which
such purchase is to be effected, net of the total of all net rental income,
Insurance Proceeds, Liquidation Proceeds and Monthly Advances that as of the
date of purchase had been distributed as or to cover REO Imputed Interest
pursuant to Section 4.01, (iii) any unreimbursed Servicing Advances and Monthly
Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or REO
Property, (iv) any amounts previously withdrawn from the Collection Account in
respect of such Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and
3.18(b), and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 2.05, expenses reasonably incurred or to be incurred by the
Servicer or the Trustee in respect of the breach or defect giving rise to the
purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have a Stated Principal Balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the outstanding principal
balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) have a remaining term to maturity not greater than
(and not more than one year less than) that of the Deleted Mortgage Loan, (iv)
[intentionally left blank], (v) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (vi) have a risk grading determined by the
Seller, with the approval of the Certificate Insurer, at least equal to the risk
grading assigned on the Deleted Mortgage Loan, (vii) is a "qualified mortgage"
as defined in the REMIC Provisions and (viii) conform to each representation and
warranty set forth in the Unaffiliated Seller's Agreement applicable to the
Deleted Mortgage Loan. In the event that one or more mortgage loans are
substituted for one or more Deleted Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (vi) hereof shall be satisfied as to each such mortgage loan, the terms
described in clause (iii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(v) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (viii) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the proceeds of
which are not more than $1000 in excess of the existing first mortgage loan and
any subordinate mortgage loan on the related Mortgaged Property and related
closing costs, and were used exclusively (except for up to $1000) to satisfy the
then existing first mortgage loan and any subordinate mortgage loan of the
Mortgagor on the related Mortgaged Property and to pay related closing costs.
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"Rating Agency or Rating Agencies": ▇▇▇▇▇'▇ and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Servicer.
"Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Sections 3.11(ix) and 3.18(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan during the calendar month in which
such Final Recovery Determination was made, net of amounts that are payable
therefrom to the Servicer with respect to such Mortgage Loan pursuant to clause
(iii) of Section 3.11.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Fund, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.18(b), minus (v) the
aggregate of all Monthly Advances made by the Servicer in respect of such REO
Property or the related Mortgage Loan for which the Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.25 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property that has been, or in connection with such Final
Recovery Determination, will be transferred to the Distribution Account pursuant
to Section 3.25.
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With respect to each Mortgage Loan which has become the subject of a
Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.
With respect to each Mortgage Loan which has become the subject of a
Debt Service Reduction, the portion, if any, of the reduction in each affected
Monthly Payment attributable to a reduction in the Mortgage Rate imposed by a
court of competent jurisdiction. Each such Realized Loss shall be deemed to have
been incurred on the Due Date for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions shall
constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Redemption Account": As defined in Section 3.29.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(l) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
"Relief Act Interest Shortfall": With respect to any Distribution
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"Remaining Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Overcollateralization Deficit
for such Distribution Date over (ii) the Net Monthly Excess Cashflow for such
Distribution Date.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A-860G of the Code, and related provisions, and proposed, temporary and final
regulations and published rulings, notices and announcements promulgated
thereunder, as the foregoing may be in effect from time to time.
24
"REMIC Trust": The segregated pool of assets comprising the Trust
Fund excluding the Policy and the Interest Coverage Account.
"Remittance Report": As defined in Section 4.02.
"Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the Servicer in
respect of an REO Property pursuant to Section 3.25.
"REO Disposition": The sale or other disposition of an REO Property
on behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of the Trust Fund, one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan if appropriate) as of the close of business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO Property, for
any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 10.01 that is
allocable to such REO Property) or otherwise, net of any portion of such amounts
(i) payable pursuant to Section 3.25(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Servicer pursuant to Section 3.25(d) for unpaid Servicing Fees in respect
of the related Mortgage Loan and unreimbursed Servicing Advances and Monthly
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.
"REO Property": A Mortgaged Property acquired by the Servicer on
behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.25.
"Request for Release": A release signed by a Servicing Officer, in
the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to any Distribution
Date, an amount equal to 3.75% of the Original Pool Balance, subject to the
following: (i) if the Step Up Trigger has occurred with respect to such
Distribution Date, the Required Subordinated Amount for such Distribution Date
will be an amount equal to the entire aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date, (ii) if the Step Down Trigger has
occurred, the Required
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Subordinated Amount for such Distribution Date will be an amount equal to the
greater of (A) 0.50% of the Original Pool Balance and (B) the lesser of (x)
3.75%, of the Original Pool Balance and (y) the Stepped Down Required
Subordinated Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date.
"Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a FNMA eligible condominium project, (iv) a detached
one-family dwelling in a planned unit development or (v) a manufactured home
treated as real property under local law, none of which is a co-operative,
mobile or manufactured home (as defined in ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, Section
5402(6)).
"Residual Certificate": Any one of the Class R Certificates.
"Residual Interest": The sole class of "residual interests" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee, any
officer of the Corporate Trust Department of the Trustee, including any Senior
Vice President, any Assistant Vice President, any Assistant Secretary, any Trust
Officer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers to whom, with
respect to a particular matter, such matter is referred.
"Rolling Delinquency Percentage": For any Distribution Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first and second Distribution Dates) most
recently ended Collection Periods.
"Rolling Loss Percentage": As of any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
"Seller": Emergent Mortgage Holdings Corporation, or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement.
"Servicer": Emergent Mortgage Corp., a South Carolina corporation,
or any successor servicer appointed as herein provided, in its capacity as
Servicer hereunder.
"Servicer Event of Default": One or more of the events described in
Section 7.01.
"Servicer Extension Notice": As described in Section 7.01.
"Servicer Remittance Date": With respect to any Distribution Date,
12:00 noon New York time on the fourth Business Day prior to such Distribution
Date.
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"Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.16, 3.18 and 3.25. The Servicer shall
not be required to make any Servicing Advance in respect of a Mortgage Loan or
REO Property that, in the good faith business judgment of the Servicer, would
not be ultimately recoverable from related Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which interest on such Mortgage Loan accrues for such calendar month. A
portion of such Servicing Fee may be retained by any Sub-Servicer as its
servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of Mortgage Loans, whose name
and specimen signature appear on a list of servicing officers furnished by the
Servicer to the Trustee and the Certificate Insurer and the Depositor on the
Closing Date, as such list may from time to time be amended.
"Single Certificate": With respect to any Class of Certificates
(other than the Residual Certificates), a hypothetical Certificate of such Class
evidencing a Percentage Interest for such Class corresponding to an initial
Certificate Principal Balance of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
"S&P": Standard & Poor's Ratings Services, a division of ▇▇▇▇▇▇-▇▇▇▇
Inc., or its successor in interest.
"Startup Day": The day designated as such pursuant to Section
11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan: (a)
as of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the outstanding principal balance of such Mortgage
Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the
sum of (i) the principal
27
portion of each Monthly Payment due on a Due Date subsequent to the Cut-off
Date, to the extent received from the Mortgagor or included in a Monthly Advance
and distributed pursuant to Section 4.01 on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to Section 4.01 on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.18, to the extent distributed pursuant to Section 4.01 on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto coinciding with or preceding such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Distribution Date
on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, zero. With respect to any REO Property: (a)
as of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such REO
Property would be distributed, an amount (not less than zero) equal to the
Stated Principal Balance of the related Mortgage Loan as of the date on which
such REO Property was acquired on behalf of the Trust Fund, minus the aggregate
amount of REO Principal Amortization in respect of such REO Property for all
previously ended calendar months, to the extent distributed pursuant to Section
4.01 on or before such date of determination, and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Step Down Cumulative Loss Test": The Step Down Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 30th
through the 41st Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is 2.00% or less, (ii) for the 42nd through the 53rd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.50% or less, (iii) for the 54th through the 65th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.90% or less and (iv)
for 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 3.25% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test will
be met with respect to a Distribution Date if the Rolling Loss Percentage for
such Distribution Date is less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 30th Distribution Date or any preceding Distribution
Date.
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"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.75% of the Original Pool Balance, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
7.50%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of six, for which
the Step Down Trigger has occurred, and the denominator of which is six.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test
will be met with respect to a Distribution Date as follows (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.15%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.65% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling Delinquency
Test will be met with respect to a Distribution Date if the Rolling Delinquency
Percentage for such Distribution Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test will be
met with respect to a Distribution Date if the Rolling Loss Percentage for such
Distribution Date is 1.50% or more.
"Step Up Trigger": For any Distribution Date, the Step Up Trigger
will have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling Delinquency Test or the Step Up Rolling Loss Test is met with respect to
such Distribution Date.
"Subordinated Amount": With respect to any Distribution Date, the
excess, if any, of (a) the sum of (i) the aggregate Stated Principal Balances of
the Mortgage Loans immediately following such Distribution Date and (ii) the
amount on deposit in the Pre-Funding Account immediately following such
Distribution Date; over (b) the Class A Certificate Principal Balance as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i) through (iv) of the definition of Principal
Distribution Amount on such Distribution Date); provided, however, that such
amount shall not be less than zero.
"Subordination Deficiency Amount": With respect to any Distribution
Date, the excess, if any, of (a) the Required Subordinated Amount applicable to
such Distribution Date over (b) the Subordinated Amount applicable to such
Distribution
29
Date prior to taking into account the payment of any Subordination Increase
Amounts on such Distribution Date.
"Subordination Increase Amount": With respect to any Distribution
Date, the lesser of (a) the Subordination Deficiency Amount as of such
Distribution Date (after taking into account the payment of the Principal
Distribution Amount, on such Distribution Date, exclusive of the payment of any
Subordination Increase Amount) and (b) the amount of Net Monthly Excess Cashflow
on such Distribution Date as reduced by any Cumulative Insurance Payments or
payments allocated to the Overcollateralization Deficit.
"Subordination Reduction Amount": With respect to any Distribution
Date, an amount equal to the lesser of (a) the Excess Subordinated Amount and
(b) the sum of the amounts available for distribution specified in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.
"Sub-Servicer": Any Person with which the Servicer has entered into
a Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and a Sub-Servicer relating to servicing and administration of certain Mortgage
Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section 2.05(d).
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
30
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof, (ii) any REO Property, together
with all collections thereon and proceeds thereof, (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof, (iv) the
Depositor's rights under the Unaffiliated Seller's Agreement (including any
security interest created thereby), (v) the Collection Account, the Distribution
Account, any REO Account and the Expense Account and such assets that are
deposited therein from time to time and any investments thereof, (vi) any
amounts on deposit in the Pre-Funding Account and the Redemption Account and
(vii) the Trustee's rights under the Policy, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, the Trust Fund specifically excludes all payments and other collections
of principal and interest on the Mortgage Loans received on or before the
Cut-off Date.
"Trustee": First Union National Bank, a national banking
association, or its successor-in-interest, or any successor trustee appointed as
herein provided.
"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties as of the preceding Distribution Date (or, in the case of
the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate": 0.015% per annum.
"Unaffiliated Seller's Agreement": The agreement dated as of August
10, 1997 between the Seller and the Depositor and providing for the transfer of
Mortgage Loans from the Seller to the Depositor.
"Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.16.
"United States Person": A citizen or resident of the United States,
a corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is ineludible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States. The
term "United States" shall have the meaning set forth in Section 7701 of the
Code.
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"Value": With respect to any Mortgaged Property, the lesser of (i)
the lesser of (a) the value thereof as determined by an appraisal made for the
originator of the Mortgage Loan at the time of origination of the Mortgage Loan
by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b) the
value thereof as determined by a review appraisal conducted by the Seller in the
event any such review appraisal determines an appraised value ten percent or
more lower than the value thereof as determined by the appraisal referred to in
clause (i)(a) above and (ii) the purchase price paid for the related Mortgaged
Property by the Mortgagor with the proceeds of the Mortgage Loan; provided,
however, in the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the lesser of (1) the value determined by an
appraisal made for the originator of such Refinanced Mortgage Loan at the time
of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by the Seller in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(l) above.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, the percentage of all the Voting Rights allocated among Holders
of each Class of Certificates shall be the fraction, expressed as a percentage,
the numerator of which is the aggregate Certificate Principal Balance of all the
Certificates of such Class then outstanding and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans then outstanding. The
Voting Rights allocated to each Class of Certificate shall be allocated among
Holders of each such Class in accordance with their respective Percentage
Interests as of the most recent Distribution Date.
ARTICLE 2.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Initial Mortgage Loans and the Additional Mortgage Loans, the rights of
the Depositor under the Unaffiliated Seller's Agreement, and all other assets
included or to be included in the Trust Fund. Such assignment includes all
interest and principal received by the Depositor or the Servicer on or after the
Cut-off Date with respect to the Initial Mortgage Loans and Additional Mortgage
Loans.
Section 2.02. Purchase and Sale of Pre-Funded Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in
paragraph (b) below, in consideration of the Trustee's delivery on the related
Pre-Funded Loan
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Transfer Dates to or upon the order of the Depositor of all or a portion of the
balance of funds in the Pre-Funding Account (exclusive of Pre-Funding Earnings)
as provided herein, the Depositor shall on any Pre-Funded Transfer Date sell to
the Trustee without recourse but subject to terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to
additional Mortgage Loans ("Pre-Funded Mortgage Loans"), including the
outstanding principal of and interest due on such Pre-Funded Mortgage Loans, and
all other assets included or to be included in the Trust Fund for the benefit of
the Certificateholders and the Certificate Insurer. The amount released from the
Pre-Funding Account with respect to a transfer of Pre-Funded Mortgage Loans
shall be one-hundred percent (100%) of the aggregate Stated Principal Balances
as of the related Cut-Off Date of the Pre-Funded Mortgage Loans so transferred.
In connection with each sale of Pre-Funded Mortgage Loans hereunder, the
Originator, the Seller, the Depositor and the Trustee shall execute and deliver
an instrument of transfer substantially in the form of Exhibit G hereto (the
"Pre-Funded Mortgage Loan Transfer Agreement").
(b) The obligation of the Trustee to accept any Pre-Funded Mortgage
Loans, and to release funds in respect thereof from the Pre-Funding Account to
the Depositor, pursuant to this Section 2.02 shall be subject to the
satisfaction of each of the following conditions on or prior to the related
Pre-Funded Loan Transfer Date:
(i) the Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice,
which shall include a Mortgage Loan Schedule listing the Pre-Funded
Mortgage Loans, and shall have provided any other information
reasonably requested by any of the foregoing with respect to the
Pre-Funded Mortgage Loans;
(ii) the Originator and the Seller shall have executed and
delivered a Pre-Funded Mortgage Loan Transfer Agreement with respect
to the Pre-Funded Mortgage Loans;
(iii) the Seller shall have deposited in the Collection
Account all collections of (x) principal in respect of the
Pre-Funded Mortgage Loans received after the related Cut-Off Date of
the Pre-Funded Mortgage Loans so transferred and (y) interest due on
the Pre-Funded Loan Mortgage Loans after the related Cut-Off Date of
such Pre-Funded Mortgage Loans;
(iv) the Depositor shall not be insolvent, aware of any
pending insolvency and the transfer of the Pre-Funded Mortgage Loans
as contemplated hereby shall not result in the insolvency of the
Depositor;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(vi) the Pre-Funding Period shall not have terminated;
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(vii) the Seller shall have delivered to the Depositor and the
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in Section 2.02(d) of the Unaffiliated
Seller's Agreement in relation to such Pre-Funded Mortgage Loans;
and
(viii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Opinions of Counsel
with respect to the transfer of the Pre-Funded Loan Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to
the Certificate Insurer and the Trustee on the Startup Date (i.e.,
bankruptcy, corporate and tax opinions).
(c) The obligation of the Trust to purchase the Pre-Funded Loan
Mortgage Loans on a Pre-Funded Loan Transfer Date is subject to the following
requirements, any of which requirements (except for the requirement stated in
clause (v) of this paragraph) may be waived or modified in any respect by the
Insurer: (i) such Pre-Funded Mortgage Loan may not be 60 or more days
contractually delinquent as of the related Pre-Funded Loan Transfer Date; (ii)
the remaining term to stated maturity of such Pre-Funded Mortgage Loan will not
exceed 30 years for fully amortizing loans or 15 years for "Balloon Loans";
(iii) such Pre-Funded Mortgage Loan will be secured by a Mortgage in a first
lien position; (iv) such Pre-Funded Mortgage Loan will not have a Mortgage Rate
less than 8.5%; (v) such Pre-Funded Mortgage Loan will be otherwise acceptable
to the Depositor and the Insurer; (vi) following the purchase of such Pre-Funded
Mortgage Loan by the Trust Fund, the Mortgage Loans (including Pre-Funded
Mortgage Loans) as of the Pre-Funded Loan Transfer Date: (a) will have a
weighted average Mortgage Rate of at least 11.00%; (b) will have a weighted
average remaining term to stated maturity of less than 205 months; (c) will not
have more than 40% by aggregate principal balance "Balloon Loans"; (d) will have
no Mortgage Loan with a principal balance in excess of $400,000; (e) will have a
state concentration not in excess of 20% for any one state; (f) will have not
more than 5% in aggregate principal balance of the Mortgage Loans concentrated
in any single ZIP code; and (g) will have no more than 5% Mortgage Loans
relating to non-owner occupied properties.
(d) In connection with the transfer and assignment of the Pre-Funded
Loan Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.03(a).
Section 2.03. Mortgage Files and Documents.
(a) In connection with each transfer and assignment contemplated by
Section 2.01 and 2.02 hereof, the Depositor will cause the Seller to deliver to,
and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan (a "Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in the following
form: "Pay to the order of First Union National Bank, as Trustee for
the registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, without recourse", with all prior and
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intervening endorsements showing a complete chain of endorsement
from the originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording thereon,
and the original recorded power of attorney, if the Mortgage was
executed pursuant to a power of attorney, with evidence of recording
thereon or, if such Mortgage or power of attorney has been submitted
for recording but has not been returned form the applicable public
recording office or is not otherwise available, a copy of such
Mortgage or power of attorney, as the case may be, certified by the
Servicer to be a true and complete copy of the original submitted
for recording with the recorded original to be delivered by the
Servicer to the Trustee promptly after receipt thereof;
(iii) an original Assignment of the Mortgage executed in the
following form: "First Union National Bank, as Trustee for the
registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator
to the Person assigning the Mortgage to the Trustee as contemplated
by the immediately preceding clause (iii) or, if any such Assignment
has been submitted for recording but has not been returned from the
applicable public recording office or is not otherwise available, a
copy of such Assignment certified by the Servicer to be a true and
complete copy of the original submitted for recording with the
recorded original to be delivered by the Servicer to the Trustee
promptly after receipt thereof;
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together
with all endorsements or riders that were issued with or subsequent
to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented
therein as a fee interest vested in the Mortgagor, or in the event
such original title policy is unavailable, a written commitment or
uniform binder or preliminary report of title issued by the title
insurance or escrow company.
(b) The Depositor shall cause the Seller, no later than 30 days
following the Seller's receipt of original recording information and in any
event within one year following the Closing Date, to submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee or the
Certificate Insurer, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.03(a)(iii) and (iv) above. In the
event that any such Assignment is lost or returned unrecorded because of a
defect therein, the Depositor shall promptly prepare or cause to
35
be prepared a substitute Assignment or cure or cause to be cured such defect, as
the case may be, and thereafter cause each such Assignment to be duly recorded.
(c) If any original Mortgage Note referred to in Section 2.03(a)(i)
cannot be located, the obligations of the Depositor to cause the Seller to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trustee of a photocopy of the original of such Mortgage Note, with a Lost Note
Affidavit to follow within one Business Day. If any of the documents referred to
in Sections 2.03(a)(ii), (iii) or (iv) above has as of the Closing Date or
Pre-Funded Loan Transfer Date been submitted for recording but either (x) has
not been returned from the applicable public recording office or (y) such public
recording office has retained the original of such document, the obligations of
the Depositor to cause the Seller to deliver such documents shall be deemed to
be satisfied upon (1) delivery to the Trustee of a copy of each such document
certified by the Seller in the case of (x) above or the applicable public
recording office in the case of (y) above to be a true and complete copy of the
original that was submitted for recording and (2) if such copy is certified by
the Seller, delivery to the Trustee promptly upon receipt thereof of either the
original or a copy of such document certified by the applicable public recording
office to be a true and complete copy of the original. Notice shall be provided
to the Trustee, the Certificate Insurer and the Rating Agencies by the Seller if
delivery pursuant to clause (2) above will be made more than 180 days after the
Closing Date or Pre-Funded Loan Transfer Date, as the case may be. If the
original lender's title insurance policy was not delivered pursuant to Section
2.03(a)(vi) above, the Depositor shall cause the Seller to deliver to the
Trustee, promptly after receipt thereof, the original lender's title insurance
policy. The Depositor shall cause the Seller to deliver to the Trustee promptly
upon receipt thereof any other original documents constituting a part of a
Mortgage File received with respect to any Mortgage Loan, including, but not
limited to, any original documents evidencing an assumption or modification of
any Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Seller, the Depositor or the Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
Insurer. In the event that any such original document is required pursuant to
the terms of this Section to be a part of a Mortgage File, such document shall
be delivered promptly to the Trustee. Any such original document delivered to or
held by the Depositor or the Seller that is not required pursuant to the terms
of this Section to be a part of a Mortgage File, shall be delivered promptly to
the Servicer.
(e) The Depositor herewith delivers to the Trustee an executed copy
of the Unaffiliated Seller's Agreement. In addition to the foregoing, the
Depositor shall cause the Certificate Insurer to deliver the Policy to the
Trustee for the benefit of the Certificateholders.
Section 2.04. Acceptance by Trustee.
(a) The Trustee acknowledges receipt of the Policy and, subject to
the provisions of Section 2.03 and subject to the review described in the next
paragraph below and any exceptions noted on the exception report described in
the next paragraph
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below, the documents referred to in Section 2.03 (other than such documents
described in Section 2.03(a)(v)) above and all other assets included in the
definition of "Trust Fund" (to the extent of amounts deposited into the
Collection Account, the Redemption Account and the Pre-Funding Account) and
declares that it holds and will hold such documents and the other documents
delivered and to be delivered to it constituting a Mortgage File, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
(b) The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File relating to the Initial Mortgage Loans and the
Additional Mortgage Loans within 30 days after the Closing Date, and to review
each Mortgage File relating to each Pre-Funded Mortgage Loan within 90 days of
the Pre-Funded Loan Transfer Date for such Pre-Funded Mortgage Loan, and to
certify in substantially the form attached hereto as Exhibit C-1 that, as to
each Mortgage Loan (other than any Mortgage Loan which has been certified as
having been paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such certification),
(i) all documents constituting part of such Mortgage File required to be
delivered to it pursuant to this Agreement are in its possession, (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (1) through (3), (6), (9)(A), (10), (13) and (16) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting such review,
the Trustee is under no duty or obligation (i) to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they have actually been recorded or that they are other than what they purport
to be on their face, or (ii) to determine whether any Mortgage File should
include any of the documents specified in clause (v) of Section 2.03(a).
(c) Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Servicer and the Certificate Insurer
a final certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.
(d) If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
finds any document or documents constituting a part of a Mortgage File to be
missing or defective in any material respect, at the conclusion of its review
the Trustee shall so notify the Depositor, the Servicer and the Certificate
Insurer. In addition, upon the discovery by the Depositor, the Servicer or the
Trustee of a breach of any of the representations and warranties made by the
Seller in the related Unaffiliated Seller's Agreement or by the Originator in
the Purchase and Assignment Agreement in respect of any Mortgage Loan which
materially adversely affects such Mortgage Loan or the interests of the related
Certificateholders in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties and the Certificate
Insurer.
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Section 2.05. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File or of the
breach by the Seller of any representation, warranty or covenant under the
Unaffiliated Seller's Agreement or by the Originator in the Purchase and
Assignment Agreement in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Trustee or the Originator, as the case may be, shall
promptly notify the Originator, the Seller, the Servicer, the Depositor and the
Certificate Insurer of such defect, missing document or breach and request that
the Seller and the Originator deliver such missing document or cure such defect
or breach within 60 days from the date the Seller and the Originator were
notified of such missing document, defect or breach, and if the Seller or the
Originator does not deliver such missing document or cure such defect or breach
in all material respects during such period, the Trustee shall enforce the
Seller's obligation under the Unaffiliated Seller's Agreement and the
Originator's obligation under the Purchase and Assignment Agreement (i) in
connection with any such breach that could not reasonably have been cured within
such 60 day period, if the Seller or the Originator shall have commenced to cure
such breach within such 60 day period, to proceed thereafter diligently and
expeditiously to cure the same within the period provided under the Unaffiliated
Seller's Agreement or the Purchase and Assignment Agreement and (ii) in
connection with any such breach (subject to clause (i) above) or in connection
with any missing document defect, to repurchase such Mortgage Loan from the
Trust Fund at the Purchase Price within 60 days after the date on which it was
notified (subject to Section 2.05(e)) of such missing document, defect or
breach, if and to the extent that the Seller is obligated to do so under the
Unaffiliated Seller's Agreement and the Originator is obligated to do so under
the Purchase and Assignment Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account and the Trustee, upon
receipt of written certification from the Servicer of such deposit, shall
release the related Mortgage File to the Seller or the Originator, as the case
may be, and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Seller or the Originator shall
furnish to it and as shall be necessary to vest in the Seller or the Originator,
as the case may be, any Mortgage Loan released pursuant hereto and the Trustee
shall have no further responsibility with regard to such Mortgage File. In lieu
of repurchasing any such Mortgage Loan as provided above, if so provided in the
Purchase and Assignment Agreement, the Originator may cause such Mortgage Loan
to be removed from the Trust Fund (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.05(d). It is
understood and agreed that the obligation of the Seller and the Originator to
cure or to repurchase (or to substitute for) any Mortgage Loan as to which a
document is missing, a material defect in a constituent document exists or as to
which such a breach has occurred and is continuing shall constitute the sole
remedy respecting such omission, defect or breach available to the Trustee on
behalf of the Certificateholders and the Certificate Insurer.
(b) [Reserved]
(c) [Reserved]
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(d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.05(a), must be effected prior
to the date which is two years after the Startup Day for the Trust Fund.
As to any Deleted Mortgage Loan for which the Originator substitutes
a Qualified Substitute Mortgage Loan or Loans, such substitution shall be
effected by the Originator delivering to the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.03, together with
an Officers' Certificate providing that each such Qualified Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.04 and deliver to the Depositor, the Servicer and the
Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan or
Loans, a certification substantially in the form attached hereto as Exhibit C-1,
with any applicable exceptions noted thereon. Within one year of the date of
substitution, the Trustee shall deliver to the Depositor, the Servicer and the
Certificate Insurer a certification substantially in the form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or Loans, with
any applicable exceptions noted thereon. Monthly Payments due with respect to
Qualified Substitute Mortgage Loans in the month of substitution are not part of
the Trust Fund and will be retained by the Originator. For the month of
substitution, distributions to Certificateholders will reflect the collections
and recoveries in respect of such Deleted Mortgage Loan in the Collection Period
preceding the month of substitution and the Originator shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Servicer shall amend the Mortgage Loan Schedule to reflect
the removal of such Deleted Mortgage Loan from the terms of this Agreement and
the substitution of the Qualified Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Mortgage Pool and shall be subject in all respects to the terms of
this Agreement and, in the case of a substitution effected by the Originator,
the Purchase and Assignment Agreement, including, in the case of a substitution
effected by the Originator all applicable representations and warranties thereof
included in the Purchase and Assignment Agreement as of the date of
substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-Off Date, together
with one month's interest on such principal balance at the applicable Net
Mortgage Rate. On the date of such substitution, the Originator will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Shortfall Amount, if any, and the Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Servicer of such deposit, shall release to the Originator
the
39
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Originator shall
deliver to it and as shall be necessary to vest therein any Deleted Mortgage
Loan released pursuant hereto.
In addition, the Originator shall obtain at its own expense and
deliver to the Trustee and the Certificate Insurer an Opinion of Counsel to the
effect that such substitution will not cause (a) any federal tax to be imposed
on the REMIC Trust, including, without limitation, any federal tax imposed on
"prohibited transactions" under Section 860F(a)(l) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code, or
(b) the REMIC Trust to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the Seller, the
Servicer, the Trustee or the Certificate Insurer that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties and the Certificate Insurer. In
connection therewith, the Originator and the Seller shall be obligated to
repurchase or, subject to the limitations set forth in Section 2.05(d),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.05(a).
The Trustee shall reconvene to the Seller or the Originator, as the case may be,
the Mortgage Loan to be released pursuant hereto in the same manner, and on the
same terms and conditions, as it would a Mortgage Loan repurchased for breach of
a representation or warranty.
Section 2.06. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trustee for
the benefit of the Certificateholders and the Certificate Insurer that as of the
Closing Date the assignment of the Depositor's rights, but none of its
obligations, under the Unaffiliated Seller's Agreement is valid, enforceable and
effective to permit the Trustee to enforce the obligations of the Seller
thereunder.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.06 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
and the Certificate Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Depositor, the Servicer
or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders and the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery.
(c) The Depositor is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its incorporation.
40
(d) The Depositor has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and perform, and
to enter into and consummate, all transactions contemplated by this Agreement.
The Depositor has duly authorized the execution, delivery and performance of
this Agreement, has duly executed and delivered this Agreement, and this
Agreement, assuming due authorization, execution and delivery by the Depositor
and the Trustee, constitutes a legal, valid and binding obligation of the
Depositor, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity.
(e) The execution and delivery of this Agreement by the Depositor
and the performance of and compliance with the terms of this Agreement will not
(a) violate the Depositor's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation, injunction, writ, decree
or the like affecting the Depositor or by which the Depositor is bound or (b)
result in a breach of or constitute a default under any indenture or other
material agreement to which the Depositor is a party or by which the Depositor
is bound, which in the case of either clause (a) or (b) will have a material
adverse effect on the Depositor's ability to perform its obligations under this
Agreement.
(f) There are no actions or proceedings against, investigations
known to it of, the Depositor before any court, administrative or other tribunal
(A) that might prohibit its entering into this Agreement, (B) seeking to prevent
the consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or validity or enforceability of, this
Agreement.
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
Section 2.07. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the
Trustee, for the benefit of each of the Trustee, the Certificateholders, the
Certificate Insurer and to the Depositor that as of the Closing Date or as of
such date specifically provided herein:
(i) The Servicer is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is and will remain duly licensed under and in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and
41
the servicing of the Mortgage Loan in accordance with the terms of
this Agreement;
(ii) The Servicer has the full power and authority to conduct
its business as presently conducted by it and to execute, deliver
and perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Servicer has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with its terms except
as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Servicer and the performance of and compliance with the terms of
this Agreement will not (a) violate the Servicer's charter or
by-laws or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the like
affecting the Servicer or by which the Servicer is bound or (b)
result in a breach of or constitute a default under any indenture or
other material agreement to which the Servicer is a party or by
which the Servicer is bound, which in the case of either clause (a)
or (b) will have a material adverse effect on the Servicer's ability
to perform its obligations under this Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
of it contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Servicer will
deliver possession of a complete Mortgage File, except for such
documents as have been delivered to the Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Servicer before any court,
administrative or other tribunal (A) that might prohibit its
entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement or
(C) that might prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or validity or
enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by the Servicer of, or compliance by the
Servicer with, this Agreement or the consummation of the
transactions contemplated by
42
this Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the Closing
Date.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.07 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor, the Certificateholders and the Certificate Insurer. Upon discovery by
any of the Depositor, the Servicer or the Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the Trustee and the Certificate Insurer.
Section 2.08. Issuance of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage Loans
and the delivery to it of the Mortgage Files, subject to the provisions of
Sections 2.03 and 2.04, together with the assignment to it of all other assets
included in the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor, the Certificates in authorized denominations. The interests
evidenced by the Certificates constitute the entire beneficial ownership
interest in the Trust Fund.
ARTICLE 3.
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders and the Certificate Insurer (as determined by the Servicer in
its reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or
any Affiliate of the Servicer or any Sub-Servicer may have with the
related Mortgagor;
(ii) the ownership of any Certificate by the Servicer or any
Affiliate of the Servicer;
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(iii) the Servicer's obligation to make Monthly Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee when the Servicer believes it reasonably necessary in its best judgment
in order to comply with its servicing duties hereunder, to execute and deliver,
on behalf of the Certificateholders and the Trustee or any of them, and upon
notice to the Trustee, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Mortgage Loans and the Mortgaged Properties and
to institute foreclosure proceedings or obtain a deed-in-lieu of foreclosure so
as to convert the ownership of such properties, and to hold or cause to be held
title to such properties, on behalf of the Trustee and Certificateholders. The
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.19, the
Trustee shall execute, at the written request of the Servicer, and furnish the
Servicer and any Sub-Servicer any special or limited powers of attorney and
other documents necessary or appropriate to enable the Servicer or any
Sub-Servicer to carry out their servicing and administrative duties hereunder
and the Trustee shall not be liable for the actions of the Servicer or any
Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph, the
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or distributions to Certificateholders, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan and
the Servicer shall not (unless the Mortgagor is in default with respect to the
Mortgage Loan or such default is, in the judgment of the Servicer, reasonably
foreseeable) permit any
44
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan or any modification, waiver or amendment of any term of any
Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or final, temporary or proposed
Treasury regulations promulgated thereunder) and (B) cause the REMIC Trust 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" under the
REMIC Provisions.
The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements (provided
that the Servicer shall have obtained the consent of the Certificate Insurer and
provided such agreements would not result in a withdrawal or a downgrading by
any Rating Agency of the rating or any shadow rating on any Class of
Certificates) with Sub-Servicers, for the servicing and administration of the
Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact business in
the state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a FHLMC or FNMA approved mortgage servicer.
Each Sub-Servicing Agreement must impose on the Sub-Servicer requirements
conforming to the provisions set forth in Section 3.08 and provide for servicing
of the Mortgage Loans consistent with the terms of this Agreement. The Servicer
will examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders, without the consent of the
Certificate Insurer. Any variation without the consent of the Certificate
Insurer from the provisions set forth in Section 3.08 relating to insurance or
priority requirements of Sub-Servicing Accounts, or credits and charges to the
Sub-Servicing Accounts or the timing and amount of remittances by the
Sub-Servicers to the Servicer, are conclusively deemed to be inconsistent with
this Agreement and therefore prohibited. The Servicer shall deliver to the
Trustee and the Certificate Insurer copies of all Sub-Servicing Agreements, and
any amendments or modifications thereof, promptly upon the Servicer's execution
and delivery of such instruments.
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(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer,
shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and of the Seller under the Unaffiliated Seller's
Agreement, including, without limitation, any obligation to make advances in
respect of delinquent payments as required by a Sub-Servicing Agreement, or to
purchase a Mortgage Loan on account of missing or defective documentation or on
account of a breach of a representation, warranty or covenant, as described in
Section 2.05(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, and shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement, to the extent, if any, that such recovery exceeds all amounts due
in respect of the related Mortgage Loans, or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Unaffiliated Seller's Agreement
against the Seller shall be effected by the Servicer to the extent it is not the
Seller, otherwise by the Trustee, in accordance with the foregoing provisions of
this paragraph.
Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement but only with the prior consent of the Certificate
Insurer. In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Sub-Servicer or the Servicer, and
the Servicer either shall service directly the related Mortgage Loans or shall
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that (i)
such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to a
Servicer Event of Default) or (ii) clearly and unambiguously states that any
termination fee is the sole responsibility of the Servicer and none of the
Trustee, the Certificateholders or the Certificate Insurer, has any liability
therefor, regardless of the circumstances surrounding such termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer or reference to actions taken through a Sub-Servicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Certificateholders and the Certificate Insurer for the servicing
and administering of the Mortgage Loans in accordance with the provisions of
Section 3.01 without diminution of such obligation or
46
liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the Sub-Servicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
any agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing Agreements
by Trustee.
In the event the original Servicer shall for any reason no longer be
the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Trustee or its designee shall thereupon assume all of the rights
and obligations of the Servicer under each Sub-Servicing Agreement that the
Servicer may have entered into, unless the Trustee elects to terminate any
Sub-Servicing Agreement in accordance with its terms as provided in Section
3.03. Upon such assumption, the Trustee, its designee or the successor servicer
for the Trustee appointed pursuant to Section 7.02 shall be deemed, subject to
Section 3.03, to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under any Sub-Servicing Agreement.
The Servicer at its expense shall, upon request of the Trustee,
deliver to the assuming party all documents and records relating to each
Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, (ii)
47
extend the due dates for the Monthly Payments due on a Mortgage Note for a
period of not greater than 90 days or (iii) if the Servicer provides prior
written notice to the Certificate Insurer to which the Certificate Insurer does
not object within two Business Days, extend the due dates for Monthly Payments
due on a Mortgage Loan for a period of not greater than 180 days; provided, that
any extension pursuant to clause (ii) or clause (iii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, and provided, further, that no more than two such extensions shall be
granted with respect to any single Mortgage Loan.
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
The Servicer shall establish and maintain one or more accounts (the
"Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
hazard insurance premiums, and comparable items for the account of the
Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Account, in no
event more than one Business Day after the deposit of such Escrow Payments, for
the purpose of effecting the timely payment of any such items as required under
the terms of this Agreement. Withdrawals of amounts from a Servicing Account may
be made only to (i) effect timely payment of taxes, assessments, hazard
insurance premiums, and comparable items; (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement) out
of related collections for any advances made pursuant to Section 3.01 (with
respect to taxes and assessments) and Section 3.16 (with respect to hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article X.
As
48
part of its servicing duties, the Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. Notwithstanding the foregoing, neither the Servicer nor
any Sub-Servicer shall be obligated to collect Escrow Payments if the related
Mortgage Loan does not require such payments but the Servicer and each
Sub-Servicer shall nevertheless be obligated to make Servicing Advances as
provided in Section 3.01.
Section 3.10. Collection and Distribution Accounts.
(a) On behalf of the Trust Fund, the Servicer shall establish and
maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee, the Certificateholders
and the Certificate Insurer. On behalf of the Trust Fund, the Servicer shall
deposit or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Servicer's receipt thereof, and shall thereafter
deposit in the Collection Account, in no event more than one Business Day after
the deposit of such payments into such clearing account, the following payments
and collections received or made by it on or subsequent to the Cut-off Date:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds (other
than proceeds collected in respect of any particular REO Property
and amounts paid by the Servicer in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to Section
3.14 in connection with any losses realized on Permitted Investments
with respect to funds held in the Collection Account;
(v) any amounts required to be deposited by the Servicer
pursuant to the second paragraph of Section 3.16(a) in respect of
any blanket policy deductibles; and
(vi) any Purchase Price or Substitution Shortfall Amount
delivered to the Servicer.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the
49
foregoing, payments in the nature of prepayment or late payment charges or
assumption fees need not be deposited by the Servicer in the Collection Account.
In the event the Servicer shall deposit in the Collection Account any amount not
required to be deposited therein, it may at any time withdraw such amount from
the Collection Account, any provision herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Servicer shall deliver to
the Trustee in immediately available funds for deposit in the Distribution
Account on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Distribution Amount for the related
Distribution Date then on deposit in the Collection Account, and (ii) on each
Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section
3.11 and shall pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution Account may
be invested in Permitted Investments in accordance with the provisions set forth
in Section 3.12. The Servicer shall give notice to the Trustee and the
Certificate Insurer of the location of the Collection Account maintained by it
when established and prior to any change thereof. The Trustee shall give notice
to the Servicer, the Depositor and the Certificate Insurer of the location of
the Distribution Account when established and prior to any change thereof. (d)
Funds held in the Collection Account at any time may be delivered by the
Servicer to the Trustee for deposit in the Distribution Account. In the event
the Servicer shall deliver to the Trustee for deposit in the Distribution
Account any amount not required to be deposited therein, it may at any time
request that the Trustee withdraw such amount from the Distribution Account and
remit to it any such amount, any provision herein to the contrary
notwithstanding. In addition, the Servicer shall deliver to the Trustee from
time to time for deposit the amounts set forth in clauses (i) through (v) below,
and the Trustee shall deposit such amounts in the Distribution Account:
(i) any Monthly Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to Section
3.25(d) or (f) in connection with any REO Property;
50
(iii) any amounts to be paid by the Terminator in connection
with a purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01;
(iv) any amounts required to be deposited pursuant to Section
3.26 in connection with any Prepayment Interest Shortfalls; and
(v) any Stayed Funds, as soon as permitted by the federal
bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Trustee shall deposit such funds in the Distribution Account, subject to
withdrawal thereof pursuant to Section 7.02(b) or as otherwise permitted
hereunder. In addition, the Servicer shall deposit in the Distribution Account
any amounts required to be deposited pursuant to Section 3.14 in connection with
losses realized on Permitted Investments with respect to funds held in the
Distribution Account.
(f) Notwithstanding any contrary provision of this Agreement
(including the provisions of this Section 3.10), (i) the Servicer shall be
deemed to be in compliance with the provisions of this Section 3.10 if amounts
in any clearing account referred to in Section 3.10(a) which the Servicer would
otherwise be required by this Section 3.10 to deposit or cause to be deposited
into the Collection Account are instead deposited or caused to be deposited into
the Distribution Account provided that such deposit into the Distribution
Account is made within the time period that such amount would otherwise have
been required to be deposited into the Collection Account (i.e., within one
Business Day of the Servicer's receipt thereof), (ii) amounts otherwise payable
or distributable from the Collection Account may be paid or distributed from the
Distribution Account to the extent of any funds deposited into the Distribution
Account rather than the Collection Account pursuant to clause (i) (as certified
by the Servicer), and (iii) the provisions of this Agreement (including
references herein to the Collection Account and the Distribution Account) shall
be interpreted and construed to give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Trustee for deposit in the Distribution
Account the amounts required to be so remitted pursuant to Section
3.10(b) or permitted to be so remitted pursuant to the first
sentence of Section 3.10(d);
(ii) subject to Section 3.18(d), to reimburse the Servicer for
Monthly Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees) of
Monthly Payments on Mortgage Loans with respect to which such
51
Monthly Advances were made in accordance with the provisions of
Section 4.03;
(iii) subject to Section 3.18(d), to pay the Servicer or any
Sub-Servicer any unpaid Servicing Fees and reimburse any
unreimbursed Servicing Advances with respect to each Mortgage Loan,
but only to the extent of any Liquidation Proceeds and Insurance
Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Servicer Remittance Date any
interest or investment income earned on funds deposited in the
Collection Account and the Distribution Account;
(v) to pay to the Servicer, the Depositor or the Seller, as
the case may be, with respect to each Mortgage Loan that has
previously been purchased or replaced pursuant to Section 2.05 or
Section 3.18(c) all amounts received thereon not included in the
Purchase Price or the Substitution Shortfall Amount;
(vi) to reimburse the Servicer for any Monthly Advance or
Servicing Advance previously made which the Servicer has determined
to be a Nonrecoverable Monthly Advance in accordance with the
provisions of Section 4.03;
(vii) to reimburse the Servicer or the Depositor for expenses
incurred by or reimbursable to the Servicer or the Depositor, as the
case may be, pursuant to Section 6.03;
(viii) to reimburse the Servicer or the Trustee, as the case
may be, for expenses reasonably incurred in respect of the breach or
defect giving rise to the purchase obligation under Section 2.05 or
Section 2.06 of this Agreement that were included in the Purchase
Price of the Mortgage Loan, including any expenses arising out of
the enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances in
respect of, expenses incurred in connection with any Mortgage Loan
pursuant to Section 3.18(b); and
(x) to clear and terminate the Collection Account pursuant to
Section 10.01.
In addition to the foregoing, the Trustee shall be entitled to
withdraw amounts from the Distribution Account and to transfer funds to the
Expense Account on the Business Day immediately preceding each Distribution Date
pursuant to Section 3.27(b) prior to any payments as required pursuant to
Section 4.01. The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent
52
held by or on behalf of it, pursuant to subclauses (ii), (iii), (v), (vi),
(viii) and (ix) above. The Servicer shall provide written notification to the
Trustee, on or prior to the next succeeding Servicer Remittance Date, upon
making any withdrawals from the Collection Account pursuant to subclauses (vi)
and (vii) above.
Section 3.12. The Pre-Funding Account
(a) The Trustee shall establish and maintain the Pre-Funding Account
which shall be titled "Pre-Funding Account, First Union National Bank, as
trustee for the registered holders of Emergent Home Equity Loan Trust 1997-3,
Mortgage Pass-Through Certificates, Series 1997-3, Class A-1, Class ▇-▇, ▇▇▇▇▇
▇-▇, Class A-4, Class A-5, Class A-6 and Class R" (the "Pre-Funding Account").
Such Account shall be an Eligible Account. Upon receipt of the proceeds of the
sale of the Certificates, on the Closing Date, the Trustee shall, upon the
Seller's direction, from the proceeds of the sale of the Certificates, deposit,
on behalf of the Certificateholders in the Pre-Funding Account, the Original
Pre-Funded Amount.
(b) On any Pre-Funding Loan Transfer Date, the Seller shall instruct
in writing the Trustee to withdraw from the Pre-Funding Account an amount equal
to 100% of the aggregate Principal Balances as of the related Pre-Funding Loan
Cut-Off Date of the Pre-Funding Loans sold to the Trust on such Pre-Funding Loan
Transfer Date and pay such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.02(b) and (c) hereof with
respect to such transfer. The Trustee may conclusively rely on such written
instructions from the Seller.
(c) If the Pre-Funding Amount (other than Pre-Funding Earnings) has
not been reduced to zero by November 1, 1997, after giving effect to any
reductions in the Pre-Funding Amount pursuant to Section 3.12(b), the Trustee
shall withdraw from the Pre-Funding Account on such date and deposit in the
Distribution Account the entire remaining Pre-Funding Amount (exclusive of
Pre-Funding Earnings) for distribution as provided in Section 4.01(a) or
4.01(g), as applicable.
(d) On the October 20, 1997 and November 20, 1997 Distribution Dates
the Trustee shall transfer from the Pre-Funding Account to the Distribution
Account the Pre-Funding Earnings, if any, applicable, respectively, to such
Distribution Dates.
Section 3.13. The Interest Coverage Account
(a) On behalf of the Trust Fund, the Trustee, as trustee, shall
establish and maintain an account, titled the "Interest Coverage Account for the
registered holders of Emergent Home Equity Loan Trust 1997-3, Mortgage
Pass-Through Certificates, Series 1997-3, Class A-1, Class ▇-▇, ▇▇▇▇▇ ▇-▇, Class
A-4, Class A-5, Class A-6 and Class R" (the "Interest Coverage Account"), into
which cash will be deposited by the Seller in the amount of $422,828.00 on the
Closing Date. The Trustee shall invest amounts on deposit in the Interest
Coverage Account in Eligible Investments. The Interest Coverage Account will not
be an asset of the REMIC.
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(b) On the October 20, 1997 Distribution Date, the Trustee shall
withdraw $260,834.00 from the Interest Coverage Account and deposit it into the
Distribution Account. On the November 20, 1997 Distribution Date, the Trustee
shall withdraw $161,949.00 from the Interest Coverage Account and deposit it
into the Distribution Account.
(c) The Trustee shall pay any amounts remaining in the Interest
Coverage Account after the November 20, 1997 Distribution Date to the Seller
immediately after such Distribution Date. The Trustee shall thereupon terminate
the Interest Coverage Account.
Section 3.14. Investment of Funds in the Investment Accounts.
(a) The Servicer may direct any depository institution maintaining
the Collection Account, the Expense Account, the Distribution Account, the
Servicing Accounts, the Redemption Account and the Pre-Funding Account, (each,
for purposes of this Section 3.14, an "Investment Account"), to invest the funds
in such Investment Account in one or more Permitted Investments bearing interest
or sold at a discount, and maturing, unless payable on demand, (i) no later than
the Business Day immediately preceding the next Distribution Date, if a Person
other than the Trustee is the obligor thereon, and (ii) no later than the next
Distribution Date, if the Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Trustee (in
its capacity as such) or in the name of a nominee of the Trustee. The Trustee
shall be entitled to sole possession over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment
shall be delivered directly to the Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Trustee or its nominee. In the event amounts on deposit in an Investment Account
are at any time invested in a Permitted Investment payable on demand, the
Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the
lesser of (1) all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Trustee that such
Permitted Investment would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the Distribution
Account and the Servicing Accounts held by or on behalf of the Servicer or the
Trustee, shall be for the benefit of the Servicer and shall be subject to its
withdrawal in accordance with Section 3.11. The Servicer shall deposit in the
Collection Account, the Expense Account or the Distribution Account, as
applicable, the amount of any loss incurred in
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respect of any such Permitted Investment made with funds in such accounts
immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee may and, subject to Section 8.01 and Section 8.02(a)(v),
upon the request of the Certificate Insurer, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.
Section 3.15. [intentionally omitted]
Section 3.16. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgaged
Property fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser of the
current principal balance of such Mortgage Loan and the amount necessary to
fully compensate for any damage or loss to the improvements which are a part of
such property on a replacement cost basis, in each case in an amount not less
than such amount as is necessary to avoid the application of any coinsurance
clause contained in the related hazard insurance policy. The Servicer shall also
cause to be maintained fire and hazard insurance with extended coverage on each
REO Property in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements which are a part of such property
and (ii) the outstanding principal balance of the related Mortgage Loan at the
time it became an REO Property, plus accrued interest at the Mortgage Rate and
related Servicing Advances. The Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Servicer would follow in
servicing loans held for its own account, subject to the terms and conditions of
the related Mortgage and Mortgage Note) shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.11, if received in respect
of a Mortgage Loan, or in the REO Account, subject to withdrawal pursuant to
Section 3.25, if received in respect of an REO Property. Any cost incurred by
the Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Certificateholders and the Certificate Insurer, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit. It is understood
and agreed that no earthquake or other additional insurance is to be required of
any Mortgagor other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Mortgaged Property or REO Property is at any time in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged
55
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program).
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
Key Rating Guide insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.16, it being understood and agreed
that such policy may contain a deductible clause, in which case the Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.16, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Trustee, Certificateholders and the
Certificate Insurer, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of the Servicer's obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of FNMA or FHLMC, unless the Servicer has obtained a
waiver of such requirements from FNMA or FHLMC. The Servicer shall be deemed to
have complied with this provision if an Affiliate of the Servicer has such
errors and omissions and fidelity bond coverage and, by the terms of such
insurance policy or fidelity bond, the coverage afforded thereunder extends to
the Servicer. Any such errors and omissions policy and fidelity bond shall by
its terms not be cancelable without thirty days' prior written notice to the
Trustee. The Servicer shall also cause each Sub-Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet
such requirements.
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any conveyance
or prospective conveyance of any Mortgaged Property by any Mortgagor (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 the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not exercise any such rights if prohibited by law from doing so.
If the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, or if any of the other conditions set forth in the
proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
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
56
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note, provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer and has a credit risk rating
at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Trustee that any
such substitution or assumption agreement has been completed by forwarding to
the Trustee the executed original of such substitution or assumption agreement,
which document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.17, 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 3.18. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with the
servicing standard set forth in Section 3.01, 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 3.07. The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that such costs and
expenses will be recoverable as Servicing Advances by the Servicer as
contemplated in Section 3.11 and 3.25. The foregoing is subject to the provision
that, in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Servicer shall not be required to expend its own funds
toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.
57
(b) Notwithstanding the foregoing provisions of this Section 3.18 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Servicer has received actual notice of, or has actual knowledge of,
the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trustee, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Certificateholders or the Certificate Insurer would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer has also
previously determined, based on its reasonable judgment and a prudent report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary to bring
the Mortgaged Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, hazardous wastes or petroleum-based
materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any federal, state or
local law or regulation, or that if any such materials are present for
which such action could be required, that it would be in the best economic
interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.18 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the
best economic interest of the Trust Fund to take such actions as are necessary
to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of such Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11 (ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
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(c) The Servicer may at its option purchase from the Trust Fund any
Mortgage Loan that is 90 days or more delinquent, which the Servicer determines
in good faith will otherwise become subject to foreclosure proceedings (evidence
of such determination to be delivered in writing to the Trustee and the
Certificate Insurer prior to purchase), at a price equal to the Purchase Price.
The Purchase Price for any Mortgage Loan purchased hereunder shall be deposited
in the Collection Account, and the Trustee, upon receipt of written
certification from the Servicer of such deposit, shall release or cause to be
released to the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
the Servicer shall furnish and as shall be necessary to vest in the Servicer
title to any Mortgage Loan released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
Monthly Advances, pursuant to Section 3.11(ii) or (iii); second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Distribution Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery allocated to interest is less than the full amount of
accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: first, to unpaid
Servicing Fees; and second, to the balance of the interest then due and owing.
The portion of the recovery so allocated to unpaid Servicing Fees shall be
reimbursed to the Servicer or any Sub-Servicer pursuant to Section 3.11(iii).
The portion of the recovery allocated to interest (net of unpaid Servicing Fees)
and the portion of the recovery allocated to principal of the Mortgage Loan
shall be applied as follows: first, to reimburse the Servicer for any related
unreimbursed Monthly Advances in accordance with Section 3.11 (ii), and second,
as part of the amounts to be transferred to the Distribution Account in
accordance with Section 3.10(b).
Section 3.19. Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full shall be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee
and the Certificate Insurer by a certification in the form of Exhibit E-2 (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, the Trustee shall
promptly release the related Mortgage File to the Servicer. No expenses incurred
in connection with any instrument of satisfaction or deed of reconveyance shall
be chargeable to the Collection Account or the Distribution Account.
Subject to the following sentence from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, including,
for this purpose,
59
collection under any insurance policy relating to the Mortgage Loans, the
Trustee shall, upon request of the Servicer and delivery to the Trustee of a
Request for Release in the form of Exhibit E-1, release the related Mortgage
File to the Servicer, and the Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Trustee
when the need therefor by the Servicer no longer exists, unless the Mortgage
Loan has been liquidated and the Liquidation Proceeds no longer exist, unless
the Mortgage Loan has been liquidated and the Liquidation Proceeds relating to
the Mortgage Loan have been deposited in the Collection Account or the Mortgage
File or such document has 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 nonjudicially, and the Servicer has delivered to
the Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, a copy of the Request for
Release shall be released by the Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Servicer, with copies to the Certificate Insurer to
be delivered by the Servicer, any court pleadings, requests for trustee's sale
or other documents necessary to the foreclosure or trustee's sale in respect of
a Mortgaged Property or to any legal action brought to obtain judgment against
any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Section 3.20. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan payable solely from payments of interest in respect of such Mortgage Loan,
subject to Section 3.26. In addition, the Servicer shall be entitled to recover
unpaid Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the
extent permitted by Section 3.11(iii) and out of amounts derived from the
operation and sale of an REO Property to the extent permitted by Section 3.25.
The right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement; provided, however, that
the Servicer may pay any fee to a Sub-Servicer out of the Servicing Fee.
60
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.26)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, pursuant to Section 3.27 to withdraw from the Expense
Account, and pursuant to Section 3.25(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.14 and Section 3.26. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums for the insurance required by Section
3.16, to the extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.21. Reports to the Trustee; Collection Account Statements.
Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Trustee, the Certificate Insurer and the Depositor
a statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Distribution Date and showing, for
the period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement may be in the form of the then current FNMA Monthly Accounting Report
for its Guaranteed Mortgage Pass-Through Program with appropriate additions and
changes, and shall also include information as to the aggregate of the
outstanding principal balances of all of the Mortgage Loans as of the last day
of the calendar month immediately preceding such Distribution Date. Copies of
such statement shall be provided by the Trustee to any Certificateholder and to
any Person identified to the Trustee as a prospective transferee of a
Certificate, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Trustee.
Section 3.22. Statement as to Compliance.
The Servicer will deliver to the Trustee, the Certificate Insurer
and the Depositor not later than 90 days following the end of the fiscal year of
the Servicer, which as of the Closing Date ends on the last day in December, an
Officers' Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all of its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such report shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such report is delivered by the Servicer to the Trustee.
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Section 3.23. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, the Servicer, at its expense, shall cause a nationally recognized firm
of independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in the Uniform Single Audit Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Servicer shall furnish a copy of
such report to the Trustee, the Certificate Insurer and each Rating Agency.
Copies of such report shall be provided by the Trustee to any Certificateholder
upon request at the Servicer's expense, provided that such report is delivered
by the Servicer to the Trustee and such report does not prohibit such delivery.
Section 3.24. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision, the
FDIC, and any other federal or state banking or insurance regulatory authority
that may exercise authority over any Certificateholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Certificate
Insurer, the Trustee and to any Person identified to the Servicer as a
prospective transferee of a Certificate, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.
Section 3.25. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trustee, or its nominee, on behalf of the
Certificateholders and the Certificate Insurer. The Servicer, on behalf of the
Trust Fund, shall either sell any REO Property within three years after the
Trust Fund acquires ownership of such REO Property for purposes of Section
860(a)(8) of the Code or request from the Internal Revenue Service, more than 60
days before the day on which the three-year grace period would otherwise expire
an extension of the three-year grace period, unless the Servicer had delivered
to the Trustee an Opinion of Counsel, addressed to the Trustee,
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the Depositor and the Certificate Insurer, to the effect that the holding by the
Trust Fund of such REO Property subsequent to three years after its acquisition
will not result in the imposition on the REMIC Trust of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause the
REMIC Trust to fail to qualify as a REMIC under Federal law at any time that any
Certificates are outstanding. The Servicer shall manage, conserve, protect and
operate each REO Property for the Certificateholders solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the REMIC Trust of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions.
(b) The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property separate and apart
from its own funds and general assets and shall establish and maintain with
respect to REO Properties an account held in trust for the Trustee for the
benefit of the Certificateholders and the Certificate Insurer (the "REO
Account"), which shall be an Eligible Account. The Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property. The Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject only
to the specific requirements and prohibitions of this Agreement, to do any and
all things in connection with any REO Property as are consistent with the manner
in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited, on a daily
basis in the REO Account all revenues received by it with respect to an REO
Property and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:
(i) all insurance premiums due and payable in respect of such
REO Property;
(ii) all real estate taxes and assessments in respect of such
REO Property that may result in the imposition of a lien thereon;
and
(iii) all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the
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payment of such amounts will be recoverable from the rental or sale of the REO
Property.
Notwithstanding the foregoing, the Servicer shall not:
(i) permit the Trust Fund to enter into, renew or extend any
New Lease with respect to any REO Property, if the New Lease by its
terms will give rise to any income that does not constitute Rents
from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real
Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of the
construction of such building or other improvement was completed
before default on the related Mortgage Loan became imminent, all
within the meaning of Section 856(e)(4)(B) of the Code; or
(iv) allow any Person to Directly Operate any REO Property on
any date more than 90 days after its date of acquisition by the
Trust Fund;
unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Trustee and the Certificate Insurer, to the effect that such
action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Servicer may take such actions
as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii) any such contract shall require, or shall be administered
to require, that the Independent Contractor pay all costs and
expenses incurred in connection with the operation and management of
such REO Property, including those listed above and remit all
related revenues (net of such costs and expenses) to the Servicer
soon as practicable, but in no event later than thirty days
following the receipt thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.25(c) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Servicer of
any of its duties and obligations to the Trustee on behalf of the
Certificateholders and the Certificate Insurer with respect to the
operation and management of any such REO Property; and
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(iv) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such
REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.20 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.25(c)(iii).
(d) In addition to the withdrawals permitted under Section 3.25(c),
the Servicer may from time to time make withdrawals from the REO Account for any
REO Property: (i) to pay itself or any Sub-Servicer unpaid Servicing Fees in
respect of the related Mortgage Loan; and (ii) to reimburse itself or any
Sub-Servicer for unreimbursed Servicing Advances and Monthly Advances made in
respect of such REO Property or the related Mortgage Loan. On the Servicer
Remittance Date, the Servicer shall withdraw from each REO Account maintained by
it and deposit into the Distribution Account in accordance with Section
3.10(d)(ii), for distribution on the related Distribution Date in accordance
with Section 4.01, the income from the related REO Property received during the
prior calendar month, net of any withdrawals made pursuant to Section 3.25(c) or
this Section 3.25(d).
(e) Subject to the time constraints set forth in Section 3.25(a),
each REO Disposition shall be carried out by the Servicer at such price and upon
such terms and conditions as the Servicer shall deem necessary or advisable, as
shall be normal and usual in its general servicing activities and as are in
accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Distribution Account in accordance
with Section 3.10(d)(ii) on the Servicer Remittance Date in the month following
the receipt thereof for distribution on the related Distribution Date in
accordance with Section 4.01. Any REO Disposition shall be for cash only (unless
changes in the REMIC Provisions made subsequent to the Startup Day allow a sale
for other consideration).
(g) The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient meet the reporting requirements imposed by such
Sections 6050H, 6050J and 6050P of the Code.
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Section 3.26. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls.
The Servicer shall deliver to the Trustee for deposit into the
Distribution Account on or before 3:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments during the related Collection
Period and (ii) the total amount of its Servicing Fee for the most recently
ended calendar month.
Section 3.27. Expense Account.
(a) The Trustee shall establish and maintain in its name, for the
benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each Distribution
Date, the Trustee shall withdraw from the Distribution Account and deposit into
the Expense Account an amount equal to the product of (i) l/12 of the
Certificate Insurer Premium Rate and (ii) the Class A Certificate Principal
Balance after giving effect to distributions of principal on such Distribution
Date.
(c) The Trustee shall make withdrawals from the Expense Account to
pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.14. Any
earnings on such amounts shall be payable to the Servicer as additional
servicing compensation, and the Servicer shall deposit in the Expense Account
the amount of any loss incurred in respect of any such Permitted Investments
made with funds in the Expense Account immediately upon the realization of such
loss. The Trustee shall give notice to the Depositor and the Certificate Insurer
of the location of the Expense Account on the Closing Date and prior to any
change thereof.
(e) Upon termination of the Trust Fund in accordance with Section
10.01, any amounts remaining in the Expense Account following the payment of all
unpaid Certificate Insurer Premiums shall be released to the Servicer as
additional servicing compensation.
Section 3.28. Obligations of the Servicer in Respect of Monthly
Payments.
In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Monthly Payments or Stated Principal Balances that were made by the Servicer in
a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the
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Servicer, upon discovery or receipt of notice thereof, immediately shall deliver
to the Trustee for deposit in the Distribution Account from its own funds the
amount of any such shortfall and shall indemnify and hold harmless the Trust
Fund, the Trustee, the Certificate Insurer, the Depositor and any successor
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement.
Section 3.29. Redemption Account.
On the Closing Date, U.S. $0.00 will be deposited by the
Seller in an account which will be in the name of, and maintained by, the
Trustee on behalf of the Trust Fund (the "Redemption Account"). On the October
20, 1997 Distribution Date, the Trustee will transfer the entire remaining
amount (other than the reinvestment income described below) on deposit in the
Redemption Account into the Distribution Account for distribution as provided in
Section 4.01(a) or 4.01(g), as applicable. The Trustee shall invest amounts on
deposit in the Redemption Account in Eligible Investments. The Trustee shall pay
any reinvestment income earned on amounts on deposit in the Redemption Account
to the Seller. The Trustee shall terminate the Redemption Account immediately
after the October 20, 1997 Distribution Date and such account will not be an
asset of the REMIC.
ARTICLE 4.
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall, based solely on
information contained in the Remittance Report for such Distribution Date,
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount (less any amount distributed on such Distribution Date as
provided in Section 4.01(g)) and distribute to the following parties the
following amounts, in the following order of priority:
(i) concurrently:
(1) the Holders of the Class A-1 Certificates an amount
equal to (A) the Class A-1 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-1 Certificates;
(2) the Holders of the Class A-2 Certificates an amount
equal to (A) the Class A-2 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance
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Payment has been previously paid to Holders of the Class
A-2 Certificates;
(3) the Holders of the Class A-3 Certificates an amount
equal to (A) the Class A-3 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-3 Certificates;
(4) the Holders of the Class A-4 Certificates an amount
equal to (A) the Class A-4 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-4 Certificates; and
(5) the Holders of the Class A-5 Certificates an amount
equal to (A) the Class A-5 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-5 Certificates;
(6) the Holders of the Class A-6 Certificates an amount
equal to (A) the Class A-6 Interest Distribution Amount
for such Distribution Date, plus (B) an undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-6 Certificates.
(ii) to the Holders of the Class of Class A Certificates then
entitled to receive payment of principal, as provided in paragraph
(b) below, a distribution of principal in an amount equal to the
Principal Distribution Amount (except for any portion thereof
consisting of any related Subordination Increase Amount);
(iii) to the Certificate Insurer, to reimburse the Certificate
Insurer for claims under the Policy, to the extent of Cumulative
Insurance Payments;
(iv) to the Holders of the Class of Class A Certificates then
entitled to receive payment of principal, as provided in paragraph
(b) below, a distribution of principal in an amount equal to the
portion of
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the Principal Distribution Amount consisting of any Subordination
Increase Amount;
(v) to the Certificate Insurer, any amounts remaining due to
the Certificate Insurer under the terms of the Insurance Agreement;
and
(vi) to the Holders of the Class A Certificates, payable from
the remaining Net Monthly Excess Cashflow, an amount equal to any
Relief Act Interest Shortfalls and/or any Prepayment Interest
Shortfalls that were allocated to such holders and therefore not
distributed pursuant to clause (i) above or this clause (vi) for all
prior Distribution Dates;
(vii) to the Holders of the Class R Certificates, the balance,
if any, of the amount in the Distribution Account for such
Distribution Date;
provided, however, that if a Certificate Insurer Default shall have occurred and
be continuing, the distributions with respect to clauses (ii) and (iv) above
shall be made pro-rata to the Class A-1 Certificateholders, the Class A-2
Certificateholders, the Class A-3 Certificateholders, the Class A-4
Certificateholders, the Class A-5 Certificateholders and the Class A-6
Certificateholders on such Distribution Date.
(b) All references above to the Certificate Principal Balance of any
Class of Certificates shall be to the Certificate Principal Balance of such
Class immediately prior to the relevant Distribution Date. All principal
distributed with respect to the Class A Certificates pursuant to Sections
4.01(a)(ii), 4.01(a)(iv) and 4.01(a)(vi) shall be distributed in the following
order: first, to the Holders of the Class A-6 Certificates, to the extent of the
least of (x) the Principal Distribution Amount, (y) the Class A-6 Certificate
Principal Balance and (z) the Class A-6 Lockout Distribution Amount; second, to
the Holders of the Class A-1 Certificates, to reduce the Class A-1 Certificate
Principal Balance to zero; third, to the Holders of the Class A-2 Certificates,
to reduce the Class A-2 Certificate Principal Balance to zero; fourth, to the
Holders of the Class A-3 Certificates, to reduce the Class A-3 Principal Balance
to zero; fifth, to the Holders of the Class A-4 Certificates, to reduce the
Class A-4 Certificate Principal Balance to zero; and sixth, to the Holders of
the Class A-5 Certificates, to reduce the Class A-5 Principal Balance to zero.
In addition to making the distributions required pursuant to Section 4.01(a), on
each Distribution Date for which there exists a Deficiency Amount, the Trustee
shall withdraw from the Distribution Account any amount therein that was
transferred from the Policy Payments Account to the Distribution Account
pursuant to Section 9.04 and distribute to the Holders of the Class A
Certificates (i) an amount equal to any amount required to be paid to such Class
pursuant to Section 4.01(a)(i) for such Distribution Date remaining unpaid after
giving effect to all distributions made pursuant to Section 4.01(a) for such
Distribution Date, (ii) an amount equal to any Remaining Overcollateralization
Deficit on such Distribution Date after giving effect to all distributions made
pursuant to Section 4.01(a) for such Distribution Date and (iii) without
duplication, any other amount constituting a Deficiency Amount.
(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a
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Class A Certificate from amounts paid under the Policy, (i) the Certificate
Insurer shall be subrogated in the manner herein provided to the rights of the
Holder of such Class A Certificate to receive from amounts on deposit in the
Distribution Account the distributions allocable to principal and interest that
would have been distributable to such Holder if no such distribution to such
Holder had been made from amounts paid under the Policy; and (ii) in addition to
the rights of the Class A Certificateholders that the Certificate Insurer may
exercise in accordance with the provisions of Section 9.01, the Certificate
Insurer may exercise any option, vote, right, power or the like with respect to
each Class A Certificate for which Cumulative Insurance Payments are
outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates. So
long as the Book-Entry Certificates are registered in the name of the Depository
or its nominee, the Trustee shall make all distributions on such Certificates by
wire transfers of immediately available funds to the Depository or its nominee.
In the case of Certificates issued in fully-registered, certificated form,
distributions shall be made by wire transfer of immediately available funds to
the account of any such Holder at a bank or other entity having appropriate
facilities therefor, if such Holder shall have so notified the Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Distribution Date and is the registered owner of Certificates having an
initial aggregate Certificate Principal Balance that is in excess of the lesser
of (i) $5,000,000 or (ii) two-thirds of the initial Class Certificate Balance
(or, in the case of the Class R Certificates, a 66% Percentage Interest) of such
Class of Certificates, or otherwise by check mailed by first class mail to the
address of such Holder appearing in the Certificate Register. The Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
The final distribution on each Certificate will be made in like manner, but only
upon presentment and surrender of such Certificate at the Corporate Trust Office
or such other location specified in the notice to Certificateholders of such
final distribution. Payments to the Certificate Insurer on any Distribution Date
will be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer.
Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor or the Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
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(e) The rights of the Certificateholders to receive distributions in
respect of the Certificates, and all interests of the Certificateholders in such
distributions, shall be as set forth in this Agreement. Neither the Holders of
any Class of Certificates nor the Trustee nor the Servicer shall in any way be
responsible or liable to the Holders of any other Class of Certificates in
respect of amounts properly previously distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than three (3) Business Days after the related Determination Date, mail to
each Holder on such date of such Class of Certificates and to the Certificate
Insurer a notice to the effect that:
(i) the Trustee expects that the final distribution with
respect to such Class of Certificates will be made on such
Distribution Date but only upon presentation and surrender of such
Certificates at the office of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and
after the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holder of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificate as to which notice has been given pursuant to this Section
4.01(f) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, contact the remaining non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the Servicer in writing. The costs and expenses of maintaining the
funds in trust and of contacting such Certificateholders shall be paid out of
the assets so held in trust for such Certificateholders. If in one year after
the second notice any such Certificates shall not have been surrendered for
cancellation, the Servicer shall pay to the Certificate Insurer any amount of
such funds that were paid by the Certificate Insurer under the Policy but shall
continue to hold any remaining funds for the benefit of the non-tendering
Certificateholders, and such Certificateholders shall thereafter look solely to
the Servicer for payment thereof, and all liability of the Certificate Insurer
with respect to such trust funds shall thereupon cease. No interest shall accrue
or be payable to any Certificateholder on any amount held in trust by the
Servicer as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(f).
(g) If the amount withdrawn from the Redemption Account and
deposited into the Distribution Account pursuant to Section 3.29 is $100,000 or
more (but not otherwise), the entire amount so withdrawn and deposited shall be
distributed
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by the Trustee on the October 20, 1997 Distribution Date as a prepayment of
principal of the Class A Certificates, pro rata, on the basis of their
respective Certificate Principal Balances. If the amount withdrawn from the
Pre-Funding Account and deposited into the Distribution Account pursuant to
Section 3.12(c) is $100,000 or more (but not otherwise), the entire amount so
withdrawn and deposited shall be distributed by the Trustee on the November 20,
1997 Distribution Date as a prepayment of principal of the Class A Certificates,
pro rata, on the basis of their respective Certificate Principal Balances.
Section 4.02. Statements to Certificateholders.
On each Servicer Remittance Date, the Servicer shall deliver to the
Trustee, the Certificate Insurer and the Rating Agencies by telecopy (or by such
other means as the Servicer and the Trustee, the Certificate Insurer or the
Rating Agencies, as the case may be, may agree from time to time) a report
prepared by the Servicer as to the distributions to be made on the related
Distribution Date and shall forward to the Trustee by overnight mail a computer
readable magnetic tape or diskette of such report. Both reports (each a
"Remittance Report") shall contain the following information:
1. the amount of the distribution to be made on such Distribution
Date to the Holders of each class of Class A Certificates
allocable to principal (separately indicating the amount to be
distributed as a prepayment of principal pursuant to Section
4.01(g));
2. the amount of the distribution to be made on such Distribution
Date to the Holders of each class of Class A Certificates
allocable to interest;
3. the aggregate amount of servicing compensation received by the
Servicer during the related Collection Period and such other
customary information within the knowledge of the Trustee as
the Trustee deems necessary or desirable, or which a
Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
4. the Guaranteed Distribution for such Distribution Date and the
respective provisions thereof allocable to principal and
interest;
5. the Available Distribution Amount for such Distribution Date
(separately indicating the amount to be distributed as a
prepayment of principal pursuant to Section 4.01(g));
6. the amount, if any, by which the Guaranteed Distribution for
such Distribution Date exceeds the Available Distribution
Amount expected to be on deposit in the Distribution Account
on such Distribution Date;
7. the amount of Monthly Advances to be made by the Servicer in
respect of the related Distribution Date, the aggregate amount
of
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Monthly Advances outstanding after giving effect to such
Monthly Advances, and the aggregate amount of Nonrecoverable
Monthly Advances in respect of such Distribution Date;
8. with respect to any reimbursement to be made to the
Certificate Insurer on such Distribution Date pursuant to
Section 4.01(a)(iv), (xi) and (xvi), the amount, if any,
allocable to principal and the amount allocable to interest;
9. Cumulative Insurance Payments after giving effect to the
distributions to be made on such Distribution Date;
10. the Delinquency Percentage for the related Collection Period;
11. the Cumulative Loss Percentage for such Distribution Date;
12. the amount of any Insurance Payment to be made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment to be made to the Certificate
Insurer on such Distribution Date pursuant to Section
4.01(a)(iii) and the amount of Cumulative Insurance Payments
after giving effect to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
13. the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties at the close of business on such
Distribution Date;
14. the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage Rate
of the Mortgage Loans as of the related Due Date;
15. the number and aggregate unpaid principal balance of Mortgage
Loans (a) 30 days past due, (b) 60 days past due, (c) 90 or
more days past due and (d) as to which foreclosure proceedings
have been commenced;
16. with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number of such
Mortgage Loan, the unpaid principal balance and the Stated
Principal Balance of such Mortgage Loan as of the date it
became an REO Property;
17. the book value of any REO Property as of the close of business
on the last Business Day of the calendar month preceding the
Distribution Date;
18. the aggregate amount of Principal Prepayments made during the
related Collection Period;
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19. the aggregate amount of Realized Losses incurred during the
related Collection Period;
20. the aggregate amount of extraordinary Trust Fund expenses
withdrawn from the Collection Account or the Distribution
Account for such Distribution Date;
21. the Class A-1 Certificate Principal Balance, Class A-2
Certificate Principal Balance, Class A-3 Certificate Principal
Balance, Class A-4 Certificate Principal Balance, Class A-5
Certificate Principal Balance and Class A-6 Certificate
Principal Balance, after giving effect to the distributions to
be made on such Distribution Date;
22. the Certificate Factor for each such Class of Certificates
applicable to such Distribution Date;
23. the Interest Distribution Amount in respect of the Class A
Certificates for such Distribution Date and the respective
portions thereof, if any, paid under the Policy or (in the
event of a Deficiency Event) remaining unpaid following the
distributions to be made in respect of such Certificates on
such Distribution Date;
24. the aggregate amount of any Prepayment Interest Shortfalls for
such Distribution Date, to the extent not covered by payments
by the Servicer pursuant to Section 3.26;
25. the aggregate amount of Relief Act Interest Shortfalls for
such Distribution Date;
26. the Required Subordinated Amount for such Distribution Date;
27. the Subordination Increase Amount, if any, for such
Distribution Date;
28. the Subordination Reduction Amount, if any, for such
Distribution Date; and
29. the amount of the distribution to be made on such Distribution
Date to the Holders of the Class R Certificates.
In the case of information furnished pursuant to clauses (1) through
(3) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class.
The Trustee shall forward such Remittance Report to each Holder of
the Class A Certificates on each Distribution Date. To the extent that there are
inconsistencies between the telecopy of the Remittance Report and the hard copy
thereof and information set forth in the computer tape or other media provided
by the Servicer hereunder, the Trustee shall be entitled to rely upon the
telecopy.
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Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Trustee, and the Trustee shall forward
to each Person who at any time during the calendar year was a Holder of a
Regular Certificate (a) a statement containing the information set forth in
clauses (1) through (3) above, aggregated for such calendar year or applicable
portion thereof during which such person was a Certificateholder and (b) such
information contained in the Remittance Reports as required to enable the
Holders of the Regular Certificates to prepare their tax returns. Such
obligation of the Servicer shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Servicer
pursuant to any requirements of the Code as from time to time are in force.
On each Distribution Date, the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Servicer, a copy of the reports forwarded to the Class A
Certificateholders on such Distribution Date and, if different from the amounts
stated in the Remittance Report, a statement setting forth the amounts, if any,
actually distributed with respect to the Residual Certificates, respectively, on
such Distribution Date.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Trustee, and the Trustee shall forward
to each Person who at any time during the calendar year was a Holder of a
Residual Certificate a statement setting forth the amount, if any, actually
distributed with respect to the Residual Certificates, as appropriate,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder.
Upon request, the Servicer shall furnish to the Trustee, and the
Trustee shall forward to each Certificateholder, during the term of this
Agreement, such periodic, special, or other reports or information, whether or
not provided for herein, as shall be reasonable with respect to the
Certificateholder, or otherwise with respect to the purposes of this Agreement,
all such reports or information to be provided at the expense of the
Certificateholder in accordance with such reasonable and explicit instructions
and directions as the Certificateholder may provide. For purposes of this
Section 4.02, the Trustee's duties are limited to the extent that the Trustee
receives timely reports as required from the Servicer.
Section 4.03. [Reserved]; Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances to be made by the Servicer for
any Distribution Date shall equal, subject to Section 4.03(d), the sum of (i)
the aggregate amount of Monthly Payments allocable to interest (with each
interest portion thereof net of the related Servicing Fee), due during the
related Collection Period in respect of the Mortgage Loans, which Monthly
Payments were delinquent as of the close of business on the related
Determination Date and (ii) with respect to each REO Property, which REO
Property was acquired during or prior to the related Collection Period and as to
which REO Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO Imputed
Interest on such REO Property for the most recently ended calendar month, over
the net
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income from such REO Property transferred to the Distribution Account pursuant
to Section 3.25 for distribution on such Distribution Date. For purposes of the
preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly interest payment that
would have been due on the related Due Date based on the original principal
amortization schedule for such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer Remittance
Date, the Servicer shall remit in immediately available funds to the Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
Monthly Advances, if any, to be made in respect of the Mortgage Loans and REO
Properties for the related Distribution Date either (i) from its own funds or
(ii) from the Collection Account, to the extent of funds held therein for future
distribution (in which case it will cause to be made an appropriate entry in the
records of the Collection Account that amounts held for future distribution have
been, as permitted by this Section 4.03, used by the Servicer in discharge of
any such Monthly Advance) or (iii) in the form of any combination of (i) and
(ii) aggregating the total amount of Monthly Advances to be made by the Servicer
with respect to the Mortgage Loans and REO Properties. Any amounts held for
future distribution and so used shall be appropriately reflected in the
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Distribution Amount for the related Distribution Date (determined
without regard to Monthly Advances to be made on the Servicer Remittance Date)
shall be less than the total amount that would be distributed to the Classes of
Certificateholders pursuant to Section 4.01 on such Distribution Date if such
amounts held for future distributions had not been so used to make Monthly
Advances. The Trustee will provide notice to the Servicer and the Certificate
Insurer by telecopy by the close of business on any Servicer Remittance Date in
the event that the amount remitted by the Servicer to the Trustee on such date
is less than the Monthly Advances required to be made by the Servicer for the
related Distribution Date.
(c) The obligation of the Servicer to make such Monthly Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no Monthly
Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such Monthly Advance or Servicing Advance would, if made, constitute
a Nonrecoverable Monthly Advance or Servicing Advance. The determination by the
Servicer that it has made a Nonrecoverable Monthly Advance or that any proposed
Monthly Advance, if made, would constitute a Nonrecoverable Monthly Advance,
shall be evidenced by an Officers' Certificate of the Servicer delivered to the
Depositor, the Trustee and the Certificate Insurer.
(e) If, at the close of business on the third Business Day prior to
any Distribution Date, the funds on deposit in the Distribution Account are less
than the
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Guaranteed Distribution for such Distribution Date, the Trustee shall give
notice by telephone or telecopy of the amount of such deficiency, confirmed in
writing in the form set forth as Exhibit A to the Policy, to the Certificate
Insurer and the Fiscal Agent (as defined in the Policy), if any, at or before
10:00 a.m., New York time, on the second Business Day prior to such Distribution
Date.
Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine as to
each Mortgage Loan and REO Property, the total amount of Realized Losses, if
any, incurred in connection with any Final Recovery Determinations made during
the related Collection Period. Prior to each Determination Date, the Servicer
shall also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Collection Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Collection Period. Such information shall be
evidenced by an Officers' Certificate delivered to the Trustee and the
Certificate Insurer by the Servicer prior to the Determination Date immediately
following the end of the Collection Period during which any such Realized Loss
was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Trustee
shall comply with all federal withholding requirements respecting payments to
Certificateholders of interest or original issue discount that the Trustee
reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.
ARTICLE 5.
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in the Trust Fund. At the Closing Date, the Class A Certificate
Principal Balance will be equal to or less than the aggregate principal balance
of the Mortgage Loans in the Mortgage Pool as of the Cut-off Date.
The Certificates will be substantially in the forms annexed hereto
as Exhibits A-1 through A-7. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.
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Upon original issue, the Certificates shall be executed and
delivered by the Trustee and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized signatory. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee to the authentication and
delivery of such Certificates, notwithstanding that such individuals or any of
them have ceased to hold such offices or did not hold such offices at the date
of such Certificates. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form provided herein
executed by the Certificate Registrar by manual signature, and such certificate
of authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
(b) The Class A Certificates shall initially be issued as one or
more Certificates registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
The Trustee, the Servicer, the Depositor and the Certificate Insurer
may for all purposes (including the making of payments due on the Book-Entry
Certificates) deal with the Depository as the authorized representative of the
Certificate Owners with respect to the Book-Entry Certificates for the purposes
of exercising the rights of Certificateholders hereunder. The rights of
Certificate Owners with respect to the Book-Entry Certificates shall be limited
to those established by law and agreements between such Certificate Owners and
the Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of the Book-Entry Certificates with respect to any particular matter
shall not be deemed inconsistent if they are made with respect to different
Certificate Owners. The Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and shall give notice to the Depository of such record date.
If (i)(A) the Depositor or the Depository advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the
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Depositor at its option advises the Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of a Servicer Event of Default, Certificate Owners representing in
the aggregate not less than 51% of the Ownership Interests of the Book-Entry
Certificates advise the Trustee through the Depository, in writing, that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration of transfer, the Trustee shall issue the
Definitive Certificates. Such Definitive Certificates will be issued in minimum
denominations of $1,000. None of the Depositor, the Servicer or the Trustee
shall be liable for any delay in the delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates, and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Trustee will initially serve as Certificate Registrar
for the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided. The Certificate Registrar may appoint, by a
written instrument delivered to the Servicer and the Depositor, any other bank
or trust company to act as Certificate Registrar under such conditions as the
predecessor Certificate Registrar may prescribe, provided that the predecessor
Certificate Registrar shall not be relieved of any of its duties or
responsibilities hereunder by reason of such appointment. If the Trustee shall
at any time not be the Certificate Registrar, the Trustee shall have and
maintain the right to inspect the Certificate Register or to obtain a copy
thereof at all reasonable times, and to rely conclusively upon a certificate of
the Certificate Registrar as to the information set forth in the Certificate
Register.
(b) No transfer of any Residual Certificate shall be made unless
that transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and effective registration
or qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of a Residual Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
each require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii)
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in all other cases, an Opinion of Counsel satisfactory to it that such transfer
may be made without such registration under the 1933 Act (which Opinion of
Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Servicer in its capacity as such), together with copies of the
written certification(s) of the Certificateholder desiring to effect the
transfer and/or such Certificateholder's prospective transferee upon which such
Opinion of Counsel is based, if any. None of the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Residual
Certificates under the 1933 Act or any other securities laws or to take any
action not otherwise required under this Agreement to permit the transfer of
such Certificates without registration or qualification. Any Certificateholder
desiring to effect the transfer of a Residual Certificate shall, and does hereby
agree to, indemnify the Trustee, the Depositor, the Certificate Registrar, the
Servicer and the Certificate Insurer against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
(c) No transfer of a Residual Certificate or any interest therein
shall be made unless the prospective transferee of any Residual Certificate
certifies that it is not (i) an employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, ▇▇▇▇▇ plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code (each,
a "Plan") or (ii) a Person who is directly or indirectly purchasing the Residual
Certificate or interest therein on behalf of, as named fiduciary of, as trustee
of, or with assets of, a Plan.
(d) (i) Each Person who has or who acquires any Ownership Interest
in a Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably authorized the Trustee or its designee under clause
(iii)(A) below to deliver payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (iii)(B) below and to
execute all instruments of Transfer and to do all other things necessary in
connection with any such sale. The rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:
(A) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any change
or impending change in its status as a Permitted Transferee.
(B) In connection with any proposed Transfer of
any Ownership Interest in a Residual Certificate, the Trustee
shall require delivery to it, and shall not register the
Transfer of any Residual Certificate until its receipt of, an
affidavit agreement (a "Transfer Affidavit and Agreement"
attached hereto as Exhibit F-2) from the proposed Transferee,
in form and substance satisfactory to the Trustee,
representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring
its Ownership Interest in the Residual Certificate
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that is the subject of the proposed Transfer as a nominee,
trustee or agent for any Person that is not a Permitted
Transferee, that for so long as it retains its Ownership
Interest in a Residual Certificate, it will endeavor to remain
a Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be bound by
them.
(C) Notwithstanding the delivery of a Transfer
Affidavit and Agreement by a proposed Transferee under clause
(B) above, if a Responsible Officer of the Trustee who is
assigned to this transaction has actual knowledge that the
proposed Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in a Residual Certificate to such
proposed Transferee shall be effected.
(D) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall agree (x) to require
a Transfer Affidavit and Agreement (in the form attached
hereto as Exhibit F-2) from any other Person to whom such
Person attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its Ownership
Interest unless it provides a Transferor Affidavit (in the
form attached hereto as Exhibit F-2) to the Trustee stating
that, among other things, it has no actual knowledge that such
other Person is not a Permitted Transferee.
(E) Each Person holding or acquiring an Ownership
Interest in a Residual Certificate, by purchasing an Ownership
Interest in such Certificate, agrees to give the Trustee
written notice that it is a "pass through interest holder"
within the meaning of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an Ownership
Interest in a Residual Certificate, if it is, or is holding an
Ownership Interest in a Residual Certificate on behalf of, a
"pass-through interest holder."
(ii) The Trustee will register the Transfer of any Residual
Certificate only if it shall have received the Transfer Affidavit
Agreement and all of such other documents as shall have been
reasonably required by the Trustee as a condition to such
registration. In addition, no Transfer of a Residual Certificate
shall be made unless the Trustee shall have received a
representation letter from the Transferee of such Certificate to the
effect that such Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become a Holder of
a Residual Certificate in violation of the provisions of this
Section 5.02(d), then the last preceding Permitted Transferee shall
be restored, to the extent permitted by law, to all rights as holder
thereof retroactive to the date of registration of such Transfer of
such Residual
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Certificate. The Trustee shall be under no liability to any Person
for any registration of Transfer of a Residual Certificate that is
in fact not permitted by this Section 5.02(d) or for making any
payments due on such Certificate to the holder thereof or for taking
any other action with respect to such holder under the provisions of
this Agreement.
(B) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the
Trustee shall have the right, without notice to the holder or
any prior holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the Trustee on
such terms as the Trustee may choose. Such purported
Transferee shall promptly endorse and deliver each Residual
Certificate in accordance with the instructions of the
Trustee. Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale, net of
the commissions (which may include commissions payable to the
Trustee or its Affiliates), expenses and taxes due, if any,
will be remitted by the Trustee to such purported Transferee.
The terms and conditions of any sale under this clause
(iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trustee shall make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions all
information necessary to compute any tax imposed (A) as a result of
the Transfer of an Ownership Interest in a Residual Certificate to
any Person who is a Disqualified Organization, including the
information described in Treasury regulations sections
1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
inclusions" of such Residual Certificate and (B) as a result of any
regulated investment company, real estate investment trust, common
trust fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any time
any Person which is a Disqualified Organization. Reasonable
compensation for providing such information may be accepted by the
Trustee.
(v) The provisions of this Section 5.02(d) set forth prior to
this subsection (v) may be modified, added to or eliminated,
provided that there shall have been delivered to the Trustee at the
expense of the party seeking to modify, add to or eliminate any such
provision the following:
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(A) written notification from each Rating Agency
to the effect that the modification, addition to or
elimination of such provisions will not cause such Rating
Agency to downgrade its then-current ratings of any Class of
Certificates; and
(B) an Opinion of Counsel, in form and substance
satisfactory to the Trustee, to the effect that such
modification of, addition to or elimination of such provisions
will not cause the REMIC Trust to cease to qualify as a REMIC
and will not cause the REMIC Trust to be subject to an
entity-level tax caused by the Transfer of any Residual
Certificate to a Person that is not a Permitted Transferee or
(y) a Person other than the prospective transferee to be
subject to a REMIC-tax caused by the Transfer of a Residual
Certificate to a Person that is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office agency of the Trustee
maintained for such purpose pursuant to Section 8.11, the Trustee shall execute
and the Certificate Registrar shall authenticate and deliver, in the name of the
designated Transferee or Transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trustee maintained for such purpose
pursuant to Section 8.11. Whenever any Certificates are so surrendered for
exchange the Trustee shall execute and cause the Certificate Registrar to
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trustee and the Certificate Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made for
any transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange shall be
canceled and destroyed by the Certificate Registrar in accordance with its
customary procedures.
(i) The Trustee will cause the Certificate Registrar (unless the
Trustee is acting as Certificate Registrar) to provide notice to the Trustee of
each transfer of a Certificate and to provide the Trustee with an updated copy
of the
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Certificate Register on the first Business Day in January and June of each year,
commencing January 1998.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee or
the Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of actual knowledge by the Trustee or the
Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
the same Class and of like denomination and Percentage Interest. Upon the
issuance of any new Certificate under this Section, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust Fund created hereunder, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Owners.
The Depositor, the Servicer, the Trustee, the Certificate Registrar,
the Certificate Insurer and any agent of any of them may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 4.01 and for all
other purposes whatsoever, and none of the Depositor, the Servicer, the Trustee,
the Certificate Registrar or any agent of any of them shall be affected by
notice to the contrary.
Section 5.05. Certain Available Information.
The Trustee shall maintain at its Corporate Trust Office and make
available free of charge during normal business hours for review by any Holder
of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (A)
this Agreement and any amendments hereof entered into pursuant to Section 12.01,
(B) all monthly statements required to be delivered to Certificateholders of the
relevant Class pursuant to Section 4.02 since the Closing Date, and all other
notices, reports, statements and written communications delivered to the
Certificateholders of the relevant Class pursuant to this Agreement since the
Closing Date, (C) all certifications delivered by a Responsible Officer of the
Trustee since the Closing Date pursuant to Section 11.01(h), (D) any and all
Officers' Certificates delivered to the Trustee by the Servicer since the
Closing Date to evidence the Servicer's determination that any Monthly Advance
or Servicing Advance was, or if made, would be a Nonrecoverable Monthly Advance
and (E) any and all Officers' Certificates delivered to the Trustee by the
Servicer since the Closing Date pursuant to Section 4.04(a). Copies and mailing
of any and all of the foregoing
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items will be available from the Trustee upon request at the expense of the
Person requesting the same.
ARTICLE 6.
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in accordance
herewith only to the extent of the obligations specifically imposed by this
Agreement and undertaken hereunder by the Depositor and the Servicer herein.
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer.
Subject to the following paragraph, the Depositor will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation. Subject to the following paragraph, the
Servicer will keep in full effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation. The
Depositor and the Servicer each will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated with or
into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or the Servicer shall be a party, or any Person succeeding
to the business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, 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
(i) the successor or surviving Person to the Servicer shall be qualified to
service mortgage loans on behalf of FNMA or FHLMC, (ii) that the Rating Agencies
ratings and shadow ratings of the Class A Certificates in effect immediately
prior to such merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter to such effect from the
Rating Agencies) and (iii) in the case of the Servicer, the Certificate Insurer
delivers its written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the Servicer
and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or
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any such person against any breach of warranties, representations or covenants
made herein, or against any specific liability imposed on the Servicer pursuant
hereto, or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the case of the Depositor,
and willful misfeasance, bad faith or negligence in the case of the Servicer, in
the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the Servicer
and any director, officer, employee or agent of the Depositor or the Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Depositor and the Servicer may in its discretion
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 and the
interests of the Certificateholders hereunder. In such event, unless the
Depositor or the Servicer acts without the consent of the Certificate Insurer
prior to a Certificate Insurer Default or without the consent of Holders of
Certificates entitled to at least 51% of the Voting Rights after a Certificate
Insurer Default, the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the case of the Depositor,
and willful misfeasance, bad faith or negligence in the case of the Servicer, in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Trustee. No resignation of the Servicer shall become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's responsibilities, duties, liabilities (other than those liabilities
arising prior to the appointment of such successor) and obligations under this
Agreement.
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Except as expressly provided herein, the Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder. If, pursuant to any provision hereof, the duties of the
Servicer are transferred to a successor servicer, the entire amount of the
Servicing Fee and other compensation payable to the Servicer pursuant hereto
shall thereafter be payable to such successor servicer.
Section 6.05. Rights of the Depositor and Others in Respect of the
Servicer.
The Servicer shall afford the Depositor, the Trustee and the
Certificate Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Servicer in respect of its rights and
obligations hereunder and access to officers of the Servicer responsible for
such obligations. Upon request, the Servicer shall furnish to the Depositor, the
Trustee and the Certificate Insurer its most recent financial statements and
such other information relating to its capacity to perform its obligations under
this Agreement it possesses. To the extent such information is not otherwise
available to the public, the Depositor, the Trustee and the Certificate Insurer
shall not disseminate any information obtained pursuant to the preceding two
sentences without the Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
or (ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction
or decree of any court or governmental authority having jurisdiction over the
Depositor, the Trustee, the Certificate Insurer or the Trust Fund, and in either
case, the Depositor, the Certificate Insurer or the Trustee, as the case may be,
shall use its best efforts to assure the confidentiality of any such
disseminated non-public information. The Depositor may, but is not obligated to,
enforce the obligations of the Servicer under this Agreement and may, but is not
obligated to, perform, or cause a designee to perform, any defaulted obligation
of the Servicer under this Agreement or exercise the rights of the Servicer
under this Agreement; provided that the Servicer shall not be relieved of any of
its obligations under this Agreement by virtue of such performance by the
Depositor or its designee. The Depositor shall not have any responsibility or
liability for any action or failure to act by the Servicer and is not obligated
to supervise the performance of the Servicer under this Agreement or otherwise.
ARTICLE 7.
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one of
the following events:
(i) any failure by the Servicer to remit to the Trustee for
distribution to the Certificateholders any payment (other than a
Monthly Advance required to be made from its own funds on any
Servicer
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Remittance Date pursuant to Section 4.03) required to be made under
the terms of the Certificates and this Agreement which continues
unremedied for the later of (x) a period of one Business Day after
the date upon which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the
Depositor, the Certificate Insurer or the Trustee (in which case
notice shall be provided by telecopy), or to the Servicer, the
Depositor, the Certificate Insurer and the Trustee by the Holders of
Certificates entitled to at least 25% of the Voting Rights or (y) 5
days; or
(ii) any failure (other than a failure identified in clause
(vi) below) on the part of the Servicer duly to observe or perform
in any material respect any other of the covenants or agreements on
the part of the Servicer contained in the Certificates or in this
Agreement which continues unremedied for a period of 30 days (or 10
days in the case of a failure to maintain any insurance policy on
any of the Mortgage Loans or Mortgaged Properties) after the earlier
of (i) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by
the Depositor, the Certificate Insurer or the Trustee, or to the
Servicer, the Depositor, the Certificate Insurer and the Trustee by
the Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency
or similar law or the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceeding, 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 90 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to it 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 or reorganization statute,
make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
(vi) any failure of the Servicer to make any Monthly Advance
on any Servicer Remittance Date required to be made from its own
funds pursuant to Section 4.03 or failure to make any payment
required pursuant to Section 3.26 which continues unremedied until
3:00 p.m.
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New York time on the Business Day immediately following the Servicer
Remittance Date; or
(vii) any breach of a representation or warranty of the
Servicer relating to such Servicer's authority to enter into, and
its ability to perform its obligations under, this Pooling and
Servicing Agreement; or
(viii) the occurrence of a Performance Test Violation (as
defined in the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described in
clauses (i) through (v) and (vii) and (viii) of this Section shall occur, then,
and in each and every such case, so long as such Servicer Event of Default shall
not have been remedied, the Depositor, the Certificate Insurer or the Trustee
may, and at the written direction of the Holders of Certificates entitled to at
least 25% of Voting Rights (with the consent of the Certificate Insurer to the
extent there is no Certificate Insurer Default), the Trustee shall, by notice in
writing to the Servicer (and to the Depositor and the Certificate Insurer if
given by the Trustee or to the Trustee if given by the Depositor or the
Certificate Insurer), terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. If
a Servicer Event of Default described in clause (vi) hereof shall occur, the
Trustee shall, by notice in writing to the Servicer, the Certificate Insurer and
the Depositor, terminate all of the rights and obligations of the Servicer in
its capacity as Servicer under this Agreement and in and to the Mortgage Loans
and the proceeds thereof. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Certificates (other than as a Holder of any
Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass to and
be vested in the Trustee pursuant to and under this Section, and, without
limitation, the Trustee is hereby authorized and empowered, as attorney-in-fact
or otherwise, to execute and deliver, on behalf of and at the expense of the
Servicer, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. The
Servicer agrees promptly (and in any event no later than ten Business Days
subsequent to such notice) to provide the Trustee with all documents and records
requested by it to enable it to assume the Servicer's functions under this
Agreement, and to cooperate with the Trustee in effecting the termination of the
Servicer's responsibilities and rights under this Agreement, including, without
limitation, the transfer within one Business Day to the Trustee for
administration by it of all cash amounts which at the time shall be or should
have been credited by the Servicer to the Collection Account held by or on
behalf of the Servicer, the Distribution Account, the Policy Payments Account or
any REO Account or Servicing Account held by or on behalf of the Servicer or
thereafter be received with respect to the Mortgage Loans or any REO Property
serviced by the Servicer (provided, however, that the Servicer shall continue to
be entitled to receive all amounts accrued or owing to it under this Agreement
on or prior to the date of such termination, whether in respect of Monthly
Advances or otherwise, and shall continue to be entitled to the benefits of
Section 6.03 notwithstanding any such termination). For purposes of this Section
7.01, the Trustee
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shall not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Servicer Event of Default is received by the
Trustee and such notice references the Certificates, the Trust Fund or this
Agreement.
The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on December 26, 1997, which term shall be extendable by the Certificate
Insurer for successive terms of three calendar months thereafter, until the
termination of the Trust Fund pursuant to Article X. Each such notice of
extension (a "Servicer Extension Notice") shall be delivered by the Certificate
Insurer to the Trustee and the Servicer. The Servicer hereby agrees that, upon
its receipt of any such Servicer Extension Notice, the Servicer shall become
bound for the duration of the term covered by such Servicer Extension Notice to
continue as the Servicer subject to and in accordance with the other provisions
of this Agreement. The Trustee agrees that if as of the fifteenth (15th) day
prior to the last day of any term of the Servicer the Trustee shall not have
received any Servicer Extension Notice from the Certificate Insurer, the Trustee
will within five (5) days thereafter, give written notice of such non-receipt to
the Certificate Insurer and the Servicer. The failure of the Certificate Insurer
to deliver a Servicer Extension Notice by the end of a calendar term shall
result in the termination of the Servicer. The foregoing provisions of this
paragraph shall not apply to the Trustee in the event the Trustee succeeds to
the rights and obligations of the Servicer and the Trustee shall continue in
such capacity until the earlier of the termination of this Agreement pursuant to
Article X or the appointment of a successor servicer.
Section 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination or the Servicer's term is not extended pursuant to Section 7.01, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto and arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement and its
obligation to deposit amounts in respect of losses pursuant to Section 3.14) by
the terms and provisions hereof including, without limitation, the Servicer's
obligations to make Monthly Advances pursuant to Section 4.03; provided,
however, that if the Trustee is prohibited by law or regulation from obligating
itself to make advances regarding delinquent mortgage loans, then the Trustee
shall not be obligated to make Monthly Advances pursuant to Section 4.03 or to
make payments in respect of Prepayment Interest Shortfalls pursuant to Section
3.26; and provided, further, that any failure to perform such duties or
responsibilities caused by the Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Trustee as
successor to the Servicer hereunder. As compensation therefor, the Trustee shall
be entitled to the Servicing Fees and all funds relating to the Mortgage Loans
to which the Servicer would have been entitled if it had continued to act
hereunder. Notwithstanding the above, the Trustee may, if it shall be unwilling
to so act, or shall, if it is unable to so act or if it is prohibited by law
from making advances regarding delinquent mortgage loans or if the Certificate
Insurer or if the Holders of Certificates
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entitled to at least 51% of the Voting Rights so request in writing to the
Trustee, promptly appoint, with the consent of the Certificate Insurer, or
petition a court of competent jurisdiction to appoint, an established mortgage
loan servicing institution acceptable to each Rating Agency and the Certificate
Insurer and having a net worth of not less than $15,000,000 and which is a FNMA
and FHLMC approved Seller/Servicer, as the successor to the Servicer under this
Agreement in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer under this Agreement. No appointment of a
successor to the Servicer under this Agreement shall be effective until the
assumption by the successor of all of the Servicer's responsibilities, duties
and liabilities hereunder. In connection with such appointment and assumption
described herein, the Trustee may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Servicer as such hereunder. The Depositor, the Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Pending appointment of a successor
to the Servicer under this Agreement, the Trustee shall act in such capacity as
hereinabove provided.
(b) If the Servicer fails to remit to the Trustee for distribution
to the Certificateholders any payment required to be made under the terms of the
Certificates and this Agreement (for purposes of this Section 7.02(b), a
"Remittance") because the Servicer is the subject of a proceeding under the
federal Bankruptcy Code and the making of such Remittance is prohibited by
Section 362 of the federal Bankruptcy Code, the Trustee shall upon notice of
such prohibition, regardless of whether it has received a notice of termination
under Section 7.01, advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Distribution Date. The Trustee
shall be obligated to make such advance only if (i) such advance, in the good
faith judgment of the Trustee, can reasonably be expected to be ultimately
recoverable from funds which are in the custody of the Servicer, a trustee in
bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Trustee is not prohibited by law from making such advance or obligating itself
to do so. Upon remittance of the Stayed Funds to the Trustee or the deposit
thereof in the Distribution Account by the Servicer, a trustee in bankruptcy or
a federal bankruptcy court, the Trustee may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution Account;
provided, however, that nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Servicer's own funds interest at the prime
rate (as set forth in the Wall Street Journal) as of the date of such advance on
the amount of any such advance. If the Trustee at any time makes an advance
under this subsection which it later determines in its good faith judgment will
not be ultimately recoverable from the Stayed Funds with respect to which such
advance was made, the Trustee shall be entitled to reimburse itself for such
advance, without interest, by withdrawing from the Distribution Account, out of
amounts on deposit therein, an amount equal to the portion of such advance
attributable to the Stayed Funds. The Servicer shall pay the Trustee, from the
Servicer's own funds, interest on any advance made by the Trustee pursuant to
this paragraph at a rate equal to the prime rate (as set forth in the Wall
Street Journal) as of the date of such advance.
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Section 7.03. Notification to Certificateholders.
(a) Upon any termination of the Servicer pursuant to Section 7.01
above or any appointment of a successor to the Servicer pursuant to Section 7.02
above, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Not later than the later of 60 days after the occurrence of any
event, which constitutes or which, with notice or lapse of time or both, would
constitute a Servicer Event of Default or five days after a Responsible Officer
of the Trustee becomes aware of the occurrence of such an event, the Trustee
shall transmit by mail to all Holders of Certificates notice of each such
occurrence, unless such default or Servicer Event of Default shall have been
cured or waived.
Section 7.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights evidenced
by all Classes of Certificates affected by any default or Servicer Event of
Default hereunder, with the written consent of the Certificate Insurer, may
waive such default or Servicer Event of Default; provided, however, that a
default or Servicer Event of Default under clause (i) or (vi) of Section 7.01
may be waived only by all of the Holders of the Regular Certificates with the
written consent of the Certificate Insurer. Upon any such waiver of a default or
Servicer Event of Default, such default or Servicer Event of Default shall cease
to exist and shall be deemed to have been remedied for every purpose hereunder.
No such waiver shall extend to any subsequent or other default or Servicer Event
of Default or impair any right consequent thereon except to the extent expressly
so waived.
ARTICLE 8.
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Event of Default
and after the curing of all Servicer Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. During a Servicer Event of Default, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. Any permissive right of the Trustee enumerated in this Agreement shall
not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this
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Agreement in a material manner, the Trustee shall take such action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will provide notice thereof
to the Certificateholders and the Certificate Insurer.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer Event of Default,
and after the curing of all such Servicer Events of Default which
may have occurred, the duties and obligations of the Trustee shall
be determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee that conform to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Certificate Insurer or
Holders of Certificates entitled to at least 25% of the Voting
Rights (with the consent of the Certificate Insurer) relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
(iv) In the absence of actual knowledge of a Servicer Event of
Default (which knowledge shall be presumed in the case of Sections
7.01(i) and (vi)), the Trustee shall not be required to take notice
or be deemed to have notice or knowledge of any default or Servicer
Event of Default unless the Trustee shall be specifically notified
in writing by the Servicer, the Certificate Insurer or any of the
Certificateholders. In the absence of actual knowledge or receipt of
such notice, the Trustee may conclusively assume that there is no
default or Servicer Event of Default;
(v) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance
of any of its duties hereunder or the exercise of any of its rights
or powers if there is reasonable ground for believing that the
repayment of such funds
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or adequate indemnity against such risk or liability is not
reasonably assured to it; and
(vi) In the event the Trustee serves as successor to the
Servicer hereunder, no implied duties or obligations shall be
imposed on the Trustee as successor Servicer and the terms and
conditions of this Agreement and the performance thereof by the
Trustee in its conformity as successor to the Servicer shall not
create any additional fiduciary duty on the Trustee to the
Certificateholders, the Certificate Insurer, the Servicer or any
other person. In the event the Trustee serves as successor to the
Servicer hereunder, the Trustee agrees to serve as Servicer pursuant
to the terms of the Agreement.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any advice of
counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice of counsel;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of a Servicer Event of Default
(which has not been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such
person's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
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(v) Prior to the occurrence of a Servicer Event of Default
hereunder and after the curing of all Servicer Events of Default
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document,
unless requested in writing to do so by the Certificate Insurer or
by Holders of Certificates entitled to at least 25% of the Voting
Rights (with the consent of the Certificate Insurer as long as there
is no Certificate Insurer Default); provided, however, that if the
payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by such Certificateholders or the Certificate
Insurer, the Trustee may require reasonable indemnity against such
expense, or liability from such Certificateholders or the
Certificate Insurer as a condition to taking any such action;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys; and
(vii) The Trustee shall not be personally liable for any loss
resulting from the investment of funds held in any Investment
Account at the direction of the Servicer pursuant to Section 3.14.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Certificate Registrar on
the Certificates, the acknowledgments of the Trustee contained in Article II and
the representations and warranties of the Trustee in Section 8.12) shall be
taken as the statements of the Depositor and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer, other than any funds held by or on behalf of the Trustee in accordance
with Section 3.10.
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Section 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity may
become the owner or pledges of Certificates with the same rights it would have
if it were not Trustee.
Section 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on each
Distribution Date and pay to itself the Trustee's Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Servicer
shall pay such fees. The Trustee and any director, officer, employee or agent of
the Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Servicer's actions or omissions in connection
with the Agreement and the Mortgage Loans (but only to the extent the Trustee is
actually indemnified by the Servicer pursuant hereto), (ii) that constitutes a
specific liability of the Trustee pursuant to Section 11.01(c) or (iii) any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder or as a result of a
breach of the Trustee's obligations under Article XI hereof. The Servicer agrees
to indemnify the Trustee from, and hold it harmless against, any loss, liability
or expense arising in respect of such Servicer's acts or omissions in connection
with this Agreement and the Mortgage Loans serviced by such Servicer. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Trustee. Any indemnity payment hereunder made by
the Servicer to the Trustee shall be from the Servicer's own funds, without
reimbursement from the Trust Fund therefor.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or an
association organized and doing business under the laws of any state or the
United States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation or association publishes reports of conditions at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of conditions so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.07.
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Section 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trust
hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Servicer and to the Certificateholders. Upon receiving
such notice of resignation, the Servicer shall, with the written consent of the
Certificate Insurer, promptly appoint a successor trustee by written instrument,
in duplicate, which instrument shall be delivered to the resigning Trustee and
to the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer, and the Servicer by the Depositor.
If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 and shall fail to resign after written
request therefor by the Servicer or the Certificate Insurer, or if at any time
the Trustee shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation or to charge the situs of the Trust Fund for state-tax reasons, then
the Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders, the Certificate Insurer and the Servicer by
the Depositor.
The Certificate Insurer or the Holders of Certificates entitled to
at least 51% of the Voting Rights (excluding any Certificates registered in the
name of the Depositor or the Servicer or any affiliate thereof), with the
written consent of the Certificate Insurer, may at any time remove the Trustee
and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by the Certificate Insurer or such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Depositor, one complete set to the Trustee so removed and
one complete set to the successor so appointed. A copy of such instrument shall
be delivered to the Certificateholders, the Certificate Insurer and the Servicer
by the Depositor.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
Section 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor, the Certificate Insurer and
to its predecessor trustee an instrument accepting such appointment hereunder,
and thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully
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vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Mortgage Files
and related documents and statements, as well as all moneys, held by it
hereunder, and the Depositor and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading or withdrawal of the rating
of any Class of Class A Certificates (including any shadow rating thereof) by
either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to the Certificate Insurer, the Rating Agencies and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so long
as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be merged
or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, 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.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as the Servicer and
the Trustee
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may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case a Servicer Event of Default shall have occurred and be continuing,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trust conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Appointment of Office or Agency.
The Trustee will maintain or appoint an office or agency where the
Certificates may be surrendered for registration of transfer or exchange, and
presented for final distribution, and where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served.
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Section 8.12. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Servicer, the
Depositor and the Certificate Insurer, as of the Closing Date, that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of
the United States.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's charter or
bylaws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result
in the breach of, any material agreement or other instrument to
which it is a party or which is applicable to it or any of its
assets.
(iii) The Trustee has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A)
applicable bankruptcy, insolvency, receivership, reorganization,
moratorium and other laws affecting the enforcement of creditors'
rights generally, and (B) general principles of equity, regardless
of whether such enforcement is considered in a proceeding in equity
or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with
the terms of this Agreement will not constitute a violation of, any
law, any order or decree of any court or arbiter, or any order,
regulation or demand of any federal, state or local governmental or
regulatory authority, which violation, in the Trustee's good faith
and reasonable judgment, is likely to affect materially and
adversely either the ability of the Trustee to perform its
obligations under this Agreement or the financial condition of the
Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely
affect either the ability of the Trustee to perform its obligations
under this Agreement or the financial condition of the Trustee.
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ARTICLE 9.
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 9.01. Rights of the Certificate Insurer To Exercise Rights
of Class A Certificateholders.
Each of the Depositor, the Servicer and the Trustee, and by
accepting its Certificate, each Class A Certificateholder, agrees that unless a
Certificate Insurer Default has occurred and is continuing, the Certificate
Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (including all Voting Rights) (except as
provided in clause (i) of the second paragraph of Section 12.01) without any
further consent of the Class A Certificateholders, including, without
limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Seller to repurchase, or substitute
for, Mortgage Loans pursuant to Section 2.05;
(c) the right to give notices of breach or to terminate the rights
and obligations of the Servicer as Servicer pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Servicer Event of Default pursuant to Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer Event
of Defaults pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate certain matters
pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section 8.07 hereof.
In addition, each Class A Certificateholder agrees that, unless a
Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
Section 9.02. Trustee To Act Solely with Consent of the Certificate
Insurer.
Unless a Certificate Insurer Default has occurred and is continuing,
the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01;
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(b) undertake any litigation pursuant to Section 8.02(a)(iii); or
(c) terminate the Servicer pursuant to Section 7.01
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
Section 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files for the
benefit of the Certificateholders and the Certificate Insurer and all references
in this Agreement (including, without limitation, in Sections 2.03 and 2.04) and
in the Certificates to the benefit of Holders of the Certificates shall be
deemed to include the Certificate Insurer. The Trustee shall cooperate in all
reasonable respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement and the Certificates.
The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Servicer shall not terminate any
Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer. The Trustee and the Servicer shall provide such information as may be
reasonably requested by, and shall otherwise cooperate with all reasonable
requests of the Certificate Insurer with respect to the Mortgage Loans or the
Certificates; provided that such information is within the control of or
reasonably accessible to such party without undue expense.
Section 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to
a Distribution Date, the Trustee determines, based on the Remittance Report,
that a Deficiency Amount for any Distribution Date is greater than zero, then
the Trustee shall give notice to the Certificate Insurer by telephone or
telecopy of the amount of such Deficiency Amount. Such notice of such Deficiency
Amount shall be confirmed in writing in the form set forth as Exhibit A to the
Policy to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York time, on the second Business
Day prior to such Distribution Date. Following receipt by the Certificate
Insurer of such notice in such form, the Certificate Insurer will pay any amount
payable under the Policy on the later to occur of (i) 12:00 noon, New York time,
on the second Business Day following such receipt and (ii) 12:00 noon, New York
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time, on the Distribution Date to which such deficiency relates, as provided in
Exhibit A to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to Holders of
Class A Certificates of the Guaranteed Distribution for which a claim was made
and such amount may not be applied to satisfy any costs, expenses or liabilities
of the Servicer, the Trustee or the Trust Fund. Amounts paid under the Policy
shall be transferred to the Distribution Account in accordance with the next
succeeding paragraph and disbursed by the Trustee to Holders of Class A
Certificates in accordance with Section 4.01(b) or Section 10.01, as applicable.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay the Guaranteed
Distribution with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Certificates to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (c) below in the Certificate Register and in the
statement to be furnished to Holders of the Class A Certificates and Residual
Certificates pursuant to Section 4.02. Funds held in the Policy Payments Account
shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Distribution Account and applied by the
Trustee, together with the other funds to be withdrawn from the Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates. Funds received by the Trustee as a result of any claim under the
Policy shall be deposited by the Trustee in the Policy Payments Account and used
solely for payment to the Holders of the Class A Certificates and may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Any funds remaining in the Policy Payments Account on
the first Business Day following a Distribution Date shall be remitted to the
Certificate Insurer, pursuant to the instructions of the Certificate Insurer, by
the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys received under the Policy. The Certificate Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A Certificates.
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Each Class A Certificateholder, by its purchase of Class A Certificates, the
Servicer and the Trustee hereby agree that the Certificate Insurer (so long as
no Certificate Insurer Default has occurred and is continuing) may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without limitation,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersedes or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the
Certificate Insurer shall be subrogated to the rights of the Servicer, the
Trustee and each Class A Certificateholder in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
Section 9.05. Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Policy shall not be
considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Class A Certificates within the meaning of Section 4.01.
The Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Trust Fund and (b) the Certificate Insurer shall
be paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
without limiting the rights or affecting the interests of the Holders as
otherwise set forth herein.
Section 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
Section 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
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Section 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the Holders
of the Class A Certificates for the purpose of making claims thereon and
distributing the proceeds thereof. The Policy, prior to any distributions
thereon deposited into the Policy Payments Account, will not constitute part of
the Trust Fund or assets of the REMIC Trust created by this Agreement. Each
Holder of Class A Certificates, by accepting its Class A Certificates, appoints
the Trustee as attorney-in-fact for the purpose of making claims on the Policy.
Section 9.09. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Certificate Insurer may terminate or refuse to renew the term of the Servicer at
such time as permitted under any separate agreements between them so long as no
Certificate Insurer Default has occurred and is continuing.
ARTICLE 10.
TERMINATION
▇▇▇▇▇▇▇ ▇▇.▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or Liquidation of All
Mortgage Loans.
Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer and the
Trustee (other than the obligations of the Servicer to the Trustee pursuant to
Section 8.05 and of the Servicer to provide for and the Trustee to make payments
to Certificateholders as hereafter set forth) shall terminate upon payment to
the Certificateholders and the deposit of all amounts held by or on behalf of
the Trustee and required hereunder to be so paid or deposited on the
Distribution Date coinciding with or following the earlier to occur (i) the
purchase by the Terminator (as defined below) of all Mortgage Loans and each REO
Property remaining in the Trust Fund at a price equal to the greater of (A) the
aggregate Purchase Price of all the Mortgage Loans included in the Trust Fund,
plus the appraised value of each REO Property, if any, included in the Trust
Fund, such appraisal to be conducted by an appraiser mutually agreed upon by the
Terminator and the Trustee in their reasonable discretion (and approved by the
Certificate Insurer in its reasonable discretion) and (B) the aggregate fair
market value of all of the assets of the Trust Fund (as determined by the
Terminator, the Certificate Insurer (to the extent the Certificate Insurer is
not the Terminator) and the Trustee, as of the close of business on the third
Business Day next preceding the date upon which notice of any such termination
is furnished to Certificateholders pursuant to the third paragraph of this
Section 10.01) (the "Termination Price") and (ii) the later of the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund; provided, however, that in no
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of
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the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late ambassador of the United States
to the Court of St. ▇▇▇▇▇, living on the date hereof.
Subject to this Section 10.01, the Majority Class R
Certificateholder and the Certificate Insurer shall have the right (the
"Terminator"), to purchase all of the Mortgage Loans and each REO Property
remaining in the Trust Fund pursuant clause (i) of the preceding paragraph no
later than the Determination Date in the month immediately preceding the
Distribution Date on which the Certificates will be retired; provided, however,
that the Terminator may elect to purchase all of the Mortgage Loans and each REO
Property remaining in the Trust Fund pursuant to clause (i) above only if the
aggregate Stated Principal Balance of the Mortgage Loans and each REO Property
remaining in the Trust Fund at the time of such election is equal to or less
than 10%, in the case of the Majority Class R Certificateholder, and 5% or less,
in the case of the Certificate Insurer, of the Original Pool Balance and
provided, further, that such purchase is evidenced by receipt of an Opinion of
Counsel that such purchase (x) will be part of a "qualified liquidation" or
other evidence as defined in Code Section 860F(a)(4)(A), (y) will not otherwise
subject the Trust Fund to tax and (z) will not cause the Trust Fund to fail to
qualify as a REMIC.
Notice of any termination shall be given promptly by the Trustee by
letter to Certificateholders and the Certificate Insurer mailed (a) in the event
such notice is given in connection with the purchase of the Mortgage Loans and
each REO Property by the Terminator, not earlier than the 10th day and not later
than the 15th day of the month next preceding the month of the final
distribution on the Certificates or (b) otherwise during the month of such final
distribution on or before the Determination Date in such month, in each case
specifying (i) the Distribution Date upon which the Trust Fund will terminate
and final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office of the Trustee therein designated, (ii)
the amount of any such final payment, (iii) that no interest shall accrue in
respect of the Certificates from and after the Interest Accrual Period relating
to the final Distribution Date therefor and (iv) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office. The Trustee
shall give such notice to the Certificate Registrar at the time such notice is
given to Certificateholders. In the event such notice is given in connection
with the purchase of all of the Mortgage Loans and each REO Property remaining
in the Trust Fund by the Terminator, the Terminator shall deliver to the Trustee
for deposit in the Distribution Account not later than the last Business Day of
the month next preceding the month of the final distribution on the Certificates
an amount in immediately available funds equal to the above described purchase
price. Upon certification to the Trustee by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit, the Trustee shall promptly release to the Terminator the
Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.
Upon presentation of the Certificates by the Certificateholders on
the final Distribution Date, the Trustee shall distribute to each
Certificateholder so presenting and surrendering its Certificates the amount
otherwise distributable on such Distribution Date in accordance with Section
4.01 in respect of the Certificates so
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presented and surrendered. Any funds not distributed to any Holder or Holder of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust and credited to the account of the appropriate
non-tendering Holder or Holders. If any Certificate as to which notice has been
given pursuant to this Section 10.01 shall not have been surrendered for
cancellation within six months after the time specified in such notice, the
Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, contact the
remaining non-tendering Certificateholders concerning surrender of their
Certificates in the manner reasonably specified to the Trustee by the Servicer
in writing. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets so held in
trust for such Certificateholders. If in one year after the second notice any
such Certificates shall not have been surrendered for cancellation, the Servicer
shall pay to the Certificate Insurer any amount of such funds that were paid by
the Certificate Insurer under the Policy but shall continue to hold any
remaining funds for the benefit of the non-tendering Certificateholders, and
such Certificateholders shall thereafter look solely to the Servicer for payment
thereof, and all liability of the Certificate Insurer with respect to such trust
funds shall thereupon cease. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust by the Servicer as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 10.01.
No such termination shall be permitted without the prior written
consent of the Certificate Insurer if it would result in a draw under the Policy
or in any outstanding Cumulative Insurance Payment or other amounts remaining
due under the Insurance Agreement.
Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.
Section 10.02. Additional Termination Requirements.
(a) In the event that the Terminator purchases all the Mortgage
Loans and each REO Property or the final payment on or other liquidation of the
last Mortgage Loan or REO Property remaining in the Trust Fund pursuant to
Section 10.01, the Trust Fund shall be terminated in accordance with the
following additional requirements:
(i) The Trustee shall specify the first day in the 90-day
liquidation period in a statement attached to the Trust Fund's final
Tax Return pursuant to Treasury regulation Section 1.860F-1 and
shall satisfy all requirements of a qualified liquidation under
Section 860F of the Code and any regulations thereunder, as
evidenced by an Opinion of Counsel obtained at the expense of the
Terminator;
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(ii) During such 90-day liquidation period, and at or prior to
the time of making of the final payment on the Certificates, the
Trustee shall sell all of the assets of the Trust Fund to the
Terminator for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute, credit, or cause to be
distributed or credited, to the Holders of the Residual Certificates
all cash on hand in the Trust Fund (other than cash retained to meet
claims), and the Trust Fund shall terminate at that time.
(b) The Majority Class R Certificateholder shall prepare the
documentation required in connection with the adoption of a plan of liquidation
of a Trust Fund pursuant to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof hereby
agree to authorize the Trustee to specify the 90-day liquidation period for the
Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
ARTICLE 11.
REMIC PROVISIONS
Section 11.01. REMIC Administration.
(a) The Trustee shall elect to treat the REMIC Trust, as a REMIC
under the Code and, if necessary, under applicable state law, provided, however,
that such election shall not be made with respect to the Redemption Account,
Pre-Funding Account or Interest Coverage Account and shall specifically exclude
such accounts from the assets for which a REMIC election is made. Such election
will be made on Form 1066 or other appropriate federal tax or information return
or any appropriate state return for the taxable year ending on the last day of
the calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of the REMIC Trust, the Class A Certificates shall be
designated as the Regular Interests in the REMIC and the Residual Certificates
shall be designated as the single class of Residual Interest in the REMIC. The
Trustee shall not permit the creation of any "interests" in the REMIC (within
the meaning of Section 860G of the Code) other than the interests represented by
the Certificates.
The Interest Coverage Account is an "outside reserve fund" within
the meaning of Treasury Regulations Section 1.860G-2(h) and is not an asset of
the REMIC. The Seller is the owner of the Interest Coverage Account for purposes
of Treasury Regulations Section 1.860G-2(h). For all federal income tax
purposes, amounts transferred by the REMIC to the Interest Coverage Account, if
any, will be treated as amounts distributed by the REMIC to the Seller.
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(b) The Closing Date is hereby designated as the "Startup Day" of
the REMIC Trust within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any right of
reimbursement, any and all expenses (not including taxes) relating to any tax
audit of the Trust Fund (including, but not limited to, any professional fees or
any administrative or judicial proceedings with respect to the Trust Fund that
involve the Internal Revenue Service or state tax authorities), other than the
expense of obtaining any tax related Opinion of Counsel except as specified
herein. The Trustee, as agent for the Trust Fund's tax matters person, shall (i)
act on behalf of the Trust Fund in relation to any tax matter or controversy
involving the Trust Fund and (ii) represent the Trust Fund in any administrative
or judicial proceeding relating to an examination or audit by any governmental
taxing authority with respect thereto. The holder of the largest Percentage
Interest of the Residual Certificates shall be designated, in the manner
provided under Treasury regulations section 1.860F-4(d) and temporary Treasury
regulations section 301.6231(a)(7)-IT, as the tax matters person of the Trust
Fund. By their acceptance thereof, the holder of the largest Percentage Interest
of the Residual Certificates hereby agrees to irrevocably appoint the Trustee or
an Affiliate as its agent to perform all of the duties of the tax matters person
for the Trust Fund.
(d) The Trustee shall prepare, sign and file all of the Tax Returns
in respect of the REMIC created hereunder. The expenses of preparing and filing
such returns shall be borne by the Trustee without any right of reimbursement
therefor. The Servicer shall provide on a timely basis to the Trustee or its
designee such information with respect to the assets of the Trust Fund as is in
its possession or within its control to obtain and reasonably required by the
Trustee to enable it to perform its obligations under this Article.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
REMIC under the Code, the REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee shall provide (i) to any Transferor of a
Residual Certificate such information as is necessary for the application of any
tax relating to the transfer of a Residual Certificate to any Person who is not
a Permitted Transferee, (ii) to the Certificateholders such information or
reports as are required by the Code or the REMIC Provisions including reports
relating to interest, original issue discount and market discount or premium
(using the Prepayment Assumption as required) and (iii) to the Internal Revenue
Service the name, title, address and telephone number of the person who will
serve as the representative of the Trust Fund. The Servicer shall provide on a
timely basis to the Trustee such information with respect to the assets of the
Trust Fund, including, without limitation, the Mortgage Loans, as is in its
possession or within its control to obtain and reasonably required by the
Trustee to enable it to perform its obligations under this subsection. In
addition, the Depositor shall provide or cause to be provided to the Trustee,
within ten (10) days after the Closing Date, all information or data that the
Trustee reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.
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(f) The Trustee shall take such action and shall cause the REMIC
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Servicer shall assist it, to the extent reasonably requested by it). The Trustee
shall not take any action, cause the Trust Fund 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 Trust as a REMIC or (ii) result in the imposition of a tax upon the REMIC
Trust (including but not limited to the tax on prohibited transactions as
defined in Section 860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code) (either such event, an "Adverse
REMIC Event") unless the Trustee has received an Opinion of Counsel, addressed
to the Trustee and the Certificate Insurer (at the expense of the party seeking
to take such action but in no event at the expense of the Trustee) to the effect
that the contemplated action will not, with respect to the REMIC Trust created
hereunder, endanger such status or result in the imposition of such a tax, nor
shall the Servicer take or fail to take any action (whether or not authorized
hereunder) as to which the Trustee has advised it in writing that it has
received an Opinion of Counsel to the effect that an Adverse REMIC Event could
occur with respect to such action. In addition, prior to taking any action with
respect to the Trust Fund or the assets of the Trust Fund, or causing the Trust
Fund to take any action, which is not expressly permitted under the terms of
this Agreement, the Servicer will consult with the Trustee or its designee, in
writing, with respect to whether such action could cause an Adverse REMIC Event
to occur with respect to the REMIC Trust, and the Servicer shall not take any
such action or cause the Trust Fund to take any such action as to which the
Trustee has advised it in writing that an Adverse REMIC Event could occur. The
Trustee may consult with counsel to make such written advice, and the cost of
same shall be borne by the party seeking to take the action not permitted by
this Agreement, but in no event shall such cost be an expense of the Trustee. At
all times as may be required by the Code, upon notice or discovery that
substantially all of the assets of the REMIC Trust created hereunder do not
consist of "qualified mortgages" as defined in Section 860G(a)(3) of the Code
and "permitted investments" as defined in Section 860G(a)(5) of the Code, the
Trustee shall take such action as shall be necessary to maintain the status of
the REMIC as a REMIC under the REMIC Provisions.
(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of the
REMIC Trust as defined in Section 860G(c) of the Code, on any contributions to
the REMIC Trust after the Startup Day therefor pursuant to Section 860G(d) of
the Code, or any other tax is imposed by the Code or any applicable provisions
of state or local tax laws, such tax shall be charged (i) to the Trustee
pursuant to Section 11.03 hereof, if such tax arises out of or results from a
breach by the Trustee of any of its obligations under this Article XI, (ii) to
the Servicer pursuant to Section 11.03 hereof, if such tax arises out of or
results from a breach by the Servicer of any of its obligations under Article
III or this Article XI, or otherwise (iii) against amounts on deposit in the
Distribution Account and shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing April
15, 1998, the Trustee shall deliver to the Servicer and each Rating Agency a
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Certificate from a Responsible Officer of the Trustee stating the Trustee's
compliance with this Article XI.
(i) The Trustee and the Servicer shall, for federal income tax
purposes, maintain books and records with respect to the Trust Fund on a
calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept any
contributions of assets to the Trust Fund other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.05
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the REMIC Trust will not cause the REMIC Trust to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject the REMIC Trust to any tax under the REMIC Provisions or other
applicable provisions of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Servicer shall enter into any
arrangement by which the Trust Fund will receive a fee or other compensation for
services nor permit the REMIC Trust to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
Section 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Servicer or the Trustee shall sell,
dispose of or substitute for any of the Mortgage Loans (except in connection
with (i) the foreclosure of a Mortgage Loan, including but not limited to, the
acquisition or sale of a Mortgaged Property acquired by deed in lieu of
foreclosure, (ii) the bankruptcy of the Trust Fund (iii) the termination of the
Trust Fund pursuant to Article X of this Agreement, (iv) a substitution pursuant
to Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for the Trust Fund
(other than a REO Property acquired in respect of a defaulted Mortgage Loan),
nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to the Trust Fund
after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.05), unless it has received an Opinion of
Counsel, addressed to the Certificate Insurer and the Trustee (at the expense of
the party seeking to cause such sale, disposition, substitution, acquisition or
contribution but in no event at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of the REMIC Trust as a REMIC or (b) cause the REMIC Trust
to be subject to a tax on "prohibited transactions" or "contributions" pursuant
to the REMIC Provisions.
Section 11.03. Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the Depositor,
the Certificate Insurer and the Servicer for any taxes and costs including,
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust Fund, the
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Depositor, the Certificate Insurer or the Servicer, as a result of a breach of
the Trustee's covenants set forth in this Article XI.
(b) The Servicer agrees to indemnify the Trust Fund, the Depositor,
the Certificate Insurer and the Trustee for any taxes and costs including,
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust Fund, the Depositor, the Certificate Insurer or the Trustee, as a result
of a breach of the Servicer's covenants set forth in Article III or this Article
XI.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the Depositor,
the Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the expectations of Holders, (ii) to correct, modify or supplement any
provisions herein, to modify, eliminate or add to any of its provisions to such
extent as shall be necessary to maintain the qualification of the Trust Fund as
a REMIC at all times that any Certificates are outstanding or to avoid or lessen
the risk of the imposition of any tax on the Trust Fund pursuant to the Code
that would be a claim against the Trust Fund, provided that the Trustee has
received an Opinion of Counsel to the effect that such action is necessary or
desirable to maintain such qualification or to avoid or minimize the risk of the
imposition of any such tax and such action will not, as evidenced by such
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder, (iii) to change the timing and/or nature of deposits in
the Collection Account, provided that such change will not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder and that such change will not adversely affect the then
current rating or shadow rating assigned to any Class A Certificates, as
evidenced by a letter from each Rating Agency to such effect, (iv) to add to,
modify or eliminate any provisions therein restricting transfers of certain
Certificates, which are inserted in response to Code provisions, or (v) to make
any other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement,
provided that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee and the Certificate Insurer, adversely affect in any
material respect the interests of any Certificateholder, provided, further, that
if the Person requesting such amendment delivers to the Trustee and the
Certificate Insurer written confirmation from each Rating Agency that such
amendment will not cause such Rating Agency to revise or withdraw its then
current rating or shadow rating of the Class A Certificates, such amendment will
be deemed to not adversely affect in any material respect the interests of the
Certificateholders and no such Opinion of Counsel shall be required.
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This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Certificate
Insurer and the Holders of Certificates entitled to at least 66% of the Voting
Rights for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding the foregoing, this Agreement may be amended by the Depositor,
the Servicer, where applicable, and the Trustee provided that such action is
approved by holders of Certificates evidencing 100% of the Percentage Interest
of each Class that, as evidenced by an Opinion of Counsel, is adversely affected
in any material respect by such action. For purposes of giving any such consent
(other than a consent to an action which would adversely affect in any material
respect the interests of the Certificateholders of any Class, while the Servicer
or any affiliate thereof is the holder of Certificates aggregating not less than
66% of the Percentage Interest of such Class), any Certificates registered in
the name of the Servicer or any affiliate thereof shall be deemed not to be
outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the REMIC Trust pursuant to the REMIC
Provisions or cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Certificates are outstanding. Any such amendment pursuant to the first
paragraph of this Section 12.01 shall not be deemed to adversely affect in any
material respect the interests of any Certificateholder if such change is
required by the Certificate Insurer, so long as no Certificate Insurer Default
has occurred and is continuing, and the Servicer receives written confirmation
from each Rating Agency that such amendment will not cause such Rating Agency to
reduce the then current rating or any shadow rating of the affected
Certificates.
Promptly after the execution of any such amendment with the consent
of Holders the Trustee shall furnish a copy of such amendment to each
Certificateholder, the Rating Agencies and the Certificate Insurer.
It shall not be necessary for the consent of Certificateholders
under this Section 12.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
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The cost of any Opinion of Counsel to be delivered pursuant to this
Section 12.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Certificateholders, but only upon direction of
the Trustee accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written notice of default and of
the continuance thereof, as hereinbefore provided, and unless also the Holders
of Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the
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Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
Section 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
Asset-Backed Finance Group (phone number (▇▇▇) ▇▇▇-▇▇▇▇), or such other address
or telecopy number as may hereafter be furnished to the Servicer, the
Certificate Insurer and the Trustee in writing by the Depositor, (b) in the case
of the Servicer, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇ (telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, or such other address or
telecopy number as may hereafter be furnished to the Trustee and the Depositor
in writing by the Servicer, (c) in the case of the Trustee, First Union National
Bank, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
Corporate Trust Department (telecopy number ▇▇▇-▇▇▇-▇▇▇▇, or such other address
or telecopy number as may hereafter be furnished to the Servicer and the
Depositor in writing by the Trustee and (d) in the Case of the Certificate
Insurer, Financial Security Assurance Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: Surveillance Department Re: Emergent Home Equity Loan Trust 1997-3
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Depositor and the Servicer in writing
by the Certificate Insurer. Any party hereto may change the address, telephone
number or telecopier number by notice to the other parties hereto in accordance
with the terms hereof. In each case in which a notice or other communication to
the Certificate Insurer refers to a Servicer Event of Default or a claim under
the Policy or with respect to which failure on the part of the Certificate
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the General
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Counsel and the Head-Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED". Any notice required or permitted to be given to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Certificate Insurer.
The Trustee shall use its best efforts promptly to provide notice to
the Rating Agencies and the Certificate Insurer with respect to each of the
following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that has not
been cured or waived;
3. The resignation or termination of the Servicer or the Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant to
or as contemplated by Section 2.05;
5. The final payment to the Holders of any Class of Certificates;
6. Any change in the location of the Collection Account or the
Distribution Account;
7. Any event that would result in the inability of the Trustee to
make advances regarding delinquent mortgage loans; and
8. Any Certificate Insurer Default that has not been cured.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Servicer shall promptly furnish to each Rating
Agency copies of the following:
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1. Each annual statement as to compliance described in Section
3.22; and
2. Each annual independent public accountants' servicing report
described in Section 3.23.
Any such notice pursuant to this Section 12.07 shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by first class mail, postage prepaid, or by express delivery service to ▇▇▇▇▇'▇
Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and to
Standard & Poor's Ratings Services, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
such other addresses as the Rating Agencies may designate in writing to the
parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans and the other assets constituting the Trust Fund by the
Depositor to the Trustee as contemplated by this Agreement be, and be treated
for all purposes as, a sale by the Depositor to the Trustee of the Mortgage
Loans and the other assets constituting the Trust Fund. It is, further, not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans and the other assets constituting the Trust Fund by the Depositor to the
Trustee to secure a debt or other obligation of the Depositor. However, in the
event that, notwithstanding the intent of the parties, the Mortgage Loans and
the other assets constituting the Trust Fund are held to continue to be property
of the Depositor then (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code;
(b) the transfer of the Mortgage Loans and the other assets constituting the
Trust Fund provided for herein shall be deemed to be a grant by the Depositor to
the Trustee of a security interest in all of the Depositor's right, title and
interest in and to the Mortgage Loans and the other assets constituting the
Trust Fund and all amounts payable on the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property; (c) the
possession by the Trustee of Mortgage Loans and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the Uniform Commercial Code; and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Trustee for the purpose
of perfecting such security interest under applicable law. Any assignment of the
interest of the Trustee pursuant to any provision hereof shall also be deemed to
be an assignment of any security interest created hereby. The Servicer and the
Depositor shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure
117
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans and the other assets constituting the Trust Fund, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and would be maintained as such throughout the term of this
Agreement.
118
IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized, in each case as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION,
as Depositor
By:
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Vice President
EMERGENT MORTGAGE CORP.,
as Servicer
By:
-----------------------------------
Name: J. ▇▇▇▇ ▇▇▇
Title: Senior Executive Vice President
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:
-----------------------------------
Name: Pablo de la Canal
Title: Assistant Vice President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared ▇▇▇▇ ▇▇▇▇▇, known to me to be a Vice
President of Prudential Securities Secured Financing Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared J. ▇▇▇▇ ▇▇▇, known to me to be a Senior
Executive Vice President of Emergent Mortgage Corp., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared Pablo de la Canal, known to me to be an
officer of First Union National Bank, a national banking association that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-1 Class A-1 Certificate Principal
Balance as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 6.545% $45,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement: Denomination: $____________
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AJ0
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-1-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-1 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-1 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-1 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-1 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-1-2
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-1 Certificates on each
Distribution Date will be a rate per annum equal to 6.545% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-1 Certificates.
The Class A-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-1-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-1-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-1-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-1 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-1-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF CLASS A-2 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository of The Depository Trust Company, a New York corporation
("DTC"), to the Trustee or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-2 Class A-2 Certificate Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 6.540% $20,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AK7
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-2-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE TRUSTEE OR ANY OF
THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-2 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-2 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-2 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, all distributions to the Holder of
this Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-2
A-2-2
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-2 Certificates on each
Distribution Date will be a rate per annum equal to 6.540% per annum (subject to
the Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-2 Certificates.
The Class A-2 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-2-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-2-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-2-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-2 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-2-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF CLASS A-3 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository of The Depository Trust Company, a New York corporation
("DTC"), to the Trustee or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-3 Class A-3 Certificate Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 6.670% $25,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AL5
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-3-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-3 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-3 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-3 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, all distributions to the Holder of
this Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-3 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-3-2
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-3 Certificates on each
Distribution Date will be a rate per annum equal to 6.670% per annum (subject to
the applicable available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-3 Certificates.
The Class A-3 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-3-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-3-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-3-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN COM - as tenants in common ---------
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-3 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-3-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF CLASS A-4 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-4 Class A-4 Certificate Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 6.925% $33,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AM3
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-4-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-4 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-4 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-4 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-4 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-4-2
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-4 Certificates on each
Distribution Date will be a rate per annum equal to 6.925% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-4 Certificates.
The Class A-4 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-4-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-4-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-4-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-4 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-4-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF CLASS A-5 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-5 Class A-5 Certificate Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 7.290% $30,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AN1
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-5-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-5 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-5 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-5 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-5 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-5-2
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-5 Certificates on each
Distribution Date will be a rate per annum equal to 7.290% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-5 Certificates.
The Class A-5 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-5-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-5 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-5-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN COM - as tenants in common ---------
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-5 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-5-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF CLASS A-6 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-6 Class A-6 Certificate Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Pass-Through Rate: 6.930% $17,000,000
--------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
CUSIP: 29088X AP6
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-6-1
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-6 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-6 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-6 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-6 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-6-2
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-6 Certificates on each
Distribution Date will be a rate per annum equal to 6.930% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-6 Certificates.
The Class A-6 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-6-3
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-6-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-6 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-6-5
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-6 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-6-6
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN
A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
AS DESCRIBED HEREIN, NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT (OR AN ENTITY USING THE
ASSETS OF SUCH A PLAN OR ARRANGEMENT) SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY
BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT TO THE
CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF
A-7-1
ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED
BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(a)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE
FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A
"DISQUALIFIED ORGANIZATION"), OR (D) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED
TRANSFEREE. NOTWITHSTANDING REGISTRATION IN THE CERTIFICATE REGISTER OR
ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH
REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER
AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY
PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF A CLASS R CERTIFICATE BY
ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE
PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(d) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
OWNERSHIP OF THIS CLASS R CERTIFICATE.
================================================================================
Series 1997-3, Class R Certificate Principal Balance of the
Class R Certificates as of the Issue
Date: $0.00
--------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement:
August 10, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
--------------------------------------------------------------------------------
Issue Date: September 24, 1997
--------------------------------------------------------------------------------
Percentage Interest: 100%
================================================================================
A-7-2
EMERGENT HOME EQUITY LOAN PASS-THROUGH
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES.
This certifies that Emergent Mortgage Corp. is the registered owner
of a Percentage Interest set forth above in that certain beneficial ownership
interest evidenced by all the Class R Certificates in the Trust Fund created
pursuant to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R Certificates the
aggregate Percentage Interest of which is in excess of a 66% Percentage Interest
of the Class R Certificates, or by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee
A-7-3
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.
The Class R Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
A-7-4
No transfer of this Certificate shall be made unless that transfer
is made pursuant to an effective registration statement under the 1933 Act and
effective registration or qualification under applicable state securities laws,
or is made in a transaction that does not require such registration or
qualification. In the event that a transfer is to be made without registration
or qualification, the Trustee and the Certificate Registrar shall require, in
order to assure compliance with such laws, (i) if such transfer is purportedly
being made in reliance upon Rule 144A under the 1933 Act, written certifications
from the Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, in the form described by the
Agreement certifying to the Trustee and the Certificate Registrar the facts
surrounding the transfer, or (ii) in all other cases, an Opinion of Counsel
satisfactory to them that such transfer may be made without such registration or
qualification, which Opinion of Counsel shall not be an expense of the
Depositor, the Trustee or the Certificate Registrar, in their respective
capacities as such, together with copies of the written certification(s) of the
Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. None of the Depositor, the Certificate Registrar nor the Trustee
is obligated to register or qualify the Class of Certificates specified on the
face hereof under the 1933 Act or any other securities law or to take any action
not otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar, the Servicer and the
Certificate Insurer against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws.
No transfer of a Certificate or any interest therein may be made to
employee benefit plans and certain other retirement plans and arrangements,
including individual retirement accounts and annuities, ▇▇▇▇▇ plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code ("Plans") or any person who is
directly or indirectly purchasing the Certificate or interest therein on behalf
of, as named fiduciary of, as trustee of, or with assets of a Plan.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed for all purposes to have consented to the provisions of Section 5.02 of
the Agreement and to any amendment of the Agreement deemed necessary by counsel
of the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the REMIC
Trust to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC Trust.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this
A-7-5
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee, the Certificate Insurer, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of they Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Mortgage Loans and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-7-6
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee and
not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK,
as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-7-7
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class R and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
--------------------------------------------------------------------------------
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-7-8
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-7-9
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
Please see Tab 12
B-1
EXHIBIT C-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
__________, 1997
Prudential Securities Secured
Financing Corporation
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Pooling and Servicing Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Agreement, we certify that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in the exception
report annexed hereto as not being covered by this certification), (i) the
Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.04 of the Agreement. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
due authorization, recordability or genuineness of any of the documents
contained in the Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
C-1-1
FIRST UNION NATIONAL BANK,
solely in its
capacity as Trustee and not in its
individual capacity
By:___________________________________
Name:_________________________________
Title:________________________________
C-1-2
EXHIBIT C-2
FORM OF TRUSTEE'S FINAL CERTIFICATION
_________, 1997
Prudential Securities Secured
Financing Corporation
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Pooling and Servicing Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:
(a) the original recorded Mortgage, and the original recorded power
of attorney, if the Mortgage was executed pursuant to a power of attorney,
or a certified copy thereof in those instances where the public recording
office retains the original or where the original has been lost; and
(b) an original recorded Assignment of the Mortgage to the Trustee
together with the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator, or a
certified copy of such Assignments in those instances where the public
recording retains the original or where original has been lost; and
(c) the original lender's title insurance policy.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans
C-2-1
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:___________________________________
Name:_________________________________
Title:________________________________
C-2-2
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
Please see Tab 8
D-1
Exhibit E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Trustee/Custodian
Name: First Union National Bank
Address: ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Certificates: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3.
E-1-1
The undersigned Servicer hereby acknowledges that it has received
from First Union National Bank, as Trustee for the Holders of Emergent Home
Equity Loan Pass-Through Certificates, Series 1997-3, the documents referred to
below (the "Documents"). All capitalized terms not otherwise in this Request for
Release shall have the meanings given them in the Pooling and Servicing
Agreement, dated as of August 10, 1997, among the Trustee, the Depositor and the
Servicer (the "Pooling and Servicing Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum of
$________, made by ______________, payable to, or endorsed to the order
of, the Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________ in
the County Recorder's Office of the County of _______________, State of
_______________ in book/reel/docket _________________ of official records
at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________ in
the County Recorder's Office of the County of _______________, State of
________________ in book/reel/docket ________________ of official records
at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on ______
as instrument no. _______ in the County Recorder's Office of the County of
______________, State of ______________ in book/reel/docket __________ of
official records at page/image ___________.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents
in trust for the benefit of the Trustee, solely for the purposes provided
in the Agreement.
(2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest,
charges, writs of
E-1-2
attachment or other impositions nor shall the Servicer assert or seek to
assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no
longer exists, unless the Mortgage Loan relating to the Documents has been
liquidated and the proceeds thereof have been remitted to the Collection
Account and except as expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Servicer shall
at all times be earmarked for the account of the Trustee, and the Servicer
shall keep the Documents and any proceeds separate and distinct from all
other property in the Servicer's possession, custody or control.
Dated:
EMERGENT MORTGAGE CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
E-1-3
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-3
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
E-2-1
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM OWNER
First Union National Bank, as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class R
Reference is hereby made to the Pooling and Servicing Agreement
dated as of August 10, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used by not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of ___________________
(the "Owner"), proposes to transfer to ___________________ (the "Transferee")
$___________________ principal amount of Class R Certificates (the
"Certificates"). In connection with such transfer, the Owner hereby represents,
warrants and certifies as follows:
1. The Certificates are being transferred by the Owner to the
Transferee in accordance with (i) the provisions of the Pooling and Servicing
Agreement (including Section 5.02 thereof), and (ii) Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended, and (iii) any other applicable
securities laws of the United States, any State thereof and any other applicable
jurisdiction.
2. Without limitation of the foregoing, the Transferee is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing for
its own account or for the account of a "qualified institutional buyer."
F-1-1
3. The Transferee is aware that the transfer to it is being made in
reliance upon Rule 144A.
[Insert Name of Owner]
By:__________________________________
Name:
Title:
Date: ___________, ____
F-1-2
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM TRANSFEREE
First Union National Bank, as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class R
Reference is hereby made to the Pooling and Servicing Agreement
dated as of August 10, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of ___________________
(the "Transferee"), proposes to acquire from ___________________ (the "Owner")
$___________________ principal amount of Class R Certificates (the
"Certificates"). In connection with such acquisition, the Transferee hereby
represents, warrants and certifies as follows:
The Transferee's intention is to acquire the Certificates (a) for
investment for the Transferee's own account (or for the account of one or more
other institutional investors for which it is acting as duly authorized
fiduciary or agent, including, without limitation, an insurance company separate
account), or (b) for resale to "qualified institutional buyers" in transactions
under Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, as
amended (the "1933 Act") and not in any event with the view to, or for resale in
connection with, any distribution thereof. It understands that the Certificates
have not been registered under the 1933 Act, by reason of a specified exemption
from the registration provisions of the 1933 Act which depends upon, among other
things, the bona fide nature of the Transferee's investment intent (or intent to
resell only in Rule 144A transactions) as expressed herein.
The Transferee (i) understands that the Owner is relying upon the
exemption from the provisions of Section 5 of the 1933 Act provided by Rule 144A
in connection with the transfer of the Certificates to the Transferee and (ii)
will take reasonable steps to ensure that any purchaser of the Certificates from
the Transferee is aware that the Transferee is relying on such exemption in
connection with any such resale.
F-1-3
The Transferee is a "qualified institutional buyer" within the
meaning of Rule 144A.
The Transferee acknowledges either (a) that it has not requested
from any person the information required to be received by the Transferee, upon
request, pursuant to Rule 144A(d)(4)(i) (the "Required Information"), or (b)
that it has requested and received the Required Information from the Owner or
the Trustee.
The Transferee will not sell or otherwise transfer any of the
Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement (including Section 5.02 thereof) and unless either such
Certificates are registered or qualified under the 1933 Act and the applicable
law any state or other applicable jurisdiction or an exemption from such
registration or qualification is available. The Purchaser understands and
acknowledges that the Certificates bear a legend to such effect.
Very truly yours,
[TRANSFEREE]
By:___________________________________
Name:_________________________________
Title:________________________________
F-1-4
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
, being duly sworn, deposes, represents and warrants as
follows:
I am a ________________ of ___________________________ (the "Owner")
a corporation duly organized and existing under the laws of ________, the record
owner of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3,
Class R (the "Class R Certificates"), on behalf of whom I have the authority to
make this affidavit and agreement. Capitalized terms used but not defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of August 10, 1997, among Prudential Securities Secured
Financing Corporation, Depositor, Emergent Mortgage Corp., Servicer, and First
Union National Bank, Trustee (the "Pooling and Servicing Agreement") pursuant to
which the Class R Certificates were issued.
The Owner (i) is and will be a "Permitted Transferee" as of
____________, 199_ and (ii) is acquiring the Class R Certificates, in the
initial principal amount of $0.00 for its own account or for the account of
another Owner from which it has received an affidavit in substantially the same
form as this affidavit. A "Permitted Transferee" is any person other than a
"disqualified organization" or a possession of the United States. For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any rural electric
or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income.
The Owner is aware (i) of the tax that would be imposed on transfers
of the Class R Certificates to disqualified organizations under the Internal
Revenue Code of 1986 that applies to all transfers of the Class R Certificates
after March 31, 1988; (ii) that such tax would be on the transferor or, if such
transfer is through an agent (which person includes a broker, nominee or
middleman) for a non-Permitted Transferee, on the agent; (iii) that the person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnishes to such person an affidavit that the transferee is a
Permitted Transferee and, at the time of transfer, such person does not have
actual knowledge that the affidavit is false; and (iv) that each of the Class R
Certificates may be a "noneconomic residual interest" within the meaning of
proposed Treasury regulations promulgated under the Code and that the transferor
of a "noneconomic residual interest"
F-2-1
will remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer is to impede the
assessment or collection of tax.
The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificates if, at any time during the taxable year of the
pass-through entity, a non-Permitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
The Owner is aware that the Trustee will not register the transfer
of any Class R Certificate unless the transferee, or the transferee's agent,
delivers to the Trustee, among other things, an affidavit substantially in the
same form as this affidavit. The Owner expressly agrees that it will not
consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is a Permitted Transferee.
The Owner's Taxpayer Identification number is _____________.
The Owner has reviewed the restrictions set forth on the face of the
Class R Certificates and the provisions of Section 5.02(d) of the Pooling and
Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)), and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.
The Owner anticipates that it will, so long as it holds the Class R
Certificates, have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, and hereby represents to and for the benefit of the person
from whom it acquired the Class R Certificates that the Owner intends to pay
taxes associated with holding such Class R Certificates as they become due,
fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
The Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Class R
Certificates.
The Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
F-2-2
The Owner is not acquiring the Class R Certificates with the intent
to transfer the Class R Certificates to any person or entity that will not have
sufficient funds to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
The Owner will, in connection with any transfer that it makes of the
Class R Certificates, obtain from its transferee the representations required by
Section 5.02(d) of the Pooling and Servicing Agreement under which the Class R
Certificate were issued and will not consummate any such transfer if it knows,
or knows facts that should lead it to believe, that any such representations are
false.
The Owner will, in connection with any transfer that it makes of the
Class R Certificates, deliver to the Trustee an affidavit, which represents and
warrants that it is not transferring the Class R Certificates to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding for so long as the Class R Certificates
remains outstanding; and (iii) is not a "Permitted Transferee".
The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
F-2-3
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:__________________________________
Name:________________________________
Title: [Vice] President
Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of ____________, 199_.
Notary Public
County of ___________
State of ____________
My Commission expires:
F-2-4
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
___________________________________, being duly sworn, deposes, represents and
warrants as follows:
I am a ___________________ of _________________________ (the
"Owner"), a corporation duly organized and existing under the laws of
_____________, on behalf of whom I make this affidavit.
The Owner is not transferring the Residual Certificates to impede
the assessment or collection of any tax.
The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Class R Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Class R Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Class R Certificates remain outstanding
and (iii) is not a Permitted Transferee.
The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F. The Owner does not know or believe that
any representation contained therein is false.
The Owner has no knowledge that the Purchaser is not both a United
States Person and a Permitted Transferee.
At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.
F-2-5
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:__________________________________
Name:________________________________
Title: [Vice] President
Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of ____________, 199_.
Notary Public
County of ___________
State of ____________
My Commission expires:
F-2-6
Schedule 1
MORTGAGE LOAN SCHEDULE
Please see Tab 7
EXHIBIT G
PRE-FUNDED MORTGAGE LOAN TRANSFER AGREEMENT
EMERGENT HOME EQUITY LOAN TRUST 1997-3
Emergent Mortgage Corp. ("Originator"), Emergent Mortgage Holdings
Corporation ("Seller"), Prudential Securities Secured Financing Corporation
("Depositor"), and First Union National Bank, as Trustee (the "Trustee"),
pursuant to (i) the Purchase Agreement and Assignment dated as of August 10,
1997 among Originator, Seller and Emergent Group, Inc. ("Emergent Group"), (ii)
the Unaffiliated Seller's Agreement dated as of August 10, 1997 (the
"Unaffiliated Seller's Agreement") among Seller, Depositor and Emergent Group,
and (iii) the Pooling and Servicing Agreement dated as of August 10, 1997 (the
"Pooling and Servicing Agreement") among the Depositor, the Originator and the
Trustee, hereby confirm, as of this day of , 1997, their understanding and
agreement as follows with respect to the sale by the Originator to the Seller,
the sale by the Seller to the Depositor, and the sale by the Depositor to the
Purchaser of the Mortgage Loans listed on the attached Mortgage Loan Schedule
(the "Pre-Funded Mortgage Loans").
The Originator hereby irrevocably sells to the Seller without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Unaffiliated Seller's Agreement and/or the Pooling and Servicing Agreement)
all of its right, title and interest in and to the Pre-Funded Mortgage Loans,
including, without limitation, the Mortgages, the Mortgage Files, the Mortgage
Notes, all other documents, materials and properties appurtenant thereto, all
interest and principal collected by the Originator on or with respect to the
Pre-Funded Mortgage Loans on or after the related Cut-off Dates, and all
proceeds received on or after such Cut-off Dates of any related insurance
policies. The Originator shall deliver the original Mortgage Note, Mortgage or
mortgage assignment with evidence of recording thereon and other required
documentation in accordance with the delivery requirements of the Seller set
forth in Section 2.04 of the Unaffiliated Seller's Agreement..
The Seller does hereby irrevocably sell to the Depositor without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Purchase Agreement, the Unaffiliated Seller's Agreement and/or the Pooling
and Servicing Agreement) all of its right, title and interest in and to the
Pre-Funded Mortgage Loans, including, without limitation, the Mortgages, the
Mortgage Files, the Mortgage Notes, all other documents, materials and
properties appurtenant thereto, all interest and principal collected by the
Seller on or with respect to the Pre-Funded Mortgage Loans on or after the
related Cut-off Dates and all proceeds received on or after such Cut-off Dates
of any related insurance policies. The Seller shall deliver the original
Mortgage Note, Mortgage or mortgage assignment with evidence of recording
thereon and other required documentation in accordance Section 2.04 of the
Unaffiliated Seller's Agreement.
The Depositor does hereby irrevocably sell to the Purchaser without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Unaffiliated Seller's Agreement and/or the Pooling and Servicing Agreement)
all of its
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right, title and interest in and to the Pre-Funded Mortgage Loans, including,
without limitation, the Mortgages, the Mortgage Files, Mortgages Notes, all
other documents, materials and properties appurtenant thereto, all interest and
principal collected by the Depositor on or with respect to the Pre-Funded
Mortgage Loans on or after the related Cut-off Dates and all proceeds received
on or after such Cut-off Dates of any related insurance policies. The Depositor
shall deliver the original Mortgage or mortgage assignment with evidence of
recording thereon and other required documentation in accordance with the terms
set forth in Section 2.03 of the Pooling and Servicing Agreement.
The expenses and costs relating to the transfers of the Pre-Funded
Mortgage Loans contemplated hereby shall be borne by the Seller.
The Originator and the Seller hereby affirm the representations and
warranties made by each of them set forth in the Purchase Agreement and the
Unaffiliated Seller's Agreement, respectively, that relate to the Pre-Funded
Mortgage Loans on and as of the date hereof. The Originator and the Seller each
hereby deliver notice and confirm that each of the conditions set forth in
Section 2.02(c) of the Pooling and Servicing Agreement are satisfied on and as
of the date hereof in respect of the Pre-Funded Mortgage Loans.
The Depositor hereby affirms each of its representations and
warranties set forth in the Unaffiliated Seller's Agreement that relate to the
Pre-Funded Mortgage Loans on and as of the date hereof. The Depositor hereby
delivers notice and confirms that each of the conditions set forth in Section
2.02(c) of the Pooling and Servicing Agreement are satisfied as of the date
hereof in respect of the Pre-Funded Mortgage Loans.
Additional terms of sale are attached hereto as Attachment A.
To the extent permitted by applicable law, this Pre-Funded Mortgage
Loan Transfer Agreement, or a memorandum thereof if permitted under applicable
law, is subject to recordation in all appropriate public offices for real
property records in all counties or other comparable jurisdictions in which any
or all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Certificateholders' expense, but only upon the
direction of the Trustee accompanied by an opinion of counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders.
Capitalized terms used herein but not defined herein shall have the
meanings ascribed thereto in the Pooling and Servicing Agreement.
This Pre-Funded Mortgage Loan Transfer Agreement shall be construed
in accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws, without giving effect to the principles of conflicts of laws.
This Pre-Funded Mortgage Loan Transfer Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of
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which, when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same agreement.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings ascribed thereto in the Pooling and Servicing Agreement.
EMERGENT MORTGAGE CORP.
By:
--------------------------------
Name:
Title:
EMERGENT MORTGAGE
HOLDINGS CORPORATION
By:
--------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
--------------------------------
Name:
Title:
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ATTACHMENTS
A. Additional Terms of Sale
B. Mortgage Loan Schedule
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