Exhibit 4.1
Form of Pooling and Servicing Agreement
POOLING AND SERVICING AGREEMENT
Relating to
__________ MORTGAGE LOAN TRUST _____
Among
----------,
as Master Servicer,
HOME EQUITY SECURITIZATION CORP.,
as the Depositor,
and
----------
as Trustee
Dated as of __________
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
Parties................................................................................................ 1
Recitals............................................................................................... 1
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.............................................................1
Section 1.1. Definitions........................................................................1
Section 1.2. Use of Words and Phrases..........................................................30
Section 1.3. Captions; Table of Contents.......................................................30
Section 1.4. Opinions..........................................................................30
Section 1.5. Calculations......................................................................30
ARTICLE II THE TRUST....................................................................................30
Section 2.1. Establishment of the Trust........................................................30
Section 2.2. Office............................................................................30
Section 2.3. Purpose and Powers................................................................30
Section 2.4. Appointment of the Trustee; Declaration of Trust..................................31
Section 2.5. Expenses of the Trust.............................................................31
Section 2.6. Ownership of the Trust............................................................31
Section 2.7. Receipt of Trust Estate...........................................................31
Section 2.8. Miscellaneous REMIC Provisions....................................................31
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR, AND THE MASTER SERVICER;
CONVEYANCE OF MORTGAGE LOANS............................................................................33
Section 3.1. Representations and Warranties of the Depositor and the Master Servicer...........33
Section 3.2. Covenants of the Depositor to Take Certain Actions with Respect to the Mortgage
Loans in Certain Situations.......................................................37
Section 3.3. Conveyance of the Mortgage Loans and Qualified Replacement Mortgages..............46
Section 3.4. Acceptance by Trustee; Certain Substitutions of Mortgage Loans; Certification by
Trustee ..........................................................................48
Section 3.5. Cooperation Procedures............................................................50
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES............................................................51
Section 4.1. Issuance of Certificates..........................................................51
Section 4.2. Sale of Certificates..............................................................51
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS........................................................51
Section 5.1. Terms.............................................................................51
Section 5.2. Forms.............................................................................51
Section 5.3. Execution, Authentication and Delivery............................................52
Section 5.4. Registration and Transfer of Certificates.........................................52
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates.................................54
Section 5.6. Persons Deemed Owners.............................................................54
Section 5.7. Cancellation......................................................................54
Section 5.8. Limitation on Transfer of Ownership Rights........................................54
Section 5.9. Assignment of Rights..............................................................55
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ARTICLE VI COVENANTS....................................................................................55
Section 6.1. Distributions.....................................................................55
Section 6.2. Money for Distributions to be Held in Trust; Withholding..........................55
Section 6.3. Protection of Trust Estate........................................................56
Section 6.4. Performance of Obligations........................................................57
Section 6.5. Negative Covenants................................................................57
Section 6.6. No Other Powers...................................................................57
Section 6.7. Limitation of Suits...............................................................57
Section 6.8. Unconditional Rights of Owners to Receive Distributions...........................58
Section 6.9. Rights and Remedies Cumulative....................................................58
Section 6.10. Delay or Omission Not Waiver......................................................58
Section 6.11. Control by Owners.................................................................58
ARTICLE VII ACCOUNTS, FLOW OF FUNDS, DISTRIBUTIONS AND REPORTS..........................................59
Section 7.1. Collection of Money...............................................................59
Section 7.2. Establishment of Accounts.........................................................59
Section 7.3. Flow of Funds.....................................................................59
Section 7.4. Investment of Accounts............................................................62
Section 7.5. Eligible Investments..............................................................63
Section 7.6. Reports by Trustee................................................................64
Section 7.7. Drawings under the Certificate Insurance Policy and Reports by Trustee............67
Section 7.8. Allocation of Realized Losses.....................................................69
Section 7.9. Supplemental Interest Payments....................................................69
ARTICLE VIII TERMINATION OF TRUST.......................................................................70
Section 8.1. Termination of Trust..............................................................70
Section 8.2. Termination Upon Option of the Depositor..........................................70
Section 8.3. Auction Sale......................................................................71
Section 8.4. Disposition of Proceeds...........................................................71
ARTICLE IX THE TRUSTEE..................................................................................72
Section 9.1. Certain Duties and Responsibilities...............................................72
Section 9.2. Removal of Trustee for Cause......................................................74
Section 9.3. Certain Rights of the Trustee.....................................................75
Section 9.4. Not Responsible for Recitals or Issuance of Certificates..........................76
Section 9.5. May Hold Certificates.............................................................76
Section 9.6. Money Held in Trust...............................................................76
Section 9.7. Compensation and Reimbursement....................................................76
Section 9.8. Corporate Trustee Required; Eligibility...........................................76
Section 9.9. Resignation and Removal; Appointment of Successor.................................76
Section 9.10. Acceptance of Appointment by Successor Trustee....................................77
Section 9.11. Merger, Conversion, Consolidation or Succession to Business of the Trustee........78
Section 9.12. Reporting; Withholding............................................................78
Section 9.13. Liability of the Trustee..........................................................78
Section 9.14. Appointment of Co-Trustee or Separate Trustee.....................................79
ARTICLE X SERVICING AND ADMINISTRATION OF MORTGAGE LOANS................................................80
Section 10.1. General Servicing Procedures......................................................80
Section 10.2. Collection of Certain Mortgage Loan Payments......................................82
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Section 10.3. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers................82
Section 10.4. Successor Sub-Servicers...........................................................83
Section 10.5. Liability of Master Servicer......................................................83
Section 10.6. No Contractual Relationship Between Sub-Servicer and Trustee or the Owners........83
Section 10.7. Assumption or Termination of Sub-Servicing Agreement by Trustee...................83
Section 10.8. Principal and Interest Account....................................................83
Section 10.9. Delinquency Advances and Servicing Advances.......................................86
Section 10.10. Compensating Interest.............................................................87
Section 10.11. Maintenance of Insurance..........................................................87
Section 10.12. Due-on-Sale Clauses; Assumption and Substitution Agreements.......................88
Section 10.13. Realization Upon Defaulted Mortgage Loans.........................................89
Section 10.14. Trustee to Cooperate; Release of Files............................................90
Section 10.15. Master Servicing Compensation.....................................................91
Section 10.16. Annual Statement as to Compliance.................................................91
Section 10.17. Annual Independent Certified Public Accountants' Reports..........................91
Section 10.18. Access to Certain Documentation and Information Regarding the Mortgage Loans;
Confidentiality ..................................................................91
Section 10.19. Assignment of Agreement...........................................................92
Section 10.20. Inspections by Certificate Insurer and Account Parties; Errors and Omissions
Insurance ........................................................................92
Section 10.21. Financial Statements..............................................................92
Section 10.22. REMIC.............................................................................93
Section 10.23. The Designated Depository Institution.............................................93
Section 10.24. Appointment of Custodian..........................................................93
ARTICLE XI EVENTS OF DEFAULT; REMOVAL OF MASTER SERVICER; MERGER........................................93
Section 11.1. Removal of Master Servicer; Resignation of Master Servicer........................93
Section 11.2. Trigger Events; Removal of Master Servicer........................................97
Section 11.3. Merger, Conversion, Consolidation or Succession to Business of Master Servicer....98
ARTICLE XII MISCELLANEOUS...............................................................................98
Section 12.1. Compliance Certificates and Opinions..............................................98
Section 12.2. Form of Documents Delivered to the Trustee........................................98
Section 12.3. Acts of Owners....................................................................99
Section 12.4. Notices, etc. to Trustee.........................................................100
Section 12.5. Notices and Reports to Owners; Waiver of Notices.................................100
Section 12.6. Rules by Trustee and Depositor...................................................100
Section 12.7. Successors and Assigns...........................................................100
Section 12.8. Severability.....................................................................100
Section 12.9. Benefits of Agreement............................................................100
Section 12.10. Legal Holidays...................................................................100
Section 12.11. Governing Law....................................................................101
Section 12.12. Counterparts.....................................................................101
Section 12.13. Usury............................................................................101
Section 12.14. Amendment........................................................................101
Section 12.15. REMIC Status; Taxes..............................................................102
Section 12.16. Additional Limitation on Action and Imposition of Tax............................103
Section 12.17. Appointment of Tax Matters Person................................................104
Section 12.18. Reports to the Securities and Exchange Commission................................104
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Section 12.19. Notices..........................................................................104
Section 12.20. Grant of Security Interest.......................................................104
Section 12.21. Indemnification..................................................................105
ARTICLE XIII CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER.........................................107
Section 13.1. Rights of the Certificate Insurer to Exercise Rights of the Owners of the Class A
Certificates ....................................................................107
Section 13.2. Trustee to Act Solely with Consent of the Certificate Insurer....................107
Section 13.3. Trust Fund and Accounts Held for Benefit of the Certificate Insurer..............108
Section 13.4. Claims Upon the Policy; Policy Payments Account..................................108
Section 13.5. Effects of Payments by the Certificate Insurer...................................109
Section 13.6. Notices to the Certificate Insurer...............................................109
Section 13.7. Third-Party Beneficiary..........................................................109
EXHIBIT A Form of Class A Certificate
EXHIBIT B-1 Form of Class B Certificate
EXHIBIT B-2 Form of Class B-S Certificate
EXHIBIT C-1 Form of Class RL Certificate
EXHIBIT C-2 Form of Class RU Certificate
EXHIBIT D Form of Transfer Certificate
EXHIBIT E Form of Residual Certificate Tax Matters Transfer Certificate
EXHIBIT F Form of Master Servicer's Trust Receipt
EXHIBIT G Form of Liquidation Report
EXHIBIT H Form of Delivery Order
EXHIBIT I Officer's Certificate
EXHIBIT J Form of Certificate Regarding Prepaid Loans
EXHIBIT K Form of Initial Trustee Certification
EXHIBIT L Form of Interim Trustee Certification
EXHIBIT M Form of Final Trustee Certification
EXHIBIT N Auction Procedures
EXHIBIT O Form of Trustee Request for Formula Interest Shortfall
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POOLING AND SERVICING AGREEMENT, relating to __________
MORTGAGE LOAN TRUST _____, dated as of __________, among __________, a
__________ corporation, as the master servicer (in such capacity, the "Master
Servicer"), HOME EQUITY SECURITIZATION CORP., a Delaware corporation, as the
depositor (the "Depositor") and __________, a __________ _________, in its
capacity as trustee (the "Trustee").
WHEREAS, the Depositor wishes to establish a trust and three
sub-trusts and provide for the allocation and sale of the beneficial interests
therein and the maintenance and distribution of the trust estate;
WHEREAS, the Depositor has acquired the Mortgage Loans from
the Company pursuant to the Sale Agreement;
WHEREAS, the Depositor wishes to convey the Mortgage Loans to
the Trust;
WHEREAS, the Master Servicer has agreed to service the
Mortgage Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done; and
WHEREAS, __________, a __________ _________, is willing to
serve in the capacity of Trustee hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Depositor, the Master Servicer and the
Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": The Certificate Account, each Principal and
Interest Account and each Distribution Account including any sub-Accounts
created pursuant to Section 7.2.
"Accrual Period": With respect to the Class A-2 Group I, A-3
Group I, A-4 Group I, and A-5 Group I Certificates and any Payment Date, the
period from and including the second day of the calendar month immediately
preceding such Payment Date to and including the first day of the calendar month
in which such Payment Date occurs; with respect to the Class A-1 Group I, and
A-6 Group II Certificates and any Payment Date, the period from and including
the prior Payment Date (or, in the case of the first Payment Date, from and
including the Startup Day) to and including the day immediately preceding such
Payment Date.
"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, as it may
be amended from time to time, and
including the Exhibits hereto.
"Allocable Losses": As defined in Section 7.8 hereof.
"Appraised Value": The appraised value of any Property based
upon the appraisal made at the time of the origination of the related Mortgage
Loan, or, in the case of a Mortgage Loan which is a purchase money mortgage, the
sales price of the Property at such time of origination, if such sales price is
less than such appraised value.
"Auction Sale": The Trustee's solicitation of bids for the
purchase of all Mortgage Loans in the Trust pursuant to Section 8.3 hereof.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Depositor,
the Master Servicer and the Trustee, initially including those individuals whose
names appear on the lists of Authorized Officers delivered on the Startup Day.
"Available Funds": With respect to Group I, the Group I
Available Funds, and with respect to Group II, the Group II Available Funds.
"Base Group I Principal Distribution Amount": As to any
Payment Date, an amount equal to (x) the sum, without duplication, of (i) the
principal portion of all scheduled and unscheduled payments received by the
Master Servicer on the Group I Mortgage Loans during the related Remittance
Period, including any Prepayments and any Net Proceeds, (ii) the principal
portion of all Substitution Amounts and the principal portion of all Loan
Purchase Prices deposited into the Principal and Interest Accounts with respect
to the Group I Mortgage Loans on the related Remittance Date, and (iii) the
proceeds received by the Trustee with respect to the Group I Mortgage Loans in
connection with any termination of the Trust pursuant to Article VIII hereof, to
the extent such proceeds relate to principal, minus (y) the amount of any Group
I Subordination Reduction Amount for such Payment Date.
"Base Group II Principal Distribution Amount": As to any
Payment Date, an amount equal to (x) the sum, without duplication, of (i) the
principal portion of all scheduled and unscheduled payments received by the
Master Servicer on the Group II Mortgage Loans during the related Remittance
Period, including any Prepayments and any Net Proceeds, (ii) the principal
portion of all Substitution Amounts and the principal portion of all Loan
Purchase Prices deposited into the Principal and Interest Accounts with respect
to the Group II Mortgage Loans on the related Remittance Date, and (iii) the
proceeds received by the Trustee with respect to the Group II Mortgage Loans in
connection with any termination of the Trust pursuant to Article VIII hereof, to
the extent such proceeds relate to principal, minus (y) the amount of any Group
II Subordination Reduction Amount for such Payment Date.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the State of New York, the
state in which the principal corporate office or bank of the Master Servicer is
located or in the state in which the principal corporate trust office of the
Trustee is located, which initially is New York, New York, are authorized or
obligated by law or executive order to be closed.
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"Certificate": Any one of the Class A-1 Group I Certificates,
Class A-2 Group I Certificates, Class A-3 Group I Certificates, Class A-4 Group
I Certificates, Class A-5 Group I Certificates, Class A-6 Group II Certificates,
Class B Certificates, Class B-S Certificates or the Residual Certificates.
"Certificate Account": The account designated as the
Certificate Account pursuant to Section 7.2 hereof.
"Certificate Insurance Policy": The financial guaranty
insurance policy number 50590-N issued by the Certificate Insurer to the Trustee
for the benefit of the Owners of the Class A Certificates.
"Certificate Insurer": __________, a __________ __________.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) the Certificate Insurer shall have failed to make a
required payment when due under the Certificate Insurance Policy;
(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, agent, or receiver of the Security Insurer or of all or
any material portion of its property.
"Certificate Insurer Premium Rate": ____% per annum.
"Certificate Principal Balance": The Class A-1 Principal
Balance, the Class A-2 Principal Balance, the Class A-3 Principal Balance, the
Class A-4 Principal Balance, the Class A-5 Principal Balance, the Class A-6
Principal Balance or the Class B Principal Balance, as the case may be.
"Certificateholder": As of any date and with respect to any
Certificate, the Person in whose name such Certificate is registered on the
Register on such date.
"Class": All of the Class A-1 Group I Certificates, the Class
A-2 Group I Certificates, the Class A-3 Group I Certificates, the Class A-4
Group I Certificates, the Class A-5 Group I Certificates, the Class A-6 Group II
Certificates, the Class B Certificates, or all of the Residual Certificates, as
applicable.
"Class A Certificate Principal Balance": The sum of the Class
A-1 Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance, the Class A-4 Principal Balance, the Class A-5 Principal Balance and
the Class A-6 Principal Balance.
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"Class A Certificates": Collectively, the Class A-1 Group I
Certificates, the Class A-2 Group I Certificates, the Class A-3 Group I
Certificates, the Class A-4 Group I Certificates, the Class A-5 Group I
Certificates and the Class A-6 Group II Certificates.
"Class A Distribution Account": The Class A Group I
Distribution Account or the Class A Group II Distribution Account, as the case
may be.
"Class A Group I Certificates": All of the Class A-1 Group I
Certificates, the Class A-2 Group I Certificates, the Class A-3 Group I
Certificates, the Class A-4 Group I Certificates and the Class A-5 Group I
Certificates.
"Class A Group I Distribution Account": The Class A Group I
Distribution Account created pursuant to Section 7.2 hereof.
"Class A Group II Distribution Account": The Class A Group II
Distribution Account created pursuant to Section 7.2 hereof.
"Class A-1 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-1 Principal Distribution Amount for such Payment Date and
(ii) the Class A-1 Interest Distribution Amount for such Payment Date.
"Class A-1 Group I Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
"Class A-1 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-1
Pass-Through Rate on the Class A-1 Principal Balance immediately prior to such
Payment Date. The Class A-1 Interest Distribution Amount does not include
interest shortfalls, if any, on the Mortgage Loans in Group I arising from
Prepayments of principal or Relief Act Shortfalls to the extent such shortfalls
are not covered by Compensating Interest or Group I Available Funds.
"Class A-1 Pass-Through Rate": The lesser of (i) LIBOR as of
the second to last Business Day prior to the immediately preceding Payment Date
(or prior to the Startup Day, in the case of the initial Payment Date) plus
____% per annum or (ii) the Net Weighted Average Coupon Rate for the Group I
Mortgage Loans for such Payment Date.
"Class A-1 Principal Balance": The original Class A-1
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-1 Group I Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-1 Principal Distribution Amount": With respect to any
Payment Date on or prior to the Class A-1 Termination Date, an amount equal to
the lesser of (x) the Remaining Group I Principal Distribution Amount for such
Payment Date and (y) the amount necessary to reduce the Class A-1 Principal
Balance (as it was immediately prior to such Payment Date) to zero. On the Class
A-1 Termination Date any portion of the Remaining Group I Principal Distribution
Amount for such Payment Date remaining on such Payment Date following the
reduction to zero of the Class A-1 Principal Balance shall be distributed as the
initial principal distribution on the Class A-2 Group I Certificates.
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"Class A-1 Termination Date": The Payment Date on which the
Class A-1 Principal Balance is reduced to zero.
"Class A-2 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-2 Principal Distribution Amount for such Payment Date and
(ii) the Class A-2 Interest Distribution Amount for such Payment Date.
"Class A-2 Group I Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
"Class A-2 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-2
Pass-Through Rate on the Class A-2 Principal Balance immediately prior to such
Payment Date. The Class A-2 Interest Distribution Amount does not include
interest shortfalls, if any, on the Mortgage Loans in Group I arising from
Prepayments of principal or Relief Act Shortfalls to the extent such shortfalls
are not covered by Compensating Interest or Group I Available Funds.
"Class A-2 Pass-Through Rate": The lesser of (i) ____% per
annum or (ii) the Net Weighted Average Coupon Rate for the Group I Mortgage
Loans for such Payment Date.
"Class A-2 Principal Balance": The original Class A-2
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-2 Group I Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-2 Principal Distribution Amount": With respect to any
Payment Date following the Class A-1 Termination Date, an amount equal to the
lesser of (x) the Remaining Group I Principal Distribution Amount for such
Payment Date and (y) the amount necessary to reduce the Class A-2 Principal
Balance (as it was immediately prior to such Payment Date) to zero. On the Class
A-1 Termination Date any portion of the Remaining Group I Principal Distribution
Amount for such Payment Date remaining on such Payment Date following the
reduction to zero of the Class A-1 Principal Balance shall be distributed as the
initial principal distribution on the Class A-2 Group I Certificates. On the
Class A-2 Termination Date any portion of the Remaining Group I Principal
Distribution Amount remaining on such Payment Date following the reduction to
zero of the Class A-2 Principal Balance shall be distributed as the initial
principal distribution on the Class A-3 Group I Certificates.
"Class A-2 Termination Date": The Payment Date on which the
Class A-2 Principal Balance is reduced to zero.
"Class A-3 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-3 Principal Distribution Amount for such Payment Date and
(ii) the Class A-3 Interest Distribution Amount for such Payment Date.
"Class A-3 Group I Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
"Class A-3 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-3
Pass-Through Rate on the Class A-3 Principal Balance immediately prior to such
Payment Date. The Class A-3 Interest Distribution Amount does not include
interest shortfalls, if any, on the Mortgage Loans in Group I arising from
Prepayments of principal or
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Relief Act Shortfalls to the extent such shortfalls are not covered by
Compensating Interest or Group I Available Funds.
"Class A-3 Pass-Through Rate": The lesser of (i) _____% per
annum or (ii) the Net Weighted Average Coupon Rate for the Group I Mortgage
Loans for such Payment Date.
"Class A-3 Principal Balance": The original Class A-3
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-3 Group I Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-3 Principal Distribution Amount": With respect to any
Payment Date following the Class A-2 Termination Date, an amount equal to the
lesser of (x) the Remaining Group I Principal Distribution Amount for such
Payment Date and (y) the amount necessary to reduce the Class A-3 Principal
Balance (as it was immediately prior to such Payment Date) to zero. On the Class
A-2 Termination Date any portion of the Remaining Group I Principal Distribution
Amount for such Payment Date remaining on such Payment Date following the
reduction to zero of the Class A-2 Principal Balance shall be distributed as the
initial principal distribution on the Class A-3 Group I Certificates. On the
Class A-3 Termination Date any portion of the Remaining Group I Principal
Distribution Amount remaining on such Payment Date following the reduction to
zero of the Class A-3 Principal Balance shall be distributed as the initial
principal distribution on the Class A-4 Group I Certificates.
"Class A-3 Termination Date": The Payment Date on which the
Class A-3 Principal Balance is reduced to zero.
"Class A-4 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-4 Principal Distribution Amount for such Payment Date and
(ii) the Class A-4 Interest Distribution Amount for such Payment Date.
"Class A-4 Group I Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
"Class A-4 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-4
Pass-Through Rate on the Class A-4 Principal Balance immediately prior to such
Payment Date. The Class A-4 Interest Distribution Amount does not include
interest shortfalls, if any, on the Mortgage Loans in Group I arising from
Prepayments of principal or Relief Act Shortfalls to the extent such shortfalls
are not covered by Compensating Interest or Group I Available Funds.
"Class A-4 Pass-Through Rate": The lesser of (i) _____% per
annum or (ii) the Net Weighted Average Coupon Rate for the Group I Mortgage
Loans for such Payment Date.
"Class A-4 Principal Balance": The original Class A-4
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-4 Group I Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-4 Principal Distribution Amount": With respect to any
Payment Date following the Class A-3 Termination Date, an amount equal to the
lesser of (x) the Remaining Group I Principal Distribution Amount for such
Payment Date and (y) the amount necessary to reduce the Class A-4 Principal
Balance (as it was immediately prior to such Payment Date) to zero. On the Class
A-3
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Termination Date any portion of the Remaining Group I Principal Distribution
Amount for such Payment Date remaining on such Payment Date following the
reduction to zero of the Class A-3 Principal Balance shall be distributed as the
initial principal distribution on the Class A-4 Group I Certificates.
"Class A-5 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-5 Principal Distribution Amount for such Payment Date and
(ii) the Class A-5 Interest Distribution Amount for such Payment Date.
"Class A-5 Group I Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
"Class A-5 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-5
Pass-Through Rate on the Class A-5 Principal Balance immediately prior to such
Payment Date. The Class A-5 Interest Distribution Amount does not include
interest shortfalls, if any, on the Mortgage Loans in Group I arising from
Prepayments of principal or Relief Act Shortfalls to the extent such shortfalls
are not covered by Compensating Interest or Group I Available Funds.
"Class A-5 Lockout Distribution Amount": With respect to any
Payment Date, the product of (i) the applicable Class A-5 Lockout Percentage for
such Payment Date and (ii) the Class A-5 Lockout Pro Rata Distribution Amount
for such Payment Date.
"Class A-5 Lockout Percentage": For each Payment Date shall be
as follows:
Payment Dates Lockout Percentage
------------- ------------------
"Class A-5 Lockout Pro Rata Distribution Amount": For any
Payment Date will be an amount equal to the product of (x) a fraction, the
numerator of which is the Certificate Principal Balance of the Class A-5
Certificates immediately prior to such Payment Date and the denominator of which
is the aggregate Certificate Principal Balance of the Group I Certificates
immediately prior to such Payment Date and (y) the Group I Principal
Distribution Amount for such Payment Date.
"Class A-5 Pass-Through Rate": The lesser of (i) _____% per
annum or (ii) the Net Weighted Average Coupon Rate for the Group I Mortgage
Loans for such Payment Date.
"Class A-5 Principal Balance": The original Class A-5
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-5 Group I Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-5 Principal Distribution Amount": With respect to any
Payment Date prior to the Class A-4 Termination Date, the Class A-5 Lockout
Distribution Amount. With respect to the Payment Date occurring on the Class A-4
Termination Date, the sum of (i) the Class A-5 Lockout Distribution Amount and
(ii) any portion of the Remaining Group I Principal Distribution Amount
remaining on such Payment Date following the reduction to zero of the Class A-4
Principal Balance. With respect to any Payment Date after the Class A-4
Termination Date, the lesser of (x) the Group I Principal Distribution Amount
and (y) the amount necessary to reduce the Class A-5 Principal Balance to zero.
7
"Class A-6 Distribution Amount": As of any Payment Date, the
sum of (i) the Class A-6 Principal Distribution Amount for such Payment Date,
(ii) the Class A-6 Interest Distribution Amount for such Payment Date and (iii)
the Class A-6 Interest Carry-Forward Amount for such Payment Date.
"Class A-6 Formula Interest Shortfall": As defined in Section
7.9(a) hereof.
"Class A-6 Formula Pass-Through Rate": As of any Payment Date,
the rate described in clause (i) of the definition of "Class A-6 Pass-Through
Rate".
"Class A-6 Full Interest Distribution Amount": With respect to
any Payment Date, the Class A-6 Interest Distribution Amount for such Payment
Date calculated using the Class A-6 Formula Pass-Through Rate for such Payment
Date rather than the Class A-6 Pass-Through Rate for such Payment Date plus, if
the full amount of the Class A-6 Formula Interest Shortfall, if any, was not
funded on any prior Payment Date and remains unpaid on such Payment Date, such
amount, together with interest thereon (from the Payment Date on which such
Class A-6 Formula Interest Shortfall was calculated) at the Class A-6 Formula
Pass-Through Rate for such Payment Date.
"Class A-6 Interest Carry-Forward Amount": As of any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-6 Interest
Distribution Amount as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution, made to the Owners of the Class A-6 Group
II Certificates pursuant to Section 7.3(c)(ii) hereof on such immediately
preceding Payment Date and allocable to the Class A-6 Interest Distribution
Amount on such immediately preceding Payment Date and (ii) interest on the
amount, if any, described in clause (i) at one-twelfth of the Class A-6
Pass-Through Rate from such immediately preceding Payment Date. The Class A-6
Interest Distribution Amount does not include interest shortfalls, if any, on
the Mortgage Loans in Group II arising from Prepayments of principal or Relief
Act Shortfalls to the extent such shortfalls are not covered by Compensating
Interest or Group II Available Funds.
"Class A-6 Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-6
Pass-Through Rate on the Class A-6 Principal Balance immediately prior to such
Payment Date.
"Class A-6 Pass-Through Rate": With respect to any Payment
Date and Accrual Period, the lesser of (i) LIBOR as of the second to last
Business Day prior to the immediately preceding Payment Date (or prior to the
Startup Day, in the case of the initial Payment Date) plus _____% per annum, or
(ii) the Net Weighted Average Coupon Rate for the Group II Mortgage Loans for
such Payment Date.
"Class A-6 Principal Balance": The original Class A-6
Principal Balance of $__________ reduced by the sum of all amounts previously
distributed to the Owners of the Class A-6 Group II Certificates in respect of
principal on all previous Payment Dates, but shall not be reduced below zero.
"Class A-6 Principal Distribution Amount": With respect to any
Payment Date, an amount equal to the lesser of (x) the Group II Principal
Distribution Amount for such Payment Date and (y) the amount necessary to reduce
the Class A-6 Principal Balance (as it was immediately prior to such Payment
Date) to zero.
"Class A-6 Group II Certificates": Those certificates in
substantially the form set forth in Exhibit A hereto.
8
"Class B Certificates": Those certificates in substantially
the form set forth in Exhibit B-1 hereto.
"Class B Carry-Forward Amount": As of any Payment Date, the
amount, if any, by which (x) the Class B Distribution Amount as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution to the Owners of the Class B Certificates made pursuant to Section
7.3(c)(v) hereof on such immediately preceding Payment Date.
"Class B Distribution Account": The Class B Distribution
Account created pursuant to Section 7.2 hereof.
"Class B Distribution Amount": As of any Payment Date, the sum
of (i) the Class B Interest Distribution Amount for such Payment Date, (ii) the
Group I Subordination Reduction Amount for such Payment Date and the Group II
Subordination Reduction Amount, if any, described in Section 7.3(b)(iii)(E)
hereof and (iv) the Class B Carry-Forward Amount, if any, as of such Payment
Date.
"Class B Interest": As of any Payment Date, the product of (x)
the Class B Pass-Through Rate, times the actual number of days in the related
Remittance Period divided by 365 (or 366, as appropriate), and (y) the Net Pool
Balance as of the opening of business on the first day of such Remittance
Period.
"Class B Interest Distribution Amount": As of any Payment
Date, the Class B Interest for such Payment Date minus the sum of
(i) the amount of any Class B Interest actually paid to the Owners
of the Class A Group I Certificates on such Payment Date as
all or a portion of (x) the Group I Insured Distribution
Amount on such Payment Date, pursuant to Section
7.3(b)(iii)(B) hereof or (y) the portion of any Group I
Subordination Increase Amount allocated to the Class A Group I
Distribution Account with respect to a Group I Subordination
Deficiency on such Payment Date pursuant to Section
7.3(b)(iii)(E) hereof; and
(ii) the amount of any Class B Interest actually paid to the Owners
of the Class A-6 Group II Certificates as all or a portion of
(x) the Group II Insured Distribution Amount on such Payment
Date, pursuant to Section 7.3(b)(iii)(B) hereof or (y) the
portion of any Group II Subordination Increase Amount
allocated to the Class A Group II Distribution Account with
respect to a Group II Subordination Deficiency on such Payment
Date, pursuant to Section 7.3(b)(iii)(E) hereof.
"Class B Pass-Through Rate": With respect to any Payment Date,
the weighted average of the interest rates borne by the LT-1, LT-2, ▇▇-▇, ▇▇-▇,
LT-5, and LT-7 Lower Tier Interests for the immediately preceding Remittance
Period minus two times the weighted average of the interest rates borne by the
LT-6, LT-8 and LT-9 Lower Tier Interests for such Remittance Period, with the
rate on the LT-9 Lower Tier Interest deemed to be zero for purposes of this
calculation.
"Class B Principal Balance": As of the Startup Day, zero. The
Class B Principal Balance shall be:
(x) increased on each Payment Date by the amounts, if any, of the
Class B Interest (i) actually paid to the Owners of the Class
A Group I Certificates on such Payment Date as all or a
portion of the Group I Principal Distribution Amount or as all
or a portion of the Group I Subordination Increase Amount on
such Payment Date pursuant to Sections
9
7.3(b)(iii)(A) and 7.3(b)(iii)(E) hereof and (ii) actually
paid to the Owners of the Class A-6 Group II Certificates on
such Payment Date as all or a portion of the Group II
Principal Distribution Amount or as all or a portion of the
Group II Subordination Deficiency Amount on such Payment Date,
pursuant to Sections 7.3(b)(iii)(A) and 7.3(b)(iii)(E) hereof;
and
(y) decreased on each Payment Date by the amounts of (i) any Group
I Subordination Reduction Amount or any Group II Subordination
Reduction Amount paid to the Owners of the Class B
Certificates on such Payment Date pursuant to Section
7.3(b)(iii)(G) hereof and (ii) the amount of any Allocable
Losses allocated as a reduction of the Class B Principal
Balance on such Payment Date pursuant to Section 7.8(a)
hereof. The Class B Principal Balance shall in no event be
less than zero.
"Class B-S Certificate": Any of those Certificates
representing the right to receive excess amounts in the Supplemental Interest
Payment Account, and designated as a "Class B-S Certificate" on the face
thereof, in the form of Exhibit B-2 hereto.
"Class LT-1 Certificates" or "LT-1": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-2 Certificates" or "LT-2": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-3 Certificates" or "LT-3": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-4 Certificates" or "LT-4": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-5 Certificates" or "LT-5": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-6 Certificates" or "LT-6": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-7 Certificates" or "LT-7": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-8 Certificates" or "LT-8": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-9 Certificates" or "LT-9": The uncertificated class
of interests in the Lower-Tier REMIC, as described in and designated in Section
2.8 hereof.
"Class LT-10 Certificates" or "LT-10": The uncertificated
class of interests in the Lower-Tier REMIC, as described in and designated in
Section 2.8 hereof.
"Class LT-11 Certificates" or "LT-11": The uncertificated
class of interests in the Lower-Tier REMIC, as described in and designated in
Section 2.8 hereof.
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"Class LT-12 Certificates" or "LT-12": The uncertificated
class of interests in the Lower-Tier REMIC, as described in and designated in
Section 2.8 hereof.
"Class RI Certificates": Those certificates representing
certain residual rights to distributions from REMIC I in substantially the form
set forth as Exhibit C-3 hereto.
"Class RL Certificates": Those certificates representing
certain residual rights to distributions from the Lower-Tier REMIC in
substantially the form set forth as Exhibit C-1 hereto.
"Class RU Certificates": Those certificates representing
certain residual rights to distributions from the Upper-Tier REMIC in
substantially the form set forth as Exhibit C-2 hereto.
"Code": The Internal Revenue Code of 1986, as amended.
"Compensating Interest": As defined in Section 10.10 of this
Agreement.
"Coupon Rate": With respect to any Note and Remittance Period,
the rate of interest borne by such Note at the opening of business on the first
day of such Remittance Period.
"Cumulative Loss Percentage": As to any Payment Date and the
Mortgage Loans, the percentage equivalent of the fraction obtained by dividing
(i) the Cumulative Net Realized Losses by (ii) the Original Pool Principal
Balance.
"Cumulative Net Realized Losses": As of any Payment Date, the
sum of all Net Realized Losses with respect to the Mortgage Loans experienced on
all prior Payment Dates.
"Cut-Off Date": The close of business on __________.
"Delinquency Advance": As defined in Section 10.9(a) of this
Agreement.
"Delinquency Percentage": As of the last day of any Remittance
Period and with respect to the Mortgage Loans, the percentage equivalent of a
fraction, the numerator of which is equal to the aggregate 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 Remittance Period, and
the denominator of which is the Pool Principal Balance as of the last day of
such Remittance Period.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The Delivery Order from the Depositor to the
Trustee directing the Trustee to issue the Certificates on the Startup Day, in
substantially the form of Exhibit H hereto.
"Depositor": Home Equity Securitization Corp., a __________
corporation.
"Depository": The Depository Trust Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and any successor depository hereafter named.
11
"Designated Depository Institution": With respect to any
Account, an institution whose deposits are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the FDIC, the long-term deposits of
which shall be rated A or better by ____ and A1 or better by ____ and in one of
the two highest short-term rating categories by ____ and the highest short-term
rating category by ____, unless otherwise approved in writing by the Certificate
Insurer and each Rating Agency, and which is any of the following: (i) a federal
savings and loan association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (iii) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, or (iv) approved in writing by
the Certificate Insurer and the Rating Agencies and, in each case acting or
designated by the Master Servicer or the Trustee as the depository institution
for such Account; provided, however, that any such institution, association or
subsidiary shall have combined capital, surplus and individual profits of at
least $100,000,000. Notwithstanding the foregoing, an Account may be held by an
institution otherwise meeting the preceding requirements except that the only
applicable rating requirement shall be that the unsecured and uncollateralized
debt obligations thereof shall be rated Baa2 or better by ____ and BBB or better
by ____ if such institution has capital and surplus of not less than $50,000,000
and has trust powers and the Account is held by such institution in its trust
capacity and not in its commercial capacity.
"Designated Residual Holder": Home Equity Securitization Corp.
"Determination Date": The second Business Day preceding each
Payment Date.
"Disqualified Organization": Has the meaning set forth from
time to time in the definition thereof at Section 860E(e)(5) of the Code (or any
successor statute thereto) and applicable to the Trust.
"Distribution Accounts": The Class A Group I Distribution
Account and the Class A Group II Distribution Account and the Class B
Distribution Account.
"Eligible Investments": Those investments so designated
pursuant to Section 7.5 hereof.
"ERISA": As defined in Section 5.8(a) hereof.
"Event of Default": As defined in Section 11.1 of this
Agreement.
"Excess Spread Trigger": As such term is defined in the
Insurance and Indemnity Agreement.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"File": The documents pertaining to a particular Mortgage Loan
pursuant to Section 3.3(b) hereof and any additional documents required to be
added to the File pursuant to this Agreement.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property as indicated on the
Mortgage Loan Schedules.
"Fiscal Agent": As defined in the Insurance Agreement.
12
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Full Interest Distribution Amount": The Class A-6 Full
Interest Distribution Amount.
"Group": Group I or Group II, as the case may be.
"Group I": The group of Mortgage Loans that are the Group I
Mortgage Loans.
"Group I Available Funds": As of any Payment Date, the amount
on deposit in the Certificate Account with respect to the Group I Mortgage Loans
on such Payment Date after making the deposits to the Certificate Account
pursuant to Sections 7.3(a)(i) hereof on such Payment Date. The term "Group I
Available Funds" does not include Insured Payments and does not include any
amounts that cannot be distributed to the Owners of the Certificates by the
Trustee as a result of proceedings under the United States Bankruptcy Code.
"Group I Certificates": Any of the Class A-1 Group I
Certificates, the Class A-2 Group I Certificates, the Class A-3 Group I
Certificates, the Class A-4 Group I Certificates and the Class A-5 Group I
Certificates.
"Group I Cumulative Net Realized Losses": As of any Payment
Date, the sum of all Net Realized Losses with respect to the Group I Mortgage
Loans experienced on all prior Payment Dates.
"Group I Excess Subordinated Amount": With respect to any
Payment Date, the excess, if any, of (x) the Group I Subordinated Amount that
would apply on such Payment Date after taking into account the payment of the
Group I Principal Distribution Amount on such Payment Date (except for any
distributions of related Group I Subordination Reduction Amounts on such Payment
Date) over (y) the Group I Specified Subordinated Amount for such Payment Date.
"Group I Insured Distribution Amount": With respect to any
Payment Date, the sum of (i) Group I Insured Interest Distribution Amount for
such Payment Date and (ii) the Group I Insured Principal Distribution Amount for
such Payment Date.
"Group I Insured Interest Distribution Amount": With respect
to any Payment Date, the sum of (i) the Class A-1 Interest Distribution Amount,
(ii) the Class A-2 Interest Distribution Amount, (iii) the Class A-3 Interest
Distribution Amount, (iv) the Class A-4 Interest Distribution Amount and (v) the
Class A-5 Interest Distribution Amount.
"Group I Insured Payment": As of any Payment Date, the sum of
(x) the Group I Shortfall Amount for such Payment Date and (y) any Preference
Amounts with respect to the Group I Certificates with respect to which the
affected Owners have complied with the provisions of Section 7.3(g) hereof
during the related Remittance Period.
"Group I Insured Principal Distribution Amount": With respect
to any Payment Date, the Group I Subordination Deficit for such Payment Date
plus any amounts paid to the Trustee at the option of the Certificate Insurer in
respect of any losses on Liquidated Loans.
"Group I Interest Distribution Amount": As of any Payment
Date, the sum of the Class A-1 Interest Distribution Amount, the Class A-2
Interest Distribution Amount, the Class ▇-▇ ▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the Class A-4 Interest Distribution Amount and the Class
A-5 Interest Distribution Amount.
"Group I Interest Remittance Amount": For any Remittance Date,
the amount equal to (x) the sum, without duplication, of (i) the aggregate
interest portions of the payments (whether or not collected) becoming due on the
Group I Mortgage Loans during the immediately preceding Remittance Period and
(ii) Compensating Interest with respect to the Group I Mortgage Loans minus (y)
the aggregate Master Servicing Fee due to the Master Servicer with respect to
Group I Mortgage Loans for such Remittance Period to the extent not previously
paid to, or withheld by, the Master Servicer.
"Group I Monthly Remittance": The sum of (i) the Group I
Interest Remittance Amount and the Group I Principal Remittance Amount required
to be remitted to the Trustee on each Remittance Date and (ii) the amount of any
Substitution Amounts and Loan Purchase Prices on deposit in the Principal and
Interest Account with respect to the Group I Mortgage Loans on such Remittance
Date.
"Group I Mortgage Loans": The Mortgage Loans held by the Trust
and assigned to Group I, as indicated on the related Mortgage Loan Schedule, as
supplemented and amended from time to time.
"Group I Pool Principal Balance": As of any date of
determination, the aggregate Principal Balances of all of the Group I Mortgage
Loans as of the close of business on such date.
"Group I Preference Amount": The Preference Amount with
respect to Group I.
"Group I Premium Amount": With respect to each Payment Date,
an amount equal to the product of (x) one twelfth of the Certificate Insurer
Premium Rate and (y) the sum of the Certificate Principal Balances of the Class
A Group I Certificates as of the close of business on the last day of the
preceding Remittance Period.
"Group I Principal Distribution Amount": As of any Payment
Date, the lesser of (A) the Group I Available Funds less the Group I Interest
Distribution Amount, the Group I Trustee's Fee and the Group I Premium Amount
and (B) the sum of (i) the Base Group I Principal Distribution Amount, (ii) the
Group I Subordination Deficit, and (iii) the Group I Subordination Increase
Amount.
"Group I Principal Remittance Amount": For any Remittance
Date, without duplication, the amount equal to the sum of (i) the aggregate
principal portions of the payments received by the Master Servicer with respect
to the Group I Mortgage Loans during the immediately preceding Remittance Period
and (ii) any Prepayments, Net Proceeds (but only to the extent that such Net
Proceeds do not exceed the Principal Balance of the related Mortgage Loan), in
each case described in clauses (i) and (ii) only to the extent collected on the
Group I Mortgage Loans during the preceding Remittance Period.
"Group I Shortfall Amount": As of any Payment Date, the
excess, if any, of (x) the Group I Insured Distribution Amount, as of such
Payment Date over (y) the Group I Total Available Funds on deposit in the Class
A Group I Distribution Account at 12 noon on the related Determination Date.
"Group I Specified Subordinated Amount": As such term is
defined in the Insurance and Indemnity Agreement.
"Group I Stepped Down Required Subordinated Percentage": As
such term is defined in the Insurance and Indemnity Agreement.
14
"Group I Subordinated Amount": With respect to any Payment
Date, the excess, if any, of (x) the Group I Pool Principal Balance as of the
close of business on the last day of the preceding Remittance Period over (y)
the sum of the Class A-1 Principal Balance, the Class A-2 Principal Balance, the
Class A-3 Principal Balance, the Class A-4 Principal Balance and the Class A-5
Principal Balance as of such Payment Date (after taking into account the payment
on such Payment Date of the amount set forth in clause (x) of the definition of
"Base Group I Principal Distribution Amount", and the Group I Subordination
Deficit except for any portions thereof related to payment of Group I Insured
Payments applied as payments of the Group I Principal Distribution Amount on
such Payment Date or on any prior Payment Date and not previously reimbursed to
the Certificate Insurer pursuant to Section 7.3 hereof).
"Group I Subordination Deficiency Amount": As of any Payment
Date, the excess, if any, of (i) the Group I Specified Subordinated Amount
applicable to such Payment Date over (ii) the Group I Subordinated Amount
applicable to such Payment Date prior to taking into account the payment of any
related Group I Subordination Increase Amounts on such Payment Date.
"Group I Subordination Deficit": As of any Payment Date, the
excess, if any, of (x) the sum of the Class A-1 Principal Balance, the Class A-2
Principal Balance, the Class A-3 Principal Balance, the Class A-4 Principal
Balance and the Class A-5 Principal Balance after taking into account the amount
otherwise payable as the Group I Principal Distribution Amount on such Payment
Date (i.e., the sum of (i) the Base Group I Principal Distribution Amount and
(ii) the Group I Subordination Increase Amount), over (y) the Group I Pool
Principal Balance as of the close of business on the last day of the preceding
Remittance Period.
"Group I Subordination Increase Amount": With respect to any
Payment Date, the lesser of (x) the Group I Subordination Deficiency Amount as
of such Payment Date and (y) the portion of the Class B Interest allocable to
Group I pursuant to Section 7.3(b)(iii)(E) as of such Payment Date.
"Group I Subordination Reduction Amount": With respect to any
Payment Date, an amount equal to the lesser of (x) the Group I Excess
Subordinated Amount and (y) the amount described in clause (x) of the definition
of Base Group I Principal Distribution Amount, in each case as of such Payment
Date.
"Group I Total Available Funds": As of any Payment Date, the
amount on deposit in the Class A Group I Distribution Account on such Payment
Date after making the allocations, transfers and disbursements from the
Certificate Account pursuant to Section 7.3(b) hereof on such Payment Date. The
term "Group I Total Available Funds" does not include Insured Payments and does
not include any amounts that cannot be distributed to the Owners of the
Certificates by the Trustee as a result of proceedings under the United States
Bankruptcy Code.
"Group I Trustee's Fee": With respect to any Payment Date, the
product of (i) one-twelfth of ____% and (ii) the Group I Pool Principal Balance
as of the last day of the preceding Remittance Period.
"Group II": The group of Mortgage Loans that are the Group II
Mortgage Loans.
"Group II Available Funds": As of any Payment Date, the amount
on deposit in the Certificate Account with respect to the Group II Mortgage
Loans on such Payment Date after making the deposit to the Certificate Account
pursuant to Section 7.3(a)(ii) hereof on such Payment Date. The term "Group II
Available Funds" does not include Insured Payments and does not include any
amounts that cannot be distributed to the Owners of the Certificates by the
Trustee as a result of proceedings under the United States Bankruptcy Code.
15
"Group II Certificates": Any of the Class A-6 Group II
Certificates.
"Group II Cumulative Net Realized Losses": As of any Payment
Date, the sum of all Net Realized Losses with respect to the Group II Mortgage
Loans experienced on all prior Payment Dates.
"Group II Excess Subordinated Amount": With respect to any
Payment Date, the excess, if any, of (x) the Group II Subordinated Amount that
would apply on such Payment Date after taking into account the payment of the
Group II Principal Distribution Amount on such Payment Date (except for any
distributions of related Group II Subordination Reduction Amounts on such
Payment Date) over (y) the Group II Specified Subordinated Amount for such
Payment Date.
"Group II Insured Distribution Amount": With respect to any
Payment Date, the sum of (i) Group II Insured Interest Distribution Amount for
such Payment Date and (ii) the Group II Insured Principal Distribution Amount
for such Payment Date.
"Group II Insured Interest Distribution Amount": With respect
to any Payment Date, the sum of (i) the Class A-6 Interest Distribution Amount
and (ii) the Class A-6 Interest Carry-Forward Amount.
"Group II Insured Payment": As of any Payment Date, the sum of
(x) the Group II Shortfall Amount for such Payment Date and (y) any Preference
Amounts with respect to the Class A-6 Group II Certificates with respect to
which the affected Owners have complied with the provisions of Section 7.3(g)
hereof during the related Remittance Period.
"Group II Insured Principal Distribution Amount": With respect
to any Payment Date, the Group II Subordination Deficit for such Payment Date
plus any amounts paid to the Trustee at the option of the Certificate Insurer in
respect of any losses on Liquidated Loans.
"Group II Interest Distribution Amount": As of any Payment
Date, interest accrued during the related Accrual Period at the Class A-6
Pass-Through Rate on the Class A-6 Principal Balance immediately prior to such
Payment Date.
"Group II Interest Remittance Amount": For any Remittance
Date, the amount equal to (x) the sum, without duplication, of (i) the aggregate
interest portions of the payments (whether or not collected) becoming due on the
Group II Mortgage Loans during the immediately preceding Remittance Period and
(ii) Compensating Interest with respect to the Group II Mortgage Loans minus (y)
the aggregate Master Servicing Fee due to the Master Servicer with respect to
the Group II Mortgage Loans for such Remittance Period to the extent not
previously paid to, or withheld by, the Master Servicer.
"Group II Monthly Remittance": The sum of (i) the Group II
Interest Remittance Amount and the Group II Principal Remittance Amount required
to be remitted to the Trustee on each Remittance Date and (ii) the amount of any
Substitution Amounts and Loan Purchase Prices on deposit in the Principal and
Interest Account with respect to the Group II Mortgage Loans on such Remittance
Date.
"Group II Mortgage Loans": The Mortgage Loans held by the
Trust and assigned to Group II, as indicated on the related Mortgage Loan
Schedule, as supplemented and amended from time to time.
"Group II Pool Principal Balance": As of any date of
determination, the aggregate Principal Balances of all of the Group II Mortgage
Loans as of the close of business on such date.
16
"Group II Preference Amount": The Preference Amount with
respect to Group II.
"Group II Premium Amount": With respect to each Payment Date,
an amount equal to the product of (x) one twelfth of the Certificate Insurer
Premium Rate and (y) the Certificate Principal Balance of the Class A-6 Group II
Certificates as of the close of business on the last day of the preceding
Remittance Period.
"Group II Principal Distribution Amount": As of any Payment
Date, the lesser of (A) the Group II Available Funds less the Group II Interest
Distribution Amount, the Group II Trustee's Fee and the Group II Premium Amount
and (B) the sum of (i) the Base Group II Principal Distribution Amount, (ii) the
Group II Subordination Deficit, and (iii) the Group II Subordination Increase
Amount in each case for such Payment Date.
"Group II Principal Remittance Amount": For any Remittance
Date, without duplication, the amount equal to the sum of (i) the aggregate
principal portions of the payments received by the Master Servicer with respect
to the Group II Mortgage Loans during the immediately preceding Remittance
Period and (ii) any Prepayments, Net Proceeds (but only to the extent that such
Net Proceeds do not exceed the Principal Balance of the related Mortgage Loan),
in each case described in clauses (i) and (ii) only to the extent collected on
the Group II Mortgage Loans during the preceding Remittance Period.
"Group II Shortfall Amount": As of any Payment Date, the
excess, if any, of (x) the Group II Insured Distribution Amount, as of such
Payment Date, over (y) the Group II Total Available Funds on deposit in the
Class A-6 Group II Distribution Account at 12 noon on the related Determination
Date.
"Group II Specified Subordinated Amount": As such term is
defined in the Insurance and Indemnity Agreement.
"Group II Stepped Down Required Subordinated Percentage": As
such term is defined in the Insurance and Indemnity Agreement.
"Group II Subordinated Amount": With respect to any Payment
Date, the excess, if any, of (x) the Group II Pool Principal Balance as of the
close of business on the last day of the preceding Remittance Period over (y)
the Class A-6 Group II Principal Balance as of such Payment Date (after taking
into account the payment on such Payment Date of the amount set forth in clause
(x) of the definition of "Base Group II Principal Distribution Amount", and the
Group II Subordination Deficit except for any portion thereof related to payment
of Group II Insured Payments applied as payments of the Group II Principal
Distribution Amount on such Payment Date or on any prior Payment Date and not
previously reimbursed to the Certificate Insurer pursuant to Section 7.3
hereof).
"Group II Subordination Deficiency Amount": As of any Payment
Date, the excess, if any, of (i) the Group II Specified Subordinated Amount
applicable to such Payment Date over (ii) the Group II Subordinated Amount
applicable to such Payment Date prior to taking into account the payment of any
related Group II Subordination Increase Amounts on such Payment Date.
"Group II Subordination Deficit": As of any Payment Date, the
excess, if any, of (x) the Class A-6 Group II Principal Balance after taking
into account the amount otherwise payable as the Group II Principal Distribution
Amount on such Payment Date (i.e., the sum of (i) the Base Group II Principal
Distribution Amount and (ii) the Group II Subordination Increase Amount), over
(y) the Group II Pool Principal Balance as of the close of business on the last
day of the preceding Remittance Period.
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"Group II Subordination Increase Amount": With respect to any
Payment Date, the lesser of (x) the Group II Subordination Deficiency Amount as
of such Payment Date and (y) the portion of the Class B Interest allocable to
Group II pursuant to Section 7.3(b)(iii)(E) as of such Payment Date.
"Group II Subordination Reduction Amount": With respect to any
Payment Date, an amount equal to the lesser of (x) the Group II Excess
Subordinated Amount for such Payment Date and (y) the amount described in clause
(x) of the definition of Base Group II Principal Distribution Amount for such
Payment Date.
"Group II Total Available Funds": As of any Payment Date, the
amount on deposit in the Class A Group II Distribution Account on such Payment
Date after making the allocations, transfers and disbursements from the
Certificate Account pursuant to Section 7.3(b) hereof on such Payment Date. The
term "Group II Total Available Funds" does not include Insured Payments and does
not include any amounts that cannot be distributed to the Owners of the
Certificates by the Trustee as a result of proceedings under the United States
Bankruptcy Code.
"Group II Trustee's Fee": With respect to any Payment Date,
the product of (i) one-twelfth of ____% and (ii) the Group II Pool Principal
Balance as of the last day of the preceding Remittance Period.
"Highest Lawful Rate": As defined in Section 12.13.
"Insurance and Indemnity Agreement": The Insurance and
Indemnity Agreement dated as of __________ among the Certificate Insurer, the
Depositor and the Depositor.
"Indemnification Agreement": The Indemnification Agreement
dated as of __________ among the Company, the Master Servicer, the Depositor,
the Underwriters and the Certificate Insurer.
"Insurance Policy": Any hazard or title insurance policy
relating to a Mortgage Loan.
"Insurance Proceeds": The proceeds of any Insurance Policy
relating to a Mortgage Loan, a Property or an REO Property, net of proceeds to
be applied to the repair of the Property or released to the Mortgagor and net of
expenses reimbursable therefrom, but excluding any Insured Payment.
"Insured Distribution Amount": The Group I Insured
Distribution Amount or the Group II Insured Distribution Amount, as the case may
be.
"Insured Payment": The Group I Insured Payment or the Group II
Insured Payment, as the case may be.
"Interest Advance": As defined in Section 7.9(a) hereof.
"Interest Advance Reimbursement Amount": As defined in Section
7.9(b) hereof.
"Interest Determination Date": With respect to any Accrual
Period for the Class A-1 Group I Certificates and the Class A-6 Group II
Certificates, the second London Business Day preceding the first day of such
Accrual Period.
"Late Payment Rate": As defined in the Insurance and Indemnity
Agreement.
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"LIBOR": With respect to any Accrual Period for the Class A-1
Group I Certificates or the Class A-6 Group II Certificates, the rate determined
by the Trustee on the related Interest Determination Date on the basis of the
offered rates of the Reference Banks for one-month U.S. dollar deposits, as such
rates appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on
such Interest Determination Date. On each Interest Determination Date, LIBOR for
the related Accrual Period will be established by the Trustee as follows:
(i) If, on such Interest Determination Date, two or more Reference
Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole
multiple of 1/16%).
(ii) If, on such Interest Determination Date, fewer than two
Reference Banks provide such offered quotations, LIBOR for the
related Accrual Period shall be the higher of (i) LIBOR as
determined on the previous Interest Determination Date and
(ii) the Reserve Interest Rate.
"Liquidated Loan": As to any Payment Date, (i) any Mortgage
Loan as to which the Master Servicer has determined, in accordance with the
servicing procedures specified herein, during the related Remittance Period that
all Liquidation Proceeds which it expects to recover from or on account of such
Mortgage Loan have been recovered or (ii) any Mortgage Loan as to which the
related REO Property has been held by the Trust for 270 days. Any such
determination shall be evidenced by an Officer's Certificate in the form of
Exhibit I to this Agreement.
"Liquidation Expenses": Expenses which are incurred by the
Master Servicer in connection with the liquidation of any defaulted Mortgage
Loan, such expenses, including, without limitation, legal fees and expenses, and
any unreimbursed Servicing Advances expended by the Master Servicer pursuant to
Sections 10.9(b) and 10.13 of this Agreement with respect to the related
Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan,
any amounts (including the proceeds of any Insurance Policy) recovered by the
Master Servicer in connection with such Liquidated Loan, whether through
trustee's sale, foreclosure sale or otherwise, and including, without
limitation, sale proceeds received upon the sale of REO Property.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Sections 3.2, 3.3,
3.4, or 10.13(f) hereof, an amount equal to the Principal Balance of such
Mortgage Loan as of the date of purchase (after giving effect to the related
Monthly Remittance remitted by the Master Servicer on such Remittance Date),
plus interest on the outstanding Principal Balance thereof as of the beginning
of the preceding Remittance Period computed at the related Coupon Rate less the
rate at which the Master Servicing Fee is calculated, plus the aggregate amounts
of (i) all unreimbursed Reimbursable Advances and (ii) all Delinquency Advances
which the Master Servicer has theretofore failed to remit with respect to such
Mortgage Loan.
"Loan-to-Value Ratio": As of any particular date (i) with
respect to any First Mortgage Loan, the ratio of (A) the original principal
balance of the Note relating to such First Mortgage Loan to (B) the Appraised
Value and (ii) with respect to any Second Mortgage Loan, the ratio of (A) an
amount equal to the sum of (a) the remaining principal balance of the Senior
Lien note relating to such First Mortgage Loan and (b) the original principal
balance of the Note relating to such Second Mortgage Loan to (B) the Appraised
Value as of the date of origination of such Second Mortgage Loan.
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"London Business Day": A day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"Lower Tier Distribution Amount": As of any Payment Date, the
sum of the Group I Available Funds and the Group II Available Funds.
"Lower-Tier Interests": As defined in Section 2.8(c) hereof.
"Lower-Tier REMIC": The segregated pool of assets held by the
Trust consisting of the REMIC I Regular Interests.
"Lower Tier Required Subordinate Amount": With respect to any
Distribution Date, an amount equal to the product of (a) the product of (i) 0.50
and (ii) the sum of the principal balances of ▇▇-▇, ▇▇-▇ and LT-9 divided by the
Pool Principal Balance then outstanding and (b) the sum of the Group I, and
Group II Specified Subordinated Amounts.
"Lower Tier Subordinated Amount": As of any date of
determination, (i) 0.50 times the sum of the principal balances of ▇▇-▇, ▇▇-▇
and LT-9 minus (ii) the sum of the principal balances of ▇▇-▇, ▇▇-▇ and LT-7, in
each case as of such date of determination.
"Master Servicer": __________, a __________ corporation.
"Master Servicer's Trust Receipt": The Master Servicer's trust
receipt in the form set forth in Exhibit F hereto.
"Master Servicing Fee": With respect to any Mortgage Loan, an
amount retained by the Master Servicer from collections of interest on the
Mortgage Loans as compensation for its servicing duties relating to such
Mortgage Loan pursuant to Section 10.15 hereof and equal to ___% per annum of
the then outstanding principal amount of such Mortgage Loan as of the first day
of each Remittance Period payable on a monthly basis; provided, that if the
Depositor is no longer the Master Servicer, such rate may be increased to a rate
not in excess of ___% and if the Trustee is acting as Master Servicer such rate
shall be equal to ___%.
"Maximum LT-12 Interest Deferral Amount": With respect to any
Distribution Date, the excess of (i) accrued interest at the stated interest
rate applicable to LT-12 for such Distribution Date on a balance equal to the
principal balance of LT-12 minus the Lower Tier Subordinated Amount, in each
case for such Distribution Date over (ii) interest on LT-6, LT-8 and LT-10 for
such Distribution Date.
"Monthly Remittance": The Group I Monthly Remittance or the
Group II Monthly Remittance, as the case may be.
"____": __________.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage Loan": Each of the mortgage loans sold by the
Depositor to the Trust on the Startup Day, together with any Qualified
Replacement Mortgages substituted therefor by the Depositor in accordance with
Section 3.2, 3.3 or 3.4 hereof as from time to time are held as a part of the
Trust Estate, the Mortgage Loans originally so held being identified in the
related Mortgage Loan Schedule. The term "Mortgage Loan" includes the terms
"First Mortgage Loan" and "Second Mortgage Loan". The term
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"Mortgage Loan" includes any Mortgage Loan which is Delinquent, which relates to
a foreclosure or which relates to a Property which is REO Property prior to such
Property's disposition by the Trust. Any mortgage loan which, although intended
by the parties hereto to have been, and which purportedly was, transferred and
assigned to the Trust by the Depositor, in fact was not transferred and assigned
to the Trust for any reason whatsoever, including, without limitation, the
incorrectness of the statement set forth in Section 3.3(b)(i) hereof with
respect to such mortgage loan, shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement.
"Mortgage Loan Group": Each of Group I and Group II.
"Mortgage Loan Schedules": The schedules of Mortgage Loans,
separated by Mortgage Loan Group and by Sub-Servicer, listing each Mortgage Loan
conveyed on the Startup Day and setting forth as to each Mortgage Loan the
following information: (i) the name of the Mortgagor, (ii) the street address of
the Property, (iii) the town or city in which the Property is located, (iv) the
Principal Balance as of the Cut-Off Date, (v) the account number, (vi) the
original principal amount, (vii) the current Coupon Rate, (viii) the first date
on which a scheduled monthly payment is due under the Note, (ix) the original
stated maturity date of the Note, (x) the State in which the Property is
located, (xi) the zip code of the Property, (xii) the Loan-to-Value Ratio,
(xiii) the Loan-to-Value Ratio of any Second Mortgage Loan calculated by
disregarding the amount described in clause (ii)(a) of the definition of
"Loan-to-Value Ratio", (xiv) whether the Property is owner-occupied or non-owner
occupied, (xv) whether the Property is a single family residence, two-to-four
family residence, a condominium, a townhouse or a rowhouse and (xvi) if such
Mortgage Loan is a "balloon loan", the amortization terms (e.g., 30 year
amortization due in 15 years).
"Mortgagor": The obligor on a Note.
"Net Insurance Proceeds": As to any Mortgage Loan, Insurance
Proceeds net of unreimbursed Reimbursable Advances relating thereto. In no event
shall Net Insurance Proceeds with respect to any Mortgage Loan be less than
zero.
"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of unreimbursed Reimbursable Advances relating to such
Mortgage Loan. In no event shall Net Liquidation Proceeds with respect to any
Liquidated Loan be less than zero.
"Net Pool Balance": As of any Payment Date, the sum of the
Pool Principal Balance less the sum of the principal balances of the Class LT-6,
LT-8, and LT-9 Certificates.
"Net Proceeds": The sum of, without duplication, Net
Liquidation Proceeds, Net Insurance Proceeds and Net Released Mortgage Property
Proceeds.
"Net Realized Loss": With respect to any Liquidated Loan the
excess, if any, of (x) the Principal Balance thereof at the time the Mortgage
Loan became a Liquidated Loan over (y) the related Net Liquidation Proceeds.
"Net Released Mortgage Property Proceeds": As to any Mortgage
Loan, Released Mortgage Property Proceeds net of unreimbursed Reimbursable
Advances relating thereto. In no event shall Net Released Mortgage Property
Proceeds with respect to any Mortgage Loan be less than zero.
"Net Weighted Average Coupon Rate": With respect to any
Mortgage Loan Group and Remittance Period, the weighted average Coupon Rates
(weighted by Principal Balances) of the related Mortgage Loans, calculated at
the opening of business on the first day of such Remittance Period, less the
21
rate at which the Master Servicing Fee is then calculated and less the Trustee
Fee and Certificate Insurer Premium Rate (in each case, such rates adjusted to
match the Accrual Period of the Certificates in the related Group); and less
interest shortfalls with respect to Mortgage Loans in the related Group as of
the end of the prior Remittance Period arising from Prepayments of principal and
from application of the Relief Act, which shortfalls are not otherwise covered
by Compensating Interest with respect to such Payment Date; and in the case of
Group I only for the first 36 Payment Dates, expressed as a per annum rate on
the aggregate principal balance of the Mortgage Loans in the related Group as of
the opening of business of the first day of the related Remittance Period; and
in the case of Group II only, less (x) __% on the first through ___ Payment
Dates or (y) ___% on the ___ Payment Date and thereafter.
"Nonrecoverable Advances": With respect to any Mortgage Loan,
any Servicing Advance or Delinquency Advance proposed to be made by the Master
Servicer in respect of a Mortgage Loan or REO Property which, in the good faith
business judgment of the Master Servicer, would not be ultimately recoverable
from late collections, Insurance Proceeds, Liquidation Proceeds or Released
Mortgage Property Proceeds on such Mortgage Loan or REO Property or otherwise.
Notwithstanding anything to the contrary contained in this Agreement, no
Delinquency Advance or Servicing Advance shall be required to be made by the
Master Servicer if such Delinquency Advance or Servicing Advance would, if made,
constitute a Nonrecoverable Advance.
"Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Trustee.
"Operative Documents": This Agreement, the Sale Agreement, the
Insurance and Indemnity Agreement, the Underwriting Agreement, and the
Indemnification Agreement.
"Original Group I Pool Principal Balance": The aggregate
Principal Balances of all Group I Mortgage Loans as of the Cut-Off Date, i.e.,
$___________.
"Original Group II Pool Principal Balance": The aggregate
Principal Balances of all Group II Mortgage Loans as of the Cut-Off Date, i.e.,
$__________.
"Original Pool Principal Balance": The aggregate Principal
Balances of all Mortgage Loans as of the Cut-Off Date, i.e., $__________.
"Original Principal Balance": With respect to each Note, the
outstanding principal amount of such Note as of the Cut-Off Date.
"Outstanding": With respect to all Certificates of a Class, as
of any date of determination, all such Certificates theretofore executed and
delivered hereunder except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment of money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
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(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser;
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided for
in Section 5.5 hereof; and
(v) With respect to voting rights, any Class A Certificates
held by the Depositor, the Master Servicer, the Depositor or any affiliate
of any thereof, unless all other Class A Certificates have been paid in
full.
Any Certificates in which the Certificate Insurer has an
interest pursuant to its right of subrogation shall be "Outstanding
Certificates".
"Owner": The Person in whose name a Certificate is registered
in the Register.
"Payment Date": The 18th day of each month (or, if such day is
not a Business Day, the next following Business Day), commencing in the month
following the Startup Day.
"Percentage Interest": As to any Class A Certificate or Class
B Certificate, that percentage, expressed as a fraction, the numerator of which
is the original principal balance of such Certificate as of the Cut-Off Date and
the denominator of which is the original principal balance of all Certificates
of the same Class as of the Cut-Off Date; as to any Residual Certificate, that
Percentage Interest set forth on such Residual Certificate.
"Person": Any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pool Delinquency Rate": With respect to any Remittance
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
Principal Balances of all Mortgage Loans 90 or more days Delinquent as of the
close of business on the last day of such Remittance Period over (y) the Pool
Principal Balance as of the close of business on the last day of such Remittance
Period.
"Pool Principal Balance": As to any Payment Date, the
aggregate Principal Balance of the Mortgage Loans as of the close of business on
the last day of the related Remittance Period.
"Pool Rolling Three Month Delinquency Rate": As of any Payment
Date the fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates), immediately preceding Remittance Periods.
"Preference Amount": As to any Payment Date, with respect to a
Class of Certificates, any amounts included in previous distributions to the
related Certificateholders of Distribution Amounts for such Class (exclusive of
Insured Payments) which are recovered from such Certificateholders as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code in accordance with a final, nonappealable order of a court having competent
jurisdiction and which have not theretofore been repaid to such
Certificateholders provided such Certificateholders have complied with the
provisions of Section 7.3(f).
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"Premium Amount": The Group I Premium Amount or the Group II
Premium Amount, as the case may be.
"Prepayment": Any payment of principal of a Mortgage Loan by a
Mortgagor which is received by the Master Servicer in advance of the scheduled
due date for the payment of such principal.
"Prepayment Interest Shortfalls": With respect to each Group,
the sum of the difference (caused by any Prepayments during a calendar month),
if any, for each Mortgage Loan in the related Group, between (i) the interest
collected by the Master Servicer from the Mortgagor during a calendar month, and
(ii) the full month's interest at the related Coupon Rate.
"Preservation Expenses": Expenditures made by the Master
Servicer in connection with a foreclosed Mortgage Loan prior to the liquidation
thereof, including, without limitation, expenditures for real estate property
taxes, hazard insurance premiums, property restoration or preservation.
Preservation Expenses shall constitute "Servicing Advances" for all purposes of
this Agreement.
"Principal and Interest Account": The principal and interest
account created by the Master Servicer pursuant to Section 10.8 hereof.
"Principal Balance": As of any date of calculation and with
respect to each Mortgage Loan, the Original Principal Balance thereof less any
related Principal Remittance Amounts relating to such Mortgage Loan included in
previous related Monthly Remittances and, if applicable, the related Monthly
Remittance as of such date; provided that the Principal Balance for any Mortgage
Loan which has become a Liquidated Loan shall be zero following the date on
which such Mortgage Loan becomes a Liquidated Loan, and at all times thereafter.
"Principal Distribution Amount": The Class A-1 Principal
Distribution Amount, the Class A-2 Principal Distribution Amount, the Class A-3
Principal Distribution Amount, the Class A-4 Principal Distribution Amount, the
Class A-5 Principal Distribution Amount or the Class A-6 Principal Distribution
Amount as the case may be.
"Principal Remittance Amounts": The Group I Principal
Remittance Amount or the Group II Principal Remittance Amount, as the case may
be.
"Prohibited Transaction": Has the meaning as defined in
Section 860F of the Code.
"Property": The underlying real property, including the
improvements thereon, securing a Mortgage Loan.
"Prospectus": The Prospectus dated __________ relating to
Mortgage Loan Asset Backed Securities, issuable in Series.
"Prospectus Supplement": The Prospectus Supplement dated
October 23, 1997 relating to the Class A Certificates.
"Qualified Liquidation": "Qualified Liquidation" shall have
the meaning set forth from time to time in the definition thereof at Section
860F(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust.
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"Qualified Mortgage": "Qualified mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another by the Depositor pursuant to Section 3.2, 3.3 or 3.4 hereof, which
(i) has a fixed rate of interest if the Mortgage Loan being replaced is a Group
I Mortgage Loan and has a variable rate of interest if the Mortgage Loan being
replaced is a Group II Mortgage Loan, (ii) has a Coupon Rate at least equal to
the Coupon Rate of the Mortgage Loan being replaced (which, in the case of a
Group II Mortgage Loan, shall be deemed to mean the same index and a margin
equal to or greater than the margin applicable to the Mortgage Loan being
replaced), (iii) is of the same or better property type and the same or better
occupancy status as the replaced Mortgage Loan, (iv) shall mature no later than
the latest maturity date of any Mortgage Loan then held in the related Mortgage
Loan Group (v) has a Loan-to-Value Ratio as of the Replacement Cut-Off Date no
higher than the Loan-to-Value Ratio of the replaced Mortgage Loan at such time,
(vi) shall be a First Mortgage Loan if the Mortgage Loan being replaced was a
First Mortgage Loan, and shall have the same or higher lien priority if the
Mortgage Loan being replaced was a junior Mortgage Loan, (vii) has a Principal
Balance as of the related Replacement Cut-Off Date equal to or less than the
Principal Balance of the replaced Mortgage Loan as of such Replacement Cut-Off
Date, (viii) shall be of the same or higher credit quality classification
(determined in accordance with the Depositor's underwriting guidelines) as the
Mortgage Loan which such Qualified Replacement Mortgage replaces, (ix) satisfies
the criteria set forth from time to time in the definition of "qualified
replacement mortgage" at Section 860G(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust, and (x) complies as of the date of
substitution with each representation and warranty set forth in Section 3.2(b)
hereof, all as evidenced by any Officer's Certificate of the Depositor delivered
to the Trustee prior to any such substitution. In the event that one or more
mortgage loans are proposed to be substituted for one or more Mortgage Loans,
the Certificate Insurer may allow the foregoing tests to be met on a weighted
average basis or other aggregate basis acceptable to the Certificate Insurer, as
evidenced by a written approval delivered to the Trustee by the Certificate
Insurer, except that the requirement of clause (ix) hereof must be satisfied as
to each Qualified Replacement Mortgage.
"Rating Agency": Any nationally recognized statistical credit
rating agency, or its successor, that rates any Certificates at the request of
the Depositor at the time of the initial issuance of the Certificates. If such
agency or a successor is no longer in existence, "Rating Agency" shall be such
statistical credit rating agency, or other comparable Person, designated by the
Depositor, notice of which designation shall be given to the Trustee, the
Certificate Insurer and the Master Servicer. References herein to the highest
rating category of a rating agency shall mean AAA (with respect to long-term
ratings) or A-1+ (with respect to short-term ratings), in the case of ____, and
Aaa (with respect to long-term ratings) or P-1 (with respect to short-term
ratings), in the case of ____, and in the case of any other Rating Agency shall
mean such equivalent ratings.
"Record Date": With respect to the Class A-2, Class A-3, Class
A-4, and Class A-5 Group I Certificates and any Payment Date, the close of
business on the first Business Day of the calendar month in which such Payment
Date occurs. With respect to the Class A-1 and Class A-6 Certificates and any
Payment Date, the close of business on the Business Day immediately preceding
such Payment Date.
"Reference Banks": Bankers Trust Company, ▇▇▇▇▇▇▇'▇ Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Depositor which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Depositor or any
25
affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO Page
on the relevant Interest Determination Date and (iv) which have been designated
as such by the Trustee.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners are set
forth.
"Registration Statement": The Depositor's Registration
Statement number 333-07837, filed on Form S-3.
"Reimbursable Advances": As to any Mortgage Loan, all
Delinquency Advances and Servicing Advances made by the Master Servicer with
respect thereto, to the extent not previously paid to or withheld by the Master
Servicer.
"Reimbursement Amount": With respect to any Class of Class A
Certificates and for any Payment Date, the sum of (x)(i) all related Insured
Payments previously received by the Trustee not previously repaid to the
Certificate Insurer pursuant to Section 7.3(b)(iii)(C), together with interest
accrued on each such related Insured Payment not previously repaid calculated
from the date the Trustee received the related Insured Payment at the Late
Payment Rate and (y) any other amounts then due and owing to the Certificate
Insurer relating to such Class A Certificates under the Insurance and Indemnity
Agreement.
"Released Mortgaged Property Proceeds": Proceeds received in
connection with a taking of a Property by condemnation or the exercise of
eminent domain or in connection with a release of part of the Property.
"Relief Act Shortfalls": With respect to each Group, the
aggregate difference (caused by application of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended) between (i) the interest collected by the Master
Servicer from the related Mortgagor during a calendar month and (ii) the full
month's interest at the related Coupon Rate.
"Remaining Group I Principal Distribution Amount": As of any
Payment Date, the Group I Principal Distribution Amount less the Class A-5
Lockout Distribution Amount.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC I": The segregated pool of assets held by the Trust
consisting of the Mortgage Loans.
"REMIC I Regular Interests": As defined in Section 2.8(d)
hereof.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"REMIC Trust": The segregated pool of assets consisting of the
Trust Estate except for the Supplemental Interest Payment Account.
"Remittance Date": Any date on which the Master Servicer is
required to remit moneys on deposit in a Principal and Interest Account to the
Trustee, which shall be the 13th day of each month,
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commencing in the month following the Startup Day or if such day is not a
Business Day the following Business Day.
"Remittance Period": The period (inclusive) beginning at the
opening of business on the second day of the calendar month immediately
preceding the calendar month in which a Remittance Date occurs and ending at the
close of business on the first day of the calendar month in which such
Remittance Date occurs.
"REO Property": A Property acquired by the Master Servicer in
the name of and on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the second day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Representative": Prudential Securities Incorporated.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which three New
York City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which three
New York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residual Certificate": Any Class RL Certificate or any Class
RU Certificate.
"Rolling Delinquency Percentage": For any Distribution Date,
the average of the Delinquency Percentages for the Mortgage Loans as of the last
day of each of the six (or 1, 2, 3, 4, and 5 in the case of the first five
Payment Dates, as applicable) most recently ended Remittance Periods.
"Rolling Loss Percentage": As of any Distribution Date
commencing on the thirteenth Payment Date, the percentage equivalent of a
fraction, the numerator of which is the aggregate amount of Net Realized Losses
incurred during the preceding twelve calendar months, and the denominator of
which is the aggregate Pool Principal Balance as of the first day of the twelfth
preceding calendar month.
"____": __________.
"Sale Agreement": The Purchase and Sale Agreement dated as of
__________ between the Company and the Depositor.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property, as
identified in the Mortgage Loan Schedules.
"Depositor": __________, a __________ corporation.
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"Depositor Optional Termination Date": The first Remittance
Date on which the then-outstanding aggregate Principal Balances of the Mortgage
Loans is ten percent or less of the Original Pool Principal Balance.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property having a first priority
lien.
"Servicing Advance": As defined in Sections 10.9(b) and 10.13
hereof.
"Servicing Standards": As defined in Section 10.2 hereof.
"Startup Day": October 31, 1997.
"Step-Down Cumulative Loss Test": As such term is defined in
the Insurance and Indemnity Agreement.
"Step-Down Rolling Delinquency Test": As such term is defined
in the Insurance and Indemnity Agreement.
"Step-Down Rolling Loss Test": As such term is defined in the
Insurance and Indemnity Agreement.
"Step-Down Trigger": For any Payment Date after the 30th
Payment 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 Payment Date or any preceding Payment Date.
"Step-Up Cumulative Loss Test": As such term is defined in the
Insurance and Indemnity Agreement.
"Step-Up Rolling Delinquency Test": As such term is defined in
the Insurance and Indemnity Agreement.
"Step-Up Rolling Loss Test": As such term is defined in the
Insurance and Indemnity Agreement.
"Step-Up Trigger": For any Payment 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.
"Sub-Servicer": Any Person with whom the Master Servicer has
entered into a Sub-Servicing Agreement and who satisfies the requirements set
forth in Section 10.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and any Sub-Servicer relating to servicing and/or administration
of certain Mortgage Loans as permitted by Section 10.3 hereof.
"Subordination Deficiency Amount": The Group I Subordination
Deficiency Amount or the Group II Subordination Deficiency Amount, as the case
may be.
"Substitution Amount": As defined in Section 3.2(a) hereof.
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"Supplemental Certificates": The Class B-S Certificates.
"Supplemental Interest Payment Account": The Supplemental
Interest Payment Account established in accordance with Section 7.9(a) hereof
and maintained by the Trustee.
"Supplemental Interest Payment Amount": As defined in Section
7.9(a) hereof.
"Supplemental Interest Trust": The Access Financial
Supplemental Interest Trust _____ created pursuant to Section 7.9(a) hereof.
"Tax Matters Person": The tax matters person, as defined in
Section 1.860F-4(d) of the Treasury Regulations, appointed with respect to the
Trust pursuant to Section 12.17 hereof.
"Trigger Event": An Event of Default described in clauses
(viii), (ix) or (x) of Section 11.1.
"Trust": __________ Mortgage Loan Trust _____, the trust
created under Article II of this Agreement.
"Trust Estate": Collectively, all money, instruments, and
other property to the extent such money, instruments and other property, are
subject hereto or intended to be held in trust for the benefit of the Owners,
including all proceeds thereof, including, without limitation, (i) the Mortgage
Loans, (ii) such amounts, including Eligible Investments, as from time to time
may be held by the Trustee in any Account, and by the Master Servicer in the
Principal and Interest Account or otherwise held by the Master Servicer in trust
for the Owners (except as otherwise provided herein), (iii) any Property, the
ownership of which has been effected in the name of the Trust as a result of
foreclosure or acceptance by the Master Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) the rights, if
any, of the Trust in any Insurance Policies relating to the Mortgage Loans, (v)
Net Liquidation Proceeds (but only to the extent that such Net Liquidation
Proceeds do not exceed the Principal Balance of the related Mortgage Loan plus
accrued and unpaid interest on such Mortgage Loan) with respect to any
Liquidated Loan, (vi) Released Mortgaged Property Proceeds and (vii) the
Certificate Insurance Policy.
"Trustee": __________, a __________ _________, located on the
date of execution of this Agreement at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, not in its individual capacity but solely as Trustee under this
Agreement, and any successor hereunder.
"Trustee's Fee": The total of the Group I Trustee's Fee and
the Group II Trustee's Fee.
"Underwriters": __________.
"Underwriting Agreement": The Underwriting Agreement dated
__________ among the Depositor and the Underwriters.
"Unregistered Certificates": Certificates which are not
registered as evidenced by inclusion in the Register.
"Upper-Tier REMIC": The segregated pool of assets held by the
Trust consisting of the Lower Tier Interests (except for the RL Lower-Tier
Interest, as set forth in the chart in Section 2.8(c) hereof), the Distribution
Accounts and the Certificate Insurance Policy.
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Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
Section 1.4. Opinions. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder must be delivered by counsel
upon whose opinion the addressee of such opinion may reasonably rely, and such
opinion may state that it is given in reasonable reliance upon an opinion of
another, a copy of which must be attached, concerning the laws of a foreign
jurisdiction. Opinions regarding REMIC matters must be furnished by special
counsel to the Depositor.
Section 1.5. Calculations All calculations of accrued interest
made pursuant to the Agreement shall be made assuming a 360-day year consisting
of twelve 30-day months, except for interest on the Class A-1 Group I
Certificates and the Class A-6 Group II Certificates, which calculations shall
be made based on the actual number of days over a 360-day year, or as otherwise
specifically provided herein.
ARTICLE II
THE TRUST
Section 2.1. Establishment of the Trust. The Depositor does
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "__________
Mortgage Loan Trust _____". The Trust shall be deemed to consist of three
sub-trusts, one with respect to each Mortgage Loan Group.
Section 2.2. Office. The office of the Trust shall be in care
of the Trustee, _______________ or at such other address as the Trustee may
designate by notice to the Company, the Master Servicer, the Depositor, the
Certificate Insurer and the Owners.
Section 2.3. Purpose and Powers. The purpose of the Trust is
to engage in the following activities, and only such activities: (i) the
purchase of the Mortgage Loans; (ii) the holding of the Mortgage Loans and the
Trust Estate related thereto; (iii) the issuance of the Certificates; (iv)
activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith, including the
investment of moneys in accordance with this Agreement; and (v) such other
activities as may be required in connection with conservation of the Trust
Estate and distributions to the Owners; provided, however, that nothing
contained herein shall be construed to permit the Trustee to take any action
which would adversely affect the status of any interest held by the Trust which
is intended to be treated as a REMIC.
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Section 2.4. Appointment of the Trustee; Declaration of Trust.
The Depositor hereby appoints the Trustee as trustee of the Trust effective as
of the Startup Day, to have all the rights, powers and duties set forth herein.
The Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 9.8 hereof and declares that it will hold the Trust Estate in trust upon
and subject to the conditions set forth herein for the benefit of the Owners.
Section 2.5. Expenses of the Trust. The Master Servicer shall
retain its monthly aggregate Master Servicing Fees as provided in Section 10.15
herein; the Trustee's Fee shall be paid monthly as provided in Section 7.3(b)(i)
hereof; and the premiums due to the Certificate Insurer shall be paid monthly as
provided in Section 7.3(b)(iii)(C) hereof; all other expenses of the Trust
including any fees and expenses incurred by the Trustee in connection with a
termination of the Trust pursuant to Article VIII shall be submitted to the
Depositor for its approval, and, if so approved, shall be paid by the Depositor.
The reasonable fees and expenses of the Trustee's counsel in connection with the
review and delivery of this Agreement and related documentation shall be due as
of the Startup Day and shall be paid by the Depositor.
Section 2.6. Ownership of the Trust. On the Startup Day, the
ownership interests in the Trust shall be transferred as set forth in Section
4.2 hereof, such transfer to be evidenced by issuance of the Certificates as
described therein. Thereafter, transfer of any ownership interest shall be
governed by Section 5.4 hereof.
Section 2.7. Receipt of Trust Estate. The Depositor hereby
directs the Trustee to accept the property conveyed to it pursuant to Section
3.3 hereof in connection with the establishment of the Trust, and the Trustee
hereby acknowledges receipt of such property. The Depositor further directs the
Trustee to issue the Certificates, to hold the Class A Certificates as transfer
agent for the Depository as provided in Section 5.4, and to deliver the Class B
Certificates and the Residual Certificates to the Depositor.
Section 2.8. Miscellaneous REMIC Provisions. (a) The Trust
shall elect that each of the Upper-Tier REMIC, the Lower-Tier REMIC and REMIC I
shall be treated as REMICs under Section 860D of the Code. Any inconsistencies
or ambiguities in this Agreement or in the administration of the Trust shall be
resolved in a manner that preserves the validity of such REMIC elections.
(b) The Class A-1 Group I Certificates, the Class A-2 Group I
Certificates, the Class A-3 Group I Certificates, the Class A-4 Group I
Certificates, the Class A-5 Group I Certificates, the Class A-6 Group II
Certificates and the uncertificated right of the Supplemental Interest Account
to receive the distributions described in Section 7.3(c) (the "Uncertificated
Interest") are hereby designated as "regular interests" with respect to the
Upper-Tier REMIC and the Class RU Certificates are hereby designated as the
single class of "residual interest" with respect to the Upper-Tier REMIC.
(c) The Class LT-1, LT-2, LT-3, LT-4, LT-5, ▇▇-▇, ▇▇-▇, LT-8
and LT-9 Certificates are hereby designated as "regular interests" with respect
to the Lower-Tier REMIC and the Class RL Certificates are hereby designated as
the single class of "residual interest" with respect to the Lower-Tier REMIC.
The beneficial ownership interest of the Lower-Tier REMIC shall be evidenced by
the interests (the "Lower-Tier Interests") having the characteristics and terms
as follows:
Class Companion Original Interest Final
Designation Classes Principal Rate Payment
Balance Date
----------------- -------------------- ------------------ ------------- --------------------------
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LT-1 A-1 (1)
LT-2 A-2 (1)
LT-3 A-3 (1)
LT-4 A-4 (1)
LT-5 A-5 (1)
LT-6 (2)
LT-7 A-6 (3)
LT-8 (4)
LT-9 (5)
RL (6)
(1) The Weighted average of the Class IB Pass-Through Rate and the excess of
the Class IA Pass-Through Rate over (a) 5.00% for the first 36 Payment
Dates and (b) 0.0% thereafter.
(2) The Weighted Average of the Class ▇-▇, ▇-▇, ▇-▇, A-4 and A-5 Pass-Through
Rates.
(3) The Net Weighted Average Coupon Rate of the Group II Mortgage Loans, plus
the Certificate Insurer Premium Rate.
(4) The Class A-6 Pass-Through Rate.
(5) The Net Weighted Average Coupon Rate of the Mortgage Loans, plus the
Certificate Insurer Premium Rate.
(6) The RL Certificate has no principal balance and does not bear interest.
The Lower-Tier Interests LT-1, LT-2, LT-3, LT-4, LT-5, LT-6, ▇▇-▇, ▇▇-▇, and
LT-9 shall be issued as non-certificated interests and recorded on the records
of the Lower-Tier REMIC as being issued to and held by the Trustee on behalf of
the Upper-Tier REMIC.
On each Payment Date, the Lower Tier Distribution Amount shall
be applied as principal and interest of particular Lower Tier Interests, other
than the RL Certificate, in amounts corresponding to the aggregate respective
amounts required to be applied as principal and interest of their related
Companion Classes (as set forth above) and the Class B Certificates pursuant to
the priorities set forth in section 7.3 hereof and with respect to the Lower
Tier Interests LT-6, LT-8, and LT-9,
(i) the Lower Tier Distribution Amount shall be
applied as interest to LT-6, LT-8, and LT-9 in an amount corresponding to the
interest accrued on the class principal balances of such classes at the interest
rate for such class as stated above; provided, however, that amounts payable as
interest in respect of LT-9 shall be reduced (the "LT-9 Distribution Reduction
Amount") when the Lower Tier Subordinated Amount is less than the Lower Tier
Required Subordinated Amount by the lesser of (x) the amount of such difference
and (y) the Maximum LT-9 Interest Deferral Amount. The LT-9 Distribution
Reduction Amount will be applied to proportionately reduce the principal
balances of LT-6, and LT-8; in the case of LT-6, in proportion to the amount on
such Payment Date of any Group I Subordination Increase Amount, and in the case
of LT-8, in proportion to the amount on such Payment Date of any Group II
Subordination Increase Amount; and
(ii) the remainder of the Lower Tier Distribution
Amount shall be applied as principal to LT-6, LT-8, and LT-9 in the following
percentages:
(a) 50.00% to LT-9; and
(b) 50.00% to LT-6 and LT-8 in proportion to the Group I
Principal Distribution Amount and the Group II Principal
Distribution Amount ; respectively, in each case as of
such Payment Date provided that the Lower Tier
Subordinated
32
Amount is less than or equal to the Lower Tier Required
Subordinated Amount. If not, 50.00% divided among ▇▇-▇,
▇▇-▇ and LT-9 such that the Lower Tier Subordinated
Amount is equal to the Lower Tier Required Subordinated
Amount.
No distributions will be made on the Class RL Certificate,
except that any distribution of the proceeds of the final remaining assets of
the Lower Tier REMIC shall be distributed to the holder thereof upon
presentation and surrender of the Class RL Certificate.
(d) REMIC I will be evidenced by the Class IA, Class IB, and
Class IC Certificates (the "REMIC I Regular Interests"), which will be
uncertificated and non-transferable and are hereby designated as the "regular
interests" in REMIC I and (y) the Class RI Certificates, which are hereby
designated as the single "residual interest" in REMIC I (the REMIC I Regular
Certificates, together with the Class RI certificates, the "REMIC I
Certificates"). The REMIC I Regular Interests shall be recorded on the records
of the REMIC I as being issued to and held by the Trustee on behalf of the
Lower-Tier REMIC.
The Class IA Certificates shall have an initial principal
balance equal to the initial principal balance of the Class A-5 Certificates
(that is, $__________). The Class IB Certificates shall have an initial
principal balance equal to the excess of the Original Group I Pool Principal
Balance over the initial principal balance of the Class IA Certificates (that
is, $__________). The Class IC Certificates shall have an initial principal
balance equal to the Original Group II Pool Principal Balance.
On each Payment Date, principal collections on the Mortgage
Loans shall be allocated as follows: an amount equal to the principal payable on
the Class A-5 Certificates shall be payable on the Class IA Certificates; the
remaining Group I Principal Distribution Amount shall be payable to the Class IB
Certificates and the Group II Principal Distribution Amount shall be payable on
the Class IC certificates.
The Class IA and Class IB Certificates shall each have
Pass-Through Rates equal to the Net Weighted Average Coupon Rate of the Group I
Loans. The Class IC Certificates shall have a Pass-Through Rate equal to the Net
Weighted Average Coupon Rate of the Group II Loans. The Class RI Certificates
shall have no principal balance and no Pass-Through Rate and shall be entitled
to only those distributable assets, if any remaining in REMIC I on each Payment
Date after all amounts required to be distributed to the Class IA , Class IB ,
and Class IC Certificates after applicable Trust expenses have been paid.
(e) The Startup Day is hereby designated as the "startup day" of each REMIC
within the meaning of Section 860G(a)(9) of the Code.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, AND THE MASTER SERVICER;
CONVEYANCE OF MORTGAGE LOANS
Section 3.1. Representations and Warranties of the Depositor
and the Master Servicer. (a) The Depositor hereby represents, warrants and
covenants to the Master Servicer, the Trustee, the Certificate Insurer and to
the Owners as of the Startup Day that:
33
(i) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of __________
and is in good standing as a foreign corporation in each jurisdiction in
which the nature of its business, or the properties owned or leased by it
make such qualification necessary. The Depositor has all requisite
corporate power and authority to own and operate its properties, to enable
it to carry out its business as presently conducted in a material manner
and as proposed to be conducted and to enter into and discharge its
obligations under this Agreement and the other Operative Documents to
which it is a party in a material manner.
(ii) The execution and delivery of this Agreement and the
other Operative Documents to which the Depositor is a party, by the
Depositor, and its performance and compliance with the terms of this
Agreement and of the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of the
Depositor and will not violate the Depositor's Certificate of
Incorporation or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which the Depositor is a party or by which the Depositor is
bound, or violate any statute or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction
over the Depositor or any of its properties.
(iii) This Agreement and the other Operative Documents to
which the Depositor is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Depositor, enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).
(iv) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a party.
(v) No litigation is pending or, to the best of the
Depositor's knowledge, threatened against the Depositor which litigation
might have consequences that would prohibit its entering into this
Agreement or any other Operative Document to which it is a party or that
would materially and adversely affect the condition (financial or
otherwise) or operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a party.
(vi) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Depositor
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the certificate, statement or report not
misleading.
(vii) The statements contained in the Registration Statement
which describe the Depositor or matters or activities for which the
Depositor is responsible in accordance with the Operative Documents or
which are attributed to the Depositor therein are true and correct in all
material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Depositor or omit
to state a material fact required to be stated
34
therein or necessary in order to prevent the statements contained therein
with respect to the Depositor from being misleading. To the best of the
Depositor's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated therein
or necessary to make the statements contained therein not misleading.
(viii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state securities
laws, real estate syndication or "Blue Sky" statutes, as to which the
Depositor makes no such representation or warranty), that are necessary or
advisable in connection with the purchase and sale of the Certificates and
the execution and delivery by the Depositor of the Operative Documents to
which it is a party, have been duly taken, given or obtained, as the case
may be, are in full force and effect on the date hereof, are not subject
to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement and
the other Operative Documents on the part of the Depositor and the
performance by the Depositor of its obligations under this Agreement and
such of the other Operative Documents to which it is a party.
(ix) The transactions contemplated by this Agreement are in
the ordinary course of business of the Depositor.
(x) The Depositor received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Mortgage
Loans to the Trust.
(xi) The Depositor did not sell any interest in any Mortgage
Loan with any intent to hinder, delay or defraud any of its creditors.
(xii) The Depositor is solvent and the Depositor will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the
Trust.
(b) The Master Servicer hereby represents and warrants to the
Depositor, the Trustee, the Certificate Insurer, and to the Owners as of the
Startup Day that:
(i) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of __________, and
is, or a Sub-Servicer is, in compliance with the laws of each state in
which any Property is located to the extent necessary to enable the Master
Servicer to perform its obligations hereunder. The Master Servicer and
each Sub-Servicer is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business, or the properties owned
or leased by it make such qualification necessary to enable the Master
Servicer to perform its obligations hereunder. The Master Servicer has all
requisite corporate power and authority to own and operate its properties,
to carry out its business as presently conducted and as proposed to be
conducted and to enter into and discharge, either directly or through
Sub-Servicers, its obligations under this Agreement. The Master Servicer
and any Sub-Servicer has equity of at least $__________ as determined in
accordance with generally accepted accounting principles. Each
Sub-Servicer appointed by the Master Servicer will have all requisite
corporate power and authority to own and operate its properties, to carry
out its business as presently conducted and as proposed to be conducted.
35
(ii) The execution and delivery of this Agreement by the
Master Servicer and its performance and compliance with the terms of this
Agreement and any Sub-Servicing Agreement have been duly authorized by all
necessary corporate action on the part of the Master Servicer and will not
violate the Master Servicer's Certificate of Incorporation or Bylaws or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach of, any
material contract, agreement or other instrument to which the Master
Servicer is a party or by which the Master Servicer is bound or violate
any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Master
Servicer or any of its properties.
(iii) This Agreement and any Sub-Servicing Agreement, assuming
due authorization, execution and delivery by the other parties hereto and
thereto, each constitutes a valid, legal and binding obligation of the
Master Servicer, enforceable against it in accordance with the terms
hereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(iv) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its
properties or might have consequences that would materially and adversely
affect its performance hereunder and under any Sub-Servicing Agreement.
(v) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering into
this Agreement or any Sub-Servicing Agreement or that would materially and
adversely affect the condition (financial or otherwise) or operations of
the Master Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder.
(vi) Each certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Master
Servicer is true and correct in all material respects.
(vii) The statements contained in the Prospectus Supplement
which describe the Master Servicer under the caption "The Master Servicer"
are true and correct in all material respects.
(viii) The Master Servicing Fee is a "current (normal)
servicing fee rate" as that term is used in Statement of Financial
Accounting Standards No. 65 issued by the Financial Accounting Standards
Board. Neither the Master Servicer nor any affiliate thereof will report
on any financial statements any part of the Master Servicing Fee as an
adjustment to the sales price of the Mortgage Loans.
(ix) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state securities
laws, real estate syndication or "Blue
36
Sky" statutes, as to which the Master Servicer makes no
such representation or warranty), that are necessary or advisable in connection
with the execution and delivery by, and the performance of the obligations of,
the Master Servicer, either directly or through a Sub-Servicer, of this
Agreement and each Sub-Servicing Agreement, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and each
Sub-Servicing Agreement on the part of the Master Servicer and the performance
by the Master Servicer, either directly or through a Sub-Servicer, of its
obligations under this Agreement and each Sub-Servicing Agreement.
(x) The collection practices used by the Master Servicer with
respect to the Mortgage Loans have been, in all material respects, legal,
proper, prudent and customary in the non-conforming credit residential
loan servicing business.
(xi) The transactions contemplated by this Agreement are in
the ordinary course of business of the Master Servicer.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Depositor, the Master Servicer,
the Certificate Insurer or the Trustee of a breach of any of the representations
and warranties set forth in this Section 3.1(c) which materially and adversely
affects the interests of the Owners or of the Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties
and the Certificate Insurer; PROVIDED that, the Trustee shall have no duty or
responsibility to inquire, investigate, determine or obtain actual knowledge of
facts or events constituting a breach of any such representations or warranties.
Within 30 days of its discovery or its receipt of notice of breach, the Master
Servicer shall cure such breach in all material respects and, upon the Master
Servicer's continued failure to cure such breach, may thereafter be removed
pursuant to Section 11.1 hereof.
Section 3.2. Covenants of the Depositor to Take Certain
Actions with Respect to the Mortgage Loans in Certain Situations. (a) Upon the
actual knowledge of the Depositor, the Master Servicer, the Certificate Insurer
or the Trustee that the statements set forth in (ii), (x), (xiii), (xix),
(xxxii), (xxxiii) or (xxxix) of subsection (b) below were untrue in any material
respect as of the Startup Day or that any of the other statements set forth in
subsection (b) below were untrue as of the Startup Day with the result that the
interests of the Owners or the interests of the Certificate Insurer are
materially and adversely affected, the party discovering such breach shall give
prompt written notice to the other parties and the Certificate Insurer.
Upon the earliest to occur of the Depositor's discovery, its
receipt of notice of breach from any one of the other parties or the Certificate
Insurer or such time as a situation resulting from an existing statement which
is untrue materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Depositor hereby covenants and
warrants that it shall promptly cure such breach in all material respects or it
shall, subject to the further requirements of this paragraph, on the second
Remittance Date next succeeding such discovery, receipt of notice or such time
(i) substitute in lieu of each Mortgage Loan which has given rise to the
requirement for action by the Depositor a Qualified Replacement Mortgage and, if
the outstanding principal amount of such Qualified Replacement Mortgage as of
the applicable Replacement Cut-Off Date is less than the Principal Balance
37
of such Mortgage Loan as of such Replacement Cut-Off Date, deliver an amount
equal to such difference together with accrued and unpaid interest on such
amount calculated at the related Coupon Rate less the rate at which the Master
Servicing Fee is calculated, if any, of the Mortgage Loan being replaced (such
aggregate amount, the "Substitution Amount"), together with the aggregate amount
of all unreimbursed Delinquency Advances and Servicing Advances theretofore made
with respect to such Mortgage Loan to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan from the
Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account. In connection with any such proposed purchase or
substitution, the Depositor at its expense, shall cause to be delivered to the
Trustee and to the Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or would
jeopardize the status of any of the REMICs as a REMIC and the Depositor shall
only be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the Trust or would not jeopardize the
status of any of the Upper-Tier REMIC, the Lower-Tier REMIC or REMIC I as a
REMIC. Notwithstanding the foregoing, the fact that a remedy would constitute a
Prohibited Transaction with respect to a Mortgage Loan shall not reduce the
obligation hereunder of the Depositor to effect another remedy with respect to
such Mortgage Loan. It is understood and agreed that the obligation of the
Depositor so to cure the defect, substitute or purchase any Mortgage Loan as to
which such a statement set forth below is untrue in any material respect and has
not been remedied, along with the indemnification remedy available under Section
12.21(b) shall constitute the sole remedies available to the Owners, the Trustee
or the Certificate Insurer respecting any such statement.
(b) (i) The information with respect to each Mortgage Loan set
forth in the related Mortgage Loan Schedule is true and correct in all
material respects as of the Cut-Off Date;
(ii) Each Mortgage Loan File has been or will be
delivered to the Trustee on the Startup Day;
(iii) Each Mortgage Loan being transferred to the Trustee
is a Qualified Mortgage and is a Mortgage;
(iv) _____% of the Original Group I Pool Principal Balance
and _____% of the Original Group II Pool Principal Balance have
corresponding Properties that are improved by a one-to-four family
residential dwelling and the remaining Mortgage Loans have
corresponding Properties that are improved by modular housing,
manufactured housing, PUD, SF row houses, townhouses or duplexes;
(v) As of the Cut-Off Date, no Mortgage Loan in Group I
had a Loan-to-Value Ratio in excess of ____% and the weighted average
Combined Loan-to-Value Ratio for Group I was approximately ____%, no
Mortgage Loan in Group II had a Loan-to-Value Ratio in excess of ____%
and the weighted average Loan-to-Value Ratio for Group II was
approximately ____%;
(vi) Each Mortgage Loan is being serviced by or on behalf
of the Master Servicer;
(vii) The Note related to each Group I Mortgage Loan bears
a fixed Coupon Rate of at least ____% per annum; the Note related to
each Group II Mortgage Loan bears interest based on an index of
six-month LIBOR, adjusts either every sixth month or every
twenty-fourth month or every thirty-sixth month, has a margin of at
least ____%, an adjustment cap of at least
38
____%, a lifetime cap of at least ____% and a Coupon Rate as of the
Cut-Off Date of at least ____%;
(viii) Notes representing not more than ____% of the
Original Group I Pool Principal Balance of the Mortgage Loans provide
for a "balloon" payment at the end of the 15th year (such Mortgage
Loans having 30-year amortization schedules), none of the Group II
Mortgage Loans provide for a "balloon" payment;
(ix) As of the Cut-Off Date, each Mortgage is a valid and
subsisting first or second lien (as identified in the Mortgage Loan
Schedule) of record on the Property subject in the case of any Second
Mortgage Loan only to a Senior Lien on such Property and subject in all
cases to the exceptions to title set forth in the title insurance
policy with respect to the related Mortgage Loan, which exceptions are
generally acceptable to banking institutions in connection with their
regular mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not individually,
or in the aggregate, materially and adversely affect the benefits of
the security intended to be provided by such Mortgage;
(x) Immediately prior to the transfer and assignment
contemplated by the Sale Agreement, the Depositor held good and
indefeasible title to, and was the sole owner of, each Mortgage Loan
conveyed by the Depositor subject to no liens, charges, mortgages,
encumbrances or rights of others except as set forth in paragraph (ix)
or other liens which will be released simultaneously with such transfer
and assignment; and immediately upon the transfer and assignment
contemplated the Trust will hold good and indefeasible title to, and be
the sole owner of, each Mortgage Loan subject to no liens, charges,
mortgages, encumbrances or rights of others except as set forth in
paragraph (ix) or other liens which will be released simultaneously
with such transfer and assignment;
(xi) As of the Cut-Off Date, no Mortgage Loan is more than
59 days delinquent, and Mortgage Loans (in the aggregate) representing
no more than ____% of the Original Group I Pool Principal Balance of
the Mortgage Loans are 30-59 days delinquent, no more than ____% of the
Original Group II Pool Principal Balance of the Mortgage Loans are
30-59 days delinquent;
(xii) As of the Startup Day, each Property is free of
substantial damage and is in good repair;
(xiii) As of the Startup Day, there is no valid and
enforceable offset, defense or counterclaim to any Note or Mortgage,
including the obligation of the related Mortgagor to pay the unpaid
principal of or interest on such Note; (xiv) As of the Startup Day,
there is no delinquent tax or assessment lien on any Property, nor is
there any claim for work, labor or material affecting any Property
which is or may be a lien prior to, or equal with, the lien of the
related Mortgage except, in each case, those which are insured against
by any title insurance policy referred to in paragraph (xvi) below;
(xv) Each Mortgage Loan complies and at the time it was
made complied in all material respects with all applicable state and
federal laws and regulations, including, without limitation, the
federal Truth-in-Lending Act, Real Estate Settlement Procedure Act and
other consumer protection laws, usury, equal credit opportunity,
disclosure and recording laws;
(xvi) With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard California Land Title Association
form or American Land Title Association form in
39
the state in which the related Property is situated, in an amount at
least equal to the Original Principal Balance of such Mortgage Loan
insuring the mortgagee's interest under the related Mortgage Loan as
the holder of a valid first mortgage lien of record in the case of each
First Mortgage Loan or second mortgage lien of record in the case of
each Second Mortgage Loan on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the
character referred to in paragraph (ix) above, was effective on the
date of the origination of such Mortgage Loan, and, as of the Startup
Day, such policy will be valid and thereafter such policy shall
continue in full force and effect. The assignment to the Trust of the
benefits of the mortgage title insurance does not require the consent
of or notification to the insurer. No claims have been made under such
mortgage title insurance policies and no prior holder of the related
mortgage has done, by act or omission, anything that would impair the
coverage of such mortgage title insurance policy;
(xvii) At the Startup Day, the improvements upon each
Property are covered by a valid and existing hazard insurance policy
(which may be a blanket policy of the type described in Section
10.11(c) hereof) with a generally acceptable carrier that provides for
fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related Mortgage
Loan (together, in the case of a Second Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (B) the minimum
amount required to compensate for damage or loss on a replacement cost
basis or (C) the full insurable value of the Property and in any event
which is not less than the amount necessary to avoid the operation of
any coinsurance provisions with respect to the Property in the event of
any loss less than the amount of the insurance coverage and consistent
with the amount that would have been required as of the date of
origination by the related originator in its normal residential
mortgage lending activities with respect to similar properties in the
same locality. All hazard insurance policies are the valid and binding
obligation of the insurer and contain a standard mortgagee clause
naming the originator, its successors and assigns, as mortgagee. All
premiums thereon have been paid. Such insurance policy requires prior
notice to the insured of termination or cancellation, and no such
notice has been received. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and
expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from
the Mortgagor;
(xviii) If any Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy (which may be a blanket
policy of the type described in Sections 10.11(b) and 10.11(c) hereof)
in a form meeting the requirements of the current guidelines of the
Federal Insurance Administration is in effect with respect to such
Property with a generally acceptable carrier in an amount representing
coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan (together, in the case of a Second
Mortgage Loan, with the outstanding principal balance of the Senior
Lien), (B) the minimum amount required to compensate for damage or loss
on a replacement cost basis or (C) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973, as
amended. All flood insurance policies are the valid and binding
obligation of the insurer and contain a standard mortgagee clause
naming the originator, its successors and assigns, as mortgagee. All
premiums thereon have been paid. Such flood insurance policy requires
prior notice to the insured of termination or cancellation, and no such
notice has been received. The Mortgage obligates the Mortgagor
thereunder to maintain all such flood insurance at the Mortgagor's cost
and expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such flood insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor
from the Mortgagor;
40
(xix) Each Mortgage and Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether considered in a proceeding
or action in equity or at law), and all parties to each Mortgage Loan
had full legal capacity to execute all documents relating to such
Mortgage Loan and convey the estate therein purported to be conveyed;
there is only one original Note with respect to each Mortgage Loan;
(xx) The Depositor has caused and will cause to be
performed any and all acts required to be performed to preserve the
rights and remedies of the Trust in any Insurance Policies applicable
to any Mortgage Loans delivered by the Depositor including, to the
extent such Mortgage Loan is not covered by a blanket policy described
in Section 10.11(c) hereof, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the
Trustee;
(xxi) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof for
the benefit of the Trustee (or, subject to Section 3.3 hereof, are in
the process of being recorded);
(xxii) The terms of each Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interests of the Owners and which has been delivered to the Trustee.
The substance of any such alteration or modification is reflected on
the related Mortgage Loan Schedule;
(xxiii) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording
such Mortgage Loans were paid;
(xxiv) No Mortgage Loan was originated under a buydown
plan;
(xxv) No Mortgage Loan has a shared appreciation feature,
or other contingent interest feature;
(xxvi) Each Property is located in the state identified in
the related Mortgage Loan Schedule and consists of one parcel of real
property (or several parcels secured by a blanket mortgage) with a
residential dwelling erected thereon;
(xxvii) Each Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
related Mortgage Loan in the event the related Property is sold without
the prior consent of the mortgagee thereunder;
(xxviii) Any advances made after the date of origination
of a Mortgage Loan but prior to the Cut-Off Date have been consolidated
with the outstanding principal amount secured by the related Mortgage,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan
Schedule. The consolidated principal amount does not exceed the
original principal amount of the related Mortgage Loan. No
41
Note permits or obligates the Master Servicer to make future advances
to the related Mortgagor at the option of the Mortgagor;
(xxix) There is no proceeding pending or threatened for
the total or partial condemnation of any Property, nor is such a
proceeding currently occurring, and each Property is undamaged by
waste, fire, earthquake or earth movement;
(xxx) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie wholly
within the boundaries and building restriction lines of such Property,
and no improvements on adjoining properties encroach upon such
Property, except in each case exceptions which are stated in the title
insurance policy and affirmatively insured;
(xxxi) With respect to each Mortgage constituting a deed
of trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named
in such Mortgage, and no fees or expenses are or will become payable by
the Owners or the Trust to the trustee under the deed of trust, except
in connection with a trustee's sale after default by the related
Mortgagor;
(xxxii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the
benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. There is no homestead or other exemption
available that would materially interfere with the right to sell the
related Property at a trustee's sale or the right to foreclose on the
related Mortgage;
(xxxiii) Except as provided by clause (xi) of this
subsection 3.2(b), there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no
event which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach,
violation or event of acceleration; and the Depositor has not waived
any default, breach, violation or event of acceleration;
(xxxiv) No instrument of release or waiver has been
executed in connection with any Mortgage Loan, and no Mortgagor has
been released, in whole or in part;
(xxxv) Each Mortgage Loan conforms, and all such Mortgage
Loans in the aggregate conform, in all material respects to the
description thereof set forth in the Registration Statement;
(xxxvi) An appraisal was performed with respect to each
Mortgage Loan; such appraisal was performed in material compliance with
the appraisal description set forth in the Prospectus;
(xxxvii) No more than ____% of the Original Pool Principal
Balance of the Mortgage Loans in Group I is secured by condominiums,
townhouses or rowhouses, no more than ____% of the Original Pool
Principal Balance of the Mortgage Loans in Group II is secured by
condominiums, townhouses or rowhouses;
(xxxviii) The credit underwriting guidelines applicable to
each Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus and the Prospectus Supplement and
each Mortgage Loan was underwritten in accordance therewith;
42
(xxxix) As of the Startup Day, the Depositor had no actual
knowledge that there exists on any Property any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act,
the Resource Conservation and Recovery Act of 1976, or other federal,
state or local environmental legislation;
(xl) No more than ____% of the Original Pool Principal
Balance of the Mortgage Loans in Group I is secured by Properties
located within any single zip code area, no more than ____% of the
Original Pool Principal Balance of the Mortgage Loans in Group II is
secured by Properties located within any single zip code area; no more
than ____% of the Original Pool Principal Balance of the Mortgage Loans
in Group I is located within any single state, no more than ____% of
the Original Pool Principal Balance of the Mortgage Loans in Group II
is located within any single state;
(xli) At least ____% of the Original Group I Pool
Principal Balance, at least ____% of the Original Group II Pool
Principal Balance are owner occupied;
(xlii) All taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid;
(xliii) Except for payments in the nature of escrow
payments, including, without limitation, taxes and insurance payments,
the Depositor has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount
required by the Mortgage, except for interest accruing from the date of
the Mortgage Note or date of disbursement of the Mortgage proceeds,
whichever is greater, to the day which precedes by one month the due
date of the first installment of principal and interest;
(xliv) No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities and the Mortgaged Property is lawfully occupied
under applicable law;
(xlv) The related Mortgage Note is not and has not been
secured by any collateral, pledged account or other security except the
lien of the corresponding Mortgage;
(xlvi) There is no obligation on the part of the
Depositor, the originator, the Master Servicer, the Trustee or any
other Person to make payments in addition to those made by the
Mortgagor;
(xlvii) With respect to each Second Mortgage Loan, the
related Senior Lien requires equal monthly payments, or if it bears an
adjustable interest rate, the monthly payments for the related Senior
Lien may be adjusted no more frequently than monthly;
(xlviii) With respect to each Second Mortgage Loan, either
(i) no consent for the Mortgage Loan is required by the holder of the
related Senior Lien or (ii) such consent has been obtained and is
contained in the File;
43
(xlix) With respect to any Senior Lien that provided for
negative amortization or deferred interest, the balance of such Senior
Lien used to calculate the Loan-to-Value Ratio for the Second Mortgage
Loan is based on the maximum amount of negative amortization or
deferred interest possible under such Senior Lien;
(l) The maturity date of each Second Mortgage Loan is
prior to the maturity date of the related Senior Lien if such Senior
Lien provides for a balloon payment;
(li) All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and disposed of such
interest, were) (1) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Property is located,
and (2)(A) organized under the laws of such state, or (B) qualified to
do business in such state, or (C) federal savings and loans
associations or national banks having principal offices in such state
or (D) not doing business in such state so as to require qualification
or licensing;
(lii) All amounts received on and after the Cut-Off Date
with respect to the Mortgage Loans to which the Master Servicer is not
entitled have been deposited into the Principal and Interest Account
and are, as of the Startup Day, in the Principal and Interest Account;
(liii) The Mortgage Loans were not selected for inclusion
in the Trust on any basis intended to adversely affect the Trust;
(liv) With respect to each Property subject to a land
trust (a "Land Trust Mortgage") (a) a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named as such in the land trust agreement
and such trustee is named in the Land Trust Mortgage as Mortgagor; (b)
all fees and expenses of the land trustee which have previously become
due and owing have been paid and no fees or expenses are or will become
payable by the Owners or the Trust to the land trustee under the land
trust agreement; (c) the beneficiary is solely obligated to pay any
fees and expenses of the land trustee and the priority of the lien of
the Land Trust Mortgage is not and will not be primed by the land
trustee; (d) the Mortgaged Property is occupied by the beneficiary
under the land trust agreement and, if such land trust agreement
terminates, the beneficiary will become the owner of the Mortgaged
Property; (e) the beneficiary is obligated to make payments under the
Note and will have personal liability for deficiency judgments; (f) the
Land Trust Mortgage and assignment of beneficial interest relating to
such land trust held by the Trust was made in compliance with the
related land trust agreement, was validly entered into by the related
land trust trustee or beneficiary and, does not currently, and will not
in the future, violate any provision of the related land trust
agreement, nor any agreement between or amongst the beneficiaries of
such land trust; (g) a UCC financing statement has been filed,
continued, and will be continued, without intervening liens, as the
first lien upon any assignment of beneficial interest in the Land Trust
Mortgage; (h) the assignment of beneficial interest with respect to
such Land Trust Mortgage held by the Trust was at the time of such
assignment the only assignment of such beneficial interest in the Land
Trust Mortgage, such assignment was accepted by, and noted in the
records of the land trust trustee, subsequent assignment of the
beneficial interest in whole or in part has not been made, and such
subsequent assignment of the beneficial interest or any part thereof is
not permitted pursuant to a written agreement between the respective
beneficiary and the Mortgagee, until the expiration of the Note
relating to the Land Trust Mortgage; (i) the Land Trust Mortgage is the
first or second lien on the Property; no lien is in place against the
beneficial interests, or any part thereof, of such Land Trust Mortgage
or collateral assignment of beneficial interest, which
44
liens are superior to the interest held by the Depositor and the
beneficial interest, or any part thereof, of any such Land Trust
Mortgage or collateral assignment of beneficial interest has not been
pledged as security for any other debt; and the beneficiary or land
trust trustee is forbidden, pursuant to a written agreement between the
beneficiary or the land trust trustee (as applicable) and the
Mortgagee, from using the land trust property or beneficial interest,
or any part of either, as security for any other debt until the
expiration date of its respective Note; and (x) the terms and
conditions of the land trust agreement do not prevent the free and
absolute marketability of the Mortgaged Property. As of the Cut-Off
Date, the aggregate Principal Balances of Land Trust Mortgage Loans
with related Mortgaged Properties subject to land trusts does not
exceed ____% of the Original Pool Principal Balance;
(lv) With respect to each Property subject to a ground
lease (a) the current ground lessor has been identified and all ground
rents which previously became due and owing have been paid; (b) the
ground lease term extends, or is automatically renewable, for at least
five years beyond the maturity date of the related Mortgage Loan; (c)
the ground lease has been duly executed and recorded; (d) the amount of
the ground rent and any increases therein are clearly identified in the
lease and are for predetermined amounts at predetermined times; (e) the
ground rent payment is included in the Mortgagor's monthly payment as
an expense item; (f) the Trust has the right to cure defaults on the
ground lease; and (g) the terms and conditions of the leasehold do not
prevent the free and absolute marketability of the Property. As of the
Cut-Off Date, the aggregate Principal Balance of Mortgage Loans with
related Mortgaged Properties subject to ground leases does not exceed
____% of the Original Pool Principal Balance;
(lvi) None of the Mortgage Loans are subject to a plan of
bankruptcy or have borrowers that have sought protection or relief
under any state or federal bankruptcy or insolvency law during the term
of the related Mortgage. With respect to each Mortgage Loan which has
been the subject of bankruptcy or insolvency proceedings, (a) as of the
Cut-Off Date, the Mortgagor is not contractually delinquent more than
30 days with respect to any payment due under the related plan, (b) the
current Loan-to-Value Ratio is less than or equal to ____% and (c)
either (i) if the current Loan-to-Value Ratio is between __% and __%,
as of the Cut-Off Date, the Mortgagor has made at least six consecutive
payments under the related Plan or (ii) if the current Loan-to-Value
Ratio is less than __% as of the Cut-Off Date, the Mortgagor has made
at least three consecutive payments under the related plan; and
(lvii) To the best of the Depositor's knowledge, there is
no error, omission, misrepresentation, fraud or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any person,
including without limitation the Mortgagor, any appraiser, any builder
or developer, or any other party involved in the origination of the
Mortgage Loan or in the application of any insurance in relation to
such Mortgage Loan.
(c) In the event that any Qualified Replacement Mortgage
is delivered by the Depositor to the Trust pursuant to this Section
3.2, the Depositor shall be obligated to take the actions described in
subsection (a) above with respect to such Qualified Replacement
Mortgage upon the discovery by any of the Owners, the Depositor, the
Master Servicer, the Certificate Insurer, any Sub-Servicer or the
Trustee that the statements set forth in subsections (ii), (x), (xiii),
(xix), (xxxii), (xxxiii) or (xxxix) of subsection (b) above are untrue
in any material respect on the date such Qualified Replacement Mortgage
is conveyed to the Trust or that any of the other statements set forth
in subsection (b) hereof are untrue on the date such Qualified
Replacement Mortgage is conveyed to the Trust such that the interests
of the Owners or the Certificate Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided,
however, that for the purposes of this subsection (c) the statements in
subsection (b) hereof referring to items "as of the Cut-Off Date" or
"as of the Startup Day"
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shall be deemed to refer to such items as of the date such Qualified
Replacement Mortgage is conveyed to the Trust.
(d) It is understood and agreed that the covenants set
forth in this Section 3.2 shall survive delivery of the respective
Mortgage Loans (including Qualified Replacement Mortgage Loans) to the
Trustee.
(e) The Depositor hereby assigns to the Trustee on behalf
of the Owners and the Certificate Insurer all of its rights to recovery
for breaches of representations and warranties given by the originators
of such Mortgage Loans that are similar in import to the following (but
only to the extent such representations are given and to the extent
such rights are assignable): no error omission, misrepresentation,
fraud or similar occurrence with respect to a Mortgage Loan has taken
place on the part of any person, including without limitation the
Mortgagor, any appraiser, any builder or developer, or any other party
involved in the origination of the Mortgage Loan or in the application
of any insurance in relation to such Mortgage Loan. Notwithstanding
such assignment, none of the Owners, the Certificate Insurer or the
Trustee may enforce any such remedy except to the extent that the
Depositor is unwilling to enforce the remedy.
Section 3.3. Conveyance of the Mortgage Loans and
Qualified Replacement Mortgages . (a) The Depositor hereby transfers,
assigns, sets over and otherwise conveys without representation,
warranty or recourse, to the Trust, all right, title and interest of
the Depositor in and to each Mortgage Loan listed on the Mortgage Loan
Schedule delivered by the Depositor on the Startup Day, and all its
right, title and interest in and to (i) scheduled payments of interest
due on each Mortgage Loan after the Cut-Off Date, (ii) scheduled
payments of principal due, and unscheduled collections of principal
received, on each Mortgage Loan on and after the Cut-Off Date, and
(iii) its Insurance Policies; such transfer of the Mortgage Loans set
forth on the Mortgage Loan Schedule to the Trust is absolute and is
intended by the Owners and all parties hereto to be treated as a sale
to the Trust.
(b) In connection with the transfer and assignment of the
Mortgage Loans by the Company to the Depositor pursuant to the Sale
Agreement, and by the Depositor to the Trust pursuant to this
Agreement, on the Startup Day, the Depositor agrees to:
(i) deliver, or cause to be delivered, without recourse to
the Trustee on behalf of the Trust on the Startup Day with respect to
each Mortgage Loan listed on the Mortgage Loan Schedule (A) the
original Notes or, if any original Note has been lost or destroyed,
certified copies thereof (together with a lost note affidavit),
endorsed without recourse by the originator (or most recent payee)
thereof "Pay to the order of __________, as Trustee", (B) originals
(subject to the provisions of paragraph (d) below relating to items in
the process of being recorded) of all intervening assignments, showing
a complete chain of assignment from origination to assignment to the
Trustee, including warehousing assignments, with evidence of recording
thereon, (C) originals of all assumption and modification agreements,
if any, and (D) either: (1) the original Mortgage (subject to the
provisions of paragraph (d) below relating to items in the process of
being recorded), with evidence of recording thereon, or (2) a copy of
the Mortgage certified by the public recording office in those
instances where the original recorded Mortgage has been lost and (E)
the original lender's title insurance policy issued on the date of
origination of such Mortgage Loan, together with any endorsements
thereto; provided, however, that, subject to Sections 3.3(d) and
3.4(b), the Depositor shall not be required to prepare an assignment
for any Mortgage as to which the original recording information is
lacking; and provided, further, that pending the issuance of the final
title policy, the Depositor shall deliver the title commitment or title
binder to insure same; and
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(ii) within 10 Business Days following the Startup Day,
assignments of the Mortgages from the related originator to __________
to be submitted for recording in the appropriate jurisdictions to
perfect the Trustee's lien thereunder as against creditors of or
purchasers from the Depositor, provided, however, that the Depositor
need not cause any assignment to be submitted with respect to which the
Depositor provides to the Trustee an opinion of counsel reasonably
acceptable to the Certificate Insurer to the effect that such
recordation is not necessary; the above-listed items constituting the
"File" for the related Mortgage Loan;
(c) Notwithstanding anything to the contrary contained in
this Section 3.3, in those instances where the public recording office
retains the original Mortgage, the assignment of a Mortgage or the
intervening assignments of the Mortgage after it has been recorded, the
Depositor shall be deemed to have satisfied its obligations hereunder
upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording
office to be a true copy of the recorded original thereof.
(d) Not later than ten days following the end of the
10-Business Day period referred to in clause (b)(ii) above, the
Depositor shall deliver, or cause to be delivered, to the Trustee
copies of all Mortgage assignments submitted for recording, together
with a list of all Mortgages for which no Mortgage assignment has yet
been submitted for recording, which list shall state the reason why
such Mortgage assignments have not been submitted for recording. With
respect to any Mortgage assignment disclosed on such list as not yet
submitted for recording for a reason other than a lack of original
recording information, the Trustee shall make an immediate demand on
the Depositor to prepare, or cause to be prepared, such Mortgage
assignments, and shall inform the Certificate Insurer of the
Depositor's failure to prepare such Mortgage assignments. Thereafter,
the Trustee shall cooperate in executing any documents submitted to the
Trustee in connection with this provision. Thereafter, the Depositor
shall prepare, or cause to be prepared, a Mortgage assignment for any
Mortgage for which original recording information is subsequently
received by the Depositor, and shall promptly deliver a copy of such
Mortgage assignment to the Trustee.
Neither the Master Servicer nor the Trustee shall be
responsible for the costs of recording any Mortgage or any assignment of
Mortgage pursuant to this Section 3.3.
Copies of all Mortgage assignments received by the Trustee
shall be kept in the related File. The Depositor shall promptly deliver, or
cause to be delivered, to the Trustee such original Mortgage or intervening
mortgage assignment with evidence of recording indicated thereon upon receipt
thereof from the public recording official. If the Depositor within nine months
from the Startup Day shall not have received such original Mortgage or
intervening mortgage assignment from the public recording official, it shall
obtain and deliver, or cause to be delivered, to the Trustee within ten months
from the Startup Day, a copy of such original Mortgage or mortgage assignment
certified by such public recording official to be a true and complete copy of
such original Mortgage or mortgage assignment as recorded by such public
recording office.
(e) In the case of Mortgage Loans which have been prepaid
in full on or after the Cut-Off Date and prior to the Startup Day, the
Depositor, in lieu of the foregoing, will deliver within 15 days after
the Startup Day to the Trustee a certification of an Authorized Officer
in the form set forth in Exhibit J.
(f) The Depositor (or an affiliate thereof) shall sell,
transfer, assign, set over and otherwise convey without recourse, to
the Trustee all its right, title and interest in and to any Qualified
Replacement Mortgage delivered by it to the Trustee on behalf of the
Trust pursuant to Section 3.2 or 3.4
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hereof and all its right, title and interest to principal collected and interest
accruing on such Qualified Replacement Mortgage on and after the applicable
Replacement Cut-Off Date; provided, however, that the Depositor (or such
affiliate) shall reserve and retain all right, title and interest in and to
payments of principal and interest due on such Qualified Replacement Mortgage
prior to the applicable Replacement Cut-Off Date.
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage
therefor, the Trustee will transfer, assign, set over and otherwise
convey without representation, warranty or recourse, on the Depositor's
order, all of its right, title and interest in and to such released
Mortgage Loan and all the Trust's right, title and interest in and to
principal collected and interest accruing on such released Mortgage
Loan on and after the applicable Replacement Cut-Off Date; provided,
however, that the Trust shall reserve and retain all right, title and
interest in and to payments of principal collected and interest
accruing on such released Mortgage Loan prior to the applicable
Replacement Cut-Off Date.
(h) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust,
the Depositor agrees to deliver to the Trustee the items described in
Section 3.3(b) on the date of such transfer and assignment or, if a
later delivery time is permitted by Section 3.3(b), then no later than
such later delivery time.
(i) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the
Trustee shall deliver on the date of conveyance of such Qualified
Replacement Mortgage and on the order of the Depositor (i) the original
Note, or the certified copy, relating thereto, endorsed without
recourse, to the Depositor, and (ii) such other documents as
constituted the File with respect thereto.
(j) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to
a defect therein, the Depositor shall prepare or cause to be prepared a
substitute assignment or cure such defect, as the case may be, and
thereafter cause each such assignment to be duly recorded.
(k) The Company shall reflect on its records that the
Mortgage Loans have been sold to the Depositor and the Depositor shall
reflect on its records that the Mortgage Loans have been sold to the
Trust.
Section 3.4. Acceptance by Trustee; Certain Substitutions
of Mortgage Loans; Certification by Trustee
.
(a) The Trustee agrees to execute and deliver on the
Startup Day an acknowledgment of receipt of the items delivered by the
Depositor in the form attached as Exhibit K hereto (the "Initial
Trustee Certification"), and declares that it will hold such documents
and any amendments, replacement or supplements thereto, as well as any
other assets included in the definition of Trust Estate and delivered
to the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners. The Trustee agrees, for
the benefit of the Owners, to review such items within 45 days after
the Startup Day (or, with respect to any document delivered after the
Startup Day, within 45 days of receipt and with respect to any
Qualified Replacement Mortgage, within 45 days after the assignment
thereof) and to deliver to the Depositor, the Master Servicer, any
Sub-Servicer, and the Certificate Insurer a Pool Certification in the
form attached hereto as Exhibit L (the "Interim Trustee
Certification"). Within 12 months from the Startup Day, the Trustee
shall review the contents of the Files and deliver to the Depositor,
the Master Servicer, any Sub-Servicer, and the Certificate Insurer a
Pool Certification in the form attached hereto as Exhibit M (the "Final
Trustee Certification").
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The Trustee shall certify in the Initial Trustee
Certification that it has examined each Note to confirm that except as
otherwise described in such certification it is in possession of an
executed original Note endorsed to the Trustee. The Trustee shall
certify in the Interim and Final Trustee Certifications that except as
described in such certification, 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 such Certification as not
covered by such Certification), (i) all documents required to be
delivered to it pursuant to this Agreement are in its possession and
have been executed, (ii) the original Note bearing an original
endorsement to the Trustee from the original payee (or set of original
endorsements evidencing a complete chain of title from the original
payee to the Trustee) is in its possession; (iii) such documents have
been reviewed by it and have not been mutilated, damaged, torn or
otherwise physically altered and relate to such Mortgage Loan
identified in the Mortgage Loan Schedule and (iv) based on its
examination and only as to the foregoing documents, the information set
forth on the Mortgage Loan Schedule as to loan number, name of
mortgagor and address, date of origination, the original stated
maturity date, the Original Principal Balance, the Coupon Rate, the
scheduled monthly payment of principal and interest and the date in
each month or which the related payments are due, accurately reflects
the information set forth in the File. The Trustee shall be under no
duty or obligation pursuant to this Section 3.4 to inspect, review or
examine any such documents, instruments, certificates or other papers
to determine that they are genuine, enforceable, or appropriate for the
represented purpose or that they are other than what they purport to be
on their face, nor shall the Trustee be under any duty to determine
independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage
Loan. In the Interim and Final Trustee Certifications, the Trustee
based on its examination of the Files shall also either confirm, or
list as an exception that:
(i) each Note and Mortgage bears an original signature or
signatures purporting to be that of the person or persons named as the
maker and mortgagor/trustor;
(ii) the principal amount of the indebtedness secured by
the Mortgage is identical to the original principal amount of the Note;
(iii) the assignment of Mortgage is in the form
"__________, as Trustee" and bears a signature that purports to be the
signature of an authorized officer of the Person which the related File
suggests was the immediately prior record holder of such Mortgage;
(iv) if intervening assignments are included in the File,
each such intervening assignment bears a signature that purports to be
the signature of the mortgagee/beneficiary and/or the assignee;
(v) the address of the real property set forth in the
title insurance policy or preliminary title report or commitment to
issue a title policy is identical to the real property address
contained in the Mortgage and such policy or commitment is for an
amount equal to the original principal amount of the Note; and
(vi) it has received an original Mortgage with evidence of
recordation and assignment, in each case, with evidence of recordation
thereon or a copy thereof certified to be true and correct by the
public recording office in possession of such Mortgage and assignment.
Following the delivery of the Final Trustee Certification, the
Trustee shall provide to the Depositor, the Master Servicer and the Certificate
Insurer no less frequently than monthly, updated certifications indicating the
then current status of exceptions, until all such exceptions have been
eliminated.
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(b) If the Trustee during such 45-day period in connection
with the Interim Trustee Certification, or 12-month period in
connection with the Final Trustee Certification finds any document
constituting a part of a File which is not properly executed, has not
been received, or is unrelated to the Mortgage Loans identified in the
Mortgage Loan Schedule or the Trustee is unable to make any of the
other required certifications, or that any Mortgage Loan does not
conform in a material respect to the description thereof as set forth
in the Mortgage Loan Schedule, the Trustee shall promptly so notify the
Depositor, the Master Servicer and the Certificate Insurer. In
performing any such review, the Trustee may conclusively rely on the
Depositor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Trustee's
review of the items delivered by the Depositor pursuant to Section
3.3(b)(i) is limited solely to such procedures as are necessary to
enable the Trustee to complete Exhibits K, L and M hereto.
The Depositor agrees to use reasonable efforts to remedy a
material defect in a document constituting part of a File of which it is so
notified by the Trustee. If, however, (i) in the case of a defect consisting of
the failure of the Depositor to deliver an original Mortgage and any intervening
mortgage assignment evidencing a complete chain of title to the Trustee with
evidence of recording thereon, on the first Remittance Date following the 12
month period from the Startup Day and (ii) in the case of all other defects
within 60 days after the Trustee's notice to it respecting such defect the
Depositor has not remedied the defect and the defect materially and adversely
affects the interest in the related Mortgage Loan of the Owners or of the
Certificate Insurer, the Depositor will on the next succeeding Remittance Date
(i) substitute in lieu of such Mortgage Loan a Qualified Replacement Mortgage
and, deliver the Substitution Amount applicable thereto to the Master Servicer
for deposit in the Principal and Interest Account or (ii) purchase such Mortgage
Loan at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account.
In connection with any such proposed purchase or substitution
the Depositor shall cause at the Depositor's expense to be delivered to the
Trustee and to the Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or would
jeopardize the status of any of the Upper-Tier REMIC, the Lower-Tier REMIC or
REMIC I as a REMIC, and the Depositor shall only be required to take either such
action to the extent such action would not constitute a Prohibited Transaction
for any of the Upper-Tier REMIC, the Lower-Tier REMIC or REMIC I as a REMIC or
would not jeopardize the status of any of the Upper-Tier REMIC, the Lower-Tier
REMIC or REMIC I as a REMIC. Any required purchase or substitution, if delayed
by the absence of such opinion shall nonetheless occur upon the earlier of (i)
the occurrence of a default or imminent default with respect to the Mortgage
Loan or (ii) the delivery of such opinion.
Section 3.5. Cooperation Procedures. (a) The Depositor
shall, in connection with the delivery of each Qualified Replacement
Mortgage to the Trustee, provide the Trustee with the information set
forth in the related Mortgage Loan Schedule with respect to such
Qualified Replacement Mortgage.
(b) The Depositor and the Trustee covenant to provide each
other and the Certificate Insurer with all data and information
required to be provided by them hereunder at the times required
hereunder, and additionally covenant reasonably to cooperate with each
other in providing any additional information required by any of them
or the Certificate Insurer in connection with their respective duties
hereunder.
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ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup
Day, upon the Trustee's receipt from the Depositor of an executed Delivery Order
in the form set forth as Exhibit H hereto, the Trustee shall execute,
authenticate and deliver the Certificates on behalf of the Trust in accordance
with the directions set forth in such Delivery Order.
Section 4.2. Sale of Certificates. At 11 a.m. New York
City time on the Startup Day, at the offices of __________, the Company will
sell and convey the Mortgage Loans and the money, instruments and other property
related thereto to the Depositor, and the Depositor will sell and convey such
property to the Trustee, and the Trustee will (i) hold the Class A Certificates
as transfer agent for the Depository, with an aggregate Percentage Interest in
each Class equal to 100%, registered in the name of Cede & Co. or in such other
names as the Underwriters shall direct against payment of the purchase price
thereof by wire transfer of immediately available funds to the Trustee for
disbursement to the Depositor and (ii) deliver to the Depositor, the Class B
Certificates and the Residual Certificates, with an aggregate Percentage
Interest equal to 100%, registered as the Depositor shall request. Upon receipt
of the proceeds of the sale of the Certificates, the Depositor shall (a) pay the
initial premiums due to the Certificate Insurer and (b) pay other fees and
expenses identified by the Depositor.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through
securities having the rights described therein and herein. Distributions on the
Certificates are payable solely from payments received on or with respect to the
Mortgage Loans (other than the Master Servicing Fees), moneys in the Certificate
Account, the Principal and Interest Account, the Supplemental Interest Payment
Account, Insured Payments made by the Certificate Insurer, Delinquency Advances
and Compensating Interest payments made by the Master Servicer or otherwise held
by the Master Servicer in trust for the Owners, except as otherwise provided
herein, and from earnings on moneys and the proceeds of property held as a part
of the Trust Estate. Each Certificate entitles the Owner thereof to receive
distributions in accordance with this Agreement and in a specified portion of
the aggregate distribution due to the related Class of Certificates, pro rata in
accordance with such Owner's Percentage Interest and in the case of the Class
A-6 Certificates, certain amounts payable from the related Supplemental Interest
Payment Account.
(b) Each Owner is required, and hereby agrees, to return
to the Trustee any Certificate with respect to which the Trustee has made the
final distribution due thereon. Any such Certificate as to which the Trustee has
made the final distribution thereon shall be deemed cancelled and shall no
longer be Outstanding for any purpose of this Agreement, whether or not such
Certificate is ever returned to the Trustee.
Section 5.2. Forms. The Certificates of each Class shall
be in substantially the forms set forth as the related Exhibits to this
Agreement, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement or as may in the
Depositor's judgment be necessary, appropriate or convenient to comply, or
facilitate compliance, with applicable laws, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any applicable securities
51
laws or as may, consistently herewith, be determined necessary by the Authorized
Officer of the Trustee executing such Certificates, as evidenced by his
execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual signature of
one of the Trustee's Authorized Officers and shall be authenticated by the
manual signature of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who
were at any time the proper officers of the Trustee shall bind the Trust,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the execution and delivery of such Certificates or did not hold
such offices at the date of authentication of such Certificates.
No Certificate shall be valid until executed and authenticated
as set forth above.
Certificates delivered on the Startup Day shall be dated the
Startup Day; all Certificates delivered thereafter shall be dated the date of
authentication.
Section 5.4. Registration and Transfer of Certificates.
(a) The Trustee shall cause to be kept a register (the "Register") in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and the registration of transfer of
Certificates.
(b) Subject to the provisions of Section 5.8 hereof with
respect to the Unregistered Certificates, upon surrender for registration of
transfer of any Certificate at the office designated as the location of the
Register, the Trustee shall execute and authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Certificates of a like
Class and in the aggregate principal or notional amount of the Certificate so
surrendered.
(c) At the option of any Owner, Certificates of any Class
owned by such Owner may be exchanged for other Certificates authorized of like
Class, tenor and a like aggregate original principal or notional amount and
bearing numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location of the
Register. Whenever any Certificate is so surrendered for exchange, the Trustee
shall execute and authenticate and deliver the Certificate or Certificates which
the Owner making the exchange is entitled to receive.
(d) All Certificates issued upon any registration of
transfer or exchange of Certificates shall be valid evidence of the same
ownership interests in the Trust and entitled to the same benefits under this
Agreement as the Certificates surrendered upon such registration of transfer or
exchange.
(e) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any
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 registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be
registered so as to participate in a global book-entry system with the
Depository, as set forth herein. Each Class of Class A Certificates
52
shall be initially issued in the form of a single fully registered Class A
Certificate of the related Class with a denomination equal to the original
principal balance of the related Class. Upon initial issuance, the ownership of
such Class A Certificates shall be registered in the Register in the name of
Cede & Co., or any successor thereto, as nominee for the Depository.
The minimum denominations shall be $1,000 for any Class A
Certificate, $100,000 for any Class B Certificate, and 10% Percentage Interest
for any Residual Certificate.
The Depositor and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the Depositor,
the Master Servicer and the Trustee shall have no responsibility or obligation
to the Depository's "Direct Participants" or "Indirect Participants" or
beneficial owners for which the Depository holds Class A Certificates from time
to time as a Depository. Without limiting the immediately preceding sentence,
the Depositor, the Master Servicer and the Trustee shall have no responsibility
or obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Class A Certificates, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, of any notice with respect to the
Class A Certificates or (iii) the payment to, or withholding with respect to,
any Direct or Indirect Participant or any other Person, other than a registered
Owner of a Class A Certificate as shown in the Register, of any amount with
respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a registered Owner of a Class A Certificate
as shown in the Register shall receive a certificate evidencing such Class A
Certificate. The Certificate Issuer shall have no responsibility for or
obligation with respect to the accuracy of the records of the Depository, Cede &
Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Class A Certificates.
Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to the
registered Owners of Class A Certificates appearing as registered Owners in the
registration books maintained by the Trustee at the close of business on a
Record Date, the name "Cede & Co." in this Agreement shall refer to such new
nominee of the Depository.
(h) In the event that (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as nominee and depository with respect to the Class A
Certificates and the Depositor is unable to locate a qualified successor, (ii)
the Depositor at its sole option elects to terminate the book-entry system
through the Depository or (iii) after an Event of Default, Owners of
Certificates evidencing at least 51% Percentage Interests of any Class affected
thereby notify the Depositor that the continuation of a book-entry system is not
in the best interests of such Class of Owners, the Class A Certificates or any
Class, as applicable, shall no longer be restricted to being registered in the
Register in the name of Cede & Co. (or a successor nominee) as nominee of the
Depository. At that time, the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Depositor, or such depository's agent or
designee but, if the Depositor does not select such alternative global
book-entry system, then the Trustee shall notify the Owners of the Class A
Certificates in writing of the termination of the book-entry system and the
Class A Certificates may be registered in whatever name or names registered
Owners of Class A Certificates transferring Class A Certificates shall
designate, in accordance with the provisions hereof.
53
(i) Notwithstanding any other provision of this Agreement
to the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates and all notices with respect to such Class
A Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) in the case of any mutilated Certificate,
such mutilated Certificate shall first be surrendered to the Trustee, and in the
case of any destroyed, lost or stolen Certificate, there shall be first
delivered to the Trustee such security or indemnity as may be reasonably
required by it to hold the Trustee harmless, then, in the absence of notice to
the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute and authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, tenor and aggregate principal amount, bearing a
number not contemporaneously outstanding.
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; any other
expense in connection with such issuance shall be an expense of the Owner.
Every new Certificate issued pursuant to this Section in
exchange for or in lieu of any mutilated, destroyed, lost or stolen Certificate
shall constitute evidence of a substitute interest in the Trust, and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and the
Certificate Insurer and any of their respective agents may treat the Person in
whose name any Certificate is registered as the Owner of such Certificate for
the purpose of receiving distributions with respect to such Certificate and for
all other purposes whatsoever, and neither the Trustee nor the Certificate
Insurer nor any of their respective agents shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered
for registration of transfer or exchange shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. No Certificate shall be authenticated in lieu of or in exchange
for any Certificate cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates may be held or destroyed
by the Trustee in accordance with its standard policies.
Section 5.8. Limitation on Transfer of Ownership Rights.
(a) No sale or other transfer of any Unregistered
Certificate (other than the initial sale of the Unregistered Certificates upon
the issuance thereof) shall be made to any Person unless such Person delivers to
the Trustee (i) a completed certificate in the form attached as Exhibit D
hereto, (ii) if required by the terms of such certificate, an opinion to the
effect that such sale or other transfer will not violate any applicable federal
or state securities laws and (iii) an opinion that such transfer will not
jeopardize the REMIC status of any REMIC or the deductibility of interest with
respect to the
54
Certificates; no sale or other transfer of any Unregistered Certificate shall be
made to any Person until such Person delivers to the Trustee either (i) an
opinion of counsel from the prospective transferee of such Certificate,
acceptable to, and in form and substance satisfactory to the Depositor, to the
effect that such transferee is not a pension or benefit plan or individual
retirement arrangement that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or to Section 4975 of the Code or an
entity whose underlying assets are deemed to be assets of such a plan or
arrangement by reason of such plan's or arrangement's investments in the entity,
as determined under U.S. Department of Labor Regulations 29 C.F.R. ss.
2510.3-101 or otherwise, collectively, a "Plan" or (ii) the representation set
forth in Paragraph D of Exhibit D hereto.
(b) No sale or other transfer of record or beneficial
ownership of a Residual Certificate (whether pursuant to a purchase, a transfer
resulting from a default under a secured lending agreement or otherwise) shall
be made to a Disqualified Organization. The transfer, sale or other disposition
of a Residual Certificate (whether pursuant to a purchase, a transfer resulting
from a default under a secured lending agreement or otherwise) to a Disqualified
Organization shall be deemed to be of no legal force or effect whatsoever and
such transferee shall not be deemed to be an Owner for any purpose hereunder,
including, but not limited to, the receipt of distributions on such Residual
Certificate. Furthermore, in no event shall the Trustee accept surrender for
transfer, registration of transfer, or register the transfer, of any Residual
Certificate nor authenticate and make available any new Residual Certificate
unless the Trustee has received an affidavit from the proposed transferee in the
form attached hereto as Exhibit E. Each holder of a Residual Certificate by his
acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.8(b).
(c) Notwithstanding anything to the contrary herein, no
sale or other transfer of record or beneficial ownership of a Class B
Certificate or a Residual Certificate shall be made to any Person until such
Person delivers to the Trustee either (i) an opinion of counsel from the
prospective transferee of such Certificate, acceptable to, and in form and
substance satisfactory to the Depositor, to the effect that such transferee is
not a Plan or (ii) the representation set forth in Paragraph D of Exhibit D
hereto. Any such Certificateholder desiring to effect such transfer shall, and
does hereby agree to, indemnify the Depositor, the Master Servicer, the
Certificate Insurer and the Trustee against any liability, cost or expense
(including attorney's fees) that may result if the transfer is in violation of
such statute.
Section 5.9. Assignment of Rights. An Owner may pledge,
encumber, hypothecate or assign all or any part of its right to receive
distributions hereunder, but such pledge, encumbrance, hypothecation or
assignment shall not constitute a transfer of an ownership interest sufficient
to render the transferee an Owner of the Trust without compliance with the
provisions of Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. On each Payment Date, the
Trustee will distribute, from funds comprising the Trust Estate, to the Owners
of record of the Certificates as of the related Record Date, such Owners'
Percentage Interests in the amounts required to be distributed to the Owners of
each Class of Certificates on such Payment Date. For so long as the Class A
Certificates are in book-entry form with the Depository, the only "Owner" of the
Class A Certificates will be the Depository.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding . (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts
55
withdrawn from the Certificate Account pursuant to Section 7.3 hereof shall be
made by and on behalf of the Trustee.
(b) The Trustee on behalf of the Trust shall comply with
all requirements of the Code and applicable state and local law with respect to
the withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment
of any amount due with respect to any Class A Certificate, Class B Certificate
or Residual Certificate and remaining unclaimed by the Owner of such certificate
for three years after such amount has become due and payable shall be discharged
from such trust and be paid to the Depositor; and the Owner of such Class A
Certificate, Class B Certificate or Residual Certificate shall thereafter, as an
unsecured general creditor, look only to the Depositor for payment thereof (but
only to the extent of the amounts so paid to the Depositor), and all liability
of the Trustee with respect to such trust money shall thereupon cease; provided,
however, that the Trustee, before being required to make any such payment, shall
at the written request and expense of the Depositor cause to be published once,
in the eastern edition of The Wall Street Journal, notice that such money
remains unclaimed and that, after a date specified therein, which shall be not
fewer than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be paid to the Depositor. The Trustee shall, at
the direction of the Depositor, also adopt and employ, at the expense of the
Depositor, any other reasonable means of notification of such payment
(including, but not limited to, mailing notice of such payment to Owners whose
right to or interest in moneys due and payable but not claimed is determinable
from the records of the Trustee at the last address of record for each such
Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee
will hold the Trust Estate in trust for the benefit of the Owners and, upon
request of the Certificate Insurer or the Depositor and at the expense of the
Depositor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 12.14 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such reasonable request, to:
(i) more effectively hold in trust all or any portion of
the Trust Estate;
(ii) perfect, publish notice of, or protect the validity
of any grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans;
(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of the Owners represented
thereby, in such Trust Estate against the claims of all Persons and parties; or
(v) perfect a security interest in the Mortgage Loans, in
the event that the conveyance by the Depositor did not constitute a sale.
(b) The Trustee shall have the power to enforce, and shall
enforce the obligations of the other parties to this Agreement by action, suit
or proceeding at law or equity, and shall also have the power to enjoin, by
action or suit in equity, any acts or occurrences which may be unlawful or in
violation of the rights of the Owners; provided, however, that nothing in this
Section shall require any action by the Trustee unless the Trustee shall first
(i) have been furnished indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred in compliance with such action and (ii) when
required by this
56
Agreement, have been requested to take such action by the Certificate Insurer,
or, with the consent of the Certificate Insurer by a majority of the Percentage
Interests represented by any Class of Class A Certificates, or, if there are no
longer any Class A Certificates then Outstanding, by such percentage of the
Percentage Interests represented by any Class of Class B Certificates then
Outstanding.
(c) The Trustee shall execute any instrument reasonably
required pursuant to this Section so long as such instrument does not conflict
with this Agreement or with the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will
not take any action that would release the Depositor, the Master Servicer from
any of their respective covenants or obligations under any instrument or
document relating to the Trust Estate or the Certificates or which would result
in the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or document, except
with the prior written consent of the Certificate Insurer, or as expressly
provided in this Agreement or such other instrument or document.
Section 6.5. Negative Covenants. The Trustee will not, to
the extent within the control of the Trustee, take any of the following actions:
(i) transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) credit on or make any deduction from the
distributions payable in respect of the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim against
any present or former Owner by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate;
(iii) assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) liquidate in whole or in part the Trust Estate,
except pursuant to Article VIII hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with respect
to the Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge, adverse
claim, security interest, mortgage or other encumbrance to or upon the Trust
Estate or any part thereof or any interest therein or the proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to
the extent within the control of the Trustee, permit the Trust to engage in any
business activity or transaction other than those activities permitted by
Section 2.3 hereof.
Section 6.7. Limitation of Suits. No Owner shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Agreement or the Certificate Insurance Policy, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the
Depositor, the Certificate Insurer and the Trustee of such Owner's intention to
institute such proceeding;
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(2) the Owners of not less than 25% of the Percentage
Interests represented by any Class of Class A
Certificates, or, if there are no Class A Certificates
then Outstanding, by such percentage of the Percentage
Interests of any Class of Class B Certificates then
Outstanding, shall have made written request to the
Trustee to institute such proceeding in its own name as
representative of the Owners;
(3) the Trustee for 30 days after its receipt of such
notice, request and offer of indemnity has failed to
institute such proceeding; and
(4) no direction inconsistent with such written request
has been given to the Trustee during such 30-day period by
the Certificate Insurer or by the Owners of a majority of
the Percentage Interests represented by each Class of
Class A Certificates or, if there are no Class A
Certificates then Outstanding, by such percentage of the
Percentage Interests represented by any Class of Class B
Certificates then Outstanding;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Owners, each
representing less than a majority of the applicable Class of Certificates, the
Trustee shall act at the direction of the Certificate Insurer.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9. Rights and Remedies Cumulative. Except as
otherwise provided herein, no right or remedy herein conferred upon or reserved
to the Depositor, the Master Servicer, the Trustee, to the Owners or to the
Certificate Insurer is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. Except as otherwise
provided herein, the assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay of
the Depositor, Master Servicer, the Trustee, or any Owner of any Certificate or
the Certificate Insurer to exercise any right or remedy under this Agreement
shall impair any such right or remedy or constitute a waiver of any such right
or remedy. Every right and remedy given by this Article VI or by law to the
Depositor or to the Owners or the Certificate Insurer may be exercised from time
to time, and as often as may be deemed expedient, by the Depositor or by the
Owners or the Certificate Insurer, as the case may be.
Section 6.11. Control by Owners. Either (x) the
Certificate Insurer or (y) with the consent of the Certificate Insurer, the
Owners of a majority of the Percentage Interests represented by each Class of
Class A Certificates then
58
Outstanding or, if there are no Class A Certificates then Outstanding, by such
majority of the Percentage Interests represented by any Class of Class B
Certificates then Outstanding, may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, provided
that:
(1) such direction shall not be in conflict with any rule
of law or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such
direction; provided, however, that the Trustee need
not take any action which it determines might involve
it in liability or may be unjustly prejudicial to the
Owners not so directing.
ARTICLE VII
ACCOUNTS, FLOW OF FUNDS,
DISTRIBUTIONS AND REPORTS
Section 7.1. Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Master Servicer, or by any
Sub-Servicer and (b) Insured Payments in accordance with the terms of the
Certificate Insurance Policy. The Trustee shall hold all such money and property
received by it as part of the Trust Estate and shall apply it as provided in
this Agreement.
Section 7.2. Establishment of Accounts. The Trustee shall
establish and maintain, at the corporate trust office of the Trustee, a
Certificate Account, a Class A Group I Distribution Account, a Class A Group II
Distribution Account and a Class B Distribution Account, each to be held by the
Trustee as a segregated trust account so long as the Trustee qualifies as a
Designated Depository Institution and if the Trustee does not so qualify, then
by any Designated Depository Institution in the name of the Trust for the
benefit of the Owners of the Certificates and the Certificate Insurer, as their
interests may appear.
In administering the Accounts the Trustee may establish
such sub-Accounts as the Trustee deems desirable.
Section 7.3. Flow of Funds. (a) The Trustee shall deposit
to the Certificate Account:
(i) with respect to the Group I Mortgage Loans, without
duplication, upon receipt, each Group I Monthly
Remittance remitted by the Master Servicer or any
Sub-Servicer, together with any amounts received by
the Trustee in connection with the termination of the
Trust insofar as such amounts relate to the Group I
Mortgage Loans; and
(ii) with respect to the Group II Mortgage Loans, without
duplication, upon receipt, each Group II Monthly
Remittance remitted by the Master Servicer or any
Sub-Servicer, together with any amounts received by
the Trustee in connection with the
59
termination of the Trust, insofar as such amounts
relate to the Group II Mortgage Loans.
(b) On each Payment Date, the Trustee shall make the
following allocations, disbursements and transfers from the Group I Available
Funds and from the Group II Available Funds in the following order of priority,
and each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) first, the Trustee shall pay first, to itself the
related Trustee's Fee then due;
(ii) [Reserved];
(iii) second, the Trustee shall allocate the following
amounts in the following order of priority:
(A) from the Available Funds then on deposit in the
Certificate Account with respect to each Group, the
lesser of (x) the Available Funds with respect to
such Group and (y) the Insured Distribution Amount
with respect to such Group shall be allocated to
the Class A Distribution Account with respect to
such Group;
(B) from the remaining Available Funds then on deposit
in the Certificate Account with respect to each
Group, the lesser of (x) such remaining Available
Funds, and (y) the excess of (i) the Insured
Distribution Amount with respect to the either of
the other two Groups over (ii) the amount then on
deposit in the Class A Distribution Account with
respect to such Group (such excess, the "Insured
Shortfall" with respect to such Group), shall be
allocated to the Class A Distribution Accounts for
the other Groups; if both of the other Groups have
an Insured Shortfall on such Payment Date, such
remaining amount will be applied to both other
Groups pro rata in proportion to the relative
amounts of their respective Insured Shortfalls;
(C) (i) from the remaining Available Funds then on
deposit in the Certificate Account with respect to
each Group to the Certificate Insurer, the lesser
of (x) such remaining Available Funds with respect
to each Group and (y) the Premium Amount and any
Reimbursement Amount then due to the Certificate
Insurer;
(ii) from the remaining Available Funds then on
deposit in the Certificate Account with respect to
each Group to the Certificate Insurer, the lesser
of (x) such remaining Available Funds and (y) any
amounts remaining due to the Certificate Insurer
after application of (c)(i) above with respect to
the other Groups (such amount, a "Reimbursement
Shortfall" with respect to a Group) shall be paid
to the Certificate Insurer on behalf of the other
Groups; if both of the other Groups have a
Reimbursement Shortfall on such Payment Date, such
remaining amount will be applied to both other
Groups pro rata in proportion to the relative
amounts of their respective Reimbursement
Shortfalls;
(iii) from the Available Funds then on deposit in
the Certificate Account with respect to each Group,
the lesser of (x) the Available Funds with respect
to
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such Group and (y) the excess of (i) the Interest
Distribution Amount with respect to such Group over
(ii) the Insured Interest Distribution Amount with
respect to such Group shall be allocated to the
Class A Distribution Account with respect to such
Group;
(D) from the remaining Available Funds then on deposit
in the Certificate Account with respect to such
Group, the lesser of (x) such remaining Available
Funds with respect to such Group and (y) the excess
of (i) the Principal Distribution Amount applicable
to such Group and Payment Date over (ii) all
amounts then on deposit in the respective Class A
Distribution Account that are allocable to
principal, shall be allocated to such Class A
Distribution Account;
(E) from the remaining Available Funds then on deposit
in the Certificate Account with respect to each
Group, the lesser of (x) such remaining Available
Funds and (y) the Subordination Deficiency Amount
applicable to the other Groups on such Payment
Date, shall be allocated to the respective Class A
Distribution Account as a Subordination Increase
Amount; if both of the other Groups have an
Subordination Deficiency Amount on such Payment
Date, such remaining amount will be applied to both
other Groups pro rata in proportion to the relative
amounts of their respective Subordination
Deficiency Amount;
(F) from the remaining Available Funds then on deposit
in the Certificate Account with respect to each
Group, the lesser of (x) such remaining Available
Funds with respect to such Group and (y) the Class
B Interest, shall be allocated to the Class B
Distribution Account and applied as a distribution
of interest on account of the Class B Certificates;
(G) from the remaining Available Funds then on deposit
in the Certificate Account with respect to such
Group, the lesser of (x) such remaining Available
Funds and (y) the Class B Principal Balance as of
such Payment Date, assuming that the amount then on
deposit in the Class B Distribution Account as a
result of the application of clause (F) above has
been applied as a distribution of principal on
account of the Class B Principal Balance on such
Payment Date, shall be allocated to the Class B
Distribution Account and applied as a distribution
of principal on the Class B Principal Balance; and
(H) all amounts then remaining on deposit in the
Certificate Account shall be distributed to the
Owners of the Residual Certificates on such Payment
Date.
(c) On each Payment Date, the Trustee shall make the
following disbursements from amounts deposited in the Distribution Accounts
pursuant to Subsection (b) above, together with the amount of any Insured
Payment with respect to a Group deposited to the respective Distribution
Account:
(i) the Trustee shall pay, pari passu from the amount
then on deposit in the Class A Group I Distribution
Account:
(A) to the Owners of the Class A-1 Group I
Certificates, the Class A-1 Distribution Amount for
such Payment Date;
61
(B) to the Owners of the Class A-2 Group I
Certificates, the Class A-2 Distribution Amount for
such Payment Date;
(C) to the Owners of the Class A-3 Group I
Certificates, the Class A-3 Distribution Amount for
such Payment Date; and
(D) to the Owners of the Class A-4 Group I
Certificates, the Class A-4 Distribution Amount for
such Payment Date; and
(E) to the Owners of the Class A-5 Group I
Certificates, the Class A-5 Distribution Amount for
such Payment Date;
provided, however, that if, on any Payment Date, (x)
the Certificate Insurer is then in default under the
Certificate Insurance Policy and (y) a Group I
Subordination Deficit exists, then any distribution
of the Group I Principal Distribution Amount on such
Payment Date shall be made pro rata to the Owners of
each of the Class A-1 Group I Certificates, the Class
A-2 Group I Certificates, the Class A-3 Group I
Certificates, the Class A-4 Group I Certificates and
the Class A-5 Group I Certificates on such Payment
Date;
(ii) the Trustee shall pay from the amount then on deposit
in the Class A Group II Distribution Account, to the
Owners of the Class A-6 Group II Certificates, the
Class A-6 Distribution Amount for such Payment Date;
and
(iii) the Trustee shall transfer from the amounts then on
deposit in the Class B Distribution Account, to the
Supplemental Interest Payment Account, the Class B
Distribution Amount for such Payment Date; such
transfer shall be deemed a distribution on the Class
B Certificates.
(d) Any amounts properly distributed to the Owners of the
Class B Certificates or to the Owners of the Residual Certificates pursuant to
the terms of this Agreement shall be distributed free of the subordination
described herein, and any such amounts shall in no event be required to be
returned to the Trustee or paid over to the Owners of the Class A Certificates.
(e) Whenever, during the administration of the Trust,
there comes into the possession of the Trustee any money or property which this
Agreement does not otherwise require to be distributed on account of the Class A
Certificates or the Class B Certificates or to the Certificate Insurer, the
Trustee shall distribute such money or other property to the Owners of the Class
RU Certificates.
(f) Each Owner of a Class A Certificate which pays any
Preference Amounts theretofore received by such Owner on account of such Class A
Certificate will be entitled to receive reimbursement for such amounts from the
Certificate Insurer in accordance with the terms of the Certificate Insurance
Policy, but only after (i) delivering a copy to the Trustee of a final,
nonappealable order (a "Preference Order") of a court having competent
jurisdiction under the United States Bankruptcy Code demanding payment of such
amount to the bankruptcy court and (ii) irrevocably assigning such Owner's claim
with respect to such Preference Order to the Certificate Insurer in such form as
is required by the Certificate Insurer. In no event shall the Certificate
Insurer pay more than one Insured Payment in respect of any Preference Amount.
Section 7.4. Investment of Accounts .(a) All or a portion
of any Account held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the
62
Owners, as described in Section 7.4(c) hereof. No investment in any Account
shall mature later than the Business Day immediately preceding the next Payment
Date and shall be held until maturity.
(b) Subject to Section 9.1 hereof, the Trustee shall not
in any way be held liable by reason of any insufficiency in any Account held by
the Trustee resulting from any loss on any Eligible Investment included therein
(except to the extent that the bank serving as Trustee is the obligor thereon).
(c) Until it is directed in writing by the Depositor to
invest in another Eligible Investment, the Trustee shall invest in Eligible
Investments described in paragraph (h) of Section 7.5 hereof.
(d) All income or other gain from investments in any
Account held by the Trustee shall be deposited in such Account immediately on
receipt, and any loss resulting from such investments shall be charged to such
Account.
Section 7.5. Eligible Investments . The following are
Eligible Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States, the timely
payment or the guarantee of which constitutes a full faith and credit obligation
of the United States.
(b) FHLMC senior debt obligations, but excluding any such
securities whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption.
(c) FNMA senior debt obligations, but excluding any such
securities whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption.
(d) Federal funds, certificates of deposit, time and
demand deposits, and bankers' acceptances (having original maturities of not
more than 365 days) of any domestic bank (which may include the Trustee or its
affiliate), the short-term debt obligations of which have been rated A-1 or
better by ____ and P-1 by ____.
(e) Deposits of any bank or savings and loan association
which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are not in excess of the applicable limits insured by
the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
provided that the long-term deposits of such bank or savings and loan
association are rated at least "BBB" by ____ and "Baa3" by ____.
(f) Commercial paper (having original maturities of not
more than 270 days) rated A-1 or better by ____ and P-1 by ____.
(g) Investments in money market funds (including those of
the Trustee or its affiliates (for which separate compensation may be received))
rated at least AAAm or AAAm-G by ____ and Aaa by ____.
(h) Such other investments as have been approved in
writing by ____, ____ and the Certificate Insurer;
provided that no instrument described above is permitted to evidence
either the right to receive (a) only interest with respect to obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect
63
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par.
Any Eligible Investment may be purchased by or through the Trustee or any of its
affiliates. The Trustee or its affiliates may act as sponsor, manager,
depository or advisor with regard to any Eligible Investment.
Section 7.6. Reports by Trustee. (a) On each Payment Date
the Trustee shall report in writing to each Owner and to the Depositor and the
Master Servicer, with a copy to the Certificate Insurer, ____ and ____:
(i) amount of the distribution with respect to each Class
of Certificates;
(ii) amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein;
(iii) amount of such distributions allocable to interest;
(iv) amount of such distributions allocable to any
Carry-Forward Amount;
(v) then-outstanding principal balance of each Class of
Class A Certificates as of such Payment Date, together with the principal
amount, by class, of each Class A Certificate (based on a Certificate in the
original principal amount of $1,000) then Outstanding, in each case after giving
effect to any payment of principal on such Payment Date;
(vi) then-outstanding principal balance of each class of
Class B Certificates, together with the principal amount, by class, of each
Class B Certificate (based on a Certificate in the original principal amount of
$1,000) then Outstanding, in each case after giving effect to any payment of
principal on such Payment Date;
(vii) total of any Substitution Amounts and any Loan
Purchase Prices included in such distribution;
(viii) amount of any Supplemental Interest Payment Amount,
Class B-S Certificate distribution and any Interest Advance on such Payment
Date, together with the amount of any unreimbursed Interest Advance then owed to
the Designated Residual Owner;
(ix) amount of the Master Servicing Fee paid with respect
to each of the three Mortgage Loan Groups with respect to the related Remittance
Period;
(x) amount of any Group I Insured Payment and any Group II
Insured Payment made with respect to such Payment Date; and
(xi) of such Payment Date, the Group I Subordinated Amount
and the Group II Subordinated Amount.
In preparing the report under this Section 7.6, the Trustee
shall rely solely upon the electronic report described in Section 10.8(d)(ii)
hereof being received from the Master Servicer or any Sub-Servicer. The Trustee
shall not be responsible for its obligations under this Section 7.6 unless and
until it receives such report from the Master Servicer.
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(b) On each Payment Date the Trustee will additionally
inform the Depositor, the Master Servicer, the Certificate Insurer, ____ and
____ with respect to the following:
(i) the Group I Available Funds and the Group II Available
Funds for the related Payment Date;
(ii) the Pool Principal Balance with respect to the three
Mortgage Loan Groups as of the end of the related Remittance Period;
(iii) the number and Principal Balances of all Mortgage
Loans in the three Mortgage Loan Groups which were the subject of Prepayments
during the related Remittance Period;
(iv) the total amount of payments in respect of or
allocable to interest on the Mortgage Loans in the three Mortgage Loan Groups
received or deemed to have been received from the related Mortgagors by the
Master Servicer or any Sub-Servicer during the related Remittance Period
(including any net income from REO Properties received during the related
Remittance Period);
(v) the aggregate of all principal payments received or
deemed to have been received from the related Mortgagors in the three Mortgage
Loan Groups by the Master Servicer or any Sub-Servicer during the related
Remittance Period;
(vi) the aggregate of any Insurance Proceeds received or
deemed to have been received by the Master Servicer or any Sub-Servicer during
the related Remittance Period with respect to the three Mortgage Loan Groups;
(vii) the aggregate of any Released Mortgaged Property
Proceeds received or deemed to have been received by the Master Servicer or any
Sub-Servicer during the related Remittance Period with respect to the three
Mortgage Loan Groups;
(viii) the aggregate of any Liquidation Proceeds,
Liquidation Expenses and Net Liquidation Proceeds received or deemed to have
been received by the Master Servicer or any Sub-Servicer, and Net Realized
Losses incurred, during the related Remittance Period with respect to the three
Mortgage Loan Groups, the Group I Cumulative Net Realized Losses, the Group II
Cumulative Net Realized Losses and the aggregate Cumulative Net Realized Losses
since the Startup Day and during the prior 12-month period and the Pool Rolling
Three Month Delinquency Rate;
(ix) the total amount of Compensating Interest payments
paid or to be paid by the Master Servicer or any Sub-Servicer pursuant to
Section 10.10 hereof with respect the three Mortgage Loan Groups;
(x) the amount of Delinquency Advances made by the Master
Servicer or any Sub-Servicer pursuant to Section 10.9 hereof with respect to
such Payment Date with respect to the three Mortgage Loan Groups;
(xi) the monthly Master Servicing Fee and any additional
servicing fees paid to the Master Servicer or any Sub-Servicer pursuant to
Section 10.15 hereof with respect to the three Mortgage Loan Groups;
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(xii) the amount of Delinquency Advances with respect to
the three Mortgage Loan Groups reimbursable to the Master Servicer or any
Sub-Servicer during such Remittance Period pursuant to Section 10.9 hereof and
not previously reimbursed;
(xiii) the amount of any Servicing Advance made by the
Master Servicer or any Sub-Servicer pursuant to Sections 10.9 and 10.13 hereof
with respect to the three Mortgage Loan Groups and not previously reimbursed;
(xiv) the Class A-1 Distribution Amount, the Class A-2
Distribution Amount, the Class A-3 Distribution Amount, the Class A-4
Distribution Amount, the Class A-5 Distribution Amount, the Class A-6
Distribution Amount and the Class B Distribution Amount, with the components
thereof stated separately;
(xv) the weighted average remaining term to maturity and
Net Weighted Average Coupon Rate of the Mortgage Loans with respect to the three
Mortgage Loan Groups as of the close of business on the last day of the related
Remittance Period;
(xvi) the Group I Subordinated Amount, Group I
Subordination Deficiency Amount, Group I Specified Subordinated Amount, Group I
Subordination Increase Amount, Group II Subordinated Amount, Group II
Subordination Deficiency Amount, Group II Specified Subordinated Amount, Group
II Subordination Increase Amount;
(xvii) the Group I Excess Subordinated Amount, Group I
Subordination Reduction Amount, Group II Excess Subordinated Amount, Group II
Subordination Reduction Amount, for the related Payment Date;
(xviii) the number of Mortgage Loans in the three Mortgage
Loan Groups at the beginning and end of the related Remittance Period;
(xix) the Group I Shortfall Amount and the Group II
Shortfall Amount for the related Payment Date;
(xx) such other information as the Certificate Insurer or
the Depositor may reasonably request and which is derived from information which
is produced or available in the ordinary course of the Master Servicer's or any
Sub-Servicer's business or which otherwise materially relates to the
transactions contemplated hereby and is provided to the Trustee by the
electronic report described in Section 10.8(d)(ii) hereof; and
(xxi) the number and Principal Balance of any Mortgage
Loans repurchased during the related Remittance Period pursuant to Section
10.13(f) and the number and cumulative Principal Balance of all Mortgage Loans
so repurchased since the Cut-Off Date.
(c) In addition, on each Payment Date the Trustee will
disseminate to each Owner, the Depositor and the Master Servicer with a copy to
the Certificate Insurer, ____ and ____, together with the information described
in Subsection (a) preceding, the following information with respect to the three
Mortgage Loan Groups as of the close of business on the last day of the related
Remittance Period, which is required to be prepared by the Master Servicer or a
Sub-Servicer and furnished to the Trustee pursuant to Section 10.8(d)(ii) hereof
for such purpose on or prior to the related Remittance Date:
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(i) total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number and aggregate principal
balances of Mortgage Loans (a) 30-59 days Delinquent, (b) 60-89 days Delinquent
and (c) 90 or more days Delinquent;
(ii) number and aggregate principal balances of all
Mortgage Loans in foreclosure proceedings (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing clause
(i));
(iii) number and aggregate principal balances of all
Mortgage Loans relating to Mortgagors in bankruptcy proceedings (and whether any
such Mortgage Loans are also included in any of the statistics described in the
foregoing clauses (i) and (ii));
(iv) number and aggregate principal balances of all
Mortgage Loans relating to REO Properties (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing clauses
(i), (ii) and (iii));
(v) number and aggregate principal balances of all
Mortgage Loans as to which foreclosure proceedings were commenced during the
prior Remittance Period;
(vi) schedule regarding cumulative foreclosures since the
Cut-Off Date; and
(vii) book value of any REO Property and any income
received from REO Properties during the prior Remittance Period.
The Depositor, the Master Servicer, and the Trustee on behalf
of Certificateholders and the Trust (the "Trust Parties") hereby authorize the
Certificate Insurer to include the information contained in reports provided to
the Certificate Insurer hereunder (the "Information") on Bloomberg, an on-line
computer based information network maintained by Bloomberg L.P. ("Bloomberg"),
or in other electronic or print information services. The Trust Parties agree
not to commence any actions or proceedings, or otherwise assert any claims,
against the Certificate Insurer or its affiliates or any of the Certificate
Insurer's or its affiliates' respective agents, representatives, directors,
officers or employees (collectively, the "Certificate Insurer Parties"), arising
out of, or related to or in connection with the dissemination and/or use of any
Information by the Certificate Insurer, including, but not limited to, claims
based on allegations of inaccurate, incomplete or erroneous transfer of
information by the Certificate Insurer to Bloomberg or otherwise (other than in
connection with the Certificate Insurer's gross negligence or willful
misconduct). The Trust Parties waive their rights to assert any such claims
against the Certificate Insurer Parties and fully and finally release the
Certificate Insurer Parties from any and all such claims, demands, obligations,
actions and liabilities (other than in connection with the Certificate Insurer's
gross negligence or willful misconduct). The Certificate Insurer makes no
representations or warranties, expressed or implied, of any kind whatsoever with
respect to the accuracy, adequacy, timeliness, completeness, merchantability or
fitness for any particular purpose of any Information in any form or manner. The
Certificate Insurer reserves the right at any time to withdraw or suspend the
dissemination of the Information by the Certificate Insurer. The authorizations,
covenants and obligations of the Trust Parties under this section shall be
irrevocable and shall survive the termination of this Agreement.
Section 7.7. Drawings under the Certificate Insurance
Policy and Reports by Trustee.
(a) On each Determination Date the Trustee shall
determine, no later than 12:00 noon on such Determination Date, whether a Group
I Shortfall Amount or a Group II Shortfall Amount has theretofore occurred and
will remain uncured on the following Payment Date, and whether a Group I
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Shortfall Amount or a Group II Shortfall Amount with respect to the Group I
Mortgage Loans or the Group II Mortgage Loans will occur on the following
Payment Date. If the Trustee determines that a Group I Shortfall Amount or a
Group II Shortfall Amount will, based on the amount then on deposit in the
Certificate Account and amounts to be deposited in the Certificate Account prior
to such Payment Date on account of the Trustee's advancing obligations as
successor Master Servicer as set forth in Section 11(j) hereof, occur on the
following Payment Date, the Trustee shall furnish the Certificate Insurer and
the Depositor with a completed Notice in the form set forth as Exhibit A to the
Certificate Insurance Policy. The Notice shall specify the amount of the Insured
Payment and shall constitute a claim for an Insured Payment pursuant to the
Certificate Insurance Policy.
(b) The Trustee shall report to the Depositor, the Master
Servicer and the Certificate Insurer with respect to the amounts then held in
each Account held by the Trustee and the identity of the investments included
therein, as the Depositor, the Master Servicer or the Certificate Insurer may
from time to time request. Without limiting the generality of the foregoing, the
Trustee shall, at the request of the Depositor, the Master Servicer or the
Certificate Insurer transmit promptly to the Depositor, the Master Servicer, and
the Certificate Insurer copies of all accountings of receipts in respect of the
Mortgage Loans furnished to it by the Master Servicer or a Sub-Servicer.
(c) Upon receipt of Insured Payments from the Certificate
Insurer under the Certificate Insurance Policy, the Trustee shall deposit such
Insured Payments in the Policy Payments Account. The Trustee shall withdraw
Insured Payments from the Policy Payments Account in accordance with section
13.4(a). The Trustee shall distribute all Insured Payments received, or the
proceeds thereof, in accordance with Section 7.3(b) and 7.3(c) to the Owners of
the Class A Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of the related Class A Certificates as set
forth in Section 7.3(b) and 7.3(c). The Certificate Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Section 7.3(b)(iii)(C)
hereof with respect to each Insured Payment made by the Certificate Insurer. The
Trustee hereby agrees on behalf of each Owner of Class A Certificates and the
Trust for the benefit of the Certificate Insurer that it recognizes that to the
extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Owners of such Class A
Certificates, the Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Section 7.3(b)(iii)(C) hereof.
(e) Insured Payments disbursed by the Trustee from
proceeds of the Certificate Insurance Policy shall not be considered payment by
the Trust Fund nor shall such payments discharge the obligation of the Trust
Fund with respect to the related Class A Certificates, and the Certificate
Insurer shall become the owner of such unpaid amounts due from the Trust Fund in
respect of the related Class A Certificates. The Trustee hereby agrees on behalf
of each Holder of a related Class A Certificate for the benefit of the
Certificate Insurer that it recognizes that to the extent the Certificate
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Trustee), to the Owners of any Class A Certificates, the Certificate
Insurer will be subrogated to the rights of such Owners with respect to such
Insured Payment, shall be deemed to the extent of payments so made to be a
registered Owner of such Class A Certificates and shall receive all future
distributions (subject to the priority set forth in 7.3(b)(iii)) until all such
Insured Payments by the Certificate Insurer, together with interest thereon at
the interest rate borne by the related Class A Certificates, have been fully
reimbursed. To evidence such subrogation, the Trustee shall note the Certificate
Insurer's rights as subrogee on the registration books maintained by the Trustee
upon receipt from the Certificate Insurer of proof of payment of any Insured
Payment.
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Section 7.8. Allocation of Realized Losses. If, on any
Payment Date, following the making of all allocations, transfers and
distributions (other than as provided in this Section) on such Payment Date (x)
the sum of the Class A-1 Principal Balance, the Class A-2 Principal Balance, the
Class A-3 Principal Balance, the Class A-4 Principal Balance, the Class A-5
Principal Balance, the Class A-6 Principal Balance, and the Class B Principal
Balance exceeds (y) the Pool Principal Balance as of the close of business on
the last day of the related Remittance Period (any such excess, "Allocable
Losses"), such Allocable Losses shall be applied as a reduction of the Class B
Principal Balance until the Class B Principal Balance has been reduced to zero.
Section 7.9. Supplemental Interest Payments.
(a) The parties hereto do hereby create and establish a
trust, the "Access Financial Supplemental Interest Trust _____" (the
"Supplemental Interest Trust"). The Supplemental Interest Trust shall hold two
trust accounts, each a "Supplemental Interest Payment Account", to be held by
the Trustee in its name on behalf of the Supplemental Interest Trust.
If, on any Determination Date, the Trustee determines that the
amount to be available on the next Payment Date in a Supplemental Interest
Payment Account with respect to Class A-6 (such amount, the "Supplemental
Interest Payment Amount") is less than the excess of (i) the Full Interest
Distribution Amount for such Class over (ii) the Interest Distribution Amount
for such Class as of such Payment Date (the difference, if any, between the
Supplemental Interest Payment Amount and such excess, the "Class A-6 Formula
Interest Shortfall"), the Trustee shall deliver a notice in the form of Exhibit
O hereto to the Designated Residual Owner demanding that the Designated Residual
Owner fund such Formula Interest Shortfall on the related Payment Date. The
amount so funded by the Designated Residual Owner on any such Payment Date is
the "Interest Advance" with respect to the related Class for such Payment Date.
The Trustee shall deposit any Interest Advance received by it in the amount of
the Formula Interest Shortfall for such Class into the Class A Group II
Distribution Account.
On each Payment Date, the Trustee shall withdraw from the
related Supplemental Interest Payment Account and deposit the Class A-6 Formula
Interest Shortfall in the Class A Group II Distribution Account; provided that
the amount to be withdrawn may not exceed the related Supplemental Interest
Payment Amount (such amount, the "Funded Amount").
(b) Any portion of the related Supplemental Interest
Payment Amount after application of clause (a) above (the "Remaining Amount")
shall be applied in the following order of priority:
(i) to the Designated Residual Owner, as reimbursement for
unpaid Interest Advances, together with interest thereon (the "Interest Advance
Reimbursement Amount"), with the earliest Interest Advances being deemed to be
paid first; and
(ii) to the Owners of the Class B-S Certificates, all
remaining amounts then on deposit in the Supplemental Interest Payment Account,
to such Owners pro rata in accordance with the Percentage Interests.
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ARTICLE VIII
TERMINATION OF TRUST
Section 8.1. Termination of Trust. The Trust created
hereunder and all obligations created by this Agreement will terminate upon the
earlier of (i) the payment to the Owners of all Certificates of all amounts held
by the Trustee and required to be paid to such Owners pursuant to this Agreement
upon the later to occur of (a) the final payment or other liquidation (or any
advance made with respect thereto) of the last Mortgage Loan in the Trust Estate
or (b) the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust is effected as described below. To effect a termination of this
Agreement pursuant to clause (b) above, the Owners of all Certificates then
Outstanding shall (x) unanimously direct the Trustee on behalf of the Trust to
adopt a plan of complete liquidation with respect to each REMIC, as contemplated
by Section 860F(a)(4) of the Code and (y) provide to the Trustee an opinion of
counsel experienced in federal income tax matters to the effect that such
liquidation constitutes a Qualified Liquidation and the Trustee either shall
sell the Mortgage Loans and distribute the proceeds of the liquidation of the
Trust Estate, or shall distribute equitably in kind all of the assets of the
Trust Estate to the remaining Owners of the Certificates each in accordance with
such plan, so that the liquidation or distribution of the Trust Estate, the
distribution of any proceeds of the liquidation and the termination of this
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation. In no event, however, will the Trust created by this
Agreement continue beyond the expiration of twenty-one (21) years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
Ambassador of the United States to the United Kingdom, living on the date
hereof. The Trustee shall give written notice of termination of the Agreement to
the Certificate Insurer and each Owner in the manner set forth in Section 12.5
hereof.
Section 8.2. Termination Upon Option of the Depositor.
(a) On any Remittance Date on or after the Remittance Date
on which the then-outstanding aggregate Principal Balances of the Mortgage Loans
is ten percent or less of the Original Pool Principal Balance, the Depositor may
determine to purchase and may cause the purchase from the Trust of all (but not
fewer than all) Mortgage Loans and all property theretofore acquired in respect
of any Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining in the Trust Estate at a price equal to 100% of the aggregate
Principal Balances of the related Mortgage Loans as of the day of termination
minus amounts remitted from the Principal and Interest Account to the
Certificate Account representing collections of principal on the Mortgage Loans
during the current Remittance Period, plus (i) one month's interest on such
amount computed at the weighted average Coupon Rate for the related Mortgage
Loan Group, (ii) the aggregate amount of any unreimbursed Delinquency Advances
and Servicing Advances, including amounts which would be Delinquency Advances
which the Master Servicer has theretofore failed to remit, (iii) any amount
owing to the Trustee, (iv) any Reimbursement Amount owing to the Certificate
Insurer and the Trustee, (v) any Insured Payment due on the related Payment
Date, (vi) the amount of any unpaid Interest Advances and (vii) the aggregate
amount of any unpaid Supplemental Interest Payment Amounts. The Depositor shall
pay such termination price to the Trustee for deposit in the Certificate
Account. In connection with such termination, the Master Servicer shall remit to
the Trustee all amounts (net of investment earnings and providing for investment
losses pursuant to Section 10.8(b) hereof, net of the Master Servicing Fee and
net of amounts reimbursable for Delinquency Advances and Servicing Advances)
then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
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(b) In connection with any such purchase, the Depositor
shall provide to the Trustee an opinion of counsel experienced in federal income
tax matters to the effect that such purchase constitutes a Qualified Liquidation
with respect to each REMIC.
(c) Promptly following any such purchase, the Trustee will
release the Files, with appropriate endorsements and transfer documents, to the
Depositor or otherwise upon its order.
Section 8.3. Auction Sale. If the Depositor fails, by the
ninetieth day following the first Remittance Date on which such option may be
exercised, to exercise its purchase option pursuant to Section 8.2 hereof, then
upon receipt of written notice and direction from the Depositor, the Trustee
will notify the Representative (or, if the Representative is unable or
unwilling, another investment banking or whole-loan trading firm selected by the
Depositor (the Representative or such other investment bank or trading firm, the
"Advisor") who will solicit on behalf of the Trustee competitive bids for the
purchase of the Mortgage Loans for fair market value. Such solicitation shall be
conducted substantially in the manner described in Exhibit N hereto. In the
event that satisfactory bids are received as described below, the proceeds of
the sale of such assets shall be deposited into the Certificate Account. The
Trustee will ask the Advisor to solicit, on behalf of the Trustee, good-faith
bids from no fewer than two prospective purchasers that are considered at the
time to be competitive participants in the home equity market. The Advisor will
consult with any securities brokerage houses identified by the Depositor as then
making a market in the Class A Certificates to obtain a determination as to
whether the fair market value of such assets has been offered.
Any purchaser of such Mortgage Loans must agree to the
continuation of the Master Servicer or any successor Master Servicer as servicer
of the assets on terms substantially similar to those in this Agreement.
If the highest good-faith bid received by the Advisor from a
qualified bidder is, in the judgment of the Representative, not less than the
fair market value of such Mortgage Loans and if such bid would equal the amount
set forth in the following sentence, the Trustee, following consultation with
and written direction from the Advisor and the Depositor, will sell and assign
such Mortgage Loans without representation, warranty or recourse to such highest
bidder and will redeem the Class A Certificates. For the Trustee to consummate
the sale, the bid must be at least equal to the termination price set forth in
Section 8.2(a) hereof. In addition, the bid must be in an amount sufficient to
pay the fees and expenses of the Trustee owing hereunder. If such conditions are
not met, the Trustee will, following consultation with the Advisor and the
Depositor, decline to consummate such sale. In addition, the Trustee will
decline to consummate such sale unless it receives from the Advisor an opinion
of counsel addressed to it and the Certificate Insurer that such sale will not
give rise either to any "prohibited transaction" tax under section 860F(a)(1) of
the Code or to any tax on contributions to any REMIC after the "startup day"
under section 860G(d)(1) of the Code. In the event such sale is not consummated
in accordance with the foregoing, the Trustee will not be under any obligation
to solicit any further bids or otherwise to negotiate any further sale of the
Mortgage Loans. In such event, however, if directed by the Depositor, the
Trustee may solicit bids from time to time in the future for the purchase of the
Mortgage Loans upon the same terms described above. The Trustee may consult with
the Advisor and the advice of the Advisor shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder. The Depositor shall reimburse the Trustee for any fees incurred
under this Section 8.3 if a sale is not consummated.
Section 8.4. Disposition of Proceeds. The Trustee shall,
upon receipt thereof, deposit the proceeds of any liquidation or termination of
the Trust Estate pursuant to this Article VIII to the Certificate Account for
application as provided in Section 7.3 hereof.
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ARTICLE IX
THE TRUSTEE
Section 9.1. Certain Duties and Responsibilities.
(a) The Trustee (i) except during the continuance of an
Event of Default, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
During the continuance of an 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 with respect to such person's
property or affairs.
(b) Notwithstanding the retention of the Master Servicer
pursuant hereto and subject to the provisions of Section 11.1 hereof, the
Trustee is hereby empowered (but not obligated) to perform the duties of the
Master Servicer hereunder following the failure of the Master Servicer to
perform pursuant hereto. Specifically, and not in limitation of the foregoing,
the Trustee shall have the power (but not the obligation):
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted by Article X hereof;
(iv) to deliver instruments of satisfaction pursuant to
Article X hereof;
(v) to enforce the Mortgage Loans; and
(vi) to make Delinquency Advances and Servicing Advances
and to pay Compensating Interest, in the manner required by this Agreement.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the
effect of clause (a) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
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(iii) the Trustee shall not be 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 Depositor or the Certificate Insurer or, with the
Certificate Insurer's consent, of the Owners of a majority in Percentage
Interest of the Certificates of the affected Class or Classes 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 relating to such Certificates;
(iv) the Trustee shall not be required to take notice or
be deemed to have notice or knowledge of any default by the Depositor or by the
Master Servicer unless the Trustee shall have received written notice thereof.
In the absence of actual receipt of such notice, the Trustee may conclusively
assume that there is no such default; and
(v) Subject to the other provisions of this Agreement and
without limiting the generality of this Section, the Trustee shall have no duty
(A) to see to any recording, filing, or depositing of this Agreement, any
Mortgage or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see
the payment or discharge of any tax, assessment, or other governmental charge or
any lien or encumbrance of any kind owing with respect to, assessed or levied
against, any property of the Trust, (D) to confirm or verify the contents of any
reports or certificates of the Master Servicer or any Sub-Servicer delivered to
the Trustee pursuant to this Agreement or any Sub-Servicing Agreement believed
by the Trustee to be genuine and to have been signed or presented by the proper
party or parties.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) No provision of this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it and none of the provisions
contained in this Agreement shall in any event require the Trustee to perform,
or be responsible for the manner of performance of, any of the obligations of
the Master Servicer hereunder except during such time, if any, as the Trustee
shall be the successor to, and be vested with the rights, duties and powers and
privileges of, the Master Servicer in accordance with the terms of this
Agreement.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the Trustee
shall not be answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute
any suit, or to take any remedial proceeding under this Agreement, or to take
any steps in the execution of the trusts hereby created or in the enforcement of
any rights and powers hereunder until it shall be indemnified to its reasonable
satisfaction against any and all costs and expenses, outlays and counsel fees
and other
73
reasonable disbursements and against all liability, except liability
which is adjudicated to have resulted from its negligence or willful misconduct,
in connection with any action so taken.
Section 9.2. Removal of Trustee for Cause . (a) The
Trustee may be removed pursuant to clause (b) hereof upon the occurrence of any
of the following events (whatever the reason for such event and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners
entitled thereto on any Payment Date amounts
available for distribution in accordance with the
terms hereof; or
(2) the Trustee shall fail in the performance of, or
breach, any covenant or agreement of the Trustee in
this Agreement, or if any representation or warranty
of the Trustee made in this Agreement or in any
certificate or other writing delivered pursuant
hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when
the same shall have been made, and such failure or
breach shall continue or not be cured for a period of
30 days after there shall have been given, by
registered or certified mail, to the Trustee by the
Depositor or the Certificate Insurer or by the Owners
of at least 25% of the aggregate Percentage Interest
represented by any Class of Class A Certificates, or,
if there are no Class A Certificates then
Outstanding, by such Percentage Interest represented
by any Class of Class B Certificates, a written
notice specifying such failure or breach and
requiring it to be remedied (unless the Trustee is
aware of such breach as evidenced by notice from the
Trustee pursuant to Section 9.2(b) in which case the
30 day cure period shall begin at the time such
notice was given); or
(3) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of
a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall
have been entered against the Trustee, and such
decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property of the
Trustee is appointed in any insolvency, readjustment
of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Trustee or
relating to all or substantially all of its property;
or
(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to pay its
debts as they come due, file or consent to the filing
of a petition to take advantage of any applicable
insolvency or reorganization statute, make an
assignment for the benefit of its creditors,
voluntarily suspend payment of its obligations, or
take corporate action for the purpose of any of the
foregoing.
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(b) The Depositor and the Trustee shall give notice to
each other, to the Certificate Insurer, and to each Owner if it becomes aware
that an event described in Subsection (a) has occurred and is continuing.
(c) If any event described in Subsection (a) occurs and is
continuing, then and in every such case (x) the Depositor or the Certificate
Insurer or (y) with the consent of the Certificate Insurer, the Owners of a
majority of the Percentage Interest represented by any Class of Class A
Certificates, or, if there are no Class A Certificates then Outstanding, by such
Percentage Interest represented by any Class of Class B Certificates then
Outstanding, may, whether or not the Trustee resigns pursuant to Section 9.9
hereof, immediately, concurrently with the giving of notice to the Trustee,
appoint a successor trustee pursuant to the terms of Section 9.9 hereof.
Section 9.3. Certain Rights of the Trustee . Except as
otherwise provided in Section 9.1 hereof:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Depositor or the
Owners of any Class of Certificates mentioned herein shall be sufficient if
evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement at the request or
direction of any of the Owners pursuant to this Agreement, unless such Owners
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) 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, direction, consent,
order, bond, note or other paper or document, but the Trustee in its discretion
may make such further inquiry or investigation into such facts or matters as it
may see fit;
(g) 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 the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized by the Authorized Officer of any Person or within
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its rights or powers under this Agreement other than as to validity and
sufficiency of its authentication of the Certificates.
Section 9.4. Not Responsible for Recitals or Issuance of
Certificates . The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Depositor and the Master Servicer and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement, any offering materials relating to the
Certificates, or of the Certificates other than as to the validity and
sufficiency of its authentication of the Certificates.
Section 9.5. May Hold Certificates. The Trustee or any
other agent of the Trust, in its individual or any other capacity, may become an
Owner or pledgee of Certificates and may otherwise deal with the Trust with the
same rights it would have if it were not Trustee or such other agent.
Section 9.6. Money Held in Trust. Money held by the
Trustee in trust hereunder need not be segregated from other trust funds except
to the extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Depositor and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 9.7. Compensation and Reimbursement . The Trustee
shall receive compensation for fees and reimbursement for expenses pursuant to
Section 2.5 hereof and Section 7.3(b)(i) hereof. The Trustee shall have no lien
on the Trust Estate for the payment of such fees and expenses.
Section 9.8. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a corporation or
association acceptable to the Certificate Insurer and organized and doing
business under the laws of the United States of America or of any State
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $100,000,000, subject to supervision or
examination by the United States of America, having a rating or ratings
acceptable to the Depositor and having a long-term deposit rating of at least
BBB from ____ and Baa2 from ____ (or such lower rating as may be acceptable to
____, ____ and the Certificate Insurer). If such Trustee publishes reports of
condition 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 condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall, upon
the request of the Depositor or the Certificate Insurer resign immediately in
the manner and with the effect hereinafter specified in this Article IX.
Section 9.9. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article IX shall become effective until the
acceptance of appointment by the successor trustee under Section 9.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to the
Certificate Insurer, the Depositor and the Master Servicer and by mailing notice
of resignation by first-class mail, postage prepaid, to the Owners at their
addresses appearing on the Register. Upon receiving notice of resignation, the
Depositor shall promptly appoint a successor trustee or trustees satisfying the
eligibility requirements of Section 9.8 by written
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instrument, in duplicate, executed on behalf of the Trust by an Authorized
Officer of the Depositor, one copy of which instrument shall be delivered to the
Trustee so resigning and one copy to the successor trustee or trustees. If no
successor trustee shall have been 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, or any Owner may, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribed, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 9.8 hereof and shall fail to resign after written request therefor
by the Depositor or the Certificate Insurer, the Depositor or the Certificate
Insurer may remove the Trustee and the Depositor, with the consent of the
Certificate Insurer, or the Certificate Insurer may appoint a successor trustee
by written instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the Depositor or the Certificate Insurer, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by any Class of Class A Certificates with the consent of the
Certificate Insurer, or, if there are no Class A Certificates then Outstanding,
by such Percentage Interest represented by any Class of Class B Certificates
then Outstanding, may at any time remove the Trustee and appoint a successor
trustee by delivering to the Trustee to be removed, to the successor trustee so
appointed, to the Depositor and to the Certificate Insurer, copies of the record
of the act taken by the Owners, as provided for in Section 12.3 hereof.
(e) If the Trustee fails to perform its duties in
accordance with the terms of this Agreement or becomes ineligible to serve as
Trustee, the Depositor or the Certificate Insurer may remove the Trustee and the
Depositor, with the consent of the Certificate Insurer, or the Certificate
Insurer may appoint a successor trustee by written instrument, in triplicate,
signed by the Depositor or the Certificate Insurer duly authorized, one complete
set to the Depositor, one complete set to the Trustee so removed and one
complete set to the successor trustee so appointed. (f) If the Trustee shall
resign, be removed or become incapable of acting, or if a vacancy shall occur in
the office of the Trustee for any cause, the Depositor shall promptly appoint a
successor trustee satisfying the eligibility requirements of Section 9.8.
(g) The Depositor shall give notice of any removal of the
Trustee by mailing notice of such event by first-class mail, postage prepaid, to
the Owners as their names and addresses appear in the Register. Each notice
shall include the name of the successor trustee and the address of its corporate
trust office.
Section 9.10. Acceptance of Appointment by Successor
Trustee. Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor on behalf of the Trust and to its predecessor
Trustee an instrument accepting such appointment hereunder and stating its
eligibility to serve as Trustee 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 vested with
all the rights, powers, trusts, duties and obligations of its predecessor
hereunder; but, on request of the Depositor or the successor trustee, such
predecessor Trustee shall, upon payment of its charges then unpaid, execute and
deliver an instrument transferring to such successor trustee all of the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver to such successor trustee all property and money held by
such trustee so ceasing to act hereunder. Upon request of any such successor
trustee, the Depositor on behalf of the Trust shall execute any and all
77
instruments for more fully and certainly vesting in and confirming to such
successor trustee all such rights, powers and trusts. The Depositor shall
reimburse the Trustee for any costs reasonably incurred hereunder resulting from
the Trustee's removal under Section 9.09(d) hereof.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Depositor shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing in the
Register. The Depositor shall send a copy of such notice to the Rating Agencies.
If the Depositor fails to mail such notice within ten 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.
No successor trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible under
this Article IX.
Section 9.11. Merger, Conversion, Consolidation or
Succession to Business of the 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 all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, however, that such corporation
or association shall be otherwise qualified and eligible under this Article IX.
In case any Certificates have been executed, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
Trustee may adopt such execution and deliver the Certificates so executed with
the same effect as if such successor Trustee had itself executed such
Certificates.
Section 9.12. Reporting; Withholding. (a) The Trustee
shall timely provide to the Owners the Internal Revenue Service's Form 1099 and
any other statement required by applicable Treasury regulations as determined by
the Depositor, and shall withhold, as required by applicable law, federal, state
or local taxes, if any, applicable to distributions to the Owners, including but
not limited to backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
(b) The Trustee shall timely file all reports required to
be filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q
and the form required under Section 6050K of the Code, if applicable.
Furthermore, the Trustee shall report to Owners, if required, with respect to
the allocation of expenses pursuant to Section 212 of the Code in accordance
with the specific instructions to the Trustee by the Depositor with respect to
such allocation of expenses. The Trustee shall collect any forms or reports from
the Owners determined by the Depositor to be required under applicable federal,
state and local tax laws.
(c) The Trustee shall provide to the Internal Revenue
Service and to persons described in section 860(E)(e)(3) and (6) of the Code the
information described in Treasury Regulation section 1.860D-1(b)(5)(ii), or any
successor regulation thereto. Such information will be provided in the manner
described in Treasury Regulation section 1.860E-2(a)(5), or any successor
regulation thereto. Section
9.13. Liability of the Trustee. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Depositor, the
Master Servicer, any Sub-
78
Servicer or any Owner for any action taken or for refraining from the taking
of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of negligent action, negligent failure to act or bad faith in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Subject to the foregoing sentence, the Trustee shall not be
liable for losses on investments of amounts in any Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Depositor covenants and agrees to indemnify the Trustee, and when
the Trustee is acting as Master Servicer, the Trustee in its capacity as Master
Servicer, from, and hold it harmless against, any and all losses, liabilities,
damages, claims or expenses (including reasonable and documented legal fees and
expenses) other than those resulting from the negligence or bad faith of the
Trustee. The Trustee and any director, officer, employee or agent of the Trustee
may rely and shall be protected in acting or refraining from acting in good
faith on any certificate, notice or other document of any kind prima facie
properly executed and submitted by the Authorized Officer of any Person
respecting any matters arising hereunder.
Section 9.14. Appointment of Co-Trustee or Separate
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate or any Property may at the time be located, the
Master Servicer and the Trustee acting jointly and with the consent of the
Certificate Insurer 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, of all or any part of the
Trust Estate or separate Trustee or separate Trustees of any part of the Trust
Estate, and to vest in such Person or Persons, in such capacity and for the
benefit of the Owners and the Certificate Insurer, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 9.14, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case any event indicated in
Section 9.2 of this Agreement shall have occurred and be continuing, the Trustee
alone (with the consent of the Certificate Insurer) 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 9.8 and no
notice to Owners of the appointment of any co-Trustee or separate Trustee shall
be required under Section 9.9.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) 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 (it
being understood that such separate Trustee or co-Trustee is not authorized to
act separately without the Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed (whether as Trustee hereunder or as successor to the Master
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 Estate or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such separate
Trustee or co-Trustee, but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other co-Trustee hereunder; and
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(iii) The Master Servicer and the Trustee acting jointly
with the consent of the Certificate Insurer may at any time accept the
resignation of or remove any separate Trustee or co-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 Section 9.14. Each separate Trustee and co-Trustee, upon
its acceptance of the trusts 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 and a
copy thereof given to the Master Servicer.
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.
ARTICLE X
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 10.1. General Servicing Procedures . (a) Acting
directly or through one or more Sub-Servicers as provided in Section 10.3, the
Master Servicer shall service and administer the Mortgage Loans in accordance
with this Agreement and shall have full power and authority, acting alone, to do
or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable and consistent with the
terms of this Agreement. Notwithstanding any provision to the contrary elsewhere
in this Agreement, the Master Servicer shall not have any duties,
responsibilities, or fiduciary relationship with the parties hereto except those
expressly set forth herein, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or shall otherwise exist against the Master Servicer.
(b) The Master Servicer may, and is hereby authorized to,
perform any of its servicing responsibilities with respect to all or certain of
the Mortgage Loans through a Sub-Servicer as it may from time to time designate,
but no such designation of a Sub-Servicer shall serve to release the Master
Servicer from any of its obligations under this Agreement. Such Sub-Servicer
shall have all the rights and powers of the Master Servicer with respect to such
Mortgage Loans under this Agreement.
(c) Without limiting the generality of the foregoing, but
subject to the provisions of this Article X, the Master Servicer in its own name
or in the name of a Sub-Servicer hereby is authorized and empowered, which
authorization may further be evidenced, at the reasonable request of the Master
Servicer, by a power of attorney executed and delivered by the Trustee, on
behalf of itself, the Owners and the Trustee or any of them, (i) to execute and
deliver any and all instruments of satisfaction or cancellation or of partial or
full release or discharge and all other comparable instruments with respect to
the Mortgage Loans and with respect to the Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property in the name of the Trust, and (iii) to
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hold title in the name of the Trust to any Property upon such foreclosure or
deed in lieu of foreclosure on behalf of the Trustee; provided, however, that to
the extent any instrument described in clause (i) preceding would be delivered
by the Master Servicer outside of its ordinary procedures for mortgage loans
held for its own account the Master Servicer shall, prior to executing and
delivering such instrument, obtain the prior written consent of the Certificate
Insurer, and provided further, however, that Section 10.14(a) shall constitute a
power of attorney from the Trustee to the Master Servicer to execute an
instrument of satisfaction (or assignment of mortgage without recourse) with
respect to any Mortgage Loan paid in full (or with respect to which payment in
full has been escrowed). Subject to Sections 10.13 and 10.14, the Trustee shall
execute any powers of attorney and other documents as the Master Servicer or
such Sub-Servicer shall reasonably request and that are provided to the Trustee
to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder. The costs to the
Master Servicer of delivering any satisfactions described in clause (i) above
shall be paid by the Master Servicer to the extent not recoverable from the
related Mortgagor under applicable state law.
(d) The Master Servicer, with the approval of the
Depositor, shall have the right to approve requests of Mortgagors for consent to
(i) partial releases of Mortgages and (ii) alterations and removal, demolition
or division of Properties subject to Mortgages. No such request shall be
approved by the Master Servicer unless: (1) (x) the provisions of the related
Note and Mortgage have been complied with; (y) the Loan-to-Value Ratio (which
may, for this purpose, be determined at the time of any such action in a manner
reasonably acceptable to the Certificate Insurer) after any release does not
exceed the Loan-to-Value Ratio set forth for such Mortgage Loan in the Mortgage
Loan Schedule; and (z) the lien priority, monthly payment, Coupon Rate or
maturity date of the related Mortgage is not affected (except in accordance with
Section 10.2) or (2) the Certificate Insurer shall have approved the granting of
such request and shall not unreasonably withhold such approval.
(e) The Master Servicer shall give prompt notice to the
Depositor, the Trustee and to the Certificate Insurer of any action, of which
the Master Servicer has actual knowledge, to (i) assert a claim against the
Trust or (ii) assert jurisdiction over the Trust.
(f) Servicing Advances incurred by the Master Servicer or
any Sub-Servicer in connection with the servicing of the Mortgage Loans
(including any penalties in connection with the payment of any taxes and
assessments or other charges) on any Property shall be recoverable by the Master
Servicer or such Sub-Servicer to the extent described in this Agreement.
(g) Each of the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee and the Certificate Insurer shall be entitled to rely,
and shall be fully protected in relying, upon any promissory note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document reasonably believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Mortgagor(s)), independent accountants and other experts selected by the
Depositor, the Master Servicer, each Sub-Servicer, the Trustee or the
Certificate Insurer. The Master Servicer shall be fully justified in failing or
refusing to take any action under this Agreement for which failure or refusal it
has sought and received instructions from the Owners and which failure or
refusal has been consented to by the Certificate Insurer. The Master Servicer
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement and the Mortgage Loans in accordance with an express
written request of the Owners to which the Certificate Insurer has consented,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon the Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and all Owners. In the event of any conflicting instructions or
requests, the instructions or requests delivered by
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the Certificate Insurer shall prevail, unless such instructions or requests
violate the express terms of this Agreement or violate applicable law.
(h) The Master Servicer shall have no liability to the
Depositor, the Trustee, the Certificate Insurer, the Owners or any other Person
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 the foregoing shall not apply to any breach of representations or
warranties made by the Master Servicer herein, or to any specific liability
imposed upon the Master Servicer pursuant to this Agreement or any liability
that would otherwise be imposed upon the Master Servicer by reason of its
willful misconduct, bad faith or negligence in the performance of its duties
hereunder or by reason of its reckless disregard of its obligations or duties
hereunder.
Section 10.2. Collection of Certain Mortgage Loan
Payments. The Master Servicer shall generally service the Mortgage Loans in a
prudent manner consistent with the Master Servicer's Servicing and Collection
Guide (the "Servicing Standards"), and agrees to 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 collection procedures for all Mortgage Loans at least as
rigorous as those the Master Servicer would take in servicing similar mortgage
loans and in collecting payments thereunder for its own account. Consistent with
the foregoing, the Master Servicer may (i) in its discretion waive or permit to
be waived any late payment charge or assumption fee or any other fee or charge
which the Master Servicer would be entitled to retain pursuant to Section 10.15
as servicing compensation, (ii) extend the due date for payments due on a Note
for a period (with respect to each payment as to which the due date is extended)
not greater than 125 days after the initially scheduled due date for such
payment and (iii) amend any Note to extend the maturity thereof, provided that
no maturity shall be extended beyond the maturity date of the Mortgage Loan with
the latest maturity date and that no more than ____% of the Original Pool
Principal Balance of the Mortgage Loans shall have a maturity date which has
been extended beyond the maturity date thereof at the Cut-off Date; provided
further, with respect to clauses (i), (ii) and (iii), that such action does not
violate applicable REMIC provisions. In the event the Master Servicer shall
consent to the deferment of the due dates for payments due on a Note, the Master
Servicer shall nonetheless make payment of any required Delinquency Advance with
respect to the payments so extended to the same extent as if such installment
were due, owing and Delinquent and had not been deferred, and shall be entitled
to reimbursement therefor in accordance with Sections 10.8(d)(i)(D) and 10.9(a)
hereof.
The Master Servicer may not waive prepayment charges or
penalty interest in connection with Prepayments. Any such amounts so received
shall be paid over to the Depositor as received.
Section 10.3. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers. The Master Servicer may enter into Sub-Servicing
Agreements for any servicing and administration of Mortgage Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Sub-Servicing Agreement and
which (i) has been designated an approved seller-servicer by FHLMC or FNMA for
first and second mortgage loans and (ii) has equity of at least $__________, as
determined in accordance with generally accepted accounting principles, and
(iii) must have demonstrated proficiency in the servicing of mortgage loans
having similar characteristics (including credit characteristics) to the
Mortgage Loans. The Master Servicer shall give notice to the Depositor, the
Trustee, ____, ____ and the Certificate Insurer of the removal or appointment of
any Sub-Servicer; no such removal or appointment shall be effective unless the
Trustee shall have received the prior consent of ____, the Certificate Insurer
and ____. Any such Sub-Servicing Agreement shall be consistent with and not
violate the provisions of this Agreement. For purposes of this Agreement, the
Master Servicer shall be deemed to have received payments on or with respect to
Mortgage Loans when any Sub-Servicer has received such payments. For purposes of
this Agreement,
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the Master Servicer shall be deemed to have made a payment required to be made
by it hereunder when any Sub-Servicer has made such payment in the manner
required of the Master Servicer hereunder. For purposes of this Agreement, the
Master Servicer shall be deemed to have delivered any document required to be
delivered by it hereunder when any Sub-Servicer has delivered such document in
the manner required of the Master Servicer hereunder. As of the Startup Day, the
only Sub-Servicer is LSI Financial Group.
Section 10.4. Successor Sub-Servicers. Each Sub-Servicing
Agreement shall expressly provide that the Master Servicer or the Trustee shall
be entitled to terminate any Sub-Servicing Agreement in accordance with the
terms and conditions of such Sub-Servicing Agreement and to enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 10.3. The Trustee shall have no duty or obligation hereunder to monitor
or supervise the performance of any Sub-Servicer.
Section 10.5. Liability of Master Servicer. The Master
Servicer shall not be relieved of its obligations under this Agreement
notwithstanding any Sub-Servicing Agreement or any of the provisions of this
Agreement relating to agreements or arrangements between the Master Servicer and
a Sub-Servicer or otherwise, and the Master Servicer shall be obligated to the
same extent and under the same terms and conditions as if it alone were
servicing and administering the Mortgage Loans. The Master Servicer shall be
entitled to enter into any agreement with a Sub-Servicer for indemnification of
the Master Servicer by such Sub-Servicer and nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
Section 10.6. No Contractual Relationship Between
Sub-Servicer and Trustee or the Owners. Any Sub-Servicing Agreement and any
other transactions or services relating to the Mortgage Loans involving a
Sub-Servicer (other than the Sub-Servicing Agreement dated the date hereof among
the Master Servicer, LSI Financial Group and the Trustee) shall be deemed to be
between the Sub-Servicer, the Master Servicer and any other parties thereto
alone and the Trustee and the Owners shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Sub-Servicer except as set forth in Sections 10.4 and 10.7, unless expressly
made a party thereto.
Section 10.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Master
Servicer hereunder by the Trustee pursuant to Section 11.1, it is understood and
agreed that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer may be
assumed or terminated by the Trustee at its option, and the Master Servicer
shall cause each Sub-Servicing Agreement to so provide. Each Sub-Servicing
Agreement shall contain term provisions at least as restrictive as those
contained herein with respect to the Master Servicer.
The Master Servicer shall, upon request of the Trustee, but at
the expense of the Master Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party.
Section 10.8. Principal and Interest Account.
(a) The Master Servicer shall establish and maintain at
one or more Designated Depository Institutions the Principal and Interest
Account as a segregated account.
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Subject to Subsections (c) and (d) below, the Master Servicer
and any Sub-Servicer shall deposit all collections (other than amounts escrowed
for taxes and insurance) related to the Mortgage Loans to the Principal and
Interest Account on a daily basis (but no later than the first Business Day
after receipt).
On or before the Startup Day, the Master Servicer shall
deposit to the Principal and Interest Account (i) all scheduled payments due and
collected (other than amounts escrowed for taxes and insurance) on the Mortgage
Loans after the Cut-Off Date and prior to the Startup Day and (ii) all
unscheduled collections (other than amounts escrowed for taxes and insurance) on
the Mortgage Loans received on or after the Cut-Off Date and prior to the
Startup Day.
(b) All funds in the Principal and Interest Account shall
be invested in Eligible Investments maturing not later than the Business Day
immediately preceding the related Remittance Date; provided, however, in the
event that Trustee is acting as Successor Master Servicer, such amounts may be
held uninvested. The Principal and Interest Account shall be held in trust in
the name of the Trustee for the benefit of the Owners. Any investment earnings
on funds held in the Principal and Interest Account shall be for the account of
the Master Servicer and may only be withdrawn from the Principal and Interest
Account by the Master Servicer immediately following the remittance of the
Monthly Remittances by the Master Servicer. Any investment losses shall be paid
by the Master Servicer to the Principal and Interest Account from the Master
Servicer's own funds. Any references herein to amounts on deposit in the
Principal and Interest Account shall refer to amounts net of such investment
earnings and to additional amounts in respect of investment losses. The Trustee
shall have no responsibility or liability for actions taken by the Master
Servicer, including withdrawals, with respect to the Principal and Interest
Accounts.
(c) The Master Servicer shall deposit to the Principal and
Interest Account all principal and interest payments from the related Mortgagors
received by the Master Servicer (including any Prepayments), Net Proceeds, other
recoveries or amounts related to the Mortgage Loans received by the Master
Servicer, Compensating Interest, Delinquency Advances together with any amounts
which are reimbursable to the Master Servicer from the Principal and Interest
Account, the amount of any Loan Purchase Price received or paid by the Master
Servicer, the amount of any Substitution Amount received by the Master Servicer,
REO income pursuant to Section 10.13(c) hereof, and amounts required to be
deposited therein pursuant to Section 10.11 hereof in connection with blanket
insurance policies and any proceeds received by the Master Servicer in
connection with the termination of the Trust, but net of (i) the Master
Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 10.15 hereof, (ii)
Net Proceeds to the extent such Net Proceeds exceed the sum of (I) the Principal
Balance of the related Mortgage Loan, plus (II) accrued and unpaid interest on
such Mortgage Loan at the Coupon Rate applicable to the related Remittance
Period (net of the Master Servicing Fee) and (iii) prepayment charges and
similar amounts to be paid over to the Depositor pursuant to Section 10.2
hereof. Amounts described in clause (ii) of the preceding sentence shall be
retained by the Master Servicer as additional servicing compensation or paid
over to the related Mortgagor if required by law.
(d)(i) The Master Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of
the related Monthly Remittance due on each
Remittance Date;
(B) to withdraw investment earnings on amounts on
deposit in the Principal and Interest Account;
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(C) to withdraw amounts that have been deposited to
the Principal and Interest Account in error;
(D) to reimburse itself for amounts which represent
Reimbursable Advances made by the Master Servicer
from its own funds and subsequently collected
from the related Mortgagor; and
(E) to clear and terminate the Principal and Interest
Account in connection with the termination of the
Trust.
(ii) On the tenth day of each month (or the immediately
following Business Day if the tenth day does not fall on a Business Day), the
Master Servicer shall send to the Trustee a report, in such electronic form as
may be agreed upon by the Master Servicer, the Depositor, the Certificate
Insurer and the Trustee, detailing the payments on the Mortgage Loans for each
of the Mortgage Loan Groups during the prior Remittance Period. Such report
shall be in the form and have the specifications as may be agreed to between the
Master Servicer, the Depositor, and the Trustee from time to time and, in any
event, shall have such information as shall be necessary to enable the Trustee
to perform its obligations hereunder.
In addition, on or prior to each Remittance Date, the Master
Servicer will furnish to the Depositor, the Trustee and to the Certificate
Insurer the following information for the three Mortgage Loan Groups as of the
close of business on the first business day of the current calendar month:
(A) the total number of Mortgage Loans and the
aggregate Principal Balances thereof, together
with the number and aggregate principal balances
of Mortgage Loans (a) 30-59 days Delinquent, (b)
60-89 days Delinquent and (c) 90 or more days
Delinquent;
(B) the number and aggregate principal balances of
all Mortgage Loans in foreclosure proceedings
(and whether any such Mortgage Loans are also
included in any of the statistics described in
the foregoing clause (A));
(C) the number and aggregate principal balances of
all Mortgage Loans relating to Mortgagors in
bankruptcy proceedings (and whether any such
Mortgage Loans are also included in any of the
statistics described in the foregoing clauses (A)
and (B));
(D) the number and aggregate principal balances of
all Mortgage Loans relating to REO Properties
(and whether any such Mortgage Loans are also
included in any of the statistics described in
the foregoing clauses (A), (B) and (C));
(E) the number and aggregate principal balances of
all Mortgage Loans as to which foreclosure
proceedings were commenced during the prior
Remittance Period;
(F) a schedule regarding cumulative foreclosures
since the Cut-Off Date;
(G) a schedule regarding the Group I Cumulative Net
Realized Losses, the Group II Cumulative Net
Realized Losses and the Cumulative Net Realized
Losses;
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(H) the book value of any REO Property and any income
received from REO Properties during the prior
Remittance Period;
(I) such other information as the Trustee, the
Depositor or the Certificate Insurer may
reasonably request and as is produced by the
Master Servicer in the ordinary course of its
business; and
(J) the number and Principal Balance of any Mortgage
Loans repurchased during the related Remittance
Period pursuant to Section 10.13(f) and the
number and cumulative Principal Balance of all
Mortgage Loans so repurchased since the Cut-Off
Date.
(iii) On each Remittance Date the Master Servicer shall
remit the Group I Monthly Remittance and the Group II Monthly Remittance to the
Trustee by wire transfer, or otherwise make funds available in immediately
available funds.
(e) In connection with any exercise by the Depositor of
its option and related termination under Article VIII hereof, upon written
request of the Depositor, the Master Servicer shall remit to the Trustee all
amounts (net of investment earnings and providing for investment losses pursuant
to Section 10.8(b), net of the Master Servicing Fee and net of amounts
reimbursable for Delinquency Advances and Servicing Advances) then on deposit in
the Principal and Interest Account for deposit to the Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such purchase.
Section 10.9. Delinquency Advances and Servicing Advances.
(a) If the amount on deposit in the Principal and Interest Account with respect
to any Mortgage Loan Group as of any Remittance Date is less than the related
Monthly Remittance for such Remittance Date, the Master Servicer shall deposit
to the Principal and Interest Account with respect to such Mortgage Loan Group a
sufficient amount of its own funds to make such amount equal to the related
Monthly Remittance for such Remittance Date. Such amounts of the Master
Servicer's own funds so deposited are "Delinquency Advances". Any Delinquency
Advances funded by the Master Servicer from its own funds are reimbursable from
subsequent collections on or with respect to the related Mortgage Loan,
including Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property
Proceeds, and payments from the related Mortgagor. Notwithstanding anything to
the contrary contained in this Agreement, no Delinquency Advance or Servicing
Advance shall be required to be made by the Master Servicer if such Delinquency
Advance or Servicing Advance would, if made, constitute a Nonrecoverable
Advance.
The Master Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date from collections on any Mortgage
Loan deposited to the Principal and Interest Account subsequent to the related
Remittance Period, and shall deposit to the Certificate Account with respect to
Delinquency Advances funded from amounts on deposit in the Principal and
Interest Account (i) collections from the Mortgagor whose delinquency gave rise
to the shortfall which resulted in such Delinquency Advance and (ii) Net
Liquidation Proceeds recovered on account of the related Mortgage Loan to the
extent of the amount of aggregate Delinquency Advances related thereto. In any
event, to the extent the Master Servicer uses such funds, the Master Servicer
must reimburse the Principal and Interest Account by the next Remittance Date to
the extent necessary to provide for the related Monthly Remittance.
(b) The Master Servicer will pay all reasonable and
customary "out-of-pocket" costs and expenses (including reasonable legal fees)
incurred in the performance of its servicing obligations including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial
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proceedings, including foreclosures, (iii) the management and liquidation of REO
Property (including, without limitation, realtors' commissions) and (iv)
advances made for taxes, insurance and other charges against the Property. Each
such expenditure will constitute a "Servicing Advance". The Master Servicer may
recover Servicing Advances from the Mortgagors to the extent permitted by the
Mortgage Loans or, if not theretofore recovered from the Mortgagor on whose
behalf such Servicing Advance was made, from Liquidation Proceeds, Insurance
Proceeds and/or Released Mortgage Property Proceeds realized with respect to the
related Mortgage Loan. In no case may the Master Servicer recover Servicing
Advances from the principal and interest payments on any Mortgage Loan or from
any amounts relating to any other Mortgage Loan.
Section 10.10. Compensating Interest. If a Prepayment in
full of the outstanding principal balance of a Mortgage Loan occurs during any
calendar month, any difference between the interest collected from the Mortgagor
during such calendar month and the full month's interest at the related Coupon
Rate less the Master Servicing Fee with respect to such Mortgage Loan
("Compensating Interest") that is due, then prior to the Remittance Date the
Master Servicer shall deposit the Compensating Interest to the Principal and
Interest Account which amount shall be included in the related Monthly
Remittance to be made available to the Trustee on the next succeeding Remittance
Date; provided, however, that Compensating Interest due from the Master Servicer
on any Remittance Date will not exceed the monthly Servicing Fee. The Master
Servicer shall not be entitled to reimbursement for Compensating Interest
payments.
Section 10.11. Maintenance of Insurance.
(a) The Master Servicer shall cause to be maintained with
respect to each Mortgage Loan a hazard insurance policy with a generally
acceptable carrier licensed in the state in which the Property is located that
provides for fire and extended coverage, and which provides for a recovery by
the Trust of insurance proceeds relating to such Mortgage Loan in an amount not
less than the least of (i) the outstanding principal balance of the Mortgage
Loan (together in the case of a Second Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (ii) the minimum amount required to
compensate for loss or damage on a replacement cost basis and (iii) the full
insurable value of the premises and which otherwise conforms to the description
thereof set forth in clause (xvii) of Section 3.2(b). The Master Servicer shall
indemnify the Trust out of the Master Servicer's own funds for any loss to the
Trust resulting from the Master Servicer's failure to maintain the insurance
required by this paragraph.
(b) If the Mortgage Loan at the time of origination
relates to a Property in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, the Master
Servicer will cause to be maintained with respect thereto a flood insurance
policy in a form meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable carrier, and which
provides for a recovery by the Master Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the least of
(i) the outstanding principal balance of the Mortgage Loan, (ii) the minimum
amount required to compensate for damage or loss on a replacement cost basis and
(iii) the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973, as amended and which otherwise conforms to the
description thereof set forth in clause (xviii) of Section 3.2(b). The Master
Servicer shall indemnify the Trust and the Certificate Insurer out of the Master
Servicer's own funds for any loss to the Trust and the Certificate Insurer
resulting from the Master Servicer's failure to maintain the insurance required
by this Section.
(c) In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer acceptable to the Certificate Insurer
insuring against fire and hazards of extended coverage on all of the Mortgage
Loans, then, to the extent such policy names the Master Servicer as loss
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payee and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Mortgage Loans with co-insurance, and otherwise complies with the
requirements of this Section 10.11, the Master Servicer shall be deemed
conclusively to have satisfied its obligations with respect to fire and hazard
insurance coverage under this Section 10.11, it being understood and agreed that
such blanket policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have been maintained on the
related Property a policy complying with subsection (a) of this Section 10.11,
and there shall have been a loss which would have been covered by such policy,
deposit in the Principal and Interest Account from the Master Servicer's own
funds the difference, if any, between the amount that would have been payable
under a policy complying with subsection (a) of this Section 10.11 and the
amount paid under such blanket policy. Upon the request of the Trustee, the
Master Servicer shall cause to be delivered to the Trustee, a certified true
copy of such policy.
(d) The Depositor shall indemnify the Master Servicer for
any loss to the Master Servicer if any Mortgage Loan does not, at the time the
Master Servicer assumed the servicing of such Mortgage Loan, have in place the
insurance described in Sections 3.2(b)(xvi) and (xvii) hereof and described
herein and, if applicable, Section 3.2(b)(xviii) hereof. Without limiting the
obligations of the Depositor pursuant to Section 3.2, the Master Servicer shall
only be required to maintain insurance on any Property if such insurance was in
place at the time the Master Servicer assumed the servicing of the related
Mortgage Loan.
Section 10.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements.
(a) When a Property has been or is about to be conveyed by
the Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due on sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if the "due on sale" clause, in the reasonable
belief of the Master Servicer, is not enforceable under applicable law; and
provided, further, that the Master Servicer may refrain from exercising any such
right if the Certificate Insurer gives its prior consent to such
non-enforcement.
(b) The Mortgage Loan, if assumed, shall conform in all
respects to the requirements, representations and warranties of this Agreement.
The Master Servicer shall notify the Trustee in writing that any applicable
assumption or substitution agreement has been completed and shall forward to the
Trustee the original recorded copy of such assumption or substitution agreement,
which copy shall be added by the Trustee in writing to the related File and
which shall, for all purposes, be considered a part of such File to the same
extent as all other documents and instruments constituting a part thereof. The
Master Servicer shall be responsible for recording any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Mortgage Loan shall not
be changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding principal amount of such
Mortgage Loan shall not be changed, the Coupon Rate shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Master Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Master Servicer as additional
servicing compensation.
(c) Notwithstanding the foregoing clauses (a) and (b) or
any other provision of this Agreement, the Master Servicer shall not be deemed
to be in default, breach or any other violation of its obligations hereunder by
reason of any assumption of a Mortgage Loan by operation of law or any
assumption which the Master Servicer may be restricted by law from preventing,
for any reason whatsoever.
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Section 10.13. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall foreclose upon or otherwise
comparably effect the ownership in the name of the Trust of Properties relating
to defaulted Mortgage Loans as to which no satisfactory arrangements can be made
for collection of Delinquent payments and which the Master Servicer has not
purchased pursuant to Section 10.13(f), unless the Master Servicer reasonably
believes that Net Liquidation Proceeds with respect to such Mortgage Loan would
not be increased as a result of such foreclosure or other action, in which case
such Mortgage Loan will be charged-off and will become a Liquidated Loan. The
Master Servicer shall have no obligation to purchase any Property at any
foreclosure sale. The Master Servicer will give notice of any such charge-off to
the Certificate Insurer by delivery of a Liquidation Report in the form attached
as Exhibit G hereto. In connection with such foreclosure or other conversion,
the Master Servicer shall exercise foreclosure procedures with the same degree
of care and skill in their exercise or use, as it would exercise or use under
the circumstances in the conduct of its own affairs. Any amounts, including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute "Servicing Advances" within the
meaning of Section 10.9(b) hereof.
(b) The Master Servicer shall sell any REO Property within
23 months of its acquisition by the Trust, unless the Master Servicer obtains
for the Trustee an opinion of counsel experienced in federal income tax matters,
addressed to the Trustee, the Certificate Insurer and the Master Servicer, to
the effect that the holding by the Trust of such REO Property for a greater
specified period will not result in the imposition of taxes on "Prohibited
Transactions" of the Trust as defined in Section 860F of the Code or cause the
REMICs to fail to qualify under the REMIC Provisions at any time that any
Certificates are outstanding.
(c) Notwithstanding the generality of the foregoing
provisions, the Master Servicer shall manage, conserve, protect and operate each
REO Property for the Owners 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 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.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master Servicer protect and
conserve such REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners and the Certificate
Insurer, rent the same, or any part thereof, as the Master Servicer deems to be
in the best interest of the Owners and the Certificate Insurer for the period
prior to the sale of such REO Property. The net income from the sale of an REO
Property shall be deposited in the Principal and Interest Account.
(d) If the Master Servicer has reason to believe that a
Property which the Master Servicer is contemplating acquiring in foreclosure or
by deed in lieu of foreclosure contains environmental or hazardous waste risks
known to the Master Servicer, the Master Servicer shall notify the Depositor,
the Trustee and the Certificate Insurer prior to acquiring the Property. The
Master Servicer shall not institute foreclosure actions with respect to such a
property if it reasonably believes that such action would not be consistent with
the Servicing Standards, and the Master Servicer is not permitted to take any
action with respect to such a Property without the prior written approval of the
Depositor, the Trustee, and the Certificate Insurer, and in no event shall the
Master Servicer be required to manage, operate or take any other action with
respect thereto which the Master Servicer in good faith believes will result in
"clean-up" or other liability under applicable law, unless the Master Servicer
receives an indemnity acceptable to it in its sole discretion.
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(e) The Master Servicer shall determine, with respect to
each defaulted Mortgage Loan, when it has recovered, whether through trustee's
sale, foreclosure sale or otherwise, all amounts, if any, it expects to recover
from or on account of such defaulted Mortgage Loan, whereupon such Mortgage Loan
shall become a "Liquidated Loan". The Master Servicer shall deliver to the
Depositor, the Trustee and the Certificate Insurer on each Remittance Date a
Liquidation Report in the form annexed as Exhibit G hereto with respect to each
Mortgage Loan as to which the Master Servicer made a determination that such
Mortgage Loan has become a Liquidated Loan during the related Remittance Period.
(f) The Master Servicer has the right and the option, but
not the obligation, to purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Master Servicer pursuant to this Section 10.13 or which is in
default or as to which a default is imminent. Any such Mortgage Loan so
purchased shall be purchased on a Remittance Date at a purchase price equal to
the Loan Purchase Price thereof, which purchase price shall be deposited in the
Principal and Interest Account.
(g) The Master Servicer shall consult with the Depositor
with respect to its obligations under this Section 10.13.
Section 10.14. Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Mortgage Loan (including the repurchase of
any Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure
or otherwise), or the receipt by the Master Servicer of a notification that
payment in full will be escrowed in a manner customary for such purposes, the
Master Servicer shall deliver to the Trustee a Master Servicer's Trust Receipt.
Upon receipt of such Master Servicer's Trust Receipt, the Trustee shall promptly
release the related File, in trust to (i) the Master Servicer, (ii) an escrow
agent or (iii) any employee, agent or attorney of the Trustee, in each case
pending its release by the Master Servicer, such escrow agent or such employee,
agent or attorney of the Trustee, as the case may be. Upon any such payment in
full, or the receipt of such notification that such funds have been placed in
escrow, the Master Servicer is authorized to give, as attorney-in-fact for the
Trustee and the mortgagee under the Mortgage which secured the Note, an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Property relating to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of payment in full, it
being understood and agreed that no expense incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Principal and Interest Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Master Servicer may prepare
and submit to the Trustee, a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Master Servicer; in
such event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related File, as
aforesaid.
(b) From time to time and as appropriate in the servicing
of any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related File is released to an escrow agent or
an employee, agent or attorney of the Trustee), promptly upon request of the
Master Servicer and delivery to the Trustee of a Master Servicer's Trust
Receipt, release the related File to the Master Servicer and shall execute such
documents as shall be reasonably necessary to the prosecution of any such
proceedings, including, without limitation, an assignment without recourse of
the related Mortgage to the Master Servicer. The Trustee shall complete in the
name of the Trustee any endorsement in blank on any Note prior to releasing
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such Note to the Master Servicer. Such receipt shall obligate the Master
Servicer to return the File to the Trustee when the need therefor by the Master
Servicer no longer exists unless the Mortgage Loan shall be liquidated, in which
case, upon receipt of the liquidation information, in physical or electronic
form, the Master Servicer's Trust Receipt shall be released by the Trustee to
the Master Servicer.
Notwithstanding the foregoing, at no time shall the Trustee
release to the Master Servicer pursuant to this Section 10.14 a quantity of
Files in excess of 10% of the number of Mortgage Loans within the Pool,
excluding Files relating to Mortgage Loans which have been paid in full or have
become Liquidated Loans (unless otherwise approved by the Certificate Insurer).
(c) In all cases where the Master Servicer needs the
Trustee to sign any document or to release a File within a particular period of
time, the Master Servicer shall notify an Authorized Officer of the Trustee by
telephone or telecopy of such need and the Trustee shall thereupon use its best
efforts to comply with the Master Servicer's needs, but in any event will comply
within two Business Days of such request.
Section 10.15. Master Servicing Compensation. As
compensation for its activities hereunder, the Master Servicer shall be entitled
to retain the amount of the Master Servicing Fee with respect to each Mortgage
Loan. Additional servicing compensation in the form of release and satisfaction
fees (to the extent allowed by law), bad check charges, assumption fees, late
payment charges, and any other servicing-related fees, Net Proceeds not required
to be deposited in the Principal and Interest Account pursuant to Section
10.8(c)(ii) and similar items may, to the extent collected from Mortgagors, be
retained by the Master Servicer.
Section 10.16. Annual Statement as to Compliance. The
Master Servicer, at its own expense, will deliver to the Depositor, the Trustee,
the Certificate Insurer, ____ and ____ annually, commencing in ____, an
Officer's Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Master Servicer during such preceding fiscal year and of
performance under this Agreement has been made under such officer's supervision,
and (ii) to the best of such officer's knowledge, based on such review, the
Master Servicer has fulfilled all its obligations under this Agreement for such
year, or, if there has been a default in the fulfillment of one or more such
obligations, specifying each such default known to such officer and the nature
and status thereof including the steps being taken by the Master Servicer to
remedy such default. Any Sub-Servicer which is not a Master Servicer Affiliate
also shall deliver an annual statement as to compliance in the form described
above or the Master Servicer shall cover their performance in their statement.
These statements shall be available to Owners upon written request.
Section 10.17. Annual Independent Certified Public
Accountants' Reports. Annually, commencing in ____, the Master Servicer, at its
own expense, shall cause to be delivered to the Depositor, the Trustee, the
Certificate Insurer, ____ and ____ a letter or letters of a firm of independent,
nationally recognized certified public accountants reasonably acceptable to the
Certificate Insurer stating that such firm has, with respect to the Master
Servicer's overall servicing operations (i) performed applicable tests in
accordance with the compliance testing procedures as set forth in Appendix 3 of
the "Audit Guide for Audits of HUD Approved Non-Supervised Mortgages" or (ii)
examined such operations in accordance with the requirements of the Uniform
Single Attestation Program for Mortgage Bankers, and stating such firm's
conclusions relating thereto. These reports will be made available to Owners
upon written request.
Section 10.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans; Confidentiality. The Master Servicer
shall provide to the Depositor, the Trustee, the Certificate Insurer, and the
supervisory agents and examiners (as required in the latter case by applicable
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state and federal regulations) of each of the foregoing access to the
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained
by the Master Servicer in respect of the Mortgage Loans, the Master Servicer
shall deliver a copy of such computer tape to the Trustee and the Depositor and
in addition shall provide a copy of such computer tape to the Trustee and the
Depositor at such other times as the Trustee and the Depositor may request.
The Master Servicer, the Trustee, and the Certificate Insurer
shall keep confidential (including from affiliates thereof) information
concerning the Mortgage Loans and the underwriting criteria for the Mortgage
Loans, except as required by law.
Each of the Depositor, the Trustee and the Certificate Insurer
acknowledges the proprietary nature of the software, software procedures,
software development tools, know-how, methodologies, processes and technologies
of the Master Servicer and any Sub-Servicer and agrees (i) that it shall use the
same means as it uses to protect its own confidential information, but in no
event less than reasonable means, to avoid disclosure by it or its agents or
employees to any third party of any confidential or proprietary information of
the Master Servicer or any Sub-Servicer, and (ii) that all such software,
software procedures, software development tools, know-how, methodologies,
process and technologies that are based upon trade secrets or proprietary
information of the Master Servicer or any Sub-Servicer shall be and remain the
property of the Master Servicer or any Sub-Servicer and that each of the
Depositor, the Trustee and the Certificate Insurer will have no interest therein
or claim thereto. Each Sub-Servicer shall be a third-party beneficiary of this
paragraph.
Section 10.19. Assignment of Agreement. The Master
Servicer may not assign its obligations under this Agreement, in whole or in
part, unless it shall have first obtained (i) the written consent of the
Depositor, the Trustee and Certificate Insurer and (ii) the Trustee and
Certificate Insurer shall have received a confirmation letter from each Rating
Agency confirming the rating of the Class A Certificates as AAA or its
equivalent; provided, however, that any assignee must meet the eligibility
requirements set forth in Section 11.1(g) hereof for a successor servicer.
Section 10.20. Inspections by Certificate Insurer and
Account Parties; Errors and Omissions Insurance. (a) At any reasonable time and
from time to time upon reasonable notice, the Depositor, the Certificate
Insurer, the Trustee, or any agents or representatives thereof may inspect the
Master Servicer's servicing operations and discuss the servicing operations of
the Master Servicer. The out-of-pocket costs and expenses incurred by the Master
Servicer or its agents or representatives in connection with any such
examinations or discussions shall be paid by the requesting party prior to the
occurrence and continuance of an Event of Default, and by the Master Servicer
after the occurrence and during the continuance of an Event of Default.
(b) The Master Servicer agrees to maintain or cause a
Sub-Servicer to maintain errors and omissions coverage and a fidelity bond, each
at least to the extent required by Section 305 of Part I of FNMA Guide or any
successor provision thereof or such other insurance arrangements reasonably
satisfactory to the Certificate Insurer.
Section 10.21. Financial Statements. The Master Servicer
understands that, in connection with the transfer of the Certificates, Owners
may request that the Master Servicer make available upon written request to
prospective Owners any publicly available annual audited financial statements of
the Master Servicer for one or more of the most recently completed four fiscal
years for
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which such statements are available, which request shall not be unreasonably
denied. Such financial statements shall also be supplied to the Certificate
Insurer.
The Master Servicer also agrees to make available on a
reasonable basis to the Depositor, the Trustee, the Certificate Insurer, any
Owner or any prospective Owner a knowledgeable financial or accounting officer
for the purpose of answering reasonable questions respecting recent developments
affecting the Master Servicer or the financial statements of the Master Servicer
and to permit the Depositor, the Trustee, the Certificate Insurer, any Owner or
any prospective Owner to inspect the Master Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Depositor, the
Trustee, the Certificate Insurer, any Owner or such prospective Owner that the
Master Servicer has the ability to service the Mortgage Loans in accordance with
this Agreement.
Each requesting party shall use the same means as it uses to
protect its own confidential information, but in no event less than reasonable
means, to avoid disclosure by it or its agents or employees to any third party
of any confidential or proprietary information of the Master Servicer.
Section 10.22. REMIC. The Master Servicer covenants and
agrees for the benefit of the Owners (i) to take no action which would result in
the termination of REMIC status for any of the REMICs, (ii) not to engage in any
"prohibited transaction", as such term is defined in Section 860F(a)(2) of the
Code and (iii) not to engage in any other action which may result in the
imposition of any other taxes under the Code.
Section 10.23. The Designated Depository Institution. The
Master Servicer shall give the Depositor, the Trustee and the Certificate
Insurer (a) at least thirty days' prior written notice of any anticipated change
of the Designated Depository Institution at which the Principal and Interest
Account is maintained and (b) written notice of any change in the ratings of
such Designated Depository Institution of which the Master Servicer is aware,
within two Business Days after discovery.
Section 10.24. Appointment of Custodian. If the Master
Servicer determines that the Trustee is unable to deliver Files to the Master
Servicer as required pursuant to Section 10.14 hereof, the Master Servicer shall
so notify the Depositor, the Trustee, the Certificate Insurer, ____ and ____,
and make request that a custodian acceptable to the Depositor, the Master
Servicer and the Certificate Insurer be appointed to retain custody of the Files
on behalf of the Trustee. The Depositor and the Trustee agree to co-operate
reasonably with the Master Servicer in connection with the appointment of such
custodian. The Trustee shall pay from the Trustee's Fee all reasonable fees and
expenses of such custodian, in an amount not to exceed 1 basis point of the Pool
Principal Balance.
ARTICLE XI
EVENTS OF DEFAULT; REMOVAL OF MASTER SERVICER; MERGER
Section 11.1. Removal of Master Servicer; Resignation of
Master Servicer. (a) The Certificate Insurer (or, with the consent of the
Certificate Insurer, the Depositor or the Owners of Class A Certificates
evidencing at least a majority in Percentage Interest of all Class A
Certificates) may remove the Master Servicer upon the occurrence of any of the
following events (each, an "Event of Default"):
(i) The Master Servicer shall (I) apply for or consent to
the appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a general
assignment for the benefit of creditors, (IV) be adjudicated a bankrupt or
insolvent, (V)
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commence a voluntary case under the federal bankruptcy laws of the United States
of America or file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take advantage
of any insolvency law or file an answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization or insolvency
proceeding or (VI) cause corporate action to be taken by it for the purpose of
effecting any of the foregoing; or
(ii) If without the application, approval or consent of
the Master Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking in respect of the Master Servicer an order for
relief or an adjudication in bankruptcy, reorganization, dissolution, winding
up, liquidation, a composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, conservator, liquidator or
custodian or similar entity with respect to the Master Servicer or of all or any
substantial part of its assets, or other like relief in respect thereof under
any bankruptcy or insolvency law, and, if such proceeding is being contested by
the Master Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B) continue
undismissed or pending and unstayed for any period of sixty (60) consecutive
days; or
(iii) The Master Servicer shall fail to perform any one or
more of its obligations hereunder (other than its obligations referenced in
clauses (vi) and (vii) below) and shall continue in default thereof for a period
of thirty (30) days after the earlier to occur of (x) the date on which an
Authorized Officer of the Master Servicer knows or reasonably should know of
such failure or (y) receipt by the Master Servicer of a written notice from the
Trustee, any Owner, the Depositor or the Certificate Insurer of said failure; or
(iv) The Master Servicer shall fail to cure any breach of
any of its representations and warranties set forth in Section 3.1(c) which
materially and adversely affects the interests of the Owners or Certificate
Insurer for a period of thirty (30) days after the earlier of (x) the date on
which an Authorized Officer of the Master Servicer knows or reasonably should
know of such breach or (y) receipt by the Master Servicer of a written notice
from the Trustee, any Owner, the Depositor or the Certificate Insurer of such
breach; or
(v) If the Certificate Insurer pays out any money under
the Certificate Insurance Policy, or if the Certificate Insurer otherwise funds
any shortfall with its own money, because the amounts available to the Trustee
(other than from the Certificate Insurer) are insufficient to make required
distributions on the Class A Certificates; or
(vi) The failure by the Master Servicer to make any
required Servicing Advance for a period of 30 days following the earlier of (x)
the date on which an Authorized Officer of the Master Servicer knows or
reasonably should know of such failure or (y) receipt by the Master Servicer of
a written notice from the Trustee, any Owner, the Depositor or the Certificate
Insurer of such failure; or
(vii) The failure by the Master Servicer to make any
required Delinquency Advance, to pay any Compensating Interest or to pay over
any Monthly Remittance or other amounts required to be remitted by the Master
Servicer pursuant to this Agreement; or
(viii) If on any Payment Date the Pool Rolling Three Month
Delinquency Rate (including all foreclosures and REO Properties) exceeds ____%
during the period __________ through __________, ____% during
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the period __________ through __________, ____% during the period __________
through ___________, ____% during the period __________ through __________,
____% during the period __________ through __________ or ____% after __________;
or
(ix) If on any Payment Date occurring in __________ of any
year, commencing in __________, the aggregate Pool Cumulative Net Realized
Losses over the prior twelve month period exceed ____% of the average Pool
Principal Balance as of the close of business on the last day of each of the
twelve preceding Remittance Periods; or
(x) If on any Payment Date the aggregate Pool Cumulative
Net Realized Losses for all prior Remittance Periods since the Startup Day
exceed ____% of the Original Pool Principal Balance;
provided, however, that (x) prior to any removal of the Master Servicer pursuant
to clauses (ii) through (iv) and (vi) of this Section 11.1(a), any applicable
grace period granted by any such clause shall have expired prior to the time
such occurrence shall have been remedied and (y) in the event of the refusal or
inability of the Master Servicer to comply with its obligations described in
clause (vii) above, such removal shall be effective (without the requirement of
any action on the part of the Depositor, the Certificate Insurer or of the
Trustee) at 4 p.m. New York City time on the second Business Day following the
day on which the Trustee notifies an Authorized Officer of the Master Servicer
that a required amount described in clause (vii) above has not been received by
the Trustee, unless the required amount described in clause (vii) above is paid
by the Master Servicer prior to such time or the Certificate Insurer grants an
extension of time for such payment. Upon the Trustee's obtaining actual
knowledge that a required amount described in clause (vii) above has not been
made by the Master Servicer, the Trustee shall so notify an Authorized Officer
of the Master Servicer, and the Certificate Insurer, as soon as is reasonably
practical.
(b) Upon the occurrence of an Event of Default as
described in clauses (viii), (ix) or (x) of Section 11.1(a), the Certificate
Insurer may remove the Master Servicer; provided, however, that if such
occurrence of an Event of Default is the result of circumstances beyond the
Master Servicer's control, the Master Servicer shall not be removed, and
provided further, that in the event of any disagreement between the Depositor
and the Certificate Insurer, the decision of the Certificate Insurer shall
control.
(c) The Master 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 or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of this
Agreement. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an opinion of counsel to such effect which shall
be delivered to the Depositor, the Trustee and the Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall
become effective until the Trustee or a successor Master Servicer acceptable to
the Certificate Insurer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with this Section.
(e) Upon removal or resignation of the Master Servicer,
the Master Servicer also shall promptly deliver or cause to be delivered to a
successor Master Servicer or the Trustee all the books and records (including,
without limitation, records kept in electronic form) that the Master Servicer
has maintained for the Mortgage Loans, including all tax bills, assessment
notices, insurance premium notices and all other documents as well as all
original documents then in the Master Servicer's possession.
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(f) Any collections received by the Master Servicer after
removal or resignation shall be endorsed by it to the Trustee and remitted
directly and immediately to the Trustee or the successor Master Servicer.
(g) Upon removal or resignation of the Master Servicer,
the Trustee (x) may solicit bids for a successor Master Servicer as described
below, and (y) pending the appointment of a successor Master Servicer as a
result of soliciting such bids, shall serve as Master Servicer; provided,
however, that the Trustee shall not be liable for any acts, omissions or
obligations of the Master Servicer prior to such succession or for any breach by
the Master Servicer of any of its representations and warranties contained in
this Agreement or in any related document or agreement. The Trustee shall, if it
is unable to obtain a qualifying bid and is prevented by law from acting as
Master Servicer, appoint, or petition a court of competent jurisdiction to
appoint, any housing and home finance institution, bank or mortgage servicing
institution which (i) has been designated as an approved seller-servicer by FNMA
or FHLMC for first and second mortgage loans, (ii) has equity of not less than
$__________, as determined in accordance with generally accepted accounting
principles, and (iii) must have demonstrated proficiency in the servicing of
mortgage loans having similar characteristics (including credit characteristics)
to the Mortgage Loans, (iv) and must be acceptable to the Certificate Insurer as
the successor to the Master Servicer hereunder in the assumption of all or any
part of the responsibilities, duties or liabilities of the Master Servicer
hereunder.
The compensation of any successor Master Servicer (including,
without limitation, the Trustee) so appointed shall be the aggregate Master
Servicing Fees, together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 10.8
and 10.15.
(h) In the event the Trustee solicits bids as provided
above, the Trustee shall solicit, by public announcement, bids from housing and
home finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Master Servicing Fees as servicing compensation (including the servicing
compensation received in the form of assumption fees, late payment charges or
otherwise) as provided in Sections 10.8 and 10.15. Within thirty days after any
such public announcement, the Trustee shall, with the consent of the Certificate
Insurer, negotiate and effect the sale, transfer and assignment of the servicing
rights and responsibilities hereunder to the qualified party submitting the
highest satisfactory bid. The Trustee shall deduct from any sum received by the
Trustee from the successor to the Master Servicer in respect of such sale,
transfer and assignment all costs and expenses of any public announcement and of
any sale, transfer and assignment of the servicing rights and responsibilities
hereunder. After such deductions, the remainder of such sum shall be paid by the
Trustee to the Master Servicer at the time of such sale, transfer and assignment
to the successor Master Servicer.
(i) The Trustee and such successor Master Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Master Servicer agrees to cooperate with the
Trustee and any successor Master Servicer in effecting the termination of the
Master Servicer's servicing responsibilities and rights hereunder and shall
promptly provide the Trustee or such successor Master Servicer, as applicable,
all documents and records reasonably requested by it to enable it to assume the
Master Servicer's functions hereunder and shall promptly also transfer to the
Trustee or such successor Master Servicer, as applicable, all amounts which then
have been or should have been deposited in the Principal and Interest Account by
the Master Servicer or which are thereafter received with respect to the
Mortgage Loans. Neither the Trustee nor any other successor Master Servicer
shall be held liable by reason of any failure to make, or any delay in making,
any distribution hereunder or any portion thereof caused by (i) the failure of
the Master Servicer to deliver, or any delay in delivering, cash,
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documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Master Servicer.
(j) The Trustee or any other successor Master Servicer,
upon assuming the duties of Master Servicer hereunder, shall immediately make
all Delinquency Advances and pay all Compensating Interest which the Master
Servicer has theretofore failed to remit with respect to the Mortgage Loans;
provided, however, that if the Trustee is acting as successor Master Servicer or
another successor Master Servicer has become the Master Servicer, the Trustee or
such other successor Master Servicer, as the case may be, shall only be required
to make Delinquency Advances (including the Delinquency Advances described in
this clause (j)) if, in the Trustee's or such other successor Master Servicer's,
as the case may be, reasonable good faith judgment, such Delinquency Advances
will ultimately be recoverable from the related Mortgage Loans. The Trustee,
while acting as Master Servicer hereunder, shall only be obligated to make
payments with respect to Compensating Interest to the extent of its Master
Servicing Fee.
(k) The Master Servicer that is being removed or is
resigning shall give notice to the Mortgagors and to the Rating Agencies of the
transfer of the servicing to the successor Master Servicer.
(l) Any successor Master Servicer shall assume all rights
and obligations of the predecessor Master Servicer under this Agreement, except
those arising before succession (other than the obligation to make Delinquency
Advances) and under Section 3.1(b) (insofar as such provisions relate to the
predecessor Master Servicer).
(m) If the Master Servicer is removed pursuant to Section
11.1(a) or the first paragraph of Section 11.1(b) hereof the Master Servicer
shall remain entitled to reimbursement for Reimbursable Advances to the extent
that the related amounts are thereafter recovered with respect to the related
Mortgage Loans.
Section 11.2. Trigger Events; Removal of Master Servicer.
(a) Upon determination by the Certificate Insurer that a
Trigger Event has occurred, the Certificate Insurer shall give notice of such
Trigger Event to the Master Servicer, the Depositor, the Trustee and to ____ and
____.
(b) At any time after such determination and while a
Trigger Event is continuing, the Certificate Insurer may direct the Trustee to
remove the Master Servicer if the Certificate Insurer makes a determination that
the manner of master servicing was a factor contributing to the end of the
delinquencies or losses incurred in the Trust Fund.
(c) Upon receipt of directions to remove the Master
Servicer pursuant to the preceding clause (b), the Trustee shall notify the
Master Servicer that it has been terminated and the Master Servicer shall be
terminated in the same manner as specified in Section 11.1.
(d) After notice of occurrence of a Trigger Event has been
given and while a Trigger Event is continuing, until and unless the Master
Servicer has been removed as provided in clause (b), the Master Servicer
covenants and agrees to act as the Master Servicer for a term from the
occurrence of the Trigger Event to the end of the calendar quarter in which such
Trigger Event occurs, which term may at the Certificate Insurer's discretion be
extended by notice to the Trustee for successive terms of three (3) calendar
months each, until the termination of the Trust Fund. The Master Servicer will,
upon the receipt of each such notice of extension (a "Master Servicer Extension
Notice") become bound for the duration of the term covered by such Master
Servicer Extension Notice to continue as Master Servicer subject to and in
accordance with this Agreement. If, as of the fifteenth (15th) day prior to the
last day of any term as
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the Master Servicer, the Trustee shall not have received any Master Servicer
Extension Notice from the Certificate Insurer, the Trustee shall, within five
(5) days thereafter, give written notice of such nonreceipt to the Certificate
Insurer and the Master Servicer. If any such term expires without a Master
Servicer Extension Notice then the Trustee shall act as Master Servicer as
provided in Section 11.1.
(e) No provision of this Section 11.2 shall have the
effect of limiting the rights of the Company, the Trustee, the
Certificateholders or the Certificate Insurer under Section 11.1.
Section 11.3. Merger, Conversion, Consolidation or
Succession to Business of Master Servicer. Subject to the immediately succeeding
sentence, any corporation into which the Master Servicer may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Master Servicer shall
be a party, or any corporation succeeding to all or substantially all of the
business of the Master Servicer, shall be the successor of the Master Servicer
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto provided (x) that such corporation meets
the qualifications set forth in Section 11.1(g) and (y) that any successor
Master Servicer must meet the qualifications set forth in Section 11.1(g). Any
Affiliate into which the Master Servicer may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation of the Master Servicer and an Affiliate, or any
Affiliate succeeding to all or substantially all of the business of the Master
Servicer, shall be the successor of the Master Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Compliance Certificates and Opinions. Upon
any application or request by the Depositor or the Owners to the Trustee to take
any action under any provision of this Agreement, the Depositor or the Owners,
as the case may be, shall furnish to the Trustee a certificate stating that all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with, except that in the case of any such
application or request as to which the furnishing of any documents is
specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 12.2. Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion
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with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matters upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Depositor, the Master
Servicer, stating that the information with respect to such factual matters is
in the possession of the Depositor, the Master Servicer, unless such Authorized
Officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may also be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
Authorized Officer of the Trustee, stating that the information with respect to
such matters is in the possession of the Trustee, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous. Any opinion of
counsel may be based on the written opinion of other counsel, in which event
such opinion of counsel shall be accompanied by a copy of such other counsel's
opinion and shall include a statement to the effect that such counsel believes
that such counsel and the Trustee may reasonably rely upon the opinion of such
other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
Section 12.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, delivered to and with the consent of the Depositor
and the Certificate Insurer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"act" of the Owners signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Whenever such execution is by an officer of a corporation or a member
of a partnership on behalf of such corporation or partnership, such certificate
or affidavit shall also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
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Section 12.4. Notices, etc. to Trustee. Any request,
demand, authorization, direction, notice, consent, waiver or act of the Owners
or other documents provided or permitted by this Agreement to be made upon,
given or furnished to, or filed with the Trustee by any Owner or by the
Depositor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 12.19 hereof.
Section 12.5. Notices and Reports to Owners; Waiver of
Notices. Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such report. In
any case where a notice or report to Owners is mailed in the manner provided
above, neither the failure to mail such notice or report nor any defect in any
notice or report so mailed to any particular Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Owners shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Owners when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as the Depositor shall direct to the Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Certificates, failure to give such notice shall not affect any
other rights or obligations created hereunder.
Section 12.6. Rules by Trustee and Depositor. The Trustee
may make reasonable rules for any meeting of Owners. The Depositor may make
reasonable rules and set reasonable requirements for its functions.
Section 12.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 12.8. Severability. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 12.9. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, expressed or implied, shall give to any
Person, other than the Owners, the Certificate Insurer and the parties hereto
and their successors hereunder, any benefit or any legal or equitable right,
remedy or claim under this Agreement.
Section 12.10. Legal Holidays. In any case where the date
of any Remittance Date, any Payment Date, any other date on which any
distribution to any Owner is proposed to be paid, or any date on which a notice
is required to be sent to any Person pursuant to the terms of this Agreement
shall not be
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a Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Remittance Date, such Payment
Date, or such other date for the payment of any distribution to any Owner or the
mailing of such notice, as the case may be, and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next succeeding Business Day.
Section 12.11. Governing Law. This Agreement and each
Certificate shall be construed in accordance with and governed by the laws of
the State of New York applicable to agreements made and to be performed therein.
Section 12.12. Counterparts. This instrument may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 12.13. Usury. The amount of interest payable or
paid on any Certificate under the terms of this Agreement shall be limited to an
amount which shall not exceed the maximum nonusurious rate of interest allowed
by the applicable laws of the State of New York or any applicable law of the
United States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error and the Owner receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Trustee
on behalf of the Trust, refund the amount of such excess or, at the option of
such Owner, apply the excess to the payment of principal of such Certificate, if
any, remaining unpaid. In addition, all sums paid or agreed to be paid to the
Trustee for the benefit of Owners of Certificates for the use, forbearance or
detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Certificates.
Section 12.14. Amendment. The Depositor, the Master
Servicer and the Trustee, may at any time and from time to time, with the prior
written consent of the Certificate Insurer but without the consent of the
Owners, amend this Agreement, and the Trustee shall consent to such amendment,
for the purpose of (i) curing any ambiguity, or correcting or supplementing any
provision hereof which may be inconsistent with any other provision hereof, or
to add provisions hereto which are not inconsistent with the provisions hereof,
(ii) upon receipt of an opinion of counsel experienced in federal income tax
matters to the effect that no entity-level tax will be imposed on the Trust or
upon the transferor of a Residual Certificate as a result of the ownership of
any Residual Certificate by a Disqualified Organization, removing the
restriction on transfer set forth in Section 5.8(b) hereof or (iii) complying
with the requirements of the Code and the regulations proposed or promulgated
thereunder; provided, however, that any such action shall not, as evidenced by
an opinion of counsel delivered to the Trustee, materially and adversely affect
the interests of any Owner or materially and adversely affect (without its
written consent) the rights and interests of the Certificate Insurer.
This Agreement may also be amended by the Depositor, the
Master Servicer and the Trustee at any time and from time to time, with the
prior written approval of the Certificate Insurer and of not less than 66 2/3%
of the Percentage Interest represented by each affected Class of Certificates
then Outstanding, for the purpose of adding any provisions or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (a) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate or (b) reduce the aforesaid percentages of
Percentage Interests which are required to
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consent to any such amendments, without the consent of the Owners of all
Certificates of the Class or Classes affected then Outstanding.
The Trustee shall be entitled to receive upon request, and
shall be fully protected in relying in good faith upon, an opinion of counsel
reasonably acceptable to the Trustee stating that the execution of such
amendment is authorized or permitted by this Agreement.
Promptly after the execution of any such amendment, the
Trustee shall furnish written notification of the substance of such amendment to
each Owner and to the Rating Agencies.
The Certificate Insurer and the Owners, if they so request,
shall be provided with copies of any amendments to this Agreement, together with
copies of any opinions or other documents or instruments executed in connection
therewith.
The Trustee shall not be required to enter into any amendment
which affects its rights or obligations hereunder.
The definitions of "Group I Specified Subordinated Amount" and
"Group II Specified Subordinated Amount" may be amended by the Depositor, the
Master Servicer and the Trustee, with the consent of the Certificate Insurer, in
any respect without the consent of, or notice to, the Owners of any
Certificates; provided, (x) that the Certificate Insurer is not then in default,
(y) that the effect of such change would not be to alter materially (in the
judgment of the Depositor) the weighted average life of the related Class A
Certificates and (z) the then-current ratings on the related Class A
Certificates are not thereby reduced.
Section 12.15. REMIC Status; Taxes. (a) The Tax Matters
Person shall prepare and file or cause to be filed with the Internal Revenue
Service Federal tax or information returns with respect to each REMIC and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations, and shall
furnish to Owners such statements or information at the times and in such manner
as may be required thereby. For this purpose, the Tax Matters Person may, but
need not, rely on any proposed regulations of the United States Department of
the Treasury. The Tax Matters Person shall indicate the election to treat each
REMIC as a REMIC (which election shall apply to the taxable period ending
December 31, 1996 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may prescribe. The Trustee, as Tax Matters
Person appointed pursuant to Section 12.17 hereof shall sign all tax information
returns filed pursuant to this Section 12.16. The Tax Matters Person shall
provide information necessary for the computation of tax imposed on the transfer
of a Residual Certificate to a Disqualified Organization, or an agent of a
Disqualified Organization, or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Trustee shall not be
required to file a separate tax return for the Supplemental Interest Trust.
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local governmental
authority having jurisdiction over the Trust, including other reports that must
be filed with the Owners, such as the Internal Revenue Service's Form 1066 and
Schedule Q and the form required under Section 6050K of the Code, if applicable
to REMICs. Furthermore, the Tax Matters Person shall report to Owners, if
required, with respect to the allocation of expenses pursuant to Section 212 of
the Code in accordance with the specific instructions to the Tax Matters Person
by the Depositor with respect to such allocation of expenses. The Tax Matters
Person shall collect any forms or reports from the Owners determined by the
Depositor to be required under applicable federal, state and local tax laws.
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(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6) of the
Code the information described in Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto.
(d) The Depositor covenants and agrees to within ten
Business Days after the Startup Day provide to the Trustee any information
necessary to enable the Trustee to meet its obligations under subsections (b)
and (c) above.
(e) The Trustee, the Depositor and the Master Servicer
each covenants and agrees for the benefit of the Owners (i) to take no action
which would result in the termination of "REMIC" status for any of the REMICs,
(ii) not to engage in any "prohibited transaction", as such term is defined in
Section 860F(a)(2) of the Code and (iii) not to engage in any other action which
may result in the imposition on the Trust of any other taxes under the Code,
including, without limitation, for purposes of this paragraph any alteration,
modification, amendment, extension, waiver or forbearance with respect to any
Mortgage Loan.
(f) The Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
(g) No Eligible Investment shall be sold prior to its
stated maturity (unless sold pursuant to a plan of liquidation in accordance
with Article VIII hereof).
(h) Neither the Depositor nor the Trustee shall enter into
any arrangement by which the Trustee will receive a fee or other compensation
for services rendered pursuant to this Agreement, which fee or other
compensation is paid from the Trust Estate, other than as expressly contemplated
by this Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee, the Depositor may engage in any of the transactions prohibited by such
clauses, provided that the Trustee shall have received an opinion of counsel
experienced in federal income tax matters to the effect that such transaction
does not result in a tax imposed on the Trust or cause a termination of REMIC
status for any of the REMICs; provided, however, that such transaction is
otherwise permitted under this Agreement.
Section 12.16. Additional Limitation on Action and
Imposition of Tax. (a) Any provision of this Agreement to the contrary
notwithstanding, the Trustee shall not, without having obtained an opinion of
counsel experienced in federal income tax matters to the effect that such
transaction does not result in a tax imposed on the Trust or cause a termination
of REMIC status for either REMIC, (i) sell any assets in the Trust Estate, (ii)
accept any contribution of assets after the Startup Day or (iii) agree to any
modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" as defined in Section 860G(c) of the Code, on any
contribution to either REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, such tax shall be paid by (i) the
Trustee, if such tax arises out of or results from the Trustee's negligence or
willful misconduct, (ii) the Master Servicer, if such tax arises out of or
results from a breach by the Master Servicer of any of its obligations under
this Agreement, or otherwise (iii) the Owners of the Residual Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Owners of the Residual Certificates,
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notwithstanding anything to the contrary contained herein, the Trustee is hereby
authorized to retain from amounts otherwise distributable to the Owners of the
Residual Certificates on any Payment Date sufficient funds for the payment of
such tax.
Section 12.17. Appointment of Tax Matters Person. A Tax
Matters Person will be appointed by the Owners of the Residual Certificates for
all purposes of the Code and such Tax Matters Person will perform, or cause to
be performed, such duties and take, or cause to be taken, such actions, as are
required to be performed or taken by the Tax Matters Person under the Code. The
Trustee hereby agrees to act as the Tax Matters Person (and the Trustee is
hereby appointed by the Owners of the Residual Certificates as the Tax Matters
Person) for each REMIC held by the Trust.
Section 12.18. Reports to the Securities and Exchange
Commission. The Trustee shall, on behalf of the Trust, cause to filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder. Upon
the request of the Trustee, each of the Master Servicer and the Depositor shall
cooperate with the Trustee in the preparation of any such report and shall
provide to the Trustee in a timely manner all such information as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section.
Section 12.19. Notices. All notices hereunder shall be
given as follows, until any superseding instructions are given to all other
Persons listed below:
The Master
Servicer:
The Depositor: Home Equity Securitization Corp.
The Trustee:
The Certificate
Insurer:
Underwriters:
Section 12.20. Grant of Security Interest. It is the
express intent of the parties hereto that the conveyance of the Mortgage Loans
and all other assets constituting the Trust Estate by the Depositor to the Trust
be, and be construed as, a sale of the Mortgage Loans and such other assets
constituting the Trust Estate by the Depositor and not a pledge by the Depositor
to secure a debt or other obligation of the Depositor. However, in the event
that, notwithstanding the aforementioned intent of the parties, the Mortgage
Loans and other assets constituting the Trust Estate are held to be property of
the Depositor, then (a) it is the express intent of the parties that such
conveyance be deemed as a pledge of the Mortgage Loans and all other assets
constituting the Trust Estate to the Trust to secure a debt or other obligation
of the Depositor and this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code and the conveyance provided
for in Section 3.3 hereof shall be deemed a grant by the Depositor to the Trust
of a security interest in all of the Depositor's right, title and interest in
and to the Mortgage Loans and all other assets constituting the Trust Estate.
Accordingly, the Depositor hereby grants to the Trustee a
security interest in the Mortgage Loans and all other assets constituting the
Trust Estate for the purpose of securing to the Trust
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the performance by the Depsitor of the obligations under this Agreement.
Notwithstanding the foregoing, the parties hereto intend the conveyance pursuant
to Section 3.3 to be a true, absolute and unconditional sale of the Mortgage
Loans and all other assets constituting the Trust Estate by the Depositor to the
Trust. The Depositor shall take such actions, and the Trustee shall take such
actions as directed in writing by the Depositor, as may be necessary to ensure
that if this Agreement were deemed to create a security interest, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such for the term of this
Agreement. Without limiting the generality of the foregoing, the Depositor shall
file, or shall cause to be filed, all filings necessary to maintain the
effectiveness of any original filings necessary under the Uniform Commercial
Code to perfect the Trustee's security interest in or lien on the Mortgage Loans
for the benefit of the Owners, including, without limitation, (x) continuation
statements and (y) such other statements as may be occasioned by (i) any change
of name of the Depositor or Trustee, (ii) any change of location of the place of
business or the chief executive office of the Depositor or (iii) any transfer of
any interest of the Depositor in any Mortgage Loan; provided, however, that with
respect to clauses (i) through (iii) above, the Depositor shall notify the
Trustee of any changes related thereto.
Section 12.21. Indemnification.
(a) The Master Servicer agrees to indemnify and hold the
Trustee, the Depositor, the Certificate Insurer, each Certificateholder harmless
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any other reasonable costs, fees
and expenses that were caused by (i) the failure of the Master Servicer to
perform its duties and service the Mortgage Loans in compliance with the terms
of this Agreement and the Servicing Standards and (ii) a breach of any of the
Master Servicer's representations, covenants and warranties contained in this
Agreement. This indemnity shall survive the termination of this Agreement and
the payment of the Mortgage Loans, provided, that the Master Servicer shall have
no liability to indemnify any such indemnified party under this Agreement to the
extent that any such losses, penalties, fines, forfeitures, costs, fees,
judgments, liabilities, damages, claims or expenses were caused by the
negligence, willful misconduct or bad faith of such indemnified party. If the
Master Servicer shall have made any indemnity payment pursuant to this Section
12.21(a) and the recipient thereafter collects from another Person any amount
relating to the matters covered by the foregoing indemnity, the recipient shall
promptly repay such amount to the Master Servicer.
Promptly after receipt by any of the above-mentioned
indemnified parties of notice of any claim or commencement of any action
discussed above, such indemnified party shall, if a claim in respect thereof is
to be made against the Master Servicer, promptly notify the Master Servicer in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the Master Servicer shall not relieve it from any
liability which it may have under this Section 12.21(a) except to the extent it
has been materially prejudiced by such failure; and provided, further, that the
failure to notify the Master Servicer shall not relieve it from any liability
which it may have to the above-mentioned indemnified parties otherwise than
under this Section 12.21(a).
(b) The Depositor agrees to indemnify and hold the Master
Servicer, the Depositor, the Certificate Insurer, the Trustee, each
Certificateholder harmless against any and all claims, losses, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments and other
reasonable costs, fees and expenses that were caused by (i) the failure of the
Depositor to perform its duties in accordance with the terms of this Agreement
or (ii) a breach of any of the Depositor's representations, covenants, and
warranties contained in this Agreement. This indemnity shall survive the
termination of this Agreement, the payment of the Mortgage Loans and the removal
or resignation of the Trustee; provided, that the Depositor shall have no
liability to indemnify any such indemnified party under this Agreement to the
extent that any such losses, penalties, fines, forfeitures, costs, fees and
judgments, liabilities, damages,
105
claims or expenses were caused by the negligence, willful misconduct or bad
faith of such indemnified party. If the Depositor shall have made any indemnity
payment pursuant to this Section 12.21 and the recipient thereafter collects
from another Person any amount relating to the matters covered by the foregoing
indemnity, the recipient shall promptly repay such amount to the Depositor.
Promptly after receipt by any of the above-mentioned
indemnified parties of notice of any claim or commencement of any action
discussed above, such indemnified party shall, if a claim in respect thereof is
to be made against the Depositor, promptly notify the Depositor in writing of
the claim or the commencement of that action; provided, however, that the
failure to notify the Depositor shall not relieve it from any liability which it
may have under this Section 12.21(b) except to the extent it has been materially
prejudiced by such failure; and provided, further, that the failure to notify
the Depositor shall not relieve it from any liability which it may have to the
above-mentioned indemnified parties otherwise than under this Section 12.21(b).
(c) The Depositor hereby covenants and agrees to
indemnify, exonerate and hold the Master Servicer, the Depositor, the Trustee,
the Trust Estate, the Owners, the Certificate Insurer, their respective
directors, officers, agents and employees (collectively, the "Indemnified
Persons") harmless from and against any and all damages, losses, liabilities,
obligations, penalties, fines, claims, litigation, demands, defenses, judgments,
suits, proceedings, costs, disbursements or expenses (including, without
limitation, reasonable attorneys' and experts' fees and disbursements as they
become due and without waiting for the ultimate outcome of the matter) of any
kind or of any nature whatsoever which may at any time be imposed upon, incurred
by or asserted or awarded against any Indemnified Person arising from or out of
any Hazardous Substances (as defined below) on, in, under or affecting all or
any portion of any of the Properties. The matters covered by the foregoing
indemnity shall include, without limitation, all of the following: (i) the costs
of removal of any and all Hazardous Substances from all or any portion of the
Properties or any adjacent property, (ii) the costs required to take necessary
precautions to protect against the release of Hazardous Substances on, in, under
or affecting any of the Properties into the air, ground, water, other public
domain or any adjacent property to the extent required by applicable
Environmental Laws or any governmental authority, including, without limitation,
the costs and expenses of environmental testing and assessments, and (iii) the
costs incurred to comply, in connection with all or any portion of the
Properties, with all applicable Environmental Laws, including without limitation
fines, penalties, and administrative and overhead costs charged by any
governmental entity.
The obligations of the Depositor under this Section to
compensate the Indemnified Persons and to reimburse them for expenses
(including, without limitation, litigation expenses), disbursements and advances
shall survive the termination of this Agreement and the resignation or removal
of the Trustee, and continue thereafter for so long as any liability or expenses
indemnified against may be imposed under applicable Environmental Law (as
defined below) against any Indemnified Person.
(d) In no event shall any Person be indemnified for any
losses, expenses, damages, claims or liabilities incurred by such Person by
reason of such Person's (or such Person's agents) willful malfeasance, bad faith
or negligence.
"Hazardous Substance" shall include, without limitation: (i)
those substances included within the definitions of one or more of the terms
"hazardous substances," "hazardous materials" and "toxic substances" in CERCLA,
RCRA, and the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
▇▇.▇▇. 1801 et seq., and in the regulations promulgated pursuant to said laws
under applicable law; (ii) those substances listed in the United States
Department of Transportation Table (49 CFR 172 1 01 and amendments thereto) or
by the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); (iii) such other
substances, materials and wastes
106
as are or become regulated under applicable local, state or Federal laws or
regulations, or which are classified as hazardous or toxic under Federal, state,
or local laws or regulations; and (iv) any material, waste or substance which is
(a) petroleum; (b) friable asbestos; (c) polychlorinated biphenyls; (d)
designated as a "Hazardous Substance" pursuant to Section 311 of the Clean Water
Act, as amended, 13 U.S.C. ▇▇.▇▇. 1321 et seq. (33 U.S.C. ▇▇.▇▇. 1321) or
designated as "toxic pollutants" subject to Chapter 26 of the Clean Water Act
pursuant to Section 307 of the Clean Water Act (33 U.S.C. ▇▇.▇▇. 1317); (e)
flammable explosive; or (f) radioactive materials.
"Environmental Law" shall mean any Federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, ordinance or other requirement
relating to public health, safety or the environment, including, without
limitation, those relating to releases, discharges or emissions to air, water,
land or ground water, to the withdrawal or use of groundwater, to the use and
handling of polychlorinated biphenyls or asbestos, to the disposal, treatment,
storage or management of hazardous or solid waste, or Hazardous Substances or
crude oil, or any fraction thereof, or to exposure to toxic hazardous materials,
to the handling, transportation, discharge or release of gaseous or liquid
Hazardous Substances and any regulation, order, notice or demand issued pursuant
to such law, statute or ordinance, in each case applicable to the property of
Borrower or the operation, construction or modification of any thereof,
including without limitation the following: CERCLA, the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976, the Safe Drinking Water Control Act, the
Clean Air Act of 1966, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1977, as amended, the Emergency Planning
and Community Right-to-Know Act of 1986, the National Environmental Policy Act
of 1975 and the Oil Pollution Act of 1990 and any similar or implementing state
law, and any state statute and any further amendments to these laws, providing
for financial responsibility for cleanup or other actions with respect to the
release or threatened release of Hazardous Substances or crude oil, or any
fraction thereof and all rules, regulations, guidance documents and publication
promulgated thereunder.
ARTICLE XIII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 13.1. Rights of the Certificate Insurer to
Exercise Rights of the Owners of the Class A Certificates. By accepting its
Certificate, each Owner of a Class A Certificate agrees that unless a
Certificate Insurer Default exists, the Certificate Insurer shall be deemed to
be the Class A Certificateholders for all purposes (other than with respect to
payment on the Class A Certificates) and will be entitled to exercise all rights
of the Class A Certificateholders under this Agreement.
In addition, each Owner of a Class A Certificate agrees that,
unless a Certificate Insurer Default exists, the rights specifically set forth
above may be exercised by the Owners of Class A Certificates only with the prior
written consent of the Certificate Insurer.
Section 13.2. Trustee to Act Solely with Consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Trustee
shall not:
(i) agree to any amendment to this Agreement; or
(ii) undertake any litigation pursuant to or in connection
with this Agreement; or
107
(iii) terminate or assume any Sub-Servicing Agreement
pursuant to this Agreement;
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld; provided, however, if a Certificate Insurer
Default occurs hereunder, the Trustee shall act hereunder without Certificate
Insurer consent.
Section 13.3. Trust Fund and Accounts Held for Benefit of
the Certificate Insurer. The Trustee shall hold the Trust Estate and the
Mortgage Files for the benefit of the Owners and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Owners 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 Master Servicer hereby acknowledges and agrees that it
shall service and administer the Mortgage Loans and any REO Properties, and
shall maintain the Principal and Interest Account, for the benefit of the Owners
and for the benefit of the Certificate Insurer, and all references in this
Agreement to the benefit of or actions on behalf of the Owners shall be deemed
to include the Certificate Insurer.
Section 13.4. Claims Upon the Policy; Policy Payments
Account. (a) The Trustee shall establish a separate special purpose trust
account for the benefit of Owners 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 Certificate Insurance Policy in
the Policy Payments Account and distribute such amount only for purposes of
payment to Owners of Class A Certificates of the Insured Payments for which a
claim was made and such amount may not be applied to satisfy any costs, expenses
or liabilities of the Master Servicer, the Trustee or the Trust. Amounts paid
under the Certificate Insurance Policy shall be transferred to the related Class
A Distribution Account in accordance with the next succeeding paragraph and
disbursed by the Trustee to Owners of Class A Certificates in accordance with
Section 7.3. 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
Insured Payments 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 (b) below in the Register and in the statement to be
furnished to Owners of the Certificates pursuant to Section 7.6. Funds held in
the Policy Payments Account shall not be invested by the Trustee.
On any Payment Date with respect to which a claim has been
made under the Certificate Insurance Policy, the amount of any funds received by
the Trustee as a result of any claim under the Certificate Insurance Policy, to
the extent required to pay the related Insured Distribution Amount on such
Payment Date shall be withdrawn from the Policy Payments Account and deposited
in the related Distribution Account and applied by the Trustee, together with
the other funds to be withdrawn from the related Distribution Account pursuant
to this Agreement, directly to the payment in full of the related Insured
Distribution Amount due on the related Class A Certificates. Funds received by
the Trustee as a result of any claim under the Certificate Insurance Policy
shall be deposited by the Trustee in the Policy Payments Account and used solely
for payment to the Owners of the Class A Certificates and may not be applied to
satisfy any costs, expenses or liabilities of the Master Servicer, the Trustee
or the Trust Fund. Any funds remaining in the Policy Payments Account on the
first Business Day following a Payment Date shall be remitted to the Certificate
Insurer, pursuant to the instructions of the Certificate Insurer, by the end of
such Business Day.
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(b) 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 Certificate Insurance 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.
(c) 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 of 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. Each Owner of a Class A Certificate, by its
purchase of Class A Certificates, the Master Servicer and the Trustee hereby
agree that, the Certificate Insurer (so long as no Certificate Insurer Default
exists) 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,
supersedeas 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 Master Servicer, the Trustee and each Owner of a Class A
Certificate 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 13.5. Effects of Payments by the Certificate
Insurer. To the extent that the Certificate Insurer makes Insured Payments it
will be entitled to receive the related Reimbursement Amounts, pursuant to
Section 7.3(b)(iii)(C) hereof.
The Trustee and the Master 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 Owners
as otherwise set forth herein.
Section 13.6. 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 Owners shall
also be sent to the Certificate Insurer.
Section 13.7. Third-Party Beneficiary. Subject to the
provisions below, the Certificate Insurer is a third party beneficiary of each
provision of this Agreement that creates a right of or benefit to the
Certificate Insurer. Any right conferred to the Certificate Insurer shall not
arise until the issuance by the Certificate Insurer of the Certificate Insurance
Policy and shall be suspended during any Certificate Insurer Default described
in clause (a) of the definition thereof (except that subrogation rights which
have previously arisen shall not be so suspended). During the period of any such
suspension, such rights shall vest in the Owners of the Class A Certificates,
and may be exercised by the Owners of a majority in Percentage Interest of each
Class of Class A Certificates then Outstanding or, if there are no Class A
Certificates then Outstanding, by such Percentage Interest represented by the
Class B Certificates then Outstanding.
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109
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
----------,
as Depositor
By: _________________________________
Name:
Title:
----------,
as Master Servicer
By: _________________________________
Name:
Title:
HOME EQUITY SECURITIZATION CORP.,
as Depositor
By: _________________________________
Name:
Title:
----------,
as Trustee
By: _________________________________
Name:
Title:
[Pooling and Servicing Agreement]