Exhibit 4.1
EXECUTION COPY
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NORWEST ASSET ACCEPTANCE CORPORATION
as Depositor,
NORWEST MORTGAGE, INC.,
as Seller and Servicer,
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Certificate Administrator,
and
FIRST UNION NATIONAL BANK,
as Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of April 30, 1998
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Asset Backed Certificates, Series 1998-HE1
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TABLE OF CONTENTS
ARTICLE I
Definitions
Section 1.01. Definitions.................................................... 1
Section 1.02. Interest Calculations......................................... 23
ARTICLE II
Conveyance of Home Equity Loans; Original Issuance of Certificates; Tax
Treatment
Section 2.01. Conveyance of Home Equity Loans............................... 24
Section 2.02. Acceptance by Trustee......................................... 28
Section 2.03. Representations and Warranties Regarding the Servicer,
the Seller and the Certificate Administrator.................. 28
Section 2.04. Representations and Warranties of the Seller Regarding the
Home Equity Loans............................................. 31
Section 2.05. Representations and Warranties of the Depositor............... 36
Section 2.06. Substitution of Home Equity Loans............................. 37
Section 2.07. Execution and Authentication of Certificates.................. 38
Section 2.08. Designation of Interests in REMIC............................. 38
Section 2.09. REMIC Startup Day and Certificate Maturity Date............... 39
Section 2.10. Tax Returns and Reports to Certificateholders................. 39
Section 2.11. Tax Matters Person............................................ 39
Section 2.12. REMIC Related Covenants....................................... 40
ARTICLE III
Administration and Servicing of Home Equity Loans
Section 3.01. The Servicer.................................................. 43
Section 3.02. Collection of Certain Home Equity Loan Payments............... 45
Section 3.03. Withdrawals from the Collection Account and Deposits to the
Certificate Account........................................... 46
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy........... 47
Section 3.06. Fidelity Bond................................................. 48
Section 3.07. Management and Realization Upon Defaulted Home Equity Loans... 49
Section 3.08. Trustee to Cooperate.......................................... 50
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
Servicer and the Trustee...................................... 51
Section 3.10. Annual Statement as to Compliance............................. 51
Section 3.11. Annual Servicing Report....................................... 52
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Page
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Section 3.12. Access to Certain Documentation and Information Regarding
the Home Equity Loans......................................... 52
Section 3.13. Maintenance of Certain Servicing Insurance Policies........... 52
Section 3.14. Reports to the Securities and Exchange Commission............. 52
Section 3.15. Reports of Foreclosures and Abandonments of Mortgaged
Property, Returns Relating to Mortgage Interest Received
from Individuals and Returns Relating to Cancellation of
Indebtedness.................................................. 53
Section 3.16. Advances...................................................... 53
Section 3.17. Optional Purchase of Defaulted Home Equity Loans.............. 54
Section 3.18. Special Servicing............................................. 54
Section 3.19. Assumption Agreements......................................... 54
Section 3.20. Payment of Taxes, Insurance and Other Charges................. 55
Section 3.21. The Certificate Administrator................................. 56
ARTICLE IV
[RESERVED]
ARTICLE V
Payments and Statements to Certificateholders; Rights of
Certificateholders
Section 5.01. Distributions................................................. 57
Section 5.02. Calculation of the Pass-Through Rate.......................... 58
Section 5.03. The Certificate Insurance Policy.............................. 58
Section 5.04. Compensating Interest......................................... 60
Section 5.05. Statements.................................................... 60
Section 5.06 Effect of Payments by the Certificate Insurer; Subrogation.... 63
Section 5.07. Certificate Account........................................... 64
Section 5.08. Investment of Accounts........................................ 64
ARTICLE VI
The Certificates
Section 6.01. The Certificates.............................................. 66
Section 6.02. Registration of Transfer and Exchange of Certificates......... 66
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates............. 71
Section 6.04. Persons Deemed Owners......................................... 71
Section 6.05. Appointment of Paying Agent................................... 71
ARTICLE VII
The Seller, the Servicer, the Certificate Administrator and the Depositor
Section 7.01. Liability of the Seller, the Servicer, the Certificate
Administrator and the Depositor............................... 73
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Page
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Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Seller, the Servicer, the Certificate Administrator
or the Depositor.............................................. 73
Section 7.03. Limitation on Liability of the Servicer and Others............ 73
Section 7.04. Servicer Not to Resign........................................ 74
Section 7.05. Delegation of Duties.......................................... 74
Section 7.06. Indemnification of the Trustee, the Certificate Administrator
and the Depositor by the Servicer............................. 74
Section 7.07. Removal of the Certificate Administrator...................... 74
ARTICLE VIII
Default
Section 8.01. Events of Default............................................. 77
Section 8.02. Trustee to Act; Appointment of Successor...................... 78
Section 8.03. Waiver of Defaults............................................ 79
Section 8.04. Notification to Certificateholders............................ 79
Section 8.05. Home Equity Loans and Accounts Held for Benefit of the
Certificate Insurer........................................... 80
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee............................................. 81
Section 9.02. Certain Matters Affecting the Trustee......................... 82
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans...... 83
Section 9.04. Trustee May Own Certificates.................................. 84
Section 9.05. Trustee's Fees and Expenses................................... 85
Section 9.06. Eligibility Requirements for Trustee.......................... 85
Section 9.07. Resignation or Removal of Trustee............................. 85
Section 9.08. Successor Trustee............................................. 86
Section 9.09. Merger or Consolidation of Trustee............................ 86
Section 9.10. Appointment of Co-Trustee or Separate Trustee................. 87
Section 9.11. Limitation of Liability....................................... 88
Section 9.12. Trustee May Enforce Claims Without Possession of Certificates. 88
Section 9.13. Suits for Enforcement......................................... 88
ARTICLE X
Termination
Section 10.01. Termination................................................... 89
Section 10.02. Additional Termination Requirements........................... 90
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment..................................................... 92
Section 11.02. Recordation of Agreement...................................... 93
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Page
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Section 11.03. Limitation on Rights of Certificateholders................... 93
Section 11.04. Governing Law................................................ 94
Section 11.05. Notices...................................................... 94
Section 11.06. Severability of Provisions................................... 94
Section 11.07. Assignment................................................... 95
Section 11.08. Certificates Nonassessable and Fully Paid.................... 95
Section 11.09. Third-Party Beneficiaries.................................... 95
Section 11.10. Counterparts................................................. 95
Section 11.11. Effect of Headings and Table of Contents..................... 95
EXHIBIT A - FORM OF CLASS A CERTIFICATE............................... A-1
EXHIBIT B - FORM OF RESIDUAL CERTIFICATE.............................. B-1
EXHIBIT C - HOME EQUITY LOAN SCHEDULE................................. C-1
EXHIBIT D - RESERVED.................................................. D-1
EXHIBIT E - TRANSFER AFFIDAVIT........................................ E-1
EXHIBIT F - FORM OF REQUEST FOR RELEASE............................... F-1
EXHIBIT G-1 - FORM OF INVESTMENT LETTER................................. G-1-1
EXHIBIT G-2 - FORM OF RULE 144A LETTER.................................. G-2-1
EXHIBIT H - FORM OF TRANSFEROR LETTER................................. H-1
EXHIBIT I - FORM OF SPECIAL SERVICING AGREEMENT....................... I-1
EXHIBIT J - FORM OF INITIAL CERTIFICATION OF TRUSTEE.................. J-1
EXHIBIT K - FORM OF FINAL CERTIFICATION OF TRUSTEE.................... K-1
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This Pooling and Servicing Agreement, dated as of April 30, 1998, among
Norwest Asset Acceptance Corporation, as Depositor (the "Depositor"), Norwest
Mortgage, Inc. ("Norwest Mortgage"), as Seller (the "Seller") and Servicer (the
"Servicer"), Norwest Bank Minnesota, National Association ("Norwest Bank"), as
Certificate Administrator (the "Certificate Administrator"), and First Union
National Bank, as Trustee (the "Trustee").
W I T N E S S E T H T H A T:
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In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the following
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words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Accounts: Collectively, the Collection Account, the Certificate Account
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and the Certificate Insurance Payments Account.
Accrual Period: With respect to any Distribution Date other than the first
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Distribution Date, the period beginning from and including the preceding
Distribution Date to and including the day preceding such Distribution Date, and
in the case of the first Distribution Date, the period beginning on the Closing
Date and ending on the day preceding the first Distribution Date.
Administration Fee: The amount payable to the Certificate Administrator,
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on any Distribution Date equal to one-twelfth of the product of (i) the
Administration Fee Rate and (ii) the Pool Balance as of the preceding
Distribution Date. Such amount shall be calculated and payable monthly only
from the amounts received in respect of interest on the Home Equity Loans and
shall be computed on the basis of the same principal amounts and for the period
respecting which any related interest payment on the Home Equity Loans is
computed.
Administration Fee Rate: 0.035% per annum.
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Advance: An advance made by the Servicer or the Trustee pursuant to
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Section 3.16 hereof.
Affiliate: With respect to any Person, any other Person controlling,
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controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
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and supplements hereto.
Amount Held for Future Distribution: As to any Distribution Date, the
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aggregate amount held in the Collection Account at the close of business on the
immediately preceding Determination Date on account of (i) all Scheduled Monthly
Payments received in respect of principal and interest of the Home Equity Loans
due after the related Due Period which do not constitute Principal Prepayments
and (ii) Principal Prepayments and Liquidation Proceeds received in respect of
such Home Equity Loans after the last day of the related Prepayment Period.
Amount Available: As to any Distribution Date, the sum of (i) the
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Available Funds and (ii) Insured Amounts, in each case with respect to such
Distribution Date.
ARMs: A Home Equity Loan the Mortgage Rate of which adjusts on each Change
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Date by reference to the applicable Mortgage Index, subject to the applicable
Periodic Rate Cap, Lifetime Floor and Lifetime Cap.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
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notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Home Equity Loans secured by Mortgaged
Properties located in the same jurisdiction.
Available Funds: As to any Distribution Date, the sum (without
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duplication) of: (i) the aggregate amount on deposit in the Collection Account
as of the close of business on the immediately preceding Determination Date, and
(ii) the amounts deposited in the Certificate Account on the Servicer Advance
Date pursuant to Section 3.03(b), reduced by the sum of (x) the Amount Held for
Future Distribution and (y) amounts permitted to be withdrawn from the
Collection Account pursuant to clauses (i) - (viii), inclusive, of Section
3.03(a).
Available Funds Adjustment: As of any Distribution Date (a) prior to the
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thirteenth Distribution Date, an amount equal to zero and (b) on or after the
thirteenth Distribution Date, an amount equal to the product of (i) the Pool
Balance as of the preceding Distribution Date and (ii) one-twelfth of 0.50% (50
basis points).
Available Funds Cap: As of any Distribution Date, a per annum rate equal
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to the fraction, expressed as a percentage, obtained by dividing (x) (i) with
respect to all Home Equity Loans, the amount of interest due on the Due Dates
relating to such Distribution Date, reduced by (ii) the sum of (a) the Servicing
Fee, the Administration Fee and the Premium Amount for such Distribution Date
and (b) the Available Funds Adjustment for such Distribution Date by (y) the
product of (i) the Class Certificate Principal Balance of the Class A
Certificates as of the close of business on the first day of the related Accrual
Period and (ii) the actual number of days elapsed during such Accrual Period
divided by 360.
Basis Risk Carryover Amount: As of any Distribution Date and for the Class
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A Certificates is equal to the sum of (a) if on such Distribution Date the Pass-
Through Rate for the Class A Certificates is based upon the Available Funds Cap,
the excess of (i) the amount of interest the Class A Certificates would
otherwise be entitled to receive on such Distribution Date had such rate been
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calculated at the Formula Pass-Through Rate for such Distribution Date, over
(ii) the amount of interest payable on the Class A Certificates at the Available
Funds Cap for such Distribution Date and (b) the unpaid Basis Risk Carryover
Amount immediately following the preceding Distribution Date with interest
thereon at the Formula Pass-Through Rate applicable to the current Distribution
Date.
BBA: British Banker's Association.
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BIF: The Bank Insurance Fund, as from time to time constituted, created
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under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Book-Entry Certificate: Any Class A Certificate registered in the name of
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the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
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on which banking institutions in the State of New York, the State of Maryland,
the State of North Carolina, the city in which the Corporate Trust Office is
located or the city in which the Certificate Insurer is located, are authorized
or obligated by law or executive order to be closed.
Capitalized Advance: As defined in Section 3.01(f).
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Carry-Forward Amount: As of any Distribution Date equals the sum of (i)
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the amount, if any, by which (a) the Interest Distribution Amount for the Class
A Certificates for the immediately preceding Distribution Date exceeded (b) the
amount of the actual distribution with respect to interest on the Class A
Certificates made to the Holders of the Class A Certificates on such immediately
preceding Distribution Date and (ii) 30 days' interest on such excess at the
Pass-Through Rate for such Distribution Date.
Certificate: Any Regular Certificate or Residual Certificate.
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Certificate Account: The trust account established and maintained by the
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Trustee on behalf of the Certificateholders and the Certificate Insurer pursuant
to Section 5.07. The Certificate Account shall be an Eligible Account.
Certificate Administrator: Norwest Bank Minnesota, National Association or
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any successor thereto or any successor hereunder.
Certificate Insurance Payments Account: As defined in Section 5.03(c).
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Certificate Insurance Policy: The certificate guaranty insurance policy
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(number AB0167BE) issued by the Certificate Insurer for the benefit of the
Owners of the Class A Certificates pursuant to which the Certificate Insurer
guarantees Insured Amounts.
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Certificate Insurer: Ambac Assurance Corporation, a stock insurance
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company organized and created under the laws of the State of Wisconsin and any
successor thereto, as issuer of the Certificate Insurance Policy.
Certificate Insurer Default: The existence and continuance of any of the
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following:
(a) the Certificate Insurer fails to make a payment required under
the Certificate Insurance Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the Wisconsin 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 Wisconsin 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 Wisconsin 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 Certificate Insurer of all or any
material portion of its property.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
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Certificate.
Certificate Register and Certificate Registrar: The register maintained
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and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
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registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Class A Certificate registered in the name of the Depositor or any Person
known to a Responsible Officer to be an Affiliate of the Depositor and (y) any
Class A Certificate for which the Depositor or any Person known to a Responsible
Officer to be an Affiliate of the Depositor is the Certificate Owner shall be
deemed not to be outstanding (unless to the knowledge of a Responsible Officer
(i) the Depositor or such Affiliate is acting as trustee or nominee for a Person
who is not an Affiliate of such Depositor and who makes the voting decision with
respect to such Class A Certificates or (ii) the Depositor or such Affiliate is
the Certificate Owner of all the Class A Certificates) and the Percentage
Interest evidenced thereby shall not be taken into account in determining
whether the requisite amount of Percentage Interests necessary to effect any
such consent, direction, waiver or request has been obtained.
Change Date: With respect to each ARM, the date or dates on which the
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Mortgage Rate is adjusted in accordance with the related Mortgage Note.
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Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
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amended.
Civil Relief Act Interest Shortfall: With respect to any Distribution
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Date, for any Home Equity Loan as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Due Period as
a result of the application of the Civil Relief Act, is the amount, if any, by
which (i) interest collectible on such Home Equity Loan during the most recently
ended Due Period is less than (ii) the sum of (a) the Stated Principal Balance
of such Home Equity Loan as of the preceding Distribution Date multiplied by
one-twelfth of the Pass-Through Rate on the Class A Certificates for such
Distribution Date and (b) the product of (1) a fraction, the numerator of which
is the Stated Principal Balance of such Home Equity Loan and the denominator of
which is the Pool Balance, each as of the prior Distribution Date and (2) the
sum of the Premium Amount, the Servicing Fee and the Administration Fee payable
to the Certificate Insurer, the Servicer or the Certificate Administrator, as
applicable, for such Due Period.
Class: As to the Certificates, the Regular Certificates or Residual
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Certificates.
Class A Certificate: Any certificate executed and authenticated by the
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Trustee substantially in the form set forth in Exhibit A hereto.
Class A Certificateholder: A Holder of a Class A Certificate.
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Class Certificate Principal Balance: With respect to the Class A
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Certificates as of any date of determination, the Original Class Certificate
Principal Balance thereof reduced by the sum of all amounts previously
distributed thereto in respect of principal on all previous Distribution Dates.
The Class R Certificates have no Class Certificate Principal Balance.
Class R Certificate. Any certificate executed and authenticated by the
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Trustee substantially in the form set forth in Exhibit B thereto.
Closing Date: April 30, 1998.
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CMT: The weekly average yield on United States treasury securities
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adjusted to a constant maturity of one year, as made available by the Federal
Reserve Board as of the date 45 days (as set forth in the related Mortgage Note)
before the applicable Change Date.
CMT Loan: An ARM for which the Mortgage Index is CMT.
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Code: The Internal Revenue Code of 1986, as the same may be amended from
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time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created by the
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Servicer and maintained for the benefit of the Certificateholders and the
Certificate Insurer pursuant to Section 3.02(b). The Collection Account shall
be an Eligible Account.
Compensating Interest: As to any Distribution Date, the amount calculated
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pursuant to Section 5.04.
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Corporate Trust Office: The principal office of the Trustee at which at
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any particular time its corporate business shall be administered, which office
on the Closing Date is located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Norwest Asset Acceptance Corporation Asset
Backed Certificates, Series 1998-HE1.
Cut-Off Date: The close of business on April 1, 1998.
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Cut-Off Date Pool Stated Principal Balance: $219,697,288.90.
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Cut-Off Date Stated Principal Balance: With respect to any Home Equity
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Loan, the unpaid scheduled principal balance thereof as of the Cut-Off Date (or
as of the applicable date of substitution with respect to an Eligible Substitute
Home Equity Loan pursuant to Section 2.02 or 2.04 and set forth on Exhibit C).
Defective Home Equity Loan: Any Home Equity Loan subject to repurchase or
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substitution pursuant to Section 2.02 or 2.04.
Deficiency Amount: As of any Distribution Date is an amount equal to the
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excess of (i) the sum of (a) the Interest Distribution Amount for such
Distribution Date, (b) the Subordination Deficit and (c) on the Final Scheduled
Distribution Date, the Class Certificate Principal Balance of the Class A
Certificates (after application of any Principal Distribution Amount to be paid
with respect to such date) over (ii) Available Funds (after any deduction for
the Premium Amount and the Administration Fee and after taking into account the
portion of the Principal Distribution Amount to be actually distributed on such
Distribution Date without regard to any related Insured Amount to be paid with
respect to such Distribution Date).
Definitive Certificates: As defined in Section 6.02(c).
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Delinquency Trigger Event: A Delinquency Trigger Event will have occurred
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with respect to any Distribution Date if the average Stated Principal Balance of
Home Equity Loans in the Trust more than 60 days delinquent for the current
Distribution Date and the preceding five Distribution Dates, is greater than 10%
of the average Pool Balance for the current Distribution Date and the preceding
five Distribution Dates. A Delinquency Trigger Event will be deemed to have
terminated as to any Distribution Date (subject to the reoccurrence of such
event), if a Delinquency Trigger Event shall not have occurred as of such
Distribution Date.
Depositor: Norwest Asset Acceptance Corporation, a Delaware corporation,
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or any successor thereto.
Depository: The initial Depository shall be The Depository Trust Company
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("DTC"), the nominee of which is Cede & Co. The Depository shall at all times
be a "clearing corporation" as defined in Section 8-102(3) of the UCC of the
State of New York.
Depository Participant: A broker, dealer, bank or other financial
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institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
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Determination Date: With respect to any Distribution Date, the 17th day of
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the month in which such Distribution Date occurs, or if such 17th Day is not a
Business Day, the Business Day preceding such 17th day.
Distribution Date: The 25th day of each month, or if such day is not a
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Business Day, then the next Business Day, beginning in the month immediately
following the month of the initial issuance of the Certificates.
Due Date: As to any Home Equity Loan, the day of the month on which the
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Scheduled Monthly Payment is due from the Mortgagor, which is the 1st day of
each month for each of the Home Equity Loans.
Due Period: With respect to each Distribution Date, the period beginning
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on the 2nd day of the calendar month preceding the calendar month in which such
Distribution Date occurs and ending on the 1st day of the month in which such
Distribution Date occurs.
Electronic Ledger: The electronic master record of Home Equity Loans
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maintained by the Servicer.
Eligible Account: An account that is either (i) maintained with a
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depository institution (which may be the Servicer or an Affiliate thereof) whose
long-term debt obligations (or in the case of a depository institution that is
part of a holding company structure, the long-term debt obligations of such
parent holding company) are rated in one of the two highest rating categories by
each of the Rating Agencies, (ii) the deposits in which are fully insured by the
FDIC through either the BIF or the Savings Association Insurance Fund (to the
limit established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured, as evidenced by an Opinion of Counsel delivered to the
Trustee, such that the Trustee, on behalf of the Certificateholders and the
Certificate Insurer, has a claim with respect to the funds in such accounts or a
perfected first security interest against any collateral securing such funds
that is superior to claims of any other depositors or creditors of the
depository institution with which such accounts are maintained, (iii) that are
trust accounts maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity or (iv) an account or accounts otherwise acceptable to each Rating
Agency and the Certificate Insurer, as evidenced by a letter from such Rating
Agency to the Trustee, and that would not cause the Trust to fail to qualify as
a REMIC.
Eligible Substitute Home Equity Loan: A Home Equity Loan substituted by
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the Seller for a Defective Home Equity Loan which must, on the date of such
substitution, (i) have a Stated Principal Balance, after deduction of the
principal portion of the scheduled payment due in the month of substitution, not
in excess of, and not less than 90% of, the Stated Principal Balance of the
Defective Home Equity Loan (the amount of any shortfall to be deposited by the
Seller in the Collection Account not later than the succeeding Determination
Date and held for distribution to the holders of Certificates on the related
Distribution Date), (ii) (A) in the case of a Defective Home Equity Loan which
is an ARM: (1) have a Lifetime Cap not more than 1% per annum higher or lower
than the Lifetime Cap of the Defective Home Equity Loan, (2) have a Lifetime
Floor not more than 1% per annum higher and not lower than the Lifetime Floor of
the Defective Home Equity Loan and (3) have
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the same Mortgage Index and Periodic Rate Cap as the Defective Home Equity Loan
and a Gross Margin not more than 1% per annum higher and not lower than that of
the Defective Home Equity Loan and (B) in the case of a Fixed Rate Loan: (1)
have a Mortgage Rate not more than 1% higher and not lower than the Mortgage
Rate of the Defective Home Equity Loan and (2) not be a balloon loan unless the
Defective Home Equity Loan was a balloon loan, (iii) be accruing interest at a
rate not more than 1% per annum higher and not lower than that of the Defective
Home Equity Loan, (iv) have a Loan-to-Value Ratio no higher than that of the
Defective Home Equity Loan, (v) have a remaining term to maturity not greater
than (and not more than one year less than) that of the Defective Home Equity
Loan, (vi) not permit conversion of the related adjustable Mortgage Rate to a
fixed Mortgage Rate nor permit conversion of the related fixed Mortgage Rate to
an adjustable Mortgage Rate, (vii) be a first lien home equity loan, (viii)
constitute the same occupancy type as the Defective Home Equity Loan, (ix) have
a credit level the same as or higher than, that of the Defective Home Equity
Loan and (x) comply with each representation and warranty set forth in Section
2.04 (deemed to be made as of the date of substitution). More than one Eligible
Substitute Home Equity Loan may be substituted for a Defective Home Equity Loan
if such Eligible Substitute Home Equity Loans meet the foregoing attributes in
the aggregate.
Event of Default: As defined in Section 8.01.
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Excess Proceeds: With respect to any Liquidated Loan, the amount by which
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Liquidation Proceeds in respect of such Liquidated Loan exceeds the sum of (i)
the Stated Principal Balance of such Liquidated Loan as of the date of such
liquidation, (ii) interest at the related Mortgage Rate from the Due Date with
respect to which interest was last paid to Certificateholders up to the Due Date
in the month in which such Liquidation Proceeds are required to be distributed
on the Stated Principal Balance of such Liquidated Loan outstanding during each
Due Period with respect to which such interest was not paid to
Certificateholders and (iii) unreimbursed Advances and Other Advances in respect
of such Liquidated Loan.
Excess Subordinated Amount: As to a Distribution Date the amount, if any,
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by which (i) the Subordinated Amount that would apply on such Distribution Date
after taking into account all distributions of principal to be made on such
Distribution Date (without giving effect to any reductions in such Subordination
Amount attributable to the Subordination Reduction Amount on such Distribution
Date) exceeds (ii) the Required Subordinated Amount for such Distribution Date.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
----
FHLMC: The Federal Home Loan Mortgage Corporation.
-----
Final Scheduled Distribution Date: The Distribution Date occurring in
---------------------------------
April 2028.
Fixed Rate Loan: A Home Equity Loan the Mortgage Rate of which is fixed
---------------
for the life of such Home Equity Loan.
FNMA: The Federal National Mortgage Association.
----
8
Formula Pass-Through Rate: With respect to the Class A Certificates and a
-------------------------
Distribution Date, the Pass-Through Rate without giving effect to the Available
Funds Cap.
Gross Margin: With respect to each ARM, the margin set forth in the
------------
related Mortgage Note which is added to the Mortgage Index, then rounded as set
forth in the related Mortgage Note to determine the Mortgage Rate on the related
Change Date, subject to the applicable Periodic Rate Cap, Lifetime Cap and
Lifetime Floor.
Home Equity Loan Schedule: With respect to any date, the schedule of Home
-------------------------
Equity Loans included in the Trust on such date. The initial schedule of Home
Equity Loans as of the Cut-Off Date is the schedule set forth herein as Exhibit
C, which schedule sets forth as to each Home Equity Loan (i) the Cut-Off Date
Stated Principal Balance, (ii) the account number, (iii) the original principal
amount, (iv) the LTV as of the date of the origination of the related Home
Equity Loan, (v) the Due Date, (vi) the Mortgage Rate as of the Cut-Off Date,
(vii) the first date on which a Scheduled Monthly Payment is due under the
Mortgage Note, (viii) the original stated maturity date of the Mortgage Note,
(ix) the remaining number of months to maturity as of the Cut-Off Date, (x) the
Mortgaged Property State, (xi) the Periodic Rate Cap, (xii) the Gross Margin,
(xiii) the Lifetime Rate Cap, (xiv) the original Mortgage Rate, (xv) the next
Change Date after the Cut-Off Date and (xvi) the type of property.
Home Equity Loans: The home equity loans that are transferred and assigned
-----------------
to the Trustee pursuant to Sections 2.01 and 2.06, together with the Related
Documents, exclusive of Home Equity Loans that are transferred to the Depositor,
the Servicer or the Seller, as the case may be, from time to time pursuant to
Section 2.02, 2.04, or 3.17, as from time to time are held as a part of the
Trust, such Home Equity Loans originally so held being identified in the Home
Equity Loan Schedule delivered on the Closing Date. The term "Home Equity Loan"
includes the term "Fixed Rate Loan," "ARM," and, except where otherwise
indicated, "Eligible Substitute Home Equity Loan." The term "Home Equity Loan"
includes any Home Equity Loan which is delinquent, which relates to a
foreclosure or which relates to a Mortgaged Property which is REO Property prior
to such Mortgaged Property's disposition by the Trust. Any home equity loan
which, although intended by the parties hereto to have been, and which purported
was, transferred and assigned to any Trust established hereby by the Depositor,
in fact was not transferred and assigned to such Trust for any reason whatsoever
shall nevertheless be considered a "Home Equity Loan" for all purposes of this
Agreement.
Insurance Agreement: The Insurance and Indemnity Agreement dated as of
-------------------
April 30, 1998, among the Depositor, the Seller, the Trustee, the Servicer, the
Certificate Administrator and the Certificate Insurer, as it may be amended from
time to time.
Insurance Policy: Any insurance or performance bond relating to a Home
----------------
Equity Loan or the Home Equity Loans, including, without limitation, any hazard
insurance, special hazard insurance, flood insurance or title insurance.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any Insurance
------------------
Policy covering a Home Equity Loan, or amounts required to be paid by the
Servicer pursuant to Section 3.05, net of any component thereof (i) covering any
expenses incurred by or on behalf of the Servicer in
9
connection with obtaining such proceeds, (ii) that is applied to the restoration
or repair of the related Mortgaged Property or (iii) released to the Mortgagor
in accordance with the Servicer's normal servicing procedures. "Insurance
Proceeds" do not include "Insured Amounts".
Insured Amount: On each Distribution Date, the sum of (a) any Deficiency
--------------
Amount and (b) any Preference Amount (without duplication).
Insured Expenses: Expenses covered by any Insurance Policy covering a Home
----------------
Equity Loan.
Interest Distribution Amount: As to any Distribution Date the sum of (i)
----------------------------
interest accrued during the related Accrual Period at the Pass-Through Rate on
the Class Certificate Principal Balance of the Class A Certificates, (ii) the
Preference Amount as it relates to interest previously paid on the Class A
Certificates prior to such Distribution Date that remains unpaid as of such
Distribution Date, and (iii) the Carry-Forward Amount, if any, with respect to
the Class A Certificates; provided, however, that the Interest Distribution
Amount for any Distribution Date will be reduced by any Civil Relief Act
Shortfalls during the related Due Period. The Interest Distribution Amount is
calculated on the basis of a 360-day year and the actual number of days elapsed
during the related Accrual Period.
Interest Settlement Rate: Currently based on rates quoted by 16 BBA
------------------------
designated banks as being, in the view of such banks, the offered rate at which
deposits are being quoted to prime banks in the London interbank market. The
Interest Settlement Rate is calculated by eliminating the four highest rates and
the four lowest rates, averaging the eight remaining rates, carrying the result
(expressed as a percentage) out to six decimal places, and rounding to five
decimal places.
Late Payment Rate: With respect to any Distribution Date, the interest
-----------------
rate set forth in the Insurance Agreement.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
------------------
a day on which banking institutions in the State of New York or in the city of
London, England are required or authorized by law to be closed.
LIBOR Loan: An ARM for which the Mortgage Index is Six-Month LIBOR; the
----------
Change Date occurs on the date set forth in the related Mortgage Note and every
sixth month thereafter.
Lifetime Cap: With respect to each ARM, the maximum Mortgage Rate
------------
permitted over the life of such ARM under the terms of the related Mortgage
Note, as set forth on Exhibit C hereto.
Lifetime Floor: With respect to each ARM, the minimum Mortgage Rate
--------------
permitted over the life of such ARM under the terms of the related Mortgage
Note, as set forth on Exhibit C hereto.
Liquidated Home Equity Loan: Any Home Equity Loan with respect to which
---------------------------
the related Mortgaged Property has been acquired, liquidated or foreclosed and
with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
10
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
--------------------
including amounts drawn under the Certificate Insurance Policy) received in
connection with the liquidation of any Home Equity Loan or related REO Property,
whether through trustee's sale, foreclosure sale or otherwise.
Loan-to-Value Ratio or LTV: The "Loan-to-Value Ratio" of a Home Equity
------------------- ---
Loan at any given time is the ratio, expressed as a percentage the numerator of
which is the principal balance of a particular Home Equity Loan at origination
and the denominator of which is the lesser of (i) the appraised value of the
related Mortgaged Property, as established by an appraisal obtained by the
originator at the time of origination of such Home Equity Loan or (ii) if the
Home Equity Loan is originated in connection with a sale of the Mortgaged
Property, the sale price for such property.
Loss Trigger Event: A Loss Trigger Event will have occurred with respect
------------------
to any Distribution Date if in the 12-month period ending on the day preceding
the related Determination Date cumulative Realized Losses during such 12-month
period are greater than 3.0% of the average Pool Balance for the current
Distribution Date and the preceding eleven Distribution Dates. A Loss Trigger
Event will be deemed to have terminated as to any Distribution Date (subject to
the reoccurrence of such event), if a Loss Trigger Event shall not have occurred
as of such Distribution Date.
Majority Certificateholder: The Holder or Holders of Class A Certificates
--------------------------
evidencing Percentage Interests in excess of 51% in the aggregate.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc. or its successor in interest.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a first
--------
lien on an estate in fee simple interest in real property securing a Mortgage
Note.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
-------------
a particular Home Equity Loan and any additional documents required to be added
to the Mortgage File pursuant to this Agreement.
Mortgage Index: CMT or Six-Month LIBOR.
--------------
Mortgage Note: With respect to a Home Equity Loan, the note pursuant to
-------------
which the related mortgagor agrees to pay the indebtedness evidenced thereby
which is secured by the related Mortgage.
Mortgaged Property: The underlying property, including real property and
------------------
improvements thereon, securing a Home Equity Loan.
Mortgaged Property State: As to any Home Equity Loan, the state in which
------------------------
the related Mortgaged Property is located.
Mortgage Rate: With respect to any Home Equity Loan as of any day, the per
-------------
annum rate of interest applicable under the related Mortgage Note to the
calculation of interest for such day on the Stated Principal Balance.
11
Mortgagor: The obligor or obligors under a Mortgage Note.
---------
Net Liquidation Proceeds: With respect to any Liquidated Home Equity Loan,
------------------------
Liquidation Proceeds net of unpaid Servicing Fees and unreimbursed Other
Advances and Advances with respect thereto.
Net Monthly Excess Cashflow: With respect to any Distribution Date, the
---------------------------
amount, if any, by which (i) the Available Funds for such Distribution Date
(less the Premium Amount and Administration Fee for such Distribution Date)
exceeds (ii) the sum of (a) the aggregate Interest Distribution Amount for such
Distribution Date plus the amount described in clause (b) of the definition of
Principal Distribution Amount (calculated for this purpose without regard to any
Subordination Increase Amount or portion thereof included therein) and (b) any
Reimbursement Amount owed to the Certificate Insurer provided that the
Certificate Insurer has not failed to make a payment required under the
Certificate Insurance Policy.
Net Mortgage Rate: With respect to any Home Equity Loan as to any day, the
-----------------
Mortgage Rate less the Servicing Fee Rate.
Non-Performing Home Equity Loans: Home Equity Loans that are 90 or more
--------------------------------
days delinquent or that constitute REO Properties.
Nonrecoverable Advances: Any portion of an Advance previously made or
-----------------------
proposed to be made in respect of a Home Equity Loan which has not been
previously reimbursed to the Servicer or the Trustee, as the case may be, and
which the Servicer or the Trustee determines will not, or in the case of a
proposed Advance would not, be ultimately recoverable from Liquidation Proceeds
or other recoveries in respect of the related Home Equity Loan. The
determination by the Servicer or the Trustee (i) that it has made a
Nonrecoverable Advance or (ii) that any proposed Advance, if made, would
constitute a Nonrecoverable Advance, shall be evidenced by an Officer's
Certificate of the Servicer delivered to the Trustee and Certificate Insurer
detailing the reasons for such determination, or as determined by the Trustee.
Officer's Certificate: A certificate signed by the President, an Executive
---------------------
Vice President, a Senior Vice President, a First Vice President, a Vice
President, Assistant Vice President, the Treasurer, Assistant Treasurer,
Assistant Secretary, Controller or Assistant Controller of the Servicer and
delivered to the Trustee.
One-Month LIBOR: The London interbank offered rate for one-month United
---------------
States dollar deposits determined on the basis of the BBA Interest Settlement
Rate for one-month deposits in U.S. Dollars as found on Telerate page 3750 as of
11:00 A.M., London time on each Rate Determination Date. "Telerate page 3750"
means the display designated as page 3750 on the Dow ▇▇▇▇▇ Markets. If on any
Rate Determination Date the Trustee is unable to determine One-Month LIBOR on
the basis of the method set forth above, One-Month LIBOR for the next Accrual
Period will be the higher of (x) One-Month LIBOR as determined on the previous
Rate Determination Date or (y) the Reserve Interest Rate. The "Reserve Interest
Rate" will be the rate per annum which the Trustee determines to be either (A)
the arithmetic mean (rounding such arithmetic mean upwards if necessary to the
nearest whole multiple of 1/16%) of the one-month Eurodollar lending rate that
New York City banks
12
selected by the Trustee are quoting, on the relevant Rate Determination Date, to
the principal London offices of at least two leading banks in the London
interbank market or (B) in the event that the Trustee can determine no such
arithmetic mean, the lowest one-month Eurodollar lending rate that the New York
City banks selected by the Trustee are quoting on such Rate Determination Date
to leading European banks. If on any Rate Determination Date the Trustee is
required but is unable to determine the Reserve Interest Rate in the manner
provided above, One-Month LIBOR for the next Accrual Period will be One-Month
LIBOR as determined on the previous Rate Determination Date.
One-Year CMT Loan: A CMT Loan having a Mortgage Rate that is fixed for 12
-----------------
months after the origination thereof before such Mortgage Rate becomes subject
to adjustment.
Opinion of Counsel: A written opinion of counsel reasonably acceptable to
------------------
the Trustee, who may be in-house counsel for the Servicer or the Depositor
(except that any opinion relating to the qualification of the Trust as a REMIC
or compliance with the REMIC Provisions must be an opinion of independent
outside counsel) and who, in the case of opinions delivered to each Rating
Agency, is reasonably acceptable to it.
Optional Termination Date: Any Distribution Date on or after the date on
-------------------------
which the Pool Balance is less than 10% of the Cut-Off Date Pool Stated
Principal Balance.
Original Class Certificate Principal Balance: $219,697,000.
--------------------------------------------
Original Home Equity Loans: The Home Equity Loans identified in Exhibit C
--------------------------
hereto, and conveyed, transferred, sold and assigned to, and deposited with, the
Trustee pursuant to Section 2.01 hereof on the Closing Date.
Other Advances: Advances of cash made by the Servicer or the Trustee, as
--------------
the case may be, to cover delinquent payments of taxes, premiums with respect to
Insurance Policies and escrowed items with respect to any Mortgaged Property or
for expenditures (including reasonable attorney's fees) incurred by it in
connection with the restoration, foreclosure or liquidation of any Mortgaged
Property (to the extent of Liquidation Proceeds or Insurance Proceeds in respect
of such Mortgaged Property) and of certain losses against which it is
indemnified by the Trust.
Ownership Interest: As to any Certificate, or security interest in such
------------------
Certificate, including any interest in such Certificate as the Holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
Pass-Through Margin: 0.18% (18 basis points) per annum until the first
-------------------
Accrual Period relating to the Distribution Date immediately following the
Optional Termination Date and for any Distribution Date thereafter, 0.36% (36
basis points) per annum.
Pass-Through Rate: With respect to the Class A Certificates and the first
-----------------
Accrual Period 5.83625%, and for any subsequent Accrual Period, the lesser of
(x) the sum of (a) One-Month LIBOR and (b) the applicable Pass-Through Margin
and (y) the Available Funds Cap.
Paying Agent: Any paying agent appointed pursuant to Section 6.05.
------------
13
Percentage Interest: As to any Class A Certificate, the percentage
-------------------
obtained by dividing the principal denomination of such Class A Certificate by
the aggregate of the principal denominations of all Class A Certificates. With
respect to a Residual Certificate, the portion of the Class evidenced thereby as
stated on the face thereof, which shall be either 99.9999% or, but only with
respect to the Tax Matters Person Residual Interest held by the Tax Matters
Person, 0.0001%.
Periodic Rate Cap: With respect to each ARM, the maximum increase or
-----------------
decrease in the Mortgage Rate permitted for such ARM from the Mortgage Rate in
effect as of a Change Date, as set forth on Exhibit C hereto.
Permitted Investments: At any time, any one or more of the following
---------------------
obligations and securities which shall mature not later than the Business Day
preceding the Distribution Date next succeeding the date of such investment,
provided that such investments continue to qualify as "cash flow investments" as
defined in Code Section 860G(a)(6):
(i) obligations of the United States of America or any agency
thereof, provided such obligations are backed by the full faith and credit
of the United States of America;
(ii) general obligations of or obligations guaranteed by any state
of the United States of America or the District of Columbia receiving the
highest short-term or highest long-term rating of each Rating Agency, or
such lower rating as would not result in the downgrading or withdrawal of
the rating then assigned to any of the Certificates by either Rating Agency
without regard to the Certificate Insurance Policy or result in any of such
rated Certificates being placed on credit review status (other than for
possible upgrading) by either Rating Agency without regard to the
Certificate Insurance Policy;
(iii) commercial or finance company paper which is then rated in
the highest long-term commercial or finance company paper rating category
of each Rating Agency or the highest short-term rating category of each
Rating Agency, or such lower rating category as would not result in the
downgrading or withdrawal of the rating then assigned to any of the
Certificates by either Rating Agency without regard to the Certificate
Insurance Policy or result in any of such rated Certificates being placed
on credit review status (other than for possible upgrading) by either
Rating Agency without regard to the Certificate Insurance Policy;
(iv) certificates of deposit, demand or time deposits, federal
funds or banker's acceptances issued by any depository institution or trust
company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or debt
obligations of such depository institution or trust company (or in the case
of the principal depository institution in a holding company system, the
commercial paper or debt obligations of such holding company) are then
rated in the highest short-term or the highest long-term rating category
for such securities of each of the Rating Agencies, or such lower rating
categories as would not result in the downgrading or
14
withdrawal of the rating then assigned to any of the Certificates by either
Rating Agency without regard to the Certificate Insurance Policy or result
in any of such rated Certificates being placed on credit review status
(other than for possible upgrading) by either Rating Agency without regard
to the Certificate Insurance Policy;
(v) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation acceptable to each Rating Agency and
the Certificate Insurer at the time of the issuance of such agreements;
(vi) repurchase agreements on obligations with respect to any
security described in clauses (i) or (ii) above or any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in either case entered into with a depository institution or
trust company (acting as principal) described in (iv) above;
(vii) securities (other than stripped bonds or stripped coupon
securities) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which, at the time of such investment or contractual
commitment providing for such investment, are then rated in the highest
short-term or the highest long-term rating category by each Rating Agency,
or in such lower rating category as would not result in the downgrading or
withdrawal of the rating then assigned to any of the Certificates by either
Rating Agency without regard to the Certificate Insurance Policy or result
in any of such rated Certificates being placed on credit review status
(other than for possible upgrading) by either Rating Agency without regard
to the Certificate Insurance Policy; and
(viii) such other investments acceptable to each Rating Agency and
the Certificate Insurer as would not result in the downgrading of the
rating then assigned to the Certificates by either Rating Agency without
regard to the Certificate Insurance Policy or result in any of such rated
Certificates being placed on credit review status (other than for possible
upgrading) by either Rating Agency without regard to the Certificate
Insurance Policy.
In no event shall an instrument be an Permitted Investment if such
instrument evidences either (i) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (ii) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provide a
yield to maturity at the date of investment of greater than 120% of the yield to
maturity at par of such underlying obligations.
Permitted Transferee: Any Person other than (i) the United States, or any
--------------------
State or any political subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, international organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) (except
certain farmers' cooperatives describe in Code section 521), (iv) rural electric
and telephone cooperatives described in
15
Code section 1381(a)(2)(C),(v) a Person that is not a citizen or resident of the
United States, a corporation or partnership (or other entity treated as a
corporation or partnership for federal income tax purposes) created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate whose income from sources without the United States is includible in
gross income for United States federal income tax purposes regardless or its
connection with the conduct of a trade or business within the United States, or
a trust for which a court in the United States is able to exercise primary
supervision over the trust's administration and for which one or more United
States persons have the authority to control all substantial decisions of the
trust, and (vi) any other Person so designated by the Trustee based on an
Opinion of Counsel to the effect that any transfer to such Person may cause the
Trust to fail to qualify as a REMIC at any time the Certificates are
outstanding. The terms "United States", "State" and "international organization"
shall have the meanings set forth in Code section 7701 or successor provisions.
A corporation will not be treated as an instrumentality of the United States or
of any State or political subdivision thereof if all of its activities are
subject to tax, and, with the exception of the FHLMC, a majority of its board of
directors is not selected by such governmental unit.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool Balance: With respect to any date, the aggregate of the Stated
------------
Principal Balances of all Home Equity Loans as of such date.
Pool Factor: With respect to any Distribution Date, the percentage,
-----------
carried to six places, obtained by dividing the Class Certificate Principal
Balance for such Distribution Date by the Original Class Certificate Principal
Balance.
Preference Amount: Any amount previously distributed to a Class A
-----------------
Certificateholder that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Premium Amount: The amount payable to the Certificate Insurer on any
--------------
Distribution Date equal to one-twelfth of the product of the Premium Percentage
and the Class Certificate Principal Balance of the Class A Certificates for such
Distribution Date (before giving effect to any distributions made with respect
to principal on such Distribution Date); provided, however, that for any
Distribution Date on which the Certificate Insurer has failed to make a payment
required under the Certificate Insurance Policy, the Premium Amount will be
equal to zero.
Premium Percentage: The percentage set forth in the Insurance Agreement.
------------------
Prepayment Assumption: An assumed rate of prepayment relating to the Class
---------------------
A Certificates equal to 120% Fixed Rate PPC for the Fixed Rate Loans and 100%
ARM PPC for the ARMs as described in the Prospectus Supplement.
16
Prepayment Interest Excess: With respect to any Distribution Date, amounts
--------------------------
in respect of interest paid on Principal Prepayments in full received from the
1st day of a month (excluding scheduled interest due on such day) through the
day preceding the Determination Date in such month. Such amounts are payable to
the Servicer as additional servicing compensation.
Prepayment Interest Shortfall: With respect to any Distribution Date, for
-----------------------------
each Home Equity Loan that was the subject, during the related Prepayment
Period, of a Principal Prepayment from the Determination Date of the month
preceding such Distribution Date through the last day of such month, an amount
equal to the excess, if any, of (i) 30 days' interest on the Stated Principal
Balance of such Home Equity Loan at the Mortgage Rate or in the case of a
partial Principal Prepayment on the amount of such Principal Prepayment (or at
such lower rate as may be in effect for such Home Equity Loan pursuant to
application of the Civil Relief Act) over (ii) the amount of interest actually
remitted by the Mortgagor in connection with such Principal Prepayment.
Prepayment Period: With respect to any Distribution Date, for Principal
-----------------
Prepayments, the period beginning on the opening of business on the
Determination Date in the month preceding the month in which the related
Distribution Date occurs (or, in the case of the first Distribution Date,
beginning on the Cut-Off Date) and ending on the day preceding the Determination
Date in the month in which such Distribution Date occurs.
Principal Distribution Amount: With respect to any Distribution Date the
-----------------------------
lesser of (a) the excess of (i) the sum, as of such Distribution Date, of (A)
the Available Funds less the Premium Amount and the Administration Fee for such
Distribution Date and (B) any Insured Amount over (ii) the related Interest
Distribution Amount for such Distribution Date and (b) the excess of (x) the
sum, without duplication, of (i) all Scheduled Monthly Payments with respect to
principal of the Home Equity Loans due during the related Due Period that were
received by the Servicer on or before the day prior to the related Determination
Date or as to which the Servicer made an Advance on the Servicer Advance Date,
together with all unscheduled recoveries of principal on the Home Equity Loans
received by the Servicer during the related Prepayment Period (excluding certain
amounts received in respect of scheduled principal on the Home Equity Loans due
after the related Due Date), (ii) the principal portion of the Purchase Price of
each Home Equity Loan that either was purchased by the Servicer or repurchased
by the Seller during the related Prepayment Period, (iii) any Substitution
Adjustment Amounts paid by the Seller during the related Prepayment Period in
connection with the substitution of Home Equity Loans, (iv) all Liquidation
Proceeds collected by the Servicer during the related Prepayment Period (to the
extent such Liquidation Proceeds are related to principal), (v) the amount of
any Subordination Deficit for such Distribution Date, (vi) the proceeds received
by the Trustee of any termination of the Trust (to the extent such proceeds are
related to principal) and (vii) the amount of any Subordination Increase Amount
for such Distribution Date (to the extent of any Net Monthly Excess Cashflow
available for such purpose); over (y) the amount of any Subordination Reduction
Amount for such Distribution Date. In no event will the Principal Distribution
Amount with respect to any Distribution Date be less than zero or greater than
the then outstanding Class Certificate Principal Balance of the Class A
Certificates.
Principal Prepayment: With respect to any Distribution Date, any Mortgagor
--------------------
payment or other recovery of principal on a Home Equity Loan (including all
proceeds allocable to principal of
17
any Home Equity Loan or property acquired in respect thereof that has been
repurchased by the Depositor or the Seller or purchased by the Servicer) that is
received in advance of its scheduled Due Date and is not accompanied by an
amount representing scheduled interest due on any date or dates in any month or
months subsequent to the month of prepayment.
Prospectus: The base prospectus dated April 24, 1998.
----------
Prospectus Supplement: The prospectus supplement dated April 24, 1998,
---------------------
relating to the offering of the Class A Certificates.
Purchase Price: As to any Defective Home Equity Loan or defaulted Home
--------------
Equity Loan purchased or repurchased on any date pursuant to Section 2.02, 2.04
or 3.17, an amount equal to the sum of (i) the unpaid Stated Principal Balance
thereof as of the prior Distribution Date, (ii) all unpaid accrued interest
thereon computed at the applicable Mortgage Rate to the first day of the month
in which the Purchase Price is to be distributed to Certificateholders and (iii)
any unreimbursed Advances and Other Advances with respect to such Home Equity
Loan; provided, however, that if at the time of repurchase the Seller is the
Servicer, the amount described in clause (ii) shall be computed at the Net
Mortgage Rate.
Rate Determination Date: With respect to the Class A Certificates for the
-----------------------
first Accrual Period, April 28, 1998. With respect to the Class A Certificates
and any Accrual Period thereafter, the second LIBOR Business Day preceding the
first day of such Accrual Period.
Rating Agency: Any nationally recognized statistical credit rating agency,
-------------
or its successor, that rated the Class A Certificates at the request of the
Seller at the time of the initial issuance of the Certificates. The Rating
Agencies for the Class A Certificates are Moody's and S&P. If any 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 Seller,
notice of which designation shall be given to the Trustee and the Servicer.
References herein to the highest short-term rating category of a Rating Agency
shall mean P1 in the case of Moody's, A-1+ in the case of S&P and in the case of
any other Rating Agency shall mean its equivalent of such ratings. References
herein to the highest long-term rating categories of a Rating Agency shall mean
Aaa in the case of Moody's, AAA in the case of S&P and in the case of any other
Rating Agency shall mean its equivalent of such rating without any plus or
minus.
Realized Loss: (i) With respect to any Liquidated Home Equity Loan, the
-------------
amount of loss realized equal to the portion of the Stated Principal Balance
remaining unpaid after application of all amounts recovered (net of amounts
reimbursable to the Servicer for related Advances, Other Advances, expenses and
Servicing Fees) towards interest and principal owing on such Liquidated Home
Equity Loan and (ii) with respect to certain Home Equity Loans the principal
balances or the scheduled payments of principal and interest of which have been
reduced in connection with bankruptcy proceedings, the amount of such reduction.
Record Date: The close of business on the Business Day preceding the
-----------
related Distribution Date.
18
Regular Certificates: The Class A Certificates.
--------------------
Reimbursement Amount: As of any Distribution Date, the amount of all
--------------------
Insured Amounts paid by the Certificate Insurer pursuant to the Certificate
Insurance Policy and certain other amounts owed to the Certificate Insurer
pursuant to the Insurance Agreement (together with interest thereon at the Late
Payment Rate) that have not been previously repaid as of such Distribution Date.
Related Documents: As defined in Section 2.01.
-----------------
Released Mortgaged Property Proceeds: As to any Home Equity Loan, proceeds
------------------------------------
received by the Servicer in connection with (a) a taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or (b) any
release of part of the Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise, which are not released to
the Mortgagor in accordance with applicable law, second mortgage servicing
standards the Servicer would use in servicing second Home Equity Loans for its
own account and this Agreement.
REMIC: A "real estate mortgage investment conduit" within the meaning of
-----
Section 860D of the Code.
REMIC Certificate Maturity Date: The "latest possible maturity date" of
-------------------------------
the Class A Certificates as that term is defined in Section 2.10.
REMIC Change of Law: Any proposed, temporary or final regulation, revenue
-------------------
ruling, revenue procedure or other official announcement or interpretation
relating to the REMIC and the REMIC Provisions issued after the Closing Date.
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
REO Property: A Mortgaged Property that is acquired by the Servicer on
------------
behalf of the Trustee in foreclosure or by deed in lieu of foreclosure.
Required Subordinated Amount: With respect to a Distribution Date (x)
----------------------------
prior to the Stepdown Date, the amount which is equal to 2.50% of the Cut-Off
Date Pool Stated Principal Balance and (y) on or after the Stepdown Date, the
lesser of (A) 2.50% of the Cut-Off Date Pool Stated Principal Balance and (B)
greatest of (i) 5.00% of the outstanding Pool Balance as of such Distribution
Date, (ii) 0.50% of the Cut-Off Date Pool Stated Principal Balance, (iii) the
sum of the Stated Principal Balances of the three largest Home Equity Loans and
(iv) two multiplied by the excess of (x) one-half multiplied by the aggregate
Stated Principal Balance of the Non-Performing Home Equity Loans over (y) five
multiplied by the Net Monthly Excess Cashflow.
Residential Dwelling: A one- to four-family dwelling, a unit in a planned
--------------------
unit development, a unit in a condominium development or a townhouse.
19
Residual Certificate: Any of the Class R Certificates executed and
--------------------
authenticated by the Trustee substantially in the form set forth in Exhibit B
hereto.
Residual Certificateholder: The holder of a Residual Certificate.
--------------------------
Responsible Officer: When used with respect to the Trustee, any officer of
-------------------
the Trustee with direct responsibility for the administration of this Agreement
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject. When used with respect to the Seller or Servicer, the
President or any Vice President, Assistant Vice President or any Secretary or
Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
----
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Scheduled Monthly Payment: The scheduled monthly payment of principal and
-------------------------
interest required to be made by a Mortgagor on the related Home Equity Loan
without giving effect to any modifications pursuant to Section 3.01(f).
Seller: Norwest Mortgage, Inc., a California corporation, or any successor
------
thereto.
Servicer: Norwest Mortgage, Inc., a California corporation, or any
--------
successor thereto.
Servicer Advance Date: With respect to any Distribution Date, the Business
---------------------
Day prior to such Distribution Date.
Servicer Termination Trigger Event: The occurrence and continuation of a
----------------------------------
Delinquency Trigger Event or Loss Trigger Event.
Servicing Certificate: A certificate completed and executed by a Servicing
---------------------
Officer on behalf of the Servicer.
Servicing Compensation: The Servicing Fee and other amounts to which the
----------------------
Servicer is entitled pursuant to Section 3.09.
Servicing Fee: The amount payable to the Servicer on any Distribution Date
-------------
equal to one-twelfth of the product of (i) the Servicing Fee Rate and (ii) the
Pool Balance as of the preceding Distribution Date. Such amount shall be
calculated and payable monthly only from the amounts received in respect of
interest on the Home Equity Loans and shall be computed on the basis of the same
principal amounts and for the period respecting which any related interest
payment on a Home Equity Loans is computed. The Servicing Fee includes any
servicing fees owed or payable to any Subservicer.
Servicing Fee Rate: 0.50% per annum.
------------------
20
Servicing Officer: Any officer of the Servicer involved in, or responsible
-----------------
for, the administration and servicing of the Home Equity Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee by the Servicer, as such list may be amended from time to time.
Six-Month LIBOR: The London interbank offered rate for six-month U.S.
---------------
dollar deposits, as quoted either (a) in The Wall Street Journal, of the
edition, if any, specified in the related Mortgage Note, (b) by FNMA or (c) by
such other source specified in the related Mortgage Note and available as of the
date before the applicable Change Date specified in the related Mortgage Note.
Six-Month LIBOR Loan: A LIBOR Loan having a Mortgage Rate that is fixed
--------------------
for 6 months after the origination thereof before such Mortgage Rate becomes
subject to adjustment.
Special Servicing Agreement: A Special Servicing and Collateral Fund
---------------------------
Agreement between the Servicer and a purchaser of the Residual Certificates not
affiliated with the Seller.
Standard & Poor's or S&P: Standard & Poor's Ratings Group, a division of
----------------- ---
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or its successor in interest.
Startup Day: The day designated as such pursuant to Section 2.09 hereof.
-----------
Stated Principal Balance: As to any Home Equity Loan or related REO
------------------------
Property equals (i) as of the Cut-Off Date, the Cut-Off Date Stated Principal
Balance thereof, and (ii) as of any Distribution Date after the Cut-Off Date,
such Cut-Off Date Stated Principal Balance minus the sum of (a) the principal
portion of the Scheduled Payments due with respect to such Home Equity Loan or
REO Property during each Due Period ending prior to such Distribution Date which
were received by the Servicer as of the day preceding the Determination Date
related to such Distribution Date or with respect to which Advances were made on
the Business Day prior to such Distribution Date, (b) all Principal Prepayments
with respect to such Home Equity Loan or REO Property, and all Liquidation
Proceeds to the extent applied by the Servicer as recoveries of principal with
respect to such Home Equity Loan or REO Property, which were received by the
Servicer as of the day preceding the Determination Date related to such
Distribution Date, and (c) any Realized Loss with respect thereto applied by the
day preceding the Determination Date relating to such Distribution Date;
provided, however, that the Stated Principal Balance of any Home Equity Loan
that becomes a Liquidated Home Equity Loan will be zero on the Distribution Date
that follows the Prepayment Period in which such Home Equity Loan becomes a
Liquidated Loan.
Stepdown Date: The Distribution Date occurring in November 2000.
-------------
Subordinated Amount: with respect to any Distribution Date is the amount
--------------------
(not less than zero), if any, by which (i) the Pool Balance for such
Distribution Date exceeds (ii) the Class Certificate Principal Balance of the
Class A Certificates as of such Distribution Date after giving effect to the
payment of the Principal Distribution Amount on such Distribution Date.
21
Subordination Deficiency Amount: With respect to any Distribution Date,
-------------------------------
the amount, if any, by which the Required Subordinated Amount as of such
Distribution Date exceeds the Subordinated Amount as of such Distribution Date
before taking into account the payment of any related Subordination Increase
Amounts on such Distribution Date.
Subordination Deficit: With respect to any Distribution Date, the amount,
---------------------
if any, by which (i) the aggregate Class Certificate Principal Balance of the
Class A Certificates as of such Distribution Date, after giving effect to the
payment of the Principal Distribution Amount on such Distribution Date (except
for any payment to be made as to principal constituting a related Insured
Amount), exceeds (ii) the Pool Balance for such Distribution Date.
Subordination Increase Amount: With respect to any Distribution Date is
-----------------------------
the lesser of (a) the Subordination Deficiency Amount as of such Distribution
Date (after taking into account the payment of the Principal Distribution Amount
on such Distribution Date (other than the Subordination Increase Amount)) and
(b) the amount of Net Monthly Excess Cashflow on such Distribution Date.
Subordination Reduction Amount: With respect to any Distribution Date
------------------------------
equals the lesser of (i) the Excess Subordinated Amount for such Distribution
Date and (ii) the sum, without duplication, of the amounts specified in clauses
(b)(x)(i) through (iv) and (vi) of the definition of Principal Distribution
Amount.
Subservicer: Any Person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who satisfies the requirements set forth in Section
3.01(b) hereof in respect of the qualification of a Subservicer.
Subservicing Agreement: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of certain Home
Equity Loans as provided in Section 3.01(b), a copy of which shall be delivered,
along with any modifications thereto, to the Trustee.
Substitution Adjustment Amount: As of the date of substitution by the
------------------------------
Seller of one or more Eligible Substitute Home Equity Loans for one or more Home
Equity Loans that are removed from the Mortgage Pool, the amount (if any) by
which the aggregate principal balance of such Replacement Home Equity Loans is
less than the aggregate Stated Principal Balance (after application of the
scheduled principal portion of the monthly payments due in the month of
substitution) of all such removed Home Equity Loans.
Tax Matters Person: The person designated as "tax matters person" in the
------------------
manner provided under Treasury regulation (S) 1.860F-4(d) and Treasury
regulation (S) 301.6231(a)(7)-1. Initially, this person shall be the
Certificate Administrator, the owner of the Tax Matters Person Residual
Interest.
Tax Matters Person Residual Interest: A 0.0001% Percentage Interest in the
------------------------------------
Residual Certificates.
Termination Price: Defined in Section 10.01(a).
-----------------
22
Trust: The trust created by this Agreement, the corpus of which consists
-----
of the Home Equity Loans, such assets as shall from time to time be deposited in
the Collection Account and/or the Certificate Account in accordance with this
Agreement, property that secured a Home Equity Loan and that has become REO
Property, the Certificate Insurance Policy, certain Insurance Policies
maintained by the Mortgagors or the Servicer in respect of the Home Equity Loans
and an assignment of the Depositor's rights hereunder and all proceeds of each
of the foregoing.
3/1 CMT Loan: A CMT Loan having a Mortgage Rate that is fixed for 36
------------
months after origination thereof before such Mortgage Rate becomes subject to
adjustment.
Trustee: First Union National Bank, or any successor Trustee appointed in
-------
accordance with this Agreement that has accepted such appointment in accordance
with this Agreement.
2/28 LIBOR Loan: A LIBOR Loan having a Mortgage Rate that is fixed for 24
---------------
months after origination thereof before such Mortgage Rate becomes subject to
adjustment.
UCC: The Uniform Commercial Code, as amended from time to time, as in
---
effect in any specified jurisdiction.
Voting Rights: As of any date and (i) with respect to the Class A
-------------
Certificates, 100% minus the fraction (expressed as a percentage) whose
numerator is the Required Subordinated Amount on such date and whose denominator
is the Pool Balance on such date and (ii) with respect to the Residual
Certificates, 100% minus the percentage determined pursuant to clause (i) above.
Section 1.02. Interest Calculations. All calculations of interest
---------------------
hereunder that are made in respect of the Stated Principal Balance of a Home
Equity Loan shall be made on the basis of a 360-day year consisting of twelve
30-day months. All calculations of interest on the Certificates shall be made
on the basis of a 360-day year and the actual number of days elapsed in the
applicable Accrual Period. The calculation of the Servicing Fee and
Administration Fee shall be made on the basis of a 360 day year consisting of
twelve 30-day months. All dollar amounts calculated hereunder shall be rounded
to the nearest ▇▇▇▇▇ with one-half of one ▇▇▇▇▇ being rounded down.
23
ARTICLE II
Conveyance of Home Equity Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Home Equity Loans.
-------------------------------
(a) The Seller, concurrently with the execution and delivery hereof, does
hereby sell, transfer, assign, set over and otherwise convey to the Depositor,
without recourse, all of its right, title and interest in and to each Home
Equity Loan, including all interest and principal received or receivable by the
Seller on or with respect to the Home Equity Loans after the Cut-Off Date and
all interest and principal payments on the Home Equity Loans received prior to
the Cut-Off Date in respect of installments of interest and principal due
thereafter, but not including payments of principal and interest due and payable
on the Home Equity Loans on or before the Cut-Off Date. On or prior to the
Closing Date, the Seller shall deliver to the Depositor or, at the Depositor's
direction, to the Trustee or other designee of the Depositor, the Mortgage File
for each Home Equity Loan listed in the Home Equity Loan Schedule. Such delivery
of the Mortgage Files shall be made against payment by the Depositor of the
purchase price, previously agreed to by the Seller and Depositor, for the Home
Equity Loans. With respect to any Home Equity Loan that does not have a first
payment date on or before the Due Date in the month of the first Distribution
Date, the Seller shall deposit into the Distribution Account on or before the
Distribution Date relating to the first Distribution Date, an amount equal to
one month's interest at the related Mortgage Rate on the Cut-Off Date Stated
Principal Balance of such Home Equity Loan.
(b) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and otherwise convey to
the Trustee for the use and benefit of the Certificateholders and the
Certificate Insurer, without recourse (subject to Sections 2.02 and 2.04), (i)
all of its right, title and interest in and to each Home Equity Loan, including
its Stated Principal Balance and all collections in respect thereof received
after the Cut-Off Date (exclusive of payments in respect of principal and
accrued interest due on the Home Equity Loans through and including the Cut-Off
Date); (ii) all other assets included or to be included in the Trust for the
benefit of Certificateholders and the Certificate Insurer; and (iii) the
Depositor's rights hereunder, including, without limitation, the representations
and warranties of the Seller hereunder together with all rights of the Depositor
to require the Seller to cure any breach thereof or to repurchase or substitute
for any affected Home Equity Loan.
(c) In connection with such transfer, assignment and conveyance set forth
in clause (b) above, the Depositor shall deliver to, and deposit with the
Trustee, on or before the Closing Date and the Servicer shall ensure that the
Trustee shall maintain the following documents or instruments with respect to
each Home Equity Loan (the "Related Documents"):
(i) the original related Mortgage Note pertaining to such Home Equity
Loan endorsed by the respective prior owner of such Home Equity Loan to the
Trustee, endorsed by such prior owner "Pay to the order of
___________________ without recourse" and signed, by facsimile or manual
signature, in the name of the Seller by a
24
Responsible Officer; the Servicer shall assure that the related Mortgage
Note shall include all prior and intervening endorsements as are necessary
to show a complete chain of endorsements from the respective originator to
the respective prior owner of such Home Equity Loan or, in lieu of such
Mortgage Note, a Lost Note Affidavit;
(ii) either the recorded original related Mortgage pertaining to such
Home Equity Loan, together with any addenda and riders, certified by the
recording office, or, if the related Mortgage is in the process of being
recorded, a photocopy of the related Mortgage, certified by a
(iii) either a recorded original Assignment of the Mortgage from the
Seller assigning the related Mortgage to the Trustee, "First Union National
Bank, as Trustee for Norwest Asset Acceptance Corporation" certified by the
recording office, or, if such Assignment of Mortgage is in the process of
being recorded, a photocopy of the related Mortgage transmitted for
recordation certified by a Responsible Officer of the Seller to be a true
and correct copy of such Assignment of Mortgage submitted for recordation;
if recordation is waived by the Servicer pursuant to the provisions of
Section 2.01(e) hereof, the Trustee will hold such an Assignment of
Mortgage in recordable form (which may be assigned in blank);
(iv) each recorded original intervening Assignment of Mortgage as is
necessary to show a complete chain of title from the respective originator
to the Seller or, if any such original is unavailable because it is in the
process of being recorded, a photocopy of such intervening Assignment of
Mortgage certified by a Responsible Officer of the Seller to be a true and
correct copy of such intervening Assignment of Mortgage submitted for
recordation;
(v) either an original title insurance policy or a final title
condition report pertaining to such Home Equity Loan or, with respect to
loans secured by properties in jurisdictions where title policies are not
available, the original attorney's opinion of title; in the event that the
policy has not been issued or is not otherwise available, (i) a written
binding ALTA commitment for such a policy (or a photocopy thereof) issued
by the respective title insurance company or (ii) a preliminary title
report (or a photocopy thereof) if the Mortgaged Property is in a state
designated by the Servicer as a preliminary title report state; and
(vi) originals of each assumption agreement, modification, written
assurance or substitution agreement pertaining to such Home Equity Loan, if
any, or, if any such document is in the process of being recorded, a
photocopy of such document, certified by a Responsible Officer of the
Seller or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing attorney to be a true
and correct copy of such document transmitted for recordation.
25
In instances where the original recorded Mortgage cannot be delivered by
the Depositor to the Trustee prior to or concurrently with the execution and
delivery of this Agreement, due to a delay in connection with recording, the
Depositor may in lieu of delivering such original recorded Mortgage, deliver to
the Trustee a copy thereof, provided that the Seller certifies that the original
Mortgage has been delivered to a title insurance company for recordation after
receipt of its policy of title insurance or binder therefor. In all such
instances, the Depositor will deliver or cause to be delivered the original
recorded Mortgage to the Trustee promptly upon receipt of the original recorded
Mortgage but in no event later than one year after the Closing Date.
The Seller hereby confirms to the Trustee that it has caused the portions
of the Electronic Ledger relating to the Home Equity Loans to be clearly and
unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Home Equity Loans have been
transferred to the Trustee and constitute part of the Trust in accordance with
the terms of the trust created hereunder.
(d) The parties hereto intend that the transactions set forth herein be a
sale (i) by the Seller to the Depositor of all of the Seller's right, title and
interest in and to the Home Equity Loans and other property described above and
(ii) by the Depositor to the Trust of all the Depositor's right, title and
interest in and to the Home Equity Loans and other property described above. In
the event either of the transactions set forth herein is deemed not to be a
sale, the Seller hereby grants to the Depositor and the Depositor hereby grants
to the Trust a security interest in all of the Depositor's right, title and
interest in, to and under the Home Equity Loans and other property described
above; and this Agreement shall constitute a security agreement under applicable
law.
(e) The Seller shall, with respect to each Home Equity Loan, deliver, or
cause to be delivered, to the Trustee, on or before the Closing Date, a Mortgage
File. If any Mortgage or Assignment of Mortgage to the Trustee or any prior
Assignment of Mortgage is in the process of being recorded on the Closing Date,
the Seller shall deliver a copy thereof, certified by a Responsible Officer of
the Seller to be a true and complete copy of the document sent for recording,
and the Seller shall use its best efforts to cause each such original recorded
document or certified copy thereof to be delivered to the Trustee promptly
following its recordation, but in no event later than one (1) year following the
Closing Date. The Seller shall also cause to be delivered to the Trustee any
other original mortgage loan document to be included in the Mortgage File if a
copy thereof has been delivered. The Seller shall pay from its own funds,
without any right of reimbursement therefor, the amount of any costs,
liabilities and expenses incurred by the Trust by reason of the failure of the
Seller to cause to be delivered to the Trustee within one (1) year following the
Closing Date any original Mortgage or Assignment of Mortgage not delivered to
the Trustee on the Closing Date.
In lieu of recording an Assignment of Mortgage the Seller may deliver or
cause to be delivered to the Trustee the Assignment of the Mortgage from the
Seller to the Trustee in a form suitable for recordation, together with an
Opinion of Counsel to the effect that recording is not required to protect the
Trustee's right, title and interest in and to the related Home Equity Loan from
claims asserted by any Person other than the Certificateholders or the
Certificate Insurer or, in case a court should recharacterize the sale of the
Home Equity Loans as a financing, to perfect
26
a first priority security interest in favor of the Trustee in the related Home
Equity Loan. In the event that the Servicer receives notice that recording is
required to protect the right, title and interest of the Trustee in and to any
such Home Equity Loan for which recordation of an Assignment of Mortgage has not
previously been required, the Servicer shall promptly notify the Trustee and the
Trustee shall within five Business Days (or such other reasonable period of time
mutually agreed upon by the Servicer and the Trustee) of its receipt of such
notice deliver each previously unrecorded Assignment of Mortgage to the Servicer
for recordation.
(f) The Trustee agrees to execute and deliver on the Closing Date (or such
other date acceptable to the Certificate Insurer) to the Depositor, the
Servicer, the Seller, the Certificate Administrator and the Certificate Insurer
an Initial Certification in the form annexed hereto as Exhibit J to the effect
that, as to each Home Equity Loan listed in the Home Equity Loan Schedule (other
than any Home Equity Loan paid in full or any Home Equity Loan specifically
identified in such certification as not covered by such certification), the
documents described in Section 2.01(c)(i) with respect to such Home Equity Loan
are in its possession, and based on its review and examination and only as to
the foregoing documents, such documents appear regular on their face and relate
to such Home Equity Loan. The Trustee agrees, for the benefit of
Certificateholders and the Certificate Insurer, within 45 days after execution
and delivery of this Agreement, to review the Mortgage Files to ascertain that
all required documents set forth in Section 2.01(c) and all other documents
required to be delivered pursuant to this Agreement with respect to each Home
Equity Loan have been executed and received, and that the Mortgage Notes have
been endorsed as set forth in Section 2.01(c), and that such documents relate to
the Home Equity Loans identified on the Home Equity Loan Schedule and in so
doing the Trustee may rely on the purported due execution and genuineness of any
signature thereon. If within such 45-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Home Equity Loans identified in said Home Equity Loan
Schedule or, if in the course of its review, the Trustee determines that such
Mortgage File is otherwise defective in any material respect, the Trustee shall
promptly upon the conclusion of its review notify the Seller and the Depositor,
and the Seller shall have a period of 60 days after such notice within which to
correct or cure any such defect. Not later than 45 days after the Closing Date,
the Trustee shall deliver to the Depositor, the Servicer, the Seller, the
Certificate Administrator and the Certificate Insurer (and to any
Certificateholder that so requests) a Final Certification in the form annexed
hereto as Exhibit K, with any applicable exceptions noted thereon.
(g) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in subsection (f) of Section 2.01. Without
limiting the effect of the preceding sentence, in reviewing any Mortgage File
pursuant to such subsection, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, but shall only be required to determine whether a
document has been executed, that it appears to be what it purports to be, and,
where applicable, that it purports to be recorded, but shall not be required to
determine whether any Person executing any document is authorized to do so or
whether any signature thereon is genuine.
27
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges its
---------------------
receipt of the Certificate Insurance Policy and the sale and assignment of the
Home Equity Loans, and, subject to the review and period for delivery provided
for in Section 2.01, its receipt of the Mortgage Files, and declares that the
Trustee holds and will hold such documents and all amounts received by it
thereunder and hereunder in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders and the Certificate
Insurer. If the Seller is given notice under Section 2.01(f) above and if the
Seller does not correct or cure such omission or defect within the 60-day period
specified in Section 2.01(f) above, the Seller shall purchase such Home Equity
Loan from the Trustee on the Determination Date in the month following the
month in which such 60-day period expired at the Purchase Price of such Home
Equity Loan or upon the expiration of the 90-day period beginning with the
Trustee's notice of the omission or defect if the omission or defect would
result in the related Home Equity Loan not being a "qualified mortgage" for
purposes of Section 860G(a)(3) of the Code. The Purchase Price for the
purchased Home Equity Loan shall be deposited in the Collection Account no later
than the Determination Date preceding the applicable Distribution Date or the
Business Day preceding the expiration of the 90-day period, as the case may be,
and, upon receipt by the Trustee of written notification of such deposit signed
by an officer of the Seller, the Trustee shall release to the Seller the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest in the Seller or its designee any Home Equity Loan released pursuant
hereto. It is understood and agreed that the obligation of the Seller to
purchase any Home Equity Loan as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy against the Seller
respecting such defect or omission available to the Certificateholders, the
Certificate Insurer or the Trustee on behalf of Certificateholders and the
Certificate Insurer. An Opinion of Counsel to the effect set forth in Section
2.06(d) shall be delivered to the Trustee in connection with any such
repurchase.
The Servicer, promptly following the transfer of (i) a Defective Home
Equity Loan from or (ii) an Eligible Substitute Home Equity Loan to the Trust
pursuant to this Section and Section 2.06, as the case may be, shall amend the
Home Equity Loan Schedule, appropriately ▇▇▇▇ the Electronic Ledger and make
appropriate entries in its general account records to reflect such transfer and
the addition of any Eligible Substitute Home Equity Loan, if applicable.
Section 2.03. Representations and Warranties Regarding the Servicer, the
----------------------------------------------------------
Seller and the Certificate Administrator.
----------------------------------------
(a) The Servicer hereby represents and warrants to the Trustee for the
benefit of Certificateholders and the Certificate Insurer that, as of the date
of execution of this Agreement:
(i) The Servicer is a corporation duly incorporated and validly
existing in good standing under the laws of the State of California;
(ii) The execution and delivery of this Agreement by the Servicer
and its performance and compliance with the terms of this Agreement will
not violate the Servicer's corporate charter or by-laws 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
28
of, any material contract, agreement or other instrument to which the
Servicer is a party or which may be applicable to the Servicer or any of
its assets;
(iii) This Agreement, assuming due authorization, execution and
delivery by the Trustee, the Depositor, the Certificate Administrator and
the Seller, constitutes a valid, legal and binding obligation of the
Servicer, enforceable against it in accordance with the terms hereof
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors' rights generally and
to general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Servicer or its properties or
might have consequences that would affect its performance hereunder; and
(v) No litigation is pending or, to the best of the Servicer's
knowledge, threatened against the Servicer which would prohibit its
entering into this Agreement or performing its obligations under this
Agreement.
(b) The Certificate Administrator hereby represents and warrants to
the Trustee for the benefit of Certificateholders and the Certificate Insurer
that, as of the date of execution of this Agreement:
(i) The Certificate Administrator is a national banking association
duly chartered and validly existing in good standing under the laws of the
United States;
(ii) The execution and delivery of this Agreement by the Certificate
Administrator and its performance and compliance with the terms of this
Agreement will not violate the Certificate Administrator's corporate
charter or by-laws 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 Certificate Administrator is a party or which may be applicable
to the Certificate Administrator or any of its assets;
(iii) This Agreement, assuming due authorization, execution and
delivery by the Trustee, the Depositor, the Servicer and the Seller,
constitutes a valid, legal and binding obligation of the Certificate
Administrator, enforceable against it in accordance with the terms hereof
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors' rights generally and
to general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The Certificate Administrator 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
29
governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Certificate Administrator or its properties or might have
consequences that would affect its performance hereunder; and
(v) No litigation is pending or, to the best of the Certificate
Administrator's knowledge, threatened against the Certificate Administrator
which would prohibit its entering into this Agreement or performing its
obligations under this Agreement.
(c) The Seller hereby represents and warrants to the Trustee for the
benefit of Certificateholders and the Certificate Insurer that, as of the date
of execution of this Agreement:
(i) The Seller is a corporation duly incorporated and validly
existing in good standing under the laws of the State of California;
(ii) The execution and delivery of this Agreement by the Seller and
its performance and compliance with the terms of this Agreement will not
violate the Seller's corporate charter or by-laws or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute
a default) under, or result in the breach of, any material contract,
agreement or other instrument to which the Seller is a party or which may
be applicable to the Seller or any of its assets;
(iii) This Agreement, assuming due authorization, execution and
delivery by the Trustee, the Servicer, the Certificate Administrator and
the Depositor, constitutes a valid, legal and binding obligation of the
Seller, enforceable against it in accordance with the terms hereof subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Certificate Administrator or its
properties or might have consequences that would affect its performance
hereunder;
(v) The Seller is in compliance with the laws of each state in
which any Mortgaged Property is located to the extent necessary to ensure
the enforceability of each Mortgage Loan in accordance with the terms of
this Agreement; and
(vi) No litigation is pending or, to the best of the Seller's
knowledge, threatened against the Seller which would prohibit its entering
into this Agreement or performing its obligations under this Agreement.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Home Equity Loans to the Trust. Upon
discovery of a breach of any
30
representations and warranties which materially and adversely affects the
interests of the Certificateholders or the Certificate Insurer, the Person
discovering such breach shall give prompt written notice to the other parties.
Within 60 days of its discovery or its receipt of notice of breach, or, with the
prior written consent of a Responsible Officer of the Trustee, such longer
period specified in such consent, the Servicer, the Certificate Administrator or
the Seller, as the case may be, shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding the
----------------------------------------------------------
Home Equity Loans. The Seller hereby represents and warrants to the Trustee
-----------------
for the benefit of Certificateholders and the Certificate Insurer that, as of
the date of execution of this Agreement, with respect to the Home Equity Loans,
or each Home Equity Loan, as the case may be:
(i) The information set forth in the Home Equity Loan Schedule
appearing as Exhibit C hereto was true and correct in all material respects
at the date or dates respecting which such information is furnished as
specified therein;
(ii) Immediately prior to the transfer and assignment
contemplated by this Agreement, the Seller is the sole owner and holder of
the Home Equity Loan, free and clear of any and all liens, charges or
security interests of any nature and has full right and authority to sell
and assign the same;
(iii) The Mortgage is a valid, subsisting and enforceable
first lien on the related Mortgaged Property, and the Mortgaged Property is
free and clear of all encumbrances and liens having priority over the first
lien of the Mortgage except for liens for real estate taxes and special
assessments not yet due and payable and liens or interests arising under or
as a result of any federal, state or local law, regulation or ordinance
relating to hazardous wastes or hazardous substances; and, if the Mortgaged
Property is a condominium unit, any lien for common charges permitted by
statute or home owners association fees; and any security agreement,
chattel mortgage or equivalent document related to, and delivered to the
Trustee, any Mortgage which establishes in the Seller a valid and
subsisting first lien on the property described therein and the Seller has
full right to sell and assign the same to the Trustee;
(iv) Neither the Seller nor any prior holder of the Mortgage or
the related Mortgage Note has modified the Mortgage or the related Mortgage
Note in any material respect; satisfied, cancelled or subordinated the
Mortgage in whole or in part, from the lien of the Mortgage; or released
the Mortgaged Property in whole or in part from the lien of the Mortgage,
or executed any instrument of release, cancellation, modification or
satisfaction, except in each case as reflected in a document delivered to
the Trustee pursuant to Section 2.01;
(v) All taxes, governmental assessments, insurance premiums,
and water, sewer and municipal charges, which previously became due and
owing have been paid, or an escrow of funds in an amount sufficient to pay
for every such item which remains unpaid has been established to the extent
permitted by law; and the Seller has not
31
advanced funds or 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 related
Mortgage Note or date of disbursement of the Home Equity Loan proceeds,
whichever is later, to the date which precedes by 30 days the first Due
Date under the related Mortgage Note;
(vi) The Mortgaged Property is undamaged by water, fire,
earthquake or earth movement, windstorm, flood, tornado or similar casualty
(excluding casualty from the presence of hazardous wastes or hazardous
substances), so as to affect adversely the value of the Mortgaged Property
as security for the Home Equity Loan or the use for which the premises were
intended and to the best of the Seller's knowledge, (a) the Mortgaged
Property is in good repair (except as a result of the presence, if any, of
hazardous wastes or hazardous substances) and (b) there is no proceeding
pending or threatened for the total or partial condemnation of the
Mortgaged Property;
(vii) The Mortgaged Property is free and clear of all
mechanics' and materialmen's liens or liens in the nature thereof;
provided, however, that this warranty shall be deemed not to have been made
at the time of the initial issuance of the Certificates if a title policy
affording, in substance, the same protection afforded by this warranty is
furnished to the Trustee by the Seller;
(viii) Except for Home Equity Loans secured by long-term
leases, the Mortgaged Property consists of a fee simple estate in real
property, all of the improvements which are included for the purpose of
determining the appraised value of the Mortgaged Property lie wholly within
the boundaries and building restriction lines of such property and no
improvements on adjoining properties encroach upon the Mortgaged Property
(unless insured against under the related title insurance policy) and, to
the best of the Seller's knowledge, the Mortgaged Property and all
improvements thereon comply with all requirements of any applicable zoning
and subdivision laws and ordinances;
(ix) The Home Equity Loan meets, or is exempt from, applicable
state or federal laws, regulations and other requirements pertaining to
usury, and the Home Equity Loan is not usurious;
(x) To the best of the Seller's knowledge, 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;
(xi) All payments required to be made up to the Due Date
immediately preceding the Cut-Off Date for such Home Equity Loan under the
terms of the related Mortgage Note have been made;
32
(xii) The Mortgage Note, the related Mortgage and other
agreements executed in connection therewith are genuine, and each is the
legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law); and, to the best of the Seller's knowledge, all parties
to the Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has been
duly and properly executed by the Mortgagor;
(xiii) Any and all requirements of any federal, state or local
law with respect to the origination of the Home Equity Loans including,
without limitation, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Home Equity Loans have been complied with;
(xiv) The proceeds of the Home Equity Loans have been fully
disbursed, there is no requirement for future advances thereunder and 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, except for escrow funds for exterior items which could not
be completed due to weather; and all costs, fees and expenses incurred in
making, closing or recording the Home Equity Loan have been paid, except
recording fees with respect to Mortgages not recorded as of the date
hereof;
(xv) The Home Equity Loan (except a T.O.P. Loan (loans
originated by Norwest Mortgage or Norwest Funding in connection with the
"Title Option Plus" program, as more fully described in the Prospectus
under "Loan Programs") and any Home Equity Loan secured by Mortgaged
Property located in Iowa as to which an opinion of counsel of the type
customarily rendered in such State in lieu of title insurance is instead
received) is covered by an ALTA mortgagee title insurance policy or other
generally acceptable form of policy or insurance acceptable to FNMA or
FHLMC, issued by a title insurer acceptable to FNMA or FHLMC insuring the
originator, its successors and assigns, as to the first priority lien of
the Mortgage in the original principal amount of the Home Equity Loan and
subject only to (A) the lien of current real property taxes and assessments
not yet due and payable, (B) covenants, conditions and restrictions,
rights-of-way, easements and other matters of public record as of the date
of recording of such Mortgage acceptable to mortgage lending institutions
in the area in which the Mortgaged Property is located or specifically
referred to in the appraisal performed in connection with the origination
of the related Home Equity Loan, (C) liens created pursuant to any federal,
state or local law, regulation or ordinance affording liens for the costs
of clean-up of hazardous substances or hazardous wastes or for other
environmental protection purposes and (D) such other matters to which like
properties are commonly subject which do not individually, or in the
aggregate, materially interfere with the benefits of the security intended
to be provided by the Mortgage; the Seller is the sole insured of such
33
mortgagee title insurance policy, the assignment to the Trustee of the
Seller's interest in such mortgagee title insurance policy does not require
any consent of or notification to the insurer which has not been obtained
or made, such mortgagee title insurance policy is in full force and effect
and will be in full force and effect and inure to the benefit of the
Trustee and no claims have been made under such mortgagee title insurance
policy, and no prior holder of the related Mortgage, including the Seller,
has done, by act or omission, anything which would impair the coverage of
such mortgagee title insurance policy;
(xvi) The Mortgaged Property securing each Home Equity Loan
is insured by an insurer acceptable to FNMA or FHLMC against loss by fire
and such hazards as are covered under a standard extended coverage
endorsement, in an amount which is not less than the lesser of 100% of the
insurable value of the Mortgaged Property and the outstanding principal
balance of the Home Equity Loan, but in no event less than the minimum
amount necessary to fully compensate for any damage or loss on a
replacement cost basis; if the Mortgaged Property is a condominium unit, it
is included under the coverage afforded by a blanket policy for the
project; if upon origination of the Home Equity Loan, the improvements on
the Mortgaged Property were in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood hazards,
a flood insurance policy meeting the requirements of the current guidelines
of the Federal Insurance Administration is in effect with a generally
acceptable insurance carrier, in an amount representing coverage not less
than the least of (A) the outstanding principal balance of the Home Equity
Loan, (B) the full insurable value of the Mortgaged Property and (C) the
maximum amount of insurance which was available under the Flood Disaster
Protection Act of 1973; and each Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and
expense;
(xvii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage 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 Seller has not waived any default,
breach, violation or event of acceleration; and no foreclosure action is
threatened or has been commenced with respect to the Home Equity Loan;
(xviii) No Mortgage Note or Mortgage is subject to any right
of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note or
Mortgage, or the exercise of any right thereunder, render such Mortgage
unenforceable, in whole or in part, or subject it to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto;
(xix) Each Mortgage Note (other than with respect to a Home
Equity Loan, which is a balloon loan) is payable in Scheduled Monthly
Payments, resulting in
34
complete amortization of the Home Equity Loan over a term of not more than
360 months;
(xx) Each Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits
of the security, including realization by judicial foreclosure (subject to
any limitation arising from any bankruptcy, insolvency or other law for the
relief of debtors), and there is no homestead or other exemption available
to the mortgagor which would interfere with such right of foreclosure;
(xxi) To the best of the Seller's knowledge, no mortgagor is
a debtor in any state or federal bankruptcy or insolvency proceeding;
(xxii) Each Mortgage Property is located in the United
States and consists of a one- to four-unit single family residential
property which may include a detached home, townhouse, condominium unit, or
unit in a planned unit development or a leasehold interest with respect to
any of the forgoing;
(xxiii) As of the Closing Date, the Seller has no actual
knowledge that there exists on any Mortgaged Property any hazardous
substances, hazard 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. For purposes of this clause (xxiii),
actual knowledge of the Seller means actual knowledge of an officer of the
Seller involved in the servicing of the relevant Home Equity Loan. Actual
knowledge of the Seller does not include knowledge imputable by virtue of
the availability of or accessibility to information relating to
environmental or hazardous waste sites or the locations thereof;
(xxiv) Each Home Equity Loan is a "qualified mortgage" within
the meaning of Section 860G of the Code;
(xxv) An appraisal completed by an independent fee appraiser
was performed with respect to each Mortgaged Property and no such appraisal
was based solely upon a cost approach analysis;
(xxvi) Any escrow arrangements established with respect to any
Home Equity Loan are in compliance with all applicable local, state and
federal laws and are in compliance with the terms of the related Mortgage
Note;
(xxvii) With respect to each Mortgage where a lost note affidavit
has been delivered to the Trustee in place of the related Mortgage Note,
the related Mortgage Note is no longer in existence;
35
(xxviii) If the Home Equity Loan is secured by a long-term
residential lease, (1) the lessor under the lease holds a fee simple
interest in the land; (2) the terms of such lease expressly permit the
mortgaging of the leasehold estate, the assignment of the lease without the
lessor's consent and the acquisition by the holder of the Mortgage of the
rights of the lessee upon foreclosure or assignment in lieu of foreclosure
or provide the holder of the Mortgage with substantially similar
protections; (3) the terms of such lease do not (a) allow the termination
thereof upon the lessee's default without the holder of the Mortgage being
entitled to receive written notice of, and opportunity to cure, such
default, (b) allow the termination of the lease in the event of damage or
destruction as long as the Mortgage is in existence, (c) prohibit the
holder of the Mortgage from being insured (or receiving proceeds of
insurance) under the hazard insurance policy or policies relating to the
Mortgaged Property or (d) permit any increase in rent other than pre-
established increases set forth in the lease; (4) the original term of such
lease is not less than 15 years; (5) the term of such lease does not
terminate earlier than five years after the maturity date of the Mortgage
Note; and (6) the Mortgaged Property is located in a jurisdiction in which
the use of leasehold estates in transferring ownership in residential
properties is a widely accepted practice.
Notwithstanding the foregoing, no representations or warranties are made by
the Seller with respect to the absence or effect of fraud in the origination of
any Home Equity Loan.
(b) It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee and the termination of the rights and obligations of the
Servicer pursuant to Section 7.04 or 8.01.
(c) Upon discovery by the Depositor, the Seller, the Servicer, the
Certificate Administrator, the Certificate Insurer or a Responsible Officer of
the Trustee of a breach of any of the foregoing representations and warranties
which materially and adversely affects the interests of the Trust or the
Certificateholders in the related Home Equity Loan, the party discovering such
breach shall give prompt written notice to the other parties. Within 60 days of
its discovery or its receipt of notice of breach, the Seller shall use all
reasonable efforts to cure such breach in all material respects or shall
purchase from the Trust or substitute an Eligible Substitute Home Equity Loan as
provided in Section 2.06 for such Home Equity Loan from the Trust. Any such
purchase by the Seller shall be at the Purchase Price, and in each case shall be
accomplished in the manner set forth in Section 2.02. It is understood and
agreed that the obligation of the Seller to cure, substitute or purchase any
Home Equity Loan as to which such a breach has occurred and is continuing shall
constitute the sole remedies against the Seller respecting such breach available
to Certificateholders or the Trustee on behalf of Certificateholders. An
Officers' Certificate and Opinion of Counsel to the effect set forth in Section
2.06(d) shall be delivered to the Trustee in connection with any such
repurchase.
Section 2.05. Representations and Warranties of the Depositor. (a) The Depositor
----------------------------------------------
represents and warrants to the Trustee for the benefit of the Certificateholders
and the Certificate Insurer that, as of the date of execution of this Agreement:
36
(i) This Agreement, assuming due authorization, execution and
delivery by the Trustee, the Servicer, the Seller, and the Certificate
Administrator, constitutes a valid, legal and binding obligation of the
Depositor, enforceable against it in accordance with the terms hereof
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors' rights generally and
to general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(ii) Immediately prior to the sale and assignment by the Depositor
to the Trustee of each Home Equity Loan, (x) the Depositor had good and
marketable title to each Home Equity Loan subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature and (y) the Depositor had
full authority under all governmental and regulatory bodies having
jurisdiction over the ownership of the Home Equity Loan to sell the Home
Equity Loan to the Trustee and such transfer will not impair the
enforceability of the Home Equity Loans;
(iii) As of the Closing Date, the Depositor has transferred all
right, title and interest in the Home Equity Loans to the Trustee; and
(iv) The Depositor has not transferred the Home Equity Loans to the
Trustee with any intent to hinder, delay or defraud any of its creditors.
Section 2.06. Substitution of Home Equity Loans. (a) On a Determination Date
---------------------------------
within two years following the Closing Date and which is on or before the date
on which the Seller would otherwise be required to repurchase a Home Equity Loan
under Section 2.02 or 2.04, the Seller may deliver to the Trustee one or more
Eligible Substitute Home Equity Loans in substitution for any one or more of the
Defective Home Equity Loans which the Seller would otherwise be required to
repurchase pursuant to Sections 2.02 or 2.04.
(b) The Seller shall notify the Servicer and the Trustee in writing not
less than five Business Days before the related Determination Date which is on
or before the date on which the Seller would otherwise be required to repurchase
such Home Equity Loan pursuant to Section 2.02 or 2.04 of its intention to
effect a substitution under this Section. On such Determination Date (the
"Substitution Date"), the Seller shall deliver to the Trustee (1) the Eligible
Substitute Home Equity Loans to be substituted for the Original Home Equity
Loans, (2) a list of the Original Home Equity Loans to be substituted for by
such Eligible Substitute Home Equity Loans, (3) an Officers' Certificate (A)
stating that no failure by the Servicer described in Section 8.01 shall have
occurred and be continuing, (B) stating that all conditions precedent to such
substitution specified in subsection (a) have been satisfied and attaching as an
exhibit a supplemental Home Equity Loan schedule (the "Supplemental Home Equity
Loan Schedule") setting forth the same type of information as appears on the
Home Equity Loan Schedule and representing as to the accuracy thereof and (C)
confirming that the representations and warranties contained in Section 2.04 are
true and correct in all material respects with respect to the Substitute Home
Equity Loans on and as of such Determination Date, provided that remedies for
the inaccuracy of such representations are limited as set forth in Sections
2.02, 2.04 and this Section 2.06, (4) an Opinion of Counsel to the effect set
forth below and (5) a
37
certificate stating that cash in the amount of the related Substitution
Adjustment Amount, if any, has been deposited to the Collection Account. Upon
receipt of the foregoing, the Trustee shall release such Original Home Equity
Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.06(a) and (b) above and the grant of such Eligible Substitute Home
Equity Loans to the Trustee pursuant to Section 2.06(a) above, Exhibit C to this
Agreement shall be deemed to be amended to exclude all Home Equity Loans being
replaced by such Eligible Substitute Home Equity Loans and to include the
information set forth on the Supplemental Home Equity Loan Schedule with respect
to such Eligible Substitute Home Equity Loans, and all references in this
Agreement to Home Equity Loans shall include such Eligible Substitute Home
Equity Loans and be deemed to be made on or after the related Substitution Date,
as the case may be, as to such Eligible Substitute Home Equity Loans.
(d) In connection with any Home Equity Loan that the Seller is required to
purchase or replace, the Seller shall deliver to the Trustee and the Certificate
Insurer an Opinion of Counsel to the effect that such purchase or substitution
will not cause (x) any federal tax to be imposed on the Trust, including without
limitation, any Federal tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the start-up day" under
Section 860G(d)(1) of the Code or (y) any portion of the Trust to fail to
qualify as a REMIC at any time that any Certificate is outstanding. In the event
that such opinion indicates that a repurchase or substitution will result in the
imposition of a prohibited transaction tax, give rise to net taxable income or
be deemed a contribution to the REMIC after the "start-up day", the Seller shall
not be required to repurchase or replace any such Home Equity Loan unless and
until the Servicer has determined there is an actual or imminent default with
respect thereto or that such defect or breach adversely affects the
enforceability of such Home Equity Loan. Notwithstanding anything to the
contrary herein, an Opinion of Counsel under this Section 2.06(d) shall not be
required with respect to the purchase or replacement of a Home Equity Loan if
such replacement occurs within three months of the Startup Day, or with respect
to a purchase or replacement (i) if the Home Equity Loan that is being purchased
or replaced is in default, or default of such Home Equity Loan is reasonably
foreseeable, or (ii) the Home Equity Loan does not conform to a customary
representation or warranty given by the Seller or prior owner of the Home Equity
Loan regarding the characteristics of such Home Equity Loan, or the
characteristics of the pool of Home Equity Loans of which the Home Equity Loan
is a part.
Section 2.07. Execution and Authentication of Certificates. The Trustee on
--------------------------------------------
behalf of the Trust shall cause to be executed, authenticated and delivered on
the Closing Date to or upon the order of the Depositor, in exchange for the Home
Equity Loans, concurrently with the sale, assignment and conveyance to the
Trustee of the Home Equity Loans, the Class A Certificates in authorized
denominations and the Residual Certificates, together evidencing the ownership
of the entire Trust.
Section 2.08. Designation of Interests in REMIC. The Residual Certificates are
---------------------------------
hereby designated as the single class of "residual interests" in the Trust for
purposes of the REMIC Provisions. The Class A Certificates are hereby designated
as "regular interests" in the Trust for purposes of the REMIC Provisions.
38
Section 2.09. REMIC Startup Day and Certificate Maturity Date. The Startup
-----------------------------------------------
Day of the REMIC for purposes of Section 860G(a)(9) of the Code is April 30,
1998, and solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of the
Treasury Regulations, the "latest possible maturity date" of the Class A
Certificates is the Distribution Date in April 2028.
Section 2.10. Tax Returns and Reports to Certificateholders. (a) For
---------------------------------------------
federal income tax purposes, the Trust shall have a calendar year and shall
maintain its books on the accrual method of accounting.
(b) The Certificate Administrator shall prepare or cause to be prepared,
execute and deliver, either directly or indirectly through the Servicer or the
Trustee, to the Servicer or Certificateholders, as applicable, any income tax
information returns for each taxable year with respect to the Trust containing
such information at the times and in the manner as may be required by the Code
or state or local tax laws, regulations, or rules, and shall furnish or cause to
be furnished to the Trust and the Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby.
Within thirty (30) days of the Closing Date, the Certificate Administrator shall
furnish or cause to be furnished to the Internal Revenue Service, on Form 8811
or as otherwise required by the Code, the name, title, address and telephone
number of the person that Holders of the Certificates may contact for tax
information relating thereto, together with such additional information at the
time or times and in the manner required by the Code. Such federal, state, or
local income tax or information returns shall be signed by the Certificate
Administrator, or such other Person as may be required to sign such returns by
the Code or state or local tax laws, regulations, or rules.
(c) In the first federal income tax return of the Trust for its short
taxable year ending December 31, 1998, REMIC status shall be elected with
respect to all assets of the Trust for such taxable year and all succeeding
taxable years and the Class A Certificates and Residual Certificate shall be
designated as the "regular interests" and "residual interest" in the REMIC,
respectively.
(d) The Certificate Administrator will maintain or cause to be maintained
such records relating to the Trust, including but not limited to the income,
expenses, assets and liabilities of the Trust, and the fair market value and
adjusted basis of the Trust property and assets determined at such intervals as
may be required by the Code, as may be necessary to prepare the foregoing
returns, schedules, statements or information.
(e) The Servicer, upon request, shall promptly furnish the Certificate
Administrator with all such information as may be required in connection with
the Certificate Administrator's obligations pursuant to this Section 2.10.
Section 2.11. Tax Matters Person. The tax matters person with respect to
------------------
the Trust shall be the Certificate Administrator. The Certificate Administrator
shall at all times hold the Tax Matters Person Residual Interest and shall have
the same duties with respect to the Trust as those of a "tax matters partner"
under Subchapter C of Chapter 63 of Subtitle F of the Code. Each holder of a
Residual Certificate shall be deemed to have agreed, by acceptance thereof, to
be bound by this Section 2.11.
39
Section 2.12. REMIC Related Covenants. For as long as the Trust shall
-----------------------
exist, the Trustee and the Certificate Administrator shall act in accordance
herewith to assure continuing treatment of the Trust as a REMIC and avoid the
imposition of tax on the Trust. In particular:
(a) Neither the Trustee nor the Certificate Administrator shall create, or
permit the creation of, any "interests" in the Trust within the meaning of Code
Section 860D(a)(2) other than the interests represented by the Class A
Certificates and the Residual Certificates.
(b) Except as otherwise provided in the Code, the Depositor shall not
grant and the Trustee shall not accept property unless (i) substantially all of
the property held in the Trust constitutes either "qualified mortgages" or
"permitted investments" as defined in Code Sections 860G(a)(3) and (5),
respectively, and (ii) no property shall be contributed to the Trust after the
Startup Day unless such grant would not subject the Trust to the 100% tax on
contributions to a REMIC after the Startup Day of the REMIC imposed by Code
Section 860G(d).
(c) The Trustee shall not accept on behalf of the Trust any fee or other
compensation for services (other than as otherwise provided herein) and shall
not accept on behalf of the Trust any income from assets other than those
permitted to be held by a REMIC.
(d) The Trustee shall not sell or permit the sale of all or any portion of
the Home Equity Loans (other than in accordance with Section 2.02, 2.04 or
3.17), unless such sale is pursuant to a "qualified liquidation" as defined in
Code Section 860F(a)(4)(A) and in accordance with Article VIII.
(e) The Trustee and the Certificate Administrator shall maintain books
with respect to the Trust on a calendar year taxable year and on an accrual
basis.
(f) Upon filing with the Internal Revenue Service, the Certificate
Administrator shall prepare and the Trustee shall furnish to the Holders of the
Class R Certificates the Form 1066 and each Form 1066Q and shall respond
promptly to written requests made not more frequently than quarterly by any
Holder of Class R Certificates with respect to the following matters:
(i) The original projected principal and interest cash flows on the
Closing Date on each class of regular and residual interests created
hereunder and on the Home Equity Loans, based on the Prepayment Assumption;
(ii) The projected remaining principal and interest cash flows as of
the end of any calendar quarter with respect to each class of regular and
residual interests created hereunder and the Home Equity Loans, based on
the Prepayment Assumption;
(iii) The Prepayment Assumption and any interest rate assumptions
used in determining the projected principal and interest cash flows
described above;
(iv) The original issue discount (or, in the case of the Home Equity
Loans, market discount) or premium accrued or amortized through the end of
such calendar quarter with respect to each class of regular or residual
interests created hereunder and with respect to the
40
Home Equity Loans, together with each constant yield to maturity used in
computing the same;
(v) The treatment of losses realized with respect to the Home
Equity Loans or the regular interests created hereunder, including the
timing and amount of any cancellation of indebtedness income of the REMIC
with respect to such regular interests or bad debt deductions claimed with
respect to the Home Equity Loans;
(vi) The amount and timing of any non-interest expenses of the
REMIC; and
(vii) Any taxes (including penalties and interest) imposed on the
REMIC, including, without limitation, taxes on "prohibited transactions,"
"contributions" or "net income from foreclosure property" or state or local
income or franchise taxes.
In the event that any tax is imposed on "prohibited transactions" of the
Trust as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of the REMIC as defined in Section 860G(c) of the Code, on
any contribution to the Trust after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax (other than any minimum tax imposed by Sections
24874 and 23153 of the California Revenue and Taxation Code) is imposed, such
tax shall be paid by (i) the Trustee, if such tax arises out of or results from
a breach by the Trustee of any of its obligations under this Agreement, (ii) the
Servicer, if such tax arises out of or results from a breach by the Servicer of
any of any of its obligations under this Agreement, (iii) the Certificate
Administrator, if such tax arises out of or results from a breach by the
Certificate Administrator of any of its obligations under this Agreement, or
otherwise or (iv) the Holders of the Class R Certificates in proportion to their
Percentage Interests. To the extent such tax is chargeable against the Holders
of the Class R Certificates, notwithstanding anything to the contrary contained
herein, the Trustee is hereby authorized to retain from amounts otherwise
distributable to the Holders of the Class R Certificates on any Distribution
Date sufficient funds to reimburse the Trustee for the payment of such tax (to
the extent that the Trustee has not been previously reimbursed or indemnified
therefor). Any tax imposed on the Trust Fund by Sections 24874 and 23153 of the
California Revenue and Taxation Code shall be timely paid by the Trustee out of
its own funds without right of reimbursement therefor if such taxes arise solely
from the Trustee's presence in California, and otherwise by the Servicer.
The Trustee shall not engage in a "prohibited transaction" (as defined in
Code Section 860F(a)(2)), except that, with the prior written consent of the
Depositor, the Trustee may engage in the activities otherwise prohibited by the
foregoing clauses (b), (c) and (d), provided that the Seller shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
transaction will not result in the imposition of a contribution or prohibited
transaction tax on the Trust and will not disqualify the Trust from treatment as
a REMIC; and provided, that the Seller shall have demonstrated to the
satisfaction of the Trustee that such action will not adversely affect the
rights of the holders of the Certificates, the Certificate Insurer and the
Trustee and that such action will not adversely impact the rating of the
Certificates.
(g) The Certificate Administrator shall pay out of its own funds, without
any right of reimbursement, any and all tax related expenses of the Trust
(including, but not limited to, tax return
41
preparation and filing expenses and any professional fees or expenses related to
audits or any administrative or judicial proceedings with respect to the Trust
that involve the Internal Revenue Service or state tax authorities), other than
the expense of obtaining any Opinion of Counsel required pursuant to Sections
2.06, 3.07 and 10.02 and other than taxes except as specified herein.
42
ARTICLE III
Administration and Servicing
of Home Equity Loans
Section 3.01. The Servicer. (a) It is intended that the Trust formed
------------
hereunder shall constitute, and that the affairs of the Trust shall be conducted
so as to qualify it as, a "real estate mortgage investment conduit" ("REMIC") as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intentions, the Servicer covenants and agrees that it shall not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust, except as provided in Article X.
(b) The Servicer, as independent contract servicer, shall service and
administer the Home Equity Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. The Servicer may enter into Subservicing
Agreements for any servicing and administration of Home Equity Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and (1)
(x) has been designated an approved Seller and Servicer by FHLMC or FNMA, or (y)
is an affiliate of the Servicer, or (2) is otherwise approved by the Certificate
Insurer and the Class A Certificateholders aggregating 51% of the Percentage
Interests thereof. Any such Subservicing Agreement shall be consistent with and
not violate the provisions of this Agreement. The Servicer shall be entitled to
terminate any Subservicing Agreement in accordance with the terms and conditions
of such Subservicing Agreement and either itself directly service the related
Home Equity Loans or enter into a Subservicing Agreement with a successor
subservicer which qualifies hereunder. Notwithstanding the foregoing, (i) each
Subservicer must be consented to by the Certificate Administrator (which consent
shall not be unreasonably withheld) and (ii) without the consent of the
Certificate Administrator, the Servicer may not engage more than two
Subservicers at any one time.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable for the servicing and
administering of the Home Equity Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Home Equity Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Home Equity Loans when the Subservicer has received such payments.
The Servicer shall be entitled to enter into any agreement with a Subservicer
for indemnification of the Servicer by such Subservicer, and nothing contained
in this Agreement shall be deemed to limit or modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Home Equity Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed to
be between the Subservicer and the Servicer alone, and the Trustee
43
and Certificateholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Section 3.01(e). The Servicer shall be solely
liable for all fees owed by it to any Subservicer irrespective of whether the
Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees.
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee shall thereupon assume all of the rights and obligations of the
Servicer under each Subservicing Agreement that the Servicer may have entered
into, unless the Trustee or designee elects to terminate any Subservicing
Agreement. If the Trustee does not terminate a Subservicing Agreement, the
Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements with regard to events that occurred prior to the date
the Servicer ceased to be the Servicer hereunder. The Servicer at its expense
and without right of reimbursement therefor, shall, upon request of the Trustee,
deliver to the assuming party all documents and records relating to each
Subservicing Agreement and the Home Equity Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Home Equity Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
Certificate Insurer or the Certificateholders, provided, however, that the
Servicer may not, without the consent of the Certificate Insurer, permit any
modification with respect to any Home Equity Loan that would change the Mortgage
Rate or the Gross Margin, defer or forgive the payment of any principal or
interest or extend the final maturity date on the Home Equity Loan.
Notwithstanding the foregoing, the Servicer may, if (x) the Mortgagor is in
default with respect to the Home Equity Loan, or such default is, in the
judgment of the Servicer, imminent, and (y) such modification would not cause
the REMIC to be disqualified or otherwise cause a tax to be imposed on the
REMIC, modify the Home Equity Loan to capitalize outstanding Advances and/or
Other Advances (each, a "Capitalized Advance ") on a Home Equity Loan and
reamortize the sum of the Stated Principal Balance of such Home Equity Loan and
the related Capitalized Advance over the remaining term to maturity of such Home
Equity Loan; provided that, without the consent of the Certificate Insurer,
which consent shall not be unreasonably withheld, Home Equity Loans with Stated
Principal Balances in the aggregate of no more than 3.0% of the Cut-Off Date
Pool Stated Principal Balance shall be modified by the Servicer in such manner.
No costs incurred by the Servicer or any Subservicer in respect of Other
Advances shall for the purposes of distributions to Certificateholders be added
to the amount owing under the related Home Equity Loan. Without limiting the
generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered to execute and deliver on behalf of the Trustee, the
Certificate Insurer and each Certificateholder, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Home Equity Loans and with respect
to the Mortgaged Properties. If reasonably required by
44
the Servicer, the Trustee shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.
Notwithstanding anything to the contrary contained herein, the Servicer, in
servicing and administering the Home Equity Loans, shall employ or cause to be
employed procedures (including collection, foreclosure and REO Property
management procedures) and exercise the same care that it customarily employs
and exercises in servicing and administering Home Equity Loans for its own
account, in accordance with accepted mortgage servicing practices of prudent
lending institutions and giving due consideration to the Certificate Insurer,
and the Certificateholders' reliance on the Servicer.
(g) On and after such time as the Trustee receives the resignation of, or
notice of the removal of, the Servicer from its rights and obligations under
this Agreement, and with respect to resignation pursuant to Section 7.04, after
receipt by the Trustee of the Opinion of Counsel required pursuant to Section
7.04, the Trustee or its designee shall assume all of the rights and obligations
of the Servicer, subject to Section 8.02 hereof. The Servicer shall, upon
request of the Trustee but at the expense of the Servicer, deliver to the
Trustee all documents and records relating to the Home Equity Loans and an
accounting of amounts collected and held by the Servicer and otherwise use its
best efforts to effect the orderly and efficient transfer of servicing rights
and obligations to the assuming party.
(h) The Servicer shall deliver a list of Servicing Officers to the Trustee
by the Closing Date.
Section 3.02. Collection of Certain Home Equity Loan Payments. (a) The
-----------------------------------------------
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Home Equity Loans, and shall, to the extent such
procedures shall be consistent with this Agreement, follow such collection
procedures as it follows with respect to Home Equity Loans in its servicing
portfolio comparable to the Home Equity Loans. Consistent with the foregoing,
and without limiting the generality of the foregoing, the Servicer may in its
discretion (i) waive any late payment charge or any assumption fees or other
fees which may be collected in the ordinary course of servicing such Home Equity
Loan and (ii) arrange with a Mortgagor a schedule for the payment of interest
due and unpaid for no more than 180 days; provided such arrangement is
--------
consistent with the Servicer's policies with respect to the Home Equity Loans it
owns or services; provided, further, that notwithstanding such arrangement such
-------- -------
Home Equity Loans will be included in the monthly information prepared by the
Certificate Administrator and delivered by the Certificate Administrator to the
Trustee pursuant to Section 5.05.
(b) The Servicer shall establish and maintain a separate trust account
(the "Collection Account") on behalf of the Certificateholders and the
Certificate Insurer. The Collection Account shall be an Eligible Account. The
Servicer shall deposit into the Collection Account daily, within two Business
Days of receipt thereof, in immediately available funds, the following payments
and collections received or made by it on and after the Cut-Off Date (to the
extent not applied in computing the Cut-Off Date Principal Balance thereof)
(without duplication):
45
(i) all payments on account of principal on the Home Equity Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Home Equity Loans
(other than interest due on the Home Equity Loans through and including the
Cut-Off Date);
(iii) all Net Liquidation Proceeds, net of Excess Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds; and
(vi) all amounts deposited pursuant to a Special Servicing Agreement.
provided, however, with respect to each Due Period, the Servicer shall be
permitted to retain from payments in respect of interest on the Home Equity
Loans, the Servicing Fee for such Due Period. The foregoing requirements
respecting deposits to the Collection Account are exclusive, it being understood
that, without limiting the generality of the foregoing, the Servicer need not
deposit in the Collection Account amounts representing Excess Proceeds, fees
(including annual fees) or late charge penalties payable by Mortgagors, or
amounts received by the Servicer for the accounts of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar items.
The Servicer may invest any funds in the Collection Account in Permitted
Investments (including obligations of the Servicer or any of its Affiliates, if
such obligations otherwise qualify as Permitted Investments) pursuant to Section
5.08.
Section 3.03. Withdrawals from the Collection Account and Deposits to the
-----------------------------------------------------------
Certificate Account.
-------------------
(a) The Servicer (or the Depositor or the Seller, as applicable, in the
case of clause (vi) below) may from time to time make withdrawals from the
Collection Account for the following purposes:
(i) to pay to the Servicer (to the extent not previously paid to or
withheld by the Servicer), as servicing compensation in accordance with
Section 3.09, that portion of any payment of interest that equals the
Servicing Fee for the period with respect to which such interest payment
was made, and, as additional servicing compensation, those other amounts
set forth in Section 3.09;
(ii) to reimburse the Servicer or the Trustee for Advances made by it
with respect to the Home Equity Loans, such right of reimbursement pursuant
to this subclause (ii) being limited to amounts received on particular Home
Equity Loan(s) (including, for this purpose, Insurance Proceeds or
Liquidation Proceeds) that represent late recoveries of payments of
principal and/or interest on such particular Home Equity Loan(s) in respect
of which any such Advance was made;
46
(iii) to reimburse the Servicer or the Trustee for any Nonrecoverable
Advance previously made;
(iv) to reimburse the Servicer from Insurance Proceeds for Insured
Expenses covered by the related Insurance Policy;
(v) to pay the Servicer any unpaid Servicing Fees and to reimburse
the Servicer or the Trustee for any unreimbursed Other Advances, the
Servicer's and the Trustee's right to reimbursement of Other Advances
pursuant to this subclause (v) with respect to any Home Equity Loan being
limited to amounts received on particular Home Equity Loan(s) (including,
for this purpose, Insurance Proceeds, Liquidation Proceeds and purchase and
repurchase proceeds) that represent late recoveries of the payments for
which such advances were made pursuant to Section 3.09 or Section 3.16;
(vi) to pay to the Seller or the Servicer, as applicable, with
respect to each Home Equity Loan or property acquired in respect thereof
that has been purchased or repurchased pursuant to Section 2.02, 2.03 or
3.07, all amounts received thereon and not taken into account in
determining the related Stated Principal Balance of such purchased or
repurchased Home Equity Loan;
(vii) to withdraw any amount deposited in the Collection Account and
not required to be deposited therein; and
(viii) to clear and terminate the Collection Account upon termination
of this Agreement pursuant to Section 10.01 hereof.
(b) On or before 1:00 p.m. on each Servicer Advance Date, or by the close
of business on such date in the case of an Advance made by the Trustee, the
Servicer shall remit to the Trustee for deposit into the Certificate Account the
following payments to be made by the Servicer:
(i) any amounts payable in connection with the repurchase by the
Seller or purchase by the Servicer of any Home Equity Loan and the amount
of any Substitution Adjustment Amount pursuant to Sections 2.02, 2.04, 2.06
and 3.17; and
(ii) any amount required to be deposited in the Certificate Account
pursuant to Sections 3.05, 3.07, 3.16, 3.17, 5.04, 5.08 or 10.01.
In addition, no later than 12:00 noon New York time on the Servicer Advance
Date, the Servicer shall withdraw from the Collection Account the amount of
Available Funds, to the extent on deposit, and the Servicer shall deposit such
amount in the Certificate Account.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
----------------------------------------------------
Expenses. The Servicer shall cause to be maintained for each Home Equity Loan
--------
fire and hazard insurance naming the Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements securing such Home Equity Loan
47
from time to time and (ii) the minimum amount required to compensate for damage
or loss on a replacement cost basis. The Servicer shall also maintain on
property acquired upon foreclosure, or by deed in lieu of foreclosure, hazard
insurance with extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value from time to time of the improvements
which are a part of such property and (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis at the time of such
foreclosure, fire and or deed in lieu of foreclosure plus accrued interest and
the good-faith estimate of the Servicer of related Other Advances to be incurred
in connection therewith. Amounts collected by the Servicer under any such
policies shall be deposited in the Collection Account to the extent called for
by Section 3.02. In cases in which any Mortgaged Property is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Home Equity Loan shall include flood insurance to the extent such flood
insurance is available and the Servicer has determined such insurance to be
necessary in accordance with accepted Home Equity Loan servicing standards. All
such flood insurance shall be in amounts equal to the least of the amount in
clause (i) above, clause (ii) above and the maximum amount of insurance
available under the National Flood Insurance Act of 1968, as amended. The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Home Equity Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy. In the
---------------------------------------------------
event that the Servicer shall obtain and maintain a blanket policy with an
insurer having a General Policy rating of A:VIII or better in Best's Key Rating
Guide, insuring against fire and hazards of extended coverage on all of the Home
Equity Loans, then, to the extent such policy names the Servicer as loss payee
and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Home Equity Loans without co-insurance, and otherwise complies
with the requirements of Section 3.04, the Servicer shall be deemed conclusively
to have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 3.04, it being understood and agreed that such blanket
policy may contain a deductible clause, in which case the Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 3.04, and there shall have been a loss
which would have been covered by such policy, deposit in the Certificate Account
the difference, if any, between the amount that would have been payable under a
policy complying with Section 3.04 and the amount paid under such blanket
policy. Upon the request of the Trustee, the Certificate Insurer or any
Certificateholder, the Servicer shall cause to be delivered to the Trustee or
such Certificateholder, as the case may be, a certified true copy of such
policy. In connection with its activities as administrator and servicer of the
Home Equity Loans, the Servicer agrees to prepare and present, on behalf of
itself, the Trustee, the Certificate Insurer and Certificateholders, claims
under any such policy in a timely fashion in accordance with the terms of such
policy.
Section 3.06. Fidelity Bond. The Servicer shall maintain with a
-------------
responsible company, and at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, in a minimum amount acceptable to FNMA or
FHLMC or otherwise in an amount as is commercially available at a cost that is
not generally regarded as excessive by industry standards, with broad coverage
on all officers, employees or other persons acting in any capacity requiring
such persons to handle funds, money, documents or papers relating to the Home
Equity Loans ("Servicer Employees"). Any such
48
fidelity bond and errors and omissions insurance shall protect and insure the
Servicer against losses, including losses resulting from forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of such Servicer
Employees. Such fidelity bond shall also protect and insure the Servicer against
losses in connection with the release or satisfaction of a Home Equity Loan
without having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 3.06 requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. Upon the request of the Trustee, the
Certificate Insurer or any Certificateholder, the Servicer shall cause to be
delivered to the Trustee, the Certificate Insurer or such Certificateholder a
certified true copy of such fidelity bond and insurance policy.
Section 3.07. Management and Realization Upon Defaulted Home Equity Loans.
-----------------------------------------------------------
The Servicer shall manage, conserve, protect and operate each REO Property for
the Certificateholders and the Certificate Insurer solely for the purpose of its
prudent and prompt disposition and sale. The Servicer shall, either itself or
through an agent selected by the Servicer, manage, conserve, protect and operate
the REO Property in the same manner that it manages, conserves, protects and
operates other foreclosed property for its own account, and in the same manner
that similar property in the same locality as the REO Property is managed. The
Servicer shall attempt to sell the same (and may temporarily rent the same) on
such terms and conditions as the Servicer deems to be in the best interest of
the Certificateholders and the Certificate Insurer.
The Servicer shall cause to be deposited, no later than two Business Days
after the receipt thereof, in the Collection Account, all revenues received with
respect to the related REO Property and shall retain therefrom funds necessary
for the proper operation, management and maintenance of the REO Property and the
fees of any managing agent acting on behalf of the Servicer.
The disposition of REO Property shall be carried out by the Servicer for
cash at such price, and upon such terms and conditions, as the Servicer deems to
be in the best interest of the Certificateholders and the Certificate Insurer
and, as soon as practicable thereafter, the expenses of such sale shall be paid.
The cash proceeds of sale of the REO Property shall be promptly and in no event
later than two Business Days after the receipt thereof deposited in the
Collection Account, net of Excess Proceeds and of any related unreimbursed Other
Advances, accrued and unpaid Servicing Fees and unreimbursed Advances payable to
the Servicer in accordance with Section 3.03, for distribution to the
Certificateholders in accordance with Section 5.01 hereof.
Subject to Section 3.18, the Servicer shall foreclose upon or otherwise
comparably convert to ownership Mortgaged Properties securing such of the Home
Equity Loans as come into and continue in default when no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.02 subject to the provisions contained in the last paragraph of this
Section 3.07.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee (which may be the Servicer) on
behalf of Certificateholders and the Certificate Insurer.
In the event any Mortgaged Property is acquired as aforesaid or otherwise
in connection with a default or imminent default on a Home Equity Loan, the
Servicer shall (i) dispose of such
49
Mortgaged Property within three years from the close of the taxable year of its
acquisition (the "grace period") or (ii) prior to the expiration of any
extension to such grace period which is requested on behalf of the Trust by the
Servicer, the Trustee or the Certificate Administrator (at the expense of the
Trust) more than 60 days prior to the end of such grace period and granted by
the Internal Revenue Service, unless the Servicer shall have received an Opinion
of Counsel to the effect that the holding of such Mortgaged Property subsequent
to the expiration of the grace period will not result in the imposition of taxes
on "prohibited transactions" as defined in Section 860F of the Code or cause the
Trust to fail to qualify as a REMIC at any time that any Class A Certificates
are outstanding. Notwithstanding any other provision of this Agreement, (i) no
Mortgaged Property acquired by the Servicer pursuant to this Section shall be
rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the Trust, and (ii) no construction
shall take place on such Mortgaged Property in such a manner or pursuant to any
terms, in either case, that would cause such Mortgaged 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 "net income from
foreclosure property" which is subject to taxation within the meaning of
Sections 860G(c) and 857(b)(4)(B) of the Code. If a period greater than the
grace period is permitted under this Agreement and is necessary to sell any REO
Property, the Servicer shall give appropriate notice to the Trustee, the
Certificate Insurer and the Certificateholders and shall report monthly to the
Trustee as to the progress being made in selling such REO Property.
Nothing in this Section shall affect the Servicer's right to deem certain
advances proposed to be made Nonrecoverable Advances. For the purpose of this
Section 3.07, actual knowledge of the Servicer means actual knowledge of a
Responsible Officer of the Servicer involved in the servicing of the relevant
Home Equity Loan. Actual knowledge of the Servicer does not include knowledge
imputable by virtue of the availability of or accessibility to information
relating to environmental or hazardous waste sites or the locations thereof.
Section 3.08. Trustee to Cooperate. Upon any Principal Prepayment in
--------------------
full, the Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.01, if the related Assignment of Mortgage has been
recorded as required hereunder, an instrument of satisfaction regarding the
related Mortgage, which instrument of satisfaction shall be recorded by the
Servicer if required by applicable law and be delivered to the Person entitled
thereto. It is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Home Equity Loan, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a Request for Release, in the form
annexed hereto as Exhibit I, signed by a Servicing Officer, release the related
Mortgage File to the Servicer, and the Trustee shall execute such documents, in
the forms provided by the Servicer, as shall be necessary to the prosecution of
any such proceedings or the taking of other servicing actions. Such Request for
Release shall obligate the Servicer to return the Mortgage File to the Trustee
when the need therefor by the Servicer no longer exists unless the Home Equity
Loan shall be liquidated, in which case, upon receipt of a certificate of a
Servicing Officer similar to that hereinabove specified, the Request for Release
shall be released by the Trustee to the Servicer.
50
In order to facilitate the foreclosure of the Mortgage securing any Home
Equity Loan that is in default following recordation of the related Assignment
of Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Home Equity Loan for
the purpose of collection to the Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Home Equity Loan and deposit or credit the Net Liquidation Proceeds,
exclusive of Excess Proceeds, received with respect thereto in the Collection
Account. In the event that all delinquent payments due under any such Home
Equity Loan are paid by the Mortgagor and any other defaults are cured then the
assignee for collection shall promptly reassign such Home Equity Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
------------------------------------------------------
Servicer and the Trustee. Subject to Section 5.04, the Servicer shall be
------------------------
entitled to retain the Servicing Fee in accordance with Section 3.02 as
compensation for its services in connection with servicing the Home Equity
Loans. Moreover, additional servicing compensation in the form of all
Prepayment Interest Excess, late payment charges, assumption fees, prepayment
penalties and other similar charges, including, without limitation, Excess
Proceeds and investment income on amounts on deposit in the Collection Account,
shall be retained by the Servicer. The Servicer will be required to pay all
expenses incurred in connection with the servicing of the Home Equity Loans,
including, without limitation, payment of the hazard insurance policy premiums.
To the extent the Servicer fails to make an advance on account of taxes or
insurance premiums with respect to a Home Equity Loan, the Trustee shall, if the
Trustee knows of any such failure of the Servicer, advance such funds and take
such steps as are necessary to pay such taxes or insurance premiums. The
Servicer and the Trustee, as applicable, will be entitled, in certain
circumstances, to reimbursement from the Collection Account of (i) Advances and
(ii) Other Advances pursuant to Section 3.03(a)(ii) and (iv). Neither the
Servicer nor the Trustee shall be entitled to reimbursement for any other
expenses therefor except as specifically provided herein.
Section 3.10. Annual Statement as to Compliance. (a) The Servicer shall
---------------------------------
deliver to the Trustee, the Rating Agencies and the Certificate Insurer on or
before April 30 of each year, an Officer's Certificate, certifying that (i) such
officer has reviewed the activities of the Servicer during the preceding
calendar year or portion thereof and its performance under this Agreement and
(ii) to the best of such officer's knowledge, based on such review, the Servicer
has performed and fulfilled its duties, responsibilities and obligations under
this Agreement in all material respects throughout such year, or, if there has
been a default in the fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such officer and the nature
and status thereof. Copies of such officers' certificate shall be provided by
the Trustee to any Certificateholder upon written request provided such
certificate is delivered, or caused to be delivered, by the Servicer to the
Trustee.
(b) The Servicer shall deliver to the Trustee, the Depositor, the
Certificate Insurer and each of the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later
51
than five Business Days thereafter, written notice by means of an Officer's
Certificate of any event which with the giving of notice or the lapse of time or
both, would become an Event of Default.
Section 3.11. Annual Servicing Report. Not later than 120 days following
-----------------------
the end of the Servicer's fiscal year, beginning in 1999, the Servicer, at its
expense, shall cause a firm of independent certified public accountants
reasonably acceptable to the Trustee and the Certificate Insurer to furnish a
letter or letters to the Trustee, the Depositor, the Seller, the Certificate
Insurer and the Certificate Administrator to the effect that on the basis of an
examination of certain documents and records relating to the mortgage loans
being serviced by the Servicer conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers, the servicing of such
mortgage loans was conducted in compliance with the provisions of this Agreement
or other similar agreements, except for (a) such exceptions as such firm
believes to be immaterial and (b) such other exceptions as are set forth in such
statement.
Section 3.12. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Home Equity Loans. (a) The Servicer shall provide to the Trustee,
---------------------
Certificateholders which are federally insured savings and loan associations,
the Office of Thrift Supervision, successor to the Federal Home Loan Bank Board,
the FDIC and the supervisory agents and examiners of the Office of Thrift
Supervision access to the documentation regarding the Home Equity Loans required
by applicable regulations of the Office of Thrift Supervision and the FDIC
(acting as operator of the SAIF or the BIF), such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer. Nothing in this Section 3.12 shall derogate from the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Mortgagors and the failure of the Servicer to
provide access as provided in this Section 3.12 as a result of such obligation
shall not constitute a breach of this Section 3.12.
(b) The Servicer shall supply information in such form as the Trustee and
the Certificate Administrator shall reasonably request to the Trustee, the
Certificate Administrator and the Paying Agent, on or before the start of the
Determination Date for the applicable Distribution Date, as is required in the
Trustee's reasonable judgment to enable the Paying Agent, the Certificate
Administrator or the Trustee, as the case may be, to make required distributions
and to furnish the required reports to Certificateholders and the Certificate
Insurer and to make any claim under the Certificate Insurance Policy.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
---------------------------------------------------
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall, together, comply with the requirements from time to time of the
Federal National Mortgage Association for persons performing servicing for
mortgage loans purchased by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The
-------------------------------------------------
Certificate Administrator shall, on behalf of the Trust, cause to be 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 Certificate Administrator, each of the Seller, the
Servicer, the
52
Trustee and the Depositor shall cooperate with the Certificate Administrator in
the preparation of any such report and shall provide to the Certificate
Administrator in a timely manner all such information or documentation as the
Certificate Administrator may reasonably request in connection with the
performance of its duties and obligations under this Section.
Section 3.15. Reports of Foreclosures and Abandonments of Mortgaged
-----------------------------------------------------
Property, Returns Relating to Mortgage Interest Received from Individuals and
-----------------------------------------------------------------------------
Returns Relating to Cancellation of Indebtedness. The Servicer shall make
------------------------------------------------
reports of foreclosures and abandonments of any Mortgaged Property for each year
beginning in 1999. The Servicer shall file reports relating to each instance
occurring during the previous calendar year in which the Servicer (i) on behalf
of the Trustee acquires an interest in any Mortgaged Property through
foreclosure or other comparable conversion in full or partial satisfaction of a
Home Equity Loan, or (ii) knows or has reason to know that any Mortgaged
Property has been abandoned. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by Sections
6050J, 6050H and 6050P of the Code.
Section 3.16. Advances. (a) If, on any Determination Date, payments of
--------
principal and interest due on any Home Equity Loan during the related Due Period
have not been received, on each Servicer Advance Date, the Servicer shall remit
to the Trustee for deposit in the Certificate Account an amount (as indicated in
the Remittance report prepared pursuant to Section 5.05), to be distributed on
the related Distribution Date pursuant to Section 5.01, equal to the aggregate
of payments of principal and interest (net of the Servicing Fees) on the Home
Equity Loans that were due during the related Due Period and not received as of
the day preceding the related Determination Date, less the aggregate amount of
any such delinquent payments that the Servicer has determined would constitute a
Nonrecoverable Advance were an advance to be made with respect thereto; such sum
being defined herein as the "Advance." With respect to any Home Equity Loan for
which a modification resulted in a Capitalized Advance, the amount of Advances
outstanding with respect to such Home Equity Loan shall be reduced by an amount
equal to such Capitalized Advance. In the event the Servicer fails to make any
required Advance on a Home Equity Loan as required by this Section 3.16(a), the
Trustee shall, to the extent permitted by Section 3.16(d), make such Advance on
the related Servicer Advance Date to the extent provided hereby.
(b) In lieu of making all or a portion of such Advance from its own funds,
the Servicer may (i) cause to be made an appropriate entry in its records
relating to the Collection Account that any Amount Held for Future Distributions
has been used by the Servicer in discharge of its obligation to make any such
Advance and (ii) transfer such funds from the Collection Account to the
Certificate Account. Any funds so applied and transferred shall be replaced by
the Servicer by deposit in the Collection Account no later than the close of
business on the Business Day immediately preceding the Distribution Date on
which such funds are required to be distributed pursuant to this Agreement. The
Servicer and the Trustee shall each be entitled to be reimbursed from the
Collection Account for all Advances of its own funds made pursuant to this
Section as provided in Sections 3.03 and 3.09, as applicable. The Servicer
shall, to the extent it has not already done so, upon the request of the
Trustee, withdraw from the Collection Account and remit to the Trustee any
amounts to which the Trustee is entitled pursuant to Section 3.03(b)(ii), (iii)
and (v). The obligation to make Advances with respect to any Home Equity Loan
shall continue until such Home Equity Loan is paid in full or the related
53
Mortgaged Property or related REO Property has been liquidated or until the
purchase or repurchase thereof (or substitution therefor) from the Trust
pursuant to any applicable provision of this Agreement, except as otherwise
provided in this Section 3.16.
(c) Notwithstanding anything herein to the contrary, no Other Advance or
Advance shall be required to be made hereunder if the Servicer or the Trustee
determines that such Other Advance or Advance would, if made, constitute a
Nonrecoverable Advance. The Trustee may conclusively rely for any determination
to be made by it hereunder upon the determination of the Servicer as set forth
in any certificate of the Servicer delivered pursuant to this Section 3.16.
(d) Notwithstanding anything herein to the contrary, the Trustee shall not
be required to make any Advances if prohibited by law.
Section 3.17. Optional Purchase of Defaulted Home Equity Loans. The
------------------------------------------------
Servicer, in its sole discretion, shall have the right to elect (by written
notice sent to the Servicer and the Trustee) to purchase for its own account
from the Trust any Home Equity Loan which is (i) 90 days or more delinquent or
(ii) for which it is reasonably foreseeable that a delinquency of 90 days or
more is imminent in the manner and at the price specified in Section 2.02. The
Purchase Price for any Home Equity Loan purchased hereunder shall be deposited
in the Certificate Account and the Trustee, upon receipt of such deposit, shall
release or cause to be released to the purchaser of such Home Equity Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Home Equity Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such Home
Equity Loan any Home Equity Loan released pursuant hereto and the purchaser of
such Home Equity Loan shall succeed to all the Trustee's right, title and
interest in and to such Home Equity Loan and all security and documents related
thereto. Such assignment shall be an assignment outright and not for security.
The purchaser of such Home Equity Loan shall thereupon own such Home Equity
Loan, and all security and documents, free of any further obligation to the
Trustee, the Certificate Insurer or the Certificateholders with respect thereto.
Notwithstanding the foregoing, unless otherwise agreed to by the
Certificate Insurer, the Servicer may only exercise its option pursuant to this
Section with respect to the Home Equity Loan or Home Equity Loans that have been
delinquent for the longest period at the time of such repurchase.
Section 3.18. Special Servicing. The Servicer with the consent of the
-----------------
Certificate Insurer (which consent shall not be unreasonably witheld) may enter
into a special Servicing Agreement with an unaffiliated holder of at least a 51%
Percentage Interest of the Class R Certificates, such agreement to be
substantially in the form of Exhibit I hereto or subject to each Rating Agency's
acknowledgment that the ratings of the Class A Certificates in effect
immediately prior to the entering into of such agreement would not be qualified,
downgraded or withdrawn and the Class A Certificates would not be placed on
credit review status (except for possible upgrading) as a result of such
agreement (without regard to the Certificate Insurance Policy). Any such
agreement may contain provisions whereby such holder may instruct the Servicer
to commence or delay foreclosure proceedings with respect to delinquent Home
Equity Loans and will contain provisions for the deposit of cash by the holder
of the related Class R Certificates that would be
54
available for distribution to Certificateholders if Liquidation Proceeds are
less than they otherwise may have been had the Servicer acted in accordance with
its normal procedures.
Section 3.19. Assumption Agreements. When a Mortgaged Property has been
---------------------
or is about to be conveyed by the Mortgagor, the Servicer shall, except in the
circumstances described below, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note applicable thereto, unless: (i) the exercise of such
rights is not permitted by applicable law, (ii) would materially increase the
risk of default or delinquency on, or materially decrease the security for, such
Home Equity Loan or (iii) the Servicer, in a manner consistent with reasonable
commercial practice, permits the purchaser of the related Property to assume the
Loan. If these conditions are not met or if the Servicer reasonably believes it
is unable under applicable law to enforce such due-on-sale clause or if such
Loan is a Home Equity Loan insured by the FHA, the Servicer shall enter into an
assumption and modification agreement with the person to whom such property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Mortgage Note and, unless prohibited by applicable law, the Mortgagor
remains liable thereon. The Servicer shall notify the Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original of such substitution or assumption agreement, which
original shall be added by the Trustee to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. In
connection with any assumption or substitution agreement entered into pursuant
to this Section 3.18, the Servicer shall not change the Mortgage Rate or the
Scheduled Monthly Payment, defer or forgive the payment of principal or
interest, reduce the outstanding principal amount or extend the final maturity
date on such Home Equity Loan. Notwithstanding the foregoing, certain of the
Mortgages or Mortgage Notes of the related Home Equity Loans may contain
provisions pursuant to which the Servicer may not exercise a "due-on-sale"
clause if (a) the borrower causes to be submitted to the Servicer the
information required by Servicer to evaluate the intended transferee as if a new
loan were being made to the transferee and (b) the Servicer reasonably
determines that the Servicer's security will not be impaired by the loan
assumption by the transferee and that the risk of a breach of covenant or
agreement is acceptable to the Servicer. To the extent permitted by applicable
law, such assumption will not release the original Mortgagor from its obligation
under any such Home Equity Loan.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach of any
other violation of its obligations hereunder by reason of any assumption of a
Home Equity Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 3.20. Payment of Taxes, Insurance and Other Charges. With
---------------------------------------------
respect to each Home Equity Loan, the Servicer shall maintain accurate records
reflecting fire and hazard insurance coverage.
With respect to each Home Equity Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges which
are or may become a lien upon the Mortgaged Property and the
55
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Servicer in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does not
provide for escrow payments, the Servicer shall, if it has received notice of a
default or deficiency, monitor such payments to determine if they are made by
the Mortgagor.
Section 3.21. The Certificate Administrator. (a) The Certificate
-----------------------------
Administrator shall prepare tax and remittance reports for the
Certificateholders and calculate amounts distributable on the Certificates on
each Distribution Date.
(b) The Certificate Administrator will have the right to assign its rights
and delegate its duties and obligations under this Agreement, provided that (i)
the purchaser or transferee accepting such assignment or delegation is
satisfactory to the Trustee and the Certificate Insurer in the reasonable
exercise of its respective judgment, and executes and delivers to the Trustee an
agreement, in form and substance reasonably satisfactory to the Trustee, which
contains an assumption by such purchaser or transferee of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Certificate Administrator under this Agreement from and after
the date of such agreement; and (ii) the ratings assigned by each Rating Agency
to the Class A Certificates in effect immediately prior to such assignment, sale
or transfer would not be qualified, downgraded or withdrawn as a result of such
assignment, sale or transfer and the Class A Certificates would not be placed on
credit review status (except for possible upgrading) by any such Rating Agency
(without regard to the Certificate Insurance Policy). The Certificate
Administrator will be released from its obligations under this Agreement upon
any such assignment and delegation, except that the Certificate Administrator
will remain liable for all liabilities and obligations incurred by it prior to
the time that the conditions contained in clauses (i) and (ii) above are met.
56
ARTICLE IV
[RESERVED]
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. On each Distribution Date, the Trustee shall
-------------
withdraw the Available Funds, together with any amount representing Insured
Amounts, to the extent on deposit, from the Certificate Account and shall make
distributions to Holders of the Certificates as of the preceding Record Date in
the following order of priority and from the indicated source of funds, in each
case to the extent of the amounts on deposit in the Certificate Account
(provided that any Insured Amounts only be applied to pay the Holders of the
Class A Certificates in accordance with the terms of the Certificate Insurance
Policy as described below) in the following order of priority:
A. from the Available Funds and any Insured Amount in the following order
of priority:
(i) to the Certificate Administrator, the Administration Fee, and
any investment earnings on funds in the Certificate Account;
(ii) to the Certificate Insurer, the Premium Amount (except during
the continuation of a Certificate Insurer Default);
(iii) to the Class A Certificateholders, an amount equal to the
Interest Distribution Amount for the Class A Certificates;
(iv) to the Class A Certificateholders, an amount equal to the
Principal Distribution Amount (excluding any Subordination Increase Amount
included therein); and
(v) to the Certificate Insurer, the Reimbursement Amount (unless the
Certificate Insurer has failed to make a payment and continues in default
of any such payment under the Certificate Insurance Policy, in which event
the Reimbursement Amount will be paid after the distributions required to
be made pursuant to paragraph B. below).
B. On any Distribution Date, to the extent that there are Available Funds
remaining after making distributions required to be made pursuant to paragraph
A. (i) - (v) above, such amount shall be distributed to the Holders of the Class
A Certificates until the Subordinated Amount on such Distribution Date is equal
to the Required Subordinated Amount on such Distribution Date.
57
C. On any Distribution Date, to the extent there are Available Funds
remaining after making distributions required to be made pursuant to Paragraphs
A. and B. above, such amount shall be paid to the Class A Certificateholders, in
an amount equal to the Basis Risk Carryover Amount.
D. On any Distribution Date, to the extent there are Available Funds
remaining after making distributions required to be made pursuant to Paragraphs
A., B., and C. above, such amount shall be distributed to Holders of the
Residual Certificates.
(a) Method of Distribution. The Trustee shall make distributions in
----------------------
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.01 respecting the
final distribution) by check or money order mailed to such Certificateholder at
the address appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least seven Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder is the
Depository or such Certificateholder owns of record one or more Certificates of
a Class aggregating at least $1,000,000 Original Class Certificate Principal
Balance or in the case of the Class R Certificates, at least 51% Percentage
Interest). Distributions among Certificateholders shall be made in proportion
to the Percentage Interests evidenced by the Certificates held by such
Certificateholders.
(b) Distributions on Book-Entry Certificates. Each distribution with
----------------------------------------
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and
disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Certificates. None of the Trustee, the Paying Agent, the Certificate
Registrar, the Depositor, the Servicer or the Seller shall have any
responsibility therefor except as otherwise provided by applicable law.
Section 5.02. Calculation of the Pass-Through Rate. On the second LIBOR
------------------------------------
Business Day preceding the Closing Date, the Trustee shall have determined One-
Month LIBOR and the Pass-Through Rate for the first Distribution Date. On the
second LIBOR Business Day immediately preceding each subsequent Distribution
Date (referred to in this sentence as the "current Distribution Date") the
Trustee shall determine One-Month LIBOR and the Pass-Through Rate for the
Distribution Date next succeeding such current Distribution Date and inform the
Servicer (at the facsimile number given to the Trustee in writing) of such rate.
Section 5.03. The Certificate Insurance Policy. (a) On each Servicer
--------------------------------
Advance Date, the Trustee shall determine with respect to the related
Distribution Date the Available Funds for such Distribution Date.
(b) If for any Distribution Date the Trustee determines that an Insured
Amount is due, the Trustee shall complete a Notice in the form of Exhibit A to
the Certificate Insurance Policy
58
and submit such notice to the Certificate Insurer no later than 12:00 noon New
York City time on the Business Day prior to the Distribution Date as a claim for
that portion of an Insured Amount that is equal to such Deficiency Amount.
(c) The Trustee shall establish a separate special purpose trust account
for the benefit of the Class A Certificateholders and the Certificate Insurer
referred to herein as the "Certificate Insurance Payments Account" over which
the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit in the Certificate Insurance Payments Account, upon
receipt, any amount paid under the Certificate Insurance Policy and shall
distribute such amount only for purposes of payment to Certificateholders of any
Insured Amount, for which, in each case, a claim was made to the Certificate
Insurer, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Certificate Administrator, the Trustee or the
Trust. Amounts paid under the Certificate Insurance Policy, to the extent
needed to pay the Insured Amount, shall be disbursed by the Trustee to
Certificateholders in accordance with Section 5.01. It shall not be necessary
for payments made under the Certificate Insurance Policy to be made by checks or
wire transfers separate from other amounts distributed pursuant to Section 5.01.
However, the amount of any payment of principal or of interest on the
Certificates to be paid from funds from the Certificate Insurance Policy shall
be noted as provided in paragraph (d) below in the Certificate Register and in
the statement to be furnished to Holders of the Certificates pursuant to Section
5.05. Funds paid under the Certificate Insurance Policy shall not be invested.
Any funds remaining in the Certificate Insurance Payments Account on the first
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Business Day.
(d) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any 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 two Business Days' prior written notice to the Trustee.
(e) In the event that the Trustee has received a certified copy of an order
of the appropriate court that any prior distribution made on the Class A
Certificates that represented payment of an Insured Amount has been voided in
whole or in part as a preference payment under applicable bankruptcy law, the
Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Amount, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to
Certificateholders of the affected Certificates that, in the event any Insured
Amount is so recovered, such Certificateholder will be entitled to payment
pursuant to the Certificate Insurance Policy, a copy of which shall be made
available through the Trustee, the Certificate Insurer or the Certificate
Insurer's fiscal agent, if any, and the Trustee shall furnish to the Certificate
Insurer or its fiscal agent, if any, its records evidencing the payments which
have been made by the Trustee and subsequently recovered from
Certificateholders, and dates on which such payments were made.
59
(f) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance of a Preference Amount.
Each Certificateholder, by its purchase of Certificates, the Servicer and the
Trustee 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 Amount direct all matters relating to such Preference
Amount, including, without limitation, (i) the direction of any appeal of any
order relating to such Preference Claim and (ii) the posting of any surety,
supersedes or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be subrogated to, and
each Certificateholder, the Servicer, the Certificate Administrator and the
Trustee hereby delegate and assign to the Certificate Insurer, to the fullest
extent permitted by law, the rights of the Servicer, the Certificate
Administrator the Trustee and each Certificateholder in the conduct of any such
Preference Amount, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Amount. The Trustee shall promptly notify
the Certificate Insurer of any Event of Default upon its occurrence.
(g) The Servicer shall designate a contact person who shall be available to
the Certificate Insurer to provide reasonable access to information regarding
the Home Equity Loans.
(h) The Trustee shall surrender the Certificate Insurance Policy to the
Certificate Insurer for cancellation at the expiration of the term of such
Certificate Insurance Policy as provided therein and in the Insurance Agreement.
(i) The Trustee shall send to the Certificate Insurer the statement
prepared pursuant to Section 5.05 hereof as well as any other statements,
reports or communications sent to Holders of the Class A Certificates, in each
case at the same time such reports, statements and communications are otherwise
sent.
(j) Simultaneously with the execution and delivery of this Agreement, the
Trustee shall execute and deliver the Insurance Agreement and, for all purposes
of this Agreement, the performance by the Trustee of its obligations under this
Agreement shall include the Trustee's obligations under the Insurance Agreement.
Section 5.04. Compensating Interest. Not later than the close of
---------------------
business on the Business Day prior to each Distribution Date, the Servicer shall
remit to the Trustee for deposit to the Certificate Account an amount equal to
the lesser of (A) the aggregate of the Prepayment Interest Shortfalls for the
related Distribution Date and (B) the Servicing Fee with respect to the related
Due Period. The Servicer shall not have the right to reimbursement for any
amounts deposited to the Certificate Account pursuant to this Section.
Section 5.05. Statements. (a) On or before 1:00 p.m. New York Time on
----------
each Determination Date, the Servicer shall deliver or cause a Subservicer to
deliver to the Certificate Administrator by electronic transmission in a
computer-readable format acceptable to the Certificate Administrator, monthly
servicer accounting reports sufficient for the Certificate Administrator to
60
perform its responsibilities pursuant to this Agreement. The monthly servicer
accounting reports shall contain information as to each Home Equity Loan as of
the close of business immediately prior to such Determination Date and such
other information as the Certificate Administrator shall reasonably require.
Such information for each Home Equity Loan shall include among other items, but
not be limited to, ending Stated Principal Balance, Advances (separately stated
for principal and interest), Realized Losses, the date the last Scheduled
Monthly Payment was paid, Principal Prepayments, Scheduled Monthly Payments of
principal and interest, Mortgage Rates, and Prepayment Interest Shortfalls. Not
later than 12:00 noon New York time two Business Days prior to the Distribution
Date, the Certificate Administrator shall prepare and deliver to the Trustee by
telecopy, and hard copy, a statement (the "Remittance Report") containing the
information set forth below with respect to such Distribution Date.
(i) the amount of the related distribution to Holders of the Class
A Certificates allocable to principal, separately identifying (A) the
aggregate amount of any Principal Prepayments included therein, and (B) the
aggregate of all scheduled payments of principal included therein;
(ii) the amount of such distribution to Holders of the Class A
Certificates allocable to interest;
(iii) the amount of any Insured Amount included in the amounts
distributed to the Holders of Class A Certificates on such Distribution
Date;
(iv) the Carry-Forward Amount and any Basis Risk Carryover Amount;
(v) the Class Certificate Principal Balance of the Class A
Certificates after giving effect to the distribution of principal made, and
the principal portion of Realized Losses, if any, allocated with respect to
such Distribution Date;
(vi) the Pool Stated Principal Balance for the following
Distribution Date;
(vii) the Required Subordinated Amount and the Subordinated Amount as
of such Distribution Date;
(viii) the Pass-Through Rate for the Class A Certificates for such
Distribution Date;
(ix) the amount of Advances by the Servicer or the Trustee included
in the distribution to the Certificates on such Distribution Date;
(x) the number of Home Equity Loans and the weighted average of the
Mortgage Rates for the Home Equity Loans outstanding as of the preceding
Determination Date;
(xi) the number and aggregate principal amounts of delinquent Home
Equity Loans (A) delinquent (exclusive of Home Equity Loans in foreclosure)
(1) 30 to 59 days, (2)
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60 to 89 days and (3) 90 plus days in each case as of the close of business
on the Business Day preceding the Determination Date in the month in which
such Distribution Date occurs;
(xii) the total number and aggregate principal balance of any Home
Equity Loans in foreclosure and any REO Properties as of the close of
business on the Business Day preceding the Determination Date in the month
in which such Distribution Date occurs;
(xiii) the aggregate of all Realized Losses, relating to Liquidated
Loans;
(xiv) the amount of any Subordination Deficiency Amount after giving
effect to the distribution of principal on such Distribution Date;
(xv) the unpaid principal balance of any Home Equity Loan as to
which the Servicer has determined not to foreclose because it believes the
related Mortgaged Property may be contaminated with or affected by
hazardous wastes or hazardous substances;
(xvi) the amount of the Servicing Fee and the Administration Fee paid
(and not previously reported) with respect to the related Distribution Date
and the amount by which the Servicing Fee has been reduced by any
Prepayment Interest Shortfalls for the related Distribution Date; and
(xvii) the number and Stated Principal Balance of the Home Equity
Loans which have been modified pursuant to Section 3.01(f) during the
related Due Period and in the aggregate since the Closing Date.
The Trustee shall forward such report to the Certificate Insurer, the
Certificateholders and the Rating Agencies on the Distribution Date. The
Trustee and the Certificate Administrator may fully rely upon and shall have no
liability with respect to information provided by the Servicer.
To the extent that there are inconsistencies between the telecopy of the
Remittance Report and the hard copy thereof, the Trustee may rely upon the
latter.
In the case of information furnished pursuant to subclauses (i) and (ii)
above, the amounts shall be expressed in a separate section of the report as a
dollar amount for each Class for each $1,000 original dollar amount as of the
Cut-Off Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Class A Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (i) and (ii) above,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be prepared and furnished by the Trustee to Certificateholders
pursuant to any requirements of the Code as are in force from time to time.
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(c) On each Distribution Date, the Trustee shall forward to the Residual
Certificateholders a copy of the reports forwarded to the Class A
Certificateholders in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Residual Certificateholders on
such Distribution Date together with such other information as the Trustee deems
necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Residual Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Residual Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
(e) The Servicer and the Trustee shall furnish to each Certificateholder
(if requested in writing), during the term of this Agreement, such periodic,
special, or other reports or information, whether or not provided for herein, as
shall be necessary, reasonable, or appropriate with respect to the
Certificateholder, or otherwise with respect to the purposes of this Agreement,
all such reports or information to be provided by and in accordance with such
applicable instructions and directions (if requested in writing) as the
Certificateholder may reasonably require; provided, that the Servicer and the
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Trustee shall be entitled to be reimbursed by such Certificateholder for their
respective fees and actual expenses associated with providing such reports, if
such reports are not generally produced in the ordinary course of their
respective businesses or readily obtainable.
(f) Reports and computer tapes furnished by the Servicer pursuant to this
Agreement shall be deemed confidential and of a proprietary nature, and shall
not be copied or distributed except to the extent required by law or to the
Rating Agencies, the Depositor or the Certificate Insurer. No Person entitled
to receive copies of such reports or tapes or lists of Certificateholders shall
use the information therein for the purpose of soliciting the customers of the
Seller or for any other purpose except as set forth in this Agreement.
Section 5.06. Effect of Payments by the Certificate Insurer; Subrogation.
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Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Class A Certificates which is made with moneys
received pursuant to the terms of the Certificate Insurance Policy shall not be
considered payment of the Class A Certificates from the Trust. The Depositor,
the Servicer, the Certificate Administrator and the Trustee acknowledge, and
each Holder by its acceptance of a Class A Certificate agrees, that without the
need for any further action on the part of the Certificate Insurer, the
Depositor, the Servicer, the Certificate Administrator, the Trustee or the
Certificate Registrar (a) to the extent the Certificate Insurer makes payments,
directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Class A Certificates, the Certificate
Insurer will be fully subrogated to, and each Certificateholder and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust, including, without limitation, any amounts due to the
Certificateholders
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in respect of securities law violations arising from the offer and sale of the
Class A Certificates, and (b) the Certificate Insurer shall be paid such amounts
but only from the sources and in the manner provided herein for the payment of
such amounts. The Trustee and the Servicer shall cooperate in all respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
without limiting the rights or affecting the interests of the Holders as
otherwise set forth herein.
Section 5.07. Certificate Account. The Trustee shall establish a separate
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trust account (the "Certificate Account") titled "First Union National Bank, as
Trustee, in trust for the registered holders of Norwest Asset Acceptance
Corporation, Asset Backed Certificates, Series 1998-HE1." The Certificate
Account shall be an Eligible Account. The Trustee shall deposit any amounts
representing payments on and any collections in respect of the Home Equity Loans
received by it immediately following receipt thereof, including, without
limitation, all amounts withdrawn by the Servicer from the Collection Account
pursuant to Section 3.03 for deposit to the Certificate Account. Amounts on
deposit in the Certificate Account may be invested in Permitted Investments
pursuant to Section 5.08.
Section 5.08. Investment of Accounts. (a) So long as no Event of Default
----------------------
shall have occurred and be continuing, and consistent with any requirements of
the Code, all or a portion of the Certificate Account shall be invested and
reinvested by the Trustee, as directed in writing by the Certificate
Administrator, in one or more Permitted Investments bearing interest or sold at
a discount. If an Event of Default shall have occurred and be continuing or if
the Certificate Administrator does not provide investment directions, the
Trustee shall invest all Accounts in Permitted Investments described in
paragraph (vi) of the definition of Permitted Investments. No such investment in
the Certificate Account shall mature no later than the Business Day immediately
preceding the next Distribution Date (except that (i) if such Permitted
Investment is an obligation of the Trustee, then such Permitted Investment shall
mature not later than such Distribution Date and (ii) any other date as may be
approved by the Rating Agencies).
(b) If any amounts are needed for disbursement from the Certificate
Account and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in the Certificate Account. The Trustee
shall not be liable for any investment loss or other charge resulting therefrom
unless the Trustee's failure to perform in accordance with this Section 5.08 is
the cause of such loss or charge.
(c) Subject to Section 9.01 hereof, the Trustee shall not in any way be
held liable by reason of any insufficiency in the Certificate Account resulting
from any investment loss on any Permitted Investment included therein (except to
the extent that the Trustee is the obligor and has defaulted thereon or as
provided in subsection (b) of this Section 5.08).
(d) The Trustee shall invest and reinvest funds in the Certificate
Account, to the fullest extent practicable, in such manner as the Certificate
Administrator shall from time to time direct as set forth in Section 5.08(a),
but only in one or more Permitted Investments.
(e) All net income and gain realized from investment of, and all earnings
on, funds deposited in the Collection Account shall be for the benefit of the
Servicer as servicing compensation
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(in addition to the Servicing Fee), and shall be subject to withdrawal on or
before the first Business Day of the month following the month in which such
income or gain is received and all net income and gain realized from investment
of, and all earnings on, funds deposited in the Certificate Account shall be for
the benefit of the Certificate Administrator (in addition to the Administration
Fee) and shall be paid to the Certificate Administrator pursuant to Section
5.01. The Servicer shall deposit in the Collection Account and the Certificate
Administrator in the Certificate Account, the amount of any loss incurred in
respect of any Permitted Investment held therein which is in excess of the
income and gain thereon immediately upon realization of such loss, without any
right to reimbursement therefore from its own funds.
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ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Class A Certificates and Residual
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Certificates shall be substantially in the forms set forth in Exhibits A and B,
respectively, and shall, on original issue, be executed, authenticated and
delivered by the Trustee to or upon the order of the Depositor concurrently with
the sale and assignment to the Trustee of the Home Equity Loans. The Class A
Certificates shall be initially evidenced by one or more certificates
representing the entire Original Class Certificate Principal Balance and shall
be held in minimum dollar denominations of $25,000 and integral dollar multiples
of $1,000 in excess thereof, except that one Class A Certificate may be in a
different denomination so that the sum of the denominations of all outstanding
Class A Certificates shall equal the Original Class Certificate Principal
Balance.
The Residual Certificates (except for the Tax Matters Person Residual
Interest) shall each be offered in fully registered form in minimum Percentage
Interests of 10% and integral multiples of 10% in excess thereof (except one
Residual Certificate which may be offered in a Percentage Interest which is not
an integral multiple of 10%).
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by a Responsible Officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to
Section 6.02(c), the Class A Certificates shall be Book-Entry Certificates. The
Residual Certificates shall not be Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Certificates.
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(a) The Certificate Registrar shall cause to be kept at the Corporate Trust
Office a Certificate Register in which, subject to such reasonable regulations
as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, and, in the case of a Residual Certificate,
upon satisfaction of the conditions set forth below, the Trustee on behalf of
the Trust shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates of the same aggregate
Percentage Interest.
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At the option of the Certificateholders, Certificates may be exchanged for
other Certificates in authorized denominations and the same aggregate Percentage
Interests, upon surrender of the Certificates to be exchanged at any such office
or agency. Whenever any Certificates are so surrendered for exchange, the
Trustee shall execute and authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: registration of such Certificates may not be
transferred by the Trustee except to another Depository; the Depository shall
maintain book-entry records with respect to the Certificate Owners and with
respect to ownership and transfers of such Certificates; ownership and
transfers of registration of such Certificates on the books of the Depository
shall be governed by applicable rules established by the Depository; the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; the Trustee shall deal with the Depository as
representative of the Certificate Owners of the Certificates for purposes of
exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representative shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
the Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect participating
firms and Persons shown on the books of such indirect participating firms as
direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms
of any such Letter of Representation and this Agreement the terms of this
Agreement shall control.
(c) If (x) 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 Depository, and (y) the Trustee or the Depositor is unable
to locate a qualified successor, the Depositor, at its sole option, with the
consent of the Trustee, elects to terminate the book-entry system through the
Depository or after the occurrence of an Event of Default, the Certificate
Owners representing Percentage Interests aggregating not less than 51% advises
the Trustee and Depository through the Financial Intermediaries and the DTC
participants in writing that the continuation of a book-entry system through the
Depository to the exclusion of definitive, fully registered certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners. Upon surrender to the Certificate
Registrar of the Class A Certificates by the Depository, accompanied by
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registration instructions from the Depository for registration, the Trustee
shall at the Depositor's expense, in the case of (i) and (ii) above, or the
Seller's expense, in the case of (iii) above, execute and authenticate the
Definitive Certificates. Neither the Depositor nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee, the Certificate Registrar, the Servicer,
any Paying Agent and the Depositor shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
(d) No transfer of a Residual Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event of any such transfer, other
than the transfer of the Tax Matters Person Residual Interest to the Certificate
Administrator or the transfer of Residual Certificates to Rose Asset Management,
Inc. (i) unless such transfer is made in reliance upon Rule 144A under the 1933
Act, the Trustee and the Depositor shall require a written Opinion of Counsel
(which may be in-house counsel) acceptable to and in form and substance
reasonably satisfactory to the Trustee and the Depositor that such transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee or the
Depositor and (ii) the Trustee shall require the transferor to execute a
transferor certificate (in substantially the form attached hereto as Exhibit K)
and the transferee to execute an investment letter (in substantially the form
attached hereto as Exhibit G-1 or G-2) acceptable to and in form and substance
reasonably satisfactory to the Depositor and the Trustee certifying to the
Depositor and the Trustee the facts surrounding such transfer, which investment
letter shall not be an expense of the Trustee or the Depositor. The Holder of a
Residual Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee and the Depositor against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
No transfer of a Residual Certificate other than the transfer of the Tax
Matters Residual Interest to the Certificate Administrator or the transfer of
Residual Certificates to Rose Asset Management, Inc. shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee and the Depositor, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA or
Section 4975 of the Code, nor a person acting on behalf of any such plan, which
representation letter shall not be an expense of the Trustee or the Depositor,
or (ii) the transferee is an "insurance company general account" within the
meaning of Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") purchasing such Residual Certificate pursuant to Sections I and III of
PTCE 95-60 or (iii) in the case of a Residual Certificate presented for
registration in the name of an employee benefit plan subject to ERISA or Section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan, an Opinion of Counsel satisfactory to the Trustee and
the Depositor to the effect that the purchase or holding of such Certificate
will not result in a prohibited transaction under ERISA and the Code and will
not subject the Trustee or the Depositor to any obligation in addition to those
undertaken in this Agreement, which opinion of counsel shall not be an expense
of the Trustee or the Depositor. Notwithstanding anything else to the contrary
herein, in the event any purported transfer of any Residual Certificate is
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made without delivery of the representation letter referred to above, such
representation shall be deemed to have been made by the Transferee by its
acceptance of such Certificate. In addition, any purported transfer of a
Residual Certificate to or on behalf of an employee benefit plan subject to
ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.
Each Person who has or who acquires any Ownership Interest in a Residual
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (v) below and to execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Residual
Certificate unless such Ownership Interest is a pro rata undivided
--- ----
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Residual Certificate other than the transfer of the Tax
Matters Residual Interest to the Certificate Administrator or the transfer
of Residual Certificates to Rose Asset Management, Inc., the Trustee shall
as a condition to such consent, require delivery to it, in form and
substance satisfactory to it, of each of the following:
A. an affidavit in the form of Exhibit E hereto from the
proposed transferee to the effect that such transferee is a Permitted
Transferee and that it is not acquiring its Ownership Interest in the
Residual Certificate that is the subject of the proposed transfer as a
nominee, trustee or agent for any Person who is not a Permitted
Transferee; and
B. a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Residual Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest
in a Residual Certificate in violation of the provisions of this Section
6.02 shall be absolutely null and void and shall vest no rights in the
purported transferee. If any purported transferee shall, in violation of
the provisions of this Section 6.02, become a Holder of a Residual
Certificate, then the prior Holder of such Residual Certificate that is a
Permitted Transferee shall, upon discovery that the registration of
transfer of such Residual Certificate was not in fact permitted by this
Section 6.02, be restored to all rights as Holder thereof retroactive to
the date of registration of transfer of such Residual Certificate. The
Trustee shall be under no liability to any Person for any registration of
transfer of a Residual Certificate that is in fact not permitted
69
by this Section 6.02 or for making any distributions due on such Residual
Certificate to the Holder thereof or taking any other action with respect
to such Holder under the provisions of the Agreement so long as the
transfer was not registered upon the express written consent of the
Trustee. The Trustee shall be entitled to recover from any Holder of a
Residual Certificate that was in fact not a Permitted Transferee at the
time such distributions were made all distributions made on such Residual
Certificate. Any such distributions so recovered by the Trustee shall be
distributed and delivered by the Trustee to the prior Holder of such
Residual Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee shall have the right
but not the obligation, without notice to the Holder of such Residual
Certificate or any other Person having an Ownership Interest therein, to
notify the Depositor to arrange for the sale of such Residual Certificate.
The proceeds of such sale, net of commissions (which may include
commissions payable to the Depositor or its affiliates in connection with
such sale), expenses and taxes due, if any, will be remitted by the Trustee
to the previous Holder of such Residual Certificate that is a Permitted
Transferee, except that in the event that the Trustee determines that the
Holder of such Residual Certificate may be liable for any amount due under
this Section 6.02 or any other provisions of this Agreement, the Trustee
may withhold a corresponding amount from such remittance as security for
such claim. The terms and conditions of any sale under this clause (v)
shall be determined in the sole discretion of the Trustee, and it shall not
be liable to any Person having an Ownership Interest in a Residual
Certificate as a result of its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee, based on information
provided to the Trustee by the Depositor will provide to the Internal
Revenue Service, and to the persons specified in Section 860E(e)(3) and (6)
of the Code, information needed to compute the tax imposed under Section
860E(e)(1) of the Code on transfers of residual interests to disqualified
organizations.
The foregoing provisions of this Section 6.02(d) shall cease to apply to
transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee, (i)
written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in this Section 6.02 will not cause such
Rating Agency to downgrade its rating of the Certificates (without regard to the
Certificate Insurance Policy) and (ii) an Opinion of Counsel to the effect that
such removal will not cause the Trust to fail to qualify as a REMIC.
The Tax Matters Person Residual Interest shall at all times be registered
in the name of the Certificate Administrator.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
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All Certificates surrendered for registration of transfer or exchange shall
be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If any
-------------------------------------------------
mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and there is delivered to the Trustee, the
Depositor and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee or the Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section 6.03, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) in connection therewith. Any duplicate Certificate
issued pursuant to this Section 6.03, shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Servicer, the Certificate
Administrator, the Depositor, the Trustee, the Certificate Registrar, any Paying
Agent and any agent of the Servicer, the Certificate Administrator, the
Depositor, the Trustee, any Paying Agent or the Certificate Registrar may treat
the Person, including a Depository, in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.01 and for all other purposes whatsoever, and none of the
Servicer, the Certificate Administrator, the Trustee, the Certificate Registrar
nor any agent of any of them shall be affected by notice to the contrary.
Section 6.05. Appointment of Paying Agent. (a) The Paying Agent shall
---------------------------
make distributions to Certificateholders from the Certificate Account pursuant
to Section 5.01 and shall report the amounts of such distributions to the
Trustee. The duties of the Paying Agent may include the obligation (i) to
withdraw funds from the Collection Account pursuant to Section 3.03 and for the
purpose of making the distributions referred to above and (ii) to distribute
statements and provide information to Certificateholders as required hereunder.
The Paying Agent hereunder shall at all times be a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a
successor to act as Paying Agent, which appointment shall be reasonably
satisfactory to the Depositor and the Certificate Insurer.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto and the Certificate Insurer until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code
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regarding the withholding of payments in respect of Federal income taxes due
from Certificate Owners and otherwise comply with the provisions of this
Agreement applicable to it.
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ARTICLE VII
The Seller, the Servicer, the Certificate Administrator and the Depositor
Section 7.01. Liability of the Seller, the Servicer, the Certificate
------------------------------------------------------
Administrator and the Depositor. The Seller, the Servicer and the Certificate
-------------------------------
Administrator shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Seller, the Servicer
or the Certificate Administrator, as the case may be, herein. The Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Depositor.
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, the Seller, the Servicer, the Certificate Administrator or the Depositor.
----------------------------------------------------------------------------
Any corporation into which the Seller, the Servicer, the Certificate
Administrator or Depositor may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Seller, the
Servicer, the Certificate Administrator or the Depositor shall be a party, or
any corporation succeeding to the business of the Seller, the Servicer, the
Certificate Administrator, or the Depositor, shall be the successor of the
Seller, the Servicer, the Certificate Administrator or the Depositor, as the
case may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 7.03. Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
-------- -------
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of duties of the Servicer or by reason of its reckless disregard
of its obligations and duties of the Servicer hereunder. The preceding sentence
shall not limit the obligations of the Servicer pursuant to Section 9.05. The
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
----- -----
submitted by any Person respecting any matters arising hereunder. The Servicer
and any director or officer or employee or agent of the Servicer shall be
indemnified by the Trust and held harmless against any loss, liability or
expense incurred in connection with any legal action relating to this Agreement
or the Certificates, other than any loss, liability or expense related to any
specific Home Equity Loan or Home Equity Loans (except as any such loss,
liability or expense shall be otherwise reimbursable pursuant to this Agreement)
and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of its reckless disregard of obligations and duties
hereunder. The Servicer may in its sole discretion undertake any such action
which it may deem necessary or desirable in respect of this Agreement, and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the reasonable legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust and the Servicer shall be entitled to be
reimbursed therefor pursuant to Section 3.03(ix). The Servicer's right to
indemnity or reimbursement pursuant to this Section 7.03 shall survive any
resignation or termination of the Servicer pursuant to Section 7.04
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or 8.01 with respect to any losses, expenses, costs or liabilities arising prior
to such resignation or termination (or arising from events that occurred prior
to such resignation or termination).
Section 7.04. Servicer Not to Resign. Subject to the provisions of
----------------------
Section 7.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or 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 or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement or (ii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee in writing and such
proposed successor servicer is reasonably acceptable to the Trustee; (b) each
Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Class A Certificates (without
regard to the Certificate Insurance Policy) and (c) the Certificate
Administrator has consented to such proposed successor servicer (such consent
not to be unreasonably withheld); provided, however, that no such resignation by
-------- -------
the Servicer shall become effective until such successor servicer or, in the
case of (i) above, the Trustee shall have assumed the Servicer's
responsibilities and obligations hereunder or the Trustee shall have designated
a successor servicer in accordance with Section 8.02. Any such resignation
shall not relieve the Servicer of responsibility for any of the obligations
specified in Sections 8.01 and 8.02 as obligations that survive the resignation
or termination of the Servicer. Any such determination permitting the
resignation of the Servicer pursuant to clause (i) above shall be evidenced by
an Opinion of Counsel to such effect delivered to the Trustee. The Servicer
shall have no claim (whether by subrogation or otherwise) or other action
against any Certificateholder for any amounts paid by the Servicer pursuant to
any provision of this Agreement. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee.
Section 7.05. Delegation of Duties. In the ordinary course of business,
--------------------
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, who agrees to conduct such duties in accordance
with standards comparable to those set forth in Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 7.04. The Servicer shall provide the Trustee with written notice
prior to the delegation of any of its duties to any Person other than any of the
Servicer's Affiliates or their respective successors and assigns.
Section 7.06. Indemnification of the Trustee, the Certificate
-----------------------------------------------
Administrator and the Depositor by the Servicer. The Servicer shall indemnify
-----------------------------------------------
and hold harmless the Trustee, the Certificate Administrator and the Depositor
and any director, officer or agent thereof against any loss, liability or
expense, including reasonable attorney's fees, arising out of, in connection
with or incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties of the Servicer under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement. Any
payment pursuant to this Section made by the Servicer to the Trustee, the
Certificate Administrator or the Depositor shall be from such entity's own
funds, without reimbursement therefor. The provisions of this Section 7.06
shall survive the termination of this Agreement.
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Section 7.07. Removal of the Certificate Administrator. The Certificate
----------------------------------------
Administrator may be removed upon written notice from the Trustee to the
Certificate Administrator if any of the following events shall occur:
(i) the Certificate Administrator shall default in any material
respect in the performance of its duties under the Agreement and, after
notice of such default, shall not cure such default within ten business
days (or, if such default cannot be cured in such time, shall not give
within ten business days such assurance of cure as shall be reasonably
satisfactory to the such Trustee);
(ii) The entry against the Certificate Administrator of a decree or
order by a court or agency or supervisory authority having jurisdiction in
the premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership, readjustment
of debt, marshalling of assets and liabilities or similar proceedings, or
for the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(iii) The Certificate Administrator shall voluntarily go into
liquidation, consent to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to the Certificate Administrator or of or relating to all or substantially
all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, liquidator or similar person 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 Certificate Administrator and such
decree or order shall have remained in force undischarged, unbonded or
unstayed for a period of 60 days; or the Certificate Administrator shall
admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.
If any of the events specified in clauses (ii) or (iii) above shall occur,
the Certificate Administrator will be required to give written notice of such
occurrence to the Trustee within five business days after the happening of such
event.
No removal of the Certificate Administrator will be effective until (1) a
successor Certificate Administrator having a net worth of not less than
$10,000,000 is appointed by the Trustee and (2) such successor Certificate
Administrator has agreed in writing to be bound by the terms of the applicable
Agreement in the same manner as the Certificate Administrator is bound.
Promptly upon the removal of the Certificate Administrator, the Certificate
Administrator will be entitled to be paid all fees and expenses accruing to it
to the date of such removal. Upon such termination, the Certificate
Administrator will be required to deliver to the applicable Trustee all property
and documents of the Trust Fund in the custody of the Certificate Administrator,
and the Certificate Administrator will be required to cooperate with the Trustee
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and take all reasonable steps requested to assist the Trustee in making an
orderly transfer of the duties of the Certificate Administrator.
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ARTICLE VIII
Default
Section 8.01. Events of Default. (a) If any one of the following events
-----------------
("Events of Default") shall occur and be continuing:
(i) The failure by the Servicer to deposit in the Collection
Account or the Certificate Account the required amounts or remit to the
Trustee any payment (including an Advance or Other Advance, required to be
made under the terms of this Agreement, which continues unremedied for a
period of five days after the date upon which written notice of such
failure shall have been given to the Servicer by the Trustee, the
Certificate Insurer or the Depositor, or to the Servicer and the Trustee by
Holders of Certificates evidencing Voting Rights aggregating not less than
25%; or
(ii) The failure by the Servicer to observe or perform, in any
material respect, any other covenant or agreements or any breach of
representation or warranty of the Servicer as set forth in this Agreement,
which failure continues unremedied for a period of 60 days, after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, the Certificate
Insurer or the Depositor, or to the Servicer, and the Trustee by the
Certificateholders of any Class evidencing Voting Rights aggregating not
less than 25%; or
(iii) The entry against the Servicer of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days;
or
(iv) The Servicer shall voluntarily go into liquidation, consent to
the appointment of a conservator or receiver or liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of its property, or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or
similar person 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 Servicer
and such decree or order shall have remained in force undischarged,
unbonded or unstayed for a period of 60 days; or the Servicer shall admit
in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations;
(c) So long as an Event of Default shall not have been remedied, the
Trustees shall, but only upon the direction of the Certificate Insurer or
Holders of Class A Certificates evidencing Voting Rights aggregating not less
than 25% with the prior written consent of the Certificate Insurer, by
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notice then given in writing to the Servicer (and to the Trustee if given by
Holders of Certificates), terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Upon the occurrence and continuation
of a Servicer Termination Trigger Event, the Trustee shall, but only upon
receipt of written instructions from the Certificate Insurer, by notice then
given in writing to the Servicer terminate all of the rights and obligations of
the Servicer as servicer under this Agreement. Any such notice to the Servicer
shall also be given to each Rating Agency and the Depositor. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Certificates or the
Home Equity Loans or otherwise, shall pass to and be vested in the Trustee
pursuant to and under this Section 8.01; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Home Equity Loan and related
documents, or otherwise. The Servicer agrees to cooperate with the Trustee in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, or that have been
deposited by the Servicer in the Collection Account or thereafter received by
the Servicer with respect to the Home Equity Loans. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Mortgage Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 8.01 shall be paid
by the predecessor Servicer (or if the predecessor Servicer is the Trustee, the
initial Servicer) upon presentation of reasonable documentation of such costs
and expenses.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 8.01(i) for a period of ten Business Days or under Section 8.01(ii) for
a period of 60 Business Days, shall not constitute an Event of Default if such
delay or failure could not be prevented by the exercise of reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or the
public enemy, acts of declared or undeclared war, public disorder, rebellion or
sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes,
floods or similar causes. The preceding sentence shall not relieve the Servicer
from using its best efforts to perform its respective obligations in a timely
manner in accordance with the terms of this Agreement and the Servicer shall
provide the Trustee, the Certificate Insurer and the Certificateholders with an
Officers' Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Servicer shall immediately notify the Trustee in writing of any Events of
Default.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and after
----------------------------------------
the time the Servicer receives a notice of termination pursuant to Section 8.01
or 7.04, the Trustee shall be the successor in all respects to the Servicer in
its capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof arising on and after its succession. As compensation therefor, the
Trustee shall be entitled to such compensation as the Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer, or (ii) if the Trustee is legally unable so to act, the Trustee may
(in the situation described in clause (i)) or shall (in
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the situation described in clause (ii)) appoint, with the prior written consent
of the Certificate Administrator (such consent not to be unreasonably withheld)
and the Certificate Insurer, or petition a court of competent jurisdiction to
appoint, any established housing and home finance institution, bank or other
home equity loan servicer acceptable to the Certificate Insurer and that is a
FNMA and FHLMC approved Seller/Servicer in good standing having a net worth of
not less than $10,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder; provided that the appointment of any such successor
--------
Servicer will not result in the qualification, reduction or withdrawal of the
ratings assigned to the Certificates by the Rating Agencies (without regard to
the Certificate Insurance Policy). Pending appointment of a successor to the
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Home Equity Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Trustee and such successor
shall agree). The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer to pay any deductible under an insurance
policy pursuant to Section 3.05 or to indemnify the Trustee pursuant to Section
7.06), nor shall any successor Servicer be liable for any acts or omissions of
the predecessor Servicer or for any breach by such Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer continue to service and
administer the Home Equity Loans for the benefit of Certificateholders and the
Certificate Insurer, (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.06.
(c) Any successor, including the Trustee, to the Servicer as servicer and
Norwest Mortgage, Inc., jointly and severally, shall pay to the Certificate
Administrator all reasonable out of pocket and documented internal costs of any
systems changes undertaken by the Certificate Administrator in connection with
interfacing by computer with such successor. Payments made pursuant to this
Section 3.06(c) shall not be made from the assets of the Trust.
Section 8.03. Waiver of Defaults. The Majority Certificateholders may, on
------------------
behalf of all Certificateholders, with the prior written consent of the
Certificate Insurer, waive any events permitting removal of the Servicer as
servicer pursuant to this Article VIII, provided, however, that the Majority
Certificateholders may not waive a default in making a required distribution on
a Certificate without the consent of the Holder of such Certificate. Upon any
waiver of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the Trustee to
the Rating Agencies.
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Section 8.04. Notification to Certificateholders. Upon any termination or
----------------------------------
appointment of a successor to the Servicer pursuant to this Article VIII or
Section 7.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Certificate Insurer and each Rating Agency.
Section 8.05. Home Equity Loans and Accounts Held for Benefit of the
------------------------------------------------------
Certificate Insurer. (a) The Trustee shall hold the Mortgage Files for the
-------------------
benefit of the Certificateholders and the Certificate Insurer and all references
in this Agreement and in the Certificates to the benefit of Holders of the
Certificates shall be deemed to include the Certificate Insurer. The Trustee
shall cooperate in all reasonable respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement and the Certificates unless, as stated
in an Opinion of Counsel addressed to the Trustee and the Certificate Insurer,
such action is adverse to the interests of the Certificateholders or diminishes
the rights of the Certificateholders or imposes additional burdens or
restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall service the
Home Equity Loans for the benefit of the Certificateholders and for the benefit
of the Certificate Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Certificateholders shall be deemed to include the
Certificate Insurer.
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ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence of an
-----------------
Event of Default and after the curing of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Default has occurred
(which has not been cured) of which a Responsible Officer has knowledge, 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 man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
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 misconduct; provided, however, that:
-------- -------
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining or
investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Certificates evidencing
Percentage Interests aggregating not less than 51%, with the consent of the
Certificate Insurer, relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising or
omitting to exercise any trust or power conferred upon the Trustee, under
this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with the obligations of the Servicer referred to
in clauses (i) and (ii) of Section 8.01 unless a Responsible Officer of the
Trustee at the Corporate Trust Office obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
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Servicer, the Certificate Insurer, or the Holders of Certificates
evidencing Percentage Interests aggregating not less than 51%.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the 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 Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as otherwise
-------------------------------------
provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be protected
in acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; the
right of the Trustee to perform any discretionary act enumerated in this
Agreement shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence of an Event of
Default (which has not been cured) of which a Responsible Officer has
knowledge, to exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in their exercise
as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
(v) prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, the Trustee shall
not be bound to make any investigation
82
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or documents, unless requested in writing to do so by
Holders of Certificates evidencing Voting Rights aggregating not less than
51%; provided, however, that if the payment within a reasonable time to the
-------- -------
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to such proceeding.
The reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be reimbursed by the Servicer
upon demand. Nothing in this clause (v) shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no liability
and makes no representation as to any acts or omissions hereunder of the
Servicer until such time as the Trustee may be required to act as Servicer
pursuant to Section 8.02;
(vii) 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 or a custodian; and
(viii) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans. The
--------------------------------------------------------
recitals contained herein and in the Certificates (other than the authentication
of the Trustee on the Certificates) shall be taken as the statements of the
Seller, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or sufficiency of
this Agreement or of the Certificates (other than the signature and
authentication of the Trustee on the Certificates) or of any Home Equity Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer, or for the use or application of any funds paid to
the Servicer in respect of the Home Equity Loans or deposited in or withdrawn
from the Collection Account by the Servicer. The Trustee shall at no time have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any Mortgage or any Home Equity Loan, or the perfection
and priority of any Mortgage or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Trust or its ability
to generate the payments to be distributed to Certificateholders under this
Agreement, including, without limitation: the existence, condition and ownership
of any Mortgaged Property; the existence and enforceability of any hazard
insurance thereon (other than if the Trustee shall assume the duties of the
Servicer pursuant to Section 8.02); the validity of the assignment of any Home
Equity Loan to the Trustee or of any intervening assignment; the completeness of
any Home Equity Loan; the performance or enforcement of any Home Equity Loan
(other than if the Trustee shall assume the duties of the Servicer pursuant to
Section 8.02); the compliance by the Depositor, the Seller or the Servicer with
any warranty or representation made under this Agreement or in any related
document or the accuracy of any such warranty or representation prior to the
Trustee's receipt of notice or other discovery of any non-compliance
83
therewith or any breach thereof; any investment of monies by or at the direction
of the Certificate Administrator or any loss resulting therefrom, it being
understood that the Trustee shall remain responsible for any Trust property that
it may hold in its individual capacity; the acts or omissions of any of the
Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 8.02), any Subservicer or any Mortgagor; any action of the
Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 8.02), or any Subservicer taken in the name of the Trustee;
the failure of the Servicer or any Subservicer to act or perform any duties
required of it as agent of the Trustee hereunder; or any action by the Trustee
taken at the instruction of the Servicer (other than if the Trustee shall assume
the duties of the Servicer pursuant to Section 8.02); provided, however, that
-------- -------
the foregoing shall not relieve the Trustee of its obligation to perform its
duties under this Agreement, including, without limitation, the Trustee's duty
to review the Mortgage Files pursuant to Section 2.01(f). The Trustee shall
have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Servicer).
Section 9.04. Trustee May Own Certificates. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Certificates with the
same rights as it would have if it were not Trustee and may transact any banking
and trust business with the Seller, the Servicer, the Certificate Administrator
or the Depositor.
Section 9.05. Trustee's Fees and Expenses. (a) The Certificate
---------------------------
Administrator covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Certificate Administrator will pay or
reimburse the Trustee upon its request for all reasonable expenses or
disbursements incurred or made by the Trustee and relating to or arising out of
the Certificate Administrator's obligations pursuant to Sections 2.10, 2.11,
2.12, 3.14, 3.21 or 5.05 hereof (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ relating to the foregoing) except any such expense, disbursement or
advance as may arise from its negligence or bad faith or which is the
responsibility of Certificateholders hereunder. In addition, the Certificate
Administrator covenants and agrees to indemnify the Trustee and its officers,
directors, employees and agents from, and hold it harmless against, any and all
losses, liabilities, damages, claims or expenses incurred in connection with any
legal action relating to the foregoing other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence of the
Trustee in the performance of its duties hereunder or by reason of the Trustee's
reckless disregard of obligations and duties hereunder.
(b) The Servicer covenants and agrees to pay or reimburse the Trustee upon
its request for all reasonable expenses or disbursements incurred or made by the
Trustee in accordance with any of the provisions of this Agreement other than
those arising out of the Certificate Administrator's obligations pursuant to
Sections 2.10, 2.11, 2.12, 3.14, 3.21 or 5.05 hereof (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ relating to the foregoing) except any such
expense, disbursement or advance as may arise
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from its negligence or bad faith or which is the responsibility of
Certificateholders hereunder. Any payments or reimbursements made by the
Servicer pursuant to this Section 9.05(b) shall not be made from the assets of
the Trust. In addition, the Servicer covenants and agrees to indemnify the
Trustee and its officers, directors, employees and agents from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
incurred in connection with any legal action relating to the foregoing other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence of the Trustee in the performance of its duties
hereunder or by reason of the Trustee's reckless disregard of obligations and
duties hereunder.
(c) This section shall survive termination of this Agreement or the
resignation or removal of any Trustee hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee hereunder
------------------------------------
shall at all times be acceptable to the Certificate Insurer and shall be a
corporation duly incorporated and validly existing under the laws of the United
States of America or any state thereof, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and a minimum long-term debt rating of "BBB", and subject to
supervision or examination by federal or state authority. If such corporation
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 9.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The principal office of the
Trustee (other than the initial Trustee) shall be in a state with respect to
which an Opinion of Counsel has been delivered to such Trustee at the time such
Trustee is appointed Trustee to the effect that the Trust will not be a taxable
entity under the laws of such state. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 9.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
---------------------------------
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Depositor, the Servicer, the Certificate Administrator and
each Rating Agency. Upon receiving such notice of resignation, the Depositor
shall promptly appoint a successor Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee; provided, however, that any such successor
-------- -------
Trustee shall be subject to the prior written approval of the Servicer and the
Certificate Administrator. If no successor Trustee shall have been so appointed
and having accepted appointment within 30 days after the giving of such notice
of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Depositor or the Certificate Insurer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor or the Servicer, with the written consent of the
Certificate Insurer or the Certificate Insurer may remove the Trustee. If the
Depositor or the Servicer
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removes the Trustee under the authority of the immediately preceding sentence,
the Depositor shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed, one copy to the Certificate Insurer and one copy to the successor
trustee. If no successor trustee approved in writing by the Certificate Insurer
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of removal, the Trustee so removed may petition any
court of competent jurisdiction for the appointment of a successor trustee.
The Holders of Certificates evidencing Percentage Interests aggregating
over 50% of all Certificates, with the written consent of the Certificate
Insurer, may at any time remove the Trustee by written instrument or instruments
delivered to the Servicer, the Depositor, the Certificate Administrator, the
Trustee and the Certificate Insurer; shall thereupon use its best efforts to
appoint a successor trustee in accordance with this Section.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
-----------------
provided in Section 9.07 shall execute, acknowledge and deliver to the
Depositor, the Servicer, the Certificate Administrator, the Certificate Insurer
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Depositor, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required or requested by the Certificate Insurer for fully and certainly
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations.
No successor Trustee shall accept appointment as provided in this Section
9.08 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 9.08, the Servicer shall mail notice of the succession of such Trustee
hereunder to all Holders of Certificates and the Certificate Insurer at their
addresses as shown in the Certificate Register and to each Rating Agency. If
the Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Servicer.
Notwithstanding anything to the contrary contained herein, so long as no
Certificate Insurer Default exists, the appointment of any successor Trustee
pursuant to any provision of this Agreement will be subject to the prior written
consent of the Certificate Insurer.
Section 9.09. Merger or Consolidation of Trustee. Any corporation into
----------------------------------
which the Trustee 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 Trustee shall be a party, or any corporation
86
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 9.06, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 9.10. 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 or any Mortgaged Property may at the time be located, the Depositor
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders and the Certificate Insurer; such title to the Trust, or any
part thereof, and, subject to the other provisions of this Section 9.10, such
powers, duties, obligations, rights and trusts as the Servicer, the Certificate
Administrator, the Certificate Insurer and the Trustee may consider necessary or
desirable. Any such co-trustee or separate trustee shall be subject to the
written approval of the Servicer. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08. The Servicer shall be responsible for the fees of any co-trustee
or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, 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 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
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 trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee
except that following the occurrence of an Event of Default, the Trustee
acting alone may accept the resignation or remove any separate trustee or
co-trustee.
87
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. 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
Depositor and the 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.
Section 9.11. Limitation of Liability. The Certificates are executed by
-----------------------
the Trustee, not in its individual capacity but solely as Trustee of the Trust,
in the exercise of the powers and authority conferred and vested in it by the
Trust Agreement. Each of the undertakings and agreements made on the part of
the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the purpose
of binding only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates. All rights of action and claims under this Agreement or the
------------
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Default or
---------------------
other default by the Servicer or the Depositor hereunder shall occur and be
continuing, the Trustee, in its discretion, may proceed to protect and enforce
its rights and the rights of the Certificateholders under this Agreement by a
suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
in aid of the execution of any power granted in this Agreement or for the
enforcement of any other legal, equitable or other remedy, as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee and the Certificateholders.
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ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
-----------
responsibilities of the Seller, the Servicer, the Certificate Administrator, the
Depositor, and the Trustee created hereby (other than the obligation of the
Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Servicer to send certain notices as
hereinafter set forth) shall terminate upon the last action required to be taken
by the Trustee on the final Distribution Date pursuant to this Article X related
to the earliest of (i) the final payment or other liquidation of the last Home
Equity Loan remaining in the Trust (including without limitation the disposition
of the Home Equity Loans pursuant to Section 10.02) or the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of any Home
Equity Loan, (ii) the purchase by the Servicer from the Trust of all remaining
Home Equity Loans and all property acquired in respect of such Home Equity Loans
as provided in the immediately following paragraph and (iii) if no Certificate
Insurer Default exists on the Final Scheduled Distribution Date, the Final
Scheduled Distribution Date; provided, however, that in no event shall the trust
-------- -------
created hereby continue beyond the expiration of 21 years from the death of the
last surviving descendant of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late ambassador of the
United States to the Court of St. ▇▇▇▇▇, living on the date hereof.
Subject to Section 10.02 and pursuant to clause (i) of the preceding
paragraph, the Servicer may, at its option, terminate this Agreement on or after
the Distribution Date on which the Pool Balance is less than 10% of the Cut-Off
Date Pool Stated Principal Balance by purchasing, on such or subsequent
Distribution Dates, all of the outstanding Home Equity Loans and REO Properties
at a price equal to (a) the sum of (i) 100% of the Stated Principal Balance of
each Home Equity Loan and REO Property as of the applicable Distribution Date
plus accrued interest thereon at the applicable Mortgage Rate for such Due
Period, (ii) any unpaid Basis Risk Carryover Amount and (iii) all amounts owed
to the Certificate Insurer minus (b) any unreimbursed Other Advances and the
principal portion of Advances (the "Termination Price"); provided that, if such
purchase shall cause an Insured Amount to be paid under the Certificate
Insurance Policy, the Servicer shall obtain the written consent of the
Certificate Insurer prior to such purchase.
Any such purchase shall be accomplished by deposit into the Certificate
Account on the Business Day before such Distribution Date of the Termination
Price.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee by letter to Class A Certificateholders mailed not earlier than the 15th
day and not later than the 20th day of the month next preceding the month of
such final distribution specifying the Distribution Date upon which final
distribution of the Class A Certificates will be made upon presentation and
surrender of Class A Certificates at the office or agency of the Trustee therein
designated, the amount of any such final distribution and that the Record Date
otherwise applicable to such Distribution Date is not applicable, distributions
being made only upon presentation and surrender of the Class A Certificates at
the office or agency of the Trustee therein specified.
89
(c) Upon presentation and surrender of the Class A Certificates, the
Trustee shall cause to be distributed to the holders of Class A Certificates on
the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Class A Certificates and to the extent
that funds are available for such purpose, an amount equal to the amount
required to be distributed to Class A Certificateholders pursuant to Section
5.01 for such Distribution Date.
(d) In the event that all of the Class A Certificateholders shall not
surrender their Class A Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall promptly following such
date cause all funds in the Certificate Account not distributed in final
distribution to Class A Certificateholders to be withdrawn therefrom and
credited to the remaining Class A Certificateholders by depositing such funds in
a separate escrow account for the benefit of such Class A Certificateholders and
the Servicer (if the Servicer has exercised its right to purchase the Home
Equity Loans) or the Trustee (in any other case) shall give a second written
notice to the remaining Class A Certificateholders to surrender their Class A
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Class A
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Class A Certificateholders concerning surrender of their
Class A Certificates, and the cost thereof shall be paid out of the funds on
deposit in such escrow account.
Section 10.02. Additional Termination Requirements. (a) In the event
-----------------------------------
that the Servicer exercises its purchase option as provided in Section 10.01,
the Trust shall be terminated in accordance with the following additional
requirements, unless the Trustee has been furnished with an Opinion of Counsel
to the effect that the failure of the Trust Fund to comply with the requirements
of this Section 10.02 will not (i) result in the imposition of taxes on
"prohibited transactions" of the Trust as defined in Section 860F of the Code,
or (ii) cause the Trust to fail to qualify as a REMIC at any time that any Class
A Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date, the
Servicer shall adopt and the Trustee shall sign a plan of complete
liquidation of the Trust meeting the requirements of a "Qualified
Liquidation" under Section 860F of the Code and any regulations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell all of the assets of the Trust Fund to the Servicer for cash;
and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Class A Certificateholders the Class
Certificate Principal Balance, plus one month's interest thereon at the
Pass-Through Rate and (B) to the Class R Certificateholders, all cash on
hand after such payment to the Class A Certificateholders (other than cash
retained to meet claims) and the Trust shall terminate at such time.
(e) By their acceptance of the Certificates, the Holders thereof hereby
agree to appoint the Trustee as their attorney in fact to: (i) adopt such a plan
of complete liquidation (and the Certificateholders hereby appoint the Trustee
as their attorney in fact to sign such plan) as appropriate,
90
and (ii) to take such other action in connection therewith as may be reasonably
required to carry out such plan of complete liquidation all in accordance with
the terms hereof.
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ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to
---------
time by the Depositor, the Seller, the Servicer, the Certificate Administrator
and the Trustee, without the consent of any of the Certificateholders but with
the consent of the Certificate Insurer (which consent shall not be unreasonably
withheld), (i) to cure any ambiguity or mistake; (ii) to correct or supplement
any provision therein which may be defective or inconsistent with any other
provision therein; (iii) to add to, modify or eliminate any provisions therein
(a) respecting transfers of the Residual Certificates to Persons other than
Permitted Transferees or (b) to such extent as shall be necessary to maintain
the qualification of the Trust as a REMIC at all times that any Certificates are
outstanding or to avoid or minimize the risk of the imposition of any federal
tax on the Trust or the REMIC pursuant to the Code that would be a claim against
the Trust, provided that (x) the Trustee has received an Opinion of Counsel to
the effect that such action is necessary or desirable to maintain such
qualification or to avoid or minimize the risk of the imposition of any such tax
and (y) such action shall not, as evidenced by such Opinion of Counsel,
adversely affect in any material respect the interests of any Certificateholder,
(iv) to make certain provisions with respect to the denominations of and the
manner of payments on the Residual Certificates, (v) to change the manner in
which the Collection Account or the Certificate Account is maintained, provided
that any such change does not adversely affect the then current rating on the
Offered Certificates (without regard to the Certificate Insurance Policy), or
(vi) to make any other revisions with respect to matters or questions arising
under the Pooling and Servicing Agreement which are not inconsistent with the
provisions thereof, provided that such action will not adversely affect in any
material respect the interests of any Certificateholder or the Certificate
Insurer. An amendment will be deemed not to adversely affect in any material
respect the interests of the Securityholders if the person requesting such
amendment obtains a letter from each Rating Agency requested to rate the class
or classes of Securities of such Series stating that such amendment will not
result in the downgrading or withdrawal of the respective ratings then assigned
to such Securities.
This Agreement may be amended from time to time by the Depositor, the
Seller, the Servicer, the Certificate Administrator and the Trustee, with the
consent of the Certificate Insurer and the Holders of Percentage Interests
aggregating at least 51% of each Class of Certificates affected thereby, to add
any provisions to or change in any manner or eliminate any of the provisions of
this Agreement or to modify in any manner the rights of the Holders of the
affected Class; provided, however, that no such amendment may (a) reduce in any
manner the amount of or delay the timing of payments received on the Home Equity
Loans which are required to be distributed on any Certificates without the
consent of the Holders of such Certificates and the Certificate Insurer or (b)
reduce the aforesaid Percentage Interest of each Class of Certificates which are
required to consent to any such amendment without the consent of the Holders of
all Certificates of such Class then outstanding. Notwithstanding the foregoing,
the Required Subordinated Amount may be amended by the Depositor, the Servicer,
the Certificate Administrator and the Seller with the consent of the Certificate
Insurer but without the consent of the Certificateholders.
92
Prior to the solicitation of consent of Certificateholders in connection
with any such amendment, the party seeking such amendment shall furnish the
Trustee with an Opinion of Counsel stating whether such amendment would
adversely affect the qualification of either the Trust as a REMIC and notice of
the conclusion expressed in such Opinion of Counsel shall be included with any
such solicitation. An amendment made with the consent of all Certificateholders
and executed in accordance with this Section 11.01 shall be permitted or
authorized by this Agreement notwithstanding that such Opinion of Counsel may
conclude that such amendment would adversely affect the qualification of the
Trust as a REMIC.
Prior to the execution of any such amendment, the Trustee shall furnish
written notification of the substance of such amendment to each Rating Agency.
In addition, promptly after the execution of any such amendment made with the
consent of the Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under this
Section 11.01 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Section 11.02. Recordation of Agreement. This Agreement is subject to
------------------------
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Certificateholders or the Certificate
Insurer accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Certificate Insurer or
the Certificateholders. The Certificate Insurer or the Certificateholders
requesting such recordation shall bear all costs and expenses of such
recordation. The Trustee shall have no obligation to ascertain whether such
recordation so affects the interests of the Certificateholders.
Section 11.03. Limitation on Rights of Certificateholders. The death or
------------------------------------------
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Sections 8.01, 9.01, 9.02 and 11.01) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with
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respect to this Agreement, unless such Holder previously shall have given to the
Trustee a written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the Holders of Certificates evidencing
Percentage Interests aggregating not less than 25% shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 11.03, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.05. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Depositor, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Vice President; Structured Finance, (b) in the case of the
Seller or Servicer, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Executive Vice President; Servicing, (c) in the case of the Trustee,
at the Corporate Trust Office, (d) in the case of the Certificate Administrator,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Certificate
Administrator Norwest Asset Acceptance Corporation 1998-HEI, and (e) in the case
of the Certificate Insurer, Ambac Assurance Corporation, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or to such party, at such
other address as shall be designated by such party in a written notice to each
other party, or as to end. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice. Any notice or other document required to be delivered or mailed by
the Trustee to any Rating Agency shall be given on a best efforts basis and only
as a matter of courtesy and accommodation and the Trustee shall have no
liability for failure to delivery such notice or document to any Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
94
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Sections 7.02, 7.04 and 7.05 (or 3.01),
this Agreement may not be assigned by the Depositor or the Servicer without the
prior written consent of the Certificate Insurer and the Holders of the
Certificates evidencing Percentage Interests aggregating not less than 66%.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
-----------------------------------------
agree that the Certificateholders shall not be personally liable for obligations
of the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 6.02 are
and shall be deemed fully paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure to
-------------------------
the benefit of and be binding upon the parties hereto, the Certificateholders,
the Certificate Insurer, the Certificate Owners and their respective successors
and permitted assigns. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
Section 11.10. 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 11.11. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
95
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer, the
Certificate Administrator and the Trustee have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
NORWEST ASSET ACCEPTANCE CORPORATION,
as Depositor
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Assistant Vice President
NORWEST MORTGAGE, INC.,
as Seller and Servicer
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Assistant Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Certificate Administrator
By:
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ Pablo De La Canal
--------------------------------
Name: Pablo De La Canal
Title: Vice President
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer, the
Certificate Administrator and the Trustee have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
NORWEST ASSET ACCEPTANCE CORPORATION,
as Depositor
By:
--------------------------------
Name:
Title:
NORWEST MORTGAGE, INC.,
as Seller and Servicer
By:
--------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Certificate Administrator
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Vice President
FIRST UNION NATIONAL BANK,
as Trustee
By:
--------------------------------
Name:
Title:
State of New York )
) ss.:
County of New York )
On the 30th day of April, 1998 before me, a notary public in and for
the State of New York, personally appeared ▇▇▇ ▇▇▇▇▇▇, known to me who, being by
me duly sworn, did depose and say that he resides at Frederick, Maryland; that
he is the Assistant Vice President of Norwest Asset Acceptance Corporation, a
Delaware corporation, one of the parties that executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
order.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the 30th day of April, 1998 before me, a notary public in and for
the State of New York, personally appeared ▇▇▇ ▇▇▇▇▇▇, known to me who, being by
me duly sworn, did depose and say that he resides at Frederick, Maryland; that
he is the Assistant Vice President of Norwest Mortgage, Inc., a California
corporation, one of the parties that executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like order.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the 30th day of April, 1998 before me, a notary public in and for
the State of New York, personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, known to me who,
being by me duly sworn, did depose and say that he resides at Frederick,
Maryland; that he is the Vice President of Norwest Bank Minnesota, National
Association, a national banking association, one of the parties that executed
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation; and that he signed his
name thereto by like order.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the 30th day of April, 1998 before me, a notary public in and for
the State of New York, personally appeared Pablo De La Canal, known to me who,
being by me duly sworn, did depose and say that he resides at Charlotte, North
Carolina; that he is the Vice President of First Union National Bank, a national
banking association, one of the parties that executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
order.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Notary Public
[Notarial Seal]
EXHIBIT A
[FORM OF CLASS A CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC"), AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
ASSET BACKED CERTIFICATES
SERIES 1998-HE1, CLASS A
evidencing an interest in a pool of fixed- and adjustable-rate, sub-prime
home equity loans, secured by first liens on one- to four-family
residential properties, sold by
NORWEST ASSET ACCEPTANCE CORPORATION
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, THE
DEPOSITOR, THE SELLER, THE SERVICER, THE CERTIFICATE ADMINISTRATOR, THE TRUSTEE,
OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE DEPOSITOR,
THE SELLER, THE SERVICER, THE CERTIFICATE ADMINISTRATOR, THE TRUSTEE OR ANY OF
THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT. ACCORDINGLY THE OUTSTANDING
PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE ORIGINAL
PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: Close of business on April 1, 1998
CUSIP No.: 66937M AA 8 First Distribution Date: May 25, 1998
Original Class Certificate Original Principal Balance
Principal Balance of of this Certificate: $
Class A Certificates: $
Final Scheduled
Distribution Date: April 25, 2028
A-1
This certifies that __________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Class A Certificates) in certain monthly distributions with respect to a Trust
consisting of (i) the Home Equity Loans deposited by Norwest Asset Acceptance
Corporation (the "Depositor") and (ii) the Certificate Insurance Policy. The
Trust was created pursuant to a Pooling and Servicing Agreement, dated as of
April 30, 1998 (the "Agreement"), among the Depositor, Norwest Mortgage, Inc.,
as seller and servicer (in such capacities, the "Seller" and the "Servicer,"
respectively), Norwest Bank Minnesota, National Association, as certificate
administrator (the "Certificate Administrator"), and First Union National Bank,
as trustee (the "Trustee"). To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Ambac Assurance Corporation (the "Certificate Insurer") has issued a
certificate insurance policy (the "Certificate Insurance Policy") with respect
to the Class A Certificates.
Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Class A
Certificates on such Distribution Date pursuant to Section 5.01 of the
Agreement. For each Accrual Period, the Pass-Through Rate for the Class A
Certificates will be equal to the lesser of (x) with respect to any Distribution
Date which occurs on or prior to the Optional Termination Date, One-Month LIBOR
plus 0.18% per annum and for any Distribution Date thereafter, One-Month LIBOR
plus 0.36% per annum and (y) the Available Funds Cap.
Distributions on this Certificate shall be made by check or money order
mailed to the Certificateholder of record on the related Record Date at the
address appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least seven Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder is the
Depository or such Certificateholder owns of record one or more Certificates of
a Class aggregating at least $1,000,000 Original Class Certificate Principal
Balance). Distributions among the Class A Certificateholders shall be made in
proportion to the Percentage Interests evidenced by the Class A Certificates
held by such Certificateholders. The final distribution on this Certificate
will be made in like manner, but only upon presentment and surrender of this
Certificate at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless the certificate of authentication hereon has
been manually executed by an authorized officer of the Trustee.
* * *
A-3
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
FIRST UNION NATIONAL BANK,
not in its individual
capacity, but solely as
Trustee
By: ____________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A
Certificates referred to in
the within-named Agreement
FIRST UNION NATIONAL BANK,
not in its individual
capacity, but solely
as Trustee
By: ______________________________
Authorized Signatory
A-4
NORWEST ASSET ACCEPTANCE CORPORATION
ASSET BACKED CERTIFICATES,
SERIES 1998-HE1
This Certificate is one of a duly authorized issue of Certificates
designated as Norwest Asset Acceptance Corporation Asset Backed Certificates,
Series 1998-HE1 issued in two Classes (Class A Certificates and Class R
Certificates, herein collectively called the "Certificates"), and representing a
beneficial ownership interest, as described in the Agreement, in (i) the Home
Equity Loans, (ii) the distributions thereon after the Cut-Off Date (to the
extent described in the Agreement), (iii) property that secured a Home Equity
Loan and has become REO Property, (iv) the Certificate Insurance Policy, (v)
certain insurance policies maintained by the Mortgagors or the Servicer in
respect of the Home Equity Loans, (vi) an assignment of the Depositor's rights
under the Agreement and (vii) the Accounts and such assets as are deposited
therein from time to time (excluding any investment income thereon), together,
in each case, with any and all income, proceeds and payments with respect
thereto.
In the event funds are advanced with respect to any Home Equity Loan
by the Servicer or the Trustee, such advances are reimbursable to the Servicer
or the Trustee, as the case may be, to the extent provided in the Agreement,
from related recoveries on such Home Equity Loan or from other cash that would
have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Servicer or the Trustee, as applicable, of advances made by the Servicer or
the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Seller, the Servicer, the Certificate Administrator, and the Trustee and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Seller, the Servicer, the Certificate Administrator and the
Trustee with the consent of the Certificate Insurer and Holders of Certificates
evidencing in the aggregate not less than 51% of the Voting Interests of each
Class of Certificates affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon the Certificate. The Agreement also permits the amendment
thereof in certain circumstances without the consent of the Holders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency appointed by the Trustee, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest will be issued to
the designated transferee or transferees.
A-5
The Certificates are issuable only as registered Certificates without
coupons in Classes and denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee or the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller, the Servicer, the Certificate Administrator, the Trustee
and the Certificate Registrar, and any agent of the Seller, the Servicer, the
Certificate Administrator, the Trustee or the Certificate Registrar, may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and none of the Seller, the Servicer, the Certificate
Administrator, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.
The obligations created by the Agreement in respect of the
Certificates and the Trust created thereby shall terminate upon the last action
required to be taken by the Trustee on the final Distribution Date pursuant to
the Agreement related to the earliest of (i) the final payment or other
liquidation of the last Home Equity Loan remaining in the Trust or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Home Equity Loan, (ii) the purchase by the Servicer from the
Trust of all remaining Home Equity Loans and all property acquired in respect of
such Home Equity Loans and (iii) if no Certificate Insurer Default exists on the
Final Scheduled Distribution Date, the Final Scheduled Distribution Date;
provided, however, that in no event shall the Trust continue beyond the
-------- -------
expiration of 21 years from the death of the last surviving descendant of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, the late ambassador of the United States to the Court of St. ▇▇▇▇▇,
living on the date of the Agreement. The Agreement permits, but does not
require, the Servicer to purchase all remaining Home Equity Loans and all
property acquired in respect of any Home Equity Loan at a price determined as
provided in the Agreement. The exercise of such option will effect early
retirement of the Certificates; the Servicer's right to exercise such option
being subject to the Pool Balance as of the Distribution Date upon which the
proceeds of such repurchase are distributed being less than ten percent of the
Cut-Off Date Pool Stated Principal Balance.
A-6
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee)
the beneficial interest evidenced by the within Asset Backed Certificate and
hereby authorizes the transfer of registration of such interest to assignee on
the Certificate Register of the Trust.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like Denomination or Percentage Interest and Class, to the
above named assignee and deliver such Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________
Social Security or other Identifying Number of Assignee:
______________________________________________________________________
Dated:
_______________________________________
Signature by or on behalf of assignor
_______________________________________
Signature Guaranteed
A-7
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, if the assignee is eligible to receive
distributions in immediately available funds, by wire transfer or otherwise, in
immediately available funds to _______________________________________________
for the account of _______________________________________________ account
number __________________, or, if mailed by check, to _______________________.
Applicable statements should be mailed to ____________________________________.
This information is provided by ______________________, the assignee
named above, or ___________________________________, as its agent.
A-8
EXHIBIT B
[FORM OF CLASS R CERTIFICATE]
THIS CLASS R CERTIFICATE HAS NO PRINCIPAL BALANCE, DOES NOT BEAR INTEREST AND
WILL NOT RECEIVE ANY DISTRIBUTIONS EXCEPT AS PROVIDED HEREIN. THIS CERTIFICATE
IS SUBORDINATE IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AND TO CERTAIN
AMOUNTS DUE TO THE CERTIFICATE INSURER AS DESCRIBED IN THE AGREEMENT REFERRED TO
HEREIN.
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED,
RESPECTIVELY IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND IS NOT TREATED AS INDEBTEDNESS OF THE TRUST REFERRED
TO BELOW. EACH PURCHASER OF THE INTEREST REPRESENTED BY THIS CERTIFICATE WILL
BE REQUIRED TO REPRESENT IN AN AFFIDAVIT THAT IT IS NOT A DISQUALIFIED
ORGANIZATION AND WILL NOT TRANSFER THIS CERTIFICATE TO A "DISQUALIFIED
ORGANIZATION." THE TERM "DISQUALIFIED ORGANIZATION" IS DEFINED IN SECTION
860(E)(5) OF THE CODE AND IN THE AGREEMENT. EACH PURCHASER WILL ALSO BE
REQUIRED TO REPRESENT IN SUCH AFFIDAVIT THAT (A) IT IS NOT ACQUIRING
CERTIFICATES FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION AND (B) IT WILL NOT
TRANSFER CERTIFICATES UNLESS (1) IT HAS RECEIVED A SIMILAR AFFIDAVIT FROM THE
PROPOSED TRANSFEREE AND (2) AS OF THE TIME OF THE TRANSFER, IT DOES NOT HAVE
ACTUAL KNOWLEDGE THAT THE AFFIDAVIT OF THE PROPOSED TRANSFEREE IS FALSE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 6.02 OF THE AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION THAT SUCH TRANSFEREE
IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR A PLAN SUBJECT TO SECTION 4975 OF
THE CODE OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF
ANY SUCH PLAN (INCLUDING ANY INSURANCE COMPANY USING ASSETS IN ITS GENERAL OR
SEPARATE ACCOUNTS THAT MAY CONSTITUTE ASSETS OF ANY SUCH PLAN) OR SUCH
TRANSFEREE IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF
SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")
PURCHASING SUCH CLASS R CERTIFICATE PURSUANT TO SECTIONS I AND III OF PTCE 95-
60, OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.02
OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE
CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF
AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR A PLAN SUBJECT TO THE CODE WITHOUT
AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AND THE CERTIFICATE
ADMINISTRATOR AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.
[THE HOLDER OF THIS CLASS R CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE
AGREED TO THE DESIGNATION OF THE CERTIFICATE ADMINISTRATOR AS ITS AGENT TO ACT
AS "TAX MATTERS PERSON" OF THE REMIC TO PERFORM THE FUNCTIONS OF A "TAX MATTERS
PARTNER" FOR PURPOSES OF SUBCHAPTER C OF CHAPTER 63 OF SUBTITLE F OF THE CODE,
OR, IF SO REQUESTED BY THE CERTIFICATE ADMINISTRATOR, TO ACT AS TAX MATTERS
PERSON OF THE REMIC.]
B-1
[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST" ISSUED
UNDER THE AGREEMENT REFERRED TO BELOW AND MAY NOT BE TRANSFERRED TO ANY PERSON
EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE TRANSFEREE OF THE DUTIES OF THE
TRUSTEE UNDER SUCH AGREEMENT.]
ASSET BACKED CERTIFICATES,
SERIES 1998-HE1, CLASS R
evidencing an interest in a pool of fixed- and adjustable-rate, sub-prime
home equity loans, secured by first liens on one- to four-family
residential properties, sold by
NORWEST ASSET ACCEPTANCE CORPORATION
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE DEPOSITOR, THE SELLER, THE SERVICER, THE CERTIFICATE ADMINISTRATOR, THE
TRUSTEE, OR ANY OF THEIR AFFILIATES, AND IS NOT INSURED OR GUARANTEED BY THE
DEPOSITOR, THE SELLER, THE SERVICER, THE CERTIFICATE ADMINISTRATOR, THE TRUSTEE
OR ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY.
Certificate No. Cut-Off Date: Close of business on April 1, 1998
Percentage Interest evidenced First Distribution Date: May 25, 1998
by this Certificate: _____%
Final Scheduled
Distribution Date: April 25, 2028
B-2
This certifies that ___________________________________________ is the
registered owner of the Percentage Interest evidenced by this Certificate in
certain monthly distributions with respect to a Trust consisting of (i) the Home
Equity Loans deposited by Norwest Asset Acceptance Corporation (the "Depositor")
and (ii) the Certificate Insurance Policy. The Trust was created pursuant to a
Pooling and Servicing Agreement, dated as of April 30, 1998 (the "Agreement"),
among the Depositor, Norwest Mortgage, Inc., as seller and servicer (in such
capacities, the "Seller" and the "Servicer," respectively), Norwest Bank
Minnesota, National Association, as certificate administrator (the "Certificate
Administrator"), and First Union National Bank, as trustee (the "Trustee"). To
the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
Ambac Assurance Corporation (the "Certificate Insurer") has issued a
certificate insurance policy (the "Certificate Insurance Policy") with respect
to the Class A Certificates. The Holders of Class R Certificates will NOT
receive any payments from the Certificate Insurance Policy.
Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Class R
Certificates on such Distribution Date pursuant to Section 5.01(D) of the
Agreement.
Distributions on this Certificate shall be made by check or money order
mailed to the Certificateholder of record on the related Record Date at the
address appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least seven Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder owns of
record one or more Certificates of a Class aggregating at least 51% Percentage
Interest). Distributions among the Class R Certificateholders shall be made in
proportion to the Percentage Interests evidenced by the Class R Certificates
held by such Certificateholders. The final distribution on this Certificate
will be made in like manner, but only upon presentment and surrender of this
Certificate at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless the certificate of authentication hereon has
been manually executed by an authorized officer of the Trustee.
* * *
B-3
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
FIRST UNION NATIONAL BANK,
not in its individual
capacity, but solely as
Trustee
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class R
Certificates referred to in
the within-named Agreement
FIRST UNION NATIONAL BANK,
not in its individual
capacity, but solely
as Trustee
By: _____________________________
Authorized Signatory
B-4
NORWEST ASSET ACCEPTANCE CORPORATION
ASSET BACKED CERTIFICATES,
SERIES 1998-HE1
This Certificate is one of a duly authorized issue of Certificates
designated as Norwest Asset Acceptance Corporation Asset Backed Certificates,
Series 1998-HE1 issued in two Classes (Class A Certificates and Class R
Certificates, herein collectively called the "Certificates"), and representing a
beneficial ownership interest, as described in the Agreement, in (i) the Home
Equity Loans, (ii) the distributions thereon after the Cut-Off Date (to the
extent described in the Agreement), (iii) property that secured a Home Equity
Loan and has become REO Property, (iv) the Certificate Insurance Policy, (v)
certain insurance policies maintained by the Mortgagors or the Servicer in
respect of the Home Equity Loans, (vi) an assignment of the Depositor's rights
under the Agreement and (vii) the Accounts and such assets as are deposited
therein from time to time (excluding any investment income thereon), together,
in each case, with any and all income, proceeds and payments with respect
thereto.
In the event funds are advanced with respect to any Home Equity Loan
by the Servicer or the Trustee, such advances are reimbursable to the Servicer
or the Trustee, as the case may be, to the extent provided in the Agreement,
from related recoveries on such Home Equity Loan or from other cash that would
have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Servicer or the Trustee, as applicable, of advances made by the Servicer or
the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Seller, the Servicer, the Certificate Administrator, and the Trustee and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Seller, the Servicer, the Certificate Administrator and the
Trustee with the consent of the Certificate Insurer and Holders of Certificates
evidencing in the aggregate not less than 51% of the Voting Interests of each
Class of Certificates affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon the Certificate. The Agreement also permits the amendment
thereof in certain circumstances without the consent of the Holders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency appointed by the Trustee, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest will be issued to
the designated transferee or transferees.
B-5
The Certificates are issuable only as registered Certificates without
coupons in Classes and denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee or the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller, the Servicer, the Certificate Administrator, the Trustee
and the Certificate Registrar, and any agent of the Seller, the Servicer, the
Certificate Administrator, the Trustee or the Certificate Registrar, may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and none of the Seller, the Servicer, the Certificate
Administrator, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.
The obligations created by the Agreement in respect of the
Certificates and the Trust created thereby shall terminate upon the last action
required to be taken by the Trustee on the final Distribution Date pursuant to
the Agreement related to the earliest of (i) the final payment or other
liquidation of the last Home Equity Loan remaining in the Trust or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Home Equity Loan, (ii) the purchase by the Servicer from the
Trust of all remaining Home Equity Loans and all property acquired in respect of
such Home Equity Loans and (iii) if no Certificate Insurer Default exists on the
Final Scheduled Distribution Date, the Final Scheduled Distribution Date;
provided, however, that in no event shall the Trust continue beyond the
-------- -------
expiration of 21 years from the death of the last surviving descendant of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, the late ambassador of the United States to the Court of St. ▇▇▇▇▇,
living on the date of the Agreement. The Agreement permits, but does not
require, the Servicer to purchase all remaining Home Equity Loans and all
property acquired in respect of any Home Equity Loan at a price determined as
provided in the Agreement. The exercise of such option will effect early
retirement of the Certificates; the Servicer's right to exercise such option
being subject to the Pool Balance as of the Distribution Date upon which the
proceeds of such repurchase are distributed being less than ten percent of the
Cut-Off Date Pool Stated Principal Balance.
B-6
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee)
the beneficial interest evidenced by the within Asset Backed Certificate and
hereby authorizes the transfer of registration of such interest to assignee on
the Certificate Register of the Trust.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like Denomination or Percentage Interest and Class, to the
above named assignee and deliver such Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________
Social Security or other Identifying Number of Assignee:
_______________________________________________________________________________
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
B-7
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, if the assignee is eligible to receive
distributions in immediately available funds, by wire transfer or otherwise, in
immediately available funds to
________________________________________________________________________ for the
account of ______________________________________________________ account number
_____________________, or, if mailed by check, to _________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by ______________________, the assignee
named above, or ___________________________________, as its agent.
B-8
EXHIBIT C
HOME EQUITY LOAN SCHEDULE
C-1
EXHIBIT D
[RESERVED]
D-1
EXHIBIT E
AFFIDAVIT PURSUANT TO SECTION 860E(e)(4) OF
THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says under
penalties of perjury:
1. That he is [Title of Officer] of [Name of Purchaser] (the
"Purchaser"), a [description of type of entity] duly organized and existing
under the laws of the [State of _______] [United States], on behalf of which he
makes this affidavit.
2. That the Purchaser's Taxpayer Identification Number is
____________.
3. That the Purchaser is not a "disqualified organization" within the
meaning of Section 860E(e)(5),of the Internal Revenue Code of 1986, as amended
(the "Code"), and will not be a "disqualified organization" or an ERISA
Prohibited Holder, as of [date of transfer], and that the Purchaser is not
acquiring the Norwest Asset Acceptance Corporation Asset Backed Certificates,
Series 1998-HE1, Class R Certificate (the "Class R Certificate") for the account
of, or as agent (including a broker, nominee, or other middleman) for, any
person or entity from which it has not received an affidavit substantially in
the form of this affidavit. For these purposes, a "disqualified organization"
means the United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (other than an instrumentality if all of its activities are
subject to tax and (except in the case of the Federal Home Loan Mortgage
Corporation) a majority of its board of directors is not selected by such
governmental entity), any cooperative organization furnishing electric energy or
providing telephone service to persons in rural areas as described in Code
Section 1381(a)(2)(C), or any organization (other than a farmers' cooperative
described in Code Section 521) that is exempt from taxation under the Code
unless such organization is subject to the tax on unrelated business income
imposed by Code Section 511.
4. That the Purchaser historically has paid its debts as they have
come due and intends to pay its debts as they come due in the future and the
Purchaser intends to pay taxes associated with holding the Class R Certificate
as they become due.
E-1
5. That the Purchaser understands that it may incur tax liabilities
with respect to the Class R Certificate in excess of cash flows generated by the
Class R Certificate.
6. That the Purchaser will not transfer the Class R Certificate to
any person or entity from which the Purchaser has not received an affidavit
substantially in the form of this affidavit and as to which the Purchaser has
actual knowledge that the requirements set forth in paragraph 3, 4 or 7 hereof
are not satisfied or that the Purchaser has reason to know does not satisfy the
requirements set forth in paragraph 4 hereof.
7. That the Purchaser (i) is a U.S. Person or (ii) is a person other
than a U.S. Person (a "Non-U.S. Person") that holds the Class R Certificate in
connection with the conduct of a trade or business within the United States and
has furnished the transferor and the Trustee with an effective Internal Revenue
Service Form 4224 or successor form at the time and in the manner required by
the Code or (iii) is a Non-U.S. Person that has delivered to both the transferor
and the Trustee an opinion of a nationally recognized tax counsel to the effect
that the transfer of the Class R Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of the Class R Certificate will not be disregarded for federal
income tax purposes. "U.S. Person" means a citizen or resident of the United
States, a corporation, partnership (except to the extent provided in applicable
Treasury regulations) or other entity treated for federal income tax purposes as
a corporation or partnership created or organized in or under the laws of the
United States or any State thereof (including the District of Columbia), an
estate that is subject to U.S. federal income tax regardless of the source of
its income, or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more U.S.
Persons have the authority to control all substantial decisions of such trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996 which are eligible to elect to be treated as
U.S. Persons).
8. That the Purchaser agrees to such amendments of the Pooling and
Servicing Agreement as may be required to further effectuate the restrictions on
transfer of the Class R Certificate to such a "disqualified organization," an
agent thereof, or a person that does not satisfy the requirements of paragraph
4, paragraph 5 and paragraph 7 hereof.
9. That the Purchaser consents to the designation of the Certificate
Administrator as its agent to act as "tax matters person" of the REMIC pursuant
to the Pooling and Servicing Agreement, and if such designation is not permitted
by the Code and applicable law, to act as tax matters person if requested to do
so.
E-2
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] this ___ day of __________, 19 __.
[NAME OF PURCHASER]
BY:
----------------------------
[Name of Officer]
[Title of Officer]
Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer], of the Purchaser, and acknowledged to me that he
[she] executed the same as his [her] free act and deed and the free act and deed
of the Purchaser.
Subscribed and sworn before me this __ day of __________, 19 __.
-----------------------------
NOTARY PUBLIC
COUNTY OF
--------------------
STATE OF
---------------------
My commission expires the __ day of __________, 19__.
E-3
EXHIBIT F
EXHIBIT F
REQUEST FOR RELEASE
(for Trustee)
Loan Information
----------------
Name of Mortgagor:
------------------------------
Servicer
Loan No.:
------------------------------
Trustee
-------
Name:
------------------------------
Address:
------------------------------
------------------------------
Trustee
Mortgage File No.:
------------------------------
The undersigned Servicer hereby acknowledges that it has received from
First Union National Bank, as Trustee (the "Trustee") for the Holders of Asset
Backed Certificates, Series 1998-HE1, the documents referred to below (the
"Documents"). All capitalized terms not otherwise defined in this Request for
Release shall have the meanings given them in the Pooling and Servicing
Agreement dated as of April 30, 1998 (the "Pooling and Servicing Agreement")
among Norwest Asset Acceptance Corporation, as Depositor, Norwest Mortgage,
Inc., as Seller and Servicer, Norwest Bank Minnesota, National Association, as
Certificate Administrator, and the Trustee.
( ) Mortgage Note dated ___________, 19__, in the original principal sum of
$________, made by __________________, payable to, or endorsed to the order
of, the Trustee.
( ) Mortgage recorded on _________________ as instrument no. ________________
in the County Recorder's Office of the County of ________________, State of
_______________ in book/reel/docket _______________ of official records at
page/image _____________.
F-1
( ) Deed of Trust recorded on _________________ as instrument no.
________________ in the County Recorder's Office of the County of
________________, State of _______________ in book/reel/docket
_______________ of official records at page/image _____________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_________________ as instrument no. __________ in the County Recorder's
Office of the County of __________, State of _______________ in
book/reel/docket _______________ of official records at page/image
_____________.
( ) Other documents, including any amendments, assignments or other assumptions
of the Mortgage Note or Mortgage.
( )
----------------------------------------------
( )
----------------------------------------------
( )
----------------------------------------------
( )
----------------------------------------------
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents in
trust for the benefit of the Trustee, solely for the purposes provided in
the Agreement.
(2) The Servicer shall not cause or knowingly permit the Documents to
become subject to, or encumbered by, any claim, liens, security interest,
charges, writs of attachment or other impositions nor shall the Servicer
assert or seek to assert any claims or rights of setoff to or against the
Documents or any proceeds thereof.
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no
longer exists, unless the Mortgage Loan relating to the Documents has been
liquidated and the proceeds thereof have been remitted to the Collection
Account and except as expressly provided in the Agreement.
F-2
(4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the Servicer shall at
all times be earmarked for the account of the Trustee, and the Servicer
shall keep the Documents and any proceeds separate and distinct from all
other property in the Servicer's possession, custody or control.
[Servicer]
By
-----------------------
Its
-----------------------
Date: _________________, 19__
F-3
EXHIBIT G-1
FORM OF INVESTMENT LETTER
[NON-RULE 144A LETTER] FOR
CLASS R CERTIFICATES
Date:
Norwest Asset Acceptance Corporation,
as Depositor
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
First Union National Bank,
as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Norwest Asset Acceptance Corporation Asset Backed Certificates, Series
----------------------------------------------------------------------
1998-HE1
--------
Ladies and Gentlemen:
In connection with our acquisition of the Class R Certificates in the
Percentage Interest of __% (the "Certificates"), we certify that (a) we
understand that the Certificates are not being registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we are an "accredited investor,"
as defined in Regulation D under the Act, and have such knowledge and experience
in financial and business matters that we are capable of evaluating the merits
and risks of investments in the Certificates, (c) we have had the opportunity to
ask questions of and receive answers from the Depositor concerning the purchase
of the Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificates, (d)
either (i) we are not an employee benefit plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended, nor a plan subject to
Section 4975 of the Internal Revenue Code of 1986 (each of the foregoing, a
"Plan"), nor are we acting on behalf of any Plan, (ii) if we are an insurance
company, a representation that we are an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under Sections I and III of PTCE 95-60 or (iii) we have
delivered to you on the date hereof the Opinion of Counsel described in
G-1-1
Section 6.02(d) of the Agreement, (e) we are acquiring the Certificates for
investment for our own account and not with a view to any distribution of such
Certificates (but without prejudice to our right at all times to sell or
otherwise dispose of the Certificates in accordance with clause (g) below), (f)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, or taken any other action that would result in a
violation of Section 5 of the Act, and (g) we will not sell, transfer or
otherwise dispose of any Certificates unless (1) such sale, transfer or other
disposition is made pursuant to an effective registration statement under the
Act or is exempt from such registration requirements, and if requested, we will
at our expense provide an opinion of counsel satisfactory to the addressees of
this Certificate that such sale, transfer or other disposition may be made
pursuant to an exemption from the Act, (2) the purchaser or transferee of such
Certificate has executed and delivered to you a certificate to substantially the
same effect as this certificate, and (3) the purchaser or transferee has
otherwise complied with any conditions for transfer set forth in the Pooling and
Servicing Agreement (the "Agreement") dated as of April 30, 1998, among Norwest
Asset Acceptance Corporation, as Depositor, Norwest Mortgage, Inc., as Seller
and Servicer, Norwest Bank Minnesota, National Association, as Certificate
Administrator and First Union National Bank, as Trustee. All capitalized terms
used herein but not defined herein shall have the meanings assigned to them in
the Agreement.
Very truly yours,
---------------------------
Name of Transferee
By:
------------------------
Name:
Title:
G-1-2
EXHIBIT G-2
FORM OF RULE 144A LETTER
FOR CLASS R CERTIFICATES
Date:
Norwest Asset Acceptance Corporation,
as Depositor
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
First Union National Bank,
as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ 1179
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: : Norwest Asset Acceptance Corporation Asset Backed Certificates,
---------------------------------------------------------------
Series 1998-HE1
---------------
Ladies and Gentlemen:
In connection with our proposed purchase of the Class R Certificates
(the "Certificates") we certify that (a) we understand that the Certificates are
not being registered under the Securities Act of 1933, as amended (the "Act"),
or any state securities laws and are being transferred to us in a transaction
that is exempt from the registration requirements of the Act and any such laws,
(b) we have such knowledge and experience in financial and business matters that
we are capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Depositor concerning the purchase of the Certificates and all
matters relating thereto or any additional information deemed necessary to our
decision to purchase the Certificates, (d) or either (i) we are not an employee
benefit plan that is subject to the Employee Retirement Income Security Act of
1974, as amended, nor a plan subject to Section 4975 of the Internal Revenue
Code of 1986 (each of the foregoing, a "Plan"), nor are we acting on behalf of
any Plan, (ii) if we are an insurance company, a representation that we are an
insurance company which is purchasing such Certificates with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificates are covered under Sections I and III
PTCE 95-60 or (iii) we have delivered to you on the date hereof the Opinion of
Counsel specified in Section 6.02(d) of the Agreement, (e) we have not, nor has
anyone acting on our behalf offered, transferred, pledged, sold or otherwise
disposed of the Certificates, any interest in the Certificates or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Certificates, any interest in the Certificates or
any other similar security from,
G-2-1
or otherwise approached or negotiated with respect to the Certificates, any
interest in the Certificates or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Securities Act or that would render
the disposition of the Certificates a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificates, and (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed either of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Securities Act. All capitalized terms used
herein but not defined herein shall have the meanings assigned to them in the
Pooling and Servicing Agreement dated as of April 30, 1998, among Norwest Asset
Acceptance Corporation, as Depositor, Norwest Mortgage, Inc., as Seller and
Servicer, Norwest Bank Minnesota, National Association, as Certificate
Administrator and First Union National Bank, as Trustee.
------------------------------------
Name of Buyer
By:
---------------------------------
Name:
Title:
G-2-2
ANNEX 1 TO EXHIBIT G-2
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $__________ /1/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A
and (ii) the Buyer satisfies the criteria in the category marked below.
Corporation, etc. The Buyer is a corporation (other than a bank,
--- ----------------
savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended.
Bank. The Buyer (a) is a national bank or banking institution
--- ----
organized under the laws of any State, territory or the District
of Columbia, the business of which is substantially confined to
banking and is supervised by the State or territorial banking
commission or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
----------------------------------
Savings and Loan. The Buyer (a) is a savings and loan
--- ----------------
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision
over any such institutions or is a foreign savings and loan
association or equivalent institution and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its latest
annual financial statements, a copy of which is attached hereto.
-------------------
/1/ Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer
must own and/or invest on a discretionary basis at least $10,000,000 in
securities.
G-2-3
Broker-dealer. The Buyer is a dealer registered pursuant to
--- -------------
Section 15 of the Securities Exchange Act of 1934.
Insurance Company. The Buyer is an insurance company whose
--- -----------------
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
State or Local Plan. The Buyer is a plan established and
--- -------------------
maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions,
for the benefit of its employees.
ERISA Plan. The Buyer is an employee benefit plan within the
--- ----------
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
Investment Advisor. The Buyer is an investment advisor
--- ------------------
registered under the Investment Advisors Act of 1940.
Small Business Investment Company. The Buyer is a small business
--- ---------------------------------
investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
Business Development Company. The Buyer is a business
--- ----------------------------
development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
Trust Fund. The Buyer is a trust fund whose trustee is a bank or
--- ----------
trust company and whose participants are exclusively State or
Local Plans or ERISA Plans as defined above, and no participant
of the Buyer is an individual retirement account or an H.R. 10
(▇▇▇▇▇) plan.
3. The term "securities" as used herein does not include (i)
---------- ----------------
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another
G-2-4
enterprise and the Buyer is not itself a reporting company under the Securities
Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
----------------------------------
Name of Buyer
By:
--------------------------------
Name:
Title:
Date:
------------------------------
G-2-5
EXHIBIT H
[Letter from Transferor of Class R Certificate]
[Date]
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ 1179
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Norwest Asset Acceptance Corporation
Series 1998-HE1, Class R
----------------------------------
Ladies and Gentlemen:
In connection with our disposition of the Class R Certificates, we
certify that (a) we understand that the Class R Certificates have not been
registered under the Securities Act of 1933, as amended (the "Act"), and are
being disposed by us in a transaction that is exempt from the registration
requirements of the Act, (b) we have not offered or sold any Class R
Certificates to, or solicited offers to buy any Class R Certificates from, any
person, or otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action that would
result in, a violation of Section 5 of the Act and (c) [Transferor] has reviewed
the attached affidavit of [Transferee], and has no actual knowledge that such
affidavit is not true and has no reason to know that the information contained
in paragraph 4 thereof is not true. All capitalized terms used herein but not
defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of April 30, 1998, among Norwest Asset Acceptance
Corporation, as Depositor, Norwest Mortgage, Inc., as Seller and Servicer,
Norwest Bank Minnesota, National Association, as Certificate Administrator and
First Union National Bank, as Trustee.
Very truly yours,
[Transferor]
-----------------------
H-1
EXHIBIT I
[FORM OF SPECIAL SERVICING AGREEMENT]
SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
-----------------------------------------------
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement") is
made and entered into as of _____________, between Norwest Mortgage, Inc. (the
"Servicer") and _________________________ (the "Purchaser").
PRELIMINARY STATEMENT
________________ is the holder of at least a 51% Percentage Interest in
Norwest Asset Acceptance Corporation Asset Backed Certificates, Series 1998-HE1,
Class R (the "Class R Certificates"). The Class R Certificates were issued
pursuant to a Pooling and Servicing Agreement dated as of April 30, 1998 among
Norwest Asset Acceptance Corporation, as Depositor ("NAAC"), the Servicer, as
Servicer, Norwest Bank Minnesota, National Association, as Certificate
Administrator and First Union National Bank, as Trustee.
________________ intends to resell at least a 51% Percentage Interest in
the Class R Certificates directly to the Purchaser on or promptly after the date
hereof.
In connection with such sale, the parties hereto have agreed that the
Servicer will engage in certain special servicing procedures relating to
foreclosures for the benefit of the Purchaser, and that the Purchaser will
deposit funds in a collateral fund to cover any losses attributable to such
procedures as well as all advances and costs in connection therewith, as set
forth herein.
In consideration of the mutual agreements herein contained, the receipt and
sufficiency of which are hereby acknowledged, the Servicer and the Purchaser
agree that the following provisions shall become effective and shall be binding
on and enforceable by the Servicer and the Purchaser:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms
-------------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Collateral Fund: The fund established and maintained pursuant to Section
---------------
3.01 hereof.
Collateral Fund Permitted Investments: Either (i) obligations of, or
-------------------------------------
obligations fully guaranteed as to principal and interest by, the United States,
or any agency or instrumentality thereof, provided such obligations are backed
by the full faith and credit of the United States,
I-1
(ii) a money market fund rated in the highest rating category by a nationally
recognized rating agency selected by the Servicer, (iii) cash, (iv) mortgage
pass-through certificates issued or guaranteed by Government National Mortgage
Association, FNMA or FHLMC, (v) commercial paper (including both non-interest-
bearing discount obligations and interest-bearing obligations payable on demand
or on a specified date), the issuer of which may be an affiliate of the
Servicer, having at the time of such investment a rating of at least A-1 by
Standard and Poor's ("S&P") or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.
("Moody's") or (vi) demand and time deposits in, certificates of deposit of, any
depository institution or trust company (which may be an affiliate of the
Servicer) incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal and/or state
banking authorities, so long as at the time of such investment either (x) the
long-term debt obligations of such depository institution or trust company have
a rating of at least Aa2 by Moody's or AA by S&P, (y) the certificate of deposit
or other unsecured short-term debt obligations of such depository institution or
trust company have a rating of at least P-1 by Moody's or A-1 by S&P or (z) the
depository institution or trust company is one that is acceptable to either
Moody's or S&P and, for each of the preceding clauses (i), (iv), (v) and (vi),
the maturity thereof shall be not later than the earlier to occur of (A) 30 days
from the date of the related investment and (B) the next succeeding Distribution
Date as defined in the related Pooling and Servicing Agreement.
Commencement of Foreclosure: The first official action required under local
---------------------------
law in order to commence foreclosure proceedings or to schedule a trustee's sale
under a deed of trust, including (i) in the case of a mortgage, any filing or
service of process necessary to commence an action to foreclose, or (ii) in the
case of a deed of trust, posting, the publishing, filing or delivery of a notice
of sale, but not including in either case (x) any notice of default, notice of
intent to foreclose or sell or any other action prerequisite to the actions
specified in (i) or (ii) above, (y) the acceptance of a deed-in-lieu of
foreclosure (whether in connection with a sale of the related property or
otherwise) or (z) initiation and completion of a short pay-off.
Current Appraisal: With respect to any Home Equity Loan as to which the
-----------------
Purchaser has made an Election to Delay Foreclosure, an appraisal of the related
Mortgaged Property obtained by the Purchaser at its own expense from an
independent appraiser (which shall not be an affiliate of the Purchaser)
acceptable to the Servicer as nearly contemporaneously as practicable to the
time of the Purchaser's election, prepared based on the Servicer's customary
requirements for such appraisals.
Election to Delay Foreclosure: Any election by the Purchaser to delay the
-----------------------------
Commencement of Foreclosure, made in accordance with Section 2.02(b).
Election to Foreclose: Any election by the Purchaser to proceed with the
---------------------
Commencement of Foreclosure, made in accordance with Section 2.03(a).
Monthly Advances: Advances and Servicing Advances.
----------------
I-2
Required Collateral Fund Balance: As of any date of determination, an
--------------------------------
amount equal to the aggregate of all amounts previously required to be deposited
in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all
withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after
adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and
Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section
2.02(g) and Section 2.03(d).
Section 1.02. Definitions Incorporated by Reference
-------------------------------------
All capitalized terms not otherwise defined in this Agreement shall have
the meanings assigned in the Pooling and Servicing Agreement.
ARTICLE II
SPECIAL SERVICING PROCEDURES
Section 2.01. Reports and Notices
-------------------
(a) In connection with the performance of its duties under the Pooling
and Servicing Agreement relating to the realization upon defaulted Home Equity
Loans, the Servicer as Servicer shall provide to the Purchaser the following
notices and reports:
(i) Within five Business Days after each Distribution Date (or
included in or with the monthly statements to Certificateholders pursuant
to the Pooling and Servicing Agreement), the Servicer, shall provide to the
Purchaser a report, using the same methodology and calculations in its
standard servicing reports, indicating the number of Home Equity Loans that
are (A) thirty days, (B) sixty days, (C) ninety days or more delinquent or
(D) in foreclosure, and indicating for each such Home Equity Loan the loan
number and outstanding principal balance.
(ii) Prior to the Commencement of Foreclosure in connection with
any Home Equity Loan, the Servicer shall provide the Purchaser with a
notice (sent by telecopier) of such proposed and imminent foreclosure,
stating the loan number and the aggregate amount owing under the Home
Equity Loan. Such notice may be provided to the Purchaser in the form of a
copy of a referral letter from the Servicer to an attorney requesting the
institution of foreclosure.
(b) If requested by the Purchaser, the Servicer shall make its
servicing personnel available (during their normal business hours) to respond to
reasonable inquiries, by phone or in writing by facsimile, electronic, or
overnight mail transmission, by the Purchaser in connection with any Home Equity
Loan identified in a report under subsection (a) (i) (B), (a) (i) (C), (a) (i)
(D), or (a) (ii) which has been given to the Purchaser; provided, that (1) the
Servicer shall only be required to provide information that is readily
accessible to its servicing personnel and is non-confidential and (2) the
Servicer shall respond within five Business Days orally or in writing by
facsimile transmission.
I-3
(c) In addition to the foregoing, the Servicer shall provide to the
Purchaser such information as the Purchaser may reasonably request provided,
however, that such information is consistent with normal reporting practices,
concerning each Home Equity Loan that is at least ninety days delinquent and
each Home Equity Loan which has become real estate owned, through the final
liquidation thereof; provided, that the Servicer shall only be required to
provide information that is readily accessible to its servicing personnel and is
non-confidential provided, however, that the Purchaser will reimburse the
Servicer for any out of pocket expenses.
Section 2.02. Purchaser's Election to Delay Foreclosure Proceedings
-----------------------------------------------------
(a) The Purchaser shall be deemed to direct the Servicer that in the
event that the Servicer does not receive written notice of the Purchaser's
election pursuant to subsection (b) below within 24 hours (exclusive of any
intervening non-Business Days) of transmission of the notice provided by the
Servicer under Section 2.01 (a) (ii) subject to extension as set forth in
Section 2.02(b), the Servicer may proceed with the Commencement of Foreclosure
in respect of such Home Equity Loan in accordance with its normal foreclosure
policies without further notice to the Purchaser. Any foreclosure that has
been initiated may be discontinued (i) without notice to the Purchaser if the
Home Equity Loan has been brought current or if a refinancing or prepayment
occurs with respect to the Home Equity Loan (including by means of a short
payoff approved by the Servicer) or (ii) if the Servicer has reached the terms
of a forbearance agreement with the borrower. In the latter case, the Servicer
may complete such forbearance agreement unless instructed otherwise by the
Purchaser within two Business Days notification.
(b) In connection with any Home Equity Loan with respect to which a
notice under Section 2.01(a)(ii) has been given to the Purchaser, the Purchaser
may elect to instruct the Servicer to delay the Commencement of Foreclosure
until such time as the Purchaser determines that the Servicer may proceed with
the Commencement of Foreclosure. Such election must be evidenced by written
notice received within 24 hours (exclusive of any intervening non-Business Days)
of transmission of the notice provided by the Servicer under Section
2.01(a)(ii). Such 24 hour period shall be extended for no longer than an
additional four Business Days after the receipt of the information if the
Purchaser requests additional information related to such foreclosure; provided,
however, that the Purchaser will have at least one Business Day to respond to
any requested additional information. Any such additional information shall be
provided only to the extent it (i) is not confidential in nature and (ii) is
obtainable by the Servicer from existing reports, certificates or statements or
is otherwise readily accessible to its servicing personnel. The Purchaser
agrees that it has no right to deal with the mortgagor during such period.
However, if such servicing activities include acceptance of a deed-in-lieu of
foreclosure or short payoff, the Purchaser will be notified and given two
Business Days to respond.
(c) With respect to any Home Equity Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Purchaser shall obtain a Current
Appraisal as soon as
I-4
practicable, but in no event more than 15 business days thereafter, and shall
provide the Servicer with a copy of such Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Purchaser shall remit by wire transfer to the Servicer, for
deposit in the Collateral Fund, an amount, as calculated by the Servicer, equal
to the sum of (i) 125% of the greater of the unpaid principal balance of the
Home Equity Loan and the value shown in the Current Appraisal referred to in
subsection (c) above (or, if such Current Appraisal has not yet been obtained,
the Servicer's estimate thereof, in which case the required deposit under this
subsection shall be adjusted upon obtaining such Current Appraisal), and (ii)
three months' interest on the Home Equity Loan at the applicable Mortgage Rate.
If any Election to Delay Foreclosure extends for a period in excess of three
months (such excess period being referred to herein as the "Excess Period"),
within two Business Days the Purchaser shall remit by wire transfer in advance
to the Servicer for deposit in the Collateral Fund the amount of each additional
month's interest, as calculated by the Servicer, equal to interest on the Home
Equity Loan at the applicable Mortgage Rate for the Excess Period. The terms of
this Agreement will no longer apply to the servicing of any Home Equity Loan
upon the failure of the Purchaser to deposit any of the above amounts relating
to the Home Equity Loan within two Business Days of the Election to Delay
Foreclosure or within two Business Days of the commencement of the Excess Period
subject to Section 3.01.
(e) With respect to any Home Equity Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Servicer may withdraw from the
Collateral Fund from time to time amounts necessary to reimburse the Servicer
for all related Monthly Advances thereafter made by the Servicer in accordance
with the Pooling and Servicing Agreement. To the extent that the amount of any
Monthly Advances related to liquidation expenses is determined by the Servicer
based on estimated costs, and the actual costs are subsequently determined to be
higher, the Servicer may withdraw the additional amount from the Collateral
Fund. In the event that the Home Equity Loan is brought current by the
mortgagor and the foreclosure action is discontinued, the amounts so withdrawn
from the Collateral Fund shall be redeposited if and to the extent that
reimbursement therefor from amounts paid by the mortgagor is not prohibited
pursuant to the Pooling and Servicing Agreement, applicable law or the related
mortgage note. Except as provided in the preceding sentence, amounts withdrawn
from the Collateral Fund to cover Monthly Advances shall not be redeposited
therein or otherwise reimbursed to the Purchaser. If and when any such Home
Equity Loan is brought current by the mortgagor, all amounts remaining in the
Collateral Fund in respect of such Home Equity Loan (after adjustment for all
permitted withdrawals and deposits pursuant to this subsection) shall be
released to the Purchaser.
(f) With respect to any Home Equity Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Servicer shall continue to service
the Home Equity Loan in accordance with its customary procedures (other than the
delay in Commencement of Foreclosure as provided herein). If and when the
Purchaser shall notify the Servicer that it believes that it is appropriate to
do so, the Servicer may proceed with the Commencement of Foreclosure. In any
event, if the Home Equity Loan is not brought current by the mortgagor
I-5
by the time the loan becomes 6 months delinquent, the Purchaser's election shall
no longer be effective and at the Purchaser's option, either (i) the Purchaser
shall purchase the Home Equity Loan from the Trust at a purchase price equal to
the fair market value as shown on the Current Appraisal, to be paid by (x)
applying any balance in the Collateral Fund to such to such purchase price, and
(y) to the extent of any deficiency, by wire transfer of immediately available
funds from the Purchaser to the Servicer for deposit in the related Certificate
Account; or (ii) the Servicer shall proceed with the Commencement of
Foreclosure.
(g) Upon the occurrence of a liquidation with respect to any Home
Equity Loan as to which the Purchaser made an Election to Delay Foreclosure and
as to which the Servicer proceeded with the Commencement of Foreclosure in
accordance with subsection (f) above, the Servicer shall calculate the amount,
if any, by which the value shown on the Current Appraisal obtained under
subsection (c) exceeds the actual sales price obtained for the related Mortgaged
Property (net of liquidation expenses and accrued interest related to the
extended foreclosure period), and the Servicer shall withdraw the amount of such
excess from the Collateral Fund, shall remit the same to the Trust and in its
capacity as Servicer shall apply such amount as additional Liquidation Proceeds
pursuant to the Pooling and Servicing Agreement. After making such withdrawal,
all amounts remaining in the Collateral Fund in respect of such Home Equity Loan
(after adjustment for all permitted withdrawals and deposits pursuant to this
Agreement) shall be released to the Purchaser.
Section 2.03. Purchaser's Election to Commence Foreclosure
--------------------------------------------
Proceedings
-----------
(a) In connection with any Home Equity Loan identified in a report
under Section 2.01(a)(i)(B), the Purchaser may elect to instruct the Servicer to
proceed with the Commencement of Foreclosure as soon as practicable. Such
election must be evidenced by written notice received by the Servicer by 5:00
p.m., New York City time, on the third Business Day following the delivery of
such report under Section 2.01(a)(i).
(b) Within two Business Days of making any Election to Foreclose, the
Purchaser shall remit to the Servicer, for deposit in the Collateral Fund, an
amount, as calculated by the Servicer, equal to 125% of the current unpaid
principal balance of the Home Equity Loan and three months interest on the Home
Equity Loan at the applicable Mortgage Interest Rate. If and when any such Home
Equity Loan is brought current by the mortgagor, all amounts in the Collateral
Fund in respect of such Home Equity Loan (after adjustment for all permitted
withdrawals and deposits pursuant to this Agreement) shall be released to the
Purchaser if and to the extent that reimbursement therefor from amounts paid by
the mortgagor is not prohibited pursuant to the Pooling and Servicing Agreement,
applicable law or the related mortgage note. The terms of this Agreement will
no longer apply to the servicing of any Home Equity Loan upon the failure of the
Purchaser to deposit the above amounts relating to the Home Equity Loan within
two Business Days of the Election to Foreclose subject to Section 3.01.
(c) With respect to any Home Equity Loan as to which the Purchaser has
made an Election to Foreclose, the Servicer shall continue to service the Home
Equity Loan in
I-6
accordance with its customary procedures (other than Commencement of Foreclosure
as provided herein). In connection therewith, the Servicer shall have the same
rights to make withdrawals for Monthly Advances from the Collateral Fund as are
provided under Section 2.02(e), and the Servicer shall make reimbursements
thereto to the limited extent provided under such subsection in accordance with
its customary procedures. The Servicer shall not be required to proceed with the
Commencement of Foreclosure if (i) the same is stayed as a result of the
mortgagor's bankruptcy or is otherwise barred by applicable law, or to the
extent that all legal conditions precedent thereto have not yet been complied
with, or (ii) the Servicer believes there is a breach of representations or
warranties by the Servicer, or the Seller, which may result in a repurchase or
substitution of such Home Equity Loan, or (iii) the Servicer reasonably believes
the Mortgaged Property may be contaminated with or affected by hazardous wastes
or hazardous substances (and, without limiting the Servicer's right not to
proceed with the Commencement of Foreclosure, the Servicer supplies the
Purchaser with information supporting such belief). Any foreclosure that has
been initiated may be discontinued (x) without notice to the Purchaser if the
Home Equity Loan has been brought current or if a refinancing or prepayment
occurs with respect to the Home Equity Loan (including by means of a short
payoff approved by the Purchaser) or (y) with notice to the Purchaser if the
Servicer has reached the terms of a forbearance agreement unless instructed
otherwise by the Purchaser within two Business Days of such notification. Any
such instruction shall be based upon a decision that such forbearance agreement
is not in conformity with reasonable servicing practices.
(d) Upon the occurrence of a liquidation with respect to any Home
Equity Loan as to which the Purchaser made an Election to Foreclose and as to
which the Servicer proceeded with the Commencement of Foreclosure in accordance
with subsection (c) above, the Servicer shall calculate the amount, if any, by
which the unpaid principal balance of the Home Equity Loan at the time of
liquidation (plus all unreimbursed Monthly Advances other than with respect to
principal advances in connection therewith other than those paid from the
Collateral Fund) exceeds the actual sales price obtained for the related
Mortgaged Property, and the Servicer shall withdraw the amount of such excess
from the Collateral Fund, shall remit the same to the Trust Estate and in its
capacity as Servicer shall apply such amount as additional Liquidation Proceeds
pursuant to the Pooling and Servicing Agreement. After making such withdrawal,
all amounts remaining in the Collateral Fund (after adjustment for all
withdrawals and deposits pursuant to subsection (c) in respect of such Home
Equity Loan shall be released to the Purchaser.
Section 2.04. Termination
-----------
(a) With respect to all Home Equity Loans included in the Trust, the
Purchaser's right to make any Election to Delay Foreclosure or any Election to
Foreclose and the Servicer's obligations under Section 2.01 shall terminate (i)
upon any transfer by the Purchaser of any interest in the Class R Certificates
(whether or not such transfer is registered under the Pooling and Servicing
Agreement), including any such transfer in connection with a termination of the
Trust or (ii) upon any breach of the terms of this Agreement by the Purchaser.
I-7
(b) Except as set forth in 2.04(a), this Agreement and the respective
rights, obligations and responsibilities of the Purchaser and the Servicer
hereunder shall terminate upon the later to occur of (i) the final liquidation
of the last Home Equity Loan as to which the Purchaser made any Election to
Delay Foreclosure or any Election to Foreclose and the withdrawal of all
remaining amounts in the Collateral Fund as provided herein and (ii) ten
Business Days' notice. The Purchaser's right to make an election pursuant to
Section 2.02 or Section 2.03 hereof with respect to a particular Home Equity
Loan shall terminate if the Purchaser fails to make any deposit required
pursuant to Section 2.02(d) or 2.03(b) or if the Purchaser fails to make any
other deposit to the Collateral Fund pursuant to this Agreement.
ARTICLE III
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund
---------------
Upon receipt from the Purchaser of the initial amount required to be
deposited in the Collateral Fund pursuant to Article II, the Servicer shall
establish and maintain with First Union National Bank as a segregated account on
its books and records an account (the "Collateral Fund"), entitled "Norwest
Mortgage, Inc., as Servicer, for the benefit of registered holders of Norwest
Asset Acceptance Corporation Asset Backed Certificates, Series 1998-HE1.
Amounts held in the Collateral Fund shall continue to be the property of the
Purchaser, subject to the first priority security interest granted hereunder for
the benefit of the Certificateholders and the Certificate Insurer, until
withdrawn from the Collateral Fund pursuant to Section 2.02 or 2.03 hereof. The
Collateral Fund shall be an "outside reserve fund" within the meaning of the
REMIC Provisions, beneficially owned by the Purchaser for federal income tax
purposes. All income, gain, deduction or loss with respect to the Collateral
Fund shall be that of the Purchaser. All distributions from the Trust to the
Collateral Fund shall be treated as distributed to the Purchaser as the
beneficial owner thereof.
Upon the termination of this Agreement and the liquidation of all Home
Equity Loans as to which the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the
Servicer shall distribute or cause to be distributed to the Purchaser all
amounts remaining in the Collateral Fund (after adjustment for all deposits and
permitted withdrawals pursuant to this Agreement) together with any investment
earnings thereon. In the event the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose, prior to any distribution to the
Purchaser of all amounts remaining in the Collateral Fund, funds in the
Collateral Fund shall be applied consistent with the terms of this Agreement.
Section 3.02. Collateral Fund Permitted Investments
-------------------------------------
The Servicer shall, at the written direction of the Purchaser, invest
the funds in the Collateral Fund in Collateral Fund Permitted Investments. Such
direction shall not be
I-8
changed more frequently than quarterly. In the absence of any direction, the
Servicer shall select such investments in accordance with the definition of
Collateral Fund Permitted Investments in its discretion.
All income and gain realized from any investment as well as any
interest earned on deposits in the Collateral Fund (net of any losses on such
investments) and any payments of principal made in respect of any Collateral
Fund Permitted Investment shall be deposited in the Collateral Fund upon
receipt. All costs and realized losses associated with the purchase and sale of
Collateral Fund Permitted Investments shall be borne by the Purchaser and the
amount of net realized losses shall be deposited by the Purchaser in the
Collateral Fund promptly upon realization. The Servicer shall periodically (but
not more frequently than monthly) distribute to the Purchaser upon request an
amount of cash, to the extent cash is available therefore in the Collateral
Fund, equal to the amount by which the balance of the Collateral Fund, after
giving effect to all other distributions to be made from the Collateral Fund on
such date, exceeds the Required Collateral Fund Balance. Any amounts so
distributed shall be released from the lien and security interest of this
Agreement.
Section 3.03. Grant of Security Interest
--------------------------
The Purchaser hereby grants to the Servicer for the benefit of the
Certificateholders and the Certificate Insurer under the Pooling and Servicing
Agreement a security interest in and lien on all of the Purchaser's right, title
and interest, whether now owned or hereafter acquired, in and to: (1) the
Collateral Fund, (2) all amounts deposited in the Collateral Fund and Collateral
Fund Permitted Investments in which such amounts are invested (and the
distributions and proceeds of such investments) and (3) all cash and non-cash
proceeds of any of the foregoing, including proceeds of the voluntary conversion
thereof (all of the foregoing collectively, the "Collateral").
The Purchaser acknowledges the lien on and the security interest in
the Collateral for the benefit of the Certificateholders. The Purchaser shall
take all actions requested by the Servicer as may be reasonably necessary to
perfect the security interest created under this Agreement in the Collateral and
cause it to be prior to all other security interests and liens, including the
execution and delivery to the Servicer for filing of appropriate financing
statements in accordance with applicable law. The Servicer shall file
appropriate continuation statements, or appoint an agent on its behalf to file
such statements, in accordance with applicable law.
Section 3.04. Collateral Shortfalls
---------------------
In the event that amounts on deposit in the Collateral Fund at any
time are insufficient to cover any withdrawals therefrom that the Servicer is
then entitled to make hereunder, the Purchaser shall be obligated to pay such
amounts to the Servicer immediately upon demand. Such obligation shall
constitute a general corporate obligation of the Purchaser. The failure to pay
such amounts within two Business Days of such demand (except for amounts
I-9
to cover interest on a Home Equity Loan pursuant to Sections 2.02(d) and 2.03
(b)), shall cause an immediate termination of the Purchaser's right to make any
Election to Delay Foreclosure or Election to Foreclose and the Servicer's
obligations under this Agreement with respect to all Home Equity Loans to which
such insufficiencies relate, without the necessity of any further notice or
demand on the part of the Servicer.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
----------
This Agreement may be amended from time to time by the Servicer and
the Purchaser by written agreement signed by the Servicer and the Purchaser.
Section 4.02. Counterparts.
-------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 4.03. Governing Law.
--------------
This Agreement shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 4.04. Notices.
--------
All demands, notices and direction hereunder shall be in writing or by
telecopy and shall be deemed effective upon receipt to:
(a) in the case of the Servicer,
Norwest Mortgage, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
Phone:
Fax:
I-10
(b) in the case of the Purchaser,
--------------------------
--------------------------
--------------------------
--------------------------
Attention:
-----------------------
Section 4.05. Severability of Provisions.
---------------------------
If any one or more of the covenants, agreements, provision or terms of
this Agreement shall be for any reason whatsoever, including regulatory, held
invalid, then such covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
Section 4.06. Successors and Assigns.
-----------------------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto, and
all such provisions shall inure to the benefit of the Certificateholders;
provided, however, that the rights under this Agreement cannot be assigned by
the Purchaser without the consent of the Servicer.
Section 4.07. Article and Section Headings.
-----------------------------
The article and section headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
Section 4.08. Confidentiality.
----------------
The Purchaser agrees that all information supplied by or on behalf of
the Servicer pursuant to Sections 2.01 or 2.02, including individual account
information, is the property of the Servicer and the Purchaser agrees to hold
such information confidential and not to disclose such information.
Each party hereto agrees that neither it, nor any officer, director,
employee, affiliate or independent contractor acting at such party's direction
will disclose the terms of Section 4.09 of this Agreement to any person or
entity other than such party's legal counsel except pursuant to a final, non-
appealable order of court, the pendency of such order the other party will have
received notice of at least five business days prior to the date thereof, or
pursuant to the other party's prior express written consent.
Section 4.09. Indemnification.
----------------
The Purchaser agrees to indemnify and hold harmless the Servicer, and
each person who vontrols the Servicer, and each of its officers, directors,
affiliates and agents acting
I-11
at the Servicer's direction (the "Indemnified Parties") against any and all
losses, claims, damages or liabilities to which they may be subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of, or are based upon, actions taken by, or actions not taken by, the
Servicer, or on its behalf, in accordance with the provisions of this agreement
and (i) which actions conflict with the Servicer's obligations under the Pooling
and Servicing Agreement or (ii) give rise to securities law liability under
federal or state securities laws with respect to the Certificates. The Purchaser
hereby agrees to reimburse the Indemnified Parties for the reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action. The indemnification
obligations of the Purchaser hereunder shall survive the termination or
expiration of this Agreement.
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IN WITNESS WHEREOF, The Servicer and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
NORWEST MORTGAGE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
I-13
EXHIBIT J
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Servicer]
[Certificate Administrator]
[Certificate Insurer]
Re: Pooling and Servicing Agreement dated as of April 30, 1998 among
Norwest Asset Acceptance Corporation, as Depositor, Norwest
Mortgage, Inc., as Seller and Servicer, Norwest Bank Minnesota,
National Association, as Certificate Administrator, and First
Union National Bank, as Trustee, Asset Backed Certificates,
-----------------------------------
Series 1998-HE1
---------------
Ladies and Gentlemen:
In accordance with Section 2.01 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, as to
each Home Equity Loan listed in the Home Equity Loan Schedule (other than any
Home Equity Loan paid in full or listed in the attached list of exceptions) it
has received the original Mortgage Note, endorsed by the prior owner of such
Home Equity Loan, in the following form: "Pay to the order of without recourse."
Based on its review and examination and only as to the foregoing documents,
such documents appear regular on their face and related to such Home Equity
Loan.
J-1
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the above-
referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the Home Equity Loans identified on the Home Equity Loan Schedule or (ii) the
collectibility, insurability, effectiveness or suitability of any such Home
Equity Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
First Union National Bank,
as Trustee
By:
-------------------------------
Name:
Title:
J-2
EXHIBIT K
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Servicer]
[Seller]
[Certificate Administrator]
[Certificate Insurer]
Re: Pooling and Servicing Agreement dated as of April 30, 1998 among
Norwest Asset Acceptance Corporation, as Depositor, Norwest
Mortgage, Inc., as Seller and Servicer, Norwest Bank Minnesota,
National Association, as Certificate Administrator, and First
Union National Bank, as Trustee, Asset Backed Certificates,
-----------------------------------
Series 1998-HE1
---------------
Ladies and Gentlemen:
In accordance with Section 2.01 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Home Equity Loan listed in the Home Equity Loan Schedule (other than any
Home Equity Loan paid in full or listed on the attached Document Exception
Report) it has received:
(i) the original Mortgage Note, endorsed by the prior owner of such
Home Equity Loan, in the following form: "Pay to the order of _________________
without recourse", with all intervening endorsements that show a complete chain
of endorsement from the originator to the Seller;
(ii) the original recorded Mortgage;
(iii) a duly executed assignment of the Mortgage in the form
permitted by Section 2.01 of the Pooling and Servicing Agreement referred to
above;
K-1
(iv) the original recorded assignment or assignments of the Mortgage
together with all interim recorded assignments of such Mortgage;
(v) the original or duplicate original lender's title policy and all
riders thereto or any one of an original title binder, an original preliminary
title report or an original title commitment, or a copy thereof certified by the
title company.
(vi) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any, with evidence of recording thereon
if recordation thereof is permissible under applicable law; and
If the public recording office in which a Mortgage or assignment thereof is
recorded has retained the original of such Mortgage or assignment, the Trustee
has received, in lieu thereof, a copy of the original Mortgage or assignment so
retained, with evidence of recording thereon, certified to be true and complete
by such recording office.
Based on its review and examination and only as to the foregoing documents,
(i) such documents appear regular on their face and related to such Home Equity
Loan, and (ii) the information set forth in items (ii), (iii), (vii), (viii),
(xiii), (xiv) and (xv) of the definition of the "Home Equity Loan Schedule" in
Section 1.01 of the Pooling and Servicing Agreement accurately reflects
information set forth in the Home Equity File.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the above-
referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the Home Equity Loans identified on the Home Equity Loan Schedule or (ii) the
collectibility, insurability, effectiveness or suitability of any such Home
Equity Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
First Union National Bank,
as Trustee
By:
----------------------------------
Name:
Title:
K-2