EXHIBIT 4.1
EXECUTION COPY
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POOLING AND SERVICING AGREEMENT
Dated as of December 1, 2001
EQCC RECEIVABLES CORPORATION
(Depositor)
and
EQUICREDIT CORPORATION OF AMERICA
(Transferor and Initial Servicer)
and
BANK OF AMERICA, N.A.
(Advancing Party)
and
FAIRBANKS CAPITAL CORP.
(Expected Successor Servicer)
and
THE BANK OF NEW YORK
(Trustee)
EQCC ASSET BACKED CERTIFICATES,
Series 2001-1F
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ................................................................................................ 2
Section 1.01. Defined Terms. ..................................................................................... 2
ARTICLE II CONVEYANCE OF THE TRUST ASSETS ............................................................................ 37
Section 2.01. Sale and Conveyance of Trust Assets; Priority and Subordination of Ownership Interests. ............ 37
Section 2.02. Possession of Mortgage Files. ...................................................................... 39
Section 2.03. Books and Records. ................................................................................. 39
Section 2.04. Delivery of Mortgage Loan Documents. ............................................................... 39
Section 2.05. [Reserved]. ........................................................................................ 40
Section 2.06. Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee. .......... 40
Section 2.07. REMIC Administration. .............................................................................. 43
Section 2.08. Execution of Certificates. ......................................................................... 48
Section 2.09. Application of Principal and Interest. ............................................................. 48
ARTICLE III REPRESENTATIONS AND WARRANTIES ........................................................................... 48
Section 3.01. Representations of the Servicer and the Depositor. ................................................. 48
Section 3.02. Assignment of Transfer Agreement; Representations and Warranties as to the Individual Mortgage
Loans and the Mortgage Pool. ....................................................................... 53
Section 3.03. Purchase and Substitution. ......................................................................... 62
Section 3.04. Representations and Warranties of the Transferor regarding Prepayment Charges. ..................... 64
ARTICLE IV THE CERTIFICATES 65
Section 4.01. The Certificates. .................................................................................. 65
Section 4.02. Registration of Transfer and Exchange of Certificates. ............................................. 67
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. ................................................. 70
Section 4.04. Persons Deemed Owners. ............................................................................. 71
ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS 71
Section 5.01. Duties of the Servicer; Subservicing Arrangements. ................................................. 71
Section 5.02. Liquidation of Mortgage Loans. ..................................................................... 75
Section 5.03. Establishment of Principal and Interest Account; Deposits in Principal and Interest Account. ....... 76
Section 5.04. Permitted Withdrawals from the Principal and Interest Account. ..................................... 78
Section 5.05. Payment of Taxes, Insurance and Other Charges. ..................................................... 81
Section 5.06. Transfer of Accounts; Monthly Statements. .......................................................... 81
Section 5.07. Maintenance of Hazard Insurance. ................................................................... 82
Section 5.08. Maintenance of Mortgage Impairment Insurance Policy. ............................................... 82
Section 5.09. Fidelity Bond. ..................................................................................... 83
Section 5.10. Title, Management and Disposition of REO Property. ................................................. 83
Section 5.11. Collection of Certain Mortgage Loan Payments. ...................................................... 85
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Section 5.12. Access to Certain Documentation and Information Regarding the Mortgage Loans. ..................... 85
Section 5.13. Superior Liens. ................................................................................... 86
Section 5.14. Servicer Prepayment Charge Waiver. ................................................................ 86
Section 5.15. Advancing Party. .................................................................................. 86
ARTICLE VI PAYMENTS TO THE CERTIFICATEHOLDERS ....................................................................... 90
Section 6.01. Establishment of Collection Accounts; Deposit in Accounts. ........................................ 90
Section 6.02. Permitted Withdrawals from REMIC I Distribution Account, REMIC II Distribution Account and REMIC
III Distribution Account. ......................................................................... 91
Section 6.03. Establishment of Insurance Account: Deposits in Insurance Account: Permitted Withdrawals from
Insurance Account. ................................................................................ 92
Section 6.04. Investment of Accounts. ........................................................................... 92
Section 6.05. Priority and Subordination of Distributions. ...................................................... 93
Section 6.06. [Reserved]. ....................................................................................... 113
Section 6.07. Statements. ....................................................................................... 113
Section 6.08. Advances by the Servicer. ......................................................................... 116
ARTICLE VII GENERAL SERVICING PROCEDURES ............................................................................ 117
Section 7.01. Assumption Agreements. ............................................................................ 117
Section 7.02. Satisfaction of Mortgages and Release of Mortgage Files. .......................................... 118
Section 7.03. Servicing Compensation. ........................................................................... 119
Section 7.04. Annual Statement as to Compliance. ................................................................ 120
Section 7.05. Annual Independent Public Accountants' Servicing Report. .......................................... 120
Section 7.06. Right to Examine Servicer Records. ................................................................ 120
Section 7.07. Reports to the Trustee; Principal and Interest Account Statements. ................................ 120
ARTICLE VIII REPORTS TO BE PROVIDED BY SERVICER ..................................................................... 123
Section 8.01. Financial Statements. ............................................................................. 123
ARTICLE IX THE SERVICER ............................................................................................. 123
Section 9.01. Indemnification; Third Party Claims. .............................................................. 123
Section 9.02. Merger or Consolidation of the Servicer. .......................................................... 124
Section 9.03. Limitation on Liability of the Servicer and Others. ............................................... 124
Section 9.04. Assignment; Resignation. .......................................................................... 125
Section 9.05. Removal of Servicer. .............................................................................. 126
ARTICLE X SERVICER DEFAULT .......................................................................................... 127
Section 10.01. Servicer Default. ................................................................................. 127
Section 10.02. Trustee to Act; Appointment of Successor Servicer. ................................................ 130
Section 10.03. Waiver of Defaults. ............................................................................... 131
Section 10.04. Control by Certificate Insurer and Majority in Aggregate Voting Interest. ......................... 132
ARTICLE XI TERMINATION .............................................................................................. 132
Section 11.01. Termination. ...................................................................................... 132
Section 11.02. Additional Termination Requirements. .............................................................. 134
Section 11.03. Accounting Upon Termination of Servicer. .......................................................... 135
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EXECUTION COPY
Section 11.04. Termination Upon Loss of REMIC Status................ 135
ARTICLE XII THE TRUSTEE.................................................. 137
Section 12.01. Duties of Trustee.................................... 137
Section 12.02. Certain Matters Affecting the Trustee................ 138
Section 12.03. Trustee Not Liable for Certificates or Mortgage Loans. 140
Section 12.04. Trustee May Own Certificates.......................... 140
Section 12.05. Trustee's Fees and Expenses........................... 140
Section 12.06. Eligibility Requirements for Trustee.................. 141
Section 12.07. Resignation and Removal of the Trustee................ 142
Section 12.08. Successor Trustee..................................... 142
Section 12.09. Merger or Consolidation of Trustee.................... 143
Section 12.10. Appointment of Co-Trustee or Separate Trustee......... 143
Section 12.11. Appointment of Custodians............................. 144
Section 12.12. Protection of Trust Fund.............................. 145
ARTICLE XIII MISCELLANEOUS PROVISIONS..................................... 145
Section 13.01. The Certificate Insurer................................. 145
Section 13.02. Amendment............................................... 146
Section 13.03. Recordation of Agreement................................ 147
Section 13.04. Duration of Agreement................................... 147
Section 13.05. Governing Law........................................... 147
Section 13.06. Notices................................................. 148
Section 13.07. Severability of Provisions.............................. 148
Section 13.08. No Partnership.......................................... 148
Section 13.09. Counterparts............................................ 148
Section 13.10. Successors and Assigns.................................. 149
Section 13.11. Headings................................................ 149
Section 13.12. Limitation of Liability of Trustee...................... 149
Section 13.13. Limitations on Rights of Others......................... 149
Section 13.14. No Petition............................................. 149
Section 13.15. Third Party Beneficiary................................. 149
Section 13.16. Rights of the NIMS Insurer.............................. 150
Section 13.17. Supplemental Provisions for Resecuritization............ 150
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EXECUTION COPY
EXHIBITS
EXHIBIT A - Contents of Mortgage File
EXHIBIT B-1 - Form of Class A-1 Certificate
EXHIBIT B-2 - Form of Class A-2 Certificate
EXHIBIT B-3 - Form of Class A-3 Certificate
EXHIBIT B-4 - Form of Class A-4 Certificate
EXHIBIT B-5 - Form of Class X Certificate
EXHIBIT B-6 - Form of Class R-I Certificate
EXHIBIT B-7 - Form of Class R-II Certificate
EXHIBIT B-8 - Form of Class R-III Certificate
EXHIBIT B-9 - Form of Reverse of Certificate
EXHIBIT C - DTC Letter of Representations
EXHIBIT D - Mortgage Loan Schedules
EXHIBIT E - Form of Trustee Initial Certification
EXHIBIT F-1 - Form of Trustee Interim Certification
EXHIBIT F-2 - Form of Trustee Final Certification
EXHIBIT G - List of Loans 30-59 Days Delinquent as of Cut-off Date
EXHIBIT H - Form of Delinquency Report
EXHIBIT I-1 - Certificate Insurance Policy for Class A-1 Certificates
EXHIBIT I-2 - Certificate Insurance Policy for Class A-2 Certificates
EXHIBIT I-3 - Certificate Insurance Policy for Class A-3 Certificates
EXHIBIT I-4 - Certificate Insurance Policy for Class A-4 Certificates
EXHIBIT J - Form of Transferor Certificate
EXHIBIT K - List of Originators
EXHIBIT L - List of Existing Advances as of Cut-off Date
EXHIBIT M-1 - Form of Transfer Affidavit and Agreement
EXHIBIT M-2 - Form of Investor Representation Letter
EXHIBIT M-3 - Form of Certificate Transferor Representation Letter
EXHIBIT M-4 - Form of Rule 144A Investment Representation
EXHIBIT N - Form of Custodial Agreement
EXHIBIT O - Form of Liquidation Report
EXHIBIT P - Form of Principal and Interest Account Letter Agreement
EXHIBIT Q - Form of Notice to Certificate Insurer
EXHIBIT R - Monthly Information Delivered by Servicer
EXHIBIT S - [Reserved]
EXHIBIT T - [Reserved]
EXHIBIT U - Destroyed Mortgage Note Affidavit
EXHIBIT SA - Form of Servicing Advance Reimbursement Request
APPENDIX 1 - Performance Standards (including Advance Continuation and REO Liquidation Tests)
APPENDIX 2 - Servicing Policy and Procedure Deviations from FHLMC Single Family
Seller/Servicer Guide
APPENDIX 3 - Terms and Conditions applicable to Successor Servicer in connection with Collection of Prepayment Charges
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POOLING AND SERVICING AGREEMENT
This Pooling and Servicing Agreement, dated as of December 1, 2001 (the
"Agreement"), is by and among EQUICREDIT CORPORATION OF AMERICA, as transferor
(the "Transferor") and as initial servicer (the "Initial Servicer"), FAIRBANKS
CAPITAL CORP., as expected successor servicer (the "Expected Successor
Servicer"), EQCC RECEIVABLES CORPORATION, as depositor (the "Depositor"), BANK
OF AMERICA, N.A., as Advancing Party, and THE BANK OF NEW YORK as trustee (the
"Trustee"). References herein to the "Servicer" refer to the entity that is
servicing the Mortgage Loans pursuant hereto at any given time, which shall be
the Initial Servicer and its successors and permitted assigns (other than the
Successor Servicer) until the Servicing Transfer Date, and which shall be the
Successor Servicer and its successors and permitted assigns, from and after the
Servicing Transfer Date.
PRELIMINARY STATEMENT
In order to transfer certain Mortgage Loans from the Depositor to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
as their interests may appear, and to facilitate the servicing of certain
Mortgage Loans by the Servicer, the Transferor, the Initial Servicer, the
Expected Successor Servicer and the Depositor are entering into this Agreement
with the Trustee. The Depositor is transferring the Mortgage Loans to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
as their interests may appear, under this Agreement, pursuant to which eight
classes of Certificates are being issued, denominated on the face thereof as
EQCC Asset Backed Certificates, Series 2001-1F, Class A-1, Class A-2, Class A-3,
Class A-4, Class X, Class R-I, Class R-II and Class R-III, respectively,
representing in the aggregate a 100% ownership interest in the Mortgage Loans
and all payments and other collections thereon received on and after December 1,
2001 (the "Cut-off Date") (exclusive of any amounts received on and after the
Cut-off Date in respect of interest accrued prior to the Cut-off Date and
exclusive of any Prepayment Penalties). As of the Cut-off Date, the Mortgage
Loans have an aggregate outstanding principal balance of $7,089,867,490, the
Mortgage Loans in Mortgage Loan Group 1 have an aggregate outstanding principal
balance of $1,999,185,958, the Mortgage Loans in Mortgage Loan Group 2 have an
aggregate outstanding principal balance of $1,500,768,958, the Mortgage Loans in
Mortgage Loan Group 3 have an aggregate outstanding principal balance of
$1,595,675,768, and the Mortgage Loans in Mortgage Loan Group 4 have an
aggregate outstanding principal balance of $1,994,236,806, in each case after
application of payments received by the Depositor before the Cut-off Date.
As provided herein, the Trustee will make an election to treat the assets
of the Trust Fund other than the Principal and Interest Account and the right of
the Transferor to receive payments in respect of the Existing Advances and any
interest thereon, as three separate REMICs (as defined herein) for federal
income tax purposes. For federal income tax purposes the Class A Certificates
and the Class X Certificates represent beneficial interests in the "regular
interests" in REMIC III and the Class R-III Certificates represent the sole
class of "residual interest" in REMIC III for purposes of the REMIC Provisions.
The Class R-II Certificates represent the sole class of "residual interest" in
REMIC II, and the Class R-I Certificates represent the sole class of "residual
interest" in REMIC I for purposes of the REMIC Provisions. There are also twelve
classes of uncertificated REMIC I Regular Interests issued under this Agreement
(the Class LT1,
Class LT2, Class LT3, Class LT4, Class LT5, Class LT6, Class LT7, Class LT8,
Class LT9, Class LT10, Class LT11 and Class LT12 Interests), each of which will
constitute regular interests in REMIC I. There are also 24 classes of
uncertificated REMIC II Regular Interests issued under this Agreement (the Class
MT1, Class MT2, Class MT3, Class MT4, Class MT5, Class MT6, Class MT7, Class
MT8, Class MT9, Class MT10, Class MT11, Class MT12, Class MTN1, Class MTN2,
Class MTN3, Class MTN4, Class MTN5, Class MTN6, Class MTN7, Class MTN8, Class
MTN9, Class MTN10, Class MTN11 and Class MTN12 Interests), each of which will
constitute regular interests in REMIC II. The REMIC I Regular Interests will be
held as assets of REMIC II, and the REMIC II Regular Interests will be held as
assets of REMIC III.
The following table sets forth the designation, aggregate Original
Principal Balance and Final Scheduled Distribution Date for each Class of
Certificates comprising the interests in the Trust Fund.
Final Scheduled
Designation Original Principal Balance Distribution Date(1)
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Class A-1 $1,999,185,957 October 25, 2031
Class A-2 $1,500,768,958 October 25, 2031
Class A-3 $1,595,675,768 October 25, 2031
Class A-4 $1,994,236,805 October 25, 2031
Class X N/A October 25, 2031
Class R-I N/A N/A
Class R-II N/A N/A
Class R-III N/A N/A
Unless otherwise noted, references in this Agreement to percentages of
Mortgage Loans refer in each case to the percentage of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date, based on the outstanding
principal balances of the Mortgage Loans as of the Cut-off Date, and giving
effect to principal payments received prior to the Cut-off Date.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
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Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the following meanings.
---------------
/1/ In each case, if the 25th is not a Business Day, the Final Scheduled
Distribution Date is the following Business Day.
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Account: The Principal and Interest Account, the Collection Account, the
REMIC I Distribution Account, the REMIC II Distribution Account, the REMIC III
Distribution Account or the Insurance Account.
Accrual Period: With respect to each Distribution Date and the Class A and
Class X Certificates and the Class LT1, Class LT2, Class LT3, Class LT4, Class
LT5, Class LT6, Class LT7, Class LT8, Class LT9, Class LT10, Class LT11, Class
LT12, Class MT1, Class MT2, Class MT3, Class MT4, Class MT5, Class MT6, Class
MT7, Class MT8, Class MT9, Class MT10, Class MT11, Class MT12, Class MTN1, Class
MTN2, Class MTN3, Class MTN4, Class MTN5, Class MTN6, Class MTN7, Class MTN8,
Class MTN9, Class MTN10, Class MTN11, and Class MTN12 Interests, the period from
and including the first day of the immediately preceding calendar month,
commencing December 1, 2001, to and including the last day of the calendar month
immediately preceding the month in which such Distribution Date occurs.
Act: As defined in Section 4.02.
Adjusted Insurer Fee Rate: With respect to each Mortgage Loan Group and
each Accrual Period or Distribution Date, the product of (i) 0.20% per annum and
(ii) the Certificate Balance of the related Class of Class A Certificates
divided by the aggregate principal balance of the Mortgage Loans in the related
Mortgage Loan Group on which interest for such Accrual Period or Distribution
Date is calculated.
Administrative Fee Rate: With respect to each Mortgage Loan Group and any
Accrual Period, the sum of (i) the Servicing Fee Rate and (ii) the applicable
Adjusted Insurer Fee Rate.
Advance: An advance made by the Servicer pursuant to Section 6.08 hereof.
Advance Continuation and REO Liquidation Tests: The tests set forth in the
Performance Standards and entitled "Advance Continuation and REO Liquidation"
tests.
Advance Reimbursement Amount: As defined in Section 5.15(a).
Advancing Party: Bank of America, N.A., in its capacity as the entity
responsible for reimbursing Servicing Advances to the Servicer hereunder
pursuant to, and subject to, Section 5.15, or any successor or permitted
assignee.
Affiliate: With respect to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
Ancillary Income: As defined in Section 7.03.
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Applicable Regulations: All federal, state or local laws, and any other
requirements of any government or any agency or instrumentality thereof
applicable to the origination and servicing of the Mortgage Loans, the
management of the related Mortgaged Properties or REO Properties, as applicable,
and the provision by the Servicer of the services required hereunder. The
parties acknowledge that the servicing of the Mortgage Loans is subject to
regulation by the Office of the Comptroller of the Currency and the Federal
Financial Institution Examination Council.
Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument sufficient, upon proper recordation thereof, under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the record of the transfer of the Mortgage to the party named as
assignee therein. Assignments of each Mortgage shall initially be delivered in
blank.
Authorized Denominations: The authorized denominations of the Certificates,
as set forth in Section 4.01 of this Agreement.
Available Funds: With respect to any Distribution Date and each Mortgage
Loan Group, an amount equal to (i) the sum of all amounts described in clauses
(i) through (vii), inclusive, but without duplication, of Section 5.03(a)
received by the Servicer or any Subservicer (including any amounts paid by the
Servicer and the Transferor and excluding any amounts not required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 and
excluding any amounts withdrawn by the Servicer pursuant to Section 5.04(ii),
(iii), (v), (vi) and (vii) as of the related Determination Date and excluding
amounts withdrawn pursuant to Section 5.04(x) as of the related Determination
Date) during the related Due Period (except that Principal Prepayments shall be
included in Available Funds to the extent received during the related Prepayment
Period) with respect to the Mortgage Loans in such Mortgage Loan Group and on
deposit in the Collection Account on such Distribution Date, plus (ii) the
amount of any Advances remitted pursuant to Section 6.08 for such Distribution
Date with respect to the Mortgage Loans in such Mortgage Loan Group and on
deposit in the Collection Account on such Distribution Date. No amount included
in the Available Funds by virtue of being described by any component of the
definition thereof shall be included more than once by virtue of also being
described by any other component or otherwise.
Base Overcollateralization Target Amount: $84,965,403 for Mortgage Loan
Group 1 (representing 4.25% of the initial Pool Principal Balance for that
Group), $63,782,681 for Mortgage Loan Group 2 (representing 4.25% of the initial
Pool Principal Balance for that Group), $75,794,599 for Mortgage Loan Group 3
(representing 4.75% of the initial Pool Principal Balance for that Group), and
$94,726,248 for Mortgage Loan Group 4 (representing 4.75% of the initial Pool
Principal Balance for that Group).
Basic Documents: The Transfer Agreement, this Pooling and Servicing
Agreement, the Custodial Agreement, the Certificate Depository Agreement and the
other documents and certificates delivered in connection therewith.
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Basic Principal Distribution Amount: Each of the Class A-1 Basic Principal
Distribution Amount, the Class A-2 Basic Principal Distribution Amount, the
Class A-3 Basic Principal Distribution Amount and the Class A-4 Basic Principal
Distribution Amount.
Book-Entry Certificates: A beneficial interest in the Certificates, the
ownership and transfer of which shall be made through book entries by the
Depository as described in Section 4.01 hereof.
Business Day: Any day other than (i) a Saturday or Sunday or (ii) a day on
which banking institutions in the States of Illinois, New York, Utah or Florida
are authorized or obligated by law or executive order to be closed.
Certificate: Any Class A-1 Certificate, Class A-2 Certificate, Class A-3
Certificate, Class A-4 Certificate, Class X Certificate, Class R-I Certificate,
Class R-II Certificate or Class R-III Certificate executed by the Trustee on
behalf of the Trust Fund and authenticated by the Trustee or its authenticating
agent, substantially in the form annexed hereto as Exhibits ▇-▇, ▇-▇, ▇-▇, ▇-▇,
▇-▇, ▇-▇, B-7 or B-8, respectively, in each case together with the form of
reverse of certificate substantially in the form annexed hereto as Exhibit B-9.
Certificate Balance: With respect to a Class, the aggregate principal
balance of the Certificates of such Class.
Certificate Custodian: Initially, The Bank of New York; thereafter, any
other Certificate Custodian acceptable to the Depository and selected by the
Trustee.
Certificate Depository Agreement: The agreement, dated as of the Closing
Date, between the Depositor and the initial Depository, relating to the Class A
Certificates.
Certificate Insurance Policies: The four surety bonds with numbers
AB0515BE, AB0516BE, AB0517BE, and AB0518BE, each in the name of the Trustee,
each dated the Closing Date, and which are issued by the Certificate Insurer for
the benefit of the holders of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates and Class A-4 Certificates, respectively.
Pursuant to each Certificate Insurance Policy, the Certificate Insurer
guarantees Insured Payments on the related Class of Class A Certificates. Copies
of the Certificate Insurance Policies are attached hereto as Exhibit I-1,
Exhibit I-2, Exhibit I-3 and Exhibit I-4.
Certificate Insurer: Ambac Assurance Corporation, a Wisconsin stock
insurance company, or any successor thereof, as issuer of the Certificate
Insurance Policy.
Certificate Owner: With respect to a Book-Entry Certificate, the Person who
is the beneficial owner of such Certificate as reflected on the books of the
Depository or on the books of a Depository Participant.
Certificate Register: As described in Section 4.02 hereof.
Certificate Transferee: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
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Certificate Transferor: Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
Certificateholder or Holder: Each Person in whose name a Certificate is
registered in the Certificate Register; provided, however, that, solely for the
purposes of giving any consent (except any consent required to be obtained
pursuant to Section 10.02), waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Transferor, the
Servicer, any Originator or the Depositor, or any Affiliate of any of them,
shall be deemed not to be outstanding and the undivided Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained; provided that if any such Person
owns 100% of the Percentage Interests of a Class, such Person shall be entitled
to vote; and, provided that the Trustee shall not be responsible for knowing
that any Certificates are registered in the name of such an Affiliate unless one
of its Responsible Officers has actual knowledge thereof. For purposes of any
consent, waiver, request or demand of Certificateholders pursuant to this
Agreement, upon the Trustee's or the Certificate Insurer's request, the
Servicer, the Transferor, any Originator and the Depositor shall provide to the
Trustee and the Certificate Insurer a notice identifying any of their respective
Affiliates that is a Certificateholder as of the date(s) specified by the
Trustee or the Certificate Insurer in such request.
Class: Collectively, Certificates bearing the same alphabetical designation
(A-1, ▇-▇, ▇-▇, ▇-▇, X, R-I, R-II or R-III).
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Certificates: The Class A-1, Class A-2, Class A-3 and Class A-4
Certificates.
Class A Interest Remittance Amount: With respect to any Distribution Date,
the sum of the Class A-1 Interest Remittance Amount, the Class A-2 Interest
Remittance Amount, the Class A-3 Interest Remittance Amount and the Class A-4
Remittance Amount for such Distribution Date.
Class A-1 Basic Principal Distribution Amount: As to any Distribution Date,
the lesser of (A) the Class A-1 Principal Balance as of such Distribution Date
and (B) the Overcollateralization Maintenance Amount for the Class A-1
Certificates for such Distribution Date.
Class A-1 Certificate: A Certificate designated as an EQCC Asset-Backed
Certificate, Series 2001-1F, Class A-1 Certificate, and evidencing an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions.
Class A-1 Interest Remittance Amount: For any Distribution Date and the
Class A-1 Certificates, (i) the amount of interest accrued during the related
Accrual Period at the Class A-1 Pass-Through Rate on the Class A-1 Principal
Balance immediately preceding such Distribution Date calculated on the basis of
a 30-day month over a 360-day year minus (ii) the amount of any Relief Act
Shortfalls incurred with respect to Mortgage Loan Group 1 in respect of the
related Due Period.
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Class A-1 Pass-Through Rate: For any Accrual Period, the lesser of (i)
6.55% per annum and (ii) the Group 1 Net Funds Cap Rate.
Class A-1 Principal Balance: As of any date of determination, the Original
Class A-1 Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-1 Certificateholders in respect of principal.
Class A-2 Basic Principal Distribution Amount: As to any Distribution Date,
the lesser of (A) the Class A-2 Principal Balance as of such Distribution Date
and (B) the Overcollateralization Maintenance Amount for the Class A-2
Certificates for such Distribution Date.
Class A-2 Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-1F, Class A-2 Certificate, and evidencing an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions.
Class A-2 Interest Remittance Amount: For any Distribution Date and the
Class A-2 Certificates, (i) the amount of interest accrued during the related
Accrual Period at the related Class A-2 Pass-Through Rate on the Class A-2
Principal Balance immediately preceding such Distribution Date calculated on the
basis of a 30-day month over a 360-day year minus (ii) the amount of any Relief
Act Shortfalls incurred with respect to Mortgage Loan Group 2 in respect of the
related Due Period.
Class A-2 Pass-Through Rate: For any Accrual Period, the lesser of (i)
6.55% per annum and (ii) the Group 2 Net Funds Cap Rate.
Class A-2 Principal Balance: As of any date of determination, the Original
Class A-2 Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-2 Certificateholders in respect of principal.
Class A-3 Basic Principal Distribution Amount: As to any Distribution Date,
the lesser of (A) the Class A-3 Principal Balance as of such Distribution Date
and (B) the Overcollateralization Maintenance Amount for the Class A-3
Certificates for such Distribution Date.
Class A-3 Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-F, Class A-3 Certificate, and evidencing an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions.
Class A-3 Interest Remittance Amount: For any Distribution Date and the
Class A-3 Certificates, (i) the amount of interest accrued during the related
Accrual Period at the related Class A-3 Pass-Through Rate on the Class A-3
Principal Balance immediately preceding such Distribution Date calculated on the
basis of a 30-day month over a 360-day year minus (ii) the amount of any Relief
Act Shortfalls incurred with respect to Mortgage Loan Group 3 in respect of the
related Due Period.
7
Class A-3 Pass-Through Rate: For any Accrual Period, the lesser of (i)
6.24% per annum and (ii) the Group 3 Net Funds Cap Rate.
Class A-3 Principal Balance: As of any date of determination, the Original
Class A-3 Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-3 Certificateholders in respect of principal.
Class A-4 Basic Principal Distribution Amount: As to any Distribution Date,
the lesser of (A) the Class A-4 Principal Balance as of such Distribution Date
and (B) the Overcollateralization Maintenance Amount for the Class A-4
Certificates for such Distribution Date.
Class A-4 Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-F, Class A-4 Certificate, and evidencing an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions.
Class A-4 Interest Remittance Amount: For any Distribution Date and the
Class A-4 Certificates, (i) the amount of interest accrued during the related
Accrual Period at the related Class A-4 Pass-Through Rate on the Class A-4
Principal Balance immediately preceding such Distribution Date calculated on the
basis of a 30-day month over a 360-day year minus (ii) the amount of any Relief
Act Shortfalls incurred with respect to Mortgage Loan Group 4 in respect of the
related Due Period.
Class A-4 Pass-Through Rate: For any Accrual Period, the lesser of (i)
6.24% per annum and (ii) the Group 4 Net Funds Cap Rate.
Class A-4 Principal Balance: As of any date of determination, the Original
Class A-4 Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-4 Certificateholders in respect of principal.
Class LT1 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 98% of the
aggregate Pool Principal Balance of Mortgage Loan Group 1 and bears interest at
the Net Group 1 Weighted Average Mortgage Interest Rate.
Class LT2 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the Class
A-1 Principal Balance and bears interest at the Net Group 1 Weighted Average
Mortgage Interest Rate.
Class LT3 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the sum
of (i) the aggregate Pool Principal Balance of Mortgage Loan Group 1 and (ii)
the Group 1 OC Amount, and bears interest at the Net Group 1 Weighted Average
Mortgage Interest Rate.
Class LT4 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 98% of the
aggregate Pool Principal Balance
8
of Mortgage Loan Group 2 and bears interest at the Net Group 2 Weighted Average
Mortgage Interest Rate.
Class LT5 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the Class
A-2 Principal Balance and bears interest at the Net Group 2 Weighted Average
Mortgage Interest Rate.
Class LT6 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the sum
of (i) the aggregate Pool Principal Balance of Mortgage Loan Group 2 and (ii)
the Group 2 OC Amount, and bears interest at the Net Group 2 Weighted Average
Mortgage Interest Rate.
Class LT7 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 98% of the
aggregate Pool Principal Balance of Mortgage Loan Group 3 and bears interest at
the Net Group 3 Weighted Average Mortgage Interest Rate.
Class LT8 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the Class
A-3 Principal Balance and bears interest at the Net Group 3 Weighted Average
Mortgage Interest Rate.
Class LT9 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the sum
of (i) the aggregate Pool Principal Balance of Mortgage Loan Group 3 and (ii)
the Group 3 OC Amount, and bears interest at the Net Group 3 Weighted Average
Mortgage Interest Rate.
Class LT10 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 98% of the
aggregate Pool Principal Balance of Mortgage Loan Group 4 and bears interest at
the Net Group 4 Weighted Average Mortgage Interest Rate.
Class LT11 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the Class
A-4 Principal Balance and bears interest at the Net Group 4 Weighted Average
Mortgage Interest Rate.
Class LT12 Interest: A regular interest in REMIC I that is held as an asset
of REMIC II that has a principal balance as of any date equal to 1% of the sum
of (i) the aggregate Pool Principal Balance of Mortgage Loan Group 4 and (ii)
the Group 4 OC Amount, and bears interest at the Net Group 4 Weighted Average
Mortgage Interest Rate.
Class MT1 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT1 Interest and bears interest at the REMIC II Group 1
Interest Rate.
Class MT2 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT2 Interest and bears interest at the REMIC II Group 1
Interest Rate.
9
Class MT3 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT3 Interest and bears interest at the REMIC II Group 1
Interest Rate.
Class MT4 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT4 Interest and bears interest at the REMIC II Group 2
Interest Rate.
Class MT5 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT5 Interest and bears interest at the REMIC II Group 2
Interest Rate.
Class MT6 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT6 Interest and bears interest at the REMIC II Group 2
Interest Rate.
Class MT7 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT7 Interest and bears interest at the REMIC II Group 3
Interest Rate.
Class MT8 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT8 Interest and bears interest at the REMIC II Group 3
Interest Rate.
Class MT9 Interest: A regular interest in REMIC II that is held as an asset
of REMIC III that has a principal balance as of any date equal to the principal
balance of the Class LT9 Interest and bears interest at the REMIC II Group 3
Interest Rate.
Class MT10 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a principal balance as of any date equal to the
principal balance of the Class LT10 Interest and bears interest at the REMIC II
Group 4 Interest Rate.
Class MT11 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a principal balance as of any date equal to the
principal balance of the Class LT11 Interest and bears interest at the REMIC II
Group 4 Interest Rate.
Class MT12 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a principal balance as of any date equal to the
principal balance of the Class LT12 Interest and bears interest at the REMIC II
Group 4 Interest Rate.
Class MTN1 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT1 Interest and bears interest at a rate equal
to (I) the Net Group 1 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 1 Interest Rate.
Class MTN2 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the
10
Class LT2 Interest and bears interest at a rate equal to (I) the Net Group
1 Weighted Average Mortgage Interest Rate minus (II) the REMIC II Group 1
Interest Rate.
Class MTN3 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT3 Interest and bears interest at a rate equal
to (I) the Net Group 1 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 1 Interest Rate.
Class MTN4 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT4 Interest and bears interest at a rate equal
to (I) the Net Group 2 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 2 Interest Rate.
Class MTN5 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT5 Interest and bears interest at a rate equal
to (I) the Net Group 2 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 2 Interest Rate.
Class MTN6 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT6 Interest and bears interest at a rate equal
to (I) the Net Group 2 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 2 Interest Rate.
Class MTN7 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT7 Interest and bears interest at a rate equal
to (I) the Net Group 3 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 3 Interest Rate.
Class MTN8 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT8 Interest and bears interest at a rate equal
to (I) the Net Group 3 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 3 Interest Rate.
Class MTN9 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT9 Interest and bears interest at a rate equal
to (I) the Net Group 3 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 3 Interest Rate.
Class MTN10 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT10 Interest and bears interest at a rate equal
to (I) the Net Group 4 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 4 Interest Rate.
Class MTN11 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT11 Interest and bears interest at a rate equal
to (I) the Net Group 4 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 4 Interest Rate.
11
Class MTN12 Interest: A regular interest in REMIC II that is held as an
asset of REMIC III that has a notional amount as of any date equal to the
principal balance of the Class LT12 Interest and bears interest at a rate equal
to (I) the Net Group 4 Weighted Average Mortgage Interest Rate minus (II) the
REMIC II Group 4 Interest Rate.
Class R-I Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-1F, Class R-I Certificate, and evidencing an interest
designated as the "residual interest" in REMIC I for purposes of the REMIC
Provisions.
Class R-I Certificateholder: A Holder of a Class R-I Certificate.
Class R-II Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-1F, Class R-II Certificate and evidencing an interest
designated as the "residual interest" in REMIC II for purposes of the REMIC
Provisions.
Class R-II Certificateholder: A Holder of a Class R-II Certificate.
Class R-III Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-1F, Class R-III Certificate and evidencing an interest
designated as the "residual interest" in REMIC III for purposes of the REMIC
Provisions.
Class R-III Certificateholder: A Holder of a Class R-III Certificate.
Class X Certificate: A Certificate designated as an EQCC Asset Backed
Certificate, Series 2001-1F, Class X Certificate and evidencing (i) an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions and (ii) the rights and obligations described herein.
Class X Certificateholder: A Holder of a Class X Certificate.
Class X Interest: A regular interest in REMIC III, ownership of which is
evidenced by the Class X Certificates.
Class X Majority: As defined in Section 11.01.
Class X Remittance Amount: An amount equal to the sum of the Class X-1
Component Remittance Amount, the Class X-2 Component Remittance Amount, the
Class X-3 Component Remittance Amount and the Class X-4 Component Remittance
Amount.
Class X-1 Component: A component of the Class X Interest representing a
specified portion of the interest payments on the Class MTN1, Class MTN2 and
Class MTN3 Interests and entitled to the Class X-1 Component Remittance Amount.
Class X-1 Component Remittance Amount: For any Distribution Date, the sum
of (i) the interest distributed in respect of the Class MTN1 Interest, (ii) the
interest distributed in respect of the Class MTN2 Interest, and (iii) the
interest distributed in respect of the Class MTN3 Interest for such Distribution
Date (before giving effect to any principal distributions on the Class MT1,
Class MT2 and Class MT3 Interests on such Distribution Date).
12
Class X-2 Component: A component of the Class X Interest representing a
specified portion of the interest payments on the Class MTN4, Class MTN5 and
Class MTN6 Interests and entitled to the Class X-2 Component Remittance Amount.
Class X-2 Component Remittance Amount: For any Distribution Date, the sum
of (i) the interest distributed in respect of the Class MTN4 Interest, (ii) the
interest distributed in respect of the Class MTN5 Interest, and (iii) the
interest distributed in respect of the Class MTN6 Interest for such Distribution
Date (before giving effect to any principal distributions on the Class MT4,
Class MT5 and Class MT6 Interests on such Distribution Date).
Class X-3 Component: A component of the Class X Interest representing a
specified portion of the interest payments on the Class MTN7, Class MTN8 and
Class MTN9 Interests and entitled to the Class X-3 Component Remittance Amount.
Class X-3 Component Remittance Amount: For any Distribution Date, the sum
of (i) the interest distributed in respect of the Class MTN7 Interest, (ii) the
interest distributed in respect of the Class MTN8 Interest, and (iii) the
interest distributed in respect of the Class MTN9 Interest for such Distribution
Date (before giving effect to any principal distributions on the Class MT7,
Class MT8 and Class MT9 Interests on such Distribution Date).
Class X-4 Component: A component of the Class X Interest representing a
specified portion of the interest payments on the Class MTN10, Class MTN11 and
Class MTN12 Interests and entitled to the Class X-4 Component Remittance Amount.
Class X-4 Component Remittance Amount: For any Distribution Date, the sum
of (i) the interest distributed in respect of the Class MTN10 Interest, (ii) the
interest distributed in respect of the Class MTN11 Interest, and (iii) the
interest distributed in respect of the Class MTN12 Interest for such
Distribution Date (before giving effect to any principal distributions on the
Class MT10, Class MT11 and Class MT12 Interests on such Distribution Date).
Closing Date: December 14, 2001.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Collection Account: The collection account established and maintained by
the Trustee pursuant to Section 6.01 hereof.
Collections: For any Due Period (and Prepayment Period), the amounts
collected by the Servicer with respect to the Mortgage Loans set forth in
Section 5.03(a), clauses (i)-(vii) that are required to be deposited to the
REMIC I Distribution Account pursuant to Section 5.04 with respect to the
related Distribution Date (and not including amounts that are permitted to be
withdrawn from the Principal and Interest Account pursuant to Section 5.04).
Combined Loan-To-Value Ratio or CLTV: With respect to any Mortgage Loan,
the ratio (expressed as a percentage) of (a) the sum of the original principal
balance of such Mortgage Loan and the outstanding principal balance of any
related First Lien as of the date of origination of the Mortgage Loan, divided
by (b) the lesser of (1) the value of the related Mortgaged Property, based upon
the appraisal made at the time such Mortgage Loan was originated, or
13
(2) the purchase price of the Mortgaged Property if the Mortgage Loan
proceeds were used to purchase the Mortgaged Property.
Commission: The Securities and Exchange Commission.
Condemnation Proceeds: All awards of settlements in respect of Mortgaged
Properties, whether permanent or temporary, partial or entire, by exercise of
the power of eminent domain or condemnation, to the extent the award of
settlement is not required to be released to a Mortgagor in accordance with the
terms of the related Mortgage Loan documents or otherwise.
Corporate Trust Office: With respect to the Trustee, the principal office
at which at any particular time the corporate trust business of the Trustee
shall be principally administered, which offices at the Closing Date are located
at The Bank of New York, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust - MBS (fax ▇▇▇-▇▇▇-▇▇▇▇).
Cumulative Losses: As of any date of determination, the aggregate Mortgage
Loan Losses for all Due Periods since the Cut-off Date.
Cumulative Loss Percentage: With respect to any Distribution Date, the
fraction expressed as a percentage equal to the Cumulative Losses over the
Original Pool Principal Balance.
Curtailment: With respect to a Mortgage Loan, any payment of principal
received in any month during a Due Period as part of a payment which is neither
intended to satisfy the Mortgage Loan in full nor to cure a delinquency.
Custodial Agreement: The agreement for the retention of the Mortgage Files
initially in the form attached hereto as Exhibit N.
Custodian: Initially, with respect to all Mortgage Loans, First Union
National Bank and thereafter, any successor custodian approved by the
Certificate Insurer and appointed pursuant to the Custodial Agreement, which is
not affiliated with the Servicer, the Transferor, the Depositor or the
Originators.
Cut-off Date: The opening of business on December 1, 2001.
Default: Any occurrence that is, or with notice or the lapse of time or
both would become, a Servicer Default under Section 10.01 hereof.
Definitive Certificates: As set forth in Section 4.01 hereof.
Deleted Mortgage Loan: A Mortgage Loan replaced by or to be replaced by a
Qualified Substitute Mortgage Loan.
Depositor: EQCC Receivables Corporation, which is a direct wholly-owned
subsidiary of the Transferor.
14
Depository: Initially, The Depository Trust Company, the nominee of which
is Cede & Co., as the registered Holder of the Book Entry Certificates. The
Depository shall at all times constitute a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Destroyed Mortgage Note: A Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.
Destroyed Mortgage Note Affidavit: An affidavit in the form of Exhibit U
delivered pursuant to Exhibit A hereto with respect to a Destroyed Mortgage
Note.
Determination Date: With respect to each Distribution Date, the fourth
Business Day prior to such Distribution Date.
Disqualified Non-United States Person: A transferee of a Class R-I, Class
R-II or Class R-III Certificate other than a person that (i) is a United States
Person or (ii) is a Non-United States Person that holds a Class R-I, Class R-II
or Class R-III 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 W-8ECI (or successor form) or (iii)
is a Non-United States 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 such Class R-I, Class R-II or Class R-III Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of a Class R-I, Class R-II or Class R-III
Certificate will not be disregarded for federal income tax purposes.
Disqualified Organization: Either (i) the United States, (ii) any state or
political subdivision thereof, (iii) any foreign government, (iv) any
international organization, (v) any agency or instrumentality of any of the
foregoing, (vi) any tax-exempt organization (other than a cooperative described
in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of
the Code unless such organization is subject to the tax imposed by Section 511
of the Code, (vii) any organization described in Section 1381(a)(2)(C) of the
Code, or (viii) any other entity designated as a Disqualified Organization by
relevant legislation amending the REMIC Provisions and in effect at or proposed
to be effective as of the time of the determination. Notwithstanding the
foregoing, 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 a majority of its board of directors is not selected by
such governmental unit. The terms "United States" and "international
organization" shall have the meanings set forth in Section 7701 of the Code.
Distribution Date: The 25th day of any month, or if such 25th day is not a
Business Day, the first Business Day immediately following, commencing on
January 25, 2002.
15
Due Date: The day of the month on which the Monthly Payment is due from the
Mortgagor on a Mortgage Loan.
Due Period: With respect to any Distribution Date, the calendar month
immediately preceding the calendar month in which such Distribution Date occurs.
Eligible Account: Either (A) a segregated account or segregated accounts
maintained with an institution whose deposits are insured by the Bank Insurance
Fund or the Savings Association Insurance Fund of the FDIC, (x) the unsecured
and uncollateralized debt obligations of which shall be rated "A" or better by
S&P or have the highest short-term rating by S&P and (y) the unsecured and
uncollateralized debt obligations of which shall be rated "A-1" or better by
▇▇▇▇▇'▇ and have the highest short-term rating by ▇▇▇▇▇'▇ and which is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer, S&P, Fitch and ▇▇▇▇▇'▇ or (B) a segregated trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company, having capital and surplus of
not less than $50,000,000, acting in its fiduciary capacity, and having a rating
from ▇▇▇▇▇'▇, Fitch and S&P for long-term deposits of at least "Baa2" and "BBB,"
respectively. Any Eligible Accounts maintained with the Trustee shall conform to
the preceding clause (B).
Eligible Servicing Advance: A Servicing Advance made by the Servicer, for
which the Servicer requests reimbursement from the Advancing Party pursuant to
Section 5.15, which meets all of the Servicing Advance Eligibility Criteria, and
which is not a Nonrecoverable Advance as of the time reimbursement from the
Advancing Party is requested to be paid.
EquiCredit: EquiCredit Corporation of America.
ERISA Qualifying Underwriting: With respect to the Class A Certificates, a
best efforts or firm commitment underwriting or private placement that meets the
requirements of Prohibited Transaction Exemption 2000-58, 65 Fed. Reg. 67765
(2000) ("PTE 2000-58"), as amended (or any successor thereto), or any
substantially similar administrative exemption granted by the United States
Department of Labor. With respect to the Class X Certificates, a best efforts or
firm commitment underwriting or private placement that meets the requirements of
PTE 2000-58 or any substantially similar administrative exemption granted by the
United States Department of Labor, except for the requirements that such
Certificates (i) not be subordinated to the rights and interests of the other
Certificates and (ii) have a rating that is one of the three highest generic
rating categories.
Event of Nonpayment: An event of nonpayment shall occur with respect to any
Distribution Date if the amount remitted by the Servicer pursuant to Sections
5.04(i) and 6.08 and on deposit in the Collection Account for such Distribution
Date, plus any amounts on deposit in the Collection Account, that are not
subject to any automatic stay under Section 362 of the United States Bankruptcy
Code pursuant to an order of a United States bankruptcy court of
16
competent jurisdiction, will not, taken together, be sufficient to pay the sum
of (x) the Class A Interest Remittance Amount and (y) the amount to be withdrawn
from the Collection Account pursuant to priority first of Sections 6.05(d),
6.05(e), 6.05(f), and 6.05(g) in respect of such Distribution Date, unless (1)
such insufficiency results from (A) a failure by the Certificate Insurer to
perform in accordance with the terms of this Agreement or any Certificate
Insurance Policy or (B) a failure by the Trustee to perform in accordance with
this Agreement, or (2) such insufficiency is not also coupled with another
Servicer Default under Section 10.01(a) (other than Section 10.01(a)(i)(A)). A
draw on a Certificate Insurance Policy will not constitute an Event of
Nonpayment unless it is coupled with a Servicer Default under Section 10.01(a),
other than Section 10.01(a)(i)(A).
Excluded Ancillary Income: As defined in Section 7.03.
Exceedance: As defined in the Performance Standards.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the excess,
if any, of (a) the Net Liquidation Proceeds received in respect thereof over (b)
the Principal Balance of such Mortgage Loan immediately prior to the time at
which such Mortgage Loan became a Liquidated Mortgage Loan, plus accrued but
unpaid interest thereon at the Mortgage Interest Rate.
Excess Spread: Each of the Group 1 Excess Spread, the Group 2 Excess
Spread, the Group 3 Excess Spread and the Group 4 Excess Spread.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Existing Advances: Advances in the nature of Servicing Advances and
advances of interest payments on certain Mortgage Loans listed on Exhibit L
attached hereto, which have been made by the Initial Servicer in respect of such
Mortgage Loans prior to the Cut-off Date, and which advances are identified on
Exhibit L attached hereto.
Expected Successor Servicer: Fairbanks Capital Corp.
Extra Principal Distribution Amount: With respect to a Class of Class A
Certificates and any Distribution Date, the lesser of (i) the related General
Excess Available Amount for such Distribution Date and (ii) the related
Overcollateralization Deficiency Amount remaining on such Distribution Date
after principal distributions have been made to such Class on such Distribution
Date pursuant to clauses third and seventh of Section 6.05(d), 6.05(e), 6.05(f),
or 6.05(g), as applicable.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fairbanks Whole Loan Servicing Agreement: As defined in Section 11.01.
Fidelity Bond: As described in Section 5.09.
17
Final Scheduled Distribution Date: With respect to each Class of
Certificates, as specified in the table under the Preliminary Statement.
First Lien: With respect to any Mortgage Loan secured by a second priority
lien, the mortgage loan relating to the corresponding Mortgaged Property secured
by a first priority lien.
Fitch: Fitch Inc.
FNMA: ▇▇▇▇▇▇ ▇▇▇ and any successor thereto.
General Excess Available Amount: With respect to a Class of Class A
Certificates and each Distribution Date, the amount, if any, by which the
Available Funds from the related Mortgage Loan Group for such Distribution Date
exceeds the aggregate amount distributed on such Distribution Date pursuant to
priorities first through seventh of Section 6.05(d), 6.05(e), 6.05(f)or 6.05(g),
as applicable.
Group 1 Available Funds: For any Distribution Date, the Available Funds
with respect to Mortgage Loan Group 1.
Group 1 Excess Spread: With respect to any Distribution Date, the excess
(if any) of (a) the aggregate interest received, or advanced pursuant to Section
6.08, for the related Due Period, with respect to the Mortgage Loans in Mortgage
Loan Group 1 at their respective Mortgage Interest Rates, over (b) the sum of
(i) interest accrued on the Class A-1 Certificates during the related Accrual
Period and (ii) the product of (x) 1/12th of the applicable Administrative Fee
Rate and (y) the aggregate of the Principal Balances of the Mortgage Loans in
Mortgage Loan Group 1 on which interest for such Due Period was calculated.
Group 1 Net Funds Cap Rate: With respect to any Accrual Period, a per annum
rate equal to the Group 1 Weighted Average Mortgage Interest Rate as of the
first day of the related Due Period less the applicable Administrative Fee Rate.
Group 1 OC Amount: The amount, if any, by which the Pool Principal Balance
of the Group 1 Mortgage Loans exceeds the aggregate principal balance of the
Class A-1 Certificates.
Group 1 Weighted Average Mortgage Interest Rate: As of any date, the
weighted average of the Mortgage Interest Rates on the Mortgage Loans in
Mortgage Loan Group 1.
Group 2 Available Funds: For any Distribution Date, the Available Funds
with respect to Mortgage Loan Group 2.
Group 2 Excess Spread: With respect to any Distribution Date, the excess
(if any) of (a) the aggregate interest received, or advanced pursuant to Section
6.08, for the related Due Period, with respect to Mortgage Loans in Mortgage
Loan Group 2 at their respective Mortgage Interest Rates, over (b) the sum of
(i) interest accrued on the Class A-2 Certificates during the related Accrual
Period and (ii) the product of (x) 1/12th of the applicable Administrative Fee
Rate and (y) the aggregate of the Principal Balances of Mortgage Loans in
Mortgage Loan Group 2 on which interest for such Due Period was calculated.
18
Group 2 Net Funds Cap Rate: With respect to any Accrual Period, a per annum
rate equal to the Group 2 Weighted Average Mortgage Interest Rate as of the
first day of the related Due Period less the applicable Administrative Fee Rate.
Group 2 OC Amount: The amount, if any, by which the Pool Principal Balance
of the Group 2 Mortgage Loans exceeds the principal balance of the Class A-2
Certificates.
Group 2 Weighted Average Mortgage Interest Rate: As of any date, the
weighted average of the Mortgage Interest Rates on Mortgage Loans in Mortgage
Loan Group 2.
Group 3 Available Funds: For any Distribution Date, the Available Funds
with respect to Mortgage Loan Group 3.
Group 3 Excess Spread: With respect to any Distribution Date, the excess
(if any) of (a) the aggregate interest received, or advanced pursuant to Section
6.08, for the related Due Period, with respect to the Mortgage Loans in Mortgage
Loan Group 3 at their respective Mortgage Interest Rates, over (b) the sum of
(i) interest accrued on the Class A-3 Certificates during the related Accrual
Period and (ii) the product of (x) 1/12th of the applicable Administrative Fee
Rate and (y) the aggregate of the Principal Balances of the Mortgage Loans in
Mortgage Loan Group 3 on which interest for such Due Period was calculated.
Group 3 Net Funds Cap Rate: With respect to any Accrual Period, a per annum
rate equal to the Group 3 Weighted Average Mortgage Interest Rate as of the
first day of the related Due Period less the applicable Administrative Fee Rate.
Group 3 OC Amount: The amount, if any, by which the Pool Principal Balance
of the Group 3 Mortgage Loans exceeds the principal balance of the Class A-3
Certificates.
Group 3 Weighted Average Mortgage Interest Rate: As of any date, the
weighted average of the Mortgage Interest Rates on the Mortgage Loans in
Mortgage Loan Group 3.
Group 4 Available Funds: For any Distribution Date, the Available Funds
with respect to Mortgage Loan Group 4.
Group 4 Excess Spread: With respect to any Distribution Date, the excess
(if any) of (a) the aggregate interest received, or advanced pursuant to Section
6.08, for the related Due Period, with respect to the Mortgage Loans in Mortgage
Loan Group 4 at their respective Mortgage Interest Rates, over (b) the sum of
(i) interest accrued on the Class A-4 Certificates during the related Accrual
Period and (ii) the product of (x) 1/12th of the applicable Administrative Fee
Rate and (y) the aggregate of the Principal Balances of the Mortgage Loans in
Mortgage Loan Group 4 on which interest for such Due Period was calculated.
Group 4 Net Funds Cap Rate: With respect to any Accrual Period, a per annum
rate equal to the Group 4 Weighted Average Mortgage Interest Rate as of the
first day of the related Due Period less the applicable Administrative Fee Rate.
Group 4 OC Amount: The amount, if any, by which the Pool Principal Balance
of the Group 4 Mortgage Loans exceeds the principal balance of the Class A-4
Certificates.
19
Group 4 Weighted Average Mortgage Interest Rate: As of any date, the
weighted average of the Mortgage Interest Rates on the Mortgage Loans in
Mortgage Loan Group 4.
HOEPA: The Home Ownership and Equity Protection Act of 1994.
Holder: A Certificateholder.
Indenture: An indenture relating to the issuance of notes guaranteed by the
NIMS Insurer.
Independent: A Person is "Independent" if such Person (i) does not have any
direct financial interest or any material indirect financial interest in the
Depositor, the Transferor, the Servicer, the Originators or any Affiliate of any
of the foregoing Persons and (ii) is not associated with the Transferor, the
Servicer, the Originators or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
Initial Servicer: EquiCredit as initial Servicer hereunder until the
Servicing Transfer Date, its successors and permitted assigns (other than the
Successor Servicer).
Insurance Account: The insurance account established and maintained by the
Trustee in accordance with Section 6.03 hereof.
Insurance Proceeds: Proceeds paid to the Trustee or the Servicer by any
insurer (except the Certificate Insurer) or by the Servicer pursuant to a
deductible clause under a blanket policy insuring against fire and hazards of
extended coverage on all of the Mortgage Loans pursuant to Section 5.08, in
either event pursuant to any insurance policy covering a Mortgage Loan,
Mortgaged Property, or REO Property or any other insurance policy net of any
expenses which are incurred by the Servicer or the Trustee in connection with
the collection of such proceeds and not otherwise reimbursed to the Servicer,
and not including proceeds to be applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with customary
mortgage servicing procedures.
Insured Payment: As to each Distribution Date the sum of (i) any shortfall
in amounts available in the Collection Account to pay the Class A Interest
Remittance Amount for such Distribution Date, (ii) the excess, if any, of (a)
the sum of the Certificate Balances of each Class of Class A Certificates then
outstanding, after giving effect to distributions on that Distribution Date,
over (b) the aggregate Principal Balance of the Mortgage Loans then outstanding,
(iii) without duplication of the amount specified in clause (ii), the
Certificate Balance of each Class of Class A Certificates which remains unpaid
on the Final Scheduled Distribution Date for such Class, after giving effect to
distributions on that Distribution Date, or the earlier termination of the Trust
and (iv) any Preference Amount for any given Business Day in accordance with the
terms of the Certificate Insurance Policies. An Insured Payment shall not
include any Relief Act Shortfalls or any shortfalls resulting from the
application of the Group 1 Net Funds Cap Rate, Group 2 Net Funds Cap Rate, Group
3 Net Funds Cap Rate, or Group 4 Net Funds Cap Rate.
Late Collections: As defined in Section 5.04(ii).
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Latest Maturity Date: With respect to any Class of Certificates, its Final
Scheduled Distribution Date.
Lien: Any security interest, lien, charge, pledge, equity or encumbrance of
any kind other than tax liens, mechanics' liens and any liens that attach by
operation of law.
Liquidated Mortgage Loan: Any defaulted Mortgage Loan or REO Property as to
which the Servicer has determined that all amounts which it reasonably and in
good faith expects to recover have been recovered from or on account of such
Mortgage Loan.
Liquidation Proceeds: Cash, including Insurance Proceeds, Condemnation
Proceeds, proceeds of any REO Disposition, amounts required to be deposited in
the Principal and Interest Account pursuant to Section 5.10 hereof, and any
other amounts received in connection with the liquidation of defaulted Mortgage
Loans, whether through trustee's sale, foreclosure sale or otherwise.
Majority in Aggregate Voting Interest: Class A and Class X
Certificateholders representing Class A and Class X Certificates voting together
as a single class evidencing an aggregate Voting Interest of at least 51% when
expressed as a percentage rounded to four decimal places.
Material Breach: As defined in Section 3.03.
Monthly Excess Spread Amount: With respect to any Distribution Date and
each Mortgage Loan Group, the amount equal to the product of 100% and the amount
of the related Excess Spread as of such Distribution Date; provided, however,
that the percentage set forth above may be reduced at any time, solely at the
discretion of the Certificate Insurer, at which time written notice shall be
sent to the Transferor, the Trustee, S&P, Fitch and Moody's.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by a Mortgagor on the related Mortgage Loan, as set forth in
the related Mortgage Note.
Monthly Premium: The monthly premium payable to the Certificate Insurer
pursuant to each Certificate Insurance Policy and the letter agreement dated as
of the Closing Date, between the Certificate Insurer and the Depositor.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
Mortgage: The mortgage, deed of trust or other instrument creating a first
or second lien on the Mortgaged Property.
Mortgage File: A file for each Mortgage Loan including the documents listed
in Exhibit A attached hereto.
Mortgage Impairment Insurance Policy: As defined in Section 5.08.
21
Mortgage Interest Rate: With respect to a Mortgage Loan in Mortgage Loan
Group 1, Mortgage Loan Group 2, Mortgage Loan Group 3, and Mortgage Loan Group 4
the fixed per annum rate of interest borne by a Mortgage Note, as shown on the
applicable Mortgage Loan Schedule.
Mortgage Loan: An individual mortgage loan which is assigned and
transferred to the Trustee pursuant to this Agreement, together with the rights
and obligations of a holder thereof and payments thereon and proceeds therefrom,
the Mortgage Loans originally subject to this Agreement being identified on the
Mortgage Loan Schedules annexed hereto as Exhibit D. Any mortgage loan which,
although intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trustee by the Depositor, in fact was not
transferred and assigned to the Trustee for any reason whatsoever, including,
without limitation, the incorrectness of the statement set forth in Section
3.02(g) hereof with respect to such mortgage loan, shall nevertheless be
considered a "Mortgage Loan" for all purposes of this Agreement. As applicable,
Mortgage Loan shall be deemed to refer to the related REO Property.
Mortgage Loan Group: Either Mortgage Loan Group 1, Mortgage Loan Group 2,
Mortgage Loan Group 3 or Mortgage Loan Group 4.
Mortgage Loan Group 1 or Group 1: The group of Mortgage Loans indicated on
the Mortgage Loan Schedule as belonging to Mortgage Loan Group 1.
Mortgage Loan Group 2 or Group 2: The group of Mortgage Loans indicated on
the Mortgage Loan Schedule as belonging to Mortgage Loan Group 2.
Mortgage Loan Group 3 or Group 3: The group of Mortgage Loans indicated on
the Mortgage Loan Schedule as belonging to Mortgage Loan Group 3.
Mortgage Loan Group 4 or Group 4: The group of mortgage Loans indicated on
the Mortgage Loan Schedule as belonging to Mortgage Loan Group 4.
Mortgage Loan Losses: With respect to any Distribution Date, the sum of the
following amounts for each Mortgage Loan that became a Liquidated Mortgage Loan
during the related Due Period: the amount, if any, by which (i) the Principal
Balance of such Mortgage Loan (determined immediately before such Mortgage Loan
became a Liquidated Mortgage Loan) exceeds (ii)(A) the Net Liquidation Proceeds
received during such Due Period in connection with the liquidation of such
Mortgage Loan minus (B) accrued and unpaid interest on the Principal Balance of
the Mortgage Loan at the related Mortgage Interest Rate to the date on which
such Mortgage Loan became a Liquidated Mortgage Loan, which have not theretofore
been used to reduce the Principal Balance of such Mortgage Loan. For purposes of
this definition, a Mortgage Loan as to which the related Mortgaged Property is
held by the Trust Fund shall be deemed to have continued to accrue interest at
the related Mortgage Interest Rate.
Mortgage Loan Schedule: The schedule of Mortgage Loans in Mortgage Loan
Group 1, the schedule of Mortgage Loans in Mortgage Loan Group 2, the schedule
of Mortgage Loans in the Mortgage Loan Group 3, and the schedule of Mortgage
Loans in Mortgage Loan Group 4, each attached hereto as Exhibit D as each may be
amended to reflect Qualified Substitute
22
Mortgage Loans, such schedule identifying each applicable Mortgage Loan by
address of the Mortgaged Property and the name of the Mortgagor and setting
forth as to each such Mortgage Loan the following information: (i) the Principal
Balance as of the Cut-off Date, (ii) the account number, (iii) the original
principal amount, (iv) the CLTV as of the date of the origination of the related
Mortgage Loan, (v) the Due Date, (vi) the Mortgage Interest Rate, (vii) the
first date on which a Monthly Payment is due under the Mortgage Note, (viii) the
Monthly Payment, (ix) the original stated maturity date of the Mortgage Note,
(x) the remaining number of months to maturity as of the Cut-off Date, (xi) the
Mortgaged Property State, and (xii) such other information agreed between the
Transferor and the Expected Successor Servicer pursuant to that certain Purchase
and Sale Agreement, dated as of December 6, 2001, among the Expected Successor
Servicer, the Initial Servicer and NationsCredit Financial Services Corporation.
The Mortgage Loan Schedule is the same schedule attached as Schedule I to the
Custodial Agreement and the Trust Receipt and Certificate issued thereunder.
Mortgage Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: The Mortgage Loans indicated on the Mortgage Loan Schedule.
Mortgaged Property: The underlying property securing a Mortgage Loan,
consisting of a fee simple estate or, with respect to certain properties located
in Maryland, a leasehold estate, in a single parcel of land improved by a
Residential Dwelling.
Mortgaged Property State: The state in which the Mortgaged Property related
to a Mortgage Loan is located, as set forth on Mortgage Loan Schedule.
Mortgagor: The obligor on a Mortgage Note.
Net Group 1 Weighted Average Mortgage Interest Rate: With respect to any
Accrual Period, a rate equal to the Group 1 Weighted Average Mortgage Interest
Rate as of the first day of the related Due Period less the applicable
Administrative Fee Rate.
Net Group 2 Weighted Average Mortgage Interest Rate: With respect to any
Accrual Period, a rate equal to the Group 2 Weighted Average Mortgage Interest
Rate as of the first day of the related Due Period less the applicable
Administrative Fee Rate.
Net Group 3 Weighted Average Mortgage Interest Rate: With respect to any
Accrual Period, a rate equal to the Group 3 Weighted Average Mortgage Interest
Rate as of the first day of the related Due Period less the applicable
Administrative Fee Rate.
Net Group 4 Weighted Average Mortgage Interest Rate: With respect to any
Accrual Period, a rate equal to the Group 4 Weighted Average Mortgage Interest
Rate as of the first day of the related Due Period less the applicable
Administrative Fee Rate.
Net Liquidation Proceeds: Liquidation Proceeds net of any reimbursements to
the Advancing Party, the Servicer and the Transferor made therefrom pursuant to
Section 5.04(ii).
23
NIMS Insurer: Any insurer that is guaranteeing certain payments under any
net interest margin securities that may be issued pursuant to an Indenture,
secured by or evidencing interests in, some or all of the Class X, Class R-I,
Class R-II and/or Class R-III Certificates.
Nondisqualification Opinion: An Independent Opinion of Counsel addressed to
the Trustee that a contemplated action will neither cause any Trust REMIC to
fail to qualify as a REMIC at any time the Class A Certificates are outstanding
nor cause an unindemnified "prohibited transaction" or a "prohibited
contribution" tax to be imposed on any Trust REMIC.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any
Servicing Advance or Existing Advance previously made and not reimbursed
pursuant to Section 5.04(ii) and which the Servicer has determined will not be
recoverable pursuant to Section 5.04(ii) out of late collections, including
without limitation Late Collections, Insurance Proceeds, Liquidation Proceeds
and Released Mortgaged Property Proceeds in respect of the related Mortgage
Loan(s) or REO Property(ies), or (ii) a Servicing Advance or Advance proposed to
be made, in respect of any Mortgage Loan or REO Property which, in the good
faith business judgment of the Servicer would not be ultimately recoverable from
Late Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage
Loan or REO Property or otherwise, which determination is made using a
calculation of net present value of the related Mortgage Loan and other items as
required by the Advance Continuation and REO Liquidation Tests included in the
Performance Standards.
Non-United States Person: Any Person other than a United States Person.
Officer's Certificate: A certificate delivered hereunder or under any other
Basic Document signed by the President or a Vice President or an Assistant Vice
President of the Transferor, a Depositor, the Trustee or the Servicer, as
required hereunder or thereunder.
Opinion of Counsel: A written opinion of counsel delivered hereunder or
under any Basic Document, reasonably acceptable to the Trustee and the
Certificate Insurer and the NIMS Insurer, and experienced in matters relating to
the subject of such opinion; except that any opinion of counsel relating to (a)
the qualification of any Trust REMIC as a REMIC or (b) compliance with the REMIC
Provisions must be an opinion of counsel who (i) is in fact Independent of the
Transferor and the Servicer, (ii) does not have any direct financial interest or
any material indirect financial interest in the Transferor or the Servicer or in
an affiliate thereof and (iii) is not associated with the Transferor or Servicer
as an officer, employee, director or person performing similar functions.
Optional Purchase Date: As defined in Section 11.01.
Original Class A-1 Principal Balance: $1,999,185,957.
Original Class A-2 Principal Balance: $1,500,768,958.
Original Class A-3 Principal Balance: $1,595,675,768.
Original Class A-4 Principal Balance: $1,994,236,805.
24
Original Pool Principal Balance: The Pool Principal Balance as of the
Cut-off Date, which amount is equal to $7,089,867,490. The "Original Pool
Principal Balance" with respect to any Mortgage Loan Group shall equal the
portion of the total Original Pool Principal Balance attributable to such
Mortgage Loan Group.
Originator: Any of the entities listed on Exhibit K hereto, each of which
(other than EquiCredit) assigned Mortgage Loans to the Transferor prior to or
contemporaneously with the Transferor's assignment of the Mortgage Loans to the
Depositor pursuant to the Transfer Agreement and, other than EquiCredit, is (i)
a direct wholly-owned subsidiary of the Transferor, and (ii) a Subservicer as of
the date hereof with respect to the Mortgage Loans assigned by it to the
Transferor.
Overcollateralization Deficiency Amount: With respect to any Distribution
Date and each Class of Class A Certificates, the amount, if any, by which the
related Overcollateralization Target Amount exceeds the related
Overcollateralized Amount on such Distribution Date (after giving effect to
distributions in respect of the principal on the Certificates on such
Distribution Date).
Overcollateralization Deficit: As defined in Section 6.05(c).
Overcollateralization Maintenance Amount: For any Distribution Date and any
Class of Class A Certificates, the amount required to be distributed as
principal on such Class on such Distribution Date so that the Overcollateralized
Amount for such Distribution Date and Class will be equal to zero after such
amount is distributed as principal on such Class.
Overcollateralization Stepdown Date: With respect to each Class of Class A
Certificates, means the later to occur of (x) the Distribution Date in June 2004
and (y) the first Distribution Date on which the Pool Principal Balance of the
related Mortgage Loan Group is less than or equal to 50% of the Original Pool
Principal Balance of such Mortgage Loan Group.
Overcollateralization Target Amount: With respect to each Class of Class A
Certificates, and any Distribution Date:
(x) on or prior to the related Overcollateralization Stepdown Date, the
related Base Overcollateralization Target Amount;
(y) after the related Overcollaterization Stepdown Date, the greatest of
(a) the lesser of (A) the Base Overcollateralization Target Amount for such
Class and (B) the product of (x) 8.50% with respect to the Class A-1
Certificates, 8.50% with respect to the Class A-2 Certificates, 9.50% with
respect to the Class A-3 Certificates, and 9.50% with respect to the Class A-4
Certificates, and (y) the Pool Principal Balance of the related Mortgage Loan
Group as of the end of the related Due Period (reduced by Principal Prepayments
collected after the end of such Due Period but before the end of the related
Prepayment Period (the "Current Pool Balance"); (b) 0.50% of the Original Pool
Principal Balance of the related Mortgage Loan Group; (c) the sum of the
Principal Balances of the three largest Mortgage Loans in the related Mortgage
Loan Group as of the end of the related Due Period; and (d) two times the excess
of (i) one-half of the aggregate Principal Balances of all Mortgage Loans in the
related Mortgage Loan
25
Group which are 90 or more days delinquent (including REO Properties and all
Mortgaged Properties then subject to foreclosure proceedings) as of the end of
the preceding Due Period, over (ii) the Projected Excess Spread for the related
Class of Class A Certificates as of such date; provided, however, that in no
event shall the Overcollateralization Target Amount which would be determined
pursuant to clause (d) above for the Class A-1 Certificates or the Class A-2
Certificates exceed 12.75% of the Current Pool Balance of the related Mortgage
Loan Group, and that in no event shall the Overcollateralization Target Amount
which would be determined pursuant to clause (d) above for the Class A-3
Certificates or the Class A-4 Certificates exceed 14.25% of the Current Pool
Balance of the related Mortgage Loan Group.
Notwithstanding the foregoing, the Overcollateralization Target Amount for
any Distribution Date may be reduced by the Certificate Insurer.
Overcollateralized Amount: With respect to any Distribution Date and each
Class of Class A Certificates, (i) the Pool Principal Balance of the related
Mortgage Loan Group on the last day of the immediately preceding Due Period,
reduced by any Principal Prepayments collected after the end of such Due Period
and through the end of the immediately preceding Prepayment Period, minus (ii)
the Principal Balance of such Class of Class A Certificates as of such
Distribution Date, after giving effect to distributions to be made on such
Distribution Date. The Overcollateralized Amount may be a negative number.
Owner-Occupied Mortgaged Property: A Residential Dwelling which the related
Mortgagor represented an intent to occupy as such Mortgagor's primary or
secondary residence at the origination of the Mortgage Loan.
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Pass-Through Rate: Any of the Class A-1 Pass-Through Rate, the Class A-2
Pass-Through Rate, the Class A-3 Pass-Through Rate or the Class A-4 Pass-Through
Rate.
Percentage Interest: With respect to a Class A-1, Class A-2, Class A-3 or
Class A-4 Certificate, the portion of the Certificates evidenced by such Class
A-1, Class A-2, Class A-3 or Class A-4 Certificates, respectively, expressed as
a percentage rounded to four decimal places, equal to a fraction the numerator
of which is the denomination represented by such Class A-1, Class A-2, Class A-3
or Class A-4 Certificate, respectively, and the denominator of which is the
Original Class A-1 Principal Balance, Original Class A-2 Principal Balance,
Original Class A-3 Principal Balance or Original Class A-4 Principal Balance,
respectively. With respect to a Class X Certificate, Class R-I Certificate,
Class R-II Certificate or Class R-III Certificate, the portion of the Class
evidenced thereby as stated on the face of such Certificate.
Performance Default: The Servicing Default described in clause (vii) of
Section 10.01(a).
Performance Standards: The Servicer performance standards set forth in
Appendix 1 attached hereto.
26
Permitted Instruments: As used herein, Permitted Instruments shall include
the following:
(i) (A) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States, and (B) Federal Housing Administration debentures, FHLMC
senior debt obligations, and FNMA senior debt obligations assigned ratings
in at highest long-term rating by S&P, Fitch and ▇▇▇▇▇'▇, but excluding any
of such securities described in clauses (A) and (B) whose terms do not
provide for payment of a fixed dollar amount upon maturity or call for
redemption;
(ii) federal funds, certificates of deposit, time and demand deposits
and banker's acceptances (in each case having maturities of not more than
365 days) of any bank or trust company incorporated under the laws of the
United States or any state thereof, provided that (A) the short-term debt
obligations of such bank or trust company at the date of acquisition
thereof have been rated "A-1+" or better by S&P and Fitch (or, if so
consented to by the Certificate Insurer, "A-1" or better by S&P and Fitch)
and (B) the short-term and long-term debt obligations of such bank or trust
company at the date of acquisition thereof have been rated "Prime-1" and
"A1" or better, respectively, by ▇▇▇▇▇'▇;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $3,000,000,
which deposits are not in excess of the applicable limits insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
provided that the long-term deposits of such bank or savings and loan
association are rated at least "BBB" by S&P and Fitch and "Baa3" by
▇▇▇▇▇'▇;
(iv) commercial paper (having original maturities of not more than 180
days) rated "A-1+" or better by S&P and Fitch and Prime-1 by ▇▇▇▇▇'▇;
(v) investments in money market funds rated "AAAm" or "AAAm-G" by S&P
and Fitch and "Aaa" by ▇▇▇▇▇'▇;
(vi) investments in Permitted Instruments on an overnight basis in
investment accounts maintained at the Trustee; provided, however, that any
such account shall be an Eligible Account; and
(vii) any other obligation or security acceptable to the Rating
Agencies and the Certificate Insurer (as certified by a letter from each
Rating Agency and the Certificate Insurer to the Trustee);
provided, that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument
27
provided a yield to maturity at par greater than 120% of the yield to maturity
at par of the underlying obligations; and provided, further, that no instrument
described hereunder may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity; and provided, further that no instrument shall be a
Permitted Instrument unless such instrument is a "permitted instrument" within
the meaning of Section 860G(a)(5) of the Code.
Permitted Transferee: Any Person other than a Disqualified Organization or
a Disqualified Non-United States Person, or an agent or nominee acting on behalf
of a Disqualified Organization or a Disqualified Non-United States Person.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
Plan: A Plan filed by a Mortgagor pursuant to the Bankruptcy Code (11
U.S.C., Section 1321) and either confirmed or pending confirmation by a court of
competent jurisdiction pursuant to the Bankruptcy Code (11 U.S.C., Section
1325), providing for, among other things, the payment of defaulted Mortgage Loan
payments all of which were due prior to, but in no event after, the
effectiveness of the Plan.
Pool Factor: As of any date of determination, the Pool Principal Balance as
of such date divided by the Original Pool Principal Balance.
Pool Principal Balance: With respect to any or all Mortgage Loan Groups,
the aggregate Principal Balances of the related Mortgage Loans, as of any date
of determination.
Preference Amount: Any payment of principal or interest on a Class A
Certificate which is made to a holder of a Class A Certificate by or on behalf
of the Trustee which has been deemed a preferential transfer and theretofore
recovered from such holder pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent
jurisdiction.
Prepayment Charge: The fee, if any, that the related Mortgagor is required
to pay to the holder of the related Mortgage Note in the event the Mortgagor
pays the loan in full or in part prior to a date specified in the Mortgage Note
or an addendum to the Mortgage Note. It is understood that the Servicer shall
not enforce any prepayment penalty that is (1) with respect to a Principal
Prepayment occurring later than the fifth anniversary of the date of the related
Mortgage Note, (2) in an amount greater than six months' interest on the
original principal balance of the related Mortgage Note, or (3) in an amount
greater than 5% of the original principal balance of the related Mortgage Note.
Prepayment Period: For the first Distribution Date, the period beginning on
the Cut-off Date and ending on the 15th day of the month in which the first
Distribution Date occurs or, if such 15th day is not a Business Day, ending on
the immediately preceding Business Day. For any other Distribution Date, the
period beginning on the day after the end of the Prepayment Period for the
preceding Distribution Date, and ending on the 15th day of the month in which
28
such current Distribution Date occurs or, if such 15th day is not a Business
Day, the next preceding Business Day.
Principal and Interest Account: The principal and interest account
established and maintained by the Servicer pursuant to Section 5.03 hereof.
References herein to any amounts on deposit in the Principal and Interest
Account shall refer only to amounts pertaining to this Agreement.
Principal Balance: With respect to any Mortgage Loan or related REO
Property, at any date of determination, the principal balance of the Mortgage
Loan outstanding as of such date. The Principal Balance of any REO Property
shall be the Principal Balance of the related Mortgage Loan as of the date on
which the related Mortgaged Property became such REO Property less any REO
Amortization, and the Principal Balance of a Mortgage Loan at the time it
becomes a Liquidated Mortgage Loan shall be zero.
Principal Distribution Amount: With respect to any Class of Class A
Certificates and any Distribution Date, the sum of (i) the Basic Principal
Distribution Amount and (ii) the Extra Principal Distribution Amount for such
Class and Distribution Date.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date, that is intended to satisfy a Mortgage
Loan in full.
Principal Remittance Amount: With respect to each Mortgage Loan Group and
each Distribution Date, the sum (without duplication) of (i) the principal
portion of all Monthly Payments received by the Servicer or any Subservicer
during the related Due Period, (ii) all Curtailments received by the Servicer or
any Subservicer during the related Due Period, and all Principal Prepayments
received by the Servicer or any Subservicer during the related Prepayment
Period, (iii) the principal portion of all Insurance Proceeds, Released
Mortgaged Property Proceeds and Net Liquidation Proceeds received by the
Servicer or any Subservicer during the related Due Period, (iv) (A) that portion
of the purchase price (as set forth in Section 2.06(b)) of any purchased
Mortgage Loans which represents principal and (B) the principal portion of any
Substitution Adjustments deposited into the Principal and Interest Account with
respect to such Distribution Date and (v) the Principal Balance of each Mortgage
Loan as of the beginning of the related Due Period which became a Liquidated
Mortgage Loan during the related Due Period (exclusive of any principal payments
in respect thereof included in clauses (i) through (iv) above).
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Projected Excess Spread: With respect to any Distribution Date and each
Class of Class A Certificates, five (5) times the amount of the related Monthly
Excess Spread Amount.
Prospectus: The prospectus and the prospectus supplement each dated
December 13, 2001, prepared by the Transferor and the Depositor in connection
with the initial issuance and sale of the Class A Certificates.
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Purchase and Sale Agreement: As defined in Section 10.01(a).
Qualified Substitute Mortgage Loan: A mortgage loan or mortgage loans
substituted for a Deleted Mortgage Loan pursuant to Section 2.06 or 3.03 hereof,
which (i) has or have a mortgage interest rate or rates of not less than (and
not more than two percentage points more than) the Mortgage Interest Rate for
the Deleted Mortgage Loan, (ii) relates or relate to the same type of
Residential Dwelling as the Deleted Mortgage Loan, or relates to a one- to
four-family dwelling, and has or have a lien priority that is no more junior or
subordinate than that of the Deleted Mortgage Loan, (iii) matures or mature no
later than (and not more than one year earlier than) the Deleted Mortgage Loan,
(iv) has or have a Combined Loan-to-Value Ratio or Combined Loan-to-Value Ratios
at the time of such substitution no higher than the Combined Loan-to-Value Ratio
of the Deleted Mortgage Loan, (v) has or have a principal balance or principal
balances (after application of all payments received on or prior to the date of
substitution) equal to or less than the Principal Balance of the Deleted
Mortgage Loan as of such date, (vi) is of equal or better underwriting program
class quality (as described in the Prospectus) as the Deleted Mortgage Loan,
(vii) complies or comply as of the date of substitution with each representation
and warranty set forth in Sections 3.01(b) and 3.02, (viii) is of the same type,
either a balloon loan or fully-amortizing Mortgage Loan, as the Deleted Mortgage
Loan, (ix) have a Prepayment Charge provision requiring a Prepayment Charge at
least equal to the Prepayment Charge required by the documents evidencing the
Deleted Mortgage Loan and (x) would be in the same Mortgage Loan Group (Mortgage
Loan Group 1, Mortgage Loan Group 2, Mortgage Loan Group 3 or Mortgage Loan
Group 4) as the related Deleted Mortgage Loan.
Ramp-up Period: The period from the Closing Date until May 31, 2002.
Rating Agencies: Collectively, ▇▇▇▇▇'▇, S&P and Fitch.
Record Date: The last day of the calendar month preceding the month in
which each Distribution Date occurs.
Recordation Trigger: The date on which the long-term senior unsecured debt
of Bank of America, N.A. or its successor in interest is reduced below "A-" by
S&P or Fitch, or below "A3" by ▇▇▇▇▇'▇ or is withdrawn.
Registered Holder: The Person in whose name a Certificate is registered on
the Certificate Register.
Regular Interests: The Class A Certificates and the Class X Certificates.
Reimbursable Amounts: As of any date of determination, an amount payable to
the Servicer, the Advancing Party, the Transferor or the Depositor with respect
to (i) any advances reimbursable pursuant to Section 9.01 and not previously
reimbursed pursuant to Section 6.05(d), 6.05(e), 6.05(f) or 6.05(g), and (ii)
any other amounts expressly reimbursable to the Servicer, the Advancing Party or
the Depositor pursuant to this Agreement (including, without limitation, amounts
reimbursable to the Servicer pursuant to Section 9.03).
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Reimbursement Rights: As defined in Section 5.15.
Released Mortgaged Property Proceeds: As to any Mortgage 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, customary mortgage servicing
procedures and this Agreement.
Relief Act Shortfall: With respect to any Due Period and any Mortgage Loan
the Mortgage Interest Rate on which has been reduced pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended, the amount by which (i) the
amount of interest that would have accrued on that Mortgage Loan during the Due
Period had the Mortgage Interest Rate not been so reduced, exceeds (ii) the
amount of interest actually accrued on that Mortgage Loan during that Due
Period.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
REMIC I: As defined in Section 2.07(a)(i).
REMIC I Distribution Account: The account established under such name in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
REMIC I Regular Interests: The Class LT1, Class LT2, Class LT3, Class LT4,
Class LT5, Class LT6, Class LT7, Class LT8, Class LT9, Class LT10, Class LT11
and Class LT12 Interests.
REMIC II: As defined in Section 2.07(a)(i).
REMIC II Distribution Account: The account established under such name in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
REMIC II Group 1 Interest Rate: With respect to any Distribution Date, a
rate obtained by dividing (A) the product of (i) 2 times (ii) the lesser of (a)
6.55% per annum and (b) the Net Group 1 Weighted Average Mortgage Interest Rate
times (iii) the principal balance of the Class LT2 Interest by (B) the sum of
(x) the principal balance of the Class LT2 Interest and (y) the principal
balance of the Class LT3 Interest, such principal balances being determined
before any reductions of principal balance made on such Distribution Date.
REMIC II Group 2 Interest Rate: With respect to any Distribution Date, a
rate obtained by dividing (A) the product of (i) 2 times (ii) the lesser of (a)
6.55% per annum and (b) the Net Group 2 Weighted Average Mortgage Interest Rate
times (iii) the principal balance of the Class LT5 Interest by (B) the sum of
(x) the principal balance of the Class LT5 Interest and (y) the principal
balance of the Class LT6 Interest, such principal balances being determined
before any reductions of principal balance made on such Distribution Date.
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REMIC II Group 3 Interest Rate: With respect to any Distribution Date, a
rate obtained by dividing (A) the product of (i) 2 times (ii) the lesser of (a)
6.24% per annum and (b) the Net Group 3 Weighted Average Mortgage Interest Rate
times (iii) the principal balance of the Class LT8 Interest by (B) the sum of
(x) the principal balance of the Class LT8 Interest and (y) the principal
balance of the Class LT9 Interest, such principal balances being determined
before any reductions of principal balance made on such Distribution Date.
REMIC II Group 4 Interest Rate: With respect to any Distribution Date, a
rate obtained by dividing (A) the product of (i) 2 times (ii) the lesser of (a)
6.24% per annum and (b) the Net Group 4 Weighted Average Mortgage Interest Rate
times (iii) the principal balance of the Class LT11 Interest by (B) the sum of
(x) the principal balance of the Class LT11 Interest and (y) the principal
balance of the Class LT12 Interest, such principal balances being determined
before any reductions of principal balance made on such Distribution Date.
REMIC II Regular Interests: The Class MT1, Class MT2, Class MT3, Class MT4,
Class MT5, Class MT6, Class MT7, Class MT8, Class MT9, Class MT10, Class MT11,
Class MT12, Class MTN1, Class MTN2, Class MTN3, Class MTN4, Class MTN5, Class
MTN6, Class MTN7, Class MTN8, Class MTN9, Class MTN10, Class MTN11 and Class
MTN12 Interests.
REMIC III: As defined in Section 2.07(a)(i).
REMIC III Distribution Account: The account established under such name in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
REMIC III Regular Interests: The Class A Certificates and the Class X
Certificates.
REMIC Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear at Sections 860A through 860G
of the Code, and related provisions, and temporary and final Treasury
regulations promulgated thereunder, as the foregoing may be in effect from time
to time (or proposed, if proposed to be retroactive).
Remittance Report: As defined in Section 6.07.
REO Amortization: As to any REO Property and Due Period, the excess, if
any, of income received from such REO Property, net of expenses, over one
months' interest at the Mortgage Interest Rate on the related Principal Balance.
REO Disposition: The final sale by the Servicer of a Mortgaged Property
acquired by the Servicer in foreclosure or by deed in lieu of foreclosure. The
proceeds of any REO Disposition constitute part of the definition of Liquidation
Proceeds.
REO Property: As described in Section 5.10.
Residential Dwelling: Any of the following: (i) a one- to four-family
dwelling, (ii) a unit in a planned unit development, (iii) a unit in a
condominium development, or (iv) a permanently affixed mobile home or a
permanently affixed manufactured housing unit, as defined in the
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FNMA Selling Guide, which constitutes real property under state law provided
that such home or housing would qualify as a single family residence under
Section 25(c)(10) of the Code.
Residual Certificate: Any of the Class R-I, Class R-II or Class R-III
Certificates.
Responsible Officer: When used with respect to the Trustee, any officer
assigned to the Corporate Trust Division (or any successor thereto) with direct
responsibility for the administration of this Agreement, including any Vice
President, Assistant Vice President, Senior Trust Officer, Trust Officer,
Assistant Trust Officer, any Assistant Secretary, any trust officer or any other
officer of such Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect to the
Transferor, the Advancing Party, the Depositor, an Originator or the Servicer,
the President or any Vice President, Assistant Vice President, or any Secretary
or Assistant Secretary authorized to perform the actions required, including,
without limitation, each Person whose name appears on a list of Responsible
Officers furnished to the Trustee and the Certificate Insurer on the Closing
Date, as such list may be amended from time to time.
S&P: Standard & Poor's, or any successor thereto.
Series: 2001-1F.
Service Level Penalties: Financial penalties that may be imposed upon the
Servicer pursuant to the Performance Standards, as more specifically described
in the Performance Standards and Section 7A.01.
Servicer: The Initial Servicer prior to the Servicing Transfer Date, and
the Successor Servicer from and after the Servicing Transfer Date.
Servicer Default: As specified in Section 10.01(a).
Servicer Employees: As defined in Section 5.09.
Servicing Advances: All reasonable and customary "out-of-pocket" costs and
expenses incurred in connection with the performance of the servicing
obligations of the Servicer hereunder with respect to delinquent or defaulted
Mortgage Loans and REO Property, including, but not limited to, the cost of (i)
the preservation, restoration and protection of the Mortgaged Property,
including, without limitation, advances in respect of real estate taxes and
assessments and insurance premiums on fire, hazard and flood insurance policies
and leasehold payments, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of the REO Property, (iv)
compliance with the obligations under Sections 5.02, 5.05 and 5.07, which
Servicing Advances are reimbursable to the Servicer or the Advancing Party to
the extent provided in Section 5.04(ii), and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 5.13, for all of which costs
and expenses the Servicer or the Advancing Party is entitled to reimbursement in
accordance with this Agreement. Notwithstanding anything herein to the
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contrary, no Servicing Advance shall be required to be made hereunder if such
Servicing Advance would, if made, constitute a Nonrecoverable Advance or would
not conform to the Servicing Policy and Procedure or the Performance Standards
or the Servicing Advance Eligibility Criteria.
Servicing Advance Eligibility Criteria: As defined in Section 5.15.
Servicing Advance Reimbursement Request: As defined in Section 5.15(a).
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03.
Servicing Fee: With respect to any Due Period, the amount equal to one
month's interest at the Servicing Fee Rate on the aggregate of the Principal
Balances of the Mortgage Loans (calculated on the basis of 30 days over a 360
day year). The Servicing Fee is payable solely from the interest portion of (i)
Monthly Payments, (ii) Liquidation Proceeds or (iii) Released Mortgaged Property
Proceeds collected by the Servicer or as otherwise provided in Section 5.04. The
Servicing Fee with respect to each Mortgage Loan shall accrue on the same
principal balance on which interest accrues on such Mortgage Loan. The Servicing
Fee includes any Servicing Fees owed or payable to any Subservicer.
Servicing Fee Rate: With respect to any Mortgage Loan and any Due Period, a
rate equal to 0.50% per annum.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee by the Servicer on the Closing Date, as such list may from time to time
be amended.
Servicing Policy and Procedure: The servicing guidelines set forth in the
FHLMC Single Family Seller/Servicer Guide, as adjusted by the Servicer to
reflect servicing of sub-prime mortgage loans, all as more particularly set
forth on Appendix 2 hereto, as it may be amended from time to time pursuant to
Section 5.01(a).
Servicing Transfer Date: The date on which the rights, responsibilities,
duties and liabilities of the Servicer hereunder to service the Mortgage Loans
pursuant to the terms of this Agreement are assigned to and assumed by the
Successor Servicer.
Startup Day: The day designated as such pursuant to Section 2.07 hereof.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies any requirements set forth in Section
5.01(c) hereof in respect of the qualification of a Subservicer. As of the
Closing Date, the only Subservicers are the Originators (other than EquiCredit).
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in
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Section 5.01(c), a copy of which shall be delivered, along with any
modifications thereto, to the Certificate Insurer and the Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.06 or 3.03, the amount (if any) by which the aggregate
Principal Balances of any Qualified Substitute Mortgage Loans as of the date of
substitution, together with accrued and unpaid interest thereon (but only to the
extent deposited in the Principal and Interest Account and transferred to the
Collection Account), are less than the aggregate of the Principal Balances
(after application of principal payments received on or before the date of
substitution and deposited into the Principal and Interest Account, of the
related Deleted Mortgage Loans), together with accrued and unpaid interest
thereon to the date of substitution, plus any unreimbursed Advances, Existing
Advances and Servicing Advances, and interest accrued on such Existing Advances
and Servicing Advances pursuant to the terms of the related Mortgage Notes and
Mortgages, with respect to such Deleted Mortgage Loans.
Successor Servicer: The entity to whom the Initial Servicer sells the
servicing rights with respect to the Mortgage Loans, pursuant to Section 9.04,
and such entity's successors and permitted assigns, as Servicer pursuant to this
Agreement from and after the Servicing Transfer Date. The Successor Servicer is
presently expected to be Fairbanks Capital Corp.
Tax Matters Person: The Person or Persons appointed from time to time to
act as the "tax matters person" (within the meaning of the REMIC Provisions) of
each of REMIC I, REMIC II and REMIC III.
Terminating Purchaser: As defined in Section 11.01.
Termination Price: As defined in Section 11.01.
Termination Without Cause Event: As defined in Section 10.01(a).
Testing Date: As defined in Section 3.02(aaa).
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or
other form of assignment of any Ownership Interest in a Certificate.
Transfer Affidavit and Agreement: As defined in Section 4.02(d)(2).
Transfer Agreement: The agreement, dated as of December 1, 2001, between
the Transferor and the Depositor, pursuant to which the Transferor transferred
the Mortgage Loans to the Depositor.
Transferor: EquiCredit Corporation of America, or its successor in
interest.
Trust: EQCC Trust 2001-1F, the trust created by this Agreement.
Trust Fund: The segregated pool of assets subject hereto, constituting the
trust created hereby and to be administered hereunder, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto and all
35
proceeds thereof, (ii) such assets as from time to time are identified as REO
Property or are deposited in the Collection Account, REMIC I Distribution
Account, REMIC II Distribution Account, REMIC III Distribution Account,
Principal and Interest Account and Insurance Account, including amounts on
deposit in the foregoing accounts and invested in Permitted Instruments, (iii)
the Trustee's rights under all insurance policies with respect to the Mortgage
Loans required to be maintained pursuant to this Agreement and any Insurance
Proceeds, (iv) the Certificate Insurance Policies, (v) Liquidation Proceeds and
(vi) Released Mortgaged Property Proceeds. Any amounts received on and after the
Cut-off Date in respect of interest accrued on the Mortgage Loans prior to the
Cut-off Date do not constitute part of the Trust Fund.
Trust REMIC: As defined in Section 2.07(a)(i).
Trustee: The Bank of New York, not in its individual capacity but solely as
trustee under this Agreement, or its successor in interest, or any successor
trustee appointed pursuant to this Agreement.
UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction.
United States Person: (i) A citizen or resident of the United States, (ii)
a corporation or partnership (unless, in the case of a partnership, Treasury
regulations are adopted that provide otherwise) created or organized in or under
the laws of the United States, any state thereof or the District of Columbia,
including an entity treated as a corporation or partnership for federal income
tax purposes, none of the interests of which, in the case of a partnership, are
owned directly or indirectly, through one or more intermediate entities, by any
Person that is not a United States Person within the meaning of this paragraph,
(iii) an estate the income of which is includible in gross income for United
States federal income tax purposes, regardless of its source or (iv) 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 United States 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 be treated as United States persons).
Unpaid Class X Remittance Amount: For any Distribution Date, the aggregate
of the Class X Remittance Amounts for such Distribution Date and all prior
Distribution Dates less amounts previously distributed to the Class X
Certificateholders.
Voting Interest: The aggregate Voting Interests of each Class of Class A
Certificates on any date will be equal to a percentage, expressed as a fraction,
the numerator of which is the principal balance of such Class and the
denominator of which is 95% of the sum of the Class A-1 Principal Balance, the
Class A-2 Principal Balance, the Class A-3 Principal Balance and the Class A-4
Principal Balance. The aggregate Voting Interests of the Class X Certificates
will be equal to a percentage, expressed as a fraction, the numerator of which
is 5% of the sum of the Class A-1 Principal Balance, the Class A-2 Principal
Balance, the Class A-3 Principal Balance and the Class A-4 Principal Balance and
the denominator of which is the sum of the Class A-1 Principal Balance, the
Class A-2 Principal Balance, the Class A-3 Principal Balance and the Class A-4
Principal Balance. Each Certificateholder of a Class will have a Voting Interest
equal to the product of the Voting Interest to which such Class is collectively
entitled and the
36
Percentage Interest in such Class represented by such Holder's Certificates;
provided, however, that only the Certificate Insurer shall have the right to
vote the Majority in Aggregate Voting Interest (except any portion thereof
attributable to the Class X Certificates), except during any period in which the
Certificate Insurer is in default in its payment obligations under any
Certificate Insurance Policy, as described in Section 13.01.
ARTICLE II
CONVEYANCE OF THE TRUST ASSETS
Section 2.01. Sale and Conveyance of Trust Assets; Priority and
Subordination of Ownership Interests.
(a) Sale of Trust Assets. The Depositor does hereby sell, transfer, assign,
set over and convey to the Trustee (for the benefit of the Certificateholders
and the Certificate Insurer, as their interests may appear) without recourse,
all of the right, title and interest of the Depositor in and to (i) the Mortgage
Loans (excepting all amounts received on and after the Cut-off Date in respect
of interest accrued on the Mortgage Loans prior to the Cut-off Date and
excluding all Prepayment Charges), (ii) the Mortgage Files relating to the
Mortgage Loans, (iii) the related Mortgaged Properties, (iv) the Depositor's
rights under all insurance policies with respect to the Mortgage Loans required
to be maintained by it, (v) all right, title and interest of the Depositor in,
to and under the Transfer Agreement, including the right to cause the Transferor
to repurchase the Mortgage Loans under certain circumstances, (vi) all right,
title and interest of the Depositor in each of the Accounts established and
maintained pursuant to Articles V and VI hereof and (vii) the interest of the
Depositor in any proceeds of the property described in clauses (i), (ii), (iii),
(iv), (v) and (vi), including all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including without limitation, all amounts from time to time held or
invested in the Accounts.
(b) Rights Determined by Agreement. The rights of the Holders and the
Certificate Insurer to receive payments with respect to the Mortgage Loans in
respect of the Certificates, and all ownership interests of the
Certificateholders in such payments, shall be as set forth in this Agreement.
(c) Sale Intended; Backup Grant of Security Interest. It is the intention
of this Agreement that the transfer of the Depositor's right, title and interest
in and to the assets of the Trust pursuant to this Agreement shall constitute an
absolute sale by the Depositor to the Trustee of the Mortgage Loans for the
benefit of the Certificateholders and the Certificate Insurer and not a loan. If
the transfer of Mortgage Loans from the Transferor to the Depositor pursuant to
the Transfer Agreement is characterized as a pledge and not an absolute sale,
then the Depositor shall be deemed to have transferred to the Trustee for the
benefit of the Certificateholders and the Certificate Insurer, as their
interests may appear, all of the Depositor's right, title and interest in, to
and under the obligations of the Transferor deemed to be secured by said pledge;
and it is the intention of this Agreement that the Depositor shall also be
deemed to have granted and for such purposes the Depositor hereby grants, to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
as their interests may appear, a first priority security interest in all of the
Depositor's right, title, and interest in, to and under the assets pledged to
the Depositor by the
37
Transferor and the obligations of the Transferor to the Depositor under the
Transfer Agreement and that the Trustee shall be deemed to be an independent
custodian for purposes of perfection of the security interest granted to the
Depositor. If the transfer of the Mortgage Loans and the other assets of the
Trust from the Depositor to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer and the NIMS Insurer is
characterized as a pledge, it is the intention of this Agreement that this
Agreement shall constitute a security agreement under applicable law, and that
the Depositor shall be deemed to have granted and for such purposes the
Depositor hereby grants, to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear, a
first priority security interest in all of the Depositor's right, title and
interest in, to and under the Mortgage Loans, all payments of principal of or
interest on such Mortgage Loans, all other rights relating to and payments made
in respect of the assets described in Section 2.01(a), and all proceeds of any
thereof, including all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held or invested in the
Accounts. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.
(d) UCC Article 9. In furtherance of the backup grant of security interest
provided for in Section 2.01(c), the Depositor hereby represents and warrants as
follows: (i) the Depositor owns and has good and marketable title to the
Mortgage Loans free and clear of any Lien, claim or encumbrance of any Person;
(ii) subject to Section 2.06 of this Agreement, all original executed copies of
the documents included in each Mortgage File that constitute or evidence the
Mortgage Loans have been delivered to the Trustee; (iii) subject to Section 2.06
of this Agreement, the Depositor has received written acknowledgment from the
Custodian that the Custodian is holding the Mortgage Files that constitute or
evidence the Mortgage Loans solely on behalf and for the benefit of the Trustee;
(iv) other than the security interest granted to the Trustee pursuant to this
Agreement, the Depositor has not pledged, assigned, sold, granted a security
interest in, or otherwise conveyed any of the Mortgage Loans; (v) the Depositor
has not authorized the filing of and is not aware of any financing statements
against the Depositor that include a description of collateral covering the
Mortgage Loans other than any financing statement relating to the security
interest granted to the Trustee hereunder or that has been terminated; (vi) the
Depositor is not aware of any judgment or tax lien filings against the
Depositor; (vii) the Depositor has in its possession all original copies of the
Mortgage Files that constitute or evidence the Mortgage Loans; (viii) the
Mortgage Files that constitute or evidence the Mortgage Loans do not have any
marks or notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Trustee; and (ix) each of the Mortgage
Notes is an "instrument" as such term is defined under, and governed by, Article
9 of the applicable UCC; and (x) to the extent this Agreement does not evidence
an absolute sale of the Mortgage Loans to the Trust, this Agreement creates a
valid and continuing security interest (as defined in the applicable UCC) in the
Mortgage Loans in favor of the Trustee, which security interest is prior to all
other Liens, and is enforceable as such as against creditors of and purchasers
from the Depositor.
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Section 2.02. Possession of Mortgage Files.
----------------------------
(a) Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the related Mortgage File is vested in
the Trustee for the benefit of the Certificateholders and the Certificate
Insurer.
(b) Pursuant to Section 2.04, the Depositor has delivered or caused to be
delivered each Mortgage File to the Custodian.
Section 2.03. Books and Records.
-----------------
The sale of each Mortgage Loan shall be reflected on the Depositor's
balance sheets and other financial statements prepared in accordance with
generally accepted accounting principles as a sale of assets by the Depositor.
The Servicer shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trustee for the
benefit of the Certificateholders and the Certificate Insurer.
Section 2.04. Delivery of Mortgage Loan Documents.
-----------------------------------
(a) Mortgage Files. Subject to Section 2.04(b) and Section 2.06, the
Depositor has delivered to the Trustee (which may be by delivery to the
Custodian on behalf of the Trustee) each of the documents listed in Exhibit A
hereto for each Mortgage Loan. The Trustee acknowledges that it will hold each
Certificate Insurance Policy in trust for the related Certificateholders.
(b) Delivery of Recorded Documents. The Depositor shall use its reasonable
efforts to promptly deliver or cause to be delivered to the Trustee or the
Custodian: (i) the original recorded Mortgage in those instances where a copy
thereof was delivered hereunder; (ii) the original recorded Assignment of
Mortgage to the Transferor or the applicable Originator, which, together with
any intervening assignments of Mortgage, evidences a complete chain of
assignment from the originator to the Transferor or the applicable Originator in
those instances where copies of such Assignments were delivered; and (iii) the
title insurance policy or assurance required in paragraph (4) of Exhibit A (to
the extent so required). The Depositor shall, within five (5) Business Days
after the receipt thereof, and in any event, within twelve months after the
Closing Date, deliver or cause to be delivered to the Trustee or the Custodian
each document described in any of paragraphs (1), (2), (3) and (5) on Exhibit A;
provided, however, that if a document described in the paragraph (2) or (5) on
Exhibit A has not been returned from the appropriate public recording office,
the Depositor shall deliver a certified copy of the Mortgage and a receipted
copy of the Assignment from the appropriate recording office prior to the
expiration of such twelve-month period. Notwithstanding anything to the contrary
contained in this Section 2.04(b), the Depositor shall be deemed to have
satisfied its obligations to deliver a Mortgage or Assignment of Mortgage upon
delivery to the Trustee or the Custodian a copy of such Mortgage or Assignment
of Mortgage, as applicable, certified by the public recording office to be a
true copy of the recorded original thereof. From time to time the Depositor
shall forward or cause to be forwarded to the Trustee or the Custodian
additional original documents evidencing an assumption or modification of a
Mortgage Loan. All Mortgage Loan documents
39
held by the Trustee or the Custodian as to each Mortgage Loan are
referred to herein as the "Mortgage File."
(c) Manufactured Housing Documents. The Transferor covenants and agrees to
take all action necessary or desirable under applicable state law to transfer
the benefits of the lien and security interest in each manufactured or mobile
home and the related Mortgaged Property to the Trustee, including, without
limitation, the filing of UCC-3 assignments, notations on the certificates of
title and recordation of the Assignment of Mortgage within the time periods
required by this Section 2.04.
(d) Recording of Assignments to Trustee. As promptly as practicable
following the occurrence of the Recordation Trigger, but in no event more than
90 days following the occurrence of the Recordation Trigger, the Transferor or
the Depositor shall at its own expense either (i) record in favor of the Trustee
each Assignment of Mortgage and each Reassignment of Assignment of Beneficial
Interest referred to in paragraphs (3) and (8) on Exhibit A attached hereto with
respect to all of the Mortgage Loans in the appropriate real property or other
records, or (ii) deliver to the Trustee an Opinion of Counsel satisfactory to
the Rating Agencies, the Certificate Insurer and the NIMS Insurer to the effect
that recording is not required and no other action on the part of such Depositor
is required (other than such actions as have been taken) to protect the
Trustee's right, title and interest in and to the related Mortgage and Note.
(e) Recording Generally. All recording required pursuant to this Section
2.04 shall be accomplished by and at the expense of the Transferor. For purposes
of determining whether a signature is made on an instrument or document,
stapling of an attachment shall be a sufficient affixation to cause the
attachment to constitute part of the instrument or document.
Section 2.05. [Reserved].
----------
Section 2.06. Acceptance by Trustee of the Trust Fund; Certain
------------------------------------------------
Substitutions; Certification by Trustee.
---------------------------------------
(a) Trustee Review of Mortgage Files. The Trustee hereby acknowledges
receipt of the Trust Fund, and declares that it will hold the Mortgage Loans, as
well as any other assets delivered to it in trust, upon and subject to the
conditions set forth in this Agreement for the benefit of the
Certificateholders, the Trustee as holder of the REMIC I Regular Interests and
REMIC II Regular Interests, and the Certificate Insurer, as their interests may
appear. The Trustee shall execute and deliver on the Closing Date an initial
certification, in the form attached as Exhibit E hereto of receipt by it or by
the Custodian on its behalf, for each Mortgage Loan of the items listed in
paragraphs (1), (2), (3), (7) and (8) on Exhibit A hereto (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), and declares that it will
hold such documents and any amendments, replacements or supplements thereto, as
well as any other assets delivered to it in trust, to the extent set forth
herein, for the benefit of the Certificateholders, the Trustee as holder of the
REMIC I Regular Interests and REMIC II Regular Interests and the Certificate
Insurer, as their interests may appear. Notwithstanding the foregoing, the
Trustee is not required to certify as to (1) the chain of intervening
endorsements of a Mortgage Note, (2) the chain of intervening assignments of a
Mortgage to the Person executing the Assignment of Mortgage, or (3) as to
40
whether a copy of a Mortgage, an Assignment of Mortgage, or an intervening
assignment was certified by a Responsible Officer of the Transferor. The Trustee
agrees to review (or cause to be reviewed) each Mortgage File within 45 days
after the Closing Date (or, with respect to any Qualified Substitute Mortgage
Loan, within 45 days after the receipt thereof by the Custodian) and to deliver
to the Transferor, the Depositor, the Servicer and the Certificate Insurer an
interim certification in the form attached hereto as Exhibit F-1 on or before
such date to the effect that, as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
this Agreement are in its possession (other than those described in paragraphs
(1)(ii), 5(ii), (6), (11), (12), (13), (14), (15), (16) and (17) on Exhibit A
hereto, (ii) such documents have been reviewed by it and have not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if properly
initialed by the Mortgagor) and relate to such Mortgage Loan, and (iii) based on
its examination and only as to the foregoing documents, the information set
forth on the Mortgage Loan Schedule (other than items (i), (iv) and (x) of the
definition of Mortgage Loan Schedule) accurately reflects the information set
forth in the Mortgage File. The Trustee shall be under no duty or obligation to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, or appropriate for
the represented purpose or that they are other than what they purport to be on
their face. Within 375 days after the Closing Date, the Trustee shall deliver
(or cause to be delivered) to the Servicer, the Depositor the NIMS Insurer, and
the Certificate Insurer a final certification in the form attached hereto as
Exhibit F-2, evidencing the completeness of the Mortgage Files.
(b) Defective and Incomplete Mortgage Files; Remedies. If the Certificate
Insurer, the NIMS Insurer, or the Trustee during the process of reviewing the
Mortgage Files finds any document constituting a part of a Mortgage File which
is not executed, has not been received, is unrelated to the Mortgage Loan
identified in the Mortgage Loan Schedule, or does not conform to the
requirements of Section 2.04 or Exhibit A hereto or substantively to the
description thereof as set forth in the Mortgage Loan Schedule, the Trustee, or
the Certificate Insurer, as applicable, shall promptly so notify the Servicer,
the Trustee, the Transferor, the Depositor, the NIMS Insurer, and the
Certificate Insurer. In performing any such review, such Person may conclusively
rely on the Transferor as to the purported genuineness of any such document and
any signature thereon. It is understood that the scope of such Person's review
of the Mortgage Files is limited solely to confirming that the documents listed
in Exhibit A hereto (other than those described in paragraph (1)(ii), 5(ii), (6)
and (11) through 17 on Exhibit A) have been executed and received and relate to
the Mortgage Files identified in the Mortgage Loan Schedule. Each of the
Transferor and the Depositor shall use reasonable efforts to cause to be
remedied any material defect in a document constituting part of a Mortgage File
of which it is so notified by the Certificate Insurer or the Trustee. If,
however, within 60 days after receipt by it of the final certification referred
to in paragraph (a) of this Section 2.06 (or within 30 days after the Closing
Date, in the case of failure to deliver original Mortgage Notes), the defect
described in such final certification has not been remedied and such defect
materially and adversely affects the interest of the Certificateholders in the
related Mortgage Loan or the interests of the Certificate Insurer, the
Transferor shall, on the third Business Day preceding the Distribution Date
immediately succeeding the end of such 60-day (or 30-day, in the case of failure
to deliver
41
original Mortgage Notes) period (i) if within 2 years of the Closing Date,
substitute, or cause the Depositor to substitute, in lieu of such Mortgage Loan,
a Qualified Substitute Mortgage Loan in the manner and subject to the conditions
set forth in Section 3.03 or (ii) purchase, or cause the Depositor to purchase,
such Mortgage Loan at a purchase price equal to the Principal Balance of such
Mortgage Loan as of the date of purchase, plus all accrued and unpaid interest
on such Principal Balance, computed at the Mortgage Interest Rate, net of the
applicable Servicing Fee if the Transferor is the Servicer, which purchase price
shall be deposited in the Principal and Interest Account on the next succeeding
Determination Date (after deducting therefrom any amounts received in respect of
such purchased Mortgage Loan or Loans and held in the Principal and Interest
Account for future distribution); provided that if such defect caused such
Mortgage Loan not to be a "qualified mortgage" within the meaning of Code
Section 860G(a)(3), such repurchase or, if applicable, substitution shall occur
within 75 days of the earlier of (i) the delivery of the Trustee's interim
certification or (ii) the Trustee's, the Depositor's or the Transferor's
discovery, or receipt of notice from the Trustee or the Servicer of discovery of
such defect. It is understood that (i) a failure of a Mortgage File to contain a
Mortgage Note (or a lost note affidavit as permitted by paragraph (1) on Exhibit
A) or a Mortgage (with or without evidence of recording), or (ii) the inclusion
in the Mortgage Pool of any Mortgage Loan with a CLTV greater than 100% which
also fails to meet the requirement that it be "principally secured by an
interest in real property" within the meaning of Treasury Regulation
1.860G-2(a)(1), or (iii) any other Mortgage File defect that causes the related
Mortgage Loan not to be a "qualified mortgage" within the meaning of Code
Section 860G(a)(3) materially and adversely affects the interests of the
Certificateholders. Except as provided in the preceding sentence, with respect
to a defect or failure of delivery of any other document required to be included
in a Mortgage File, such defect or non-delivery shall not be deemed to have a
material and adverse effect on the interests of the Trustee or
Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer unless and until a Mortgage Loan Loss shall have occurred
with respect to that Mortgage Loan, or foreclosure on the related Mortgaged
Property is rendered impossible, as the direct and proximate result of such
defect or failure of delivery. In the event of a Mortgage Loan Loss resulting
directly and proximately from such a defect or non-delivery, which Mortgage Loan
Loss is determined following liquidation of the related Mortgage Loan, it is
understood that the Transferor may satisfy its repurchase obligation by
depositing the amount of the Mortgage Loan Loss into the Principal and Interest
Account on the next succeeding Determination Date (after deducting therefrom any
amounts received in respect of such liquidated Mortgage Loan or Loans and held
in the Principal and Interest Account for future distribution).
(c) Release of Deleted Mortgage Loans. Upon receipt by the Trustee of a
certification of a Responsible Officer of the Transferor confirming that a
substitution or purchase has taken place, and that amounts required to be
deposited into the Principal and Interest Account in connection with such
substitution or purchase pursuant to Section 2.06(b) have been deposited into
the Principal and Interest Account (which certification shall be in the form of
Exhibit B to the Custodial Agreement), the Trustee shall release to the Servicer
for release to the Depositor or the Transferor, as appropriate, the related
Mortgage File and shall execute, without recourse, and deliver such instruments
of transfer necessary to transfer such Mortgage Loan to the Depositor or the
Transferor.
42
(d) Review of Recorded Assignments. If recordation of any Assignment of
Mortgage is required hereunder after the occurrence of a Recordation Trigger,
the original of each such recorded Assignment of Mortgage shall be delivered to
the Trustee or the Custodian within 10 days following the date on which it is
returned to the Depositor or the Transferor by the office with which such
Assignment of Mortgage was filed for recordation and, within 10 days following
receipt by the Trustee or Custodian, as applicable, of the recorded Assignment
of Mortgage the Trustee shall review or shall cause the Custodian to review such
Assignment of Mortgage to confirm that such Assignment of Mortgage has been
recorded. Upon receipt by the Trustee or the Custodian, as applicable, of the
recorded Assignment of Mortgage, such recorded Assignment of Mortgage shall
become part of the Mortgage File. The Trustee shall notify the Depositor, the
Transferor, the Servicer and the Certificate Insurer of any defect in such
Assignment of Mortgage if it shall have actual knowledge of any such defect
based on such review. The Transferor or the Depositor shall have a period of 30
days following such notice to correct or cure such defect. In the event that the
Transferor or the Depositor fails to record an Assignment of Mortgage as herein
provided (which Assignment of Mortgage was required to be recorded) and the
Trustee shall have actual knowledge of such failure, the Trustee shall prepare
and file or shall cause the Custodian to prepare and file such Assignment of
Mortgage for recordation in the appropriate real property or other records, and
the Transferor and the Depositor hereby appoint the Trustee and the Custodian as
their attorney-in-fact with full power and authority acting in their stead for
the purpose of such preparation, execution and recordation. Any expense incurred
by the Trustee or the Custodian not otherwise paid for by the Depositor or the
Transferor as required hereunder in connection with the preparation and
recordation of such Assignment of Mortgage shall be reimbursed to the Trustee or
Custodian, as applicable, pursuant to Section 12.05.
(e) Notwithstanding anything to the contrary contained herein, the parties
hereto acknowledge that the functions of the Trustee with respect to the
custody, acceptance, inspection and release of the Mortgage Files pursuant to
Sections 2.04, 2.06, 3.03, 7.01 and 7.02 and the preparation and delivery of the
certifications in the form of Exhibits E, F-1 and F-2 shall be performed by the
Custodian pursuant to the Custodial Agreement. The fees and expenses of the
Custodian shall be paid by the Servicer.
Section 2.07. REMIC Administration.
--------------------
(a) Tax Administration.
(i) Elections will be made by the Trustee on behalf of the Trust Fund
to treat the assets of the Trust Fund other than the Principal and Interest
Account and the right of the Transferor to receive amounts in respect of
the Existing Advances and any interest thereon as three separate REMICs
under the Code ("REMIC I," "REMIC II" and "REMIC III," respectively, and
each, a "Trust REMIC"). Such elections will be made on Form 1066 or other
appropriate federal tax or information return for each Trust REMIC for the
taxable year ending on the last day of the calendar year in which the
Certificates are issued. The assets of REMIC I will consist of all of the
assets constituting the Trust Fund other than (i) the Principal and
Interest Account, (ii) the assets of REMIC II and REMIC III and (iii)
amounts in respect of the Existing Advances and any payments of interest in
respect of such Existing Advances, which are retained by the Transferor.
43
REMIC I will issue classes of interests which will be the REMIC I Regular
Interests (which will be uncertificated and will represent the "regular
interests" in REMIC I) and the Class R-I Certificates, which will be the
sole class of "residual interests" in REMIC I. The Trustee will hold the
REMIC I Regular Interests in trust for the benefit of REMIC II. The assets
of REMIC II will consist of the REMIC I Regular Interests and the REMIC II
Distribution Account. REMIC II will issue classes of interests which will
be the REMIC II Regular Interests (which will be uncertificated and will
represent the "regular interests" in REMIC II) and the Class R-II
Certificates, which will be the sole class of "residual interests" in REMIC
II. The Trustee will hold the REMIC II Regular Interests in trust for the
benefit of REMIC III. The assets of REMIC III will consist of the REMIC II
Regular Interests and the REMIC III Distribution Account. REMIC III will
issue the REMIC III Regular Interests (which will represent the "regular
interests" in REMIC III represented by the Class A and the Class X
Certificates) and the Class R-III Certificates, which will be the sole
class of "residual interests" in REMIC III. The Owner of the Class R-I,
Class R-II or Class R-III Certificates, respectively, representing at any
time the largest Percentage Interest in such Class shall be the Tax Matters
Person with respect to the applicable Trust REMIC. Each holder of a Class
R-I, Class R-II and Class R-III Certificate, as a condition of ownership
thereof, irrevocably appoints the Trustee to act as its agent and
attorney-in fact to perform all duties of the Tax Matters Person. The
"latest possible maturity date" within the meaning of Treasury Regulation
Section 1.860G-1(a)(4) of the REMIC I Regular Interests, the REMIC II
Regular Interests and the REMIC III Regular Interests shall be the Final
Scheduled Distribution Date. Any amounts in respect of Existing Advances or
in respect of interest on Existing Advances shall not be an asset of REMIC
I, REMIC II or REMIC III. Rather, the right to receive such amounts will be
retained by the Transferor.
(ii) The Closing Date is hereby designated as the "Startup Day" of
each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.
(iii) Except as provided in Section 12.05 and this Section 2.07(a),
the Trustee shall pay (and shall be entitled to reimbursement thereof by
the Servicer or otherwise in accordance with the terms of this Agreement)
the ordinary and usual expenses in connection with the preparation, filing
and mailing of tax information reports and returns that are incurred by it
in the ordinary course of its administration of its tax-related duties
under this Agreement, but extraordinary or unusual expenses, costs or
liabilities incurred in connection with its tax-related duties under this
Agreement, including without limitation any expenses, costs or liabilities
associated with audits, required independent opinions regarding tax
methodology and related matters or any administrative or judicial
proceedings with respect to each Trust REMIC that involve the Internal
Revenue Service or state tax authorities, shall be expenses of the Trust
Fund pursuant to Section 6.05.
(iv) The Trustee shall prepare and file all of the Trust REMICs'
federal and state income or franchise tax and information returns. Except
as provided in Section 12.05 and this Section 2.07(a), the expenses of
preparing and filing such returns shall be borne by the Trustee. The
Servicer and the Depositor shall provide on a timely basis to the Trustee
or its designee such information with respect to each Trust REMIC as is in
their possession, which the Servicer or the Depositor has or have received
or prepared by
44
virtue of its activities as Servicer or Depositor hereunder and reasonably
requested by the Trustee to enable it to perform its obligations under this
subsection, and the Trustee shall be entitled to rely, and shall be
protected in relying, on such information in the performance of its
obligations hereunder.
(v) The Trustee shall perform on behalf of the Trust Fund and each
Trust REMIC all tax reporting duties and other tax compliance duties that
are the responsibility of a REMIC under the Code, the REMIC Provisions, or
other compliance guidance issued by the Internal Revenue Service or any
state or local taxing authority. Among its other duties, the Trustee shall
provide (i) to the Internal Revenue Service or other Persons (including,
but not limited to, the transferor of any Residual Certificate to a
Disqualified Organization or to an agent that has acquired any Residual
Certificate on behalf of a Disqualified Organization) such information as
is necessary for the application of any tax relating to the transfer of any
Residual Certificate to any Disqualified Organization pursuant to Section
860E(e) of the Code and the Treasury Regulations thereunder and (ii) to the
Certificateholders such information or reports as are required by the Code
or REMIC Provisions. Each of the Depositor and the Servicer shall provide
on a timely basis (and in no event later than 30 days after the Trustee's
request) to the Trustee or its designee such information with respect to
each Trust REMIC as is in its possession and reasonably requested in
writing by the Trustee to enable it to perform its obligations under this
subsection.
(vi) [Reserved]
(vii) The Trustee and the Servicer shall perform their obligations
under this Agreement and the REMIC Provisions in a manner consistent with
the status of each Trust REMIC as a REMIC or, as appropriate, shall adopt a
plan of complete liquidation as provided in Section 11.02.
(viii) The Trustee and the Servicer shall not take any action or cause
any Trust REMIC to take any action, within their respective control and the
scope of their specific respective duties under this Agreement that, under
the REMIC Provisions, could (i) endanger the status of any Trust REMIC as a
REMIC or (ii) result in the imposition of a tax upon any Trust REMIC
(including but not limited to the tax on prohibited transactions as defined
in Code Section 860F(a)(2) and the tax on prohibited contributions as
defined in Code Section 860G(d)) unless the Trustee has received a
Nondisqualification Opinion (at the expense of the party seeking to take
such action) with respect to such action.
(ix) To the extent not paid pursuant to paragraph (d) of this Section
2.07, the Trustee shall pay when due any and all federal, state and local
taxes imposed on the applicable Trust REMIC or its assets or transactions,
including, without limitation, "prohibited transaction" taxes, as defined
in Section 860F of the Code, any tax on contributions imposed by Section
860G(d) of the Code, and any tax on "net income from foreclosure property"
as defined in Section 860G(c) of the Code from the REMIC I Distribution
Account, the REMIC II Distribution Account or the REMIC III Distribution
Account pursuant to Section 6.02(ii)(E), and shall reimburse such amounts
to the
45
applicable Trust REMIC, prior to current or future amounts otherwise
distributable to the Holders of any Class X Certificates pursuant to
Section 6.05.
(x) The Trustee shall, for federal income tax purposes, maintain books
and records with respect to each Trust REMIC on a calendar year and on an
accrual basis. Notwithstanding anything to the contrary contained herein,
all amounts collected on the Mortgage Loans shall, for federal income tax
purposes, be allocated first to interest due and payable on the Mortgage
Loans (including interest on overdue interest) (other than additional
interest at a penalty rate payable following a default). The books and
records must be sufficient concerning the nature and amount of each Trust
REMIC's investments to show that each Trust REMIC has complied with the
REMIC Provisions.
(xi) Neither the Trustee nor the Servicer shall enter into any
arrangement by which any Trust REMIC will receive a fee or other
compensation for services.
(xii) In order to enable the Trustee to perform its duties as set
forth herein, the Depositor shall provide, or cause to be provided, to the
Trustee within 10 days after the Closing Date all information or data that
the Trustee reasonably determines to be relevant for tax purposes on the
valuations and offering prices of the Certificates, including, without
limitation, the yield, issue prices, pricing prepayment assumption and
projected cash flows of the Class A Certificates, the Class X Certificates
and the Residual Certificates, as applicable, and the projected cash flows
on the Mortgage Loans. Thereafter, the Servicer shall provide to the
Trustee, promptly upon request therefor, any such additional information or
data that the Trustee may, from time to time, reasonably request in order
to enable the Trustee to perform its duties as set forth herein, and which
the Servicer can reasonably be expected to provide. The Trustee is hereby
directed to use any and all such information or data provided by the
Depositor or the Servicer in the preparation of all federal and state
income or franchise tax and information returns and reports for the Trust
REMICs to Certificateholders as required herein. The Depositor and the
Servicer each hereby indemnifies the Trustee for any losses, liabilities,
damages, claims or expenses of the Trustee arising from any errors or
miscalculations of the Trustee pursuant to this Section that result from
any failure of the Depositor or the Servicer to provide, or to cause to be
provided, accurate information or data to the Trustee (but not resulting
from the methodology employed by the Trustee) required to be provided by
the Depositor, the Servicer, as the case may be, pursuant to this
paragraph, on a timely basis and such indemnifications shall survive the
termination of this Agreement.
(xiii) The Trustee shall prepare and file with the Internal Revenue
Service, on behalf of each Trust REMIC, an application for a taxpayer
identification number for such Trust REMIC on IRS Form SS-4 or by any other
permissible method. The Trustee, upon receipt from the Internal Revenue
Service of the Notice of Taxpayer Identification Number Assigned, shall
promptly forward a copy of such notice to the Depositor. The Trustee shall
prepare and file Form 8811 on behalf of REMIC III and shall designate from
time to time an appropriate Person to respond to inquiries by or on behalf
of Certificateholders for original issue discount and related information
in accordance with applicable provisions of the Code.
46
To the extent required by the Trustee, the Servicer will engage an
accounting firm to prepare the necessary tax filings required by the Trustee
under this Section 2.07(a).
The Trustee agrees that all such information or data so obtained by it are
to be regarded as confidential information and agrees that it shall use its best
reasonable efforts to retain in confidence, and shall ensure that its officers,
employees and representatives retain in confidence, and shall not disclose,
without the prior written consent of the Depositor, any or all of such
information or data, or make any use whatsoever (other than for the purposes
contemplated by this Agreement) of any such information or data without the
prior written consent of the Depositor, unless such information is generally
available to the public (other than as a result of a breach of this Section) or
is required by law or applicable regulations to be disclosed.
(b) Modifications of Mortgage Loans. Notwithstanding anything to the
contrary in this Agreement, neither the Trustee nor the Servicer shall permit
any modification of, or take any action with respect to, the Mortgage Loans that
would change the Mortgage Interest Rate, defer (except as permitted by Section
5.11) or forgive the payment of any principal or interest (unless in connection
with the liquidation of the related Mortgage Loan), extend the final maturity
date or modify any other material term of the Mortgage Loan, unless (A) the
Mortgagor is in default with respect to the Mortgage Loan or such default is, in
the judgment of the Servicer, reasonably foreseeable or (B) (i) such waiver,
modification, postponement or indulgence would not be considered to constitute
the acquisition by REMIC I of a new mortgage loan under Treasury Regulations
Section 1.860G-2(b), and (ii) the Trustee or the Servicer has received a
Nondisqualification Opinion or a ruling from the Internal Revenue Service (at
the expense of the party making the request of the Servicer or the Trustee to
modify the Mortgage Loans) to the same effect as a Nondisqualification Opinion
with respect to such modification.
(c) Prohibited Transactions and Activities. The Trustee shall not permit
the sale, disposition (except in a disposition pursuant to (i) the bankruptcy or
insolvency of any Trust REMIC or (ii) the termination of any Trust REMIC in a
"qualified liquidation" as defined in Section 860F(a)(4) of the Code) or
substitution of the Mortgage Loans (except a substitution pursuant to Sections
2.06(b) or 3.03) or the substitution of a property for a Mortgaged Property, nor
acquire any assets for any Trust REMIC (other than REO Property or a Qualified
Substitute Mortgage Loan pursuant to Sections 2.06(b) or 3.03), nor accept any
contributions to any Trust REMIC (other than a cash contribution during the
3-month period beginning on the Startup Day), unless it has received an Opinion
of Counsel (at the expense of the Person requesting the Trustee to take such
action) to the effect that such disposition, acquisition, substitution, or
acceptance will not (a) affect adversely the status of any Trust REMIC as a
REMIC or of the REMIC I Regular Interests, the REMIC II Regular Interests or the
REMIC III Regular Interests represented by the Class A Certificates and the
Class X Certificates as the regular interests therein, (b) affect the
distribution of interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred or assigned to any Trust REMIC (except
pursuant to the provisions of this Agreement) or (d) cause any Trust REMIC to be
subject to an unindemnified tax on "prohibited transactions" or "prohibited
contributions" pursuant to the REMIC Provisions.
(d) Prohibited Transactions. In the event that any tax is imposed on
"prohibited transactions" of any Trust REMIC as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of any Trust REMIC as
defined in Section 860G(c) of the
47
Code, on any contribution to any Trust REMIC after the Startup Day pursuant to
Section 860G(c) of the Code, or any other tax is imposed, such tax shall be paid
by (i) the Trustee, if such tax arises out of or results from a breach by the
Trustee of any of its obligations under this Agreement, which breach constitutes
negligence or willful misconduct of the Trustee, or (ii) the Servicer, if such
tax arises out of or results from a breach by the Servicer of any of its
obligations under this Agreement, which breach constitutes negligence or willful
misconduct of the Servicer, or (iii) the Depositor, if such tax arises out of or
results from a breach by the Depositor of any of its obligations under this
Agreement.
(e) Interpretation of Agreement. Any inconsistencies or ambiguities in this
Agreement or in the administration of a Trust REMIC shall be resolved in a
manner that preserves the validity of the elections to be treated as three
separate REMICs.
Section 2.08. Execution of Certificates.
-------------------------
The Trustee acknowledges (i) the assignment to it of Mortgage Loans in
trust for the benefit of the Certificateholders and the Certificate Insurer, as
their interests may appear, and subject to the terms and conditions of this
Agreement, and (ii) the delivery of the Mortgage Files as set forth above and,
concurrently with such delivery, in exchange for the Mortgage Loans, the
Mortgage Files and the other assets conveyed by the Depositor pursuant to
Section 2.01 and Section 2.04, the Trustee has executed the Certificates and
caused the Certificates to be authenticated and delivered to or upon the order
of the Depositor, each in Authorized Denominations.
Section 2.09. Application of Principal and Interest.
-------------------------------------
In the event that Net Liquidation Proceeds on a Liquidated Mortgage Loan
are less than the Principal Balance of such Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and such
collections shall be allocated as provided in Section 5.01(h).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Servicer and the Depositor.
-------------------------------------------------
A. Servicer Representations, Warranties and Covenants. The Initial Servicer
and the Successor Servicer (collectively referred to in this Section 3.01 as
"the Servicer") each hereby represents, warrants and covenants to the Trustee,
the Certificate Insurer the NIMS Insurer, each with respect to itself only, and
the Certificateholders as of the Closing Date (in the case of the Initial
Servicer) and as of the Servicing Transfer Date (in the case of the Successor
Servicer); provided that only the Initial Servicer makes the representation and
warranty in Section 3.01.A.(i):
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(a) Organization, Authorization; Enforceability. The Servicer is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction in which it was formed, and has all licenses necessary to carry on
its business as it is now being conducted, and is licensed, qualified and in
good standing in each Mortgaged Property State if the laws of such state require
licensing or qualification in order to conduct business of the type conducted by
the Servicer and perform its obligations as Servicer hereunder; the Servicer has
the power and authority to execute and deliver this Agreement and each Basic
Document to which it is a party and to perform in accordance therewith; the
execution, delivery and performance of this Agreement and the Basic Documents to
which it is a party (including all instruments of transfer to be delivered by
the Initial Servicer pursuant to this Agreement and the Basic Documents to which
it is a party) by the Servicer and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all necessary
action; each of this Agreement and the Basic Documents to which it is a party is
the valid, binding and enforceable obligation of the Servicer; and all requisite
action has been taken by the Servicer to make this Agreement and each Basic
Document to which it is a party valid, binding and enforceable upon the Servicer
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other, similar laws relating to or affecting
creditors' rights generally or the application of equitable principles in any
proceeding, whether at law or in equity.
(b) Actions, Consents and Approvals. All actions, approvals, consents,
waivers, exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency (other
than any such actions, approvals, etc. under any state securities laws, real
estate syndication or "Blue Sky" statutes, as to which the Servicer makes no
such representation or warranty), that are necessary in connection with the
performance by the Servicer of its obligations hereunder or under the Basic
Documents to which it is a party or (in the case of the Initial Servicer only)
the purchase and sale of the Certificates, and the execution and delivery by the
Servicer of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not subject to
any pending proceedings or appeals (administrative, judicial or otherwise) and
either the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the Basic Documents and the
other documents on the part of the Servicer and the performance by the Servicer
of its obligations as the Servicer under this Agreement and such of the other
Basic Documents to which it is a party.
(c) No Breach. The consummation of the transactions contemplated by this
Agreement and the Basic Documents will not result in the breach of any terms or
provisions of the organizational documents or bylaws of the Servicer or result
in the breach of any term or provision of, or conflict with or constitute a
default under or result in the acceleration of any obligation under, any
material agreement, indenture or loan or credit agreement or other material
instrument to which the Servicer or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Servicer or its property is subject.
(d) No Misrepresentations or Omissions. The information in the Prospectus
describing the Initial Servicer and the Expected Successor Servicer,
respectively, does not
49
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. The Initial Servicer
makes the foregoing representation only as to information describing the Initial
Servicer, and the Expected Successor Servicer makes the foregoing representation
only as to information describing the Expected Successor Servicer.
(e) Litigation. There is no action, suit, proceeding or investigation
pending or, to the best of the Servicer's knowledge, threatened, against the
Servicer which, either in any one instance or in the aggregate, may result in
any material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the right
or ability of the Servicer to carry on its business substantially as it is now
conducted, or in any material liability on the part of the Servicer or which
would draw into question the validity of this Agreement or the Mortgage Loans or
any Basic Document to which the Servicer is a party or of any action taken or to
be taken in connection with the obligations of the Servicer contemplated herein,
or which would be likely to impair materially the ability of the Servicer to
perform under the terms of this Agreement or any Basic Document to which it is a
party.
(f) No Defaults. 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 materially and adversely affect its performance hereunder or under the
Basic Documents or under any Subservicing Agreement.
(g) Collection Practices. The collection practices used by the Servicer
with respect to each Mortgage Note and Mortgage have been in and will be all
material respects legal, proper, prudent and customary in the non-conforming
mortgage origination and servicing business.
(h) Approved Seller/Servicer. The Servicer is an approved seller/servicer
of first and second mortgage loans for FNMA, in good standing, and is an
approved servicer of first and second mortgage loans for FHLMC, in good
standing.
(i) Solvency of Depositor. The Depositor is solvent and the Depositor will
not be rendered insolvent as a result of the transfer of the Mortgage Loans to
the Trust Fund or the sale of any of the Certificates. There exist no asserted
or, to the Transferor's knowledge, threatened, claims against the Depositor
which, singly or together, should reasonably be expected to render the Depositor
insolvent. In addition, the Transferor is not aware of any facts which lead it
to conclude that the Depositor should reasonably be expected to become insolvent
prior to termination of this Agreement.
B. Depositor Representations and Warranties. The Depositor hereby
represents and warrants to the Trustee, the Servicer, the Certificate Insurer
and the Certificateholders as of the Closing Date:
(a) Organization; Authorization; Enforceability. The Depositor is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all licenses necessary to carry on its
business as it is now being conducted and is licensed,
50
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Depositor and perform its obligations as the Depositor
hereunder; the Depositor has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement and the Basic Documents to which it is a party
(including all instruments of transfer to be delivered pursuant to this
Agreement and the Basic Documents to which it is a party) by the Depositor and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action; each of this Agreement and each
Basic Document to which the Depositor is a party is the valid, binding and
enforceable obligation of the Depositor; and all requisite action has been taken
by the Depositor to make this Agreement and each Basic Document to which the
Depositor is a party valid, binding and enforceable upon the Depositor in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other, similar laws relating to or affecting
creditors rights generally or the application of equitable principles in any
proceeding, whether at law or in equity.
(b) Actions, Consents and Approvals. All actions, approvals, consents,
waivers, exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency (other
than any such actions, approvals, etc. under any state securities laws, real
estate syndication or "Blue Sky" statutes, as to which the Depositor makes no
such representation or warranty), that are necessary in connection with the
purchase and sale of the Certificates and the execution and delivery by the
Depositor of the Basic Documents to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Basic Documents on the
part of the Depositor and the performance by the Depositor of its obligations as
Depositor under this Agreement, the Transfer Agreement and such of the other
Basic Documents to which it is a party.
(c) No Breach. The consummation of the transactions contemplated by this
Agreement and the Basic Documents will not result in the breach of any terms or
provisions of the bylaws of the Depositor or result in the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Depositor or its
property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Depositor or its property is subject.
(d) No Misrepresentations or Omissions. None of this Agreement, any of the
Basic Documents to which the Depositor is a party or the Prospectus, and no
statement, report or other document prepared by the Depositor and furnished or
to be furnished pursuant to this Agreement or the Basic Documents or in
connection with the transactions contemplated hereby, contains any untrue
statement of material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
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(e) Litigation. There is no action, suit, proceeding or investigation
pending or, to the best of the Depositor's knowledge, threatened, against the
Depositor which, either in any one instance or in the aggregate, may result in
any material adverse change in the business, operations, financial condition,
properties or assets of the Depositor or in any material impairment of the right
or ability of the Depositor to carry on its business substantially as now
conducted, or in any material liability on the part of the Depositor or which
would draw into question the validity of this Agreement or the Basic Documents
or the Mortgage Loans or of any action taken or to be taken in connection with
the obligations of the Depositor contemplated herein, or which would be likely
to impair materially the ability of the Depositor to perform under the terms of
this Agreement or the Basic Documents to which it is a party.
(f) No Defaults. The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Depositor or its properties or might have consequences that
would materially and adversely affect its performance hereunder, under the Basic
Documents to which it is a party.
(g) Title to Mortgage Loans Upon the receipt of each Mortgage File under
this Agreement, the Trustee will have good and indefeasible title on behalf of
the Certificateholders and the Certificate Insurer to each Mortgage Loan (other
than any amounts received on and after the Cut-off Date in respect of interest
accrued prior to the Cut-off Date and other than Prepayment Charges) and such
other items conveyed by the Depositor to the Trustee hereunder, free and clear
of any lien (other than liens which will be simultaneously released).
(h) No Bulk Transfer. The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Depositor pursuant to this Agreement are
not subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction.
(i) No Intent to Defraud Creditors. The Depositor did not transfer any
interest in any Mortgage Loan with any intent to hinder, delay or defraud any of
its creditors.
(j) Solvency. The Depositor is solvent and the Depositor will not be
rendered insolvent as a result of the transfer of the Mortgage Loans to the
Trust Fund or the sale of any of the Certificates. There exist no asserted or,
to the Depositor's knowledge, threatened, claims against the Depositor which,
singly or together, should reasonably be expected to render the Depositor
insolvent.
(k) No Amendments to Depositor's Charter. The Depositor will not amend
Articles THIRD, NINTH, TENTH and ELEVENTH of its Certificate of Incorporation
without the prior written consent of the Certificate Insurer and the Rating
Agencies.
(l) No Downgrade. The Depositor will not engage in any activity which would
result in a downgrading of the Certificates by any Rating Agency or in a
downgrading of the "shadow rating" (that is, the rating without taking into
account any Certificate Insurance Policy) below investment grade by any Rating
Agency.
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Section 3.02. Assignment of Transfer Agreement; Representations and
-----------------------------------------------------
Warranties as to the Individual Mortgage Loans and the Mortgage Pool.
--------------------------------------------------------------------
Pursuant to Section 2.01, the Depositor assigns to the Trustee (for the
benefit of the Certificateholders and the Certificate Insurer, as their
interests may appear) all of its right, title and interest in, to and under the
Transfer Agreement including, without limitation, the representations and
warranties of the Transferor made to the Depositor pursuant to Section 3.01 of
the Transfer Agreement. The Depositor hereby represents and warrants to the
Trustee that the Depositor has taken no action which would cause such
representations and warranties of the Transferor to be false in any material
respect as of the Closing Date, and acknowledges that the Trustee relies on the
representations and warranties of the Depositor under this Agreement and of the
Transferor under the Transfer Agreement in accepting the Mortgage Loans and
executing and delivering the Certificates. The foregoing representation and
warranty speaks as of the Closing Date, but shall survive the transfer and
assignment of the Mortgage Loans to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear.
The Depositor hereby represents and warrants as follows to the Trustee,
the Certificate Insurer and the Certificateholders, with respect to each
Mortgage Loan as of the Closing Date (except as otherwise indicated); provided,
that all references to percentages of the Mortgage Loans in this Section 3.02
refer in each case to the percentage of the aggregate Principal Balance of the
Mortgage Loans (or of the Mortgage Loans in Mortgage Loan Group 1, Mortgage Loan
Group 2, Mortgage Loan Group 3 or Mortgage Loan Group 4, as applicable) as of
the Cut-off Date (rounded to two decimal points):
(a) Mortgage Loan Schedules. The information with respect to each related
Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct.
(b) Delivery of Documents. All of the original or certified documentation
set forth in Section 2.04 (including all material documents related thereto) has
been or will be delivered to the Trustee (or the Custodian on behalf of the
Trustee) on the Closing Date or as otherwise provided in Section 2.04.
(c) Servicing. Each Mortgage Loan is being serviced by the Initial Servicer
or one or more Subservicers.
(d) Mortgage Interest Rates. The Mortgage Note related to each Mortgage
Loan in Mortgage Loan Group 1, Mortgage Loan Group 2, Mortgage Loan Group 3 and
Mortgage Loan Group 4 bears a fixed Mortgage Interest Rate.
(e) Balloon Loans and Amortizing Loans. Mortgage Loans constituting
approximately 12.68% of the Mortgage Loans in Mortgage Loan Group 1,
approximately 21.70% of the Mortgage Loans in Mortgage Loan Group 2,
approximately 29.01% of the Mortgage Loans in Mortgage Loan Group 3 and
approximately 23.52% of the Mortgage Loans in Mortgage Loan Group 4, are balloon
loans which will provide for a final Monthly Payment substantially greater than
the preceding Monthly Payments. Approximately 12.64% of the Mortgage Loans in
Mortgage Loan Group 1, approximately 21.68% of the Mortgage Loans in Mortgage
Loan Group 2, approximately 28.95% of the Mortgage Loans in Mortgage Loan
53
Group 3 and approximately 23.47% of the Mortgage Loans in Mortgage Loan Group 4,
are balloon loans based on a 30-year amortization schedule. Approximately 0.02%,
0.18%, 2.71% and 9.77% of the Mortgage Loans in Mortgage Loan Group 1 provide
for a single payment of the remaining loan balances approximately 5, 7, 10, and
15 years, respectively, after origination. Approximately 0.03%, 0.11%, 1.68% and
19.88% of the Mortgage Loans in Mortgage Loan Group 2 provide for a single
payment of the remaining loan balances approximately 5, 7, 10, and 15 years,
respectively, after origination. Approximately 0.01%, 0.09%, 0.60% and 28.31% of
the Mortgage Loans in Mortgage Loan Group 3 provide for a single payment of the
remaining loan balances approximately 5, 7, 10, and 15 years, respectively,
after origination. Approximately 0.11%, 0.06%, 2.39% and 20.96% of the Mortgage
Loans in Mortgage Loan Group 4 provide for a single payment of the remaining
loan balances approximately 5, 7, 10, and 15 years, respectively, after
origination. All of such balloon loans provide for Monthly Payments based on an
amortization schedule specified in the related Mortgage Note and have a final
balloon payment no earlier than 60 months following origination and no later
than 180 months following origination. Each other Mortgage Note will provide for
a schedule of substantially equal Monthly Payments which are, if timely paid,
sufficient to fully amortize the principal balance of such Mortgage Note on or
before its maturity date.
(f) Valid Lien; Mortgaged Property Types. Each Mortgage relating to a
Mortgage Loan in Mortgage Loan Group 1, Mortgage Loan Group 2, Mortgage Loan
Group 3 and Mortgage Loan Group 4 is a valid and subsisting first or second lien
on the Mortgaged Property subject, in the case of any second Mortgage Loan, only
to a First Lien on such Mortgaged Property, and subject in all cases to the
exceptions to title set forth in the title insurance policy or the other
evidence of title enumerated in paragraph 4 of Exhibit A hereto, with respect to
the related Mortgage Loan, which exceptions are generally acceptable to first
and second lien mortgage lending companies, and such other exceptions to which
similar properties are commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage.
(i) Each Mortgage Loan is principally secured by Mortgaged Property.
Each Mortgaged Property is improved by a one- to four-family Residential
Dwelling, which, to the best of the Depositor's knowledge, does not include
(A) cooperatives, (B) mobile homes other than permanently affixed mobile
homes which constitute real property under state law, or (C) except for not
more than approximately 0.65% of the Mortgage Loans in Mortgage Loan Group
1, 0.57% of the Mortgage Loans in Mortgage Loan Group 2, 0.49% of the
Mortgage Loans in the Mortgage Loan Group 3 and 0.89% of the Mortgage Loans
in Mortgage Loan Group 4, manufactured housing units, as defined in the
FNMA Selling Guide, which constitute other than real property under state
law. Each manufactured home securing a Mortgage Loan is a "single family
residence" as defined in Section 25(e)(10) of the Code that is used as a
single family residence, has a minimum living space of 400 square feet and
a minimum width of 102 inches and is of the kind customarily used at a
fixed location; and
(ii) With respect to each Mortgage Loan involving property improved by
a manufactured or mobile home, the Transferor or the related Originator has
taken all action necessary to create a valid and perfected first or second
priority (as reflected in the Mortgage Loan Schedule) lien and security
interest in such manufactured or mobile home
54
and the related Mortgaged Property, including, without limitation, the
filing of UCC financing statements or notations on certificates of title if
necessary, under applicable state law.
(g) Ownership of Mortgage Loans. Immediately prior to the transfer and
assignment herein contemplated, the Depositor held good and indefeasible title
to, and was the sole owner of, each Mortgage Loan, subject to no liens, charges,
mortgages, encumbrances or rights of others (except any liens released
immediately prior to the Depositor's transfer of the Mortgage Loans to the
Trustee); and immediately upon the transfer and assignment herein contemplated,
the Trustee, for the benefit of the Certificateholders and the Certificate
Insurer, will hold good and indefeasible title, to, and be the sole owner of,
each Mortgage Loan (other than amounts collected on the Mortgage Loans in
respect of interest accrued prior to the Cut-off Date) subject to no liens,
charges, mortgages, encumbrances or rights of others.
(h) Delinquencies. Approximately 3.07% of the Mortgage Loans in Mortgage
Loan Group 1, approximately 2.95% of the Mortgage Loans in Mortgage Loan Group
2, approximately 3.07% of the Mortgage Loans in the Mortgage Loan Group 3 and
approximately 3.55% of the Mortgage Loans in Mortgage Loan Group 4 are 30 or
more days contractually delinquent as of the close of business on November 30,
2001; and none of the Mortgage Loans in the Mortgage Pool are more than 59 days
contractually delinquent as of the close of business on November 30, 2001. For
purposes of this representation and warranty "30 or more days contractually
delinquent" means that a Monthly Payment due on a Due Date was unpaid as of the
end of the month of the next succeeding Due Date or following Due Dates. As of
the Closing Date, the Depositor does not know or have reason to know of any
facts or circumstances with respect to any Mortgagor or Mortgage Loan that would
indicate that foreclosure is likely to occur with respect to the related
Mortgaged Property.
(i) Delinquent Taxes; Good Repair. To the best of the Depositor's
knowledge, (i) there is no delinquent tax or assessment lien on any Mortgaged
Property that would jeopardize the Depositor's enforcement of the lien of the
applicable Mortgage, and (ii) each Mortgaged Property is free of material damage
and is in average repair.
(j) No Defenses. No Mortgage Loan 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 the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable in whole or in part, or subject 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.
(k) No Mechanics' Liens. To the best of the Depositor's knowledge, there is
no mechanics' lien or claim for work, labor or material affecting any Mortgaged
Property which is or may be a lien prior to, or equal with, the lien of such
Mortgage except those which are insured against by the title insurance policy
referred to in Section 3.02(m) below.
(l) Compliance with Laws. Each Mortgage Loan at the time it was made
complied in all material respects with applicable state and federal laws and
regulations, including, without limitation, usury, equal credit opportunity and
disclosure laws.
55
(m) Title Insurance. With respect to each Mortgage Loan, other than (i) any
Mortgage Loan secured by a second priority lien and having an original Principal
Balance not in excess of $50,000 and (ii) any Mortgage Loan with an original
Principal Balance not in excess of $50,000 which is secured by a first priority
Mortgage on a Mortgaged Property located in Oklahoma, a written commitment for a
lender's title insurance policy, issued in standard American Land Title
Association or California Land Title Association form, or other form customary
and acceptable in the related Mortgaged Property State, by a title insurance
company acceptable to FNMA and FHLMC and authorized to transact business in the
state in which the related Mortgaged Property is situated, together with a
condominium endorsement, if applicable, in an amount at least equal to the
original Principal Balance of such Mortgage Loan insuring the mortgagee's
interest under the related Mortgage Loan as the holder of a valid first or
second mortgage lien of record on the real property described in the Mortgage,
subject only to (1) in the case of any second lien Mortgage Loan, a First Lien
on the same Mortgaged Property, (2) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date of
recording of the related Mortgage, such exceptions being set forth in the title
insurance policy or attorney's opinion of title and in the related appraisal,
with respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and (3) such other exceptions to which similar properties
are commonly subject and which do not, individually or in the aggregate,
materially and adversely affect the benefits of the security intended to be
provided by the related Mortgage, was effective on the date of the origination
of such Mortgage Loan, and, as of the Closing Date, such commitment will be
valid and thereafter the policy issued pursuant to such commitment shall
continue in full force and effect or, with respect to Mortgaged Properties
located in jurisdictions in which it is customary and acceptable to obtain an
assurance of title in lieu of a title insurance policy, such assurance of title
has been obtained.
(n) Hazard Insurance. The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire and extended coverage representing
coverage described in Sections 5.07 and 5.08.
(o) Flood Insurance. A flood insurance policy is in effect with respect to
each Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Section 5.07 or 5.08, if and to the extent
required by Section 5.07 or 5.08.
(p) Mortgage Documents Enforceable. Each Mortgage and Mortgage Note is the
legal, valid and binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), and all parties to each Mortgage Loan had full legal capacity to
execute all Mortgage Loan documents and convey the estate therein purported to
be conveyed.
(q) Enforcement of Insurance. The Depositor has directed the Servicer to
perform any and all acts required to be performed to preserve the rights and
remedies of the Trustee in any insurance policies applicable to the Mortgage
Loans including, without limitation, any
56
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Trustee.
(r) Geographic Concentration. No more than approximately 0.10% of the
Mortgage Loans in Mortgage Loan Group 1, approximately 0.15% of the Mortgage
Loans in Mortgage Loan Group 2, no more than approximately 0.22% of the Mortgage
Loans in Mortgage Loan Group 3 and no more than approximately 0.27% of the
Mortgage Loans in Mortgage Loan Group 4, are secured by Mortgaged Properties
located within any single five-digit zip code area within the State of
California. No more than approximately 0.30% of the Mortgage Loans in Mortgage
Loan Group 1, no more than approximately 0.23% of the Mortgage Loans in Mortgage
Loan Group 2, no more than approximately 0.21% of the Mortgage Loans in Mortgage
Loan Group 3 and no more than approximately 0.17% of the Mortgage Loans in
Mortgage Loan Group 4, are secured by Mortgaged Properties located within any
single five-digit zip code area outside the State of California.
(s) Owner Occupancy. At least approximately 91.10% of the Mortgage Loans in
Mortgage Loan Group 1, approximately 92.00% of the Mortgage Loans in Mortgage
Loan Group 2, approximately 92.71% of the Mortgage Loans in the Mortgage Loan
Group 3 and approximately 85.16% of the Mortgage Loans in Mortgage Loan Group 4,
are secured by an Owner Occupied Mortgaged Property.
(t) No Amendment. The terms of the Mortgage Note and the Mortgage have not
been impaired, altered or modified in any material respect, except by a written
instrument which has been recorded or is in the process of being recorded, if
necessary to protect the interests of the Trustee, and which has been or will be
delivered to the Trustee. The substance of any such alteration or modification
is reflected on the related Mortgage Loan Schedule. Each original Mortgage was
recorded, and all subsequent assignments of the original Mortgage (other than
the Assignment to the Trustee) have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Depositor (or, subject to Section 2.04 hereof, are
in the process of being recorded).
(u) No Release or Waiver. No instrument of release or waiver has been
executed in connection with the Mortgage Loan, and no Mortgagor has been
released, in whole or in part, from his or her obligations under the related
Mortgage, Mortgage Note and other related documents.
(v) All Taxes Paid. Except for Existing Advances, the Servicer has not
advanced funds, or induced, solicited or knowingly received any advance of funds
by a party other than the Mortgagor, directly or indirectly, for the payment of
any amount required by the Mortgage, except for interest accruing from the date
of the Mortgage Note or date of disbursement of the Mortgage proceeds, whichever
was earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest. With respect to Mortgaged Properties that
are the subject of a ground lease, to the best of the Depositor's knowledge, all
lease rents, and all other payments or assessments that have become due have
been paid and the Mortgagor is not in material default under any other
provisions of the lease and the lease is valid, in good standing and in full
force and effect.
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(w) No Condemnation. To the best of the Depositor's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation of the
Mortgaged Property, nor is such a proceeding currently in process, and the
Mortgaged Property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty, so as to affect adversely the value
of the Mortgaged Property as security for the Mortgage Loan or the use for which
the premises were intended.
(x) No Encroachment. To the best of the Depositor's knowledge, all of the
improvements which were 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.
(y) Zoning. To the best of the Depositor's knowledge, no improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation. To the best of the Depositor's knowledge,
all inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property, including but not
limited to certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities.
(z) No Future Advances. The proceeds of the Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording documents with respect to the Mortgage Loans were
paid.
(aa) No Other Collateral. The related Mortgage Note is not and has not been
secured by any collateral, pledged account or other security except the lien of
the corresponding Mortgage.
(bb) No Buydown. No Mortgage Loan was originated under a buydown plan.
(cc) No Depositor Payment Obligation There is no obligation on the part of
the Depositor or any other party to make payments in addition to those made by
the Mortgagor.
(dd) Deeds of Trust. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Trustee to the trustee
under such deed of trust, except in connection with a trustee's sale after
default by the Mortgagor.
(ee) No Shared Appreciation or Contingent Interest. No Mortgage Loan has a
shared appreciation feature or other contingent interest feature.
(ff) First Lien Payments. With respect to each Mortgage Loan secured by a
second priority lien, the related First Lien requires equal monthly payments, or
if it bears an adjustable
58
interest rate, the monthly payments for the related First Lien may be adjusted
not more frequently than once every six months.
(gg) First Lien Consent. With respect to each Mortgage Loan secured by a
second priority lien, either (i) no consent for the Mortgage Loan was or is
required by the holder of the related First Lien or (ii) such consent has been
obtained and is contained in the Mortgage File.
(hh) Maturity of First Liens. The maturity date of each Mortgage Loan
secured by a second priority lien is prior to the maturity date of the related
First Lien if such First Lien provides for a balloon payment.
(ii) Licensing. All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein the related Mortgaged Property is located, and (2)(A) organized under
the laws of such state, or (B) qualified to do business in such state, or (C)
federal savings and loan associations or national banks having principal offices
in such state, or (D) not doing business in such state so as to require
qualification or licensing.
(jj) Due-on-Sale Clauses. The Mortgage contains a customary provision for
the acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event the related security for the Mortgage Loan is sold without the
prior consent of the mortgagee thereunder.
(kk) Consolidation of Advances. Except for Existing Advances, any future
advances made to the Mortgagor prior to (and excluding) the Cut-off Date have
been consolidated with the outstanding principal amount secured by the Mortgage,
and the secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the related Mortgage Loan Schedule. The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan. The Mortgage Note does not permit or obligate the Servicer to
make future advances to the Mortgagor at the option of the Mortgagor.
(ll) Customary and Enforceable Provisions. The related Mortgage contains
customary and enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged Property of
the benefits of the security purported to be provided by the Mortgage,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial or non-judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage (subject to the applicable
federal and state laws and judicial precedent with respect to bankruptcy and
rights of redemption) except as set forth in the Prospectus.
(mm) No Defaults. Except for payment delinquencies described in Section
3.02(h), to the best of the Depositor's knowledge, there is no default, breach,
violation or event of acceleration existing under the 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
59
constitute a default, breach, violation or event of acceleration; and neither
the Servicer nor the Depositor has waived any such default, breach, violation or
event of acceleration.
(nn) Due Execution. 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 have been duly and properly executed by such parties.
(oo) Payments Properly Deposited. All amounts received on and after the
Cut-off Date with respect to the Mortgage Loans that are required to be
deposited into the Principal and Interest Account pursuant to Section 5.03 have
been so deposited.
(pp) Origination and Underwriting. Each Mortgage Loan was originated and
underwritten by, or purchased and re-underwritten by, the Transferor or by an
affiliate of the Transferor, provided, that, with respect to one segment of the
Mortgage Loans purchased by the Originators from a third-party, which segment
comprises approximately 11.72% of the Mortgage Loans, only a random sample of
approximately 10.00% of such purchased segment was re-underwritten by the
Transferor or by an Affiliate of the Transferor.
(qq) Prospectus Disclosure. As of the Cut-off Date, each Mortgage Loan
conforms, and all Mortgage Loans in the aggregate conform, in all material
respects, to the description thereof set forth in the Prospectus, including all
statistical data provided therein in tabular format or otherwise.
(rr) No Adverse Selection. The Mortgage Loans were not selected by the
Originators, the Transferor or the Depositor for transfer to the Trustee (for
the benefit of the Certificateholders and the Certificate Insurer) hereunder on
any basis intended to adversely affect the assets of the Trust.
(ss) Interior Inspections. A full interior inspection appraisal was
performed in connection with each Mortgaged Property; provided, that for certain
loans with Combined Loan-To-Value Ratios less than 85% and balances less than
$50,000, interior inspections may not have been performed.
(tt) Mortgage Interest Rate Ranges. The Mortgage Interest Rate for each
Mortgage Loan in Mortgage Loan Group 1 is not less than 1.65% per annum; the
Mortgage Interest Rate for each Mortgage Loan in Mortgage Loan Group 2 is not
less than 5.00% per annum; the Mortgage Interest Rate for each Mortgage Loan in
Mortgage Loan Group 3 is not less than 5.50% per annum; and the Mortgage
Interest Rate for each Mortgage Loan in Mortgage Loan Group 4 is not less than
5.50% per annum; and the Mortgage Interest Rate for each Mortgage Loan in
Mortgage Loan Group 1 is not more than 18.79% per annum; the Mortgage Interest
Rate for each Mortgage Loan in Mortgage Loan Group 2 is not more than 18.01% per
annum; the Mortgage Interest Rate for each Mortgage Loan in Mortgage Loan Group
3 is not more than 18.55% per annum; and the Mortgage Interest Rate for each
Mortgage Loan in Mortgage Loan Group 4 is not more than 21.50% per annum.
(uu) HOEPA Loans. None of the Mortgage Loans in Mortgage Loan Group 1,
Mortgage Loan Group 2, or Mortgage Loan Group 3 is subject to HOEPA. With
respect to any
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Mortgage Loan in Mortgage Loan Group 4 that is subject to HOEPA, all notices
required to be delivered to the related Mortgagor pursuant to HOEPA have been
delivered, and all other requirements of HOEPA have been complied with.
(vv) Hazard Policies Enforceable. Each hazard insurance policy required to
be maintained under Section 5.07 of this Agreement with respect to such Mortgage
Loan is a valid, binding, enforceable and subsisting insurance policy of its
respective kind and is in full force and effect.
(ww) Leasehold Interests. If the Mortgaged Property consists of a leasehold
estate, the Mortgage covers property improvements and the Mortgagor's leasehold
interest in the land upon which such improvements are situated; at origination
of the Mortgage Loan the term of the leasehold estate was scheduled to last for
at least ten years beyond the maturity date of the Mortgage or provided for
perpetual renewal covenants; the leasehold estate is assignable by the
Mortgagee; and the lease is valid and in full force and effect.
(xx) Environmental Matters. To the best of the Depositor's knowledge, no
Mortgaged Property was, at origination, located within a one-mile radius of any
site with material environmental or hazardous waste risks.
(yy) Conforming Balances. Each Mortgage Loan had an original principal
balance that was lower than the maximum principal balance for Mortgage Loans
that are eligible for purchase by ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ Mac.
(zz) CLTVs. With respect to each Mortgage Loan, the CLTV does not exceed
100%. To the extent there is no documentation evidencing an appraisal with
respect to a Mortgage Loan, such Mortgage Loan was originated pursuant to a
program that required an appraisal of the Mortgaged Property securing the
Mortgage Loan that established a CLTV of less than 100%. In addition, no
Mortgage Loan has been modified since the date it was originated in a manner
that would change the Mortgage Interest Rate, defer or forgive the payment of
any principal or interest, extend the final maturity date, or modify any other
material term of the Mortgage Loan unless such Mortgage Loan was delinquent or
in default at the time of such modification.
(aaa) REMIC Qualified Mortgages. Each Mortgage Loan constitutes a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code. For
this purpose, Section 860G(a)(3) of the Code shall be applied without regard to
the rule contained in Treasury Regulations Section 1.860G-2(f)(2) which treats a
defective mortgage loan as a "qualified mortgage" under certain circumstances.
Accordingly, the Depositor represents and warrants that each Mortgage Loan is
directly secured by a Mortgage on residential real property, and either (1)
substantially all of the proceeds of such Mortgage Loan were used to acquire,
improve or protect such residential real property and such interest in
residential real property was the sole security for such Mortgage Loan as of the
Testing Date (as defined below), or (2) the fair market value of the interest in
real property which secures such Mortgage Loan was at least equal to 80% of the
principal amount of the Mortgage Loan (a) as of the Testing Date or (b) as of
the Closing Date. For purposes of the previous sentence, (1) the fair market
value of the referenced interest in real property shall first be reduced by (a)
the amount of any lien on such interest in real property that is senior to the
lien of the Mortgage Loan, and (b) a proportionate amount of
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any lien on such interest in real property that is on a parity with the Mortgage
Loan, and (2) the "Testing Date" shall be the date on which the referenced
Mortgage Loan was originated unless (a) such Mortgage Loan was modified after
the date of its origination in a manner that would cause a "significant
modification" of such Mortgage Loan within the meaning of Treasury Regulations
Section 1.1001-3(e), and (b) such "significant modification" did not occur at a
time when such Mortgage Loan was in default or when default with respect to such
Mortgage Loan was reasonably foreseeable. However, if the referenced Mortgage
Loan has been subjected to a "significant modification" after the date of its
origination and at a time when such Mortgage Loan was not in default or when
default with respect to such Mortgage Loan was not reasonably foreseeable, the
"Testing Date" shall be the date upon which the latest such "significant
modification" occurred.
(bbb) Transfer Agreement. The representations and warranties with respect
to the Mortgage Loans and Mortgage Pool set forth in Section 3.02(a) through
(aaa), inclusive, have been made to the Depositor by the Transferor pursuant to
Section 3.02(a) through (aaa), inclusive, of the Transfer Agreement with respect
to the Mortgage Loans and the Mortgage Pool, and each of the Trustee and the
Certificate Insurer and the NIMS Insurer is entitled to rely thereon.
Section 3.03. Purchase and Substitution.
-------------------------
It is understood and agreed that the representations and warranties set
forth in Sections 3.01 and 3.02 shall survive transfer of the Mortgage Loans and
delivery of the Certificates hereunder. Upon discovery by the Depositor, the
Servicer, any Subservicer, any Custodian, a Responsible Officer of the Trustee,
the NIMS Insurer or the Certificate Insurer of a breach of any of such
representations and warranties which materially and adversely affects the value
of Mortgage Loans or the interest of the Trustee, the Certificateholders, the
NIMS Insurer or the Certificate Insurer (in the case of representations and
warranties made in Section 3.01), or which materially and adversely affects the
interests of the Trustee, the Certificate Insurer, or the Certificateholders in
the related Mortgage Loan in the case of a representation and warranty made in
Section 3.02 relating to a particular Mortgage Loan (notwithstanding that such
representation and warranty was made to the Depositor's best knowledge), the
party discovering such breach shall give prompt written notice to the others
(either of the foregoing, a "Material Breach"). Within 60 days of the earlier of
its discovery or its receipt of notice of any Material Breach, the Transferor
shall (a) promptly cure, or cause the Depositor to cure, such Material Breach in
all material respects, or (b) promptly purchase, or cause the Depositor to
purchase, such Mortgage Loan, in the manner and at the price specified in
Section 2.06(b), by depositing such price into the Principal and Interest
Account on the next succeeding Determination Date (after deducting therefrom any
amounts received in respect of such purchased Mortgage Loan or Loans and held in
the Principal and Interest Account for future distribution), or (c) promptly
substitute, or cause the Depositor to substitute, one or more Qualified
Substitute Mortgage Loans, provided such substitution is effected not later than
the date which is two years after the Closing Date. Any such substitution shall
be accompanied by payment of the Substitution Adjustment, if any, to be
deposited in the Principal and Interest Account; provided that if such breach of
a representation or warranty caused such Mortgage Loan not to be a "qualified
mortgage" within the meaning of Code Section 860G(a)(3), such repurchase or, if
applicable, substitution shall occur within 75 days of the earlier of (i) the
delivery of the Trustee's interim
62
certification under the Pooling and Servicing Agreement or (ii) the Trustee's,
the Depositor's or the Transferor's discovery, or receipt of notice from the
Trustee or the Servicer of the discovery of such defect. It is understood that
(i) a failure of a Mortgage File to contain a Mortgage Note (or a lost note
affidavit as permitted by paragraph (1) on Exhibit A) or a Mortgage (with or
without evidence of recording), (ii) the inclusion in the Mortgage Pool of a
Mortgage Loan with a CLTV greater than 100% which also fails to meet the
requirement that it be "principally secured by an interest in real property"
within the meaning of Treasury Regulation 1.860G-2(a)(1), or (iii) any other
Mortgage File defect that causes the related Mortgage Loan not to be a
"qualified mortgage" within the meaning of Code Section 860G(a)(3) constitutes a
Material Breach. Notwithstanding anything to the contrary herein (except as
stated in the preceding sentence), a breach of a representation and warranty
with respect to a particular Mortgage Loan shall not be considered to be a
Material Breach unless and until a Mortgage Loan Loss is incurred on the related
Mortgage Loan as the direct and proximate result of the breach. In the event of
a Mortgage Loan Loss resulting directly and proximately from such a breach,
which Mortgage Loan Loss is determined following liquidation of the related
Mortgage Loan, it is understood that the Transferor may satisfy its repurchase
obligation by depositing the amount of the Mortgage Loan Loss into the Principal
and Interest Account on the next succeeding Determination Date (after deducting
therefrom any amounts received in respect of such liquidated Mortgage Loans and
held in the Principal and Interest Account for future distribution).
Notwithstanding the foregoing, the inclusion of any Mortgage Loan subject to
HOEPA in Mortgage Loan Group 1, Mortgage Loan Group 2 or Mortgage Loan Group 3
in breach of the representation in Section 3.02 (uu), and any breach of the
representation in Section 3.02(uu) as to any Mortgage Loan subject to HOEPA in
Mortgage Loan Group 4, shall constitute a Material Breach, and such Mortgage
Loan must be repurchased or substituted by no later than the third Business Day
following the 60th day after the Transferor's receipt of actual knowledge that
such Mortgage Loan is subject to HOEPA or that such representation was breached.
As to any Deleted Mortgage Loan for which a Qualified Substitute Mortgage
Loan or Loans is substituted, the Transferor or the Depositor shall effect such
substitution by delivering to the Trustee (or the Custodian on behalf of the
Trustee), a certification in the form of Exhibit B attached to the Custodial
Agreement, executed by a Responsible Officer of the Depositor or the Transferor
(with a copy to the Trustee), and delivering to the Trustee (or the Custodian on
behalf of the Trustee) the documents constituting the Mortgage File for such
Qualified Substitute Mortgage Loan or Loans. The Trustee or the Custodian shall
review the Mortgage Files for Qualified Substitute Mortgage Loans, and deliver
certifications reporting on such review, as described in Section 2.06(a).
The Servicer shall deposit in the Principal and Interest Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution; provided, however, that any amounts
received after the date of substitution in respect of interest accrued prior to
the date of substitution on such Qualified Substitute Mortgage Loan will
constitute the property of the Depositor. Monthly Payments received with respect
to Qualified Substitute Mortgage Loans on or before the date of substitution
will be remitted by the Servicer to the Transferor or the Depositor, as the case
may be. The Trustee will own, for the benefit of the Certificateholders and the
Certificate Insurer, all payments received on the Deleted Mortgage Loan on or
before the date of substitution, and the Servicer shall remit to the Transferor
or the Depositor as the case may be, all amounts subsequently received in
respect of
63
such Deleted Mortgage Loan. The Transferor or the Depositor shall give written
notice to the Trustee, the Transferor and the Certificate Insurer that such
substitution has taken place and the Custodian shall amend the Mortgage Loan
Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of
this Agreement and the substitution of the Qualified Substitute Mortgage Loan.
Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall
be subject to the terms of this Agreement in all respects, and the Depositor
shall be deemed to have made with respect to such Qualified Substitute Mortgage
Loan or Loans, as of the date of substitution, the covenants, representations
and warranties set forth in Sections 3.01 and 3.02. On the date of such
substitution, the Depositor or the Transferor, as the case may be, will remit to
the Servicer, and the Servicer will deposit into the Principal and Interest
Account, an amount equal to the Substitution Adjustment, if any.
It is understood and agreed that the obligations of the Transferor and the
Depositor set forth in Sections 2.06 and 3.03 to cure, purchase or substitute or
cause to be cured, purchased or substituted for a defective Mortgage Loan as
provided in Sections 2.06 and 3.03, constitute the sole remedies of the Trustee,
the Certificate Insurer and the Certificateholders respecting a breach of the
representations and warranties contained in this Article III, except for any
guaranty of such obligations from a parent company of the Transferor.
Any cause of action against the Depositor or the Transferor relating to or
arising out of a defect in a Mortgage File as contemplated by Section 2.06 or
the breach of any representations and warranties made in Sections 3.01 or 3.02
shall arise as to any Mortgage Loan upon the occurrence of not less than all of
the following events: (i) discovery of such defect or breach by any party and
notice thereof to the Depositor or the Transferor or notice thereof by the
Depositor or the Transferor to the Trustee, the Certificate Insurer, the NIMS
Insurer and the Servicer, (ii) failure by the Depositor or the Transferor to
cure or cause to be cured such defect or breach or purchase or substitute or
cause to be purchased or substituted such Mortgage Loan with the cure period
referred to above, and (iii) demand upon the Depositor or the Transferor by the
Trustee, the Certificate Insurer or the Servicer for all amounts payable in
respect of such Mortgage Loan. The party delivering such notice shall also
deliver a copy thereof to the Certificate Insurer.
The Trustee shall give prompt written notice to ▇▇▇▇▇'▇, S&P, Fitch, the
Certificate Insurer and to each Certificateholder of any repurchase or
substitution made pursuant to this Section 3.03 or Section 2.06(b).
Section 3.04. Representations and Warranties of the Transferor regarding
----------------------------------------------------------
Prepayment Charges.
------------------
The Transferor made certain representations regarding the Prepayment
Charges in Section 4.29 of the Purchase and Sale Agreement and agreed to a
remedy for breach of that representation in Section 8.5 of the Purchase and Sale
Agreement, and the Transferor hereby covenants that, if the Transferor sells the
Prepayment Charges to the Expected Successor Servicer, then the Expected
Successor Servicer may assign those representations and the related rights to
remedies for breach thereof to any assignees of the Expected Successor Servicer
with respect to the Prepayment Charges.
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ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates.
----------------
(a) Designations and Denominations. The Class A-1, Class A-2, Class A-3,
Class A-4,Class X, Class R-I, Class R-II and Class R-III Certificates shall be
substantially in the forms annexed hereto as Exhibits ▇-▇, ▇-▇, ▇-▇, ▇-▇, ▇-▇,
▇-▇, B-7 and B-8, respectively, with reverse sides in substantially the form of
Exhibit B-9 annexed hereto. The Class A Certificates shall be issued in minimum
denominations of $100,000 and in integral multiples of $1 in excess thereof. The
Class X Certificates shall be issued in minimum denominations of 25% Percentage
Interest and in integral multiples of 1% Percentage Interest in excess thereof.
The Class R-I, Class R-II and Class R-III Certificates shall be issued in a
minimum denomination of 100% Percentage Interest. All Certificates shall be
executed by manual or facsimile signature on behalf of the Trustee by at least
one authorized officer and authenticated by the manual signature of an
authorized officer. Certificates bearing the signatures of individuals who were
at the time of the execution of the Certificates the authorized officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the delivery of such Certificates
or did not hold such offices at the date of such Certificates. All Certificates
issued hereunder shall be dated the date of their authentication.
(b) Book-Entry Certificates. The Class A Certificates, upon original
issuance, shall be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to the
Depository or pursuant to the Depository's instructions on behalf of the
Depository to, and deposited with, the Certificate Custodian. Such Class A
Certificate or Certificates shall initially be registered on the Certificate
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Certificate Owner of a Class A Certificate or Certificates shall receive a
definitive Class A Certificate representing such Certificate Owner's interest in
such Class A Certificate, except as provided in Section 4.01(c). Unless and
until definitive fully registered Class A Certificates (the "Definitive
Certificates") shall have been issued to Certificate Owners pursuant to Section
4.01(c):
(i) the provisions of this Section 4.01(b) shall be in full force and
effect;
(ii) the Certificate Registrar and the Trustee shall be entitled to
deal with the Depository for all purposes of this Agreement (including the
payment of principal of and interest on the Certificates and the giving of
instructions or directions hereunder) as the sole Holder of the Class A
Certificates, and shall have no obligation to the Certificate Owners with
respect thereto;
(iii) to the extent that the provisions of this Section 4.01(b)
conflict with any other provisions of this Agreement, the provisions of
this Section 4.01(b) shall control;
(iv) the rights of the Certificate Owners with respect to the Class A
Certificates shall be exercised only through the Depository and shall be
limited to those established by law and agreements between such Certificate
Owners and the Depository and/or the
65
Depository Participants. Unless and until Definitive Certificates are
issued pursuant to Section 4.01(c), the initial Depository will make
book-entry transfers among the Depository Participants and receive and
transmit payments of principal of and interest on the Class A Certificates
to such Depository Participants;
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Certificates evidencing
a specified aggregate Percentage Interest, the Depository shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Depository
Participants owning or representing, respectively, such required aggregate
Percentage Interest of Class A Certificates (taking into account the
proviso contained in the definition of "Certificateholder" contained
herein) and has delivered such instructions to the Trustee; and
(vi) whenever a notice or other communication to the Class A
Certificateholders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 4.01(c), the Trustee shall give all such notices and
communications specified herein to be given to Class A Certificateholders
to the Depository and shall have no further obligation to the Certificate
Owners of the Class A Certificates.
provided, however, that the provisions of this Section 4.01(b) shall not be
applicable in respect of Class A Certificates issued to the Depositor. The
Depositor or the Trustee may set a record date for the purpose of determining
the identity of Holders of Class A Certificates entitled to vote or to consent
to any action by vote as provided in this Agreement.
(c) Definitive Certificates. The Class X, Class R-I, Class R-II and Class
R-III Certificates shall be issued in the form of Definitive Certificates. With
respect to the Class A Certificates, if (i) the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities with respect to the Class A Certificates, and the Depositor
is unable to locate a qualified successor; (ii) the Depositor at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository; or (iii) after the occurrence of a Servicer Default, a
Majority in Aggregate Voting Interest (not including any portion thereof
attributable to the Class X Certificates) advise the Depository in writing that
the continuation of a book-entry system through the Depository is no longer in
the best interests of the Certificate Owners of the Class A Certificates, then
the Depository shall notify all Certificate Owners and the Trustee of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
typewritten Certificate or Certificates representing the Book-Entry Certificates
by the Depository, accompanied by registration instructions, the Trustee shall
execute and authenticate the Definitive Certificates in accordance with the
instructions of the Depository. Neither the Certificate Registrar 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 shall recognize the
Holders of the Definitive Certificates as Certificateholders.
66
Section 4.02. Registration of Transfer and Exchange of Certificates.
------------------------------------------------------
(a) Certificate Register. The Trustee shall cause to be kept at the
Corporate Trust Office, a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, it shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series.
(b) Restricted Transfers other than pursuant to Rule 144A. Except as
provided in Section 4.02(c), no transfer, sale, pledge or other disposition of a
Class X, Class R-I, Class R-II or Class R-III Certificate shall be made unless
such transfer, sale, pledge or other disposition is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event that a transfer of a Class X, Class R-I, Class R-II or Class
R-III Certificate is to be made under this Section 4.02(b), either (i) the
Trustee shall be furnished an Opinion of Counsel acceptable to, and in form and
substance satisfactory to, the Trustee and the Depositor that such transfer
shall be made pursuant to an exemption, describing the applicable exemption and
the basis therefor, from the Act, or that such transfer is being made pursuant
to the Act, which Opinion of Counsel shall not be an expense of the Trustee, the
Transferor, the Depositor, the Certificate Insurer, the NIMS Insurer or the
Servicer, or (ii) the transferee shall execute a representation letter,
substantially in the form of Exhibit M-2 hereto, and the transferor shall
execute a representation letter, substantially in the form of Exhibit M-3
hereto, certifying to the Depositor and the Trustee the facts surrounding such
transfer, which representation letters shall not be an expense of the Trustee,
the Transferor, the Depositor, the Certificate Insurer, the NIMS Insurer or the
Servicer, provided that such representation letters will not be required in
connection with any transfer of any such Certificate by the Depositor to an
affiliate of the Depositor. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Transferor,
the Depositor, the Certificate Insurer the NIMS Insurer and the Servicer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such applicable federal and state laws.
(c) Rule 144A Transfers. Transfers of Class X, Class R-I, Class R-II and
Class R-III Certificates may be made in accordance with this Section 4.02(c) if
the prospective transferee of a Certificate provides the Trustee and the
Depositor with an investment letter substantially in the form of Exhibit M-4
attached hereto, which investment letter shall not be an expense of the Trustee,
the Transferor, the Depositor or the Servicer, and which investment letter
states that, among other things, such transferee is a "qualified institutional
buyer" as defined under Rule 144A. Such transfers shall be deemed to have
complied with the requirements of Section 4.02(b) hereof; provided, however,
that no Transfer of any of the Certificates may be made pursuant to this Section
4.02(c) by the Depositor. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Transferor,
the Depositor and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such applicable
federal and state laws.
(d) Residual Certificate Transfer Restrictions. Each Person who has or who
acquires any Ownership Interest in a Residual Certificate must be deemed by the
acceptance or
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acquisition of such Ownership Interest to have agreed to be bound by the
following provisions 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:
(1) Each Person holding or acquiring any Ownership Interest in a Residual
Certificate must be a Permitted Transferee and shall promptly notify
the Trustee of any change or impending change in its status as a
Permitted Transferee.
(2) In connection with any proposed Transfer of any Ownership Interest in
a Residual Certificate, the Trustee shall require delivery to it, and
shall not register the Transfer of any such Residual Certificate until
its receipt of, an affidavit and agreement (a "Transfer Affidavit and
Agreement") attached hereto as Exhibit M-1 from the proposed
Certificate Transferee, in form and substance satisfactory to the
Trustee, representing and warranting, among other things, that such
Certificate Transferee is a Permitted Transferee, that it is not
acquiring its Ownership Interest in such Residual Certificate that is
the subject of the proposed Transfer as a nominee, trustee or agent
for any Person that is not a Permitted Transferee, that for so long as
it retains its Ownership Interest in such Residual Certificate, it
will endeavor to remain a Permitted Transferee, and that it has
reviewed the provisions of this Section 4.02(d) and agrees to be bound
by them.
(3) Notwithstanding the delivery of a Transfer Affidavit and Agreement by
a proposed Certificate Transferee under clause (2) above, if a
Responsible Officer of the Trustee has actual knowledge that the
proposed Certificate Transferee is not a Permitted Transferee, no
Transfer of an Ownership Interest in a Residual Certificate to such
proposed Certificate Transferee shall be effected.
(4) Each Person holding or acquiring any Ownership Interest in a Residual
Certificate shall agree (x) to require a Transfer Affidavit and
Agreement from any other Person to whom such Person attempts to
transfer its Ownership Interest in such Residual Certificate and (y)
not to transfer its Ownership Interest unless it provides a
certificate (attached hereto as Exhibit J) to the Trustee stating
that, among other things, it has no actual knowledge that such other
Person is not a Permitted Transferee.
(5) The Trustee will register the Transfer of any Residual Certificate
only if it shall have received the Transfer Affidavit and Agreement
and all of such other documents as shall have been required by the
terms of this Agreement as a condition to such registration. In
addition, no Transfer of a Residual Certificate shall be made unless
the Trustee shall have received a representation letter from the
Certificate Transferee of such Certificate to the effect that such
Certificate Transferee is not a Disqualified Non-United States Person
and is not a Disqualified Organization or an agent of either.
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Transfers of the Residual Certificates to Disqualified Non-United
States Persons and Disqualified Organizations or their agents are
prohibited.
(6) Any attempted or purported transfer of any Ownership Interest in a
Residual Certificate in violation of the provisions of this Section
4.02 shall be absolutely null and void and shall vest no rights in the
purported transferee. If any purported transferee shall become a
Holder of a Residual Certificate in violation of the provisions of
this Section 4.02, then the last preceding Permitted Transferee shall
be restored to all rights as Holder thereof retroactive to the date of
registration of transfer of such Residual Certificate. The Trustee
shall notify the Depositor upon receipt of written notice or discovery
by a Responsible Officer that the registration of transfer of a
Residual Certificate was not in fact permitted by this Section 4.02.
Knowledge shall not be imputed to the Trustee with respect to an
impermissible transfer in the absence of such a written notice or
discovery by a Responsible Officer. The Trustee shall be under no
liability to any Person for any registration of transfer of a Residual
Certificate that is in fact not permitted by this Section 4.02 or for
making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the
provisions of this Agreement so long as the transfer was registered
after receipt of the related Transfer Affidavit and Agreement. The
Trustee shall be entitled, but not obligated to recover from any
Holder of a Residual Certificate that was in fact not a Permitted
Transferee at the time it became a Holder or, at such subsequent time
as it became other than a Permitted Transferee, all payments made on
such Residual Certificate at and after either such time. Any such
payments so recovered by the Trustee shall be paid and delivered by
the Trustee to the last preceding Holder of such Certificate.
(e) Tax Information. The Trustee shall make available to the Internal
Revenue Service and those Persons specified by the REMIC Provisions, all
information necessary to compute any tax imposed as a result of the transfer of
an ownership interest in a Residual Certificate to any Person who is a
Disqualified Organization or an agent thereof, including the information
regarding "excess inclusions" of such Residual Certificates required to be
provided to the Internal Revenue Service and certain Persons as described in
Treasury Regulations Sections 1.860D-1(b)(5) and 1.860E-2(a)(5). The Trustee may
charge and shall be entitled to reasonable compensation for providing such
information as may be required from those Persons which may have had a tax
imposed upon them as specified in this paragraph for providing such information.
(f) ERISA Transfer Restrictions.
(1) Class A Certificates. No transfer of all or any portion of the
Class A Certificates may be made to a proposed transferee that is an
employee benefit plan or other retirement arrangement, including individual
retirement accounts and annuities, ▇▇▇▇▇ plans and collective investment
funds and separate accounts in which such plans, accounts or arrangements
are invested, that is subject to the Employee Retirement
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Income Security Act of 1974, as amended ("ERISA"), or section 4975 of the
Code (collectively, an "ERISA Plan"), or any person directly or indirectly
purchasing such Certificate on behalf of, as named fiduciary of, as trustee
of, or with assets of an ERISA Plan (each, together with an ERISA Plan, a
"Plan Investor"), unless such Certificate has been the subject of an ERISA
Qualifying Underwriting and such Certificate is rated in one of the four
highest generic rating categories at the time of such transfer. Each
purchaser of such Certificate will be deemed to have represented to the
Trustee and the Servicer, by virtue of its acquisition of such Certificate,
either that (i) it is not a Plan Investor or (ii) (A) it is a Plan
Investor, (B) the Class A Certificates have been the subject of an ERISA
Qualifying Underwriting and (C) the Class A Certificates are rated in one
of the four highest generic rating categories at the time of purchase.
(2) Class X and Residual Certificates. No transfer of a Certificate or
any interest therein shall be made to a Plan Investor unless the
prospective transferee of such Certificate provides the Servicer and the
Trustee with a certification of facts and, at the prospective transferee's
expense, an Opinion of Counsel which establish to the satisfaction of the
Servicer and the Trustee that such transfer will not result in a non-exempt
prohibited transaction under ERISA or Section 4975 of the Code or cause the
Servicer or the Trustee to be subject to any obligations in addition to
those imposed by this Agreement. In the absence of their having received
the certification of facts or Opinion of Counsel contemplated by the
preceding sentence, the Trustee and the Servicer shall require the
prospective transferee of any Certificate to certify in the form of Exhibit
M-2 or Exhibit M-4 that it is not a Plan Investor or that it otherwise
complies with the requirements of Exhibit M-2.
(g) Delivery of New Certificates. Subject to the restrictions set forth in
this Agreement, upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office, the Trustee shall execute, authenticate and
deliver in the name of the designated transferee or transferees, a new
Certificate of the same Class and Percentage Interest and dated the date of
authentication by the Trustee. At the option of the Certificateholders,
Certificates may be exchanged for other Certificates of Authorized Denominations
of a like aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. No
service charge shall be made for any transfer or exchange of Certificates, but
the Trustee may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates. All Certificates surrendered for transfer and exchange
shall be canceled by the Trustee.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) there is delivered to the Servicer and the Trustee
such security or indemnity, which may include a letter of indemnity delivered by
an insurance company reasonably acceptable to the Trustee and the Servicer, as
may be required by each of them to save each of them harmless, then, in the
absence of notice to the Servicer and the Trustee that such Certificate has been
acquired by a bona fide
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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, but bearing a number not
contemporaneously outstanding. Upon the issuance of any new Certificate under
this Section 4.03, the Servicer and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith. Any duplicate
Certificate issued pursuant to this Section 4.03 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time.
Section 4.04. Persons Deemed Owners.
----------------------
Prior to due presentation of a Certificate for registration of transfer,
the Servicer, the Depositor, the Certificate Insurer and the Trustee may treat
the Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving remittances pursuant to Section 6.05
and for all other purposes whatsoever, and the Servicer, the Depositor and the
Trustee shall not be affected by notice to the contrary.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. Duties of the Servicer; Subservicing Arrangements.
-------------------------------------------------
(a) Standard of Care; Servicing Policy and Procedure. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Mortgage 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 mortgage loans for its own account, in accordance
with accepted mortgage servicing practices of prudent lending institutions
servicing mortgage loans similar to the Mortgage Loans, and giving due
consideration to the Depositor's, the Certificate Insurer's, the Advancing
Party's, and the Certificateholders' reliance on the Servicer.
In addition, the Servicer shall service the Mortgage Loans in compliance
with the Servicing Policy and Procedure and all Applicable Regulations. The
Servicer acknowledges that the Advancing Party may request reasonable changes to
improve performance (a "Requested Change") to the Servicing Policy and Procedure
from time to time. Such changes shall only become effective forty-five (45) days
after they have been proposed to the Servicer, unless the Servicer reasonably
objects in writing, in which case the Advancing Party and the Servicer will
cooperate in good faith to come to an acceptable agreement with respect to such
changes. If the change is one that is not consistent with the FHLMC Single
Family Seller/Servicer Guide and is unique to the Mortgage Loans, the Servicer
and the Advancing Party shall meet and determine the proper method and
reasonable manner to implement such change, and such a change shall not be
implemented without the written consent of the Certificate Insurer, which shall
not be unreasonably withheld or delayed. The cost of any such Requested Change
shall be borne by the Advancing Party except as provided below with respect to
Required Changes. Changes to the Servicing Policy and Procedure that are (1)
required by all FHLMC servicers (not including
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changes to provisions of the FHLMC Single Family Seller/Servicer Guide which
provisions are excluded from the Servicing Policy and Procedure), and which
changes reflect servicing practices generally undertaken by prudent servicers of
sub-prime mortgage loans, and which should not reasonably be expected to have a
negative effect on the Servicer's ability to meet Performance Standards, or (2)
required to comply with Applicable Regulations (each a "Required Change"), shall
be the sole responsibility of the Servicer and shall be implemented at its cost
and expense. If the Servicer fails to make a Required Change within forty-five
(45) days after request, that shall constitute a Servicer Default.
(b) REMIC Qualifications. It is intended that each Trust REMIC formed
hereunder shall constitute, and that the affairs of each Trust REMIC shall be
conducted so as to qualify it as a REMIC as defined in and in accordance with
the REMIC Provisions. In furtherance of such intention, 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 any
Trust REMIC.
(c) Subservicing Arrangements. The Servicer, as independent contract
servicer, shall service and administer the Mortgage 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
Mortgage Loans with any entity which is in compliance with the laws of each
state necessary to enable it to perform its obligations under such Subservicing
Agreement and (x) has been designated an approved Seller-Servicer by FHLMC or
FNMA for first and second mortgage loans, or (y) is an affiliate or wholly owned
subsidiary of the Servicer. The Servicer shall give notice to the Depositor, the
Trustee and the Certificate Insurer of the appointment of any Subservicer other
than a Subservicer which is an affiliate or wholly-owned subsidiary of the
Servicer. 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
Mortgage Loans or enter into a Subservicing Agreement with a successor
subservicer which qualifies hereunder.
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 to the Depositor, the
Trustee, the Advancing Party, the NIMS Insurer, the Certificate Insurer and the
Certificateholders for the servicing and administering of the Mortgage 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 Mortgage Loans. For purposes of this
Agreement, the Servicer shall be deemed to have received payments on Mortgage
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 or limit or modify
indemnification provided by the Servicer herein.
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Any Subservicing Agreement that may be entered into and any transactions or
services relating to the Mortgage 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 Depositor, the Transferor, the Trustee, the NIMS
Insurer, the Advancing Party, the Certificate Insurer 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 the following paragraph.
In the event the Servicer shall for any reason no longer be the Servicer
(including by reason of a Servicer Default), the Trustee or its designee shall,
subject to Section 10.02 hereof, 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 elects to terminate any Subservicing
Agreement. If the Trustee elects to terminate a Subservicing Agreement, any
expenses incurred in connection with such termination shall be paid by the
Servicer. 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. The Servicer at its expense and without right of
reimbursement therefore, shall, upon request of the Trustee, deliver to the
assuming party all documents and records relating to each Subservicing Agreement
and the Mortgage 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.
(d) Waivers and Modifications of Mortgage Loans and Instruments of
Satisfaction. Consistent with the terms of this Agreement and the Servicing
Policy and Procedure, the Servicer may waive, modify or vary any term of any
Mortgage 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 would not
have a material adverse effect on interests of the Depositor, the Transferor,
the Trustee, the Certificateholders or the Certificate Insurer, considering the
alteratives otherwise available; provided, however, that the Servicer shall have
complied with Section 2.07(b) herein. No costs incurred by the Servicer or any
Subservicer in respect of any such waiver, modification, postponement or
indulgence shall, for the purposes of distributions to Certificateholders, be
added to the Principal Balance of the related Mortgage Loan for purposes of this
Agreement. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered to execute and deliver on behalf of the Trustee,
all instruments of satisfaction or cancellation, or of partial or full release,
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the Mortgaged Properties, upon a payoff in full or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes. If reasonably required by the Servicer
(as evidenced by an Officer's Certificate of the Servicer to such effect
delivered to the Trustee), 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. If the Servicer errs and accepts less than the accurate full payoff
or amount owing and the Servicer prepares a satisfaction or release of a
Mortgage without having obtained payment in full of the
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indebtedness secured by the Mortgage, or should it otherwise prejudice any right
the Trustee, the Certificateholders or the Certificate Insurer may have under
the mortgage instruments, the Servicer, upon written demand, shall deposit into
the Principal and Interest Account the amount by which an accurate full payoff
amount exceeds the amount collected by the Servicer, within one Business Day of
its discovery or receipt of notice of such error. The Servicer shall maintain a
fidelity bond in accordance with Section 5.09. Notwithstanding the foregoing,
the Servicer shall not be responsible for errors in collecting full payoffs in
reasonable reliance upon erroneous information in the Mortgage Loan Schedule.
Notwithstanding the preceding sentence, nothing contained herein shall limit the
Servicer's responsibility as a prudent servicer to use commercially reasonable
efforts to ascertain the correct information once an error for such Mortgage
Loan is discovered or should have been discovered by the Servicer in the
exercise of ordinary care exercised by prudent sub-prime mortgage loan
servicers. Nothing in this paragraph shall prejudice the Servicer's discretion,
and the Servicer shall have the discretion, to effect a "short sale," i.e.,
releasing a Mortgaged Property for less than the full payoff amount, if in the
Servicer's reasonable determination, such short sale would not have a material
adverse effect on the interests of the Trustee, the Certificateholders or the
Certificate Insurer in such Mortgage Loan and is the best alternative for
maximizing proceeds of the Mortgage Loan, considering the alternatives otherwise
available.
(e) Reimbursement of Servicing Advances. Notwithstanding anything to the
contrary contained herein, the Servicer may reimburse the Advancing Party for
Servicing Advances (and may reimburse itself, in respect of Servicing Advances
made by the Servicer and not reimbursed by the Advancing Party) pursuant to
Section 5.04(ii) and Section 5.01(h).
(f) Trustee as Back-up Servicer. 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 any resignation
pursuant to Section 9.04, after receipt of the Opinion of Counsel required
pursuant to Section 9.04, the Trustee or its designee shall assume all of the
rights and obligations of the Servicer, subject to Section 9.02 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 Mortgage 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.
(g) Tax Reporting by Servicer. The Servicer shall prepare, file and furnish
all information returns required to be provided under Sections 6050H, 6050J and
6050P of Code in respect of the Mortgage Loans, the Mortgaged Property and the
REO Property.
(h) Allocation of Collections to Mortgage Loan Amounts. Unless otherwise
provided in the related Mortgage Note and/or Mortgage, the Servicer shall apply
collections in respect of any Mortgage Loan, other than Liquidation Proceeds and
Prepayment Charges, (1) first to accrued and unpaid interest on the Mortgage
Loan, and interest paid ahead by instruction of a non-delinquent Mortgagor
(including amounts allocable to Servicing Fees but not including amounts
described in clause (5) below); (2) second to reduce the principal balance of
the Mortgage Loan (by the amount of the scheduled principal payment for the next
Due Date in the case of a scheduled payment collection and by the amount of
principal paid ahead by instruction of a non-delinquent Mortgagor); (3) third to
unreimbursed Existing Advances and Servicing
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Advances owed to the Transferor and the Advancing Party (and the Servicer); (4)
fourth, to Ancillary Income; (5) fifth, to interest on Existing Advances and
Servicing Advances owed to the Transferor and the Advancing Party pursuant to
the related Mortgage Note or Mortgage; and (6) sixth, to any other applicable
charges. Unless otherwise provided in the related Mortgage Note and/or Mortgage,
Liquidation Proceeds shall be applied first to reimburse Existing Advances and
Servicing Advances owed to the Transferor and the Advancing Party, second to
reimburse Servicing Advances made by the Servicer but not previously reimbursed
by the Advancing Party or otherwise, and thereafter in the order specified in
the preceding sentence, but shall not be applied to pay any interest on Existing
Advances or Servicing Advances. All amounts allocable to any item listed above
shall be applied first to those items that become due earliest, and thereafter
in chronological order (i.e., on a first-in, first-out (FIFO) basis).
Servicing Fees paid out of interest collections on a Mortgage Loan
shall be applied to the unpaid Servicing Fee payments that became due in
connection with the interest payment that became due earliest first (i.e., on a
FIFO basis).
Section 5.02. Liquidation of Mortgage Loans.
-----------------------------
In the event that any payment due under any Mortgage Loan and not postponed
pursuant to Section 5.01 is not paid when the same becomes due and payable, or
in the event the Mortgagor fails to perform any other covenant or obligation
under the Mortgage Loan and such failure continues beyond any applicable grace
period, the Servicer shall take such action as it shall deem in its good faith
business judgment to be in the best interest of the Depositor, the Certificate
Insurer and the Certificateholders and otherwise in accordance with the
Servicing Policy and Procedure and/or Performance Standards. The Servicer, in
accordance with the provisions of Section 5.10, shall foreclose upon or
otherwise comparably effect the change of ownership into the name of the Trustee
for the benefit of the Certificateholders of Mortgaged Properties relating to
defaulted Mortgage Loans as to which no satisfactory arrangements can be made
for collection of delinquent payments; provided, however, that the Servicer
shall not be obligated to foreclose or take comparable action in the event that
the Servicer, in its good faith reasonable business judgment, determines that
such action would not be in the best interests of the Depositor, the Trustee,
the Certificateholders or the Certificate Insurer. In connection with such
foreclosure or other conversion, the Servicer shall exercise and use collection
and foreclosure procedures with the same degree of care and skill as it would
exercise or use under the circumstances in the conduct of its own affairs. Any
amounts advanced by the Servicer in connection with such foreclosure or other
action shall constitute Servicing Advances.
After a Mortgage Loan has become a Liquidated Mortgage Loan, the Servicer
shall promptly prepare and forward to the Depositor, the Advancing Party, the
Trustee and the Certificate Insurer a Liquidation Report, in the form attached
hereto as Exhibit O, detailing the Liquidation Proceeds received from the
Liquidated Mortgage Loan, expenses incurred with respect thereto, and any loss
incurred in connection therewith.
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Section 5.03. Establishment of Principal and Interest Account; Deposits in
------------------------------------------------------------
Principal and Interest Account.
------------------------------
(a) The Servicer, for the benefit of the Certificateholders and the
Certificate Insurer, as their interests may appear, shall cause to be
established and maintained one or more Principal and Interest Accounts in
accounts directed by the Advancing Party, and in the name of the Trustee, which
shall be Eligible Accounts, which may be interest-bearing, titled "EQCC Trust
2001-1F Principal and Interest Account," bearing an additional designation
clearly indicating that the funds deposited therein are held for the benefit of
the Certificateholders and the Certificate Insurer. The Principal and Interest
Accounts shall be insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be, to the maximum extent provided
by law. The creation of any Principal and Interest Account shall be evidenced by
a letter agreement in the form of Exhibit P hereto. A copy of such letter
agreement shall be furnished by the Servicer to the Depositor, the Trustee, the
NIMS Insurer, and the Certificate Insurer. The Servicer shall deposit into the
Principal and Interest Account (without duplication), within one Business Day of
receipt of available funds in respect thereof, and shall retain therein, the
following items:
(i) all payments received on or after the Cut-off Date on account of
principal on the Mortgage Loans and all Curtailments and Principal
Prepayments collected on or after the Cut-off Date;
(ii) all payments received on or after the Cut-off Date on account of
interest accrued on the Mortgage Loans on or after the Cut-off Date;
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the purchase of any
Mortgage Loan and the amount of any Substitution Adjustment, in each case
pursuant to Sections 2.06 and 3.03; and
(vii) any amount required to be deposited in the Principal and
Interest Account pursuant to Section 5.04, 5.07, 5.08 or 5.10.
In making the deposits set forth in clauses (i) through (vii) (inclusive)
above, the Servicer shall note in its records the respective amounts deposited
with respect to Mortgage Loan Group 1, Mortgage Loan Group 2, Mortgage Loan
Group 3 and Mortgage Loan Group 4. The foregoing requirements for deposit in the
Principal and Interest Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, with respect to
each Mortgage Loan, amounts received on and after the Cut-off Date in respect of
interest accrued on the Mortgage Loans prior to the Cut-off Date, the Servicing
Fee, Prepayment Charges and Ancillary Income, to the extent permitted by
Sections 7.01 and 7.03, and any amounts received after the date of substitution
of a Qualified Substitute Mortgage Loan pursuant to
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Section 2.06 or 3.03 in respect of interest accrued on such Qualified Substitute
Mortgage Loan on or prior to the date of substitution (except to the extent
taken into account in calculating the Substitution Adjustment with respect
thereto)), need not be deposited by the Servicer in the Principal and Interest
Account, and interest on the related Deleted Mortgage Loan accrued through such
date shall be deposited into the Principal and Interest Account. The Servicer
shall remit such amounts with respect to Qualified Substitute Mortgage Loans to
the Transferor, in each case immediately upon receipt. The Servicer shall remit
any Excluded Ancillary Income to the Transferor within one Business Day of
receipt of available funds in respect thereof. In addition, upon receipt of a
payment in full of a Mortgage Loan by the related Mortgagor, in connection with
which the Mortgagor pays the full outstanding principal balance of the Mortgage
Loan, all interest accrued and unpaid thereon, the amount of all previously
unreimbursed Servicing Advances and Existing Advances made by the Advancing
Party and the Transferor in respect of such Mortgage Loan, plus interest on the
amount of the related Servicing Advances and Existing Advances, the Servicer
shall withhold such interest payments, and shall remit to the Advancing Party
the amount of any such interest paid on Servicing Advances, and shall remit to
the Transferor the amount of any such interest on Existing Advances.
Prepayment Charges collected by the Servicer shall be remitted to the
Transferor or the Transferor's designee or assignee, as separately agreed
between the Servicer and the owner of such Prepayment Charges.
Amounts on deposit in the Principal and Interest Account shall be invested
by the Servicer in Permitted Instruments as directed by the Advancing Party. Any
investment earnings on funds held in the Principal and Interest Account shall be
for the account of the Advancing Party, and the Servicer shall remit such
amounts to the Advancing Party within one Business day after receipt thereof, or
as otherwise arranged between the Servicer and the Advancing Party. Any
reference herein to amounts on deposit in the Principal and Interest Account
shall refer to amounts net of such investment earnings.
Payment of interest collected on Existing Advances and Servicing Advances
and investment earnings shall be governed by Section 5.15.
(b) Notwithstanding Section 5.03(a), for so long as EquiCredit is acting as
the Initial Servicer, and so long as the conditions set forth in clauses (i),
(ii) and (iii) below are met, the Servicer shall not be required to establish
any separate Principal and Interest Account as described in Section 5.03(a), and
instead may cause to be maintained an account for deposit of the amounts
described in Section 5.03(a), which account is not required to be an Eligible
Account or invested in Permitted Instruments and may be a commingled account
containing other Servicer funds, but which account shall otherwise be a
"Principal and Interest Account" for all purposes of this Agreement to the
extent of funds therein deposited pursuant to the terms of this Agreement. In
the event EquiCredit as Initial Servicer maintains the Principal and Interest
Account in this manner, (i) the Servicer shall maintain separate books and
records with respect to allotments relating to this Agreement that are deposited
in such Principal and Interest Account and shall separately account for all
amounts relating to this Agreement that are deposited or withdrawn from such
account and (ii) amounts deposited in such Principal and Interest Account may be
used for any purposes; provided, that the Servicer shall cause all payments
required to be made under this Agreement from the Principal and Interest Account
to be paid. No insurance by
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the FDIC, and no letter agreement evidencing the creation of this account, shall
be required. EquiCredit's right as Servicer to make deposits into an account of
the type described in the preceding sentences shall exist only if the specific
terms and conditions set forth below are satisfied and only for so long as such
terms and conditions are satisfied:
(i) there exists no Servicer Default;
(ii) if EquiCredit does not have a short term debt rating of at least
"A-1" from S&P and "P-1" from ▇▇▇▇▇'▇, a guaranty, letter of credit, surety
bond or other similar instrument is issued covering remittance to the
Collection Account of Collections received during any Due Period, which
instrument is acceptable to the Rating Agencies and the Certificate Insurer
and is issued by an entity which has a short-term debt or certificate of
deposit rating, as applicable, of at least "A-1" from S&P and Fitch and
"P-1" from ▇▇▇▇▇'▇; and
(iii) EquiCredit, the Trustee, the Depositor and the Certificate
Insurer shall not have received any notice from S&P, ▇▇▇▇▇'▇ or Fitch that
such arrangement will result in a reduction or withdrawal of the then
current rating on the Certificates without regard to the Certificate
Insurance Policies by either S&P, ▇▇▇▇▇'▇ or Fitch.
If the Initial Servicer maintains the Principal and Interest Account pursuant to
this Section 5.03(b), then the Initial Servicer shall provide information to the
Successor Servicer sufficient to enable the Successor Servicer to allocate
amounts from the Initial Servicer's Principal and Interest Account and to
properly establish the new Principal and Interest Account pursuant to Section
5.03(a).
(c) In the event that, prior to the Servicing Transfer Date, at any time
the conditions set forth in Section 5.03(b) are not satisfied, the Initial
Servicer shall forthwith cause to be established a Principal and Interest
Account meeting the requirements of Section 5.03(a), and the Initial Servicer
shall deposit therein all amounts then on deposit in any account maintained by
the Initial Servicer pursuant to Section 5.03(b) (such account, an "Ineligible
Account") which were deposited in the Ineligible Account pursuant to this
Agreement.
Section 5.04. Permitted Withdrawals from the Principal and Interest
-----------------------------------------------------
Account.
-------
The Servicer shall withdraw or cause to be withdrawn funds from the
Principal and Interest Account (or, so long as a Principal and Interest Account
is maintained pursuant to Section 5.03(b) by EquiCredit as Initial Servicer,
note on its books that such funds are no longer funds with respect to the
Principal and Interest Account), for the following purposes:
(i) to remit to the Trustee for deposit into the REMIC I Distribution
Account on the second Business Day prior to the Distribution Date, the sum
of the amounts set forth in Section 5.03(a)(i) through (vii) deposited into
the Principal and Interest Account during the related Due Period (except
that Principal Prepayments shall be remitted if deposited into the
Principal and Interest Account during the related Prepayment Period)
(excluding any amounts not required to be deposited in the Principal and
Interest Account pursuant to Section 5.03(a) and excluding any amounts
withdrawn by the Servicer
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pursuant to clauses (ii), (iii), (v), (vi) and (vii) below as of the
related Determination Date and excluding amounts withdrawn pursuant to
clause (x) below);
(ii) to reimburse the Servicer (including any predecessor Servicer)
for any accrued unpaid Servicing Fees not retained pursuant to Section
5.03(a), to reimburse the Transferor for unreimbursed Existing Advances, to
reimburse the Advancing Party for unreimbursed Servicing Advances, and to
reimburse the Servicer for any Servicing Advances made by the Servicer and
not reimbursed by the Advancing Party; provided, that any withdrawal of
accrued unpaid Servicing Fees pursuant to this Section 5.04(ii) shall be
used first by the Servicer to pay any amounts due to the Trustee from the
Servicer pursuant to this Agreement; and provided further, that the
reimbursement of Servicing Advances shall be made subject to the priority
allocation requirements of Section 5.01(h). Except in the case of
Nonrecoverable Advances, the Servicer's (except to the extent reimbursed by
the Advancing Party pursuant to Section 5.15), the Transferor's and the
Advancing Party's rights to reimbursement for unpaid Servicing Fees,
unreimbursed Existing Advances and unreimbursed Servicing Advances with
respect to a Mortgage Loan shall be limited to late collections on the
related Mortgage Loan or REO Property, including Liquidation Proceeds,
Released Mortgaged Property Proceeds, Insurance Proceeds and such other
amounts as may be collected by the Servicer from the related Mortgagor or
otherwise relating to the Mortgage Loan or REO Property in respect of which
such unreimbursed Advances are owed (collectively, "Late Collections"). If
a Servicing Advance or Existing Advance has become a Nonrecoverable
Advance, the Servicer shall recover such Servicing Advance or Existing
Advance on behalf of the Advancing Party, or the Transferor or the
Servicer, as the case may be, by withdrawing any amounts on deposit in the
Principal and Interest Account, and remitting such amounts immediately to
the Advancing Party or the Transferor, as appropriate, or for its own
account, in the case of Servicing Advances made by the Servicer and not
reimbursed by the Advancing Party. Any such Late Collections on a Mortgage
Loan or REO Property as directed by the Advancing Party shall be applied by
the Servicer (1) first, to reimburse Existing Advances made by the
Transferor, (2) second, to reimburse Servicing Advances reimbursed by the
Advancing Party and (3) third, to reimburse Servicing Advances made by the
Servicer and not reimbursed by the Advancing Party. Payment of
reimbursements in respect of Existing Advances and Servicing Advances to
the Advancing Party and the Transferor shall be governed by Section 5.15,
and shall be accomplished by funds transfer directly from the Principal and
Interest Account to the account of the Advancing Party or the Transferor,
pursuant to transfer and account instructions provided to the Servicer by
the Advancing Party and the Transferor in writing. It is understood that
the rights to reimbursement pursuant hereto shall be prior to the rights of
Certificateholders;
(iii) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) (a) to make investments in Permitted Instruments as directed by
the Advancing Party and (b) after effecting the remittance to the Trustee
as provided in
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Section 5.04(i), to pay to the Advancing Party interest earned in respect
of Permitted Instruments or on funds deposited in the Principal and
Interest Account;
(v) to withdraw any funds deposited in the Principal and Interest
Account that were not required to be deposited therein (such as Servicing
Compensation) or were deposited therein in error, including amounts
deposited that were subsequently reversed due to insufficient funds;
(vi) to pay itself Servicing Compensation pursuant to Section 7.03
hereof to the extent not retained or paid pursuant to Section 5.03, and to
remit to the Transferor any Ancillary Income assessed or accrued prior to
the Cut-off Date;
(vii) to withdraw funds necessary for the conservation and disposition
of REO Property pursuant to the third paragraph of Section 5.10 hereof to
the extent such funds were deposited in the Principal and Interest Account;
(viii) to utilize any excess funds on deposit to make any Advance
pursuant to Section 6.08;
(ix) to clear and terminate the Principal and Interest Account upon
the termination of this Agreement and allocate the amounts therein pursuant
to the priority set forth in Sections 6.05(d), (e), (f), (g) and (h); and
(x) to remit to the Trustee for deposit in the Collection Account, in
the manner that deposits are made pursuant to Section 5.04(i), any amounts
in respect of Existing Advances and any amounts in respect of interest on
Existing Advances. Any such amounts shall not be an asset of any of REMIC
I, REMIC II or REMIC III, but rather will be assets of the Transferor.
In making the withdrawals set forth in clauses (i) through (x) (inclusive)
above, the Servicer shall note (when applicable) in its records the respective
amounts withdrawn with respect to Mortgage Loan Group 1, Mortgage Loan Group 2,
Mortgage Loan Group 3 and Mortgage Loan Group 4. The funds held in the Principal
and Interest Account shall be invested by the Servicer (to the extent
practicable) in Permitted Instruments, as directed in writing to the Advancing
Party by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the day on which such funds are to be remitted to the Trustee for deposit in the
Collection Account, but in no event later than the second Business Day
immediately preceding the Distribution Date next following the date of such
investment (except, in each case, that if such Permitted Instrument is an
obligation of the institution that maintains the Principal and Interest Account,
then such Permitted Instrument shall mature not later than such Determination
Date) and shall not be sold or disposed of prior to its maturity. All Permitted
Instruments in which funds in the Principal and Interest Account are invested
must be held by or registered in the name of the Trustee. All interest or other
earnings from funds on deposit in the Principal and Interest Account (or any
Permitted Instruments thereof) shall be the exclusive property of the Advancing
Party, and may be withdrawn from the Principal and Interest Account pursuant to
clause (iv) above. The amount of any losses incurred in connection
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with the investment of funds in the Principal and Interest Account in Permitted
Instruments shall be deposited in the Principal and Interest Account by the
Advancing Party from its own funds immediately as realized without reimbursement
therefor.
Section 5.05. Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
With respect to each Mortgage Loan, the Servicer shall maintain accurate
records reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, property taxes and assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
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 monitor such payments to
determine if they are made by the Mortgagor at the time they become due and, if
not paid by the Mortgagor, shall advance such amounts as Servicing Advances, to
the extent the Servicer determines such amounts are Eligible Servicing Advances,
pursuant to Section 5.15. To the extent ground lease payments are not made by
the Mortgagor, and the Servicer has notice of such failure to pay, the Servicer
shall advance such delinquent payments, to the extent the Servicer determines
such amounts are Eligible Servicing Advances, pursuant to Section 5.15. Any
out-of-pocket expenses incurred by the Servicer or the Advancing Party pursuant
to this Section 5.05 shall constitute Servicing Advances.
Section 5.06. Transfer of Accounts; Monthly Statements.
----------------------------------------
The Accounts (other than the Principal and Interest Account, which shall be
established pursuant to Section 5.03 hereof) shall be established, as of the
Closing Date, in the name of the Trustee as Eligible Accounts pursuant to clause
(B) of the definition thereof. Any Account may, upon written notice from the
Servicer to the Trustee, be transferred to a different depository institution so
long as (i) such transfer (A) is to an Eligible Account and the Certificate
Insurer receives notice thereof from the Servicer or (B) is approved in writing
by the Certificate Insurer, which approval shall not be unreasonably withheld
and (ii) written notice of such transfer is sent to the Rating Agencies, the
Advancing Party, the Transferor and the Depositor. The Trustee shall provide to
the Certificate Insurer a monthly statement of activity in the Accounts
established by it, and the Servicer shall provide to the Trustee, the
Certificate Insurer, the Advancing Party, the Transferor and the Depositor a
monthly statement of activity in the Principal and Interest Account from the
party holding such account.
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Section 5.07. Maintenance of Hazard Insurance.
-------------------------------
The Servicer shall cause each Mortgagor to maintain, and if the Mortgagor
does not so maintain, shall itself maintain, subject to the provisions of
Section 5.08 hereof, fire and hazard insurance with extended coverage customary
in the area where the Mortgaged Property is located, in an amount which is at
least equal to the least of (a) the outstanding principal balance owing on the
Mortgage Loan (and any prior lien if the related Mortgage Loan is in a junior
lien position), (b) the full insurable value of the Mortgaged Property securing
the Mortgage Loan and (c) the minimum amount required to compensate for damage
or loss on a replacement cost basis. If the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management Agency as
Flood Zone "A," and such flood insurance has been made available, the Servicer
will cause to be purchased a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the outstanding principal balance of the Mortgage Loan (plus the principal
balance of any lien having priority over the Mortgage Loan), (ii) the full
insurable value of the Mortgaged Property, and (iii) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as amended.
The Servicer shall also maintain on REO Property, to the extent reasonably
available, fire and hazard insurance in the amounts described above, liability
insurance and, to the extent required and available under the National Flood
Insurance Act of 1968, as amended, and the Servicer determines that such
insurance is necessary in accordance with accepted mortgage servicing practices
of prudent lending institutions servicing mortgage loans similar to the Mortgage
Loans, flood insurance in an amount equal to that required above. Any amounts
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the Mortgaged Property or REO Property,
or to be released to the Mortgagor in accordance with customary mortgage
servicing procedures) shall be deposited in the Principal and Interest Account,
subject to (X) retention by the Servicer to the extent such amounts constitute
Servicing Compensation or (Y) withdrawal pursuant to Section 5.04. It is
understood and agreed that no earthquake or other additional insurance need be
required by the Servicer of any Mortgagor or maintained on REO Property, other
than pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. All policies required
hereunder shall be endorsed with standard mortgagee clauses with losses payable
to the Servicer. Any out-of-pocket expenses incurred by the Servicer or the
Advancing Party pursuant to this Section 5.07, including, without limitation,
any advances of premiums on insurance policies required by this Section 5.07,
shall constitute Servicing Advances.
Section 5.08. Maintenance of Mortgage Impairment Insurance Policy.
---------------------------------------------------
In the event that the Servicer shall obtain and maintain a blanket policy
insuring against fire and hazards of extended coverage on all of the Mortgage
Loans as to which the Mortgagor does not maintain the insurance described in
Section 5.07, 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 Mortgage Loans without co-insurance, and otherwise complies with
the requirements of Section 5.07, the Servicer shall be deemed conclusively to
have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 5.07, 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
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Mortgaged Property a policy complying with Section 5.07, and there shall have
been a loss which would have been covered by such policy, deposit in the
Principal and Interest Account from the Servicer's own funds (which shall not
constitute a Servicing Advance) the difference, if any, between the amount that
would have been payable under a policy complying with Section 5.07 and the
amount paid under such blanket policy. Upon the request of the Certificate
Insurer or the Trustee, the Servicer shall cause to be delivered to such
requesting Person a certified true copy of such policy. Any amounts collected by
the Servicer under any such blanket policy (other than amounts to be applied to
the restoration or repair of the Mortgaged Property or REO Property, or to be
released to the Mortgagor in accordance with customary mortgage servicing
procedures) shall be deposited in the Principal and Interest Account, subject to
(X) retention by the Servicer to the extent such amounts constitute Servicing
Compensation or (Y) withdrawal pursuant to Section 5.04.
Section 5.09. Fidelity Bond.
-------------
The Servicer shall maintain with a responsible company, at its own expense,
a blanket fidelity bond and an errors and omissions insurance policy in a
minimum amount acceptable to FNMA or FHLMC, with broad coverage on all officers,
employees or other persons acting in any capacity requiring such persons to
handle funds, money, documents or papers relating to the Mortgage Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance 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 Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 5.09 requiring such
fidelity bond and errors and omissions insurance shall diminish, or relieve the
Servicer from, the Servicer's duties and obligations as set forth in this
Agreement. Upon the request of the Trustee the NIMS Insurer, or the Certificate
Insurer, the Servicer shall cause to be delivered to such requesting Person a
certified true copy of such fidelity bond and errors and omissions insurance
policy. On the Closing Date, such fidelity bond and errors and omissions
insurance policy for the Initial Servicer is maintained with certain
underwriters at National Union Fire Insurance Company of Pittsburgh, PA.
Section 5.10. Title, Management and Disposition of REO Property.
-------------------------------------------------
In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be taken in the name of the Trustee for the benefit of
the Certificateholders.
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 for its own account 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 interests of the Certificate Insurer and the Certificateholders.
Any out-of-pocket expenses
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incurred by the Servicer or the Advancing Party pursuant to this Section 5.10
shall constitute Servicing Advances. The Servicer shall cause the Trustee to be
named as a beneficiary and loss payee under the REO liability provisions of the
Servicer's general comprehensive liability insurance policy.
The Servicer shall cause to be deposited into the Principal and Interest
Account all revenues received with respect to the conservation and disposition
of the related REO Property and shall retain or withdraw 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 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 reasonably incurred expenses of such sale
shall be paid. The proceeds of sale of the REO Property and other proceeds of
any REO Disposition shall be deposited in the Principal and Interest Account,
net of accrued and unpaid Servicing Fees.
In the event any Mortgaged Property is acquired as aforesaid or otherwise
in connection with a default or imminent default on a Mortgage Loan, the
Servicer shall dispose of such Mortgaged Property prior to the close of the
third calendar year beginning after the year of its acquisition (the
"Disposition Period") unless (i) the Servicer shall have received an Opinion of
Counsel to the effect that the holding of such Mortgaged Property subsequent to
the Disposition Period will not result in the imposition of taxes on "prohibited
transactions" as defined in Section 860F of the Code or cause any Trust REMIC to
fail to qualify as a REMIC at any time that any Class A or Class X Certificates
are outstanding or (ii) the Servicer shall have applied for, at least 60 days
prior to the expiration of such period, an extension of such period in the
manner contemplated by Section 856(e)(3) of the Code, in which case the original
period shall be extended by the applicable period. Notwithstanding any other
provision of this Agreement, (1) 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 or by or on behalf of the Trust
Fund, and (2) no construction shall take place on such Mortgaged Property, if
such activity as described in the preceding clause (1) or clause (2) is
conducted or otherwise undertaken in such a manner or pursuant to any terms 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
any Trust REMIC 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 Disposition 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.
If the Servicer has actual knowledge that a Mortgaged Property which the
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a one-mile radius of any site with material
environmental or hazardous waste risks known to the Servicer, the Servicer will
notify the Certificate Insurer the NIMS Insurer, and the Trustee prior to
acquiring the Mortgaged Property and shall not take any action without the prior
written
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approval of the Certificate Insurer the NIMS Insurer, and the Trustee. The
Servicer shall not be obligated to foreclose on or take similar action with
respect to any Mortgaged Property which it believes may be contaminated with or
affected by hazardous wastes or hazardous substances. The Servicer will not be
liable to Certificateholders, the Trustee, the Certificate Insurer, the NIMS
Insurer or any other party if it fails to foreclose on a Mortgaged Property
which it believes may be so contaminated or affected, even if such Mortgaged
Property is, in fact, not so contaminated or affected. Conversely, the Servicer
will not be liable to Certificateholders, the Trustee, the Certificate Insurer
the NIMS Insurer, or any other party if, based on its belief that no such
contamination or effect exists, the Servicer forecloses on a Mortgaged Property
and takes title to such Mortgaged Property, and thereafter such Mortgaged
Property is determined to be so contaminated or affected. The Trustee shall have
no liability to any party if the Servicer forecloses on a Mortgaged Property
that is so contaminated or affected.
Nothing in this Section shall affect the Servicer's rights to deem certain
advances proposed to be made Nonrecoverable Advances. For the purpose of this
Section 5.10, actual knowledge of the Servicer means actual knowledge of a
Responsible Officer of the Servicer involved in the servicing of the relevant
Mortgage 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 5.11. Collection of Certain Mortgage Loan Payments.
--------------------------------------------
The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and shall, to the
extent such procedures shall be consistent with this Agreement and the Servicing
Policy and Procedure, comply with the terms and provisions of any applicable
hazard insurance policy. Consistent with the foregoing, the Servicer may in its
discretion extend the due date for payments due on a Mortgage Note for a period
(with respect to each payment as to which the due date is extended) not greater
than 125 days after the initially scheduled due date for such payment, provided
that such extension may only be made once in any twelve month period without the
prior written consent of the Certificate Insurer, which consent shall not be
unreasonably withheld. In the event the Servicer shall consent to the deferment
of the Due Dates for payments due on a Mortgage Note, the Servicer shall
nonetheless remit any required Advance in accordance with Section 6.08 hereof
with respect to the payments so extended to the same extent as if such
installment were due, owing and delinquent and had not been deferred.
Section 5.12. Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Mortgage Loans.
--------------
The Servicer and the Depositor shall provide to the Trustee, the
Certificateholders, the Certificate Insurer, the Federal Reserve, the Office of
the Comptroller of the Currency, the Federal Financial Institution Examination
Council, and to the supervisory agents and examiners of each of the foregoing,
access to the documentation regarding the Mortgage Loans (such access in the
case of the supervisory agents and examiners shall be limited to that required
by applicable state and federal regulations), such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer designated by it.
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Section 5.13. Superior Liens.
--------------
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the First Lien,
or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take such
actions as are consistent with Applicable Regulations and the Servicing Policy
and Procedure to protect the interests of the Trustee, the Certificateholders
and the Certificate Insurer, and/or to preserve the security for the related
Mortgage Loan. The Servicer may make a Servicing Advance of the funds necessary
to cure the default or reinstate the superior lien, if the Servicer determines
that such Servicing Advance would maximize the net recovery to the Trust Fund
and would not be a Nonrecoverable Advance, consistent with the Performance
Standards and the Advance Continuation and REO Liquidation Tests. The Servicer
shall thereafter take such action as the Servicer determines is commercially
reasonable to recover the amount so advanced.
Section 5.14. Prepayment Charges.
------------------
(a) Each of the parties hereto acknowledges and agrees that,
notwithstanding anything to the contrary contained herein, (i) the Transferor
has not transferred to the Depositor, and the Depositor has not transferred to
the Trustee, and the Trust Fund does not include, any right, title or interest
in the Prepayment Charges, which Prepayment Charges have been retained by the
Transferor and may be transferred to one or more third parties and (ii) the
Servicing Compensation does not include any rights to retain Prepayment Charges.
(b) The Servicer is authorized to administer and collect the Prepayment
Charges on behalf of the owner or owners thereof on such terms as the Servicer
and such owner or owners may agree; provided, however, that such terms will not
be inconsistent with the Servicer's duty to maximize proceeds of the Mortgage
Loans to the Trust pursuant to the servicing standards provided for herein, and
shall be subject to the prior written consent of the Transferor.
(c) In the event (i) the Servicer resigns or assigns the servicing of the
Mortgage Loans pursuant to Section 9.04 hereof or otherwise, (ii) the rights of
the Servicer hereunder are terminated pursuant to Section 10.01 hereof or
otherwise or (iii) this Agreement is terminated pursuant to Section 11.01 hereof
or otherwise, then the Successor Servicer shall, at the request of the owner or
owners of the Prepayment Charges, enter into an agreement with such owner or
owners in which such successor servicer agrees to administer the enforcement and
collection of the Prepayment Charges on the terms specified in Appendix 3.
Section 5.15. Advancing Party.
---------------
(a) Disbursement and Reimbursement of Servicing Advances. The Servicer
shall make Servicing Advances that are Eligible Servicing Advances on the
Mortgage Loans (i) when necessary or appropriate in the course of performing its
servicing responsibilities pursuant to this Agreement, (ii) in accordance with
the Servicing Policy and Procedure and the Advance Continuation and REO
Liquidation Tests included in the Performance Standards, and (iii) to the extent
the Servicer determines that such Servicing Advance would not be a
Nonrecoverable Advance (collectively, the "Servicing Advance Eligibility
Criteria"). The Servicer shall make
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Servicing Advances required hereunder from its own funds, but subject to daily
reimbursement from the Advancing Party as described in, and subject to, this
Section 5.15. Certain of the Servicing Advances will be paid to service
providers to perform actions with respect to Mortgage Loans and REO Properties.
The Servicer may from time to time engage and pay Affiliates of the Servicer to
perform some of such actions. Such payment shall be at arms-length market rates
for the services rendered and shall be reimbursable as Servicing Advances.
The Servicer shall submit a daily written report in substantially the form
of Exhibit SA attached hereto (a "Servicing Advance Reimbursement Request")
(which may be by electronic transmission) to the Advancing Party, pursuant to
delivery instructions provided to the Servicer by the Advancing Party, reporting
(i) the amount of all Servicing Advances made by the Servicer on the preceding
day, (ii) the aggregate amounts of collections on the Mortgage Loans on deposit
in the Principal and Interest Account or other custodial account on the
preceding day, and which, if on deposit in the Principal and Interest Account,
were permitted to be withdrawn from the Principal and Interest Account to
reimburse outstanding Servicing Advances or Existing Advances pursuant to
Section 5.04(ii) (regardless of whether reimbursed by the Advancing Party to the
Servicer pursuant to this Section 5.15) ("Advance Reimbursement Amounts"), and
which Advance Reimbursement Amounts were withdrawn by the Servicer and used to
pay some or all of the Servicing Advances paid on that preceding day, (iii) the
amounts specified in clause (B)(1) of the next paragraph, and (iv) the amount
requested to be paid by the Advancing Party to the Servicer, or the amount
required to be paid by the Servicer to the Advancing Party, pursuant to the next
paragraph. For each Servicing Advance, the Servicer shall report (A) the loan
number, (B) the purpose for the Servicing Advance, (C) a code indicating the
vendor to whom the Servicing Advance was paid, (D) the amount of the Servicing
Advance, and (E) other information reasonably requested by the Advancing Party.
The Advancing Party shall remit to the Servicer, on the next Business Day
following its receipt of a daily Servicing Advance Reimbursement Request, or the
second Business Day after receipt, if the Servicing Advance Reimbursement
Request is received later than 12:00 noon Eastern Time on a Business Day, (A)
the amount of the Servicing Advances made by the Servicer on the preceding date,
as reported in the related Servicing Advance Reimbursement Request, except to
the extent rejected by the Advancing Party for not being Eligible Servicing
Advances, minus (B) the sum of (1) the aggregate amounts by which individual
Servicing Advances made by the Servicer exceed the amounts established for
Servicing Advances of such type under the Servicing Policy and Procedure, and
(2) the amount of all Advance Reimbursement Amounts on deposit on the date of
the Servicing Advance Reimbursement Request in the Principal and Interest
Account or other custodial account, to the extent used by the Servicer to
disburse Servicing Advances. If the number determined pursuant to the preceding
sentence is a negative number, the Servicer shall remit such amount to the
Advancing Party on the Business Day following the date on which the Servicing
Advance Reimbursement Request is delivered.
The Servicer represents and warrants with respect to each Servicing Advance
Reimbursement Request it submits to the Advancing Party that (i) the Servicer
will not fail to comply with the Performance Standards as a result of its having
made any or all of the Servicing Advances for which reimbursement was requested
in such Servicing Advance Reimbursement Request, including the Advance
Continuation and REO Liquidation Tests set forth in the
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Performance Standards; (ii) each Servicing Advance for which reimbursement is
requested is an Eligible Servicing Advance, and, in the Servicer's reasonable
good faith judgment, is not a Nonrecoverable Advance; and (iii) each Servicing
Advance has not exceeded the limits established for such Servicing Advance under
the Servicing Policy and Procedure. To the extent the amount of any Servicing
Advance exceeds the parameters set forth in the Servicing Policy and Procedure,
the Servicer will be required to obtain the prior written approval of the
Advancing Party for any and all such payments.
The Servicer shall pay to the Advancing Party (or the Certificate Insurer,
if a draw shall have been made under a Certificate Insurance Policy and shall
not have been reimbursed) all amounts required under the Performance Standards
due to failures of the REO Sale Test or the Other Test referred to in the
Performance Standards.
(b) Recovery of Servicing Advance and Existing Advance Reimbursements. The
Servicer shall perform all servicing-related work and collection activities with
respect to the Mortgage Loans related to the recovery of all Servicing Advances
and Existing Advances, including, without limitation, active collection actions
for Servicing Advances and Existing Advances and interest accrued thereon
pursuant to the terms of the related Mortgage Notes and Mortgages, prior to
payoff or liquidation of the related Mortgage Loans. In addition, the Servicer
shall charge Mortgagors interest on the amount of all outstanding Servicing
Advances and Existing Advances in connection with payoffs of Mortgage Loans, to
the full extent such interest is allowed under the Mortgagor's Mortgage Note and
Mortgage, and to the full extent permitted under Applicable Regulations. The
Servicer shall cause such interest amounts to be transferred to the Advancing
Party immediately upon the Servicer's receipt thereof, and the Advancing Party
shall remit to the Transferor any such amounts representing interest on Existing
Advances. The Servicer shall actively examine unreimbursed Advances to analyze
their recoverability out of Late Collections and (without duplication)
Liquidation Proceeds of the related Mortgage Loans and shall declare
unreimbursed Advances that it deems nonrecoverable to be Nonrecoverable
Advances.
(c) Advance Financing Facilities. The Advancing Party may assign any of its
rights hereunder and delegate its obligations hereunder to any party with the
prior written consent of the Certificate Insurer and the Servicer, which consent
shall not be unreasonably withheld or delayed. The Servicer acknowledges and
understands that the Advancing Party may wish to enter into a facility to
finance the rights to be reimbursed for outstanding unreimbursed Servicing
Advances and Existing Advances. The Servicer is familiar with these types of
financing facilities and the terms thereof, and hereby covenants and agrees to
use all commercially reasonable efforts, at its own expense, to modify its
procedures and the documentation of those procedures and this Agreement, and to
enter into other documentation as needed, to facilitate such a facility, if and
when requested to do so by the Advancing Party.
(d) Servicing Advance and Existing Advance Reimbursements, Servicing
Compensation Prior to Servicing Transfer Date; Float Income Belongs to Advancing
Party.
It is the express intent of the parties hereto that the Servicer shall have
no rights whatsoever in respect of (i) any and all reimbursements in respect of
Servicing Advances or Existing Advances made by the Advancing Party or the
Transferor, or reimbursed by the
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Advancing Party to the Servicer with respect to the Mortgage Loans or, if made
by the Servicer, that have been previously reimbursed to the Servicer, or to
interest received on any Servicing Advances or Existing Advances, (ii) interest
earned on funds on deposit in the Principal and Interest Account and investment
earnings on investments in which such deposits are invested, or (iii) Servicing
Compensation the right to receive which accrued or arose prior to the Servicing
Transfer Date (items (i) through (iii) collectively, the "Reimbursement
Rights"). However, in the event that, notwithstanding the express intent of the
parties hereto, any such Reimbursement Rights are determined to belong to the
Servicer, then the Servicer hereby unconditionally assigns, transfers and
otherwise conveys to the Advancing Party (in the case of Reimbursement Rights
described in clauses (i) and (ii) above) and to the Transferor (in the case of
Reimbursement Rights described in clause (iii) above) all of the Servicer's
right, title and interest, in, to and under such Reimbursement Rights, whether
now existing or hereafter created or arising from time to time with respect
thereto until the termination of this Agreement, and all monies due or to become
due and all amounts received with respect thereto and all proceeds (including,
without limitation, "proceeds" as defined in the Uniform Commercial Code)
thereof. At the Advancing Party's or the Transferor's request and expense, the
Servicer agrees to the filing of UCC financing statements in the applicable
jurisdictions to perfect the Advancing Party's and the Transferor's interests in
the Reimbursement Rights. The Servicer acknowledges and agrees that in
collecting Reimbursement Amounts, the Servicer is acting solely as servicer and
collection agent for the Advancing Party and the Transferor, and shall hold all
such Reimbursement Amounts and interest thereon in trust for the sole benefit of
the Advancing Party and the Transferor.
(e) Form of Remittances to Advancing Party and Transferor. Any and all
amounts required to be remitted by the Servicer to the Advancing Party or the
Transferor shall be effected by funds transfer directly from the Principal and
Interest Account to the account of the Advancing Party or the Transferor, as the
case may be, pursuant to written instructions provided to the Servicer by the
Advancing Party and the Transferor, respectively.
(f) Advancing Party Not Responsible for Servicing. Notwithstanding anything
to the contrary in this Agreement, the Advancing Party's role is merely to
provide liquidity for Servicing Advances, and nothing contained in this
Agreement shall be construed to render the Advancing Party a servicer or master
servicer or in any way responsible for performing, or for supervising or
overseeing the performance of, the Servicer's duties, responsibilities and
obligations hereunder, and the Advancing Party shall not be liable for any
Servicer liability hereunder. The Advancing Party shall be responsible only for
the duties, responsibilities and obligations specifically and explicitly
undertaken by the Advancing Party hereunder and, without limiting the generality
of the foregoing, shall not be liable for any action taken based upon
information and instructions given to the Advancing Party by the Servicer
pursuant to this Section 5.15.
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Establishment of Collection Accounts; Deposit in Accounts.
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(a) No later than the Closing Date, the Trustee, for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear,
shall establish and maintain (i) the REMIC I Distribution Account in the name of
the Trustee, in trust for the benefit of Certificateholders and the Trustee as
the Holder of the REMIC I Regular Interests; (ii) the REMIC II Distribution
Account in the name of the Trustee, in trust for the benefit of
Certificateholders and the Trustee as the Holder of the REMIC II Regular
Interests; and (iii) the REMIC III Distribution Account in the name of the
Trustee, in trust for the benefit of Certificateholders and the Trustee as the
Holder of the REMIC III Regular Interests. Each of the REMIC I Distribution
Account, the REMIC II Distribution Account and the REMIC III Distribution
Account shall be established and maintained as an Eligible Account.
Notwithstanding the foregoing, however, the Trustee may establish a single
account (the "Collection Account"), of which the REMIC I Distribution Account,
the REMIC II Distribution Account and the REMIC III Distribution Account will be
deemed to be subaccounts, provided that: (i) the Collection Account shall be
established and maintained in the name of the Trustee, in trust for the benefit
of Certificateholders and the Certificate Insurer, (ii) the Collection Account
shall be established and maintained as an Eligible Account and (iii) the Trustee
shall for all other purposes hereunder treat the REMIC I Distribution Account,
the REMIC II Distribution Account and the REMIC III Distribution Account as
separate accounts, and shall keep accurate records with respect thereto.
The Trustee shall, promptly upon receipt, deposit in the REMIC I
Distribution Account and retain therein:
(i) the amounts remitted by the Servicer pursuant to Section 5.04(i);
(ii) the Advances pursuant to Section 6.08 remitted to the Trustee by
the Servicer;
(iii) Insured Payments pursuant to Section 6.05(c); and
(iv) amounts required to be paid by the Servicer pursuant to Section
6.04(e) in connection with losses on investments of amounts in the
Collection Account.
In making the deposits set forth in clauses (i) through (iv) (inclusive)
above, the Trustee, in reliance on the Remittance Report remitted to the Trustee
by the Servicer, shall note in its records (if applicable) the respective
amounts deposited with respect to Mortgage Loan Group 1, Mortgage Loan Group 2,
Mortgage Loan Group 3 and Mortgage Loan Group 4.
With respect to each Distribution Date, on or before such date the Trustee
shall make the withdrawals from the REMIC I Distribution Account, as set forth
in Section 6.05 hereof, shall make the deposits into the REMIC II Distribution
Account, as set forth in Section 6.05 hereof,
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shall make the withdrawals from the REMIC II Distribution Account, as set forth
in Section 6.05 hereof, shall make deposits into the REMIC III Distribution
Account, as set forth in Section 6.05 hereof, shall make the withdrawals from
the REMIC III Distribution Account, as set forth in Section 6.05 hereof, and
shall cause the amount of Available Funds and Insured Payments to be distributed
in respect of the Certificates pursuant to Section 6.05 hereof on such date.
Section 6.02. Permitted Withdrawals from REMIC I Distribution Account,
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REMIC II Distribution Account and REMIC III Distribution Account.
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The Trustee shall withdraw amounts on deposit in the REMIC I Distribution
Account, the REMIC II Distribution Account and the REMIC III Distribution
Account on each Distribution Date (except as set forth in clause (ii) below) in
the following order of priority:
(i) to make the distributions pursuant to Section 6.05(d), Section
6.05(e), Section 6.05(f); Section 6.05(g); and Section 6.05(h); and
(ii) on any day during the related Accrual Period, and in no
particular order of priority:
(A) to invest amounts on deposit in the REMIC I Distribution
Account as directed by the Advancing Party in Permitted Instruments or
such other instruments as may be approved in writing by the
Certificate Insurer (with written notice to the Rating Agencies)
pursuant to Section 6.04;
(B) to pay to the Advancing Party interest paid and earnings
realized on Permitted Instruments with respect to funds in the REMIC I
Distribution Account (except the portion thereof owing to the Trustee
pursuant to Section 12.05);
(C) to withdraw any amount deposited in the REMIC I Distribution
Account, the REMIC II Distribution Account or the REMIC III
Distribution Account not required to be deposited therein or deposited
therein in error;
(D) to withdraw any amount that constitutes a Mortgagor payment
previously deposited into the REMIC I Distribution Account that is
held to constitute a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(E) to pay any unanticipated expense of the Trust Fund out of the
REMIC I Distribution Account and to pay any taxes imposed on REMIC I,
REMIC II and REMIC III from the REMIC I Distribution Account, the
REMIC II Distribution Account or the REMIC III Distribution Account,
respectively, which are not otherwise paid pursuant to Section
2.07(d); and
(F) to clear and terminate the REMIC I Distribution Account, the
REMIC II Distribution Account and the REMIC III Distribution Account
upon
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the termination of this Agreement and allocate amounts therein
pursuant to Sections 6.05(d), (e), (f), (g) and (h).
(iii) to reimburse the Servicer or the Trustee, as the case may be,
for enforcement expenses reasonably incurred in respect of the breach or
defect giving rise to the purchase obligation under Section 3.03 of this
Agreement that were included in the Purchase Price of the Mortgage Loan,
including any expenses arising out of the enforcement of the purchase
obligation.
In making the withdrawals set forth in clauses (i) and (ii) above, the
Trustee shall note in its records (if applicable) the respective amounts
withdrawn with respect to Mortgage Loan Group 1, Mortgage Loan Group 2, Mortgage
Loan Group 3 and Mortgage Loan Group 4. In addition, the Trustee shall keep and
maintain a separate accounting for withdrawals from each of the REMIC I
Distribution Account, the REMIC II Distribution Account and the REMIC III
Distribution Account pursuant to each subclause listed above.
Section 6.03. Establishment of Insurance Account: Deposits in Insurance
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Account: Permitted Withdrawals from Insurance Account.
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(a) No later than the Closing Date, the Trustee, for the benefit of the
Certificateholders and the Certificate Insurer, shall establish and maintain one
or more Eligible Accounts as trust accounts with itself which shall not be
interest-bearing, titled "EQCC Trust 2001-1F Insurance Account". The Insurance
Account shall bear an additional designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders and the
Certificate Insurer. On each Distribution Date, the Trustee, upon receipt (and
to the extent received), promptly shall deposit into the Insurance Account, an
amount equal to the aggregate Monthly Premium with respect to the Class A
Certificates due on such Distribution Date in accordance with Section 6.05(d),
priority first (A), Section 6.05(e), priority first (A), Section 6.05(f),
priority first (A), and Section 6.05(g), priority first (A).
(b) The Trustee may make withdrawals from the Insurance Account for
application in the following order:
(i) to pay the Certificate Insurer the aggregate Monthly Premium on
each Distribution Date; and
(ii) to withdraw amounts not required to be deposited in the Insurance
Account or deposited therein in error.
Section 6.04. Investment of Accounts.
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(a) All or a portion of any Account (other than the REMIC II Distribution
Account and the REMIC III Distribution Account) held by the Trustee shall be
invested and reinvested by the Trustee (or remain uninvested), as directed in
writing by the Advancing Party on its own behalf, in one or more Permitted
Instruments (or, in the case of the REMIC I Distribution Account, in such other
instruments approved in writing by the Certificate Insurer (with written notice
to each Rating Agency)) bearing interest or sold at a discount. At no time shall
any such
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investment in any Account mature later than the Business Day immediately
preceding the date on which such amounts are required by the terms hereof to be
withdrawn from such Account, which (i) in the case of the REMIC I Distribution
Account, shall be the next Distribution Date, (ii) in the case of the Principal
and Interest Account, shall be the second business day preceding the next
Distribution Date and (iii) in all other cases, until the day actually withdrawn
pursuant to the terms hereof.
(b) If any amounts are needed for disbursement from any Account held by the
Trustee 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 such 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 6.04 is the cause
of such loss or charge.
(c) Subject to Section 12.01 hereof, the Trustee shall not in any way be
held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any investment loss on any Permitted Instrument (or other
instrument permitted by Section 6.04(a)) included herein (except to the extent
that the Trustee is the obligor and has defaulted thereon).
(d) The Trustee shall invest and reinvest funds in the Accounts held by it,
to the fullest extent practicable, in such manner as the Advancing Party shall
from time to time direct as set forth in, and as limited by, Section 6.04(a),
but only in one or more Permitted Instruments (or other instrument permitted by
Section 6.04(a)). All investment earnings on such Accounts and interest earned
on the deposits therein shall be for the account of the Advancing Party, except
as provided in Section 12.05 with respect to the Trustee's compensation.
(e) All income or other gain from investments in any Account held by the
Trustee, or from amounts on deposit in such Account and invested in Permitted
Instruments, shall be deposited in such Account, as the case may be, immediately
on receipt, and the Trustee shall notify the Advancing Party of any loss
resulting from such investments. Upon receipt of such notification, the
Advancing Party shall promptly remit the amount of any such loss from its own
funds, without reimbursement therefor, to the Trustee for deposit in the Account
from which the related funds were withdrawn for investment.
(f) Any investment earnings on funds held in the Principal and Interest
Account shall be reinvested by the Servicer at the direction of the Advancing
Party. All such investment earnings, the proceeds of the reinvestment thereof,
and all interest earned on deposits in the Principal and Interest Account, are
for the account of the Advancing Party.
Section 6.05. Priority and Subordination of Distributions.
-------------------------------------------
(a) Subordination. The rights of the Certificateholders to receive
distributions from the proceeds of the Trust Fund, and all ownership interests
of the Certificateholders in such distributions, shall be as set forth in this
Agreement. The rights of the Class X Certificateholders to receive distributions
in respect of the Class X Certificates shall be subject and subordinate to the
preferential rights of the Class A Certificateholders to receive distributions
in respect of the Class A Certificates, to the extent set forth herein.
Notwithstanding anything contained in this
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Agreement to the contrary, no Certificateholder shall be required to refund any
amount properly distributed to it pursuant to Section 6.02 or 6.05.
(b) [Reserved]
(c) Events of Nonpayment. As soon as possible, and in no event later than
10:00 a.m. New York time on the Business Day immediately preceding each
Distribution Date, the Trustee shall furnish the Certificate Insurer and the
Servicer with a completed notice in the form set forth as Exhibit Q hereto (the
"Notice) in the event that (i) an Event of Nonpayment will occur, pursuant to
the definition thereof, with respect to such Distribution Date, (ii) the
aggregate of the Certificate Balances of the Class A Certificates then
outstanding (after giving effect to principal distributions to be made pursuant
to Sections 6.05(d), (e), (f) and (g) on such Distribution Date) would exceed
the aggregate Principal Balance of the Mortgage Loans then outstanding (an
"Overcollateralization Deficit"), (iii) without duplication of the notice
specified in clause (ii), the Certificate Balance of each Class of Class A
Certificates remains unpaid on the Final Scheduled Distribution Date for such
Class, after giving effect to distributions on such Distribution Date, (iv) such
Distribution Date is the date fixed for termination of the Trust pursuant to
Section 11.01 or (v) a Preference Amount exists. The Notice shall specify the
amount of Insured Payment requested to be paid under each Certificate Insurance
Policy and shall constitute a claim for an Insured Payment pursuant to each such
Certificate Insurance Policy with respect to which an Insured Payment amount is
specified. In the case of an Overcollateralization Deficit, the related Insured
Payment shall be made by draws on each Certificate Insurance Policy relating to
a Class of Class A Certificates as to which the related Overcollateralized
Amount is less than zero, and shall be drawn on such Certificate Insurance
Policies pro rata based upon the respective amounts by which zero exceeds the
Overcollateralized Amounts for the Classes of Class A Certificates related to
such respective Certificate Insurance Policies. In the case of a Preference
Amount, such Notice shall be accompanied by a certified copy of the order
requiring the return of a preference payment, and such other documentation as is
required pursuant to the terms of the related Certificate Insurance Policy by
the Certificate Insurer, such documentation being in a form satisfactory to the
Certificate Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be received
on the following Business Day. Upon receipt of Insured Payments for the benefit
of the Class A Certificateholders under the related Certificate Insurance
Policy, the Trustee shall deposit such Insured Payments in the Collection
Account.
The Trustee shall receive, as attorney-in-fact of each Holder of a Class A
Certificate, any Insured Payment from the Certificate Insurer and disburse the
same to each Holder of a Class A Certificate, respectively, in accordance with
the provisions of this Section 6.05. Insured Payments disbursed by the Trustee
from proceeds of a Certificate Insurance Policy shall not be considered payment
by the Trust Fund nor shall such payment discharge the obligation of the Trust
Fund with respect to such Class A Certificates, and the Certificate Insurer
shall become the owner of such unpaid amounts due from the Trust Fund in respect
of Class A Certificates. The Trustee hereby agrees on behalf of each Holder of a
Class A Certificate for the benefit of the Certificate Insurer that it
recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Class A
Certificateholders, the Certificate Insurer will be subrogated to the rights of
the Class A Certificateholders, as applicable, with respect to such Insured
Payment and shall be deemed to
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the extent of the payments so made to be a registered Class A Certificateholder
and shall receive all future amounts distributable pursuant to Sections 6.05(d),
(e), (f) and (g) to the Class A Certificates which received such Insured
Payment, as the case may be, until all such Insured Payments by the Certificate
Insurer have been fully reimbursed together with interest thereon at the prime
rate of interest published by The Wall Street Journal, plus 2.00% per annum. To
evidence such subrogation, the Trustee shall note the Certificate Insurer's
rights as subrogee on the registration books maintained by the Trustee upon
receipt from the Certificate Insurer of proof of payment of any Insured Payment.
Except as otherwise described herein, the Certificate Insurer shall not acquire
any voting rights hereunder as a result of such subrogation.
(d) Group 1 Available Funds. Not later than 12:00 p.m. New York time on
each Distribution Date, the Trustee will be required to withdraw from the
Collection Account and distribute, based on the information provided by the
Servicer pursuant to Section 6.07 with respect to the Mortgage Loans, the Group
1 Available Funds and Insured Payments in respect of the Class A-1 Certificates
in the priority described below:
first, in the following order of priority, (A) to the Insurance
Account for the benefit of the Certificate Insurer, the Monthly Premium payable
to the Certificate Insurer in respect of Mortgage Loan Group 1 Certificates and
(B) to the Trustee, all expense reimbursements and indemnification amounts owed
to the Trustee pursuant to Section 12.05, subject to a cap of $100,000 for any
calendar year, and a $500,000 cap in the aggregate for the term of this
Agreement, for all such amounts paid from all Mortgage Loan Group funds (such
amounts will be allocated by the Trustee to each Group (to the extent of
Available Funds attributable to such Group) based on the relative Pool Principal
Balance of such Group to the Pool Principal Balance of all the Mortgage Loan
Groups);
second, to the Class A-1 Certificates, the Class A-1 Interest
Remittance Amount;
third, to the Class A-1 Certificates, Class A-1 Basic Principal
Distribution Amount;
fourth, to the Certificate Insurer, an amount equal to any Insured
Payments previously made by the Certificate Insurer on the Class A-1
Certificates (including any interest thereon) and not previously reimbursed;
fifth, concurrently, pro rata, as follows:
(i) to the Certificate Insurer, an amount equal to the excess, if
any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-2 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(e), priority fourth, below from Group 2 Available Funds;
(ii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-3 Certificates (including interest thereon) and
not previously reimbursed
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over (y) the amount actually distributed to the Certificate Insurer on
such Distribution Date pursuant to Section 6.05(f), priority fourth,
below from Group 3 Available Funds; and
(iii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-4 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(g), priority fourth, below from Group 4 Available Funds; and
sixth, concurrently, pro rata, as follows:
(i) to the Class A-2 Certificates, an amount equal to the excess,
if any, of (x) the Class A-2 Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-2 Certificates on such Distribution Date pursuant to Section
6.05(e), priority second, below from Group 2 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to the
excess, if any, of (x) the Class A-3 Interest Remittance Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-3 Certificates on such Distribution Date pursuant to Section
6.05(f), priority second, below from Group 3 Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any, of (x) the Class A-4 Interest Remittance Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-4 Certificates on such Distribution Date pursuant to Section
6.05(g), priority second, below from Group 4 Available Funds;
seventh, concurrently, pro rata, as follows:
(i) to the Class A-2 Certificates, an amount equal to the excess,
if any of (x) the Class A-2 Basic Principal Distribution Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-2 Certificates on such Distribution Date pursuant to Section
6.05(e), priority third, below from Group 2 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to the
excess, if any of (x) the Class A-3 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-3 Certificates on such Distribution Date
pursuant to Section 6.05(f), priority third, below from Group 3
Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any of (x) the Class A-4 Basic Principal Distribution
Amount for such Distribution
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Date over (y) the amount actually distributed to the Class A-4
Certificates on such Distribution Date pursuant to Section 6.05(g),
priority third, below from Group 4 Available Funds;
eighth, to the Class A-1 Certificates, an amount equal to the Extra
Principal Distribution Amount for the Class A-1 Certificates;
ninth, concurrently, pro rata, as follows:
(i) to the Class A-2 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-2 Certificates after distributions
to the Class A-2 Certificates on such Distribution Date pursuant to
Section 6.05(e), priority eighth, below from Group 2 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-3 Certificates after distributions
to the Class A-3 Certificates on such Distribution Date pursuant to
Section 6.05(f), priority eighth, below from Group 3 Available Funds;
and
(iii) to the Class A-4 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-4 Certificates after distributions
to the Class A-4 Certificates on such Distribution Date pursuant to
Section 6.05(g), priority eighth, below from Group 4 Available Funds;
tenth, to the Servicer, the Advancing Party, the Depositor and/or the
Transferor, as applicable, Group 1's allocable share (based on the relative Pool
Principal Balances of the Mortgage Loan Groups) of any Reimbursable Amounts;
eleventh, to the Trustee, any expense reimbursements or
indemnification amounts owed to the Trustee pursuant to Section 12.05 to the
extent they exceed the $100,000 annual cap or the $500,000 aggregate cap,
referred to in clause first above (such amounts will be allocated by the Trustee
to each Group (to the extent of Available Funds attributable to such Group)
based on the relative Pool Principal Balance of such Group to the Pool Principal
Balance of all the Mortgage Loan Groups);
twelfth, to the Class A-1 Certificates, the amount of any Relief Act
Shortfalls incurred with respect to Mortgage Loan Group 1 in respect of the
preceding Due Period, and the amount of any such Relief Act Shortfalls incurred
during previous Due Periods that were not paid on earlier Distribution Dates;
thirteenth, to the Advancing Party (or the Servicer, in the case of
Servicing Advances unreimbursed by the Advancing Party) and the Transferor, the
amount of all previously unreimbursed interest accrued on Servicing Advances and
Existing Advances made
97
by the Advancing Party and the Transferor on Mortgage Loans in Mortgage Loan
Group 1 that became Liquidated Mortgage Loans during the preceding Due Period;
fourteenth, to the Class X Certificates, the Unpaid Class X Remittance
Amount (without duplication of amounts distributed pursuant to priority
fourteenth of Sections 6.05(e), 6.05(f)) or Section 6.05(g); and
fifteenth, to the Residual Certificates, the balance, if any, of the
Group 1 Available Funds.
(e) Group 2 Available Funds. On each Distribution Date the Trustee shall
withdraw from the Collection Account and distribute, based on the information
provided by the Servicer pursuant to Section 6.07 with respect to the Mortgage
Loans, Group 2 Available Funds and Insured Payments in respect of the Class A-2
Certificates in the priority described below:
first, in the following order of priority, (A) to the Insurance
Account for the benefit of the Certificate Insurer, the Monthly Premium payable
to the Certificate Insurer in respect of the Class A-2 Certificates and (B) to
the Trustee, all expense reimbursements and indemnification amounts owed to the
Trustee pursuant to Section 12.05, subject to a cap of $100,000 for any calendar
year, and a $500,000 cap in the aggregate for the term of the Agreement, for all
such amounts paid from all Mortgage Loan Group funds (such amounts will be
allocated by the Trustee to each Group (to the extent of Available Funds
attributable to such Group) based on the relative Pool Principal Balance of such
Group to the Pool Principal Balance of all the Mortgage Loan Groups);
second, to the Class A-2 Certificates, the Class A-2 Interest
Remittance Amount;
third, to the Class A-2 Certificates, the Class A-2 Basic Principal
Distribution Amount, until the Certificate Balance of such Class has been
reduced to zero;
fourth, to the Certificate Insurer, an amount equal to any Insured
Payments previously made by the Certificate Insurer on the Class A-2
Certificates (including any interest thereon) and not previously reimbursed;
fifth, concurrently, pro rata, as follows:
(i) to the Certificate Insurer, an amount equal to the excess, if
any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-1 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(d), priority fourth, above from Group 1 Available Funds;
(ii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-3 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such
98
Distribution Date pursuant to Section 6.05(f), priority fourth, below
from Group 3 Available Funds; and
(iii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-4 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(g), priority fourth, below from Group 4 Available Funds;
sixth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates on such Distribution Date pursuant to Section
6.05(d), priority second, above from Group 1 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to the
excess, if any, of (x) the Class A-3 Interest Remittance Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-3 Certificates on such Distribution Date pursuant to Section
6.05(f), priority second, below from Group 3 Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any, of (x) the Class A-4 Interest Remittance Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-4 Certificates on such Distribution Date pursuant to Section
6.05(g), priority second, below from Group 4 Available Funds; and
seventh, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Basic Principal Distribution Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates on such Distribution Date pursuant to Section
6.05(d), priority third, above from Group 1 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to the
excess, if any, of (x) the Class A-3 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-3 Certificates on such Distribution Date
pursuant to Section 6.05(f), priority third, below from Group 3
Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any, of (x) the Class A-4 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-4 Certificates on such
99
Distribution Date pursuant to Section 6.05(g), priority third, below
from Group 3 Available Funds;
eighth, to the Class A-2 Certificates, an amount equal to Class A-2
Extra Principal Distribution Amount;
ninth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-1 Certificates after distributions
to the Class A-1 Certificates on such Distribution Date pursuant to
Section 6.05(d), priority eighth, above from Group 1 Available Funds;
(ii) to the Class A-3 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-3 Certificates after distributions
to the holders of the Class A-3 Certificates on such Distribution Date
pursuant to Section 6.05(f), priority eighth, below from the Group 3
Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-4 Certificates after distributions
to the holders of the Class A-4 Certificates on such Distribution Date
pursuant to Section 6.05(g), priority eighth, below from the Group 4
Available Funds;
tenth, to the Servicer, the Advancing Party, the Depositor and/or the
Transferor, as applicable, Group 2's allocable share (based on the relative Pool
Principal Balances of the Mortgage Loan Groups) of any Reimbursable Amounts;
eleventh, to the Trustee, any expense reimbursements or
indemnification amounts owed to the Trustee pursuant to Section 12.05 to the
extent they exceed the $100,000 annual cap or the $500,000 aggregate cap,
referred to in clause first above (such amounts will be allocated by the Trustee
to each Group (to the extent of Available Funds attributable to such Group)
based on the relative Pool Principal Balance of such Group to the Pool Principal
Balance of all the Mortgage Loan Groups);
twelfth, to the Class A-2 Certificates, the amount of any Relief Act
Shortfalls incurred with respect to Mortgage Loan Group 2 in respect of the
preceding Due Period, and the amount of any such Relief Act Shortfalls incurred
during previous Due Periods that were not paid on earlier Distribution Dates;
thirteenth, to the Advancing Party (or the Servicer, in the case of
Servicing Advances unreimbursed by the Advancing Party) and the Transferor, the
amount of all previously unreimbursed interest accrued on Servicing Advances and
Existing Advances made by the Advancing Party and the Transferor on Mortgage
Loans in Mortgage Loan Group 2 that became Liquidated Mortgage Loans during the
preceding Due Period;
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fourteenth, to the Class X Certificates, the Unpaid Class X Remittance
Amount (without duplication of amounts distributed pursuant to priority
fourteenth of Sections 6.05(d), 6.05(f)); and Section 6.05(g); and
fifteenth, to the Residual Certificates, the balance, if any, of Group
2 Available Funds.
(f) Group 3 Available Funds. On each Distribution Date, the Trustee shall
withdraw from the Collection Account and distribute, based on the information
provided by the Servicer pursuant to Section 6.07 with respect to the Mortgage
Loans, the Group 3 Available Funds and Insured Payments in respect of the Class
A-3 Certificates in the priority described below:
first, in the following order of priority, (A) to the Insurance
Account for the benefit of the Certificate Insurer, the Monthly Premium payable
to the Certificate Insurer in respect of the Class A-3 Certificates and (B) to
the Trustee, all expense reimbursements and indemnification amounts owed to the
Trustee pursuant to Section 12.05, subject to a cap of $100,000 for any calendar
year, and a $500,000 cap in the aggregate for the term of the Agreement, for all
such amounts paid from all Mortgage Loan Groups funds (such amounts will be
allocated by the Trustee to each Group (to the extent of Available Funds
attributable to such Group) based on the relative Pool Principal Balance of such
Group to the Pool Principal Balance of all the Mortgage Loan Groups);
second, to the Class A-3 Certificates, the Class A-3 Interest
Remittance Amount;
third, to the Class A-3 Certificates, the Class A-3 Basic Principal
Distribution Amount, until the Certificate Balance thereof has been reduced to
zero;
fourth, to the Certificate Insurer, an amount equal to any Insured
Payments previously made by the Certificate Insurer on the Class A-3
Certificates (including any interest thereon) and not previously reimbursed;
fifth, concurrently, pro rata, as follows:
(i) to the Certificate Insurer, an amount equal to the excess, if
any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-1 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(d), priority fourth, above from Group 1 Available Funds;
(ii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-2 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(e), priority fourth, above from Group 2 Available Funds; and
101
(iii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-4 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(g), priority fourth, below from Group 4 Available Funds;
sixth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates from Group 1 Available Funds on such
Distribution Date pursuant to Section 6.05(d), priority second, above
from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to the
excess, if any, of (x) the Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-2 Certificates on such Distribution Date pursuant to Section
6.05(e), priority second, above from Group 2 Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any, of (x) the Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-4 Certificates on such Distribution Date pursuant to Section
6.05(g), priority second, below from Group 4 Available Funds;
seventh, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Basic Principal Distribution Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates on such Distribution Date pursuant to Section
6.05(d), priority third, above from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to the
excess, if any of (x) the Class A-2 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-2 Certificates on such Distribution Date
pursuant to Section 6.05(e), priority third, above from Group 2
Available Funds; and
(iii) to the Class A-4 Certificates, an amount equal to the
excess, if any of (x) the Class A-4 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-4 Certificates on such Distribution Date
pursuant to Section 6.05(g), priority third, below from Group 4
Available Funds;
102
eighth, to the Class A-3 Certificates, an amount equal to the Class
A-3 Extra Principal Distribution Amount;
ninth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-1 Certificates after distributions
to the Class A-1 Certificates on such Distribution Date pursuant to
Section 6.05(d), priority eighth, above from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-2 Certificates after distributions
to the Class A-2 Certificates on such Distribution Date pursuant to
Section 6.05(e), priority eighth, above from Group 2 Available Funds;
and
(iii) to the Class A-4 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-4 Certificates after distributions
to the Class A-4 Certificates on such Distribution Date pursuant to
Section 6.05(g), priority eighth, below from Group 4 Available Funds;
tenth, to the Servicer, the Advancing Party, the Depositor and/or the
Transferor, as applicable, Group 3's allocable share (based on relative Pool
Principal Balances of the Mortgage Loan Groups) any Reimbursable Amounts;
eleventh, to the Trustee, any expense reimbursements or
indemnification amounts owed to the Trustee pursuant to Section 12.05 to the
extent they exceed the $100,000 annual cap or the $500,000 aggregate cap,
referred to in clause first above (such amounts will be allocated by the Trustee
to each Group (to the extent of Available Funds attributable to such Group)
based on the relative Pool Principal Balance of such Group to the Pool Principal
Balance of all the Mortgage Loan Groups);
twelfth, to the Class A-3 Certificates, the amount of any Relief Act
Shortfalls incurred with respect to Mortgage Loan Group 3 in respect of the
preceding Due Period, and the amount of any such Relief Act Shortfalls incurred
during previous Due Periods that were not paid on earlier Distribution Dates;
thirteenth, to the Advancing Party (or the Servicer, in the case of
Servicing Advances unreimbursed by the Advancing Party) and the Transferor, the
amount of all previously unreimbursed interest accrued on Servicing Advances and
Existing Advances made by the Advancing Party and the Transferor on Mortgage
Loans in Mortgage Loan Group 3 that became Liquidated Mortgage Loans during the
preceding Due Period;
103
fourteenth, to the Class X Certificates, the Unpaid Class X Remittance
Amount (without duplication of amounts distributed pursuant to priority
fourteenth of Sections 6.05(d), 6.05(e), and Section 6.05(g); and
fifteenth, to the Residual Certificates, the balance, if any, of
Group 3 Available Funds.
(g) Group 4 Available Funds. On each Distribution Date, the Trustee shall
withdraw from the Collection Account and distribute, based on the information
provided by the Servicer pursuant to Section 6.07 with respect to the Mortgage
Loans, the Group 4 Available Funds and Insured Payments in respect of the Class
A-4 Certificates in the priority described below:
first, in the following order of priority, (A) to the Insurance
Account for the benefit of the Certificate Insurer, the Monthly Premium payable
to the Certificate Insurer in respect of the Class A-4 Certificates and (B) to
the Trustee, all expense reimbursements and indemnification amounts owed to the
Trustee pursuant to Section 12.05, subject to a cap of $100,000 for any calendar
year, and a $500,000 cap in the aggregate for the term of the Agreement, for all
such amounts paid from all Mortgage Loan Group funds (such amounts will be
allocated by the Trustee to each Group (to the extent of Available Funds
attributable to such Group) based on the relative Pool Principal Balance of such
Group to the Pool Principal Balance of all the Mortgage Loan Groups);
second, to the Class A-4 Certificates, the Class A-4 Interest
Remittance Amount;
third, to the Class A-4 Certificates, the Class A-4 Basic Principal
Distribution Amount, until the Certificate Balance thereof has been reduced to
zero;
fourth, to the Certificate Insurer, an amount equal to any Insured
Payments previously made by the Certificate Insurer on the Class A-4
Certificates (including any interest thereon) and not previously reimbursed;
fifth, concurrently, pro rata, as follows:
(i) to the Certificate Insurer, an amount equal to the excess, if
any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-1 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(d), priority fourth, above from Group 1 Available Funds;
(ii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-2 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(e), priority fourth, above from Group 2 Available Funds; and
104
(iii) to the Certificate Insurer, an amount equal to the excess,
if any, of (x) any Insured Payments previously made by the Certificate
Insurer on the Class A-3 Certificates (including interest thereon) and
not previously reimbursed over (y) the amount actually distributed to
the Certificate Insurer on such Distribution Date pursuant to Section
6.05(f), priority fourth, above from Group 3 Available Funds;
sixth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates from Group 1 Available Funds on such
Distribution Date pursuant to Section 6.05(d), priority second, above
from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to the
excess, if any, of (x) the Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-2 Certificates on such Distribution Date pursuant to Section
6.05(e), priority second, above from Group 2 Available Funds; and
(iii) to the Class A-3 Certificates, an amount equal to the
excess, if any, of (x) the Interest Remittance Amount for such
Distribution Date over (y) the amount actually distributed to the
Class A-3 Certificates on such Distribution Date pursuant to Section
6.05(f), priority second, above from Group 3 Available Funds;
seventh, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to the excess,
if any, of (x) the Class A-1 Basic Principal Distribution Amount for
such Distribution Date over (y) the amount actually distributed to the
Class A-1 Certificates on such Distribution Date pursuant to Section
6.05(d), priority third, above from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to the
excess, if any of (x) the Class A-2 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-2 Certificates on such Distribution Date
pursuant to Section 6.05(e), priority third, above from Group 2
Available Funds; and
(iii) to the Class A-3 Certificates, an amount equal to the
excess, if any of (x) the Class A-3 Basic Principal Distribution
Amount for such Distribution Date over (y) the amount actually
distributed to the Class A-3 Certificates on such Distribution Date
pursuant to Section 6.05(f), priority third, above from Group 3
Available Funds;
105
eighth, to the Class A-4 Certificates, an amount equal to the Class
A-4 Extra Principal Distribution Amount;
ninth, concurrently, pro rata, as follows:
(i) to the Class A-1 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-1 Certificates after distributions
to the Class A-1 Certificates on such Distribution Date pursuant to
Section 6.05(d), priority eighth, above from Group 1 Available Funds;
(ii) to the Class A-2 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-2 Certificates after distributions
to the Class A-2 Certificates on such Distribution Date pursuant to
Section 6.05(e), priority eighth, above from Group 2 Available Funds;
and
(iii) to the Class A-3 Certificates, an amount equal to any
remaining Overcollateralization Deficiency Amount for such
Distribution Date for the Class A-3 Certificates after distributions
to the Class A-3 Certificates on such Distribution Date pursuant to
Section 6.05(f), priority eighth, above from Group 3 Available Funds;
tenth, to the Servicer, the Advancing Party, the Depositor and/or the
Transferor, as applicable, Group 4's allocable share (based on relative Pool
Principal Balances of the Mortgage Loan Groups) any Reimbursable Amounts;
eleventh, to the Trustee, any expense reimbursements or
indemnification amounts owed to the Trustee pursuant to Section 12.05 to the
extent they exceed the $100,000 annual cap, or the $500,000 aggregate cap,
referred to in clause first above (such amounts will be allocated by the Trustee
to each Group (to the extent of Available Funds attributable to such Group)
based on the relative Pool Principal Balance of such Group to the Pool Principal
Balance of all the Mortgage Loan Groups);
twelfth, to the Class A-4 Certificates, the amount of any Relief Act
Shortfalls incurred with respect to Mortgage Loan Group 4 in respect of the
preceding Due Period, and the amount of any such Relief Act Shortfalls incurred
during previous Due Periods that were not paid on earlier Distribution Dates;
thirteenth, to the Advancing Party (or the Servicer, in the case of
Servicing Advances unreimbursed by the Advancing Party) and the Transferor, the
amount of all previously unreimbursed interest accrued on Servicing Advances and
Existing Advances made by the Advancing Party and the Transferor on Mortgage
Loans in Mortgage Loan Group 4 that became Liquidated Mortgage Loans during the
preceding Due Period;
106
fourteenth, to the Class X Certificates, the Unpaid Class X Remittance
Amount (without duplication of amounts distributed pursuant to priority
fourteenth of Sections 6.05(d), 6.05(e), and 6.05(f); and
fifteenth, to the Residual Certificates, the balance, if any, of
Group 4 Available Funds.
(h) Allocation of Distributions Among Various REMIC Interests. The
following additional rules shall apply to the allocation of distributions
hereunder:
(i) Amounts distributed pursuant to Section 6.05(d), priority
fourteenth, Section 6.05(e), priority fourteenth, Section 6.05(f), priority
fourteenth, and Section 6.05(g), priority fourteenth shall be distributed
in respect of the Class X Interest pro rata (based on interest accrued) in
respect of the Class X-1 Component Remittance Amounts, the Class X-2
Component Remittance Amounts and the Class X-3 Component Remittance
Amounts, respectively.
(ii) Any Available Funds which are available to be distributed
pursuant to priorities fifth, sixth, seventh or ninth, respectively, of
Sections 6.05(d), 6.05(e), 6.05(f) or 6.05(g) shall be distributed on a pro
rata basis.
(iii) All distributions made pursuant to Sections 6.05(d), (e), (f)
and (g) above in respect of the REMIC III Regular Interests shall be
treated as having been distributed in respect of the REMIC I Regular
Interests pursuant to Section 6.05(h)(vi) and deposited in the REMIC II
Distribution Account, then as having been distributed in respect of the
REMIC II Regular Interests pursuant to Section 6.05(h)(v) and deposited
into the REMIC III Distribution Account, and finally as having been
distributed to Certificateholders from the REMIC III Distribution Account.
(iv) Any remaining Available Funds in REMIC III will be distributed on
the Class R-III Certificates.
(v) REMIC II. For each Distribution Date, amounts shall be distributed
on the REMIC II Regular Interests and the Class R-II Certifidates as
follows:
(A) On each Distribution Date, Group 1 Available Funds and
Insured Payments with respect to the Class A-1 Certificates shall be
distributed in respect of the Class MT1, Class MTN1, Class MT2, Class
MTN2, Class MT3 and Class MTN3 Interests as follows:
(I) The Class A-1 Basic Principal Distribution Amount shall
be distributed among the Class MT1, Class MT2 and Class MT3
Interests, such that their principal balances remain in the ratio
of 98% of the Pool Principal Balance of Mortgage Loan Group 1, 1%
of the excess of the Pool Principal Balance of Mortgage Loan
Group 1 over the Group 1 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 1 and the Group 1 OC
Amount, respectively.
107
(II) Such portion of Group 1 Available Funds representing
interest collections on Mortgage Loan Group 1 shall be
distributed to the Class MT1, Class MTN1, Class MT2, Class MTN2,
Class MT3 and Class MTN3 Interests, up to the amount
distributable at the interest rates set forth in the definitions
thereof on their principal balances or notional balances, as
applicable, pro rata (based on interest accrued).
(III) Any recoveries of principal losses or prior shortfalls
in interest on Mortgage Loan Group 1 received by REMIC II shall
be distributed to the Class MT1, Class MTN1, Class MT2, Class
MTN2, Class MT3 and Class MTN3 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(B) On each Distribution Date, the Group 2 Available Funds and
Insured Payments with respect to the Class A-2 Certificates shall be
distributed in respect of the Class MT4, Class MTN4, Class MT5, Class
MTN5, Class MT6 and Class MTN6 Interests as follows:
(I) The Class A-2 Basic Principal Distribution Amount shall
be distributed among the Class MT4, Class MT5 and Class MT6
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 1, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 2
over the Group 2 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 2 and the Group 2 OC
Amount, respectively.
(II) Such portion of the Group 2 Available Funds
representing interest collections on Mortgage Loan Group 2 shall
be distributed to the Class MT4, Class MTN4, Class MT5, Class
MTN5, Class MT6 and Class MTN6 Interests, up to the amount
distributable at the interest rates set forth in the definitions
thereof on their principal balances or notional balances, as
applicable, pro rata (based on interest accrued).
(III) Any recoveries of principal losses or prior shortfalls
in interest on Mortgage Loan Group 2 received by REMIC II shall
be distributed to the Class MT4, Class MTN4, Class MT5, Class
MTN5, Class MT6 and Class MTN6 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(C) On each Distribution Date, the Group 3 Available Funds and
Insured Payments with respect to the Class A-3 Certificates shall be
distributed in respect of the Class MT7, Class MTN7, Class MT8, Class
MTN8, Class MT9 and Class MTN9 Interests as follows:
(I) The Class A-3 Basic Principal Distribution Amount shall
be distributed among the Class MT7, Class MT8 and Class MT9
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal
108
Balance of the Mortgage Loan Group 3, 1% of the excess of the
Pool Principal Balance of the Mortgage Loan Group 3 over the
Group 3 OC Amount and 1% of the sum of the Pool Principal Balance
of Mortgage Loan Group 3 and the Group 3 OC Amount, respectively.
(II) Such portion of the Group 3 Available Funds
representing interest collections on Mortgage Loan Group 3 shall
be distributed to the Class MT7, Class MTN7, Class MT8, Class
MTN8, Class MT9 and Class MTN9 Interests, up to the amount
distributable at the interest rates set forth in the definitions
thereof on their principal balances or notional balances, as
applicable, pro rata (based on interest accrued).
(III) Any recoveries of principal losses or prior shortfalls
in interest on Mortgage Loan Group 3 received by REMIC II shall
be distributed to the Class MT7, Class MTN7, Class MT8, Class
MTN8, Class MT9 and Class MTN9 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(D) On each Distribution Date, the Group 4 Available Funds and
Insured Payments with respect to the Class A-4 Certificates shall be
distributed in respect of the Class MT10, Class MTN10, Class MT11,
Class MTN11, Class MT12 and Class MTN12 Interests as follows:
(I) The Class A-4 Basic Principal Distribution Amount shall
be distributed among the Class MT10, Class MT11 and Class MT12
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 4, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 4
over the Group 4 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 4 and the Group 4 OC
Amount, respectively.
(II) Such portion of the Group 4 Available Funds
representing interest collections on Mortgage Loan Group 4 shall
be distributed to the Class MT10, Class MTN10, Class MT11, Class
MTN11, Class MT12 and Class MTN12 Interests, up to the amount
distributable at the interest rates set forth in the definitions
thereof on their principal balances or notional balances, as
applicable, pro rata (based on interest accrued).
(III) Any recoveries of principal losses or prior shortfalls
in interest on Mortgage Loan Group 4 received by REMIC II shall
be distributed to the Class MT10, Class MTN10, Class MT11, Class
MTN11, Class MT12 and Class MTN12 Interests, as the case may be,
in the proportions in which such losses or shortfalls were
previously incurred.
(E) Any remaining Available Funds in REMIC II will be distributed
to the Class R-II Certificate.
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(vi) REMIC I. For each Distribution Date, amounts shall be distributed on
the REMIC I Regular Interests and the Class R-I Certificates as follows:
(A) On each Distribution Date, the Group 1 Available Funds and
Insured Payments in respect of the Class A-1 Certificates shall be
distributed in respect of the Class LT1, Class LT2 and Class LT3
Interests as follows:
(I) The Class A-1 Basic Principal Distribution Amount shall
be distributed among the Class LT1, Class LT2 and Class LT3
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 1, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 1
over the Group 1 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 1 and the Group 1 OC
Amount, respectively.
(II) Such portion of the Group 1 Available Funds
representing interest collections on Mortgage Loan Group 1 shall
be distributed to the Class LT1, Class LT2 and Class LT3
Interests, up to the amount distributable at the interest rates
set forth in the definitions thereof on their principal balances,
pro rata (based on interest accrued).
(III) Subject to Section 6.05(h)(vi)(E), any recoveries of
principal losses or prior shortfalls in interest on Mortgage Loan
Group 1 received by REMIC I shall be distributed to the Class
LT1, Class LT2 and Class LT3 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(B) On each Distribution Date, the Group 2 Available Funds and
Insured Payments in respect of the Class A-2 Certificates shall be
distributed in respect of the Class LT4, Class LT5 and Class LT6
Interests as follows:
(I) The Class A-2 Basic Principal Distribution Amount shall
be distributed among the Class LT4, Class LT5 and Class LT6
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 2, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 2
over the Group 2 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 2 and the Group 2 OC
Amount, respectively.
(II) Such portion of the Group 2 Available Funds
representing interest collections on Mortgage Loan Group 2 shall
be distributed to the Class LT4, Class LT5 and Class LT6
Interests, up to the amount distributable at the interest rates
set forth in the definitions thereof on their principal balances,
pro rata (based on interest accrued).
(III) Subject to Section 6.05(h)(vi)(E), any recoveries of
principal losses or prior shortfalls in interest on Mortgage Loan
Group 2 received
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by REMIC I shall be distributed to the Class LT4, Class LT5, and
Class LT6 Interests, as the case may be, in the proportions in
which such losses or shortfalls were previously incurred.
(C) On each Distribution Date, the Group 3 Available Funds and
Insured Payments in respect of the Class A-3 Certificates shall be
distributed in respect of the Class LT7, Class LT8 and Class LT9
Interests as follows:
(I) The Class A-3 Basic Principal Distribution Amount shall
be distributed among the Class LT7, Class LT8 and Class LT9
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 3, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 3
over the Group 3 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 3 and the Group 3 OC
Amount, respectively.
(II) Such portion of the Group 3 Available Funds
representing interest collections on the Mortgage Loan Group 3
shall be distributed to the Class LT7, Class LT8 and Class LT9
Interests, up to the amount distributable at the interest rates
set forth in the definitions thereof on their principal balances
or notional balances, as applicable, pro rata (based on interest
accrued).
(III) Subject to Section 6.05(h)(vi)(E) any recoveries of
principal losses or prior shortfalls in interest on Mortgage Loan
Group 3 received by REMIC I shall be distributed to the Class
LT7, Class LT8 and Class LT9 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(D) On each Distribution Date, the Group 4 Available Funds and
Insured Payments in respect of the Class A-4 Certificates shall be
distributed in respect of the Class LT10, Class LT11 and Class LT12
Interests as follows:
(I) The Class A-4 Basic Principal Distribution Amount shall
be distributed among the Class LT10, Class LT11 and Class LT12
Interests, such that their principal balances remain in the ratio
of 98% of Pool Principal Balance of Mortgage Loan Group 4, 1% of
the excess of the Pool Principal Balance of Mortgage Loan Group 4
over the Group 4 OC Amount and 1% of the sum of the Pool
Principal Balance of Mortgage Loan Group 4 and the Group 4 OC
Amount, respectively.
(II) Such portion of the Group 4 Available Funds
representing interest collections on the Mortgage Loan Group 3
shall be distributed to the Class LT10, Class LT11 and Class LT12
Interests, up to the amount distributable at the interest rates
set forth in the definitions thereof on their principal balances
or notional balances, as applicable, pro rata (based on interest
accrued).
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(III) Subject to Section 6.05(h)(vi)(E) any recoveries of
principal losses or prior shortfalls in interest on Mortgage Loan
Group 3 received by REMIC I shall be distributed to the Class
LT10, Class LT11 and Class LT12 Interests, as the case may be, in
the proportions in which such losses or shortfalls were
previously incurred.
(E) All amounts distributable pursuant to Section 6.05(d),
priorities first, fourth, fifth, tenth and eleventh, Section 6.05(e),
priorities first, fourth, fifth, tenth and eleventh, Section 6.05(f),
priorities first, fourth, fifth, tenth and eleventh, and Section
6.05(g), priorities first, fourth, fifth, tenth and eleventh, shall be
treated as having been distributed to the Insurance Account, the
Trustee, the Certificate Insurer, the Servicer, the Advancing Party,
the Depositor and/or the Transferor, as applicable, from REMIC I.
(F) Any remaining Available Funds in REMIC I will be distributed
to the Class R-I Certificates.
(vii) Amounts distributed pursuant to priority thirteenth of Sections
6.05(d), (e), (f), and (g) with respect to Existing Advances shall be
deemed to be paid outside of the Trust REMICs.
(i) General Distribution Allocation Rules. All distributions made to the
Class A Certificateholders or the Class X, Class R-I, Class R-II and Class R-III
Certificateholders as a Class on each Distribution Date will be made on a pro
rata basis among the Certificateholders of the respective Class of record on the
next preceding Record Date based on the Percentage Interest represented by their
respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of such Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder shall
own of record Class A Certificates which have denominations aggregating at least
$1,000,000 appearing in the Certificate Register, and in all cases with respect
to the Class X, Class R-I, Class R-II and Class R-III Certificateholders, and
shall have provided complete wiring instructions at least five Business Days
prior to the Record Date, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register.
If more than one Class of Class A Certificates is entitled to receive
distributions out of Available Funds attributable to unrelated Mortgage Loan
Groups due to shortfalls in amounts of Available Funds from such Classes'
respective related Mortgage Loan Groups, then the amount of the Available Funds
from such other Mortgage Loan Groups that is used to make such distributions
will be allocated among such Classes on a pro rata basis based upon the relative
amounts of their shortfalls. If the amounts available to cover such shortfalls
on Classes of Class A Certificates from unrelated Mortgage Loan Groups is more
than sufficient to cover shortfalls in Available Funds for related Mortgage Loan
Groups, then the amounts of the Available Funds from the respective unrelated
Mortgage Loan Groups used to cover such shortfalls shall be determined on a pro
rata basis, based on the respective amounts of Available Funds from such
unrelated Mortgage Loan Groups that are available to make payments on such
Classes of Class A Certificates.
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Section 6.06. [Reserved].
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Section 6.07. Statements.
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(a) Remittance Reports. Not later than 3:00 p.m. New York time on each
Determination Date, the Servicer shall deliver to the Trustee, the NIMS Insurer,
the Advancing Party, and the Certificate Insurer a computer tape or written
report containing the information set forth on Exhibit R as to each Mortgage
Loan with respect to the related Due Period and Prepayment Period and such other
information with respect to the Mortgage Loans in the aggregate as the Trustee
shall reasonably require. Not later than 1:00 p.m. New York time on each
Distribution Date, the Trustee shall make available to the Depositor, the
Servicer, the Advancing Party, the Certificate Insurer, the NIMS Insurer,
▇▇▇▇▇'▇, S&P and Fitch by telecopy, by request, a statement (the "Remittance
Report") prepared based on the Mortgage Loan and Mortgage Loan Group information
provided by the Servicer on Exhibit R containing the information set forth below
with respect to such Distribution Date, with a hard copy thereof to be delivered
on the immediately succeeding Business Day:
(i) the Available Funds attributable to each Mortgage Loan Group and
any portion of the Available Funds that has been deposited in the
Collection Account but may not be withdrawn therefrom pursuant to an order
of a United States bankruptcy court of competent jurisdiction imposing a
stay pursuant to ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code;
(ii) the Class A-1 Principal Balance, the Class A-2 Principal Balance,
the Class A-3 Principal Balance, the Class A-4 Principal Balance and the
Pool Principal Balance with respect to each Mortgage Loan Group, as
reported pursuant to subclause (xiii) below in the Remittance Report
provided for the immediately preceding Distribution Date, or, in the case
of the first Determination Date, the Original Class A-1 Principal Balance,
the Original Class A-2 Principal Balance, the Original Class A-3 Principal
Balance, the Original Class A-4 Principal Balance and the Original Pool
Principal Balance with respect to each Mortgage Loan Group;
(iii) with respect to the Mortgage Pool and each Mortgage Loan Group,
the number and the aggregate Principal Balances of all Mortgage Loans which
were the subject of Principal Prepayments during the related Prepayment
Period;
(iv) with respect to the Mortgage Pool and each Mortgage Loan Group,
the amount of all Curtailments which were received during the related Due
Period;
(v) with respect to the Mortgage Pool and each Mortgage Loan Group,
the aggregate amount of principal portions of all Monthly Payments received
during the related Due Period;
(vi) with respect to the Mortgage Pool and each Mortgage Loan Group,
the amount of interest received on the Mortgage Loans during the related
Due Period (and Prepayment Period, in the case of interest on Principal
Prepayments);
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(vii) with respect to the Mortgage Pool and each Mortgage Loan Group, the
aggregate amount of the Advances made with respect to such Distribution Date and
the aggregate amount of recoveries during the related Due Period of previously
made Advances;
(viii) with respect to the Mortgage Pool and each Mortgage Loan Group, the
delinquency and foreclosure information set forth in the form attached hereto as
Exhibit H and the amount of Mortgage Loan Losses incurred during the related Due
Period;
(ix) the Class A-1 Principal Balance, the Class A-2 Principal Balance, the
Class A-3 Principal Balance and the Class A-4 Principal Balance after giving
effect to the distribution to be made on such Distribution Date;
(x) with respect to the Mortgage Pool and each Mortgage Loan Group, the
weighted average remaining maturity and the weighted average Mortgage Interest
Rate of the Mortgage Loans in each Mortgage Loan Group as of the last day of the
related Due Period;
(xi) the Servicing Fees paid and Servicing Fees accrued during the related
Due Period;
(xii) the amount of all payments or reimbursements to the Servicer pursuant
to Section 5.04(ii), (iv), (v), (vi) and (vii) paid or to be paid since the
prior Distribution Date (or in the case of the first Distribution Date, since
the Closing Date);
(xiii) the Pool Principal Balance and aggregate Principal Balance for each
Mortgage Loan Group as of the last day of the related Due Period (after giving
effect to all Principal Prepayments during the related Prepayment Period);
(xiv) such other information as the Certificate Insurer, the NIMS Insurer
and the Certificateholders may reasonably require;
(xv) the amounts of Reimbursable Amounts and Nonrecoverable Advances and
interest on Advances which are reimbursable to the Servicer, the Transferor or
the Depositor, as appropriate, pursuant to Section 6.05;
(xvi) with respect to the Mortgage Pool and each Mortgage Loan Group, the
number of Mortgage Loans outstanding at the beginning and at the end of the
related Due Period (after giving effect to all Principal Prepayments received
during the related Prepayment Period);
(xvii) the aggregate interest accrued on the Mortgage Loans at their
respective Mortgage Interest Rates for the related Due Period;
(xviii) the Overcollateralized Amount, the Overcollateralization Target
Amount and any Overcollateralization Deficiency Amount for each Certificate
Group for such
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Distribution Date, in each case after giving effect to distributions on
such Distribution Date;
(xix) the aggregate cumulative Mortgage Loan Losses since the Cut-off
Date as of the end of the related Due Period;
(xx) the Pass-Through Rate for each Class of Class A Certificates for
the related Accrual Period, stating in each case whether the Pass-Through
Rate equals the applicable Net Funds Cap Rate;
(xxi) the aggregate amount of interest and/or principal (reported
separately) to be distributed on each Class of Certificates on such
Distribution Date;
(xxii) the aggregate amount of Principal Prepayments made during the
related Prepayment Period; and
(xxiii) an itemization of each Servicing Advance made and reimbursed
during the preceding Due Period, by loan number, borrower name, property
address, dollar amount, date paid, date reimbursed (if applicable), and the
purpose for the Servicing Advance.
The Trustee will make such report available on each Distribution Date to
Certificateholders and the Rating Agencies via the Trustee's website at
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇. Parties that are unable to use the website are entitled to
have a paper copy mailed to them via first class mail by calling the Trustee at
(▇▇▇) ▇▇▇-▇▇▇▇ and indicating such. The Trustee shall have the right to change
the way such statements are distributed in order to make such distribution more
convenient and/or more accessible to the above parties and the Trustee shall
provide timely and adequate notification to all parties regarding any such
changes. The Depositor and the Trustee 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 Servicer and the Trustee may
rely upon the telecopy.
In the case of information furnished pursuant to subclause (xxi) above, the
amounts shall be expressed in a separate section of the report as a dollar
amount for each of the Class A Certificates for each $1,000 original principal
amount as of the Cut-off Date.
(b) Access to Information and Documentation. Upon reasonable advance notice
in writing, the Servicer will provide to the Trustee access to information and
documentation regarding the Mortgage Loans sufficient to permit any Holder which
is a savings and loan association, bank or insurance company to comply with
applicable regulations of the FDIC or other regulatory authorities with respect
to investment in the Certificates, as applicable.
(c) Cumulative Loss Percentage. Not later than 10 days after each
Distribution Date, the Servicer shall report the Cumulative Loss Percentage, as
of the end of the Due Period related to such Distribution Date, to the Trustee
and the Certificate Insurer. In addition, the Servicer shall furnish to the
Trustee, the NIMS Insurer and to the Certificate Insurer, during the term of
this Agreement, such periodic, special, or other reports or information not
specifically provided
115
for herein, as may be necessary, reasonable, or appropriate with respect to the
Trustee, the NIMS Insurer or the Certificate Insurer, as the case may be, 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 as the Trustee or the Certificate Insurer may
reasonably require; provided, that the Servicer shall be entitled to be
reimbursed by the requesting party, for the fees and actual expenses associated
with providing such reports, if such reports are not generally produced in the
ordinary course of its business.
(d) Confidentiality. Reports and computer tapes furnished by the Servicer
pursuant to this Agreement shall be deemed confidential and of proprietary
nature, and shall not be copied or distributed except in connection with the
purposes and requirements of this Agreement; provided that the Trustee and the
Certificate Insurer or the NIMS Insurer, as the case may be, may copy or
distribute such information (A) pursuant to a subpoena or order issued by a
court of competent jurisdiction or by a judicial or administrative or
legislative body or committee, (B) as may be required in any report, statement
or testimony submitted to any federal, state, municipal or other regulatory body
having jurisdiction over the Certificate Insurer, (C) in order to comply with
any law, ruling, order or regulation applicable to the Certificate Insurer, or
(D) as may be required by any rating agency or reinsurer. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Originators or for any other
purpose except as set forth in this Agreement.
(e) Notices to Certificate Insurer and the NIMS Insurer. The Trustee shall
promptly send to the Certificate Insurer and, upon request, to each
Certificateholder in writing:
(i) notice of the appointment of any Subservicer;
(ii) notice of any transfer of any Account to a different depository
institution;
(iii) a copy of each Officer's Certificate delivered pursuant to
Section 7.04 and any notice received from the Servicer of a change in the
fiscal year of the Servicer;
(iv) a copy of each letter delivered pursuant to Section 7.05; and
(v) notice of the receipt by the Trustee of any information regarding
the Servicer's servicing activities pursuant to the last paragraph of
Section 10.01(c);
provided, that in each case the Trustee shall only be required to send such
notices and other items to such Persons to the extent that the Trustee has
itself received the related information.
Section 6.08. Advances by the Servicer.
------------------------
Not later than the close of business on the second Business Day preceding
each Distribution Date, the Servicer shall remit to the Trustee (but solely from
and to the extent of amounts on deposit in the Principal and Interest Account as
of the related Determination Date, after giving effect to withdrawals from the
Principal and Interest Account as of the Determination Date for such
Distribution Date pursuant to Section 5.04(i)), an amount (the "Advance") equal
to the sum of (a) the interest accrued in the related Due Period on the Mortgage
Loans but uncollected as of the close of business on the last day of such Due
Period
116
(net of the Servicing Fee) and (b) with respect to each REO Property which was
acquired during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount equal to the
excess, if any, of interest on the Principal Balance of such REO Property
computed at the related Mortgage Interest Rate (net of the Servicing Fee) for
the most recently ended Due Period over the net income from the REO Property
deposited in the Principal and Interest Account during such Due Period pursuant
to Section 5.10; provided, however, that no such Advance shall be made if the
Servicer shall have determined, in its reasonable judgment, that such Advance,
if made, would be a Nonrecoverable Advance.
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01. Assumption Agreements.
---------------------
When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. In such event, the
Servicer shall enter into an assumption 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
or the Mortgage Documents, the Mortgagor remains liable thereon. The Servicer is
also authorized with the prior approval of the Certificate Insurer to enter into
a substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Mortgage Note; provided that if the
Certificate Insurer does not respond within five Business Days after its
approval has been requested in writing by the Servicer, then the Certificate
Insurer shall be deemed to have approved the substitution of liability. The
Servicer shall notify the Depositor, the Trustee, the NIMS Insurer and the
Certificate Insurer that any such substitution or assumption agreement has been
completed by forwarding to the Trustee (or to the Custodian on behalf of the
Trustee) the original of such substitution or assumption agreement and a
duplicate thereof to the Depositor, the NIMS Insurer and the Certificate
Insurer, which original shall be added by the Trustee (or by the Custodian on
behalf of 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 7.01,
the Servicer shall not change the Mortgage Interest Rate or the Monthly Payment,
defer or forgive the payment of principal or interest, reduce the outstanding
principal amount or extend the final maturity date on such Mortgage Loan. Any
fee collected by the Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Servicer as additional Servicing Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any
117
assumption which the Servicer may be restricted by law from preventing, for any
reason whatsoever.
Section 7.02. Satisfaction of Mortgages and Release of Mortgage Files.
-------------------------------------------------------
Subject to Section 5.01(d), the Servicer shall not grant a satisfaction or
release of a Mortgage without having obtained payment in full of the
indebtedness secured by the Mortgage or otherwise prejudice any right the
Certificateholders or the Certificate Insurer may have under the mortgage
instruments subject to Section 5.01 hereof. The Servicer shall maintain the
Fidelity Bond as provided for in Section 5.09 insuring the Servicer against any
loss it may sustain with respect to any Mortgage Loan not satisfied in
accordance with the procedures set forth herein.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee or
the Custodian on behalf of the Trustee by an Officers' Certificate in the form
of Exhibit B attached to the Custodial Agreement (which certification shall
include a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the Principal
and Interest Account pursuant to Section 5.03 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
Upon receipt of such certification and request, the Trustee or the Custodian on
behalf of the Trustee shall promptly release the related Mortgage File to the
Servicer. Expenses incurred in connection with any instrument of satisfaction or
deed of reconveyance shall be payable by the Servicer and shall not be Servicing
Advances or reimbursed from the Principal and Interest Account or the Collection
Account.
From time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, including, for this purpose, collection under any primary
mortgage guaranty insurance policy, the Trustee or the Custodian on behalf of
the Trustee shall, upon request of the Servicer and delivery to the Trustee or
the Custodian on behalf of the Trustee of a certification in the form of Exhibit
B attached to the Custodial Agreement signed, by a Servicing Officer, promptly
release the related Mortgage File, or the requested portion thereof, to the
Servicer, and the Trustee shall execute such documents as shall be necessary to
the prosecution of any such proceedings. Such servicing receipt shall obligate
the Servicer to return the Mortgage File or any document released therefrom to
the Trustee or the Custodian on behalf of the Trustee when the need therefor by
the Servicer no longer exists, unless the Mortgage Loan has been liquidated and
the Net Liquidation Proceeds relating to the Mortgage Loan have been deposited
in the Principal and Interest Account and remitted to the Trustee for deposit in
the Collection Account or the Mortgage File or document(s) released therefrom
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the related Mortgaged Property
either judicially or non-judicially, and the Servicer has delivered to the
Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated, the servicing
receipt shall be released promptly by the Trustee, or the Custodian on behalf of
the Trustee, to the Servicer.
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The Trustee shall promptly execute and deliver to the Servicer any legal
notices, court pleadings, requests for trustee's sale in respect of a Mortgaged
Property or any legal action brought to obtain judgment against any Mortgagor on
a Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce
any other remedies or rights provided by the Mortgage Note or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such pleadings or documents be executed by the
Trustee and certifying as to the reason such documents or pleadings are required
and that the execution and delivery thereof by the Trustee will not invalidate
or otherwise affect the lien of the Mortgage, except for the termination of such
a lien upon completion of the foreclosure or trustee's sale. The Trustee shall,
upon receipt of a written request from a Servicing Officer, execute any document
provided to the Trustee by the Servicer or take any other action requested in
such request that is, in the opinion of the Servicer as evidenced by such
request, required by any state or other jurisdiction to discharge the lien of a
Mortgage upon the satisfaction thereof and the Trustee will promptly sign and
deliver any such documents to the Servicer, or such other party as the Servicer
may direct, within five Business Days, or more promptly if needed, of the
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Trustee's satisfaction that the related
Mortgage Loan has been paid in full by or on behalf of the Mortgagor and that
such payment has been deposited in the Principal and Interest Account.
In addition, upon recording of any Assignment of Mortgage to the Trustee,
the Trustee shall deliver to the Servicer at the Servicer's request, an
irrevocable power of attorney, in recordable form in the jurisdiction in which
the related Mortgaged Property is located, authorizing, empowering and directing
the Servicer to execute any and all documents described in the preceding
paragraph on behalf of the Trustee. The Servicer shall prepare and supply any
such power of attorney documentation to the Trustee.
Section 7.03. Servicing Compensation.
----------------------
As compensation for its services hereunder, the Servicer shall be entitled
to withdraw from the Principal and Interest Account (or, so long as the
Principal and Interest Account is maintained by EquiCredit as Initial Servicer
pursuant to Section 5.03(b), note on its books that such funds are no longer
funds with respect to the Principal and Interest Account) or to retain from
interest payments on the Mortgage Loans, the Servicer's Servicing Fee.
Additional servicing compensation in the form of assumption and other
administrative fees (including bad check charges, late payment fees and similar
fees, but excluding Prepayment Charges) (collectively, "Ancillary Income"),
shall be retained by or remitted to the Servicer, and the Servicer shall remit
any Ancillary Income consisting of NSF charges and late fees that was assessed
or accrued prior to the Servicing Transfer Date ("Excluded Ancillary Income") to
the Transferor within one Business Day after receipt of such Excluded Ancillary
Income in available funds, in each case to the extent not otherwise required to
be remitted to the Trustee for deposit in the Collection Account. The Servicer
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for herein.
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Section 7.04. Annual Statement as to Compliance.
---------------------------------
The Servicer will deliver to the Certificate Insurer, the NIMS Insurer, the
Trustee and each Rating Agency, not later than the last day of the fourth month
following the end of the Servicer's fiscal year, beginning with the Servicer's
fiscal year ending in 2002, an Officers' Certificate stating that (i) the
Servicer has fully complied with the provisions of Articles V, VII and VIII,
(ii) a review of the activities of the Servicer during the preceding fiscal year
and of performance under this Agreement has been made under such officers'
supervision, and (iii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof and the action being taken by the Servicer to cure
such default. The Servicer shall promptly notify the Certificate Insurer, the
NIMS Insurer, the Trustee and each Rating Agency promptly upon any change in the
basis on which its fiscal year is determined; provided that the parties
understand the Expected Successor Servicer is changing its fiscal year end date
to December 31, commencing with December 31, 2001.
Section 7.05. Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
Not later than the last day of the fourth month following the end of the
Servicer's fiscal year, beginning with the fiscal year ending in 2002, the
Servicer, at its expense, shall cause a firm of independent public accountants
reasonably acceptable to the Trustee and the Certificate Insurer to furnish a
letter or letters to the Certificate Insurer, the NIMS Insurer, the Trustee and
each Rating Agency to the effect that such firm has with respect to the
Servicer's overall servicing operations examined such operations in accordance
with the requirements of the Uniform Single Attestation Program for Mortgage
Bankers, and stating such firm's conclusions relating thereto.
Section 7.06. Right to Examine Servicer Records.
---------------------------------
The Trustee or the Trustee at the request of a Majority in Aggregate Voting
Interest (or the representatives designated in writing by the Majority in
Aggregate Voting Interest), the Certificate Insurer and the NIMS Insurer shall
have the right upon reasonable prior notice, during normal business hours and as
often as reasonably required, to examine and audit any and all of the books,
records or other information of the Servicer, whether held by the Servicer or by
another on behalf of the Servicer, which may be relevant to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement.
Section 7.07. Reports to the Trustee; Principal and Interest Account
------------------------------------------------------
Statements.
----------
Solely with respect to a Principal and Interest Account maintained pursuant
to Section 5.03(a), if the Principal and Interest Account is not maintained with
the Trustee, then not later than 25 days after the end of each Due Period, the
Servicer shall forward to the Certificate Insurer, the NIMS Insurer and the
Trustee a statement, certified by a Servicing Officer, setting forth the status
of the Principal and Interest Account as of the end of such Due Period and
showing, for the period covered by such statement, the aggregate of deposits
into the Principal and Interest Account for each category of deposit specified
in Section 5.03, the aggregate of
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withdrawals from the Principal and Interest Account for each category of
withdrawal specified in Section 5.04, and the amount of Advances, if any, for
such Due Period.
ARTICLE VII-A
PERFORMANCE STANDARDS
Section 7A.01. Description and Purpose.
-----------------------
(a) The Performance Standards define certain of the Servicer's duties under
this Agreement and (i) establish financial penalties ("Service Level
Penalties"), which apply in the event that the Servicer fails to meet certain
minimum standards and performs below acceptable levels, and (ii) provide a basis
for termination of the Servicer as described in Section 10.01(a)(vii) of this
Agreement. The Performance Standards distinguish between Level 1 Performance
Standards and ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇ ▇ Performance Standards
specify standards for the breach of which there may be Service Level Penalties
assessed to the Servicer or, in the case of more severe breaches, the Servicer
may be subject to termination hereunder (the "Termination Standards"). Level 2
Performance Standards specify standards for the breach of which there may be
Service Level Penalties assessed against the Servicer. The ▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Termination Standards and the penalties for failures
to perform to each Standard are described more fully in Appendix 1 attached
hereto.
(b) The Performance Standards are attached hereto as Appendix 1 and are
intended to define acceptable levels of performance during the term of this
Agreement. It is understood that during the term of this Agreement, designated
representatives of the Servicer and the Advancing Party will meet periodically
and may agree, with respect to any Level 2 Performance Standards, on different
or additional performance categories and standards and amend these Performance
Standards in a writing acceptable to both parties, with the prior consent of the
Certificate Insurer, which shall not be unreasonably withheld or delayed. In
addition to the reporting duties described below, the Servicer shall be
responsible for investigating and correcting failures to meet the Performance
Standards by initiating problem reports to identify the root causes of any such
failure, reporting such problems to the Advancing Party that could be reasonably
expected to have an adverse impact on credit quality and results, making written
recommendations to the Advancing Party for improvement in procedures which the
Servicer believes are impacting its ability to perform, and advising the
Advancing Party of changes which have negatively impacted the Servicer's ability
to perform. In the event that the Servicer's performance hereunder fails to meet
the applicable Performance Standards, the Advancing Party may recover as
liquidated damages the Service Level Penalties specified in Appendix 1.
References to the Advancing Party in this paragraph shall mean the Certificate
Insurer at any time at which a payment shall have been made under a Certificate
Insurance Policy, which payment shall not have been reimbursed.
(c) The Performance Standards identified on Appendix 1 as Level 2 Standards
may be modified or waived by mutual written agreement executed by the Servicer
and the Advancing Party, and with the consent of the Certificate Insurer, which
consent shall not be unreasonably withheld or delayed.
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Section 7A.02. Effective Date.
--------------
The Service Level Penalties shall become effective as of February 1, 2002.
From February 1, 2002 through May 31, 2002 (the "Ramp-up Period"), the Advancing
Party may recover Service Level Penalties in accordance with the Interim
Standards, as set forth on Appendix 1. After the expiration of the Ramp-up
Period, the Servicer will be required to fully meet the standard test levels of
related Performance Standard in order to avoid imposition of a Service Level
Penalty.
Section 7A.03. Audit.
-----
Each year, in connection with Servicer's audit by its independent certified
public accountants pursuant to the Uniform Single Attestation Program or a
successor program ("USAP"), the Servicer's independent auditor will be required
to prepare and furnish an agreed upon procedures report relating to the
Servicer's compliance with the nine Performance Standards in ▇▇▇▇▇ ▇, as more
particularly set forth on Appendix 1.
Section 7A.04. Reporting.
---------
Each month, the Servicer shall prepare reports containing data relating to
the degree of compliance with the Performance Standards of its servicing of the
Mortgage Loans. The Servicer will deliver these reports to the Advancing Party
and to the Certificate Insurer each month no later than the tenth (10th)
Business Day following the previous month's end. The reports shall be
substantially in the form required by Appendix 1 and will indicate (i) where the
Servicer has not met the Performance Standard (each event called an
"Exceedance"); (ii) if not met, the root cause for missing the Performance
Standard; and (iii) the corrective action required and preventative procedures
recommended to remedy the problem (including a timeline).
Section 7A.05. Service Level Penalty.
---------------------
If during any month, the Servicer performs the servicing of the Mortgage
Loans under this Agreement below acceptable tolerance levels set forth on
Appendix 1, the Advancing Party shall, unless the Servicer cures the Exceedance
as described below, be entitled to a Service Level Penalty in an amount
calculated as set forth on Appendix 1, with respect to the related Performance
Standard. Upon receipt of the report, the Advancing Party shall notify the
Servicer of the below acceptable level occurrence and corresponding Exceedance,
and the Servicer shall attempt to cure the deficiency during the applicable cure
period. The Servicer shall have a period of sixty (60) days in which to cure
such occurrence by bringing the related Performance Standard to within agreed to
service levels in the second full month following the month in which such
Exceedance occurs. For example, if in the month of March there is a Level 1
Exceedance for Right Party Contacts (as defined in Appendix 1), and the same
Exceedance for Right Party Contacts occurs in both April and May, then in May,
the Service Level Penalty will be imposed and payable by the Servicer pursuant
to Section 7A.07 for all three monthly periods. If, however, in May the Servicer
brings the Right Party Contacts within acceptable tolerance levels, there will
be no Service Level Penalty imposed with respect to the March and April
Exceedance.
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Section 7A.06. Performance Standard Review.
---------------------------
On a monthly basis, commencing the first day of March 2002, the designated
representatives of the Servicer and the Advancing Party shall meet to review the
then-current Level 1 Performance Standards, minimum standards, and Service Level
Penalties, as appropriate.
Section 7A.07. Payment of Service Level Penalty.
--------------------------------
If a Service Level Penalty is due and owing in any month, it shall be
invoiced by the Advancing Party (or by the Certificate Insurer, if a payment
shall have been made under any Certificate Insurance Policy which shall not have
been reimbursed) to the Servicer and paid by the Servicer within fifteen (15)
days of receipt of the invoice.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01. Financial Statements.
--------------------
The Successor Servicer (unless the Trustee shall become the Successor
Servicer) will furnish to the Certificate Insurer, the NIMS Insurer, the
Depositor or the Trustee, on request, unaudited financial statements (including
a balance sheet and statements of income) of the Successor Servicer for the most
recent fiscal quarter ended more than 45 days prior to the date of request
(and/or for the most recent fiscal year ended more than 90 days prior to the
date of request), which shall fairly present the assets, liabilities and
financial condition of the Successor Servicer as of the dates of such financial
statements, and which shall have been prepared in accordance with generally
accepted accounting principles for the United States, consistently applied.
The Successor Servicer (unless the Trustee shall become the Successor
Servicer) also agrees to make available on a reasonable basis to the Certificate
Insurer, the NIMS Insurer, the Depositor, the Trustee, any Certificateholder or
any prospective Certificateholder a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Successor Servicer or the financial statements of the
Successor Servicer.
ARTICLE IX
THE SERVICER
Section 9.01. Indemnification; Third Party Claims.
-----------------------------------
The Servicer agrees to indemnify and hold the Depositor, the Custodian, the
Trustee, the NIMS Insurer, the Certificate Insurer, the Advancing Party and each
Holder harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trustee, the Custodian, the NIMS Insurer, the Certificate
Insurer, the Advancing Party and any Holder may sustain in any way related to
the failure of the Servicer to perform its duties and service the Mortgage Loans
in compliance with
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the terms of this Agreement. The Servicer shall immediately notify the
Depositor, the Trustee, the Custodian, the NIMS Insurer, the Certificate
Insurer, the Advancing Party and each Certificateholder, if a claim is made by a
third party with respect to this Agreement, and the Servicer shall assume (with
the consent of the Custodian, the Trustee, the Advancing Party and the
Certificate Insurer) the defense of any such claim and advance all expenses in
connection therewith, including reasonable counsel fees and expenses, and
promptly advance funds to pay, discharge and satisfy any judgment or decree
which may be entered against the Servicer, the Custodian, the Trustee, the NIMS
Insurer, the Certificate Insurer, the Advancing Party and/or any
Certificateholder in respect of such claim. The Servicer shall be reimbursed
pursuant to clause tenth of Sections 6.05(d), (e), (f) and (g) for all amounts
advanced by it pursuant to the preceding sentence, and for all indemnification
payments made by the Servicer to the Custodian pursuant to the Custodial
Agreement to the extent unrelated to negligence or intentional or willful
misconduct of the Servicer, and except that the Servicer shall have no
entitlement to any payment pursuant to this sentence when the claim relates
directly to the failure of the Servicer to service and administer the Mortgage
Loans in compliance with the terms of this Agreement, in which event the
Servicer shall reimburse to the Principal and Interest Account any amount paid
to the Servicer as a Reimbursable Amount in respect thereof. The Servicer shall
have no lien on the assets of the Trust with respect to amounts advanced
pursuant to this Section 9.01 directly as a result of Servicer's failure to
service and administer the Mortgage Loans in compliance with the terms of this
Agreement.
Section 9.02. Merger or Consolidation of the Servicer.
---------------------------------------
The Servicer will keep in full effect its existence, rights and franchises
as a corporation and will obtain and preserve its qualification to do business
as a foreign corporation, in each jurisdiction necessary to protect the validity
and enforceability of this Agreement or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an established mortgage loan servicing institution that has a
net worth of at least $15,000,000 and shall be the successor of the Servicer
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. The
Servicer shall send notice of any such merger or consolidation to the Trustee,
the NIMS Insurer, the Certificate Insurer and each Rating Agency.
Section 9.03. Limitation on Liability of the Servicer and Others.
--------------------------------------------------
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend, any legal action which is not incidental to the Servicer's
duty to service the Mortgage Loans in accordance with this Agreement.
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The Servicer will not be under any liability for taking any action or for
refraining from taking any action in good faith pursuant to this Agreement, or
for errors in judgment; provided, however, that the Servicer will not be
protected against any liability that otherwise would be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement. The Servicer and any director, officer, employee or agent of the
Servicer shall be indemnified by the Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans,
and without duplication of any other reimbursement of any loss, liability or
expense pursuant to this Agreement, and not including any loss, liability or
expense incurred by the Servicer by reason of its willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement or by reason
of the Servicer's reckless disregard of its obligations and duties under this
Agreement.
Section 9.04. Assignment; Resignation.
-----------------------
The Initial Servicer may assign its rights and delegate its duties and
obligations under this Agreement one time to the Successor Servicer on the
Servicing Transfer Date without the consent of any party, if the Successor
Servicer is an established mortgage loan servicing institution that has a net
worth of at least $75,000,000. Otherwise, the Servicer may assign its rights and
delegate its duties and obligations under this Agreement if the successor
accepting the assignment or delegation:
(a) services mortgage loans similar to the Mortgage Loans in the ordinary
course of its business;
(b) is approved by the Certificate Insurer (which approval may not be
unreasonably withheld or delayed);
(c) would not cause any Rating Agency's rating of any of the Certificates
in effect immediately prior to the assignment, sale or transfer to be qualified,
downgraded or withdrawn as a result of that assignment, sale or transfer,
without regard to the Certificate Insurance Policies; and
(d) executes and delivers to the Trustee and the Certificate Insurer an
agreement, in form and substance reasonably satisfactory to the Trustee and the
Certificate Insurer, which contains an assumption by the Successor Servicer of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Servicer under this Agreement from and after
the date the appointment of the Successor Servicer becomes effective.
Except as provided in the preceding paragraph, the Servicer shall not
assign this Agreement nor resign from the obligations and duties hereby imposed
on it except by mutual consent of the Servicer, the Certificate Insurer and the
Trustee or upon the determination that the Servicer's duties hereunder are no
longer permissible under applicable law and such incapacity cannot be cured by
the Servicer. Any such determination permitting the resignation of the
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Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel
for the Servicer) to such effect delivered to the Trustee and the Certificate
Insurer, which Opinion of Counsel shall be in form and substance acceptable to
the Certificate Insurer and the Trustee. No such resignation shall become
effective until a successor has assumed the Servicer's responsibilities and
obligations hereunder in accordance with Section 9.02. The Servicer shall
promptly notify each Rating Agency promptly of its intention to resign pursuant
to this Section 9.04.
Notwithstanding anything to the contrary herein, the Successor Servicer may
pledge or assign as collateral all its rights, title and interest under this
Agreement to a lender (the "Lender") financing the purchase price payable by the
Successor Servicer for the servicing rights purchased from the Initial Servicer;
provided, however, that:
(1) the Lender may not effect the termination of the Successor Servicer as
Servicer hereunder, or designate any replacement Servicer or the
manner of engaging a successor following a termination of the
Successor Servicer as Servicer, without the prior written consent of
the Certificate Insurer, the Advancing Party, the Transferor and the
Depositor;
(2) the Lender's rights are subject to this Agreement; and
(3) the Servicer shall be subject to termination as Servicer under this
Agreement pursuant to the terms hereof.
In connection with any permitted assignment by the Servicer of its rights
under this Agreement, the Servicer shall cause the successor servicer of the
Mortgage Loans, at the request of the owner or owners of the Prepayment Charges,
to enter into an agreement with such owner or owners in which such successor
servicer agrees to administer the enforcement and collection of the Prepayment
Charges on the terms specified in Appendix 3.
Section 9.05. Removal of Servicer.
The Certificate Insurer or the Holders of Certificates representing a
Majority in Aggregate Voting Interest may, with the prior written consent of the
Certificate Insurer, remove the Servicer upon the occurrence of and continuation
of a Servicer Default or a Termination Without Cause Event upon 90 days' prior
written notice to the Servicer (or 30 days' prior written notice in the case of
a Servicer Default described in Section 10.01(a)(viii)). No such removal shall
become effective until a successor (other than the Trustee, if the Trustee
agrees to so act) has assumed the Servicer's responsibilities and obligations
hereunder in accordance with Section 9.02. The Trustee shall promptly notify
each Rating Agency and the NIMS Insurer of such removal.
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ARTICLE X
SERVICER DEFAULT
Section 10.01. Servicer Default.
----------------
(a) Itemization of Servicer Defaults. The occurrence and continuation of
any one or more of the following events shall constitute a "Servicer Default":
(i) (A) an Event of Nonpayment (subject to paragraph (c) below); (B)
the failure by the Servicer to make any required Servicing Advance that
meets the Servicing Advance Eligibility Criteria (not including any
Nonrecoverable Advance), to the extent such failure materially and
adversely affects the interests of the Certificate Insurer or the
Certificateholders; or (C) any other failure by the Servicer to remit to
the Trustee for the benefit of any Holders, any amount collected by the
Servicer that is required to be remitted by the Servicer under the terms of
this Agreement (other than a Nonrecoverable Advance) which continues
unremedied for three Business Days after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been given
to a Servicing Officer of the Servicer by the Certificate Insurer, the
Trustee or to a Servicing Officer of the Servicer and the Trustee by any
Holder;
(ii) the failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Certificate Insurer or the Trustee or to the Servicer and
the Trustee by any Holder or the Certificate Insurer;
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days;
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property;
(v) the Servicer shall admit in writing its inability to pay its debts
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;
127
(vi) the Servicer shall fail for 60 days to pay, or bond against, an
unappealable, undischarged, unvacated and unstayed final judgment by a
court of competent jurisdiction in an aggregate amount of $250,000 or more;
(vii) after August 31, 2002, the Servicer fails to meet the
Performance Standards and Exceedances occur and continue as follows: (x)
the occurrence of any five (5) Level 1 Exceedances for three (3)
consecutive months, or (y) the occurrence of any three (3) Level 1
Exceedances for six (6) consecutive months, or (z) the occurrence of the
same one (1) Level 1 Exceedance for nine (9) consecutive months; or
(viii) the cumulative aggregate amount of all Mortgage Loan Losses
incurred with respect to the Mortgage Loans from and after the Cut-off Date
exceeds 6.00% of the aggregate Original Pool Principal Balance of all
Mortgage Loan Groups.
Notwithstanding Section 10.01(a)(i)(B) above, if the Expected Successor
Servicer shall fail to make an Eligible Servicing Advance at a time (1) when the
Advancing Party shall have materially breached its obligation to reimburse
Eligible Servicing Advances, to the Expected Successor Servicer pursuant to
Section 5.15 (meaning a material breach that shall not have been cured within a
reasonable time frame after notice thereof), and (2) when the Expected Successor
Servicer shall not have breached any obligation under the Purchase and Sale
Agreement, dated as of December 6, 2001, among the Expected Successor Servicer,
the Initial Servicer and Nations Credit Financial Services Corporation (the
"Purchase and Sale Agreement") and shall not be subject to Section 10.01(a)(vii)
above, then (A) the Servicer's failure to make Servicing Advances as described
in Section 10.01(a)(i)(B) shall not be considered a "Servicer Default" or a
breach of the Servicer's obligations hereunder, but shall instead be a
"Termination Without Cause Event" for which the sole remedy shall be to
terminate the Servicer as servicer pursuant to this Section 10.01 or Section
9.05, (B) the Transferor or the Advancing Party shall pay to the Servicer
termination fees as described in Section 7.17(d) of the Purchase and Sale
Agreement, if the Expected Successor Servicer is terminated as Servicer due to
such Termination Without Cause Event, and (C) the Advancing Party shall
indemnify and hold the Expected Successor Servicer harmless for, from and
against, any and all third party claims made against the Expected Successor
Servicer due to the Expected Successor Servicer's failure to make such Eligible
Servicing Advances, on the terms applicable to the Transferor as indemnifying
party pursuant to Section 10.01(a) of the Fairbanks Whole Loan Servicing
Agreement.
(b) Remedies. In the case of any Servicer Default (and Termination Without
Cause Event), and in each and every such case, so long as such Servicer Default
(or Termination Without Cause Event) shall not have been remedied, and in the
case of clause (i) in Section 10.01(a) above, if such Servicer Default (or
Termination Without Cause Event) shall not have been remedied within three
Business Days after the Servicer has received notice of such Servicer Default
(or Termination Without Cause Event), the Majority in Aggregate Voting Interest,
subject to the prior written consent of the Certificate Insurer and the NIMS
Insurer, which consent may not be unreasonably withheld, or by the Certificate
Insurer or the NIMS Insurer, by notice in writing to the Servicer and a
Responsible Officer of the Trustee may, in addition to whatever rights they or
it may have at law or equity to damages, including injunctive relief and
specific performance, commence termination of all the rights and obligations of
the Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, as servicer.
128
Upon receipt by the Servicer of a second written notice from the Majority in
Aggregate Voting Interest, subject to the prior written consent of the
Certificate Insurer and the NIMS Insurer, which consent may not be unreasonably
withheld, or by the Certificate Insurer or the NIMS Insurer stating that they or
it intend to terminate the Servicer as a result of such Servicer Default (or
Termination Without Cause Event), all authority and power of the Servicer under
this Agreement, whether with respect to the Mortgage Loans or otherwise, shall,
subject to Section 10.02, pass to and be vested in the Trustee or its designee
and 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 do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
including, but not limited to, the transfer and endorsement or assignment of the
Mortgage Loans and related documents to the extent required by this Agreement.
The Servicer agrees to cooperate with the Trustee in effecting the termination
of the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee, for the benefit of the Holders of the
Certificates, or its designee for administration by it of all amounts which
shall at the time be credited by the Servicer to the Principal and Interest
Account or thereafter received with respect to the Mortgage Loans.
The Trustee shall not be deemed to have knowledge of a Servicer Default (or
Termination Without Cause Event) unless a Responsible Officer thereof has
received written notice thereof.
(c) Events of Nonpayment. Notwithstanding anything to the contrary
contained in this Agreement, upon the occurrence of an Event of Nonpayment or a
Performance Default of which the Certificate Insurer has knowledge, the
Certificate Insurer shall promptly notify the Trustee. During any applicable
grace period following receipt of such notice (or immediately following such
notice in the case of a Performance Default), the Trustee and the Certificate
Insurer shall cooperate with each other to determine if the occurrence of such
Event of Nonpayment is in their reasonable business judgment or Performance
Default is in the reasonable business judgment of the Certificate Insurer (x)
the result of the acts or omissions of the Servicer or (y) the result of events
beyond the control of the Servicer. If the Trustee and the Certificate Insurer
conclude that such Event of Nonpayment, or the Certificate Insurer concludes
that such Performance Default, is the result of the latter, Section 10.01(b)
above shall not apply, and the Servicer shall not be terminated, unless and
until an Event of Default unrelated to such Event of Nonpayment or Performance
Default has occurred and is continuing, whether or not the Servicer has cured
such Event of Nonpayment or Performance Default. If the Trustee and the
Certificate Insurer conclude that the Event of Nonpayment, or the Certificate
Insurer concludes that such Performance Default, is the result of the former,
the Certificate Insurer or the Majority in Aggregate Voting Interest, as the
case may be, may terminate the Servicer in accordance with Section 10.01(b)
above, provided that the Trustee shall have until the 60th day following the
date of receipt of notice of the Event of Nonpayment or Performance Default to
either assume the servicing or appoint a successor servicer pursuant to Section
10.02 hereof.
If the Trustee and the Certificate Insurer cannot agree, and the basis for
such disagreement is not arbitrary or unreasonable, as to the cause of the Event
of Nonpayment or Performance Default, the decision of the Certificate Insurer
shall control.
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The Trustee shall promptly notify each Rating Agency, the Certificate
Insurer, the NIMS Insurer, the Trustee and each Certificateholder, of the
occurrence of a Servicer Default.
Section 10.02. Trustee to Act; Appointment of Successor Servicer.
-------------------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 10.01, or the Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel pursuant to Section 9.04, or the
Servicer is removed as servicer pursuant to this Article X (in which event the
Trustee shall promptly notify each Rating Agency), except as otherwise provided
in Section 10.01, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any servicer prior to the Trustee becoming the
Servicer under this Agreement. The Trustee shall be obligated to make advances
pursuant to Sections 5.10, 5.13 and 6.08 unless, and only to the extent the
Trustee determines reasonably and in good faith that, such advances would not be
recoverable pursuant to Section 5.04(ii) or 6.05(d), such determination to be
evidenced by a certification of a Responsible Officer of the Trustee delivered
to the Certificate Insurer and the NIMS Insurer; provided that the Trustee shall
not be required to make an advance from its own funds if such advance is
prohibited by law. The Trustee acting as Servicer shall be entitled to
reimbursement for Servicing Advances pursuant and subject to Section 5.15.
Notwithstanding the above, the Trustee may, if it shall be unwilling to so
act, and shall, if it is unable to so act or if the Majority in Aggregate Voting
Interest (with the consent of the Certificate Insurer), or the Certificate
Insurer so request in writing to the Trustee, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer, which acceptance shall not be
unreasonably withheld, that has a net worth of not less than $75,000,000 and
which is approved as a servicer by FNMA and FHLMC 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. Any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Trustee and
remitted directly to the Trustee or, at the direction of the Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Trustee) so appointed shall be the aggregate Servicing
Fees, together with other Servicing Compensation in the form of assumption fees,
late payment charges or otherwise, other than those assessed or accrued prior to
the date of termination (which shall be payable to the predecessor Servicer
pursuant to Section 5.04(ii) in accordance with the priorities set forth in the
last paragraph of Section 5.01(h)). In the event the Trustee is required to
solicit bids, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees as servicing compensation, together with the other
Servicing Compensation in the form of assumption fees, late payment charges or
otherwise, other than those assessed or accrued prior to the date of
termination. Within thirty days after any such public announcement, the Trustee
shall negotiate and effect the sale, transfer and assignment of the servicing
rights and responsibilities hereunder to the qualified party submitting the
highest qualifying bid. The Trustee shall deduct
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from any sum received by the Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Advances. After such deductions, the remainder of such
sum shall be paid by the Trustee to the Servicer at the time of such sale,
transfer and assignment to the Servicer's successor. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. The Servicer agrees to cooperate
with the Trustee and any successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Trustee or such successor servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in the Principal and Interest Account by the Servicer or
which are thereafter received with respect to the Mortgage Loans. Neither the
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it, or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder (other than
the Trustee) shall be effective until the Trustee and the Certificate Insurer
shall have consented thereto. The Trustee shall not resign as servicer until a
successor servicer reasonably acceptable to the Certificate Insurer has been
appointed.
Pending appointment of a successor to the Servicer hereunder, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 7.03, together with
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in this Agreement. The Servicer, the Trustee,
any Custodian and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
Section 10.03. Waiver of Defaults.
------------------
The Certificate Insurer or a Majority in Aggregate Voting Interest may, on
behalf of all Certificateholders, and subject to the consent of the Certificate
Insurer, (with notice of such waiver delivered to the NIMS Insurer by the
Trustee) which consent may not be unreasonably withheld, waive any events
permitting removal of the Servicer as servicer pursuant to this Article X. Upon
any waiver of a past default, such default shall cease to exist, and any
Servicer Default (or Termination Without Cause Event) 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 each Rating Agency.
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Section 10.04. Control by Certificate Insurer and Majority in Aggregate
--------------------------------------------------------
Voting Interest.
---------------
The Certificate Insurer, or the Majority in Aggregate Voting Interest with
the consent of the Certificate Insurer, which consent may not be unreasonably
withheld, may direct the time, method and place of conducting any proceeding
relating to the assets of the Trust or the Certificates or for any remedy
available to the Trustee with respect to the Certificates, or exercising any
trust or power conferred on the Trustee with respect to the Certificates or the
assets of the Trust, provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Agreement;
(ii) the Trustee shall have been provided with indemnity satisfactory
to it; and
(iii) the Trustee may take any other action deemed proper by it which
is not inconsistent with such direction; provided, however, that the
Trustee need not take any action which it determines might involve it in
liability or may be unjustly prejudicial to the Holders not so directing.
If inconsistent directions are given, the Certificate Insurer's directions
shall control.
ARTICLE XI
TERMINATION
Section 11.01. Termination.
-----------
Subject to Section 11.03, this Agreement shall terminate upon notice to the
Trustee of either: (a) the collection with respect to the last Mortgage Loan (or
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due hereunder and the
payment of all amounts due and payable to the Certificate Insurer and the
Trustee or (b) mutual consent of the Servicer, the Certificate Insurer and all
Certificateholders in writing.
The Servicer may, at its option, elect to terminate this Agreement on any
Distribution Date on or following the first Distribution Date on which the
aggregate Pool Principal Balance as of the last day of the related Due Period is
less than 10% of the Original Pool Principal Balance (such Distribution Date
being the "Optional Purchase Date") by purchasing from the Trust on such
Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a
price (the "Termination Price") equal to the fair market value thereof
(determined as provided below); provided, that the Trust shall not sell the
Mortgage Loans and REO Properties if the Termination Price to be received is
less than the sum of (x) 100% of the aggregate Principal Balance of the
outstanding Mortgage Loans and REO Properties and (y) accrued and unpaid
interest on each such Mortgage Loan at a rate equal to its respective Mortgage
Interest Rate. At least ten Business Days before the Servicer exercises this
right, it must notify the Holders of the Class X Certificates and any NIMS
Insurer, and the Holders of a majority of the Class X Certificates (the "Class X
Majority") may, instead of the Servicer, purchase the Mortgage Loans for the
Termination Price. On or after the Optional Purchase Date, the Class X Majority
may purchase
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all the Mortgage Loans for the Termination Price as described above, under
circumstances such that the Servicer remains as servicer of the Mortgage Loans
on terms substantially identical to those set forth in this Agreement or in the
Servicing Agreement, dated as of December 6, 2001, among the Transferor,
NationsCredit Financial Services Corporation, and the Expected Successor
Servicer (the "Fairbanks Whole Loan Servicing Agreement"), except that the
Servicing Compensation shall be as specified in this Agreement. If the Class X
Majority shall fail or refuse to make a terminating purchase, the NIMS Insurer
may do so on the same terms those on which the Class X Majority is entitled to
make such purchase pursuant to this Section 11.01. The maker of the terminating
purchase, whether it be the Class X Majority, the NIMS Insurer or the Servicer,
is referred to herein as the "Terminating Purchaser." In connection with any
such sale, as a condition which must be satisfied before or simultaneously with
the termination, the Terminating Purchaser shall pay any outstanding and unpaid
fees and expenses of the Trustee and the Certificate Insurer relating to this
Agreement that such parties would otherwise have been entitled to pursuant to
Sections 6.05(d), (e), (f) and (g), after giving effect to the Termination Price
and without regard to whether sufficient funds would be available therefor, and
shall pay to the Advancing Party, the Transferor and the Servicer all
unreimbursed Existing Advances and Servicing Advances, respectively, made by
such respective parties, and shall pay to the Servicer its unpaid accrued
Servicing Fees (to the extent such amounts are not otherwise included in the
Termination Price). The Servicer's rights under this Section 11.01 are subject
to Section 11.03.
The fair market value of the outstanding Mortgage Loans and REO Properties
for purposes of this Section 11.01 shall be an amount equal to the average of
the bid prices for such assets taken as a whole, provided to the Terminating
Purchaser by two Independent, nationally recognized dealers in whole loans
substantially similar to the Mortgage Loans.
Any such sale pursuant to this Section 11.01 shall be accomplished by
depositing into the REMIC I Distribution Account, on the third Business Day
immediately preceding the final Distribution Date on which such purchase is to
be effected, the amount of the Termination Price. On the same day that the
Termination Price is deposited into the REMIC I Distribution Account, any other
amounts then on deposit in the Principal and Interest Account shall be
transferred to the REMIC I Distribution Account pursuant to Section 5.04(i) for
payment to the Trustee as Holder of the REMIC I Regular Interests, REMIC II
Regular Interests and REMIC III Regular Interests and to the Holders of the
Residual Certificates pursuant to Section 6.05(h) and to Certificateholders and
the Certificate Insurer pursuant to Sections 6.05(d), (e), (f) and (g) on the
final Distribution Date as specified in the notice to Certificateholders
described below; provided, that the amount of any unpaid Existing Advances or
interest thereon shall not be paid from any of the Trust REMICs but shall be
treated as paid directly from the Terminating Purchaser of the Mortgage Loans to
the Transferor. Any amounts received with respect to the Mortgage Loans and REO
Properties subsequent to the last day of the related Due Period shall belong to
the Person purchasing the Mortgage Loans and REO Properties. Promptly upon
receipt of the Termination Price, the Trustee shall release (or cause to be
released) each related Mortgage File to the Person purchasing the Mortgage Loans
and REO Properties as set forth herein.
Notice of any termination, specifying the Distribution Date upon which this
Agreement will terminate, shall be given promptly by the Trustee by letter to
the Certificateholders mailed during the month of such final Distribution Date
before the Determination Date in such month,
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specifying (i) the Distribution Date upon which final payment of the
Certificates will be made and (ii) the amount of any such final payment. The
obligations of the Certificate Insurer hereunder shall terminate upon the
deposit by the Terminating Purchaser with the Trustee for deposit into the REMIC
I Distribution Account of a sum sufficient to purchase all of the Mortgage Loans
and REO Properties as set forth above. The Terminating Purchaser shall notify
the Trustee of the Distribution Date on which this Agreement shall terminate, at
least ten Business Days prior to such date.
Each Holder is required, and hereby agrees, to return to the Trustee any
Certificate with respect to which the Trustee has made the final distribution
due thereon. Any such Certificate as to which the Trustee has made the final
distribution thereon shall be deemed canceled and shall no longer be outstanding
for any purpose of this Agreement, whether or not such Certificate is ever
returned to the Trustee.
In the event that any amount due to any Class A Certificateholder remains
unclaimed, the Servicer shall, at the expense of the Trust Fund, which amount
shall be allocated to REMIC III, cause to be published once, in the eastern
edition of The Wall Street Journal, notice that such money remains unclaimed.
If, within the period then specified in the escheat laws of the State of New
York after such publication such amount remains unclaimed, the Class R-III
Certificateholders shall be entitled to all unclaimed funds, and other assets
which remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look to the Class R-III Certificateholders for payment.
Section 11.02. Additional Termination Requirements.
-----------------------------------
In the event a Terminating Purchaser exercises its purchase option as
provided in Section 11.01, the Trust Fund 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 11.02 will not (i) result in the
imposition of taxes on "prohibited transactions" of any Trust REMIC as defined
in Section 860F of the Code, or (ii) cause any Trust REMIC to fail to qualify as
a REMIC at any time that any Certificates are outstanding:
(i) Within 89 days prior to the final Distribution Date the Trustee
shall designate a date as the date of adoption of a plan of complete
liquidation of such REMIC under Section 860F of the Code and any
regulations thereunder and shall specify such date in the Trust REMICs'
final federal income tax returns;
(ii) At or after the date 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 or the Certificate Insurer for
cash;
(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 each Class of Class A Certificates, the
Certificate Balance thereof, together with one month's interest at the
related Pass-Through Rate, (B) after such payments to the Class A
Certificateholders, to the Class X Certificateholders any Unpaid Class X
Remittance
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Amount and (C) to the Class R-I Certificateholders, all cash on hand
after such payment to the Class A and Class X Certificateholders (other
than cash retained to meet claims), and the Trust REMICs and the Trust Fund
shall terminate at such time; and
(iv) In no event may the final payment on the Certificates (except to
the extent permitted in Section 11.01 with respect to Certificateholders
who fail to surrender their Certificates) be made after the 89th day from
the date of such plan of complete liquidation.
Section 11.03. Accounting Upon Termination of Servicer.
Upon termination of the Servicer under Article X hereof, the Servicer
shall:
(a) deliver to its successor or, if none shall yet have been appointed, to
the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been appointed, to
the Trustee, the Mortgage Files or copies thereof held by it and related
documents and statements held by it hereunder and a Mortgage Loan portfolio
computer tape;
(c) deliver to its successor or, if none shall yet have been appointed, to
the Trustee and, upon request, to the Certificateholders, a full accounting of
all funds, including a statement showing the Monthly Payments collected by it
and a statement of monies held in trust by it for the payments or charges with
respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Mortgage Loans to its successor and to more fully and definitively vest in
such successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
Section 11.04. Termination Upon Loss of REMIC Status.
-------------------------------------
(a) Following a final determination by the Internal Revenue Service, or by
a court of competent jurisdiction, in either case, from which no appeal is taken
within the permitted time for such appeal, or if any appeal is taken, following
a final determination of such appeal from which no further appeal can be taken,
to the effect that any Trust REMIC does not and will no longer qualify as a
REMIC pursuant to Section 860D of the Code (the "Final Determination"), at any
time on or after the date which is 30 calendar days following such Final
Determination (i) the Majority in Voting Interest may direct the Trustee on
behalf of each Trust REMIC to adopt a "plan of complete liquidation" (within the
meaning of Section 860F(a)(4)(B)(i) of the Code) and (ii) the Certificate
Insurer may notify the Trustee of the Certificate Insurer's determination to
purchase from the Trust Fund all Mortgage Loans and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in respect of
any Mortgage Loan then remaining in the Trust Fund at a price equal to the
Termination Price. Upon receipt of notice from the Certificate Insurer, the
Trustee shall notify the Class R-I Certificateholders of such election to
liquidate or such determination to purchase, as the case may be (the
"Termination Notice"). The Holders of a majority of the Percentage Interest of
the Class R-I
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Certificates then outstanding may, within 60 days from the date of receipt of
the Termination Notice (the "Purchase Option Period"), at their option, purchase
from the Trust all Mortgage Loans and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Mortgage Loan then remaining in the Trust Fund at a purchase price equal to the
Termination Price. Any such purchase shall be accomplished in the manner set
forth in Section 11.01.
(b) If, during the Purchase Option Period, the Class R-I Certificateholders
have not exercised the option described in Section 11.04(a), then upon the
expiration of the Purchase Option Period (i) in the event that the Majority in
Aggregate Voting Interest have given the Trustee the direction described in
clause (a)(i) above, the Trustee shall sell the Mortgage Loans and distribute
the proceeds of the liquidation of the Trust Fund, each in accordance with the
plan of complete liquidation, such that, if so directed, the liquidation of the
Trust Fund, the distribution of the proceeds of the liquidation and the
termination of this Agreement occur no later than the close of the 60th day, or
such later day as the Majority in Aggregate Voting Interest shall permit or
direct in writing, after the expiration of the Purchase Option Period and (ii)
in the event that the Certificate Insurer has given the Trustee notice of the
Certificate Insurer's determination to purchase the Trust Fund described in
clause (a)(ii) preceding, the Certificate Insurer shall so purchase the Trust
Fund within 60 days after the expiration of the Purchase Option Period. In the
event that the Trustee is required to sell the Mortgage Loans, the Trustee may
retain, at the expense of the Trust Fund, and rely upon, an investment bank to
conduct the sale.
(c) Following a Final Determination, the Holders of a majority of the
Percentage Interest of the Class R-I Certificates then outstanding may, at their
option and upon delivery to the Class A and Class X Certificateholders and the
Certificate Insurer of an opinion of nationally recognized tax counsel selected
by the Holders of the Class R-I Certificates, which opinion shall be reasonably
satisfactory in form and substance to the Majority in Aggregate Voting Interest
and the Certificate Insurer, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of each Trust REMIC will be subject to federal taxation, purchase from the Trust
Fund all Mortgage Loans and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Fund at a purchase price equal to the Termination Price.
Any such purchase shall be accomplished in the manner set forth in Section
11.01. The foregoing opinion shall be deemed satisfactory unless the Certificate
Insurer or the Majority in Aggregate Voting Interest give the Holders of a
majority of the Percentage Interest of the Class R-I Certificates notice that
such opinion is not satisfactory within thirty days after receipt of such
opinion.
(d) Any sale or purchase of Mortgage Loans pursuant to this Section 11.04
shall be on terms under which the Servicer continues to service the Mortgage
Loans, on terms substantially identical to this Agreement or the Fairbanks Whole
Loan Servicing Agreement, except that the Servicing Compensation shall be as
specified in this Agreement.
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ARTICLE XII
THE TRUSTEE
Section 12.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of a Servicer Default and after the
curing of all Servicer Defaults which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If a Servicer Default has occurred and has not been cured or waived,
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 its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's 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; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Depositor hereunder. If any such instrument is
found not to conform to the requirements of this Agreement, the Trustee shall
notify the Certificate Insurer and request written instructions as to the action
it deems appropriate to have the instrument corrected, and if the instrument is
not so corrected, the Trustee will provide notice thereof to the Certificate
Insurer who shall then direct the Trustee as to the action, if any, to be taken.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer Default, and after the
curing of all Servicer Defaults 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 or other officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer, or the Class A
Certificateholders, relating to the time, method and
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place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Agreement;
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any Default or Servicer Default unless a
Responsible Officer of the Trustee shall have received notice thereof. In
the absence of receipt of such notice, the Trustee may conclusively assume
that there is no Default or Servicer Default;
(v) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability for the performance of any of its
duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds 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;
(vi) Subject to the other provisions of this Agreement and without
limiting the generality of this Section, the Trustee shall have no duty (A)
to see to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance of
any such recording or filing or depositing or to any rerecording, refiling
or redepositing of any thereof, (B) to see to any insurance, (C) to see to
the payment or discharge of any tax, assessment, or other governmental
charge or any lien or encumbrance of any kind owing with respect to,
assessed or levied against, any part of the Trust Fund or any Trust REMIC,
(d) to confirm or verify the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed by
the Trustee to be genuine and to have been signed or presented by the
proper party or parties; and
(vii) The Trustee shall not be deemed a fiduciary for the Certificate
Insurer in its capacity as such, except to the extent the Certificate
Insurer has made an Insured Payment and is thereby subrogated to the rights
of the Certificateholders with respect thereto.
Section 12.02. Certain Matters Affecting the Trustee.
-------------------------------------
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, Opinion
of Counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
138
(ii) The Trustee may consult with counsel and any written advice or
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 Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement or to institute, conduct or
defend by litigation hereunder or in relation hereto at the request, order
or direction of the Certificate Insurer, the NIMS Insurer or any of the
Certificateholders, pursuant to the provisions of this Agreement, unless
such Certificateholders or the Certificate Insurer, as applicable, shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby;
nothing contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of a Servicer Default (which has not been
cured), 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 its exercise as
a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(v) Prior to the occurrence of a Servicer Default hereunder and after
the curing of all Defaults which may have occurred, the Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Certificate Insurer or Holders of
Class A Certificates evidencing not less than 25% of the sum of the
aggregate Class Balances of the Class A Certificates; 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 expense or
liability as a condition to taking any such action. The reasonable expense
of every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be repaid by the Servicer upon demand from the Servicer's
own funds;
(vi) 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;
(vii) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust created hereby or the powers granted
hereunder;
(viii) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder, including, without limitation, under
Section 2.06 hereof, either directly or by or through agents, attorneys or
custodians, and the Trustee shall not be
139
responsible for any misconduct or negligence on the part of any such agent,
attorney or custodian appointed by the Trustee with due care; and
(ix) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Trustee be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Trustee has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(b) Following the Startup Day, the Trustee shall not knowingly accept any
contribution of assets, including substitutions, to the Trust Fund or any Trust
REMIC, unless the Trustee shall have received an Opinion of Counsel to the
effect that the inclusion of such assets in the Trust Fund or any Trust REMIC
will not cause such Trust REMIC to fail to qualify as a REMIC at any time that
any Certificates are outstanding or subject any Trust REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
Section 12.03. Trustee Not Liable for Certificates or Mortgage Loans.
-----------------------------------------------------
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 12.04. 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 it would have if it were not
Trustee, and may otherwise deal with the parties hereto.
Section 12.05. Trustee's Fees and Expenses.
---------------------------
(a) For its compensation for serving as trustee hereunder, the Trustee
shall be entitled to retain 35% of the interest on amounts on deposit in the
Collection Account (and of the earnings on Permitted Instruments in which such
amounts are invested) on the Business Day prior to each Distribution Date and on
each day thereafter to but excluding such Distribution Date. In addition, the
Trustee shall be reimbursed, pursuant to Sections 6.05(d), 6.05(e), 6.05(f) and
6.05(g), for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Agreement
(including, without limitation, the reasonable fees, expenses and disbursements
of its counsel (including, without limitation, reasonable compensation of its
in-house counsel on an hourly basis) and of all persons not regularly in its
employ, including any agents, attorneys and accountants of the Trustee, as
140
described in Section 2.07(a) hereof), such reimbursable amounts to include
expenses incurred due to the representations and warranties as to any Mortgage
Loan or Mortgage Loans being untrue, except any such expense, disbursement or
advance as may arise from the Trustee's negligence or bad faith, and not
including any costs, fees or expenses incurred in negotiating this Agreement and
the related documents for the Closing Date.
(b) The predecessor Servicer shall pay all out-of-pocket costs and
expenses (including attorneys' fees) incurred by the Trustee in, assuming
servicing responsibilities under Section 10.02 hereof and amending this
Agreement to reflect such successor as Servicer (provided, however, that prior
to incurring such expenses, disbursements and advances ("costs"), the Trustee
will give the predecessor Servicer an opportunity to provide such services to
render such costs unnecessary), but the predecessor Servicer shall not be
responsible for general overhead incurred by the Trustee as a result of becoming
successor Servicer or for any such expense, disbursement or advance as may arise
from the Trustee's negligence or bad faith; provided further, to the extent that
the predecessor Servicer fails to pay such amounts, the Successor Servicer shall
be entitled to withdraw such amounts from the Collection Account.
(c) Notwithstanding anything to the contrary herein, the Trustee shall have
no lien on the Trust Fund or any Trust REMIC for the payment of its fees and
expenses.
(d) The Trustee and any director, officer, employee or agent of the Trustee
shall be indemnified and held harmless (i) by the Trust Fund, but solely as
provided in Sections 6.05(d), 6.05(e), 6.05(f) and 6.05(g) 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
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of the Trustee's duties hereunder or by reason of the Trustee's
reckless disregard of its obligations and duties hereunder, and (ii) by the
Servicer against any loss, liability or expense resulting from any error in any
tax or information return prepared by the Servicer.
(e) The obligations of the Trust Fund and the Servicer under this Section
12.05 shall survive termination of the Servicer, the payment of the Certificates
and the resignation and removal of the Trustee, and shall extend to any
co-trustee appointed pursuant to this Article XII.
Section 12.06. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be (i) a banking association
organized and doing business under the laws of any state or the United State of
America, (ii) authorized under such laws to exercise corporate trust powers,
including taking title to the Trust Fund asset on behalf of the
Certificateholders, (iii) having a combined capital and surplus of at least
$50,000,000, (iv) whose long-term deposits, if any, shall be rated at least
"BBB" by S&P and Fitch or such lower long-term deposit rating by S&P and Fitch
as may be approved in writing by the Certificate Insurer and S&P and Fitch and
with a long-term deposit rating of at least "Baa2" from ▇▇▇▇▇'▇ (or such lower
rating which would not cause ▇▇▇▇▇'▇ to reduce its then current ratings of the
Class A Certificates without regard to the Certificate Insurance Policies), (v)
is subject to supervision or examination by federal or state authority and (vi)
is reasonably acceptable to the Certificate Insurer as evidenced in writing. If
such banking association publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
141
examining authority, then for the purposes of this Section 12.06 its
combined capital and surplus shall be deemed to be as set forth in its most
recent report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall give notice of such ineligibility to the Certificate Insurer and
shall resign, upon the request of the Certificate Insurer or the Majority in
Aggregate Voting Interest, in the manner and with the effect specified in
Section 12.07.
Section 12.07. Resignation and Removal of the Trustee.
--------------------------------------
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Servicer, the Certificate
Insurer, the NIMS Insurer and to all Certificateholders. Upon receiving such
notice of resignation, the Servicer shall, with the consent of the Certificate
Insurer, promptly appoint a successor trustee by written instrument, in
duplicate, which instrument shall be delivered to the resigning Trustee and to
the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders by the Servicer. Unless a successor trustee shall have been
appointed and have accepted appointment within 60 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 12.06 and shall fail to resign after written request
therefor by the Servicer, the Certificate Insurer or the Majority in Aggregate
Voting Interest, or if at any time the Trustee shall become incapable of acting,
or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer may remove the
Trustee and shall, within 30 days after such removal, appoint, subject to the
approval of the Certificate Insurer, which approval shall not be unreasonably
withheld, a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the Trustee so removed and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders
by the Servicer.
The Majority in Aggregate Voting Interest or, if the Trustee fails to
perform in accordance with this Agreement, the Certificate Insurer may remove
the Trustee and appoint a successor trustee by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, or by the Certificate Insurer, as the case may be, one complete
set of which instruments shall be delivered to the Servicer, one complete set to
the Trustee so removed and one complete set to the Successor Trustee so
appointed.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
12.08.
Section 12.08. Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 12.07 shall execute,
acknowledge and deliver to the Servicer and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor trustee shall
142
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 the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Trustee's Mortgage Files and related documents and statements held
by it hereunder, and the Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers duties and obligations.
No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 12.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses shown in the
Certificate Register and S&P, Fitch and ▇▇▇▇▇'▇. If the Servicer fails to mail
such notice within ten days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 12.09. Merger or Consolidation of Trustee.
----------------------------------
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the Trustee, shall be the successor of the Trustee hereunder;
provided that such corporation or national banking association shall be eligible
under the provisions of Section 12.06, 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 12.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and the Certificate Insurer with written notice to the NIMS Insurer and
the Rating Agencies to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such title
to the Trust Fund, or any part thereof, and, subject to the other provisions of
this Section 12.10, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case a Servicer Default shall have occurred and be
continuing, the Trustee alone (with the consent of the Certificate Insurer with
written notice to the Rating Agencies) shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the
143
terms of eligibility as a successor trustee under Section 12.06 hereunder and no
notice to Holders of Certificates of the appointment of co-trustee(s) or
separate trustee(s) shall be required under Section 12.08 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 12.10, all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (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 Fund or any portion thereof in any
such jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XII. 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.
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.
Provided that any such selected co-trustee or separate trustee is
adequately capitalized and experienced in light of its anticipated activities
and potential liabilities, and was selected with reasonable care by the Trustee
in light of the foregoing, the Trustee shall not be responsible for the acts of
such co-trustee or separate trustee.
Section 12.11. Appointment of Custodians.
-------------------------
The Trustee may, with the consent of the Servicer and the Certificate
Insurer and notice to the Rating Agencies, appoint one or more Custodians to
hold all or a portion of the Trustee's Mortgage Files as agent for the Trustee,
by entering into a Custodial Agreement. First Union National Bank, N.A. is
initially appointed Custodian with respect to all Mortgage Loans and, for so
long as it shall be the Custodian hereunder, agrees to comply with the terms of
the provisions of Exhibit N hereto applicable to the duties of the Custodian.
Subject to this Article XII, the Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders and the Certificate Insurer.
The Servicer shall be liable for the fees of any Custodian appointed
144
hereunder. Each Custodian shall be a depository institution subject to
supervision by federal or state authority and shall be qualified to do business
in the jurisdiction in which it holds any Trustee's Mortgage File. Each
Custodial Agreement may be amended only as provided in Section 13.02.
Section 12.12. Protection of Trust Fund.
------------------------
(a) The Trustee will hold the Trust Fund in trust for the benefit of the
Holders and the Certificate Insurer and, upon request of the Certificate
Insurer, or, with the consent of the Certificate Insurer, at the request of the
Depositor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 13.02 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request to:
(i) more effectively hold in trust all or any portion of the Trust
Fund;
(ii) perfect, publish notice of, or protect the validity of any grant
made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Fund and the rights of the
Trustee, and the ownership Interests of the Holders represented thereby, in
such Trust Fund against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the Certificate
Insurer or the Depositor to take any action pursuant to this Section 12.12 to
the others.
(b) Subject to Article X hereof, the Trustee shall have the power to
enforce, and shall enforce the obligations of the other parties to this
Agreement and of the Certificate Insurer and the NIMS Insurer, by action, suit
or proceeding at law or equity, and shall also have the power to enjoin, by
action or suit in equity, any acts or occurrences which may be unlawful or in
violation of the rights of the Holders; provided, however, that nothing in this
Section 12.12 shall require any action by the Trustee unless the Trustee shall
first (i) have been furnished indemnity satisfactory to it and second (ii) when
required by this Agreement, have been requested to take such action by the
Majority in Aggregate Voting Interest, the Certificate Insurer, the NIMS Insurer
or the Depositor in accordance with the terms of this Agreement.
(c) The Trustee shall execute any instrument required pursuant to this
Section so long as such instrument does not conflict with this Agreement or with
the Trustee's fiduciary duties.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. The Certificate Insurer.
-----------------------
Any right conferred to the Certificate Insurer hereunder shall be suspended
during any period in which the Certificate Insurer is in default in its payment
obligations under any
145
Certificate Insurance Policy, and its rights during such period shall vest in
the Majority in Aggregate Voting Interest. At such time as the Certificates are
no longer outstanding, and no amounts owed to the Certificate Insurer hereunder
remain unpaid and the Certificate Insurance Policies have expired in accordance
with their terms, the Certificate Insurer's rights hereunder shall terminate.
Section 13.02. Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor, the
Transferor, the Trustee and the Servicer by written agreement, upon the prior
written consent of the Certificate Insurer and the NIMS Insurer, without notice
to or consent of the Certificateholders, to cure any ambiguity or mistake, to
correct or supplement any provisions herein, to comply with any changes in the
Code, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement, or any Custodial Agreement; provided, however, that such
action shall not adversely affect the interests of any Certificateholder or the
Certificate Insurer and the NIMS Insurer, as evidenced by an Opinion of Counsel
or written notification from each Rating Agency to the effect that such
amendment will not cause such Rating Agency to lower or withdraw the then
current ratings on the Certificates, without regard to the Certificate Insurance
Policies, at the expense of the party requesting the change, delivered to the
Certificate Insurer and the NIMS Insurer, the Trustee, the Transferor, and the
Depositor; and provided, further, that no such amendment shall reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, or change the rights or obligations
of any other party hereto without the consent of such party. The Trustee shall
give prompt written notice to each Rating Agency of any amendment made pursuant
to this Section 13.02(a).
(b) This Agreement may be amended from time to time by the Depositor, the
Transferor, the Trustee and the Servicer, with the consent of the Certificate
Insurer and the NIMS Insurer, the Majority in Aggregate Voting Interest and the
Holders of the majority of the Percentage Interest in the Class R-I, Class R-II
and Class R-III Certificates for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
any payments which are required to be distributed on any Class A Certificate
without the consent of the Holder of such Certificate or reduce the percentage
for each Class of Certificates the Holders of which are required to consent to
any such amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby. Prior notice of any proposed amendment pursuant
to this Section 13.02(b) shall be given to each Rating Agency.
(c) It shall not be necessary for the consent of Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof.
(d) Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel to the effect that such amendment or the exercise
of any power granted to the Servicer,
146
the Transferor, the Depositor, the Certificate Insurer, the NIMS Insurer or the
Trustee in accordance with such amendment will not result in the imposition of a
tax on any Trust REMIC, will not cause any Trust REMIC to fail to qualify as a
REMIC or will not cause the portion of the Trust Fund exclusive of any Trust
REMIC to fail to qualify as a grantor trust at any time that any Certificate is
outstanding. No amendment shall have the effect of varying the latest possible
maturity, principal amount or interest rate of the Trust unless the Trustee
shall have received an Opinion of Counsel that the amendment will not cause the
regular interest to lack fixed terms within the meaning of the REMIC provisions.
In addition, prior to consenting to any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
such amendment is authorized and permitted by this Agreement. The Trustee may,
but shall not be obligated to, enter into any amendment which affects the
Trustee's own rights, duties or immunities under this Agreement.
(e) An amendment or supplement to the original issue discount legend shall
not be an amendment or supplement for purposes of this Article XIII.
Section 13.03. Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the properties subject to
the Mortgages are situated, and in any other appropriate public recording office
or elsewhere, such recordation to be effected by the Servicer at the Holders' or
Certificate Insurer's expense on direction and at the expense of the Majority in
Aggregate Voting Interest, the Certificate Insurer or the NIMS Insurer
requesting such recordation, but only when accompanied by an Opinion of Counsel
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders, the Certificate Insurer or the NIMS Insurer
or is necessary for the administration or servicing of the Mortgage Loans.
Section 13.04. Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 13.05. 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, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW (BUT WITH REFERENCE TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS AGREEMENT).
147
Section 13.06. 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
overnight mail, certified mail or registered mail, postage prepaid, to (i) in
the case of the Initial Servicer and the Transferor, EquiCredit Corporation of
America, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel, or such other addresses as may hereafter be
furnished to the Trustee in writing by the Transferor and the Servicer; (ii) in
the case of the Depositor, EQCC Receivables Corporation c/o EquiCredit
Corporation of America, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ Attention: General Counsel, or such other addresses as may hereafter
be furnished to the Trustee in writing by the Depositor; (iii) in the case of
the Certificateholders, as set forth in the Certificate Register; (iv) in the
case of the Trustee, at the Corporate Trust Office; (v) in the case of ▇▇▇▇▇'▇,
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Home Equity Monitoring
Group; (vi) in the case of S&P, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇; (vii) in the case of Fitch, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; (viii) in the case of the
Certificate Insurer, Ambac Assurance Corporation, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Consumer Asset-Backed Securities (re: EQCC
Asset Backed Certificates, Series 2001-1F; (ix) in the case of the Advancing
Party, Bank of America, N.A., NC1-005-14-02, Interstate Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇); (x) in
the case of the Expected Successor Servicer, Fairbanks Capital Corp., P. O. ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, overnight delivery to ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, General
Counsel; and (xi) in the case of the NIMS Insurer, if any, at an address to be
provided by such NIMS Insurer in writing to the other Persons identified above.
Any such notices shall be deemed to be effective with respect to any party
hereto upon the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 13.07. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08. No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create a
co-partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor and not as agent for
the Certificateholders.
Section 13.09. Counterparts.
------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
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Section 13.10. Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
Transferor, the Initial Servicer, the Successor Servicer, the Depositor, the
Trustee and the Certificateholders and their respective successors and assigns.
Section 13.11. Headings.
--------
The headings of the various Sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 13.12. Limitation of Liability of Trustee.
----------------------------------
Notwithstanding anything contained herein to the contrary, this Agreement
has been executed by The Bank of New York not in its individual capacity but
solely as Trustee and in no event shall The Bank of New York have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Depositor hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Trust Fund.
Section 13.13. Limitations on Rights of Others.
-------------------------------
The provisions of this Agreement are solely for the benefit of the
Depositor, the Servicer, the Trustee, the Certificateholders, the Certificate
Insurer and the Transferor and nothing in this Agreement whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the assets of the Trust or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 13.14. No Petition.
-----------
The Servicer, the Transferor, the Advancing Party and the Trustee by
entering into this Agreement each hereby covenants and agrees that it shall not,
prior to the date which is one year and one day after the termination of this
Agreement pursuant to Article XI hereof, acquiesce, petition or otherwise invoke
or cause the Depositor to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the
Depositor under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of each of the Depositor or any substantial part of its
respective property, or ordering the winding up or liquidation of the affairs of
the Depositor.
Section 13.15. Third Party Beneficiary.
-----------------------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and, in addition, shall inure to the benefit of
Certificateholders and, to the extent provided herein, the Certificate Insurer
and the NIMS Insurer (to the same extent as if each were a party hereto) and
their respective successors and permitted assigns and each shall have the right
to enforce the provisions of this Agreement. Except as otherwise provided in
this Agreement, no other Person shall have any right or obligation hereunder.
149
Section 13.16. Rights of the NIMS Insurer.
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Each of the rights of the NIMS Insurer set forth in this Agreement shall
exist so long as the notes issued pursuant to the Indenture remain outstanding
or the NIMS Insurer is owed amounts in respect of its guarantee of payment on
such notes; provided, however, the NIMS Insurer shall not have any rights
hereunder so long as any default has occurred and is continuing under the
insurance policy issued by the NIMS Insurer with respect to such notes.
Section 13.17. Supplemental Provisions for Resecuritization.
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This Agreement may be supplemented by means of the addition of a separate
Article hereto (a "Supplemental Article") for the purpose of resecuritizing any
of the Certificates issued hereunder, under the following circumstances. With
respect to any Class or Classes of Certificates issued hereunder, or any portion
of any such Class, as to which the Depositor or any of its Affiliates (or any
designee thereof) is the registered Holder (the "Resecuritized Certificates"),
such Holder may deposit such Resecuritized Certificates into a new REMIC,
grantor trust, FASIT or custodial arrangement (a "Restructuring Vehicle") to be
held by the Trustee pursuant to a Supplemental Article. The instrument adopting
such Supplemental Article shall be executed by such Holder, the Servicer, the
Advancing Party and the Trustee; provided, that neither the Servicer nor the
Trustee shall withhold their consent thereto if their respective interests would
not be materially adversely affected thereby. To the extent that the terms of
the Supplemental Article do not in any way affect any provisions of this
Agreement as to any of the Certificates initially issued hereunder, the adoption
of the Supplemental Article shall not constitute an "amendment" of this
Agreement.
Each Supplemental Article shall set forth all necessary provisions relating
to the holding of the Resecuritized Certificates by the Trustee, the
establishment of the Restructuring Vehicle, the issuing of various classes of
new certificates by the Restructuring Vehicle and the distributions to be made
thereon, and any other provisions necessary for the purposes thereof. In
connection with each Supplemental Article, the Holder of the Resecuritized
Certificates shall deliver to the Trustee an Opinion of Counsel to the effect
that (i) the Restructuring Vehicle will qualify as a REMIC, grantor trust, FASIT
or other entity not subject to taxation for federal income tax purposes and (ii)
the adoption of the Supplemental Article will not endanger the status of the
Trust Fund as a REMIC or result in the imposition of a tax upon the Trust Fund
(including but not limited to the tax on prohibited transactions as defined in
Section 860F(a)(2) of the Code and the tax on contributions to a REMIC as set
forth in Section 860G(d) of the Code).
150
IN WITNESS WHEREOF, the Depositor, the Initial Servicer, the Advancing
Party, the Expected Successor Servicer and the Trustee have caused their names
to be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
EQCC RECEIVABLES CORPORATION,
as Depositor
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
EQUICREDIT CORPORATION OF AMERICA,
as Transferor and Initial Servicer
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
BANK OF AMERICA, N.A.,
as Advancing Party
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
FAIRBANKS CAPITAL CORP.,
as Expected Successor Servicer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Executive Vice President
------------------------------------
THE BANK OF NEW YORK,
as Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Assistant Treasurer
------------------------------------
[Signature Page to the Pooling and Servicing Agreement]
STATE OF NORTH CAROLINA )
) ss.:
COUNTY OF MECKLENBURG )
On the ______ day of December, 2001 before me, a Notary Public in and for
the State of North Carolina, personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, known to me to
be a Senior Vice President of EQCC Receivables Corporation, a corporation that
executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
STATE OF NORTH CAROLINA )
) ss.:
COUNTY OF MECKLENBURG )
On the _____ day of December, 2001 before me, a Notary Public in and for
the State of North Carolina, personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, known to me to
be a Senior Vice President of EquiCredit Corporation of America, a corporation
that executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF )
--------------------------
On the ____ day of December, 2001 before me, a Notary Public in and for the
State of New York, personally appeared ___________________________, known to me
to be ____________________ of The Bank of New York, a New York banking
corporation that executed the within instrument and also known to me to be the
person who executed it on behalf of said banking corporation, and acknowledged
to me that such banking corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
STATE OF NORTH CAROLINA )
) ss.:
COUNTY OF MECKLENBURG )
On the ____ day of December, 2001 before me, a Notary Public in and for the
State of North Carolina, personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, known to me to be a
Senior Vice President of Bank of America, N.A., a national banking association
that executed the within instrument and also known to me to be the person who
executed it on behalf of said national banking association, and acknowledged to
me that such national banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
STATE OF )
-----------------------------------
) ss.:
COUNTY OF )
----------------------------------
On the ___ day of December, 2001 before me, a Notary Public in and for the
State of _________________, personally appeared ____________________________,
known to me to be the _____________________ of Fairbanks Capital Corp., the
corporation that executed the within instrument and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
Appendix 3
Terms and Conditions applicable to Successor Servicer
in connection with Collection of Prepayment Charges
(a) The successor servicer (the "Servicer") will act as the agent of the
owner of the Prepayment Charges (the "Owner") in connection with the enforcement
and collection of the Prepayment Charges. The Servicer shall not be entitled to
any compensation from the Owner for providing such services other than the
Servicing Compensation already set forth in the Pooling and Servicing Agreement.
The foregoing shall not prohibit the Servicer from contracting with third
parties for specific tasks in the ordinary course of business, but no such
arrangement shall relieve the Servicer of its obligations hereunder.
(b) In the performance of its duties, the Servicer shall be an independent
contractor acting on behalf of the Owner in its own name and for its own
account. It shall have no authority, express or implied, to act in any manner or
by any means for or on behalf of the Owner in any capacity other than an
independent contractor.
(c) The Servicer shall establish an Eligible Account ( a "Prepayment Charge
Collection Account") into which the Servicer shall deposit all Prepayment
Charges received with respect to the Mortgage Loans. The Servicer shall withdraw
Prepayment Charges from the Prepayment Charge Collection Account and remit them
at the written direction of the Owner twice each month, once within two Business
Days after the end of the preceding calendar month, and again within two
Business Days after the tenth (10th) day of the month. The Servicer shall be
entitled to all interest on amounts on deposit in the Prepayment Charge
Collection Account. The Servicer shall make deposits to, but shall not be
entitled to make any withdrawal from, the Prepayment Charge Collection Account
except as expressly contemplated hereby.
(d) The Servicer's duties shall include collecting, with respect to each
Mortgage Loan, all Prepayment Charges payable in respect in such Mortgage Loan,
and depositing such amounts in the Prepayment Charge Collection Account within
one (1) Business Day after receipt of available funds in respect thereof. The
Servicer shall carry out its obligations hereunder in a manner consistent with
prudent industry practice, using that degree of care, skill and diligence that
the Servicer exercises with respect to comparable loans that it services for
itself and others and in respect of which it owns the right to receive fees,
penalty and other amounts payable in connection with the payment of such loans
prior to their scheduled maturity.
(e) Without the prior written consent of the Owner, the Servicer shall not,
except as required by law, amend, modify or waive any of the Prepayment Charges;
provided that the Servicer may waive any Prepayment Charge if (A) such waiver is
standard and customary in servicing similar Mortgage Loans and (B) such waiver
relates to a default or a reasonably foreseeable default and would, in the
reasonable judgment of the Servicer, maximize recovery of total proceeds on the
related Mortgage Loan taking into account the value of such Prepayment Charge
and the related Mortgage Loan. The Servicer shall not enforce any Prepayment
Charge (x) with respect to a payoff occurring later than the fifth anniversary
of the date of the related Mortgage Loan, (y) in an amount greater than six
months' interest on the original principal balance of the related note, or (z)
in an amount greater than 5% of the original principal balance of the related
note. If the Servicer waives a Prepayment Penalty in violation of this
paragraph,
Appendix 3 - Page 1
the Servicer shall promptly deposit the amount of the Prepayment Penalty into
the Prepayment Charge Collection Account.
(f) The Servicer shall, at all times while performing its duties and
obligations hereunder, comply with all applicable laws and regulations,
including but not limited to, laws and regulations pertaining to financing,
licensing, sales, debt collection, consumer protection, disclosure, credit
reporting, usury, any applicable civil and commercial code, foreclosure,
repossession, record retention, bribery and financial privacy. The Servicer
shall obtain and maintain all licenses and qualifications required to enable the
Servicer to perform its obligations hereunder from time to time.
(g) The Owner and its designees shall have the right (at the Owner's
expense) to examine and audit, upon prior reasonable notice to the Servicer,
during business hours or at such other times as may be reasonable under the
circumstances, any and all documents related to the Prepayment Charges or books,
records, documentation or other information of the Servicer, which relate to the
administration thereof hereunder or the performance by the Servicer of its
obligations hereunder. Such access shall be afforded at the Servicer's place of
business, and the Owner and its respective designees shall have the right to
make copies or extracts of any such books, records and documents. Any
investigation or review of such books and records shall be conducted in a manner
which does not unreasonably impair the Servicer's ability to meet its
obligations hereunder.
(h) The Servicer shall furnish to the Owner such reports as are currently
available from the Servicer's system, and such other reports in such form and
containing such substance as the Owner reasonably determines are necessary for
it to track and monitor the collection of Prepayment Charges.
(i) The Servicer agrees that it will not, without the prior written consent
of the Owner, (i) use in advertising, publicity, or otherwise the name of the
Owner or any Affiliate of the Owner, nor any trade name, trademark, trade
device, service ▇▇▇▇, symbol or any abbreviation, contraction or simulation
thereof owned by the Owner or any of its Affiliates or (ii) represent, directly
or indirectly, that any product or any service provided by the Servicer has been
approved or endorsed by the Owner or any of its Affiliates.
(j) Notwithstanding anything to the contrary herein, under no circumstances
may the Owner effect the termination of the Servicer under the Pooling and
Servicing Agreement, or designate any replacement Servicer or the manner of
engaging a successor following a termination of the Servicer under the Pooling
and Servicing Agreement pursuant to the terms thereof subject to Section
5.14(c). No party other than the Servicer shall have any obligations to the
Owner, and the Owner shall have no rights or recourse against the Trust Fund,
the Certificate Insurer, or any party other than the Servicer.