EXECUTION COPY
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RESIDENTIAL ASSET FUNDING CORPORATION,
as Depositor
NOVASTAR MORTGAGE, INC.,
as Servicer and as Seller
FIRST UNION NATIONAL BANK,
as Certificate Administrator
and
THE CHASE MANHATTAN BANK,
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 2000
--------------------------------
NovaStar Mortgage Funding Trust, Series 2000-2
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2000-2
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.........................................................................1
Section 1.02. Accounting...........................................................................33
Section 1.03. Allocation of Certain Interest Shortfalls............................................33
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans, MI Policies and Cap Agreements.........................33
Section 2.02. Acceptance of Mortgage Loans by Certificate Administrator on behalf
of the Trustee.......................................................................36
Section 2.03. Repurchase or Substitution of Mortgage Loans by the Seller...........................37
Section 2.04. Acknowledgement of Trustee...........................................................40
Section 2.05. Representations, Warranties and Covenants of the Servicer............................40
Section 2.06. Representations and Warranties of the Depositor......................................41
Section 2.07. Issuance of Certificates.............................................................42
Section 2.08. Conveyance of the Subsequent Mortgage Loans..........................................42
Section 2.09. Miscellaneous REMIC Provisions.......................................................42
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
Section 3.01. Servicer to Assure Servicing.........................................................44
Section 3.02. Subservicing Agreements Between Servicer and Subservicers............................45
Section 3.03. Successor Subservicers...............................................................46
Section 3.04. Liability of the Servicer............................................................46
Section 3.05. Assumption or Termination of Subservicing Agreements by the
Certificate Administrator............................................................46
Section 3.06. Collection of Mortgage Loan Payments.................................................47
Section 3.07. Withdrawals from the Collection Account..............................................49
Section 3.08. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts.............................................................................51
Section 3.09. Access to Certain Documentation and Information Regarding the
Mortgage Loans.......................................................................52
Section 3.10. Administration of the Cap Agreements.................................................52
Section 3.11. Maintenance of Hazard Insurance and Fidelity Coverage................................53
Section 3.12. Due-on-Sale Clauses; Assumption Agreements...........................................54
Section 3.13. Realization Upon Defaulted Mortgage Loans............................................55
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Section 3.14. Certificate Administrator to Cooperate; Release of Mortgage Files....................57
Section 3.15. Servicing Compensation...............................................................58
Section 3.16. Annual Statements of Compliance......................................................58
Section 3.17. Annual Independent Public Accountants'Servicing Report...............................59
Section 3.18. Optional Purchase of Defaulted Mortgage Loans........................................59
Section 3.19. Information Required by the Internal Revenue Service Generally and
Reports of Foreclosures and Abandonments of Mortgaged Property.......................60
Section 3.20. Purchase of Converted Mortgage Loans.................................................60
Section 3.21. [Reserved]...........................................................................60
Section 3.22. Servicing and Administrating of the MI Policies......................................60
Section 3.23. Determination Date Reports...........................................................61
Section 3.24. Advances.............................................................................62
Section 3.25. Compensating Interest Payments.......................................................63
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Distributions........................................................................63
Section 4.02. Payment Account and Distribution Account.............................................66
Section 4.03. Statements...........................................................................67
Section 4.04. Supplemental Interest Account........................................................70
Section 4.05. Pre-Funding Account..................................................................71
Section 4.06. Interest Coverage Account............................................................72
Section 4.07. Allocation of Realized Losses........................................................73
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.....................................................................74
Section 5.02. Registration of Transfer and Exchange of Certificates................................75
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates....................................79
Section 5.04. Persons Deemed Owners................................................................80
Section 5.05. Appointment of Paying Agent..........................................................80
ARTICLE VI
THE SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Servicer and the Depositor..........................................80
Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer or the Depositor............................................................81
Section 6.03. Limitation on Liability of the Servicer and Others...................................81
Section 6.04. Servicer Not to Resign...............................................................82
Section 6.05. Delegation of Duties.................................................................82
Section 6.06. Servicer to Pay Trustee's, and Certificate Administrator's Fees and
Expenses; Indemnification............................................................82
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ARTICLE VII
DEFAULT
Section 7.01. Servicing Default....................................................................84
Section 7.02. Certificate Administrator to Act; Appointment of Successor...........................85
Section 7.03. Waiver of Defaults...................................................................87
Section 7.04. Notification to Certificateholders...................................................87
Section 7.05. Survivability of Servicer Liabilities................................................87
ARTICLE VIII
THE TRUSTEE AND THE CERTIFICATE ADMINISTRATOR
Section 8.01. Duties of the Trustee and the Certificate Administrator..............................87
Section 8.02. Rights of Trustee and Certificate Administrator......................................89
Section 8.03. Individual Rights of Trustee and Certificate Administrator...........................91
Section 8.04. Trustee's and Certificate Administrator's Disclaimer.................................91
Section 8.05. Notice of Servicing Default..........................................................91
Section 8.06. [Reserved]...........................................................................92
Section 8.07. Compensation and Indemnity...........................................................92
Section 8.08. Replacement of Trustee or Certificate Administrator..................................92
Section 8.09. Successor Trustee or Certificate Administrator by Merger.............................93
Section 8.10. Appointment of Co-Trustee or Separate Trustee........................................93
Section 8.11. Eligibility; Disqualification........................................................95
Section 8.12. [Reserved]...........................................................................95
Section 8.13. Representations and Warranties.......................................................95
Section 8.14. Directions to Trustee and Certificate Administrator..................................96
Section 8.15. The Agents...........................................................................96
Section 8.16. Reports by the Certificate Administrator; Trust Fiscal Year..........................96
ARTICLE IX
[Reserved]
ARTICLE X
REMIC ADMINISTRATION
Section 10.01. REMIC Administration.................................................................97
Section 10.02. Prohibited Transactions and Activities...............................................99
ARTICLE XI
TERMINATION
Section 11.01. Termination.........................................................................100
Section 11.02. Additional Termination Requirements.................................................101
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment...........................................................................102
Section 12.02. Recordation of Agreement; Counterparts..............................................103
Section 12.03. Limitation on Rights of Certificateholders..........................................103
Section 12.04. Governing Law; Jurisdiction.........................................................104
Section 12.05. Notices.............................................................................104
Section 12.06. Severability of Provisions..........................................................106
Section 12.07. Article and Section References......................................................106
Section 12.08. Further Assurances..................................................................106
Section 12.09. Benefits of Agreement...............................................................106
Section 12.10. Acts of Certificateholders..........................................................106
EXHIBITS:
Exhibit A-1 Form of Class A-1 Certificates
Exhibit A-2 Form of Class M-1 Certificates
Exhibit A-3 Form of Class M-2 Certificates
Exhibit A-4 Form of Class M-3 Certificates
Exhibit A-5 Form of Class AIO Certificates
Exhibit A-6 Form of Class O Certificates
Exhibit A-7 Form of Class P Certificates
Exhibit A-8 Form of Class RL Certificates
Exhibit A-9 Form of Class RU Certificates
Exhibit B Mortgage Loan Schedule
Exhibit C Form of Addition Notice
Exhibit D Form of Subsequent Transfer Instrument
Exhibit E Request for Release
Exhibit F-1 Form of Trustee's Initial Certification
Exhibit F-2 Form of Trustee's Final Certification
Exhibit G Form of Investment Letter
Exhibit H Form of Residual Certificate Transfer Affidavit
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This Pooling and Servicing Agreement is dated as of September 1, 2000
(the "Agreement"), among RESIDENTIAL ASSET FUNDING CORPORATION, as depositor
(the "Depositor"), NOVASTAR MORTGAGE, INC., as servicer (the "Servicer") and as
seller (the "Seller"), FIRST UNION NATIONAL BANK, as certificate administrator
(the "Certificate Administrator") and THE CHASE MANHATTAN BANK, as trustee (the
"Trustee").
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement or in the Preliminary Statement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Unless otherwise specified, all
calculations in respect of interest on the Class A-1 Certificates, the Class AIO
Certificates and the Mezzanine Certificates shall be made on the basis of the
actual number of days elapsed on the basis of a 360-day year and all other
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months. The Class O Certificates are
not entitled to distributions in respect of interest and, accordingly, will not
accrue interest.
"1933 Act": The Securities Act of 1933, as amended.
"Account": The Collection Account, the Pre-Funding Account, the
Interest Coverage Account, the Supplemental Interest Account, and the Payment
Account.
"Accrual Period": With respect to each Distribution Date, the period
commencing on the preceding Distribution Date (or in the case of the first
Accrual Period, commencing on the Closing Date) and ending on the day preceding
the current Distribution Date.
"Addition Notice": With respect to the transfer of Subsequent Mortgage
Loans to the Trust Fund pursuant to Section 2.08, a notice of the Depositor's
designation of the Subsequent Mortgage Loans to be sold to the Trust Fund and
the aggregate principal balance of such Subsequent Mortgage Loans as of the
Subsequent Cut-off Date. The Addition Notice shall be given not later than six
Business Days prior to the related Subsequent Transfer Date and shall be
substantially in the form attached hereto as Exhibit C.
"Adjustable Rate Mortgage Loan": A Mortgage Loan which provides at any
period during the life of such loan for the adjustment of the Mortgage Rate
payable in respect thereto. The Adjustable Rate Mortgage Loans are identified as
such on the Mortgage Loan Schedule.
"Adjustment Date": With respect to each Adjustable Rate Mortgage Loan,
each adjustment date, on which the Mortgage Rate of such Mortgage Loan changes
pursuant to the related Mortgage Note.
"Administrative Fee": With respect to each Distribution Date, the sum
of the MI Premium, the Servicing Fee and the Certificate Administrator Fee with
respect to such Distribution Date.
"Administrative Fee Rate": As to each Distribution Date, the sum of (i)
the Certificate Administrator Fee Rate, (ii) the Servicing Fee Rate, and (iii)
the total MI Premiums due during the related Due Period, expressed as an annual
percentage rate of the Pool Balance as of the beginning of that Due Period.
"Advance": As to any Mortgage Loan, any advance made by the Servicer in
respect of any Distribution Date pursuant to Section 3.24.
"Adverse REMIC Event": As defined in Section 10.01(f) hereof.
"Affiliate": With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Allocable Cap Payment Amount": With respect to any Cap Payment and
Distribution Date:
(i) if such Distribution Date is the first Distribution Date following
the Trust's Receipt of that Cap Payment, one-third of the amount of that Cap
Payment;
(ii) if such Distribution Date is the second Distribution Date
following the Trust's receipt of that Cap Payment, the sum of one-third of the
amount of that Cap Payment plus any remaining portion of the one-third amount on
the prior Distribution Date which was not applied to any Supplemental Interest
Payment on the prior Distribution Date; and
(iii) if such Distribution Date is the third Distribution Date
following the Trust's receipt of that Cap Payment, any remaining portion thereof
which was not applied to any Supplemental Interest Payment on the prior two
Distribution Dates.
"Allocated Realized Loss Amount": With respect to any Distribution Date
and any Class of Mezzanine Certificates, the Realized Losses allocated to such
Class of Certificates on such Distribution Date pursuant to Section 4.07 hereof.
"Applicable Regulations": As to any Mortgage Loan, all federal and
state laws, statutes, rules and regulations applicable thereto.
"Appraised Value": The appraised value of a Mortgaged Property based
upon the appraisal made at the time of the origination of the related Mortgage
Loan. With respect to a Mortgage Loan the proceeds of which were used to
refinance an existing mortgage loan, the
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appraised value of the Mortgaged Property based upon the appraisal (as reviewed
and approved by the Seller) obtained at the time of refinancing.
"Assignment of Mortgage": An assignment of Mortgage, notice of transfer
or equivalent instrument, in recordable form, which is sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
of record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
"Assumed Final Maturity Date": As to each Class of Certificates, the
Distribution Date in January, 2031.
"Available Funds Cap Carryforward Amount": With respect to any Class of
Underwritten Certificates and any Distribution Date, the sum of (i) the positive
excess, if any, of (x) the aggregate, cumulative amount of REMIC Available Funds
Cap Shortfall Amounts for such Class on all prior Distribution Dates over (y)
the aggregate, cumulative amount of Supplemental Interest Payments actually paid
to the Holders of that Class on all prior Distribution Date pursuant to those
clauses of Section 4.04(c) which relate to payments to that Class, plus (ii)
interest on the amount described in clause (i) at a rate equal to the related
Formula Rate for such Class and Distribution Date.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the payment
of the unamortized principal balance of such Mortgage Loan in a single payment
at the maturity of such Mortgage Loan that is substantially greater than the
preceding monthly payment.
"Balloon Payment": A payment of the unamortized principal balance of a
Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is
substantially greater than the preceding Monthly Payment.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"Base Prospectus": The base Prospectus, dated September 9, 1999, with
respect to the Offered Certificates.
"Basic Documents": This Agreement, the Purchase Agreement, each
Subsequent Transfer Instrument, the Side Indemnity Letter, the REMIC Interests
Sale Agreement, the Converted Loan Purchase Agreement, the Underwriting
Agreement, and the other documents and certificates delivered in connection with
any of the above.
"Book-Entry Certificates": Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a Depository
Participant, or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.02 hereof). On the Closing
Date, the Class A-1 Certificates, the Class AIO Certificates, the Class P
Certificates and the Mezzanine Certificates shall be Book-Entry Certificates.
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"Business Day": Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the City of New York, Delaware, California
or Kansas or in the city in which the corporate trust offices of the Trustee and
the Certificate Administrator are located, are required or authorized by law to
be closed.
"Cap Payment": Any payment received by the Trust under any Cap
Agreement.
"Cap Agreement": each of (i) the interest rate cap agreement, dated as
of May 22, 2000, from Credit Suisse First Boston, in the notional principal
amount of $50,000,000 with a 90-day LIBOR strike price of 6.75%, maturing May
24, 2001, (ii) the interest rate cap agreement, dated as of July 20, 2000, from
National Westminister Bank PLC, in the notional principal amount of $50,000,000
with a 90-day LIBOR strike price of 6.75%, maturing July 24, 2002 and (iii) the
interest rate cap agreement, dated as of July 20, 2000, from National
Westminister Bank PLC, the notional principal amount of $25,000,000, with a
90-day LIBOR strike price of 6.75%, maturing July 24, 2003.
"Cash Liquidation": As to any defaulted Mortgage Loan other than a
Mortgage Loan as to which an REO Acquisition occurred, a determination by the
Servicer that it has received all Liquidation Proceeds and other payments or
cash recoveries which the Servicer reasonably and in good faith expects to be
finally recoverable with respect to such Mortgage Loan.
"Certificate": Any Regular Certificate, Class RL or Class RU
Certificate.
"Certificate Administrator": First Union National Bank, a national
banking association, and any successor thereto.
"Certificate Administrator Fee": With respect to each Distribution
Date, the product of (i) the Certificate Administrator Fee Rate divided by 12
and (ii) the sum of the Principal Balance of the Mortgage Loans and the
Pre-Funded Amount as of the first day of the related Due Period.
"Certificate Administrator Fee Rate": 0.0125% per annum.
"Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register, except that a Disqualified
Organization or non-U.S. Person shall not be a Holder of a Residual Certificate
for any purpose hereof.
"Certificate Margin": With respect to the Class A-1 Certificates on
each Distribution Date (A) on or prior to the Rate Step-Up Date, 0.28% per annum
and (B) after the Rate Step-Up Date, 0.560% per annum. With respect to the Class
M-1 Certificates on each Distribution Date (A) on or prior to the Rate Step-Up
Date, 0.75% per annum and (B) after the Rate Step-Up Date, 11.25% per annum.
With respect to the Class M-2 Certificates on each Distribution Date (A) on or
prior to the Rate Step-Up Date, 1.25% per annum and (B) after the Rate Step-Up
Date, 1.875% per annum. With respect to the Class M-3 Certificates on each
Distribution Date (A) on or prior to the Rate Step-Up Date, 2.25% per annum and
(B) after the Rate Step-Up Date, 3.375% per annum.
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"Certificate Owner": With respect to each Book-Entry Certificate, any
beneficial owner thereof.
"Certificate Principal Balance": With respect to any Class of Regular
Certificates (other than the Class AIO Certificates, the Class O Certificates
and the Class P Certificates) immediately prior to any Distribution Date, will
be equal to the Initial Certificate Principal Balance thereof reduced by the sum
of all amounts actually distributed in respect of principal of such Class and,
in the case of a Mezzanine Certificate, Allocated Realized Loss Amounts applied
with respect to that class on all prior Distribution Dates. With respect to the
Class O Certificates as of any date of determination, an amount equal to the
excess, if any, of (A) the Principal Balances of the Mortgage Loans over (B) the
then aggregate Certificate Principal Balances of the Class A-1 Certificates and
the Mezzanine Certificates then outstanding. The Class AIO Certificates and the
Class P Certificates will not have a Certificate Principal Balance.
"Certificate Register": The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the registration
of Certificates and of transfers and exchanges of Certificates.
"Certificate Registrar": Initially, the Certificate Administrator, in
its capacity as Certificate Registrar, or any successor to the Certificate
Administrator in such capacity.
"Certificates Sale Agreement": The Certificates Sale Agreement, dated
as of September 28, 2000, between NovaStar Mortgage Funding Corporation III, a
Delaware corporation and NovaStar REMIC Financing Corporation, a Delaware
corporation.
"Class": Collectively, Certificates which have the same priority of
payment and bear the same class designation and the form of which is identical
except for variation in the Percentage Interest evidenced thereby.
"Class A-1 Certificate": Any one of the Class A-1 Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in
the form annexed hereto as Exhibit A-1, representing the right to distributions
as set forth herein and therein and evidencing a regular interest in the
Upper-Tier REMIC.
"Class A-1 Certificateholder": Any Holder of a Class A-1 Certificate.
"Class A-1 Principal Distribution Amount": The excess of (x) the
Certificate Principal Balance of the Class A-1 Certificates immediately prior to
such Distribution Date over (y) the lesser of (A) the product of (i) 86.00% and
(ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the
last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period) minus $1,700,000.
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"Class AIO Certificate": Any one of the Class AIO Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in
the form annexed hereto as Exhibit A-5, representing the right to distributions
as set forth herein and therein and evidencing one or more regular interests in
the Upper-Tier REMIC.
"Class AIO Current Interest": With respect to any Distribution Date is
equal to the excess of (x) Interest Remittance Formula Amount for that
Distribution Date less (y) the sum of (i) the Administrative Fees, (ii) the
REMIC Current Interest for the Class A-1 Certificates, (iii) the REMIC Current
Interest for the Class M-1 Certificates, (iv) the REMIC Current Interest for the
Class M-2 Certificates, and (v) the REMIC Current Interest for the Class M-3
Certificates. The "REMIC Current Interest" on each of the Class A-1, Class M-1,
Class M-2 and Class M-3 Certificates will be calculated for this purpose by
using the REMIC Available Funds Cap Rate.
"Class AIO Monthly Distributable Amount": For any Distribution Date,
the sum of (1) the Class AIO Remaining Monthly Interest Distributable Amount for
that Distribution Date and (2) Excess Supplemental Amounts for that Distribution
Date.
"Class AIO Monthly Interest Distributable Amount": As of any
Distribution Date, the sum of (1) the Class AIO Unpaid Interest Shortfall Amount
for that Distribution Date and (2) the Class AIO Current Interest for that
Distribution Date.
"Class AIO Pass-Through Rate": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is equal to the
Class AIO Current Interest for that Distribution Date and the denominator of
which is the product of (1) the actual number of days in the related Accrual
Period, divided by 360 and (2) the aggregate Principal Balance of the Mortgage
Loans as of the first day of the preceding Due Period.
"Class AIO Remaining Monthly Interest Distributable Amount": As of any
Distribution Date, the excess of (i) the Class AIO Current Interest over (ii)
the sum of the Supplemental Interest Payments for all Classes of Underwritten
Certificates on that Distribution Date.
"Class AIO Unpaid Interest Shortfall Amount": For the first
Distribution Date, zero and for any Distribution Date after the first
Distribution Date, the amount, if any, by which (a) the Class AIO Monthly
Interest Distributable Amount for the immediately preceding Distribution Date
exceeds (b) the aggregate amount actually paid to the Holders of the Class AIO
Certificates on such immediately preceding Distribution Date pursuant to Section
4.01(a)(i)(A)(x) hereof plus the amount actually transferred to the Supplemental
Interest Account on such immediately preceding Distribution Date pursuant to
Section 4.01(a)(i)(A)(y) hereof, plus interest on such sum, at the Class AIO
Pass-Through Rate for the related Accrual Period.
"Class M-1 Certificate": Any one of the Class M-1 Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in
the form annexed hereto as Exhibit A-2, representing the right to distributions
as set forth herein and therein and evidencing a regular interest in the
Upper-Tier REMIC.
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"Class M-1 Principal Distribution Amount": The excess of (x) the sum of
(i) the Certificate Principal Balance of the Class A-1 Certificates (after
taking into account the payment of the Class A-1Principal Distribution Amount on
such Distribution Date) and (ii) the Certificate Principal Balance of the Class
M-1 Certificates immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 90.00% and (ii) the aggregate Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period) and (B) the aggregate Principal Balance of
the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period) minus $1,700,000.
"Class M-2 Certificate": Any one of the Class M-2 Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in
the form annexed hereto as Exhibit A-3, representing the right to distributions
as set forth herein and therein and evidencing a regular interest in the
Upper-Tier REMIC.
"Class M-2 Principal Distribution Amount": The excess of (x) the sum of
(i) the Certificate Principal Balance of the Class A-1 Certificates (after
taking into account the payment of the Class A-1Principal Distribution Amount on
such Distribution Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date) and (iii) the Certificate
Principal Balance of the Class M-2 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 94.00% and (ii)
the aggregate Principal Balance of the Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the
last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period) minus $1,700,000.
"Class M-3 Certificate": Any one of the Class M-3 Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in
the form annexed hereto as Exhibit A-4, representing the right to distributions
as set forth herein and therein and evidencing a regular interest in the
Upper-Tier REMIC.
"Class M-3 Principal Distribution Amount": The excess of (x) the sum of
(i) the Certificate Principal Balance of the Class A-1 Certificates (after
taking into account the payment of the Class A-1 Principal Distribution Amount
on such Distribution Date), (ii) the Certificate Principal Balance of the Class
M-1 Certificates (after taking into account the payment of the Class M-1
Principal Distribution Amount on such Distribution Date), (iii) the Certificate
Principal Balance of the Class M-2 Certificates (after taking into account the
payment of the Class M-2 Principal Distribution Amount on such Distribution
Date) and (iv) the Certificate Principal Balance of the Class M-3 Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 96.60% and (ii) the aggregate Principal Balance of the
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Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period) and (B) the aggregate Principal Balance of
the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period) minus $1,700,000.
"Class O Certificate": Any one of the Class O Certificates executed,
authenticated and delivered pursuant to Section 5.01, substantially in the form
annexed hereto as Exhibit A-6, representing the right to distributions as set
forth herein and therein and evidencing a regular interest in the Upper-Tier
REMIC.
"Class P Certificate": Any one of the Class P Certificates executed,
authenticated and delivered pursuant to Section 5.01, substantially in the form
annexed hereto as Exhibit A-7, representing the right to distributions as set
forth herein and therein and evidencing a regular interest in the Upper-Tier
REMIC.
"Class RL Certificate": Any one of the Class RL Certificates executed,
authenticated and delivered pursuant to Section 5.01, substantially in the form
annexed hereto as Exhibit A-8, representing the right to distributions as set
forth herein, and evidencing an interest designated as the "residual interest"
in the Lower-Tier REMIC for the purposes of the REMIC Provisions.
"Class RU Certificate": Any one of the Class RU Certificates executed,
authenticated and delivered pursuant to Section 5.01, substantially in the form
annexed hereto as Exhibit A-9, representing the right to distributions as set
forth herein, and evidencing an interest designated as the "residual interest"
in the Upper-Tier REMIC for the purposes of the REMIC Provisions.
"Close of Business": As used herein, with respect to any Business Day,
5:00 p.m. (New York time).
"Closing Date": September 28, 2000.
"Code": The Internal Revenue Code of 1986 as it may be amended from
time to time.
"Collection Account": The account or accounts created and maintained by
the Servicer pursuant to Section 3.06(d) hereof, which must be an Eligible
Account.
"Commission": The Securities and Exchange Commission.
"Compensating Interest": With respect to any Determination Date, an
amount equal to the lesser of (i) the aggregate amount of Prepayment Interest
Shortfall for the related Prepayment Period and (ii) the Servicing Fee for the
related Distribution Date.
8
"Conversion Date": The date on which a Convertible Mortgage Loan
becomes a Converted Mortgage Loan according to the terms of the related Mortgage
Note.
"Converted Loan Purchase Agreement": The Converted Loan Purchase
Agreement, dated as of September 1, 2000, among the Converted Loan Purchaser,
the Certificate Administrator, the Trustee and the Servicer.
"Converted Loan Purchaser": NovaStar Capital, Inc., a Delaware
corporation, and any successor thereto.
"Converted Mortgage Loan": Any Convertible Mortgage Loan as to which
the Mortgagor has exercised the option to convert to a fixed Mortgage Rate and
satisfied all of the conditions to conversion set forth in the Mortgage Note.
"Convertible Mortgage Loans": Any Mortgage Loan evidenced by a Mortgage
Note that according to its terms is convertible at the option of the Mortgagor
from a variable Mortgage Rate to a fixed Mortgage Rate, subject to satisfaction
of the conditions set forth in such note.
"Corporate Trust Office": With respect to the Trustee and the Paying
Agent, the principal corporate trust office at which at any particular time its
corporation trust business shall be administered, which office at the date of
execution of this Agreement is located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Capital Markets Fiduciary Services, NovaStar
2000-2. With respect to the Certificate Administrator and the Certificate
Registrar, the principal corporate trust office at which at any particular time
its corporate trust business shall be administered, which office at the date of
the execution of this instrument is located at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 1179,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Structured Finance
Trust Services (NovaStar Mortgage Funding Trust, Series 2000-2).
"Credit Enhancement Percentage": For any Distribution Date, the
percentage equivalent of a fraction, (x) the numerator of which is the sum of
the aggregate Certificate Principal Balances of the Mezzanine Certificates and
the Class O Certificates, and (y) the denominator of which is the sum of (i) the
aggregate Principal Balance of the Mortgage Loans and (ii) the Pre-Funded
Amount, in each case calculated prior to taking into account the distribution of
the Principal Distribution Amount to the Holders of the Certificates then
entitled to distributions of principal on such Distribution Date.
"Crossover Date": The later to occur of (i) the Distribution Date
occurring in October 2003 and (ii) the first Distribution Date on which the
Credit Enhancement Percentage (calculated for this purpose only prior to taking
into account the distribution of the Principal Distribution Amount to the
Certificates then entitled to distributions of principal on such Distribution
Date) is equal to or greater than 14%.
"Cumulative Loss Percentage": As to any Distribution Date, the
percentage equivalent of the fraction obtained by dividing (i) the aggregate
amount of Realized Losses on the Mortgage Loans (after giving effect to coverage
provided by any MI Policy) from the Cut-off
9
Date through such Distribution Date by (ii) the sum of the aggregate Principal
Balance of the Initial Mortgage Loans as of the Cut-off Date plus the Original
Pre-Funded Amount.
"Cut-off Date": With respect to each Initial Mortgage Loan, the later
of (i) the date of origination of such Mortgage Loan or (ii) September 1, 2000.
"Cut-off Date Aggregate Principal Balance": With respect to the
Mortgage Pool, the aggregate of the Cut-off Date Principal Balances of the
Initial Mortgage Loans.
"Cut-off Date Principal Balance": With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the Cut-off Date or Subsequent
Cut-off Date, as the case may be (or as of the applicable date of substitution
with respect to an Eligible Substitute Mortgage Loan).
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.
"Definitive Certificates": The Class O, Class RU and Class RL
Certificates, and such other classes of certificates as become definitive
certificates pursuant to Section 5.02(c) hereof.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
one or more Eligible Substitute Mortgage Loans.
"60-Day Delinquency Percentage": As of the last day of any Due Period,
the percentage equivalent of a fraction, (i) the numerator of which equals the
aggregate Principal Balance of the Mortgage Loans that are 60 or more days
delinquent, in foreclosure or converted to REO Properties as of such last day of
such Due Period, and (ii) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
"90-Day Delinquency Percentage": As of the last day of any Due Period,
the percentage equivalent of a fraction, (i) the numerator of which equals the
aggregate Principal Balance of the Mortgage Loans that are 90 or more days
delinquent, in foreclosure or converted to REO Properties as of such last day of
such Due Period, and (ii) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
"Delinquent": Any Mortgage Loan, the Monthly Payment due on a Due Date
which is not made by the Close of Business on the next scheduled Due Date for
such Mortgage Loan.
10
"Depositor": Residential Asset Funding Corporation, a North Carolina
corporation, or any successor in interest.
"Depository": The initial Depository shall be The Depository Trust
Company, whose nominee is Cede & Co., or any other organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The Depository shall initially be the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
"Depository Participant": A broker, dealer, bank or other financial
institution or other person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date": With respect to any Distribution Date, the 15th
day of the calendar month in which such Distribution Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Determination Date Report": The meaning specified in Section 3.23
hereof.
"Disqualified Organization": "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code and applicable to the Trust.
"Distribution Date": The 25th day of any calendar month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in October 2000.
"Due Date": The first day of the month of the related Distribution
Date.
"Due Period": With respect to any Mortgage Loan and Due Date, the
period commencing on the second day of the month preceding the month of such
Distribution Date and ending on the related Due Date.
"Eligible Account": An account that is either: (A) a segregated account
or accounts maintained with an institution whose deposits are insured by the
FDIC, the unsecured and uncollateralized long-term debt obligations of which
institution shall be rated AA or higher by Standard & Poor's and Aa2 or higher
by Moody's and in the highest short-term rating category by each of the Rating
Agencies, and which is (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 each Rating Agency or (B) a segregated trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution acceptable to each Rating Agency, having capital and surplus of not
less than $100,000,000, acting in its fiduciary capacity.
11
"Eligible Investments": One or more of the following:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, any of the Federal Home Mortgage Corporation, the
Federal National Mortgage Association, the Federal Home Loan Banks or any agency
or instrumentality of the United States of America the obligations of which are
backed by the full faith and credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Trustee, the Certificate
Administrator or their agents acting in their respective commercial capacities)
incorporated under the laws of the United States of America or any State thereof
and subject to supervision and examination by federal and/or state authorities,
so long as at the time of such investment or contractual commitment providing
for such investment, such depository institution or trust company has a
short-term unsecured debt rating in the highest available rating category of
each of the Rating Agencies and provided that each such investment has an
original maturity of no more than 365 days, and (B) any other demand or time
deposit or deposit which is fully insured by the Federal Deposit Insurance
Corporation;
(iii) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (i) above and entered into with a
depository institution or trust company (acting as a principal) rated "A" or
higher by S&P and A2 or higher by Moody's; provided, however, that collateral
transferred pursuant to such repurchase obligation must (A) be valued daily at
current market price plus accrued interest, (B) pursuant to such valuation,
equal, at all times, 105% of the cash transferred in exchange for such
collateral and (C) be delivered in such a manner as to accomplish perfection of
a security interest in the collateral by possession of certificated securities.
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
State thereof which has a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of such
investment;
(v) commercial paper having an original maturity of less than 365 days
and issued by an institution having a short-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the time of
such investment;
(vi) a guaranteed investment contract approved by each of the Rating
Agencies and issued by an insurance company or other corporation having a
long-term unsecured debt rating in the highest available rating category of each
of the Rating Agencies at the time of such investment;
(vii) money market funds having ratings in the highest available
long-term rating category of each of the Rating Agencies at the time of such
investment; any such money market funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirement for Eligible
Investments set forth in the Agreement; and
(viii) any investment approved in writing by each of the Rating
Agencies;
12
provided, however, that each such instrument shall be acquired in an
arm's-length transaction and no such instrument shall be an Eligible Investment
if it represents, either (1) the right to receive only interest payments with
respect to the underlying debt instrument or (2) the right to receive both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity greater than 120% of the yield to
maturity at par of such underlying obligations; provided, further, however, that
each such instrument acquired shall not be acquired at a price in excess of par.
The Trustee or Certificate Administrator may purchase from or sell to itself or
an affiliate, as principal or agent, the Eligible Investments listed above.
"Eligible Substitute Mortgage Loan": A Mortgage Loan substituted by the
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in an Officer's Certificate delivered to the Certificate
Administrator, (i) have an outstanding principal balance, after deduction of the
principal portion of the monthly payment due in the month of substitution (or in
the case of a substitution of more than one Mortgage Loan for a Deleted Mortgage
Loan, an aggregate outstanding principal balance, after such deduction), not in
excess of the outstanding principal balance of the Deleted Mortgage Loan (the
amount of any shortfall to be deposited by the Seller in the Collection Account
in the month of substitution); (ii) comply in all material respects with each
representation and warranty set forth in clauses (ii) through (lxviii) of
Section 3.01(b) of the Purchase Agreement other than clauses (iii), (v)-(xiv),
(xli), (lv) and (lvi); (iii) have a Mortgage Rate and, with respect to an
Adjustable Rate Mortgage Loan, a Gross Margin no lower than and not more than 1%
per annum higher than the Mortgage Rate and Gross Margin, respectively, of the
Deleted Mortgage Loan as of the date of substitution; (iv) have a Loan-to-Value
Ratio, at the time of substitution no higher than that of the Deleted Mortgage
Loan at the time of substitution; (v) have a remaining term to stated maturity
not greater than (and not more than one year less than) that of the Deleted
Mortgage Loan; (vi) not be 30 days or more delinquent; (vii) not be a negative
amortization loan; (viii) have a lien priority equal to or superior to the lien
priority of the Deleted Mortgage Loan; and (ix) be a Qualified Replacement
Mortgage.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Excess Supplemental Amounts": With respect to any Cap Payment, the
portion of the Allocable Cap Payment Amount remaining on any Distribution Date
following the Trustee's or Certificate Administrator's receipt of that Cap
Payment which was not applied to Supplemental Interest Payments on that
Distribution Date or on the prior two Distribution Dates.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage Loan, as
of any date of determination, a per annum rate of interest equal to the then
applicable Mortgage Rate for such Mortgage Loan minus the Administrative Fee
Rate.
"▇▇▇▇▇▇ ▇▇▇": Federal National Mortgage Association or any successor
thereto.
"FDIC": Federal Deposit Insurance Corporation or any successor thereto.
13
"Fixed Rate Mortgage Loan": A first lien Mortgage Loan which provides
for a fixed Mortgage Rate payable with respect thereto. The Fixed Rate Mortgage
Loans are identified as such on the Mortgage Loan Schedule.
"Foreclosure Profit": With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Mortgage Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
"Formula Rate": For any Distribution Date and the Class A-1
Certificates and the Mezzanine Certificates, LIBOR plus the related Certificate
Margin.
"▇▇▇▇▇▇▇ Mac": The Federal Home Loan Mortgage Corporation, or any
successor thereto.
"Funding Period": The period beginning on the Closing Date and ending
on the earlier to occur of the date upon which (a) the amount on deposit in the
Pre-Funding Account (exclusive of investment income) has been reduced to less
than $10,000 or (b) December 28, 2000.
"Gross Margin": With respect to each Adjustable Rate Mortgage Loan, the
fixed percentage set forth in the related Mortgage Note that is added to the
Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Mortgage Loan.
"Independent": When used with respect to any specified Person, any such
Person who (a) is in fact independent of the Depositor, the Servicer and their
respective Affiliates, (b) does not have any direct financial interest in or any
material indirect financial interest in the Depositor or the Servicer or any
Affiliate thereof, and (c) is not connected with the Depositor or the Servicer
or any Affiliate thereof as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of the Depositor or the
Servicer or any Affiliate thereof merely because such Person is the beneficial
owner of 1% or less of any class of securities issued by the Depositor or the
Servicer or any Affiliate thereof, as the case may be.
"Index": With respect to each Adjustable Rate Mortgage Loan and with
respect to each related Adjustment Date, the index as specified in the related
Mortgage Note.
"Initial Certificate Principal Balance": With respect to any Regular
Certificate (other than a Class AIO or a Class P Certificate), the amount
designated "Initial Certificate Principal Balance" on the face thereof.
"Initial Mortgage Loan": Any of the Mortgage Loans included in the
Trust Fund as of the Closing Date. The aggregate principal balance of the
Initial Mortgage Loans as of the Closing Date is equal to $188,723,314.17.
14
"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan which are required to be remitted to
the Servicer, including MI Insurance Proceeds in the case of Mortgage Loans
covered under a MI Policy, or amounts required to be paid by the Servicer
hereunder, net of any component thereof (i) covering any expenses incurred by or
on behalf of the Servicer in connection with obtaining such proceeds, (ii) that
is applied to the restoration or repair of the related Mortgaged Property or
(iii) released to the Mortgagor in accordance with the Servicer's normal
servicing procedures.
"Interest Coverage Account": The account established and maintained
pursuant to Section 4.06 , as defined therein, which must be an Eligible
Account.
"Interest Coverage Amount": The amount to be paid by the Depositor to
the Certificate Administrator for deposit in the Interest Coverage Account on
the Closing Date pursuant to Section 4.06, which amount is $200,000.
"Interest Determination Date": With respect to each Accrual Period, the
second LIBOR Business Day preceding the commencement of such Accrual Period.
"Interest Remittance Amount": With respect to any Distribution Date,
that portion of the REMIC Available Funds for such Distribution Date allocable
to interest and Prepayment Charges.
"Interest Remittance Formula Amount": As of any Distribution Date is an
amount equal to (1) the product of (x) 1/12 of the Weighted Average Mortgage
Rate of the Mortgage Pool as of the beginning of the prior Due Period and (y)
the aggregate Principal Balances of the Mortgage Loans as of the beginning of
the prior Due Period minus (2) the aggregate amount of Relief Act Shortfalls and
Prepayment Interest Shortfalls for the prior period.
"LIBOR": With respect to any Accrual Period, the rate determined by the
Certificate Administrator on the related Interest Determination Date on the
basis of the offered rates of the Reference Banks for one-month United States
dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00
a.m. (London time) on such Interest Determination Date. If such rate does not
appear on Telerate Page 3750, the rate for that day will be determined on the
basis of the rates at which deposits in United States dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on that day to prime
banks in the London interbank market for a period equal to the relevant Accrual
Period (commencing on the first day of such Accrual Period). The Certificate
Administrator will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that day
will be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Certificate Administrator, at approximately 11:00 a.m., New York
City time, on that day for loans in United States dollars to leading European
banks for a period equal to the relevant Accrual Period (commencing on the first
day of such Accrual Period).
15
The establishment of LIBOR on each Interest Determination Date by the
Certificate Administrator and the Certificate Administrator's calculation of the
rate of interest applicable to the Certificates for the related Accrual Period
shall (in the absence of manifest error) be final and binding.
"LIBOR Business Day": Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York or in the city
of London, England are required or authorized by law to be closed.
"Lifetime Rate Cap": With respect to each Adjustable Rate Mortgage Loan
with respect to which the related Mortgage Note provides for a lifetime rate
cap, the maximum Mortgage Rate permitted over the life of such Mortgage Loan
under the terms of such Mortgage Note, as set forth on the Mortgage Loan
Schedule.
"Liquidated Mortgage Loan": With respect to any Distribution Date, any
Mortgage Loan in respect of which the Servicer has determined, in accordance
with the servicing procedures specified in Article III hereof, as of the end of
the related Prepayment Period that substantially all Liquidation Proceeds which
it reasonably expects to recover with respect to the disposition of the related
Mortgaged Property or REO Property have been recovered.
"Liquidation Expenses": Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses, including, without limitation, legal fees and expenses, any
unreimbursed amount expended respecting the related Mortgage Loan and any
related and unreimbursed expenditures for real estate property taxes or for
property restoration, preservation or insurance against casualty loss or damage.
"Liquidation Proceeds": Proceeds (including Insurance Proceeds)
received in connection with the liquidation of any Mortgage Loan or related REO
Property.
"Loan-to-Value Ratio": With respect to any Mortgage Loan, as of any
date of determination, a fraction expressed as a percentage, the numerator of
which is the then current principal amount of the Mortgage Loan, and the
denominator of which is the lesser of the purchase price or the Appraised Value
of the related Mortgaged Property.
"Loan Year": With respect to any Mortgage Loan, the one year period
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.
"Lower-Tier Balance": As to each Class of Lower-Tier Interests and any
Distribution Date, the Initial Lower-Tier Balance as set forth in Section
2.09(b) minus all amounts distributed as principal of such Class on previous
Distribution Dates.
"Lower-Tier Interest 1": The interest of that name established pursuant
to Section 2.09(b) hereof.
"Lower-Tier Interest 2": The interest of that name established pursuant
to Section 2.09(b) hereof.
16
"Lower-Tier Interest 3": The interest of that name established pursuant
to Section 2.09(b) hereof.
"Lower-Tier Interest 4": The interest of that name established pursuant
to Section 2.09(b) hereof.
"Lower-Tier Interest 5": The interest of that name established pursuant
to Section 2.09(b) hereof.
"Lower-Tier Interest 6": The interest of that name established pursuant
to Section 2.09(b) hereof.
"Lower-Tier Pass-Through Rate": As to each of the respective Lower-Tier
Interests, the applicable "Lower-Tier Pass-Through Rate" set forth in Section
2.09(b) hereof.
"Lower-Tier REMIC": The segregated pool of assets consisting of the
Mortgage Loans, the Accounts (other than the Non-REMIC Accounts), any REO
Property and any proceeds of the foregoing.
"Lower-Tier REMIC Interests": As defined in Section 2.09(b) hereof.
"Lower-Tier REMIC Regular Interests": As defined in Section 2.09(b)
hereof.
"Majority Certificateholders": The Holders of Certificates evidencing
at least 51% of the Voting Rights.
"Maximum Collateral Amount": The sum of the Principal Balance as of the
Cut-off Date of the Initial Mortgage Loans and the Principal Balance of each
Subsequent Mortgage Loan as of its respective Subsequent Cut-Off Date.
"Maximum Mortgage Rate": With respect to each Adjustable Rate Mortgage
Loan, the percentage set forth in the related Mortgage Note as the maximum
Mortgage Rate thereunder.
"Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate or Class M-3 Certificate.
"MI Insurance Agreement": A private mortgage insurance agreement issued
by the MI Insurer pursuant to which MI Policies are issued on individual
Mortgage Loans.
"MI Insurance Proceeds": Proceeds paid by the MI Insurer pursuant to an
MI Policy.
"MI Insurer": PMI Mortgage Insurance Co., an Arizona mortgage insurance
company, and its successors and assigns.
"MI Insurer Insolvency Event": (A) The determination by the applicable
regulatory or supervisory agency having jurisdiction over the MI Insurer that
such MI Insurer is
17
insolvent or unable to pay its obligations as they mature, (B) following the
failure of the MI Insurer to pay any claim under the related MI Policy, the
determination by the Servicer that such MI Insurer is insolvent or unable to
pay its obligations as they become due, (C) the long-term rating on the claims
paying ability of the MI Insurer shall be lowered by Moody's below A-2, if such
MI Insurer is then rated by Moody's, or shall be lowered by S&P below AA, if
such MI Insurer is then rated by S&P.
"MI Policy": A private mortgage insurance policy underwritten by the MI
Insurer with respect to an individual Mortgage Loan, issued pursuant to the MI
Insurance Agreement.
"MI Premium": The primary mortgage insurance premium for each MI
Policy, payable annually to an MI Insurer, as specified in the MI Insurance
Agreement, and with respect to each monthly premium payment, 1/12 of the annual
premium.
"Minimum Mortgage Rate": With respect to each Adjustable Rate Mortgage
Loan, the percentage set forth in the related Mortgage Note as the minimum
Mortgage Rate thereunder.
"Monthly Payment": With respect to any Mortgage Loan (including any REO
Property) and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization schedule at the time applicable thereto (after
adjustment, if any, for partial Principal Prepayments and for Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than a Deficient
Valuation, or similar proceeding or any moratorium or similar waiver or grace
period).
"Moody's": ▇▇▇▇▇'▇ Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate or fee simple interest in real property securing a
Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan Schedule": With respect to any date, the schedule of
Mortgage Loans subject to this Agreement on such date. The schedule of Initial
Mortgage Loans as of the Cut-off Date is the schedule set forth in Exhibit B
hereto and the schedule or schedules of Subsequent Mortgage Loans, if any, as of
the Subsequent Cut-off Date, which schedules set forth as to each Mortgage Loan
(i) the loan number and name of the Mortgagor;
(ii) ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ and zip code of the Mortgaged
Property;
(iii) the Mortgage Rate at origination;
(iv) with respect to an Adjustable Rate Mortgage Loan, the Maximum Rate
and the Minimum Rate;
18
(v) the maturity date;
(vi) the original principal balance;
(vii) the first Distribution Date;
(viii) the type of Mortgaged Property;
(ix) the Monthly Payment in effect as of the Cut-off Date (with respect
to an Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a
Subsequent Mortgage Loan);
(x) the Principal Balance as of the Cut-off Date (with respect to an
Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a Subsequent
Mortgage Loan);
(xi) with respect to an Adjustable Rate Mortgage Loan, the Index, the
Gross Margin; the Lifetime Rate Cap and the Periodic Rate Cap;
(xii) with respect to an Adjustable Rate Mortgage Loan, the first
Adjustment Date and next Adjustment Date, if any;
(xiii) with respect to an Adjustable Rate Mortgage Loan, the Adjustment
Date frequency and Distribution Date frequency;
(xiv) the occupancy status;
(xv) the purpose of the Mortgage Loan;
(xvi) the Appraised Value of the Mortgaged Property;
(xvii) the original term to maturity;
(xviii) the paid-through date of the Mortgage Loan;
(xix) the Loan-to-Value Ratio;
(xx) whether the Mortgage Loan is an Adjustable Rate Mortgage Loan or a
Fixed Rate Mortgage Loan;
(xxi) whether or not the Mortgage Loan was underwritten pursuant to a
limited documentation program;
(xxii) whether or not the Mortgage Loan is a Convertible Mortgage Loan;
and
(xxiii) whether the Mortgage Loan is covered by an MI Policy.
The Mortgage Loan Schedule shall set forth the total of the amounts
described under (x) above for all of the Mortgage Loans.
19
"Mortgage Loans": At any time, collectively, all Mortgage Loans that
have been transferred and conveyed to the Trust, in each case together with the
Related Documents, and that remain subject to the terms of the Agreement. As
applicable, Mortgage Loan shall be deemed to refer to the related REO Property
and both Initial Mortgage Loans and Subsequent Mortgage Loans.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Rate": With respect to any Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on Exhibit B
from time to time, and any REO Properties acquired in respect thereof and as
supplemented by any Subsequent Mortgage Loans identified on each schedule of
Subsequent Mortgage Loans attached to a Subsequent Transfer Instrument.
"Mortgaged Property": The underlying property, including real property
and improvements thereon, securing a Mortgage Loan.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses.
"Net Mortgage Rate": With respect to any Mortgage Loan and any day, the
related Mortgage Rate less the Administrative Fee Rate.
"NFI": NovaStar Financial, Inc., a Maryland corporation, and its
successors and assigns.
"Non-REMIC Accounts" The Supplemental Interest Account, the Pre-Funding
Account and the Interest Coverage Account.
"Nonrecoverable Advance": With respect to any Mortgage Loan, any
Advance (i) which was previously made or is proposed to be made by the Servicer;
and (ii) which, in the good faith judgment of the Servicer, will not or, in the
case of a proposed Advance, would not, be ultimately recoverable by the Servicer
from Liquidation Proceeds, Repurchase Price or future payments on such Mortgage
Loan.
"Notional Principal Amount": For purposes of calculating original issue
discount ("OID"), with respect to the Class AIO Certificates, initially
$340,000,000, and with respect to the Class P Certificates, initially
$340,000,000.
"NRFC": NovaStar REMIC Financing Corporation, a Delaware corporation,
and its successors and assigns.
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"Offered Certificates": Collectively, the Class A-1 Certificates, the
Class AIO Certificates, the Mezzanine Certificates and the Class P Certificates.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or any vice president
(however denominated), and by the Treasurer, the Secretary, or any assistant
treasurer or assistant secretary of the applicable Person.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be a salaried counsel for the Depositor or the Servicer, acceptable
to the Certificate Administrator, except that any opinion of counsel relating to
(a) the qualification of any REMIC as a REMIC or (b) compliance with the REMIC
Provisions which must be an opinion of Independent counsel.
"Optional Termination Date": The first Distribution Date on which the
Servicer may opt to terminate the Trust Fund pursuant to Section 11.01.
"Original Pre-Funded Amount": The amount deposited by the Depositor in
the Pre-Funding Account on the Closing Date, which amount is $151,726,685.83.
"Original Value": Except in the case of a refinanced Mortgage Loan, the
lesser of the Appraised Value or sales price of Mortgaged Property at the time a
Mortgage Loan is closed, and for a refinanced Mortgage Loan, the Original Value
is the value of such property set forth in an appraisal acceptable to the
Servicer.
"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.
"Paying Agent": Any paying agent appointed pursuant to Section 5.05.
"Payment Account": The trust account or accounts created and maintained
by the Trustee or the Certificate Administrator pursuant to Section 4.02 hereof,
which must be an Eligible Account.
"Percentage Interest": With respect to any Underwritten Certificate, a
fraction, expressed as a percentage, the numerator of which is the Initial
Certificate Principal Balance represented by such Certificate and the
denominator of which is the Initial Certificate Principal Balance of the related
Class. With respect to a Class AIO Certificate, Class P Certificate, Class O
Certificate or Residual Certificate, the portion of the Class evidenced thereby,
expressed as a percentage, as stated on the face of such Certificate; provided,
however, that the sum of all such percentages for each such Class totals 100%.
"Periodic Rate Cap": With respect to each Adjustable Rate Mortgage Loan
and any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on
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such Adjustment Date from the Mortgage Rate in effect immediately prior to such
Adjustment Date.
"Permitted Transferee": Any transferee of a Residual Certificate other
than a Disqualified Organization or a non-U.S. Person.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan": Any employee benefit plan or certain other retirement plans and
arrangements, including individual retirement accounts and annuities, ▇▇▇▇▇
plans and bank collective investment funds and insurance company general or
separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA or Section 4975 of the Code.
"Pool Balance": As of any date of determination, the aggregate unpaid
principal balance of the Mortgage Loans as of such date.
"Pre-Funded Amount": With respect to any date of determination, the
amount on deposit in the Pre-Funding Account.
"Pre-Funding Account": The account established and maintained pursuant
to Section 4.05, as defined herein, and which must be an Eligible Account.
"Prepayment Assumption": As defined in the Prospectus Supplement.
"Prepayment Charge": With respect to any Mortgage Loan, the charges or
premiums, if any, due in connection with a full or partial prepayment of such
Mortgage Loan in accordance with the terms thereof.
"Prepayment Interest Shortfall": As to any Distribution Date and any
Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that was
the subject of (a) a Principal Prepayment in full during the related Prepayment
Period, an amount equal to the excess of interest accrued during the related
Prepayment Period at the Mortgage Rate (net of the Servicing Fee) on the
Principal Balance of such Mortgage Loan over the amount of interest (adjusted to
the Mortgage Rate (net of the Servicing Fee)) paid by the Mortgagor for such
Prepayment Period to the date of such Principal Prepayment in full or (b) a
partial Principal Prepayment during the prior calendar month, an amount equal to
interest accrued during the related Prepayment Period at the Mortgage Rate (net
of the Servicing Fee) on the amount of such partial Prepayment.
"Prepayment Period": As to any Distribution Date, the calendar month
preceding the month of such Distribution Date.
"Principal Balance": With respect to any Mortgage Loan or related REO
Property, at any given time, (i) the Principal Balance of the Mortgage Loan as
of the Cut-off Date or Subsequent Cut-off Date, as applicable, minus (ii) the
sum of (a) the principal portion of
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the Monthly Payments due with respect to such Mortgage Loan or REO Property
during each Due Period ending prior to the most recent Distribution Date which
were received or with respect to which an Advance was made, and (b) all
Principal Prepayments with respect to such Mortgage Loan or REO Property, and
all Insurance Proceeds, Liquidation Proceeds and REO Proceeds, to the extent
applied by the Servicer as recoveries of principal in accordance with Section
3.13 hereof with respect to such Mortgage Loan or REO Property, and (c) the
principal portion of any Realized Loss with respect thereto for any previous
Distribution Date.
"Principal Prepayment": Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.
"Principal Remittance Amount": With respect to any Distribution Date,
the sum of (i) each scheduled payment of principal collected or advanced on the
Mortgage Loans by the Servicer that were due during the related Due Period, (ii)
the principal portion of all partial and full principal prepayments of the
Mortgage Loans applied by the Servicer during the related Prepayment Period,
(iii) the principal portion of all related Net Liquidation Proceeds and
Insurance Proceeds received during such Prepayment Period, (iv) that portion of
the Repurchase Price, representing principal of any repurchased Mortgage Loan,
deposited to the Collection Account during such Prepayment Period, (v) the
principal portion of any related Substitution Adjustment Amounts deposited in
the Collection Account during such Prepayment Period, (vi) in the case of the
Distribution Date immediately following the end of the Funding Period, any
amount remaining in the Pre-Funding Account not used by the Trustee to purchase
Subsequent Mortgage Loans and (vii) on the Distribution Date on which the Trust
Fund is to be terminated pursuant to Section 11.01, that portion of the
Termination Price, in respect of principal.
"Prospectus": The Prospectus Supplement together with the Base
Prospectus attached thereto with respect to the Offered Certificates.
"Prospectus Supplement": That certain Prospectus Supplement dated
September 22, 2000 relating to the public offering of the Offered Certificates.
"Purchase Agreement": The agreement, dated as of September 1, 2000,
between the Seller, the Transferor, the Trustee, the Certificate Administrator
and the Depositor, regarding the transfer of the Mortgage Loans by the Seller to
or at the direction of the Depositor.
"Qualified Liquidation": The meaning set forth from time to time in the
definition thereof at Section 860F(a)(3) of the Code and applicable to the
Trust.
"Qualified Mortgage": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code and applicable to the
Trust.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.01 of the Purchase Agreement and that satisfies
all of the criteria set forth from time to time in the definition thereof at
Section 860G(a)(4) of the Code and applicable to the Trust, all as evidenced by
an Officer's Certificate of the Seller delivered to the Certificate
Administrator on behalf of the Trustee prior to any such substitution.
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"Rate Stepup Date": The first Distribution Date to occur after the
Optional Termination Date has occurred.
"Rating Agency": Any nationally recognized statistical rating
organization, or its successor, that rated the Offered Certificates at the
request of the Depositor at the time of the initial issuance of the Offered
Certificates. Initially such rating agencies shall consist of Moody's and
Standard & Poor's. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Depositor,
notice of which designation shall be given to the Certificate Administrator and
the Trustee. References herein to the highest short-term unsecured rating
category of a Rating Agency shall mean A-1 or better in the case of Standard &
Poor's and P-1 or better in the case of Moody's and in the case of any other
Rating Agency shall mean such equivalent rating. References herein to the
highest long-term rating category of a Rating Agency shall mean "AAA" in the
case of Standard & Poor's and "Aaa" in the case of Moody's and in the case of
any other Rating Agency, such equivalent rating.
"Realized Loss": With respect to each Mortgage Loan (or REO Property)
as to which a Cash Liquidation or REO Disposition has occurred, an amount (not
less than zero) equal to (i) the Principal Balance of the Mortgage Loan (or REO
Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Certificateholders up
to the last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) Net Liquidation Proceeds (after giving effect to coverage provided
by any MI policy), if any, received with respect to such Cash Liquidation (or
REO Disposition), minus the portion thereof reimbursable to the Servicer or any
Subservicer with respect to related Advances or expenses as to which the
Servicer or Subservicer is entitled to reimbursement thereunder but which have
not been previously reimbursed. With respect to each Mortgage Loan which has
become the subject of a Deficient Valuation, the difference between the
principal balance of the Mortgage Loan outstanding immediately prior to such
Deficient Valuation and the principal balance of the Mortgage Loan as reduced by
the Deficient Valuation. With respect to each Mortgage Loan which has become the
object of a Debt Service Reduction, the amount of such Debt Service Reduction.
"Record Date": With respect to each Distribution Date, the Close of
Business on the Business Day immediately preceding the related Distribution
Date.
"Reference Banks": Deutsche Bank, ▇▇▇▇▇▇▇'▇ Bank PLC, The Bank of
Tokyo-Mitsubishi, LTD. and National Westminster Bank PLC and their successors in
interest; provided that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Certificate
Administrator which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Seller or any Affiliate thereof, (iii) whose quotations appear on the
Reuters Screen LIBO Page on the relevant Interest Determination Date and (iv)
which have been designated as such by the Certificate Administrator.
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"Regular Certificate": Any of the Class A-1 Certificates, Mezzanine
Certificates, Class AIO Certificates, Class O Certificates or Class P
Certificates.
"Related Documents": With respect to each Mortgage Loan, the documents
specified in Section 2.01 hereof and any documents required to be added to such
documents pursuant to this Agreement, the Purchase Agreement or any Subsequent
Transfer Instrument.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Relief Act Shortfall": As to any Distribution Date and any Mortgage
Loan (other than a Mortgage Loan relating to an REO Property), any shortfalls
relating to the Relief Act or similar legislation or regulations.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
"REMIC Available Funds": As to each Distribution Date, an amount equal
to the amount on deposit in the Payment Account, representing the sum of (i) the
aggregate amount of scheduled payments on the related Mortgage Loans due on the
related Due Date and received on or prior to the related Determination Date,
(ii) miscellaneous fees and collections, including prepayment penalties with
respect to the Mortgage Loans (but excluding late fees), (iii) any unscheduled
payments and receipts, including Mortgagor prepayments on the related Mortgage
Loans, received during the related Prepayment Period and proceeds of
repurchases, and adjustments in the case of substitutions and terminations, Net
Liquidation Proceeds, Insurance Proceeds, MI Insurance Proceeds and proceeds
from the sale of Converted Mortgage Loans, (iv) all Advances made for such
Distribution Date in respect of the related Mortgage Loans, (v) on the
Distribution Date relating to the Due Period in which the termination of the
Funding Period occurred, the amount on deposit in the Pre-Funding Account with
respect to such Class at such time, and (vi) on each Payment Date on or prior to
the Distribution Date in December 2000, the amount, if any, withdrawn from the
Interest Coverage Account for such Class.
"REMIC Available Funds Cap Rate": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is equal
to the Interest Remittance Formula Amount for that Distribution Date less the
Administrative Fees for that Distribution Date, and the denominator of which is
the product of (1) the actual number of days in the related Accrual Period,
divided by 360 and (2) the aggregate Certificate Principal Balances of the
Underwritten Certificates immediately prior to such Distribution Date.
"REMIC Available Funds Cap Shortfall Amount": With respect to any
Distribution Date and Class of Underwritten Certificates, the excess, if any, of
(1) the interest due on such Class calculated using the Formula Rate applicable
to such Class (less any Prepayment Interest Shortfalls and Relief Act Shortfalls
allocable to that Class) over (2) the interest due on such Class, calculated
using the REMIC Pass-Through Rate applicable to such Class (less any Prepayment
Interest Shortfalls and Relief Act Shortfalls allocable to that Class).
"REMIC Current Interest": For any Distribution Date and each Class of
Underwritten Certificates, the amount of interest accrued during the related
Accrual Period at the related REMIC Pass-through Rate on the Certificate
Principal Balance of such Class
25
immediately prior to such Distribution Date, in each case, reduced by any
Prepayment Interest Shortfalls and any Relief Act Shortfalls allocated to that
class (allocated to each Certificate based on its respective entitlements to
interest irrespective of any Prepayment Interest Shortfalls or Relief Act
Shortfalls for that Distribution Date).
"REMIC Interests Sale Agreement": The REMIC Interests Sale Agreement,
dated as of September 28, 2000, between the Transferor and NRFC.
"REMIC Monthly Interest Distributable Amount": For any Distribution
Date and any Class of Underwritten Certificates, the sum of (1) the Unpaid
Interest Shortfall Amount for that Class and Distribution Date and (2) the REMIC
Current Interest for that Class and Distribution Date. In the event of a
shortfall in the full amount necessary to pay both the Unpaid Interest Shortfall
Amount and the REMIC Current Interest for a Class, the money will first be
applied to the Unpaid Interest Shortfall Amount and then to the REMIC Current
Interest.
"REMIC Pass-Through Rate": With respect to the Underwritten
Certificates (other than the Class AIO Certificates) and any Distribution Date,
the lesser of (x) the related Formula Rate for such Distribution Date and (y)
the REMIC Available Funds Cap Rate for such Distribution Date.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.
"REMIC Regular Interests": The Lower-Tier REMIC Regular Interests and
the Upper-Tier REMIC Regular Interests.
"REMIC Trust": The segregated pool of assets containing of the Trust
Fund, but excluding the Non-REMIC Accounts.
"REO Acquisition": The acquisition by the Servicer on behalf of the
Trustee for the benefit of the Certificateholders of any REO Property pursuant
to Section 3.13 hereof.
"REO Disposition": As to any REO Property, a determination by the
Servicer that it has received substantially all Insurance Proceeds, Liquidation
Proceeds, REO Proceeds and other payments and recoveries (including proceeds of
a final sale) which the Servicer expects to be finally recoverable from the sale
or other disposition of the REO Property.
"REO Imputed Interest": As to any REO Property, for any period, an
amount equivalent to interest (at the Net Mortgage Rate that would have been
applicable to the related Mortgage Loan had it been outstanding net, with
respect to a negative amortization loan, of amounts that would have been
Deferred Interest, if any) on the unpaid principal balance of the Mortgage Loan
as of the date of acquisition thereof for such period as such balance is reduced
pursuant to Section 3.13 hereof by any income from the REO Property treated as a
recovery of principal and with respect to a negative amortization loan, as such
balance is increased by the addition of Deferred Interest.
26
"REO Proceeds": Proceeds, net of expenses, received in respect of any
REO Property (including, without limitation, proceeds from the rental of the
related Mortgaged Property), which proceeds are required to be deposited into
the Collection Account within two days of receipt by the Servicer.
"REO Property": A Mortgaged Property that is acquired by the Trust by
foreclosure or by deed in lieu of foreclosure.
"Repurchase Event": With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date the related Mortgage was not a valid lien
on the related Mortgaged Property subject only to (A) the lien of real property
taxes and assessments not yet due and payable, (B) covenants, conditions, and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage and such other permissible title
exceptions as are permitted and (C) other matters to which like properties are
commonly subject which do not materially adversely affect the value, use,
enjoyment or marketability of the related Mortgaged Property or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit
certifying that the original Mortgage Note has been lost or destroyed, a
subsequent default on such Mortgage Loan if the enforcement thereof or of the
related Mortgage is materially and adversely affected by the absence of such
original Mortgage Note.
"Repurchase Price": With respect to any Mortgage Loan (i) required to
be repurchased on any date by the Seller pursuant to the Purchase Agreement,
(ii) permitted to be purchased by the Servicer pursuant to Article III hereof or
(iii) required to be purchased by the Converted Loan Purchaser pursuant to the
Converted Loan Purchase Agreement, an amount equal to the sum, without
duplication, of (i) 100% of the Principal Balance thereof (without reduction for
any amounts charged off) and (ii) unpaid accrued interest at the Mortgage Rate
on the outstanding principal balance thereof from the Due Date to which interest
was last paid by the Mortgagor (or with respect to which an Advance was last
made by the Servicer) to the first day of the month following the month of
purchase plus (iii) the amount of any unreimbursed Servicing Advances or
unreimbursed Advances made with respect to such Mortgage Loan plus (iv) any
other amounts owed to the Servicer or the Subservicer pursuant to Section 3.07
hereof and not included in clause (iii) of this definition.
"Request for Release": A request for release in substantially the form
of Exhibit E hereto.
"Residual Certificate": The Class RL Certificates and the Class RU
Certificates.
"Residual Interest": The sole class of "residual interests" in a REMIC
within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": With respect to the Trustee or the Certificate
Administrator, any officer thereof with direct responsibility for the
administration of this Agreement and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Retained Certificates": The Class O Certificates, the Class P
Certificates, the Class R Certificates and the Class AIO Certificates.
27
"Rolling 60-Day Delinquency Percentage": For any Distribution Date, the
average of the 60-Day Delinquency Percentages for the Mortgage Loans as of the
last day of each of the three (or 1 and 2 in the case of the first two
Distribution Dates, as applicable) most recently ended Due Periods.
"Rolling 90-Day Delinquency Percentage": For any Distribution Date, the
average of the 90-Day Delinquency Percentages for the Mortgage Loans as of the
last day of each of the three (or 1 and 2 in the case of the first two
Distribution Dates, as applicable) most recently ended Due Periods.
"Seller": NovaStar Mortgage, Inc., a Virginia corporation, and its
successors and assigns.
"Servicer": NovaStar Mortgage, Inc., a Virginia corporation, and its
successors and assigns.
"Servicer Remittance Date": The third Business Day prior to each
Distribution Date.
"Servicing Account": The separate trust account created and maintained
by the Servicer or each Subservicer with respect to the Mortgage Loans or REO
Property, which shall be an Eligible Account, for collection of taxes,
assessments, insurance premiums and comparable items as described in Section
3.08 hereof.
"Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event in the performance by the Servicer of its servicing
obligations, including, without duplication, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.13 hereof.
"Servicing Default": The meaning assigned in Section 7.01 hereof.
"Servicing Fee": With respect to the Mortgage Loans and any
Distribution Date, the product of (i) the Servicing Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such Distribution Date.
"Servicing Fee Rate": With respect to any Mortgage Loan, 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 Certificate Administrator by the Servicer or a Subservicer, as such list may
be amended from time to time.
"Servicing Transfer Costs": Reasonable and necessary costs and expenses
incurred, by or on behalf of the Trustee, Certificate Administrator or successor
Servicer in
28
connection with the transfer of servicing in the event of termination of the
Servicer as servicer hereunder and the resulting transfer to the successor
Servicer.
"Side Indemnity Letter": The Side Indemnity Letter dated September 28,
2000 among the Depositor, the Seller and NFI.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc., or its successor in interest.
"Startup Day": As defined in Section 10.01(b) hereof.
"Subsequent Cut-off Date": With respect to those Subsequent Mortgage
Loans which are sold to the Trust pursuant to a Subsequent Transfer Instrument,
the first day of the month in which the Subsequent Transfer Date occurs.
"Subsequent Mortgage Loan": A Mortgage Loan sold by the Depositor to
the Trust Fund pursuant to Section 2.08, such Mortgage Loan being identified on
the Mortgage Loan Schedule attached to a Subsequent Transfer Instrument.
"Subsequent Transfer Date": With respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Mortgage Loans are sold to
the Trust Fund.
"Subsequent Transfer Instrument": Each Subsequent Transfer Instrument,
dated as of a Subsequent Transfer Date, executed by the Trustee and the
Depositor substantially in the form attached hereto as Exhibit D, by which
Subsequent Mortgage Loans are transferred to the Trust Fund.
"Sub-Servicer": Any Person with which either Servicer has entered into
a Subservicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02 hereof.
"Subservicing Account": An account established by a Sub-Servicer which
meets the requirements set forth in Section 3.06(e) and is otherwise acceptable
to the applicable Servicer.
"Subservicing Agreement": The written contract between either Servicer
and a Sub-Servicer relating to servicing and administration of certain Mortgage
Loans as provided in Section 3.02 hereof.
"Subservicing Fee": With respect to each Mortgage Loan and any
Distribution Date, the portion of the Servicing Fee paid to a Subservicer.
"Substitution Adjustment Amount": As defined in Section 2.03 hereof.
"Supplemental Interest Account": The reserve fund established and
maintained pursuant to Section 4.04.
29
"Supplemental Interest Amount Due": With respect to any Class of
Underwritten Certificates and any Distribution Date, the sum of (x) the REMIC
Available Funds Cap Shortfall Amount for such Class of Certificates and such
Payment Date and (y) the Available Funds Cap Carryforward Amount for such Class
and Distribution Date.
"Supplemental Interest Payment": With respect to any Distribution Date:
(i) for the Class A-1 Certificates, the lesser of (x) the Supplemental
Interest Amount Due for the Class A-1 Certificates and (y) the Total
Supplemental Interest Payment Amount Available for that Distribution Date;
(ii) for the Class M-1 Certificates, the lesser of (x) the Supplemental
Interest Amount Due for the Class M-1 Certificates and (y) any portion of the
Total Supplemental Interest Payment Amount Available not applied to the payment
of the Supplemental Interest Payment Amount for the Class A-1 Certificates on
that Distribution Date;
(iii) for the Class M-2 Certificates, the lesser of (x) the
Supplemental Interest Amount Due for the class M-2 Certificates and (y) any
portion of the Total Supplemental Interest Payment Amount Available not applied
to the payment of the Supplemental Interest Amount Due for the Class A-1 and the
Class M-1 Certificates on that Distribution Date; and
(iv) for the Class M-3 Certificates, the lesser of (x) the Supplemental
Interest Payment Amount Due for the Class M-3 Certificates and (y) any portion
of the Total Supplemental Interest Payment Amount Available not applied to the
payment of the Supplemental Interest Amounts Due for the Class A-1, Class M-1
and Class M-2 Certificates on that Distribution Date.
"Tax Matters Person": The tax matters person appointed pursuant to
Section 10.01(e) hereof.
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed by the Certificate Administrator, as agent of the Trustee, on
behalf of each REMIC, together with any and all other information reports or
returns that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 11.01(a) hereof.
"Telerate Page 3750": The display page currently so designated on the
Dow ▇▇▇▇▇ Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices) and "Reference
Banks" means leading banks selected by the Certificate Administrator and engaged
in transactions in European deposits in the international Eurocurrency market.
30
"Total Supplemental Interest Payment Amount Available": With respect to
any Distribution Date, the sum of (i) the Class AIO Current Interest for that
Payment Date and (ii) the Allocable Cap Payment Amount of each Cap Payment
previously received by the Trust.
"Transferor": NovaStar Mortgage Funding Corporation III, a Delaware
corporation, and its successors and assigns.
"Treasury Regulations": Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trigger Event": A Trigger Event is in effect with respect to any
Distribution Date if the Rolling 60-Day Delinquency Percentage calculated with
respect to that Distribution Date exceeds 14% of the current Principal Balance
of the Mortgage Loans.
"Trust": NovaStar Mortgage Funding Trust 2000-2, the trust created
hereunder.
"Trust Fund": All of the assets of the Trust, which is the trust
created hereunder consisting of the Lower-Tier REMIC, the Upper-Tier REMIC, the
Interest Coverage Account, the Pre-Funding Account, the Supplemental Interest
Account and the Cap Agreements.
"Trustee": The Chase Manhattan Bank, a New York banking corporation,
and its successors and assigns or any successor Agreement trustee appointed
pursuant to the terms of the Agreement.
"Trustee Fee": With respect to each Distribution Date, the product of
(i) the Trustee Fee Rate divided by 12 and (ii) the sum of the Principal Balance
of the Mortgage Loans and the Pre-Funded Amount as of such date, which fee shall
be payable from the Certificate Administrator Fee.
"Trustee Fee Rate": 0.004% per annum.
"Underwriter": First Union Securities, Inc. and its successors and
assigns.
"Underwriting Agreement": The Underwriting Agreement dated as of
September 28, 2000 between the Underwriter and the Depositor with respect to the
offer and sale of the Class A-1 Certificates and the Mezzanine Certificates, as
the same may be amended from time to time.
"Underwriting Guidelines": The underwriting guidelines set forth in the
Prospectus Supplement under the heading "Description of the Mortgage
Pool--Underwriting Standards for Mortgage Loans".
"Underwritten Certificates" means, collectively, the Class A-1 and
Mezzanine Certificates.
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"United States Person" or "U.S. Person": A citizen or resident of the
United States, a corporation, partnership or other entity treated as a
corporation or partnership for federal income tax purposes (other than a
partnership that is not treated as a U.S. Person pursuant to any applicable
Treasury regulations) created or organized in, or under the laws of, the United
States, any state thereof or the District of Columbia, or an estate the income
of which from sources without the United States is includible in gross income
for United States federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, or a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have authority
to control all substantial decisions of the trust. The term "United States"
shall have the meaning set forth in Section 7701 of the Code.
"Unpaid Interest Shortfall Amount": With respect to each Class of
Underwritten Certificates and (i) the first Distribution Date, zero, and (ii)
any Distribution Date after the first Distribution Date, the sum of (a) the
Unpaid Interest Shortfall Amount for that Class as of the prior Distribution
Date, (b) the excess of the amount of the REMIC Current Interest due with
respect to that Class on the prior Distribution Date over the amount actually
distributed to the Holders of that Class on account of the REMIC Current
Interest on the prior Distribution Date and (c) interest on the sum of (a) and
(b) to the extent permitted by law, at the Formula Rate for such Class for the
related Accrual Period.
"Upper-Tier REMIC": The REMIC established pursuant to Section 2.09
hereof. The assets of the Upper-Tier REMIC shall be the Lower-Tier REMIC Regular
Interests.
"Upper-Tier REMIC Regular Interests": As defined in Section 2.09(c)
hereof.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. At all times the Class A-1
Certificates and the Mezzanine Certificates shall have 96% of the Voting Rights
(allocated among the Holders of the Class A-1 Certificates and the Mezzanine
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates), the Class AIO Certificates shall
have 1% of the Voting Rights, the Class O Certificates shall have 1% of the
Voting Rights, the Class P Certificates shall have 1% of the Voting Rights and
the Class RU Certificates shall have 1% of the Voting Rights. The Voting Rights
allocated to any Class of Certificates (other than the Class AIO Certificates,
Class O Certificates, Class P Certificates and the Class RU Certificates) shall
be allocated among all Holders of each such Class in proportion to the
outstanding Certificate Principal Balance of such Certificates and the Voting
Rights allocated to the Class AIO Certificates, Class O Certificates, Class P
Certificates and the Class RU Certificates shall be allocated among all Holders
of each such Class in proportion to such Holders' respective Percentage
Interest; provided, however that when none of the Regular Certificates are
outstanding, 100% of the Voting Rights shall be allocated among Holders of the
Class RU Certificates in accordance with such Holders' respective Percentage
Interests in the Certificates of such Class.
"Weighted Average Mortgage Rate": With respect to any Distribution
Date, the weighted average of the Mortgage Rates of the Mortgage Loans (weighted
by the Principal Balances of the Mortgage Loans).
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Section 1.02. Accounting.
Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any
related definitions or calculations shall be determined without duplication of
such functions.
Section 1.03. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of the REMIC Monthly Interest
Distributable Amount for the Class A-1 Certificates, the Mezzanine Certificates
and the Class AIO Certificates for any Distribution Date, (1) the aggregate
amount of any Prepayment Interest Shortfalls and any Relief Act Shortfalls
incurred in respect of the Mortgage Loans for any Distribution Date shall be
allocated on a pro rata basis based on, and to the extent of, the gross REMIC
Monthly Interest Distributable Amount for each such Class, among the Class A-1
Certificates, the Mezzanine Certificates and the Class AIO Certificates and (2)
the aggregate amount of any Available Funds Cap Carryforward Amounts incurred
for any Distribution Date shall be allocated to the Class AIO Certificates to
the extent of the gross REMIC Monthly Interest Distributable Amount for that
Class, after deduction of any Prepayment Interest Shortfalls and any Relief Act
Shortfalls.
All Prepayment Interest Shortfalls and Relief Act Shortfalls on the
Lower-Tier REMIC Regular Interests shall be allocated on each Distribution Date
among the Lower-Tier REMIC Regular Interests in the proportion that Prepayment
Interest Shortfalls and Relief Act Shortfalls are allocated to the related
Upper-Tier REMIC regular interests.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans, MI Policies and Cap
Agreements.
The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse for the benefit of the Certificateholders all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to (i) each Initial Mortgage
Loan identified on the Mortgage Loan Schedule, including the related Cut-off
Date Principal Balance, all interest accruing thereon on and after the Cut-off
Date and all collections in respect of interest and principal due after the
Cut-off Date; (ii) property which secured each such Mortgage Loan and which has
been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest
in any insurance policies in respect of the Mortgage Loans; (iv) its interest in
the MI Policies; (v) its interest in the Cap Agreements; (vi) the rights of the
Depositor under the Purchase Agreement; (vii) all other assets included or to be
included in the Trust Fund; and (viii) all proceeds of any of the foregoing.
Such assignment includes all interest and principal due to the Depositor or the
Servicer after the Cut-off Date with respect to the Mortgage Loans.
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In connection with such transfer and assignment, the Seller, on behalf
of the Depositor, does hereby deliver to, and deposit with the Certificate
Administrator, as the Trustee's designated agent, the following documents or
instruments with respect to each Initial Mortgage Loan so transferred and
assigned and the Seller, on behalf of the Depositor, shall, in accordance with
Section 2.09, deliver or caused to be delivered to the Certificate
Administrator, as the Trustee's designated agent, with respect to each
Subsequent Mortgage Loan, the following documents or instruments (with respect
to each Mortgage Loan, a "Mortgage File"):
(i) the original Mortgage Note endorsed to "The Chase Manhattan Bank,
as Trustee pursuant to the Agreement dated as of September 1, 2000,
relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series
2000-2";
(ii) the original Mortgage with evidence of recording thereon, or, if
the original Mortgage has not yet been returned from the public recording
office, a copy of the original Mortgage certified by the Seller or the
public recording office in which such original Mortgage has been recorded;
(iii) an original assignment (which may be included in one or more
blanket assignments if permitted by applicable law) of the Mortgage
endorsed to "The Chase Manhattan Bank, as Trustee pursuant to the Agreement
dated as of September 1, 2000, relating to the NovaStar Home Equity Loan
Asset-Backed Certificates, Series 2000-2", and otherwise in recordable
form;
(iv) originals of any intervening assignments of the Mortgage, with
evidence of recording thereon, or, if the original of any such intervening
assignment has not yet been returned from the public recording office, a
copy of such original intervening assignment certified by the Seller or the
public recording office in which such original intervening assignment has
been recorded;
(v) the original policy of title insurance (or a commitment for title
insurance, if the policy is being held by the title insurance company
pending recordation of the Mortgage);
(vi) with respect to each Mortgage Loan insured by a MI Policy, a
certificate of insurance or other evidence of such MI Policy; and
(vii) a true and correct copy of each assumption, modification,
consolidation or substitution agreement, if any, relating to the Mortgage
Loan.
If a material defect in any Mortgage File is discovered which may
materially and adversely affect the value of the related Mortgage Loan, or the
interests of the Trustee or the Certificateholders in such Mortgage Loan,
including if any document required to be delivered to the Certificate
Administrator has not been delivered (provided that a Mortgage File will not be
deemed to contain a defect for an unrecorded assignment under clause (iii) above
for 180 days following submission of the assignment if the Seller has submitted
such assignment for recording pursuant to the terms of the following paragraph),
the Seller shall cure such defect or repurchase the related Mortgage Loan at the
Repurchase Price or substitute an Eligible Substitute Mortgage Loan for the
related Mortgage Loan upon the same terms and conditions set forth in
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Section 3.01 of the Purchase Agreement as to the Initial Mortgage Loans and the
Subsequent Mortgage Loans and Section 2.02(c) of the Purchase Agreement as to
the Subsequent Mortgage Loans for breaches of representations and warranties.
Promptly after the Closing Date in the case of an Initial Mortgage Loan
or, in the case of a Subsequent Mortgage Loan, promptly after the Subsequent
Transfer Date (or after the date of transfer of any Eligible Substitute Mortgage
Loan), the Seller at its own expense shall complete and submit for recording in
the appropriate public office for real property records each of the assignments
referred to in clause (iii) above, with such assignment completed in favor of
the Trustee. While such assignment to be recorded is being recorded, the
Certificate Administrator shall retain a photocopy of such assignment. If any
assignment is lost or returned unrecorded to the Certificate Administrator
because of any defect therein, the Seller is required to prepare a substitute
assignment or cure such defect, as the case may be, and the Seller shall cause
such substitute assignment to be recorded in accordance with this paragraph.
In instances where an original Mortgage or any original intervening
assignment of Mortgage is not, in accordance with clause (ii) or (iv) above,
delivered by the Seller to the Certificate Administrator, on behalf of the
Trustee, prior to or on the Closing Date in the case of an Initial Mortgage Loan
or, in the case of a Subsequent Mortgage Loan, prior to or on the Subsequent
Transfer Date, the Seller will deliver or cause to be delivered the originals of
such documents to the Certificate Administrator, on behalf of the Trustee,
promptly upon receipt thereof.
Effective on the Closing Date, the Transferor hereby acknowledges its
acceptance of all right, title and interest to the Initial Mortgage Loans and
other property, existing on the Closing Date and thereafter created and conveyed
to it pursuant to this Section 2.01 and the Depositor hereby acknowledges its
acceptance of all right, title and interest to the Initial Mortgage Loans and
other property existing on the Closing Date and thereafter created and conveyed
to it pursuant to this Section 2.01.
The Trustee, as assignee or transferee of the Transferor and the
Depositor, shall be entitled to all scheduled principal payments due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Initial Mortgage Loans. No
scheduled payments of principal due on or before the Cut-off Date and collected
after the Cut-off Date shall belong to the Transferor or the Depositor pursuant
to the terms of the Purchase Agreement. Any late payment charges collected in
connection with a Mortgage Loan shall be paid to the Servicer as provided in
Section 3.15(b) hereof.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Depositor to the Trust on the Closing Date of all the
Depositor's right, title and interest in and to the Initial Mortgage Loans and
other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Depositor
hereby grants to the Trustee as of the Closing Date a security interest in all
of the Depositor's right, title and interest in, to and under the Initial
Mortgage Loans and such other property, to secure all of the Depositor's
obligations hereunder and this Agreement shall constitute a security agreement
under applicable law and in such event, the parties hereto acknowledge that the
Certificate Administrator, in addition to holding the Initial Mortgage Loans on
behalf of the Trustee for the
35
benefit of the Certificateholders, holds the Initial Mortgage Loans as designee
of the Depositor. The Seller agrees to take or cause to be taken such actions
and to execute such documents, including without limitation the filing of all
necessary UCC-1 financing statements filed in the State of Virginia and the
State of Kansas (which shall have been submitted for filing as of the Closing
Date and each Subsequent Transfer Date, as applicable), any continuation
statements with respect thereto and any amendments thereto required to reflect a
change in the name or corporate structure of the Seller or the filing of any
additional UCC-1 financing statements due to the change in the principal office
of the Seller, as are necessary to perfect and protect the interests of the
Transferor, the Depositor and their respective assignees in each Initial
Mortgage Loan and the proceeds thereof and the interests of the Trust and its
assignees in each Subsequent Mortgage Loan and the proceeds thereof.
Section 2.02. Acceptance of Mortgage Loans by Certificate Administrator
on behalf of the Trustee.
(a) The Certificate Administrator, on behalf of the Trustee,
acknowledges receipt of, subject to the review described below and any
exceptions it notes pursuant to the procedures described below, the documents
(or certified copies thereof) referred to in Section 2.01 hereof and declares
that it holds and will continue to hold those documents and any amendments,
replacements or supplements thereto and all other assets of the Trust Fund in
trust for the use and benefit of all present and future Certificateholders. No
later than 45 days after the Closing Date and each Subsequent Transfer Date (or,
with respect to any Eligible Substitute Mortgage Loan, within 5 Business Days
after the receipt by the Certificate Administrator, on behalf of the Trustee,
thereof and, with respect to any documents received beyond 45 days after the
Closing Date, promptly thereafter), the Certificate Administrator, on behalf of
the Trustee, agrees, for the benefit of the Certificateholders, to review each
Mortgage File delivered to it and to execute and deliver, or cause to be
executed and delivered, to the Seller an initial certification in the form
annexed hereto as Exhibit F-1. In conducting such review, the Certificate
Administrator, on behalf of the Trustee, will ascertain whether all required
documents described in Section 2.01 hereof have been executed and received and
whether those documents relate, determined on the basis of the Mortgagor name,
original principal balance and loan number, to the Mortgage Loans it has
received, as identified in Exhibit B to this Agreement, as supplemented
(provided, however, that with respect to those documents described in subclause
(vii) of such section, the Certificate Administrator's obligations shall extend
only to documents actually delivered pursuant to such subclause). In performing
any such review, the Certificate Administrator, on behalf of the Trustee, may
conclusively rely on the purported due execution and genuineness of any such
document and on the purported genuineness of any signature thereon. If the
Certificate Administrator, on behalf of the Trustee, finds that any document
constituting part of the Mortgage File not to have been executed or received, or
to be unrelated to the Mortgage Loans identified in Exhibit B or Attachment B to
Exhibit 2 of the Purchase Agreement or to appear to be defective on its face,
the Certificate Administrator, on behalf of the Trustee, shall promptly notify
the Seller of such finding and the Seller's obligation to cure such defect or
repurchase or substitute for the related Mortgage Loan.
(b) No later than 180 days after the Closing Date, the Certificate
Administrator, on behalf of the Trustee, will review, for the benefit of the
Certificateholders, the Mortgage Files and will execute and deliver or cause to
be executed and delivered to the Seller, a final
36
certification in the form annexed hereto as Exhibit F-2. In conducting such
review, the Certificate Administrator, on behalf of the Trustee, will ascertain
whether an original of each document described in subclauses (ii)-(iv) of
Section 2.01 hereof required to be recorded has been returned from the recording
office with evidence of recording thereon or a certified copy has been obtained
from the recording office. If the Certificate Administrator, on behalf of the
Trustee, finds any document constituting part of the Mortgage File has not been
received, or to be unrelated, determined on the basis of the Mortgagor name,
original principal balance and loan number, to the Mortgage Loans identified in
Exhibit B or Attachment B to Exhibit 2 of the Purchase Agreement or to appear
defective on its face, the Certificate Administrator, on behalf of the Trustee,
shall promptly notify the Seller of such finding and the Seller's obligation to
cure such defect or repurchase or substitute for the related Mortgage Loan.
(c) Upon deposit of the Repurchase Price in the Collection Account and
notification of the Certificate Administrator, on behalf of the Trustee, by a
certification signed by a Servicing Officer (which certification shall include a
statement to the effect that the Repurchase Price has been deposited in the
Collection Account), the Certificate Administrator, on behalf of the Trustee,
shall cause to be released to the Seller the related Mortgage File and shall
cause to be executed and delivered all instruments of transfer or assignment,
without recourse, furnished to it by the Seller as are necessary to vest in the
Seller title to and rights under the related Mortgage Loan. Such purchase shall
be deemed to have occurred on the date on which certification of the deposit of
the Repurchase Price in the Payment Account was received by the Trustee. The
Certificate Administrator, on behalf of the Trustee, shall amend the applicable
Mortgage Loan Schedule to reflect such repurchase and shall promptly notify the
Servicer, and the Rating Agencies of such amendment. The Trustee agrees to
provide the Certificate Administrator with such power of attorneys as are
necessary for the Certificate Administrator to fulfill its obligations under
this Section 2.03 and otherwise under the Basic Documents.
Section 2.03. Repurchase or Substitution of Mortgage Loans by the
Seller.
(a) Upon discovery or receipt of written notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Certificate Administrator shall promptly notify the
Seller and the Servicer of such defect, missing document or breach and request
that the Seller deliver such missing document or cure such defect or breach
within 90 days from the date the Seller was notified of such missing document,
defect or breach, and if the Seller does not deliver such missing document or
cure such defect or breach in all material respects during such period, the
Certificate Administrator shall enforce the Seller's obligation under the
Purchase Agreement and cause the Seller to repurchase such Mortgage Loan from
the Trust Fund at the Repurchase Price on or prior to the Determination Date
following the expiration of such 90 day period; provided that, in connection
with any such breach that could not reasonably have been cured within such 90
day period, if the Seller shall have commenced to cure such breach within such
90 day period, the Seller shall be permitted to proceed thereafter diligently
and expeditiously to cure the same within the additional period provided under
the Purchase Agreement.
37
(b) The Repurchase Price for the repurchased Mortgage Loan shall be
deposited in the Collection Account, and the Certificate Administrator, upon
receipt of written certification from the Servicer of such deposit, shall
release to the Seller the related Mortgage File and the Certificate
Administrator or the Trustee, as applicable, shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall furnish to it and as shall be necessary to vest in the Seller any
Mortgage Loan released pursuant hereto and the Certificate Administrator shall
have no further responsibility with regard to such Mortgage File (it being
understood that the Certificate Administrator shall have no responsibility for
determining the sufficiency of such assignment for its intended purpose). In
lieu of repurchasing any such Mortgage Loan as provided above, the Seller may
cause such Mortgage Loan to be removed from the Trust Fund (in which case it
shall become a Deleted Mortgage Loan) and substitute one or more Eligible
Substitute Mortgage Loans in the manner and subject to the limitations set forth
in Section 2.03(d). It is understood and agreed that the obligation of the
Seller to cure or to repurchase (or to substitute for) any Mortgage Loan as to
which a document is missing, a material defect in a constituent document exists
or as to which such a breach has occurred and is continuing shall constitute the
sole remedy against the Seller respecting such omission, defect or breach
available to the Trustee or the Certificate Administrator on behalf of the
Certificateholders.
(c) Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in Section 2.05 which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the Servicer shall cure such breach in all material respects.
(d) Any substitution of Eligible Substitute Mortgage Loans for Deleted
Mortgage Loans made pursuant to Section 2.03(a) must be effected prior to the
last Business Day that is within two years after the Closing Date. As to any
Deleted Mortgage Loan for which the Seller substitutes an Eligible Substitute
Mortgage Loan or Loans, such substitution shall be effected by the Seller
delivering to the Certificate Administrator, for such Eligible Substitute
Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the Assignment to the
Trustee, and such other documents and agreements, with all necessary
endorsements thereon, as are required by Section 2.01, together with an
Officers' Certificate providing that each such Eligible Substitute Mortgage Loan
satisfies the definition thereof and specifying the Substitution Adjustment
Amount (as described below), if any, in connection with such substitution. The
Certificate Administrator shall acknowledge receipt for such Eligible Substitute
Mortgage Loan or Loans and, within ten Business Days thereafter, shall review
such documents as specified in Section 2.02 and deliver to the Servicer, with
respect to such Eligible Substitute Mortgage Loan or Loans, a certification
substantially in the form attached hereto as Exhibit F-1, with any applicable
exceptions noted thereon. Within one year of the date of substitution, the
Certificate Administrator shall deliver to the Servicer a certification
substantially in the form of Exhibit F-2 hereto with respect to such Eligible
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the
month of substitution are not part of the Trust Fund and will be retained by the
Seller. For the month of substitution, distributions to Certificateholders will
reflect the collections and recoveries in respect of such Deleted Mortgage Loan
in the Due Period preceding the month of substitution and the Seller shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Seller shall give or cause
38
to be given written notice to the Certificateholders that such substitution has
taken place, 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 Eligible Substitute Mortgage Loan or Loans and shall deliver a copy of
such amended Mortgage Loan Schedule to the Certificate Administrator. Upon such
substitution by the Seller, such Eligible Substitute Mortgage Loan or Loans
shall constitute part of the Mortgage Pool and shall be subject in all respects
to the terms of this Agreement and the Purchase Agreement, including all
applicable representations and warranties thereof included in the Purchase
Agreement as of the date of substitution.
For any month in which the Seller substitutes one or more Eligible
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (the "Substitution Adjustment Amount"), if any, by
which the aggregate Repurchase Price of all such Deleted Mortgage Loans exceeds
the aggregate, as to each such Eligible Substitute Mortgage Loan, of the
principal balance thereof as of the date of substitution, together with one
month's interest on such principal balance at the applicable Net Mortgage Rate.
On the date of such substitution, the Seller will deliver or cause to be
delivered to the Servicer for deposit in the Collection Account an amount equal
to the Substitution Adjustment Amount, if any, and the Certificate
Administrator, upon receipt of the related Eligible Substitute Mortgage Loan or
Loans and certification by the Servicer of such deposit, shall release to the
Seller the related Mortgage File or Files and the Certificate Administrator or
the Trustee, as applicable, shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Seller shall
deliver to it and as shall be necessary to vest therein any Deleted Mortgage
Loan released pursuant hereto.
In addition, the Seller shall obtain at its own expense and deliver to
the Certificate Administrator an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on the Trust Fund,
including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(l) of the Code or on "contributions after
the startup date" under Section 860G(d)(l) of the Code, or (b) any REMIC to fail
to qualify as a REMIC at any time that any Certificate is outstanding. If such
Opinion of Counsel can not be delivered, then such substitution may only be
effected at such time as the required Opinion of Counsel can be given.
(e) Upon discovery by the Seller, the Servicer, the Certificate
Administrator or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the
party discovering such fact shall within two Business Days give written notice
thereof to the other parties. In connection therewith, the Seller or the
Depositor, as the case may be, shall repurchase or, subject to the limitations
set forth in Section 2.03(d), substitute one or more Eligible Substitute
Mortgage Loans for the affected Mortgage Loan within 90 days of the earlier of
discovery or receipt of such notice with respect to such affected Mortgage Loan.
Such repurchase or substitution shall be made by the Seller. Any such repurchase
or substitution shall be made in the same manner as set forth in Section
2.03(a). The Certificate Administrator on behalf of the Trustee shall reconvey
to the Seller, the Mortgage Loan to be released pursuant hereto in the same
manner, and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty.
39
Section 2.04. Acknowledgement of Trustee.
The Trustee acknowledges that in the event that any of (i) the transfer
of the Initial Mortgage Loans, the MI Policies and the Cap Agreements from the
Seller to the Transferor or from the Transferor to the Depositor is determined
to constitute a financing, or (ii) the transfer of the Subsequent Mortgage Loans
from the Seller to the Transferor or from the Transferor to the Trustee is
determined to constitute a financing, then in each case the Certificate
Administrator, on behalf of the Trustee, and the Trustee hold the Initial
Mortgage Loans, the MI Policies, the Cap Agreements and the Subsequent Mortgage
Loans as the designee and bailee of the Transferor and the Depositor,
respectively, subject, however, in each case, to a prior lien in favor of the
Certificate holders pursuant to the terms of this Agreement.
Section 2.05. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee,
for the benefit of each of the Trustee and the Certificateholders and to the
Depositor that as of the Closing Date or as of such date specifically provided
herein:
(i) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Virginia and has the
corporate power to own its assets and to transact the business in which it
is currently engaged. The Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure to so
qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Servicer or the validity
or enforceability of the Mortgage Loans;
(ii) The Servicer has the corporate power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Servicer enforceable in
accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies;
(iii) The Servicer is not required to obtain the consent of any other
Person or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consent, license,
approval or authorization, or registration or declaration, as shall have
been obtained or filed, as the case may be;
(iv) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby by the Servicer will not violate
any provision of any existing law or regulation or any order or decree of
any court applicable to the Servicer or any provision of the certificate of
incorporation or bylaws of the Servicer, or constitute
40
a material breach of any mortgage, indenture, contract or other
agreement to which the Servicer is a party or by which the Servicer
may be bound; and
(v) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of
the Servicer threatened, against the Servicer or any of its properties or
with respect to this Agreement or the Certificates which, to the knowledge
of the Servicer, has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Agreement.
The foregoing representations and warranties shall survive any
termination of the Servicer hereunder.
Section 2.06. Representations and Warranties of the Depositor.
The Depositor represents and warrants to the Trust and the Trustee on
behalf of the Certificateholders as follows:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of North Carolina, with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Depositor and the
ability of the Depositor to perform hereunder.
(c) The Depositor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Depositor has full power and
authority to purchase the property to be purchased from the Transferor and the
Depositor has duly authorized such purchase by all necessary corporate action;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Depositor by all necessary corporate action.
(d) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of incorporation or
bylaws of the Depositor, or any indenture, agreement or other instrument to
which the Depositor is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or its
properties.
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Section 2.07. Issuance of Certificates.
The Trustee acknowledges the assignment to the Trustee of the Mortgage
Loans and the delivery to the Certificate Administrator, on behalf of the
Trustee of the Mortgage Files, subject to the provisions of Sections 2.01 and
2.02, together with the assignment to it of all other assets included in the
Trust Fund, receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery and in exchange therefor, the Trustee, pursuant to the
written request of the Depositor executed by an officer of the Depositor, has
executed, and authenticated and delivered to or upon the order of the Depositor,
the Certificates in authorized denominations. The interests evidenced by the
Certificates, constitute the entire beneficial ownership interest in the Trust
Fund.
Section 2.08. Conveyance of the Subsequent Mortgage Loans.
The Trustee, or the Certificate Administrator on behalf of the Trustee,
shall purchase the Subsequent Mortgage Loans as set forth in Section 2.02 of the
Purchase Agreement.
Section 2.09. Miscellaneous REMIC Provisions.
(a) The Certificate Administrator as agent of the Trustee shall elect
that each of the Lower-Tier REMIC and the Upper-Tier REMIC shall be treated as a
REMIC under Section 860D of the Code. Any inconsistencies or ambiguities in this
Agreement or in the administration of this Agreement shall be resolved in a
manner that preserves the validity of such REMIC elections. The assets of the
Lower-Tier REMIC shall include the Mortgage Loans, the Accounts (other than the
Non-REMIC Accounts), any REO Property, and any proceeds of the foregoing. The
Lower-Tier REMIC Regular Interests (as defined below) shall constitute the
assets of the Upper-Tier REMIC.
(b) The Lower-Tier REMIC will be evidenced by (x) Lower-Tier Interest
1, Lower-Tier Interest 2, Lower-Tier Interest 3, Lower-Tier Interest 4,
Lower-Tier Interest 5, and Lower-Tier Interest 6 (the "Lower-Tier REMIC Regular
Interests"), which will be uncertificated and non-transferable and are hereby
designated as the "regular interests" in the Lower-Tier REMIC and (y) the Class
RL Certificate, which is hereby designated as the single "residual interest" in
the Lower-Tier REMIC (the Lower-Tier REMIC Regular Interests, together with the
Class RL Certificate, the "Lower-Tier REMIC Interests"). The Lower-Tier REMIC
Regular Interests shall be recorded on the records of the Lower-Tier REMIC as
being issued to and held by the Trustee on behalf of the Upper-Tier REMIC.
The Lower-Tier REMIC Interests will have the following designations and
Lower-Tier Pass-Through Rates, and distributions of principal, interest and
Realized Losses thereon shall be allocated to the Certificates in the following
manner:
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Lower-Tier Pass-Through Allocation of Allocation of
Interests Initial Balance Rate Principal(3) Interest(4)
--------- --------------- ------------ ------------- -------------
1 $316,200,000 (1) A1 A1, AIO
2 $6,800,000 (1) M1 M1, AIO
3 $6,800,000 (1) M2 M2, AIO
4 $4,420,000 (1) M3 M3, AIO
5 $340,000,000(6) (1) O AIO
6 (2) (2) (2) P
Class RL (5) (5) (5) (5)
--------------------
(1) The Lower-Tier Pass-Through Rate on these Lower-Tier REMIC Regular
Interests shall at any time of determination equal the Weighted Average
Mortgage Rate of the Mortgage Loans.
(2) Lower-Tier REMIC Interest 6 is entitled to distributions of all Prepayment
Charges. It is not entitled to any other distributions of principal or
interest.
(3) Distributions of principal and Realized Losses from the Lower-Tier REMIC
Interests will be allocated to the related Upper-Tier REMIC Interests in
the amounts and priorities provided for such Upper-Tier REMIC Interests in
Section 4.1.
(4) Distributions of interest from the Lower-Tier REMIC Interests will be
allocated to the related Upper-Tier REMIC Interests in the amounts and
priorities provided for such Upper-Tier REMIC Interests in Section 4.1.
(5) On each Distribution Date, available funds, if any, remaining in the
Lower-Tier REMIC after payments of interest and principal, as designated
above, will be distributed to the Class RL Certificate. It is expected that
there shall not be any distributions on the Class RL Certificate.
(6) Notional Principal Amount
(c) The Class A-1, Class AIO, Class M-1, Class M-2, Class M-3, Class O
and Class P Certificates are hereby designated as "regular interests" with
respect to the Upper-Tier REMIC (the "Upper-Tier REMIC Regular Interests") and
the Class RU Certificate is hereby designated as the single "residual interest"
with respect to the Upper-Tier REMIC. On each Distribution Date, available
funds, if any, remaining in the Upper-Tier REMIC after payments of interest and
principal as designated herein shall be distributed to the Class RU
Certificates.
(d) For federal income tax purposes, the "latest possible maturity
date" for each of the Lower-Tier REMIC Regular Interests and Upper-Tier REMIC
Regular Interests is hereby set to be the Distribution Date of January, 2031.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
Section 3.01. Servicer to Assure Servicing.
(a) The Servicer shall supervise, or take such actions as are necessary
to ensure, the servicing and administration of the Mortgage Loans and any REO
Property in accordance with this Agreement and its normal servicing practices,
which generally shall conform to the standards of an institution prudently
servicing mortgage loans for its own account and shall have full authority to do
anything it reasonably deems appropriate or desirable in connection with such
servicing and administration. The Servicer may perform its responsibilities
relating to servicing through other agents or independent contractors, but shall
not thereby be released from any of its responsibilities as hereinafter set
forth. Subject to Section 3.06(b), the authority of the Servicer, in its
capacity as Servicer, and any Subservicer acting on its behalf, shall include,
without limitation, the power to (i) consult with and advise any Subservicer
regarding administration of a related Mortgage Loan, (ii) approve any
recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii)
supervise the filing and collection of insurance claims and take or cause to be
taken such actions on behalf of the insured Person thereunder as shall be
reasonably necessary to prevent the denial of coverage thereunder, and (iv)
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing a related Mortgage Loan, including the employment of
attorneys, the institution of legal proceedings, the collection of deficiency
judgments, the acceptance of compromise proposals and any other matter
pertaining to a delinquent Mortgage Loan. The authority of the Servicer shall
include, in addition, the power on behalf of the Certificateholders, the
Trustee, or any of them to (i) execute and deliver customary consents or waivers
and other instruments and documents, (ii) consent to transfer of any related
Mortgaged Property and assumptions of the related Mortgage Notes and Mortgages
(in the manner provided in this Agreement) and (iii) collect any Insurance
Proceeds and Liquidation Proceeds. Without limiting the generality of the
foregoing, the Servicer and any Subservicer acting on its behalf may, and is
hereby authorized, and empowered by the Trustee when the Servicer believes it is
reasonably necessary in its best judgment in order to comply with its servicing
duties hereunder, to execute and deliver, on behalf of itself, the
Certificateholders, the Trustee, or any of them, any instruments of
satisfaction, cancellation, partial or full release, discharge and all other
comparable instruments, with respect to the related Mortgage Loans, the
insurance policies and the accounts related thereto, and the Mortgaged
Properties. The Servicer may exercise this power in its own name or in the name
of a Subservicer.
The Servicer, in such capacity, may not consent to the placing of a
lien senior to that of the Mortgage on the related Mortgaged Property.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trust and the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
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(b) Notwithstanding the provisions of Subsection 3.01(a), the Servicer
shall not take any action inconsistent with the interests of the Trustee, or the
Certificateholders or with the rights and interests of the Trustee, or the
Certificateholders under this Agreement.
(c) The Certificate Administrator shall furnish or shall cause the
Trustee to furnish the Servicer with any powers of attorney and other documents
in form as provided to it necessary or appropriate to enable the Servicer to
service and administer the related Mortgage Loans and REO Property and the
Certificate Administrator and the Trustee shall not be liable for the actions of
the Servicer or any Subservicers under such powers of attorney.
Section 3.02. Subservicing Agreements Between Servicer and
Subservicers.
(a) The Servicer may enter into Subservicing Agreements with
Subservicers for the servicing and administration of the Mortgage Loans and for
the performance of any and all other activities of the Servicer hereunder. Each
Subservicer shall be either (i) an institution the accounts of which are insured
by the FDIC or (ii) another entity that engages in the business of originating
or servicing mortgage loans comparable to the Mortgage Loans, and in either case
shall be authorized to transact business in the state or states in which the
related Mortgaged Properties it is to service are situated, if and to the extent
required by applicable law to enable the Subservicer to perform its obligations
hereunder and under the Subservicing Agreement. Any Subservicing Agreement
entered into by the Servicer shall include the provision that such Agreement may
be immediately terminated (i) (x) with cause and without any termination fee by
the Servicer hereunder and/or (y) without cause, in which case the Servicer
shall be solely responsible for any termination fee or penalty resulting
therefrom and (ii) at the option of the Trustee upon the termination or
resignation of the Servicer hereunder, in which case the Servicer shall be
solely responsible for any termination fee or penalty resulting therefrom. In
addition, each Subservicing Agreement shall provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer and the
Subservicers may enter into Subservicing Agreements and make amendments to the
Subservicing Agreements or enter into different forms of Subservicing Agreements
providing for, among other things, the delegation by the Servicer to a
Subservicer of additional duties regarding the administration of the Mortgage
Loans; provided, however, that any such amendments or different forms shall be
consistent with and not violate the provisions of this Agreement, and that no
such amendment or different form shall be made or entered into which could be
reasonably expected to be materially adverse to the interests of the
Certificateholders, without the consent of the Certificateholders holding at
least 51% of the aggregate Voting Rights.
(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, and the Certificateholders, shall enforce the
obligations of each Subservicer under the related Subservicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense, but shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement only to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
45
Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys'
fees against the party against whom such enforcement is directed.
Section 3.03. Successor Subservicers.
The Servicer shall be entitled to terminate any Subservicing Agreement
that may exist in accordance with the terms and conditions of such Subservicing
Agreement and without any limitation by virtue of this Agreement; provided,
however, that upon termination, the Servicer shall either act as servicer of the
related Mortgage Loans or enter into an appropriate contract with a successor
Subservicer reasonably acceptable to the Certificate Administrator on behalf of
the Trustee, pursuant to which such successor Subservicer will be bound by all
relevant terms of the related Subservicing Agreement pertaining to the servicing
of such Mortgage Loans.
Section 3.04. Liability of the Servicer.
(a) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall under all circumstances remain obligated and
primarily liable to the Certificate Administrator, the Trustee, the
Certificateholders for the servicing and administering of the Mortgage Loans and
any REO Property in accordance with this Agreement. The obligations and
liability of the Servicer shall not be diminished by virtue of Subservicing
Agreements or by virtue of indemnification of the Servicer by any Subservicer,
or any other Person. The obligations and liability of the Servicer shall remain
of the same nature and under the same terms and conditions as if the Servicer
alone were servicing and administering the related Mortgage Loans. The Servicer
shall, however, be entitled to enter into indemnification agreements with any
Subservicer or other Person and nothing in this Agreement shall be deemed to
limit or modify such indemnification. For the purposes of this Agreement, the
Servicer shall be deemed to have received any payment on a Mortgage Loan on the
date the Subservicer received such payment.
(b) 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 Certificate Administrator, the
Trustee and the Certificateholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
Subservicer except as set forth in Section 3.15.
Section 3.05. Assumption or Termination of Subservicing Agreements by
the Certificate Administrator.
(a) If the Certificate Administrator or its designee as the successor
Servicer, shall assume the servicing obligations of the Servicer in accordance
with Section 7.02 below, the Certificate Administrator, to the extent necessary
to carry out the provisions of Section 7.02 with respect to the Mortgage Loans,
shall succeed to all of the rights and obligations of the Servicer under each of
the Subservicing Agreements. In such event, the Certificate Administrator or its
designee as the successor Servicer shall be deemed to have assumed all of the
Servicer's rights and obligations therein and to have replaced the Servicer as a
party to such Subservicing
46
Agreements to the same extent as if such Subservicing Agreements had been
assigned to the Certificate Administrator or its designee as a successor
Servicer, except that the Certificate Administrator or its designee as a
successor Servicer shall not be deemed to have assumed any obligations or
liabilities of the Servicer arising prior to such assumption or as a result of
the Certificate Administrator's terminating any Subservicer upon the Certificate
Administrator becoming successor Servicer and the Servicer shall not thereby be
relieved of any liability or obligations under such Subservicing Agreements
arising prior to such assumption or as a result of the Certificate
Administrator's terminating any Subservicer upon the Certificate Administrator
becoming successor Servicer.
(b) The Certificate Administrator may terminate any Subservicer upon
becoming successor Servicer.
(c) In the event that the Certificate Administrator or its designee as
successor Servicer assumes the servicing obligations of the Servicer under
Section 7.02, upon the request of the Certificate Administrator or such designee
as successor Servicer, the Servicer shall at its own expense deliver to the
Certificate Administrator, or at its written request to such designee, originals
or, if originals are not available, photocopies of all documents, files and
records, electronic or otherwise, relating to the Subservicing Agreements and
the related Mortgage Loans or REO Property then being serviced and an accounting
of amounts collected and held by it, if any, and will otherwise cooperate and
use its reasonable efforts to effect the orderly and efficient transfer of the
Subservicing Agreements, or responsibilities hereunder to the Certificate
Administrator, or at its written request to such designee as successor Servicer.
Section 3.06. Collection of Mortgage Loan Payments.
(a) The Servicer will coordinate and monitor remittances by
Subservicers to it with respect to the Mortgage Loans in accordance with this
Agreement.
(b) The Servicer shall make its best reasonable efforts to collect or
cause to be collected all payments required under the terms and provisions of
the Mortgage Loans and shall follow, and use its best reasonable efforts to
cause Subservicers to follow, collection procedures comparable to the collection
procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Agreement.
Consistent with the foregoing, the Servicer or the related Subservicer may in
its discretion (i) waive or permit to be waived any late payment charge,
prepayment charge, assumption fee, or any penalty interest in connection with
the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be
suspended or reduced regular monthly payments for a period of up to six months,
or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation
of delinquencies; provided, however, that the Servicer or the related
Subservicer may permit the foregoing only if it believes, in good faith, that
recoveries of Monthly Payments will be maximized; provided further, however,
with respect to Mortgage Loans insured by an MI Policy, that the Servicer may
not without the prior written consent of the MI Insurer permit any waiver,
modification or variance which would (a) change the loan rate, (b) forgive any
payment of principal or interest, (c) lessen the lien priority or (d) extend the
final maturity date of a Mortgage Loan past 12 months after the original
maturity date on such Mortgage Loan. In the event the Servicer or related
Subservicer shall consent to the deferment of the due dates for
47
payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance
or shall cause the related Subservicer to make an advance to the same extent as
if such installment were due, owing and delinquent and had not been deferred
through liquidation of the Mortgaged Property; provided, however, that the
obligation of the Servicer or the related Subservicer to make an Advance shall
apply only to the extent that the Servicer believes, in good faith, that such
advances are not Nonrecoverable Advances.
(c) Within five Business Days after the Servicer has determined that
all amounts which it expects to recover from or on account of a Liquidated
Mortgage Loan have been recovered and that no further Liquidation Proceeds will
be received in connection therewith, the Servicer shall provide to the
Certificate Administrator a certificate of a Servicing Officer that such
Mortgage Loan became a Liquidated Mortgage Loan as of the date of such
determination.
(d) The Servicer shall establish a segregated account in the name of
the Trustee (the "Collection Account"), which shall be an Eligible Account, in
which the Servicer shall deposit or cause to be deposited any amounts
representing payments on and any collections in respect of the Mortgage Loans
received by it after the Cut-Off Date or, with respect to the Subsequent
Mortgage Loans, the Subsequent Cut-off Date (other than in respect of the
payments referred to in the following paragraph) within two Business Days
following receipt thereof, including the following payments and collections
received or made by it (without duplication):
(i) all payments of principal or interest on the Mortgage Loans
received by the Servicer directly from Mortgagors or from the respective
Subservicer;
(ii) the aggregate Repurchase Price of the Mortgage Loans purchased by
the Servicer pursuant to Section 3.18 or by the Converted Loan Purchaser,
pursuant to Section 3.20;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by the Seller
pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts
required to be deposited in connection with the substitution of an Eligible
Substitute Mortgage Loan pursuant to the Purchase Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI
Insurance Proceeds resulting from any insurance policy maintained on a
Mortgaged Property;
(vi) any Advance and any Compensating Interest payments;
(vii) any other amounts received by the Servicer, including all
Foreclosure Profits, assumption fees, prepayment penalties and any other
fees that are required to be deposited in the Collection Account pursuant
to this Agreement.
provided, however, that with respect to each Due Period, the Servicer shall be
permitted to retain from payments in respect of interest on the Mortgage Loans,
the Servicing Fee for such Due Period. The foregoing requirements respecting
deposits to the Collection Account are exclusive,
48
it being understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account late payment charges payable
by Mortgagors, as further described in Section 3.15, or amounts received by the
Subservicer for the accounts of Mortgagors for application towards the payment
of taxes, insurance premiums, assessments and similar items. In the event any
amount not required to be deposited in the Collection Account is so deposited,
the Servicer may at any time (prior to being terminated under this Agreement)
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding. The Servicer shall keep records that accurately
reflect the funds on deposit in the Collection Account that have been identified
by it as being attributable to the Mortgage Loans and shall hold all collections
in the Collection Account for the benefit of the Trustee, and the
Certificateholders, as their interests may appear.
Funds in the Collection Account may be invested in Eligible
Investments, but shall not be commingled with the Servicer's own funds or
general assets or with funds respecting payments on mortgage loans or with any
other funds not related to the Certificates. Income earned on such Eligible
Investments shall be for the account of the Servicer.
(e) The Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Servicer, in one or more accounts in the name of the Trustee meeting the
requirements of an Eligible Account, and such funds shall not be invested. The
Subservicer shall segregate and hold all funds collected and received pursuant
to each Mortgage Loan separate and apart from any of its own funds and general
assets and any other funds. Each Subservicer shall make remittances to the
Servicer no later than one Business Day following receipt thereof and the
Servicer shall deposit any such remittances received from any Subservicer within
one Business Day following receipt by the Servicer.
Section 3.07. Withdrawals from the Collection Account.
(a) The Servicer shall, from time to time as provided herein, make
withdrawals from the Collection Account of amounts on deposit therein pursuant
to Section 3.06 that are attributable to the Mortgage Loans for the following
purposes (without duplication):
(i) to deposit in the Payment Account, by the Servicer Remittance Date
prior to each Distribution Date, all collections on the Mortgage Loans
required to be distributed from the Payment Account on a Distribution Date;
(ii) to the extent deposited to the Collection Account, to reimburse
itself or the related Subservicer for previously unreimbursed expenses
incurred in maintaining individual insurance policies pursuant to Section
3.11, or Liquidation Expenses, paid pursuant to Section 3.13, such
withdrawal right being limited to amounts received on particular Mortgage
Loans (other than any Repurchase Price in respect thereof) which represent
late recoveries of the payments for which such advances were made, or from
related Liquidation Proceeds;
49
(iii) to pay to itself out of each payment received on account of
interest on a Mortgage Loan as contemplated by Section 3.15, an amount
equal to the related Servicing Fee (to the extent not retained pursuant to
Section 3.06);
(iv) to pay to itself or the Seller, with respect to any Mortgage Loan
or property acquired in respect thereof that has been purchased by the
Seller, the Servicer or other entity, all amounts received thereon and not
required to be distributed to Certificateholders as of the date on which
the related Repurchase Price is determined;
(v) to reimburse the Servicer or any Subservicer for any unreimbursed
Advance of its own funds or any unreimbursed advance of such Subservicer's
own funds, the right of the Servicer or a Subservicer to reimbursement
pursuant to this subclause (v) being limited to amounts received on a
particular Mortgage Loan (including, for this purpose, the Repurchase Price
therefor, Insurance Proceeds and Liquidation Proceeds) which represent late
payments or recoveries of the principal of or interest on such Mortgage
Loan respecting which such Advance or advance was made;
(vi) to reimburse the Servicer or any Subservicer from Insurance
Proceeds or Liquidation Proceeds relating to a particular Mortgage Loan for
amounts expended by the Servicer or such Subservicer pursuant to Section
3.13 in good faith in connection with the restoration of the related
Mortgage Property which was damaged by the uninsured cause or in connection
with the liquidation of such Mortgage Loan;
(vii) to reimburse the Servicer or any Subservicer for any unreimbursed
Nonrecoverable Advance previously made, and otherwise not reimbursed
pursuant to this Subsection 3.07(a);
(viii) to withdraw any other amount deposited in the Collection Account
that was not required to be deposited therein pursuant to Section 3.06;
(ix) to reimburse the Servicer for costs associated with the
environmental report specified in Section 3.13(c);
(x) to clear and terminate the Collection Account upon a termination
pursuant to Section 7.08;
(xi) to pay to the Servicer income earned on Eligible Investments in
the Collection Account;
(xii) to pay to the MI Insurer the monthly MI Premiums due under each
MI Policy from payments received (or Advances made) on account of interest
due on the related Mortgage Loan; and
(xiii) to make an Advance with respect to a delinquent Mortgage Loan
from funds held in the Collection Account as contemplated by Section 3.24,
provided that the amount withdrawn for such an Advance is immediately
deposited into the Payment Account.
50
Withdrawals made pursuant to clause (xii) shall be made on a first priority
basis. In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v)
and (vi), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Mortgage Loan, and the Servicer shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Collection Account pursuant to
such clauses.
The Servicer shall not use any payments received under the Cap Agreements and
deposited in the Collection Account to make any of the foregoing payments, other
than pursuant to clause (xiii) above.
(b) Notwithstanding the provisions of this Section 3.07, the Servicer
may, but is not required to, allow the Subservicers to deduct from amounts
received by them or from the related account maintained by a Subservicer, prior
to deposit in the Collection Account, any portion to which such Subservicers are
entitled as reimbursement of any reimbursable Advances made by such
Subservicers.
Section 3.08. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
(a) The Servicer shall establish and maintain or cause the related
Subservicer to establish and maintain, one or more Servicing Accounts. The
Servicer or a Subservicer will deposit and retain therein all collections from
the Mortgagors for the payment of taxes, assessments, insurance premiums, or
comparable items as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by
the Servicer or a Subservicer (and its successors and assigns) in the name of
the Trustee. Such Servicing Accounts shall be Eligible Accounts and, if
permitted by applicable law, invested in Eligible Investments held in trust by
the Servicer or a Subservicer as described above and maturing, or be subject to
redemption or withdrawal, no later than the date on which such funds are
required to be withdrawn, and in no event later than 45 days after the date of
investment; withdrawals of amounts from the Servicing Accounts may be made only
to effect timely payment of taxes, assessments, insurance premiums, or
comparable items, to reimburse the Servicer or a Subservicer for any advances
made with respect to such items, to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to Mortgagors on
balances in the Servicing Accounts or to clear and terminate the Servicing
Accounts at or any time after the termination of this Agreement. Amounts
received from Mortgagors for deposit into the Servicing Accounts shall be
deposited in the Servicing Accounts by the Servicer within two days of receipt.
The Servicer shall advance from its own funds amounts needed to pay items
payable from the Servicing Accounts if the Servicer reasonably believes that
such amounts are recoverable from the related Mortgagor. The Servicer shall
comply with all laws relating to the Servicing Accounts, including laws relating
to payment of interest on the Servicing Accounts. If interest earned by the
Servicer on the Servicing Accounts is not sufficient to pay required interest on
the Servicing Accounts, the Servicer shall pay the difference from its own
funds. The Servicing Accounts shall not be the property of the Trust.
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Section 3.09. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
The Servicer shall provide, and shall cause any Subservicer to provide,
to the Certificate Administrator and the Trustee, access to the documentation
regarding the related Mortgage Loans and REO Property and to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC (to which the Certificate Administrator and the Trustee shall also provide)
access to the documentation regarding the related Mortgage Loans required by
applicable regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer or the Subservicers that are designated by these entities; provided,
however, that, unless otherwise required by law, the Certificate Administrator,
and the Trustee shall not be required to provide access to such documentation if
the provision thereof would violate the legal right to privacy of any Mortgagor;
provided, further, however, that the Certificate Administrator and the Trustee,
shall coordinate their requests for such access so as not to impose an
unreasonable burden on, or cause an unreasonable interruption of, the business
of the Servicer or any Subservicer. The Servicer, the Subservicers, the Trustee
and the Certificate Administrator shall allow representatives of the above
entities to photocopy any of the documentation and shall provide equipment for
that purpose at a charge that covers their own actual out-of-pocket costs.
Section 3.10. Administration of the Cap Agreements. (a) The Servicer
shall take all such actions on behalf of the Trustee as are necessary to
administer the Cap Agreements and to enforce the Trustee's rights under the Cap
Agreements, which actions shall conform to the standards of an institution
prudently administering the Cap Agreements for its own account. Except as
expressly set forth herein, the Servicer shall have full authority on behalf of
the Trustee to do anything it reasonably deems appropriate or desirable in
connection with the administration of the Cap Agreements. The Servicer shall
make its best reasonable efforts to collect or cause to be collected from the
Cap Agreement counterparties payments due to the Trustee under the Cap
Agreements.
(b) The Servicer shall cause to be deposited into the Supplemental
Interest Account all payments received from the Cap Agreement counterparties
under the terms of the Cap Agreements.
(c) Notwithstanding the provisions of Subsection 3.10(a) and (b), the
Servicer shall not make any action in regard to the Cap Agreements inconsistent
with the interests of the Trustee, or the Certificateholders or with the rights
and interests of the Trustee, or the Certificateholders under this Agreement.
(d) The Trustee and the Certificate Administrator shall furnish the
Servicer with any powers of attorney and other documents in form as provided to
it necessary or appropriate to enable the Servicer to service and administer the
Cap Agreements; provided, however, that neither the Trustee nor Certificate
Administrator shall not be liable for the actions of the Servicer under such
powers of attorney.
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Section 3.11. Maintenance of Hazard Insurance and Fidelity Coverage.
(a) The Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each Mortgage Loan and each REO Property, in
full force and effect hazard insurance (fire insurance with extended coverage)
equal to at least the lesser of the Principal Balance of the Mortgage Loan (or
the combined Principal Balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan) or the current replacement cost of the Mortgaged
Property, and containing a standard mortgagee clause, provided, however, that
the amount of hazard insurance may not be less than the amount necessary to
prevent loss due to the application of any co-insurance provision of the related
policy. Unless applicable state law requires a higher deductible, the deductible
on such hazard insurance policy may be no more than $1,500 or 1% of the
applicable amount of coverage, whichever is less. In the case of a condominium
unit or a unit in a planned unit development, the required hazard insurance
shall take the form of a multi-peril policy covering the entire condominium
project or planned unit development, in an amount equal to at least 100% of the
insurable value based on replacement cost. If the Servicer shall obtain and
maintain a blanket policy consistent with its general mortgage servicing
activities insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in this
Section 3.11(a), it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with this Section 3.11(a) and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible clause
without any right of reimbursement. Any such deposit by the Servicer shall be
made on the last Business Day of the Due Period in the month in which payments
under any such policy would have been deposited in the Collection Account. In
connection with its activities as servicer of the Mortgage Loans, the Servicer
agrees to present, on behalf of itself, the Trust, and the Trustee, claims under
any such blanket policy.
(b) Any amounts collected by the Servicer or a Subservicer under any
such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with the Servicer's or a Subservicer's normal servicing
procedures, the Mortgage Note, the Mortgage or applicable law) shall be
deposited in the Collection Account.
(c) Any cost incurred by a Servicer or a Subservicer in maintaining any
such individual hazard insurance policies shall not be added to the amount owing
under the Mortgage Loan for the purpose of calculating monthly distributions to
Certificateholders, notwithstanding that the terms of the Mortgage Loan so
permit. Such costs of maintaining individual hazard insurance policies shall be
recoverable by the Servicer or a Subservicer out of related late payments by the
Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or by the
Servicer from the Repurchase Price, to the extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of
any Mortgagor or maintained on property acquired with respect to a Mortgage
other than pursuant to such applicable laws and regulations as shall at any time
be in force and shall require such additional insurance. When, at the time of
origination of the Mortgage Loan or at any subsequent
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time, the Mortgaged Property is located in a federally designated special flood
hazard area, the Servicer shall use its best reasonable efforts to cause with
respect to the Mortgage Loans and each REO Property flood insurance (to the
extent available and in accordance with mortgage servicing industry practice) to
be maintained. Such flood insurance shall cover the Mortgaged Property,
including all items taken into account in arriving at the Appraised Value on
which the Mortgage Loan was based, and shall be in an amount equal to the lesser
of (i) the Principal Balance of the related Mortgage Loan and (ii) the minimum
amount required under the terms of coverage to compensate for any damage or loss
on a replacement cost basis, but not more than the maximum amount of such
insurance available for the related Mortgaged Property under either the regular
or emergency programs of the National Flood Insurance Program (assuming that the
area in which such Mortgaged Property is located is participating in such
program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,500 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections
3.11 (a) and (d) and there shall have been a loss which would have been covered
by such insurance had it been maintained, the Servicer shall pay, or cause the
related Subservicer to pay, for any necessary repairs without any right of
reimbursement.
(f) The Servicer shall present, or cause the related Subservicer to
present, claims under any related hazard insurance or flood insurance policy.
(g) The Servicer shall obtain and maintain at its own expense, and
shall cause each Subservicer to obtain and maintain at its own expense, and for
the duration of this Agreement, a blanket fidelity bond and an errors and
omissions insurance policy covering the Servicer's and such Subservicer's
officers, employees and other persons acting on its behalf in connection with
its activities under this Agreement. The amount of coverage shall be consistent
with industry standards but in an amount not less than presently maintained by
the Servicer. The Servicer shall promptly notify the Certificate Administrator
and the Trustee of any material change in the terms of such bond or policy. The
Servicer shall provide annually to the Certificate Administrator and the Trustee
a certificate of insurance that such bond and policy are in effect. If any such
bond or policy ceases to be in effect, the Servicer shall, to the extent
possible, give the Certificate Administrator and the Trustee ten days' notice
prior to any such cessation and shall use its reasonable best efforts to obtain
a comparable replacement bond or policy, as the case may be. Any amounts
relating to the Mortgage Loans collected under such bond or policy shall be
deposited in the Collection Account.
Section 3.12. Due-on-Sale Clauses; Assumption Agreements.
(a) In any case in which the Servicer is notified by any Mortgagor or
Subservicer that a Mortgaged Property relating to a Mortgage Loan has been or is
about to be conveyed by the Mortgagor, the Servicer shall enforce, or shall
instruct such Subservicer to enforce, any due-on-sale clause contained in the
related Mortgage to the extent permitted under the terms of the related Mortgage
Note and by applicable law. The Servicer or the related Subservicer may
repurchase a Mortgage Loan at the Repurchase Price when the Servicer requires
acceleration of the Mortgage Loan, but only if the Servicer is satisfied, as
evidenced by an Officer's Certificate delivered to the Certificate Administrator
and the Trustee, that such Mortgage Loan is in default
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or default is reasonably foreseeable. If the Servicer reasonably believes that
such due-on-sale clause cannot be enforced under applicable law or if the
Mortgage Loan does not contain a due-on-sale clause, the Servicer is authorized,
and may authorize any Subservicer, to consent to a conveyance subject to the
lien of the Mortgage, and, with the consent of the MI Insurer, if applicable, to
take or enter into an assumption agreement from or with the Person to whom such
property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the related Mortgage Note and unless prohibited by
applicable state law, on condition, however, that the related Mortgage Loan
shall continue to be covered by a hazard policy. In connection with any such
assumption, no material term of the related Mortgage Note may be changed. The
Servicer shall notify the Certificate Administrator and the Trustee, whenever
possible, before the completion of such assumption agreement, and shall forward
to the Certificate Administrator the original copy of such assumption agreement,
which copy shall be added by the Certificate Administrator to the related
Mortgage File and which 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.
(b) 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 conveyance by the Mortgagor of the
related Mortgaged Property or assumption of a Mortgage Loan which the Servicer
reasonably believes it may be restricted by law from preventing, for any reason
whatsoever or if the exercise of such right would impair or threaten to impair
any recovery under any applicable insurance policy.
Section 3.13. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, or shall direct the related Subservicer to,
foreclose upon or otherwise comparably convert the ownership of properties
securing any Mortgage Loans that come into and continue in default and as to
which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 3.06, except that the Servicer shall not, and shall
not direct the related Subservicer to, foreclose upon or otherwise comparably
convert a Mortgaged Property if there is evidence of toxic waste or other
environmental hazards thereon unless the Servicer follows the procedures in
Subsection (c) below. In connection with such foreclosure or other conversion,
the Servicer in conjunction with the related Subservicer, if any, shall use its
best reasonable efforts to preserve REO Property and to realize upon defaulted
Mortgage Loans in such manner as to maximize the receipt of principal and
interest by the Certificateholders, taking into account, among other things, the
timing of foreclosure and the considerations set forth in Subsection 3.13(b).
The foregoing is subject to the proviso that the Servicer shall not be required
to expend its own funds in connection with any foreclosure or towards the
restoration of any property unless it determines in good faith (i) that such
restoration or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Certificateholders after reimbursement to itself for such
expenses and (ii) that such expenses will be recoverable to it either through
Liquidation Proceeds (respecting which it shall have priority for purposes of
reimbursements from the Collection Account pursuant to Section 3.07) or through
Insurance Proceeds (respecting which it shall have similar priority). The
Servicer shall be responsible for all costs and expenses constituting
Liquidation Expenses incurred by it in any such proceedings; provided, however,
that it shall be entitled to reimbursement thereof (as well
55
as its normal servicing compensation) as set forth in Section 3.07. Any income
from or other funds (net of any income taxes) generated by REO Property shall be
deemed for purposes of this Agreement to be Liquidation Proceeds.
Any subsequent collections with respect to any Liquidated Mortgage Loan
shall be deposited to the Collection Account. For purposes of determining the
amount of any Liquidation Proceeds or Insurance Proceeds, or other unscheduled
collections, the Servicer may take into account any estimated additional
Liquidation Expenses expected to be incurred in connection with the related
defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee and held by the Certificate Administrator, who
shall hold the same on behalf of Trustee and the Trust in accordance with the
Agreement. Notwithstanding any such acquisition of title and cancellation of the
related Mortgage Loan, such Mortgaged Property shall (except as otherwise
expressly provided herein) be considered to be an outstanding Mortgage Loan held
as an asset of the Trust until such time as such property shall be sold.
(b) The Servicer shall not acquire any real property (or any personal
property incident to such real property) on behalf of the Trust Fund except in
connection with a default or reasonably foreseeable default of a Mortgage Loan.
In the event that the Servicer acquires any real property (or personal property
incident to such real property) on behalf of the Trust Fund in connection with a
default or imminent default of a Mortgage Loan, such property shall be disposed
of by the Servicer on behalf of the Trust Fund within three years after its
acquisition on behalf of the Trust Fund.
(c) With respect to any Mortgage Loan as to which the Servicer or a
Subservicer has received notice of, or has actual knowledge of, the presence of
any toxic or hazardous substance on the Mortgaged Property, the Servicer shall
promptly notify the Certificate Administrator and the Trustee, and shall act in
accordance with any such directions and instructions provided by the Certificate
Administrator on behalf of, and after consulting with the Trustee. If the
Certificate Administrator, on behalf of the Trustee has not provided directions
and instructions to the Servicer in connection with any such Mortgage Loan
within 5 days of a request by the Servicer for such directions and instructions,
then the Servicer shall take such action as it deems to be in the best economic
interest of the Trust Fund (other than proceeding against the Mortgaged
Property) and is hereby authorized at such time as it deems appropriate to
release such Mortgaged Property from the lien of the related Mortgage. The
parties hereto acknowledge that the Servicer shall not obtain on behalf of the
Trust a deed as a result or in lieu of foreclosure, and shall not otherwise
acquire possession of or title to, or commence any proceedings to acquire
possession of or title to, or take any other action with respect to, any
Mortgaged Property, if the Trust could reasonably be considered to be a
responsible party for any liability arising from the presence of any toxic or
hazardous substance on the Mortgaged Property.
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Section 3.14. Certificate Administrator to Cooperate; Release of
Mortgage Files.
(a) Upon payment in full of any Mortgage Loan, the Servicer will
immediately notify the Certificate Administrator and the Trustee by a
certification signed by a Servicing Officer (which certification shall include a
statement to the effect that all amounts received in connection with such
payment which are required to be deposited in the Collection Account have been
so deposited) and shall request delivery to the Servicer or Subservicer, as the
case may be, of the Mortgage File. Upon receipt of such certification and
request, the Certificate Administrator on behalf of the Trustee shall promptly
cause to be released the related Mortgage File to the Servicer or Subservicer
and execute and deliver to the Servicer, without recourse, the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage (furnished by the Servicer),
together with the Mortgage Note with written evidence of cancellation thereon.
(b) From time to time as is appropriate, for the servicing or
foreclosure of any Mortgage Loan or collection under an insurance policy, the
Servicer may deliver to the Certificate Administrator a Request for Release
signed by a Servicing Officer on behalf of the Servicer in substantially the
form attached as Exhibit E hereto. Upon receipt of the Request for Release, the
Certificate Administrator on behalf of the Trustee shall deliver the Mortgage
File or any document therein to the Servicer or Subservicer, as the case may be,
as bailee for the Trustee.
(c) The Servicer shall cause each Mortgage File or any document therein
released pursuant to Subsection 3.14(b) to be returned to the Certificate
Administrator when the need therefor no longer exists, and in any event within
21 days of the Servicer's receipt thereof, unless the Mortgage Loan has become a
Liquidated Mortgage Loan and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Collection Account or such Mortgage File is
being used to pursue foreclosure or other legal proceedings. Prior to return of
a Mortgage File or any document to the Certificate Administrator, the Servicer,
the related insurer or Subservicer to whom such file or document was delivered
shall retain such file or document in its respective control as bailee for the
Certificate Administrator on behalf of the Trustee unless the Mortgage File or
such document has been delivered to an attorney, or to a public trustee or other
public official as required by law, to initiate or pursue legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Servicer has delivered to the Certificate Administrator
and 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. If a Mortgage Loan
becomes a Liquidated Mortgage Loan, the Certificate Administrator on behalf of
the Trustee shall deliver the Request for Release with respect thereto to the
Servicer upon deposit of the related Liquidation Proceeds in the Collection
Account.
(d) The Certificate Administrator on behalf of the Trustee shall
execute and deliver or cause to be executed and delivered to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to (i)
the foreclosure or trustee's sale with respect to a Mortgaged Property; (ii) any
legal action brought to obtain judgment against any Mortgagor on the Mortgage
Note or Mortgage; (iii) obtain a deficiency judgment against the Mortgagor; or
(iv) enforce any other rights or remedies provided by the Mortgage Note or
Mortgage or otherwise
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available at law or equity. Together with such documents or pleadings the
Servicer shall deliver to the Certificate Administrator and the Trustee a
certificate of a Servicing Officer in which it requests the Certificate
Administrator on behalf of the Trustee to execute or cause to be executed the
pleadings or documents. The certificate shall certify and explain the reasons
for which the pleadings or documents are required. It shall further certify that
the Trustee's or the Certificate Administrator's execution and delivery of the
pleadings or documents will not invalidate any insurance coverage under the
insurance policies or invalidate or otherwise affect the lien of the Mortgage,
except for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Section 3.15. Servicing Compensation.
(a) As compensation for its activities hereunder, the Servicer shall be
entitled to receive the Servicing Fee (out of which it will pay the Trustee)
from full payments of accrued interest on each Mortgage Loan. The Servicer shall
be solely responsible for paying any and all fees with respect to a Subservicer,
and the Trustee and the Trust Fund shall not bear any fees, expenses or other
costs directly associated with any Subservicer.
(b) The Servicer may retain additional servicing compensation in the
form of late payment charges, to the extent such charges are collected from the
related Mortgagors and investment earnings on the Collection Account. The
Servicer shall be required to pay all expenses it incurs in connection with
servicing activities under this Agreement and shall not be entitled in
connection with servicing activities under this Agreement to reimbursement
except as provided in this Agreement. Expenses to be paid by the Servicer
without reimbursement under this Subsection 3.15(b) shall include payment of the
expenses of the accountants retained pursuant to Section 3.17.
Section 3.16. Annual Statements of Compliance.
Within 90 days after December 31 of each year, the Servicer at its own
expense shall deliver to the Certificate Administrator, with a copy to the
Trustee and the Rating Agencies, an Officer's Certificate stating, as to the
signer thereof, that (i) a review of the activities of the Servicer during the
preceding calendar year and of performance under this Agreement has been made
under such officer's supervision, (ii) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled its obligations under this
Agreement in all material respects for such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof including the steps
being taken by the Servicer to remedy such default; (iii) a review of the
activities of each Subservicer during the Subservicer's most recently ended
calendar year and its performance under its Subservicing Agreement has been made
under such officer's supervision; and (iv) to the best of the Servicing
Officer's knowledge, based on his review and the certification of an officer of
the Subservicer (unless the Servicing Officer has reason to believe that
reliance on such certification is not justified), either each Subservicer has
performed and fulfilled its duties, responsibilities and obligations under this
Agreement and its Subservicing Agreement in all material respects throughout the
year, or, if there has been a default in performance or fulfillment of any such
duties, responsibilities or obligations, specifying the nature and status of
each such default known to the Servicing Officer. Copies of such statements
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shall be provided by the Servicer to the Certificateholders upon request or by
the Certificate Administrator at the expense of the Servicer should the Servicer
fail to provide such copies.
Section 3.17. Annual Independent Public Accountants' Servicing Report.
(a) Within 90 days after December 31 of each year, the Servicer, at its
expense, shall cause a firm of independent public accountants who are members of
the American Institute of Certified Public Accountants to furnish a statement to
the Servicer, which will be provided to the Certificate Administrator, the
Trustee, and the Rating Agencies, to the effect that, in connection with the
firm's examination of the Servicer's financial statements as of the end of such
calendar year, nothing came to their attention that indicated that the Servicer
was not in compliance with Sections 3.06, 3.07 and 3.08 except for (i) such
exceptions as such firm believes to be immaterial and (ii) such other exceptions
as are set forth in such statement.
(b) Within 90 days after December 31 of each year, the Servicer, at its
expense, shall, and shall cause each Subservicer to cause, a nationally
recognized firm of independent certified public accountants to furnish to the
Servicer or such Subservicer, as the case may be, a report stating that (i) it
has obtained a letter of representation regarding certain matters from the
management of the Servicer or such Subservicer, as the case may be, which
includes an assertion that the Servicer or such Subservicer, as the case may be,
has complied with certain minimum mortgage loan servicing standards identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America with respect to the servicing of
first lien conventional single family mortgage loans during the most recently
completed calendar year and (ii) on the basis of an examination conducted by
such firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. Immediately upon receipt of such report, the Servicer shall or
shall cause each Subservicer to furnish a copy of such report to the Certificate
Administrator, the Trustee and the Rating Agencies.
Section 3.18. Optional Purchase of Defaulted Mortgage Loans.
The Servicer may repurchase any Mortgage Loan delinquent in payment for
a period of 90 days or longer for a price equal to the Repurchase Price. The
procedure for such repurchase shall be the same as for repurchase by the Seller
under the Purchase Agreement. Notwithstanding any contrary provision of this
Agreement, with respect to any Mortgage Loan which is not in default or as to
which no default is imminent, no purchase or substitution pursuant to Section
2.03 or this Section 3.18 shall be made unless the Servicer provides to the
Certificate Administrator and the Trustee, an Opinion of Counsel to the effect
that such purchase or substitution would not (i) result in the imposition of
taxes on "prohibited transactions" of the Trust Fund, as defined in Section 860F
of the Code or a tax or contributions to the Trust Fund under the REMIC
Provisions, or (ii) cause the Trust Fund to fail to qualify as a REMIC at any
time that any Certificates are outstanding. Any Mortgage Loan to be purchased or
substituted pursuant to this Section 3.18 shall be purchased or substituted
(subject to compliance with this Section 3.18) upon the earlier of (x) the
occurrence of a default or reasonably foreseeable default with respect to such
Mortgage Loan or (y) receipt by the Certificate Administrator and the
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Trustee, of an Opinion of Counsel to the effect that such purchase or
substitution will not result in the events described in clauses (i) and (ii) of
the preceding sentence.
Section 3.19. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Servicer shall prepare and deliver all federal and state
information reports when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under Section
6050J of the Code to the effect that the Servicer or Subservicer shall make
reports of foreclosures and abandonments of any mortgaged property, the Servicer
or Subservicer shall file reports relating to each instance occurring during the
previous calendar year in which the Servicer (i) acquires an interest in any
Mortgaged Property through foreclosure or other comparable conversion in full or
partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to know
that any Mortgaged Property has been abandoned. The reports from the Servicer or
Subservicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Section 6050J, Section 6050H (reports relating to
mortgage interest received) and Section 6050P of the Code (reports relating to
cancellation of indebtedness).
Section 3.20. Purchase of Converted Mortgage Loans.
Pursuant to the Converted Loan Purchase Agreement, the Converted Loan
Purchaser shall be obligated to purchase from the Trust any Converted Mortgage
Loans at the Repurchase Price. The Servicer shall promptly notify the
Certificate Administrator, the Trustee and the Converted Loan Purchaser of each
Mortgage Loan which becomes a Converted Mortgage Loan. If the Converted Loan
Purchaser fails to purchase any Converted Loan, the Servicer shall be terminated
and the Certificate Administrator shall be the Servicer and is obligated to make
such purchase under the Converted Loan Purchase Agreement.
Section 3.21. [Reserved]
Section 3.22. Servicing and Administrating of the MI Policies.
(a) The Servicer shall take all such actions on behalf of the Trustee
as are necessary to service, maintain and administer the MI Policies and to
perform the Trustee's obligations and enforce the Trustee's rights under the MI
Policies, which actions shall conform to the standards of an institution
prudently administering MI Policies for its own account. Except as expressly set
forth herein, the Servicer shall have full authority on behalf of the Trust to
do anything it reasonably deems appropriate or desirable in connection with the
servicing, maintenance and administration of the MI Policies. The Servicer shall
make its best reasonable efforts to file all insured claims under the MI
Policies and collect from the MI Insurer all Insurance Proceeds due to the
Trustee under the MI Policies. The Servicer shall not take, or permit any
subservicer to take, any action which would result in non-coverage under any
applicable MI Policy of any loss which, but for the actions of the Servicer or
Subservicer, would have been covered thereunder. To the extent coverage is
available, the Servicer shall keep or cause to be kept in full force and effect
each such MI Policy for the life of the Mortgage Loan; provided, however, that
if a MI Insurer Insolvency Event has occurred and is continuing, the Servicer
may terminate the MI Policy on any Mortgage Loan that is not then past due. The
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Servicer shall cooperate with the MI Insurer and shall use its best efforts to
furnish all reasonable aid, evidence and information in the possession of the
Servicer or to which the Servicer has access with respect to any Mortgage Loan.
(b) The Servicer shall deposit into the Collection Account pursuant to
Section 3.06(d)(v) hereof all MI Insurance Proceeds received from the MI Insurer
under the terms of the MI Policies. The Servicer shall withdraw from the
Collection Account and pay to the MI Insurer pursuant to Section 3.07(a)(xii)
hereof, the monthly MI Premiums due to the MI Insurer in accordance with the
terms of the MI Insurance Agreements.
(c) Notwithstanding the provisions of Subsection 3.22(a) and (b), the
Servicer shall not take any action in regard to the MI Policies inconsistent
with the interests of the Trustee or the Certificateholders or with the rights
and interests of the Trustee or the Certificateholders under this Agreement;
provided, however, that payments of the monthly MI Premiums to the MI Insurer
pursuant to Subsection 3.22(b) above and Section 3.07(a)(xiii) hereof shall be
deemed not to be inconsistent with such interests.
(d) The Trustee and the Certificate Administrator on behalf of the
Trustee shall furnish the Servicer with any powers of attorney and other
documents in form as provided to it necessary or appropriate to enable the
Servicer to service and administer the MI Policies; provided, however, that
neither the Certificate Administrator nor the Trustee shall be liable for the
actions of the Servicer under such powers of attorney.
(e) If at any time during the term of this Agreement, a MI Insurer
Insolvency Event has occurred and is continuing, the Servicer agrees to review,
not less often than monthly, the financial condition of the related MI Insurer
with a view towards determining whether recoveries under the MI Policy are
jeopardized for reasons related to the financial condition of the related MI
Insurer. In such event, the Servicer may obtain an additional MI Policy or a
replacement MI Policy, the MI Premiums on which would be paid by the Servicer
from the Collection Account pursuant to Section 3.07(a)(xiii) hereof.
(f) The Servicer shall comply with all other terms, conditions and
obligations set forth in the MI Policies.
Section 3.23. Determination Date Reports.
On the second Business Day following each Determination Date, the
Servicer shall deliver to the Certificate Administrator a report, prepared as of
the close of business on the Determination Date (the "Determination Date
Report"), and shall forward to the Certificate Administrator in the form of
computer readable electromagnetic tape or disk a copy of such report. The
Determination Date Report and any written information supplemental thereto shall
include such information with respect to the Mortgage Loans that is reasonably
available to the Servicer and that is required by the Certificate Administrator
for purposes of making the calculations and providing the reports referred to in
this Agreement, as set forth in written specifications or guidelines issued by
the Certificate Administrator from time to time. Such information
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shall include the aggregate amounts required to be withdrawn from the Collection
Account and deposited into the Payment Account pursuant to Section 3.07. Such
information shall also include (a) the number of Mortgage Loans that prepaid in
the previous month; (b) the loan balance of each such Mortgage Loan; (c) whether
a prepayment penalty was applied to such Mortgage Loan; and (d) the amount of
prepayment penalty with respect to each such Mortgage Loan. The Servicer agrees
to cooperate with the Certificate Administrator in providing all information as
is reasonably requested by the Certificate Administrator to prepare the reports
required under the Agreement.
The determination by the Servicer of such amounts shall, in the absence
of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Trustee and the Certificate Administrator shall be fully
protected in relying upon the same without any independent check or
verification.
Section 3.24. Advances.
If any Monthly Payment (together with any advances from the
Subservicers) on a Mortgage Loan that was due on the immediately preceding Due
Date and delinquent on the Determination Date is delinquent other than as a
result of application of the Relief Act, the Servicer will deposit in the
Collection Account not later than the Servicer Remittance Date immediately
preceding the related Distribution Date an amount equal to such deficiency net
of the related Servicing Fee for such Mortgage Loan, except to the extent the
Servicer determines any such advance to be nonrecoverable from Liquidation
Proceeds, Insurance Proceeds or future payments on such Mortgage Loan. Subject
to the foregoing and in the absence of such a determination, the Servicer shall
continue to make such advances through the date that the related Mortgaged
Property has, in the judgment of the Servicer, been completely liquidated.
The Servicer may fund an Advance from its own corporate funds, advances
made by any subservicer or funds held in the Collection Account for future
payment or withdrawal.
Advances made from funds held in the Collection Account may be made by
the Servicer from subsequent collections of principal and interest received on
other Mortgage Loans and deposited into the Collection Account. Advances made
from the Collection Account are not limited to subsequent collections of
principal and interest received on the delinquent Mortgage Loan with respect to
which an Advance is made. If on the Servicer Remittance Date prior to any
Distribution Date funds in the Collection Account are less than the amount
required to be paid to the Certificateholders on such Distribution Date, then
the Servicer shall deposit its own funds into the Payment Account in the amount
of the lesser of (i) any unreimbursed Advances previously made by the Servicer
with funds held in the Collection Account or (ii) the shortfall in the
Collection Account, provided, however, that in no event shall the Servicer
deposit into the Collection Account an amount that is less than any shortfall in
the Collection Account attributable to delinquent payments on Mortgage Loans
which the Servicer deems to be recoverable and which has not been covered by an
Advance from the Servicer's own corporate funds or any subservicer's funds. If
applicable, on the Servicer Remittance Date preceding each Distribution Date,
the Servicer shall present an Officer's Certificate to the Certificate
Administrator, and the Trustee (i) stating that the Servicer elects not to make
an Advance in a stated amount and (ii) detailing the reason it deems the advance
to be nonrecoverable.
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Section 3.25. Compensating Interest Payments.
The Servicer shall deposit in the Collection Account not later than the
Servicer Remittance Date preceding the Distribution Date an amount equal to the
Compensating Interest related to the related Determination Date. The Servicer
shall not be entitled to any reimbursement of any Compensating Interest payment.
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall (based solely on the
information provided to the Trustee by the Certificate Administrator pursuant to
Section 4.03 hereof) withdraw from the Distribution Account that portion of
REMIC Available Funds for such Distribution Date consisting of the Interest
Remittance Amount for such Distribution Date, and make the following
disbursements and transfers in the order of priority described below, in each
case to the extent of the Interest Remittance Amount remaining for such
Distribution Date:
(i) On each Distribution Date, the Trustee will first distribute the
Prepayment Charges collected during the prior Prepayment Period to the
Holders of the Class P Certificates. After making that distribution, the
Trustee will distribute the remaining Interest Remittance Amount for that
Distribution Date, to the Certificate Administrator, the Certificate
Administrator Fee which is due on that Distribution Date, and will then
apply the remaining Interest Remittance Amount to the payment of interest
then due on the certificates in the following order of priority:
(A) first, with respect to the Class AIO Certificates and the Class A-1
Certificates, the Class AIO Monthly Interest Distributable Amount and the
REMIC Monthly Interest Distributable Amount for the Class A-1 Certificates,
respectively; these payments are of equal priority to those two Classes,
and, in the event that the remaining Interest Remittance Amount is
insufficient to pay both Classes the full amount due, the amount paid to
the Holders of each of these two Classes will be a pro rata portion of the
remaining Interest Remittance Amount, with the allocation based on the
relative proportions of the Class AIO Monthly Interest Distributable Amount
and the REMIC Monthly Interest Distributable Amount for the Class A-1
Certificates; the REMIC Monthly Interest Distributable Amount for the Class
A-1 Certificates shall be paid to the Holders of the Class A-1
Certificates, and the Class AIO Monthly Interest Distributable Amount shall
be paid as follows:
(x) first, to the Holders of the Class AIO Certificates, the Class AIO
Unpaid Interest Shortfall Amount; and
(y) second, to the Supplemental Interest Account for further
application in accordance with Section 4.04 hereof, the Class AIO Current
Interest.
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(B) second, to the Holders of the Class M-1 Certificates, the REMIC
Monthly Interest Distributable Amount for Class M-1;
(C) third, to the Holders of the Class M-2 Certificates, the REMIC
Monthly Interest
Distributable Amount for Class M-2;
(D) fourth, to the Holders of the Class M-3 Certificates, the REMIC
Monthly Interest Distributable Amount for Class M-3; and
(E) fifth, to the Holders of the Class RU Certificates, any remainder.
(ii) On each Distribution Date (a) prior to the Crossover Date or (b)
on which a Trigger Event is in effect, the Trustee shall (based solely on
the information provided to the Trustee by the Certificate Administrator
pursuant to Section 4.03 hereof) withdraw from the Distribution Account
that portion of the REMIC Available Funds for such Distribution Date
consisting of the Principal Remittance Amount and make the following
disbursements and transfers in the order of priority described below:
(A) first, to the Holders of the Class A-1 Certificates, the entire
amount of the Principal Remittance Amount, until the Certificate Principal
Balance of the Class A-1 Certificates has been reduced to zero;
(B) second, to the Holders of the Class M-1 Certificates, the entire
amount of the Principal Remittance Amount until the certificate principal
balance of the Class M-1 Certificates has been reduced to zero;
(C) third, to the Holders of Class M-2 Certificates, the entire amount
of the Principal Remittance Amount until the Certificate Principal Balance
of the Class M-2 Certificates has been reduced to zero;
(D) fourth, to the Holders of the Class M-3 Certificates, the entire
amount of the Principal Remittance Amount until the Certificate Principal
Balance of the Class M-3 Certificates has been reduced to zero;
(E) fifth, to the Trustee and the Certificate Administrator, pro rata,
any amounts owed to them under the Basic Documents remaining unpaid;
(F) sixth, to the Servicer, the amount of any reimbursement or
indemnification owed to it by the Trust pursuant to Section 6.03 hereof;
(G) seventh, to the Holders of the Class O Certificates, the entire
amount of the Principal Distribution Amount until the Certificate Balance
of the Class O Certificates has been reduced to zero; and
(H) eighth, to the Holders of the Class RU Certificates, any remainder.
(iii) On each Distribution Date (a) on or after the Crossover Date and
(b) on which a Trigger Event is not in effect, the Trustee shall (based
solely on the information
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provided to the Trustee by the Certificate Administrator pursuant to
Section 4.03 hereof) withdraw from the Distribution Account that portion of
the REMIC Available Funds for such Distribution Date consisting of the
Principal Remittance Amount and make the following disbursements and
transfers in the order of priority described below:
(A) first, to the Holders of the Class A-1 Certificates, the Class A-1
Principal Distribution Amount, until the Certificate Principal Balance of
the A-1 Certificates has been reduced to zero;
(B) second, to the Holders of the Class M-1 Certificates, the Class M-1
Principal Distribution Amount, until the Certificate Principal Balance of
the Class M-1 Certificates has been reduced to zero;
(C) third, to the Holders of the Class M-2 Certificates, the Class M-2
Principal Distribution Amount, until the Certificate Principal Balance of
the Class M-2 Certificates has been reduced to zero;
(D) fourth, to the Holders of the Class M-3 Certificates, the Class M-3
Principal Distribution Amount, until the Certificate Principal Balance of
the Class M-3 Certificates has been reduced to zero;
(E) fifth, to the Trustee and the Certificate Administrator, pro rata,
any amounts owed to them under the Basic Documents remaining unpaid;
(F) sixth, to the Servicer, the amount of any reimbursement or
indemnification owed to it by the Trust pursuant to Section 6.03 hereof;
(G) seventh, to the Holders of the Class O Certificates, the entire
amount of the Principal Distribution Amount until the Certificate Balance
of the Class O Certificates has been reduced to zero; and
(H) eighth, to the Holders of the Class RU Certificates, any remainder.
(b) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 11.01 respecting the
final distribution), in the case of Certificateholders of the Regular
Certificates, by check or money order mailed to such Certificateholder at the
address appearing in the Certificate Register, or by wire transfer.
Distributions among Certificateholders shall be made in proportion to the
Percentage Interests evidenced by the Certificates held by such
Certificateholders.
(c) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All
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such credits and disbursements with respect to a Book-Entry Certificate are to
be made by the Depository and the Depository Participants in accordance with the
provisions of the Certificates. None of the Certificate Administrator, the
Trustee, the Depositor, the Servicer or the Seller shall have any responsibility
therefor except as otherwise provided by applicable law.
Section 4.02. Payment Account and Distribution Account.
(a) No later than the Closing Date, the Certificate Administrator shall
establish and maintain a segregated trust account that is an Eligible Account,
which shall be titled "Payment Account, The First Union National Bank, as
Certificate Administrator for the registered holders of NovaStar Mortgage
Funding Trust 2000-2, Home Equity Loan Asset-Backed Certificates, Series 2000-2"
(the "Payment Account"). The Certificate Administrator shall, promptly upon
receipt, deposit in the Payment Account and retain therein the Interest
Remittance Amount and the Principal Remittance Amount remitted on each Servicer
Remittance Date to the Certificate Administrator by the Servicer, as well as
amounts transferred from the Interest Coverage Account and the Pre-Funding
Account. Funds deposited in the Payment Account shall be held in trust by the
Certificate Administrator for the Certificateholders for the uses and purposes
set forth herein.
(b) The Certificate Administrator may invest funds deposited in the
Payment Account in Permitted Investments in its discretion with a maturity date
(i) no later than the Business Day immediately preceding the date on which such
funds are required to be withdrawn from such account pursuant to this Agreement,
if a Person other than the Certificate Administrator or an Affiliate manages or
advises such investment, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Certificate Administrator or an Affiliate manages or advises such investment.
All income or other gain from such investments may be released from the Payment
Account and paid to the Certificate Administrator, from time to time as part of
its compensation for acting as Certificate Administrator.
(c) Amounts on deposit in the Payment Account shall be withdrawn by the
Certificate Administrator as follows:
(i) To fund the distributions described in Section 4.01 hereof;
(ii) To withdraw any amount not required to be deposited in the Payment
Account or deposited therein in error; and
(iii) To clear and terminate the Payment Account upon the termination
of this Agreement, with any amounts remaining on deposit therein being paid
to the Holders of the Class RU Certificates.
(d) By noon on the Business Day prior to each Distribution Date, the
Certificate Administrator shall remit funds in the Payment Account to the
Trustee.
(e) No later than the Closing Date, the Trustee shall establish and
maintain a segregated trust account that is an Eligible Account, which shall be
titled "Distribution Account, The Chase Manhattan Bank, as Trustee for the
registered holders of NovaStar Mortgage Funding
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Trust 2000-2, Home Equity Loan Asset-Backed Certificates, Series 2000-2" (the
"Distribution Account"). The Certificate Administrator shall, promptly upon
receipt, deposit in the Distribution Account and retain therein amounts
transferred from the Payment Account. Funds deposited in the Distribution
Account shall be held in trust by the Trustee for the Certificateholders for the
uses and purposes set forth herein.
(f) The Trustee may invest funds deposited in the Distribution Account
in Permitted Investments in its discretion with a maturity date (i) no later
than the Business Day immediately preceding the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if a
Person other than the Trustee or an Affiliate manages or advises such
investment, and (ii) no later than the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement, if the Trustee or an
Affiliate manages or advises such investment. All income or other gain from such
investments may be released from the Distribution Account and paid to the
Trustee, from time to time as part of its compensation for acting as Trustee.
(g) Amounts on deposit in the Distribution Account shall be withdrawn
by the Trustee as follows:
(i) To fund the distributions described in Section 4.01 hereof;
(ii) To withdraw any amount not required to be deposited in the
Distribution Account or deposited therein in error; and
(iii) To clear and terminate the Distribution Account upon the
termination of this Agreement, with any amounts remaining on deposit
therein being paid to the Holders of the Class RU Certificates.
(h) On each Distribution Date, the Trustee shall distribute all amounts
on deposit in the Distribution Account established by it to Certificateholders
in respect of the Certificates and to such other persons in the order of
priority set forth in Section 4.01 hereof.
Section 4.03. Statements.
(a) On each Distribution Date, based, as applicable, on information
provided to it by the Servicer, the Certificate Administrator shall prepare and
make available to each Holder of the Regular Certificates, the Servicer and the
Rating Agencies, a statement as to the distributions made on such Distribution
Date:
(i) the amount of the distribution made on such Distribution Date to
the Holders of each Class of Regular Certificates, separately identified,
allocable to principal and the amount of the distribution made to the
Holders of the Class P Certificates allocable to Prepayment Charges;
(ii) the amount of the distribution made on such Distribution Date to
the Holders of each Class of Regular Certificates (other than the Class P
Certificates) allocable to interest, separately identified;
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(iii) the Pool Balance at the Close of Business at the end of the
related Due Period;
(iv) the number, aggregate principal balance, and weighted average
Mortgage Rate of the Mortgage Loans as of the related Determination Date
and the number and aggregate principal balance of all Subsequent Mortgage
Loans added during the preceding Prepayment Period;
(v) the number and aggregate unpaid principal balance of Mortgage Loans
that were (A) Delinquent (exclusive of Mortgage Loans in bankruptcy or
foreclosure and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and
(3) 90 or more days, (B) as to which foreclosure proceedings have been
commenced and (C) REO Properties;
(vi) the aggregate amount of Principal Prepayments made during the
related Prepayment Period;
(vii) the aggregate amount of Realized Losses incurred during the
related Prepayment Period and the cumulative amount of Realized Losses;
(viii) the Certificate Principal Balance of the Class A-1 Certificates,
the Mezzanine Certificates and the Class O Certificates, after giving
effect to the distributions made on such Distribution Date;
(ix) the Unpaid Interest Shortfall Amount, if any, with respect to the
Class A-1 Certificates, the Mezzanine Certificates and the Class AIO
Certificates for such Distribution Date;
(x) the aggregate amount of any Prepayment Interest Shortfalls for such
Distribution Date, to the extent not covered by payments by the Servicer
pursuant to Section 3.25;
(xi) the Credit Enhancement Percentage for such Distribution Date;
(xii) the Available Funds Cap Carryforward Amount for the Class A-1
Certificates and the Mezzanine Certificates, if any, for such Distribution
Date and the amount remaining unpaid after reimbursements therefor on such
Distribution Date;
(xiii) the respective REMIC Pass-Through Rates applicable to the Class
A-1 Certificates, the Mezzanine Certificates and the Class AIO Certificates
for such Distribution Date and the REMIC Pass-Through Rate applicable to
the Class A-1 Certificates and the Mezzanine Certificates for the
immediately succeeding Distribution Date;
(xiv) the Supplemental Interest Payment for each Class on such
Distribution Date;
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In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed in a separate section of the report
as a dollar amount for each Class for each $1,000 original dollar amount as of
the Closing Date.
The Certificate Administrator may, in the absence of manifest error,
conclusively rely upon the Determination Date Report of the Servicer in its
preparation of the statement to Certificateholders pursuant to this Section
4.03.
(b) Within a reasonable period of time after the end of each calendar
year, the Certificate Administrator shall, upon written request, furnish to each
Person who at any time during the calendar year was a Certificateholder of a
Regular Certificate, if requested in writing by such Person, such information as
is reasonably necessary to provide to such Person a statement containing the
information set forth in subclauses (i) and (ii) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Certificate Administrator shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be prepared and furnished by the Certificate Administrator to
Certificateholders pursuant to any requirements of the Code as are in force from
time to time.
(c) On each Distribution Date, the Certificate Administrator shall
forward to the Residual Certificateholders a copy of the reports forwarded to
the Regular Certificateholders in respect of such Distribution Date with such
other information as the Certificate Administrator deems necessary or
appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Certificate Administrator shall deliver to each Person who at any time
during the calendar year was a Residual Certificateholder, if requested in
writing by such Person, such information as is reasonably necessary to provide
to such Person a statement containing the information provided pursuant to the
previous paragraph aggregated for such calendar year or applicable portion
thereof during which such Person was a Residual Certificateholder. Such
obligation of the Certificate Administrator shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
prepared and furnished to Certificateholders by the Certificate Administrator
pursuant to any requirements of the Code as from time to time in force.
(e) No later than noon on the Business Day prior to each Distribution
Date, the Certificate Administrator shall forward, by facsimile transmission,
the statement prepared pursuant to paragraph (a) of this Section 4.03, together
with all other information reasonably necessary to make the distributions
pursuant to Section 4.01 of this Agreement, to the Trustee. On each Distribution
Date, the Trustee shall forward by mail to each Certificateholder the statement
prepared pursuant to paragraph (a) of this Section 4.03. Neither the Trustee nor
the Certificate Administrator shall have any responsibility to (i) verify
information provided by the Servicer to be included in such statement or (ii)
include any information required to be included in such statement if the
Servicer has failed to timely produce such information to the Certificate
Administrator, as required pursuant hereto.
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Section 4.04. Supplemental Interest Account.
(a) The parties do hereby create and establish a sub-trust of the Trust
Fund, which shall hold an account, which, no later than the Closing Date, the
Certificate Administrator shall establish and maintain, on behalf of the
Trustee, as a segregated trust account that is an Eligible Account, which shall
be titled "Supplemental Interest Account, The First Union National Bank, as
Certificate Administrator for the registered holders of NovaStar Mortgage
Funding Trust 2000-2, Home Equity Loan Asset-Backed Certificates, Series 2000-2"
(the "Supplemental Interest Account"). The Cap Agreement and the proceeds
thereof shall be the assets of such trust. The Certificate Administrator shall,
promptly upon receipt, deposit in the Supplemental Interest Account all Cap
Payments received by the Certificate Administrator, on behalf of the Trustee,
under the Cap Agreements and (ii) each distribution of the Class AIO Current
Interest pursuant to Section 4.01(a)(i)(A)(ii). Funds deposited in the
Supplemental Interest Account shall be held in trust by the Certificate
Administrator for the Certificateholders for the uses and purposes set forth
herein.
(b) The Certificate Administrator will invest funds deposited in the
Supplemental Interest Account as directed by the Servicer in Permitted
Investments with a maturity date (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Certificate
Administrator or an Affiliate manages or advises such investment, and (ii) no
later than the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if the Certificate Administrator or an
Affiliate manages or advises such investment. For federal income tax purposes,
the Holders of the Class AIO Certificates shall be the owners of the
Supplemental Interest Account and shall report all items of income, deduction,
gain or loss arising therefrom. All income and gain realized from investment of
funds deposited in the Supplemental Interest Account shall be credited to such
Account. At no time will the Cap Agreements or the Supplemental Interest Account
be assets of any REMIC created hereunder.
(c) On each Distribution Date, the Certificate Administrator shall
transfer the Supplemental Interest Payment Amount Available as follows:
(i) first, to pay the Supplemental Interest Payment for the Class A-1
Certificates;
(ii) second, to pay the Supplemental Interest Payment for the Class M-1
Certificates;
(iii) third, to pay the Supplemental Interest Payment for the Class M-2
Certificates; and
(iv) fourth, to pay the Supplemental Interest Payment for the Class M-3
Certificates.
The Trustee, in making the foregoing distributions, shall first apply in
full that portion of the Total Supplemental Interest Payment Amount equal
to the Class AIO Current Interest, and, only if that entire amount is
exhausted, shall then apply that portion of the Total Supplemental Interest
Payment Amount Available equal to the Allocable Cap
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Payment Amount. Any remaining amount of the Total Supplemental Interest
Payment Amount Available for such Distribution Date shall be retained in
the Supplemental Interest Amount, except for the portion thereof that is
distributable as the Class AIO Monthly Distributable Amount pursuant to
Section 4.4(d) hereof.
(d) On each Distribution Date, the Trustee shall distribute to the Holders
of the Class AIO Certificates, the Class AIO Monthly Distributable Amount for
such Distribution Date plus all income and gain realized on investments in the
Supplemental Interest Account which have not previously been distributed to such
Holders.
(e) The Certificate Administrator shall comply with all requirements of the
Code and applicable state and local law with respect to the withholding from any
distributions made by it to any Person entitled thereto of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(f) Notwithstanding any other provision of this Section 4.04, the right to
receive the Supplemental Interest Amount (such right, the "Supplemental Interest
Right") shall not be separately transferable from the Underwritten Certificates.
Section 4.05. Pre-Funding Account.
(a) No later than the Closing Date, the Certificate Administrator shall
establish and maintain, on behalf of the Trustee, a segregated trust account
that is an Eligible Account, which shall be titled "Pre-Funding Account, The
First Union National Bank, as Certificate Administrator for the registered
holders of NovaStar Mortgage Funding Trust 2000-2, Home Equity Loan Asset-Backed
Certificates, Series 2000-2" (the "Pre-Funding Account"). The Certificate
Administrator shall, promptly upon receipt, deposit in the Pre-Funding Account
and retain therein the Original Pre-Funded Amount remitted on the Closing Date
to the Certificate Administrator by the Depositor. Funds deposited in the
Pre-Funding Account shall be held in trust by the Certificate Administrator, on
behalf of the Trustee, for the Certificateholders for the uses and purposes set
forth herein.
(b) The Certificate Administrator will invest funds deposited in the
Pre-Funding Account as directed by the Servicer in Permitted Investments with a
maturity date (i) no later than the Business Day immediately preceding the date
on which such funds are required to be withdrawn from such account pursuant to
this Agreement, if a Person other than the Certificate Administrator or an
Affiliate manages or advises such investment, and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Certificate Administrator or an Affiliate manages or advises
such investment. For federal income tax purposes, the Servicer shall be the
owner of the Pre-Funding Account and shall report all items of income,
deduction, gain or loss arising therefrom. All income and gain realized from
investment of funds deposited in the Pre-Funding Account shall be withdrawn and
deposited in the Interest Coverage Account. At no time will the Pre-Funding
Account be an asset of any REMIC created hereunder.
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(c) Amounts on deposit in the Pre-Funding Account shall be withdrawn by
the Certificate Administrator as follows:
(i) On any Subsequent Transfer Date, the Certificate Administrator
shall withdraw from the Pre-Funding Account an amount equal to 98.40% of
the Principal Balances of the Subsequent Mortgage Loans transferred and
assigned to the Certificate Administrator for deposit in the Mortgage Pool
on such Subsequent Transfer Date and pay such amount to or upon the order
of the Depositor upon satisfaction of the conditions set forth in Section
2.08 with respect to such transfer and assignment;
(ii) If the amount on deposit in the Pre-Funding Account (exclusive of
investment income) has not been reduced to zero during the Funding Period,
on the day immediately following the termination of the Funding Period, the
Certificate Administrator shall deposit into the Payment Account any
amounts remaining in the Pre-Funding Account (exclusive of investment
income) for distribution in accordance with the terms hereof;
(iii) To withdraw investment income for deposit in the Interest
Coverage Account;
(iv) To withdraw any amount not required to be deposited in the
Pre-Funding Account or deposited therein in error; and
(v) To clear and terminate the Pre-Funding Account upon the earlier to
occur of (A) the Distribution Date immediately following the end of the
Funding Period and (B) the termination of this Agreement, with any amounts
remaining on deposit therein being paid to the Holders of the Certificates
then entitled to distributions in respect of principal.
Withdrawals from the Pre-Funding Account pursuant to clauses (i), (ii)
and (iv) shall be treated as contributions of cash to the Lower-Tier REMIC on
the date of withdrawal.
Section 4.06. Interest Coverage Account.
(a) No later than the Closing Date, the Certificate Administrator shall
establish and maintain, on behalf of the Trustee, a segregated trust account
that is an Eligible Account, which shall be titled "Interest Coverage Account,
First Union National Bank, as Certificate Administrator for the registered
holders of NovaStar Mortgage Funding Trust 2000-2, Home Equity Loan Asset-Backed
Certificates, Series 2000-2" (the "Interest Coverage Account"). The Certificate
Administrator shall, promptly upon receipt, deposit in the Interest Coverage
Account and retain therein (i) the Interest Coverage Amount remitted on the
Closing Date to the Certificate Administrator by the Depositor and (ii) income
and gain realized from investments in the Pre-Funding Account. Funds deposited
in the Interest Coverage Account shall be held in trust by the Certificate
Administrator on behalf of the Trustee for the Certificateholders for the uses
and purposes set forth herein.
(b) For federal income tax purposes, the Servicer shall be the owner of
the Interest Coverage Account and shall report all items of income, deduction,
gain or loss arising
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therefrom. At no time will the Interest Coverage Account be an asset of any
REMIC created hereunder. All income and gain realized from investment of funds
deposited in the Interest Coverage Account shall be for the sole and exclusive
benefit of the Servicer and shall be remitted by the Certificate Administrator
to the Servicer no later than the first Business Day following receipt of such
income and gain by the Certificate Administrator. The Servicer shall deposit in
the Interest Coverage Account the amount of any net loss incurred in respect of
any such Permitted Investment immediately upon realization of such loss.
(c) On each Distribution Date during the Funding Period and on the
Distribution Date immediately following the end of the Funding Period, the
Certificate Administrator shall withdraw from the Interest Coverage Account, to
the extent funds are available therefore, and deposit in the Payment Account an
amount, as provided in the related Determination Date Report, equal to (i) 30
days' interest on the Original Pre-Funded Amount calculated at an annual rate
equal to the weighted average of the interest rate payable on the Underwritten
Certificates as of the commencement of the related Due Period, minus (ii) the
sum of (1) any interest payments received on Subsequent Mortgage Loans during
the related Due Period and (2) any Advances in respect of interest portions of
delinquent Monthly Payments on the Subsequent Mortgage Loans conveyed to the
Certificate Administrator during the related Due Period. Such withdrawal and
deposit shall be treated as a contribution of cash by the Depositor to REMIC 1
on the date thereof. Immediately following any such withdrawal and deposit, and
immediately following the conveyance of any Subsequent Mortgage Loans to the
Trust on any Subsequent Transfer Date, the Certificate Administrator shall
withdraw from the Interest Coverage Account and remit to the Depositor or its
designee an amount equal to the excess, if any, of the amount remaining in the
Interest Coverage Account over the amount that would be required to be withdrawn
therefrom (assuming sufficient funds therein) pursuant to the preceding sentence
on each subsequent Distribution Date, if any, that will occur during the Funding
Period or that will be the Distribution Date immediately following the end of
the Funding Period, if no Subsequent Mortgage Loans were acquired by the Trust
Fund after the end of the Prepayment Period relating to the current Distribution
Date.
(d) Upon the earliest of (i) the Distribution Date immediately
following the end of the Funding Period, (ii) the reduction of the Certificate
Principal Balances of the Certificates to zero or (iii) the termination of this
Agreement in accordance with Section 11.01, any amount remaining on deposit in
the Interest Coverage Account after distributions pursuant to paragraph (c)
above shall be withdrawn by the Certificate Administrator and paid to the
Servicer or its designee.
Section 4.07. Allocation of Realized Losses.
(a) All Realized Losses on the Mortgage Loans shall be allocated by the
Certificate Administrator on each Distribution Date as follows: first, to the
Class O Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; second, to the Class M-3 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; third, to the Class M-2
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; and fourth, to the Class M-1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero. All Realized Losses to be
allocated to the Certificate Principal Balances of all Classes on any
Distribution Date shall be so allocated after the actual distributions to be
made on
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such date as provided above. All references above to the Certificate Principal
Balance of any Class of Certificates shall be to the Certificate Principal
Balance of such Class immediately prior to the relevant Distribution Date,
before reduction thereof by any Realized Losses, in each case to be allocated to
such Class of Certificates, on such Distribution Date.
Any allocation of Realized Losses to a Class O Certificate or to a
Mezzanine Certificate on any Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated. No allocations
of any Realized Losses shall be made to the Certificate Principal Balances of
the Class A-1 Certificates.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
Each of the Class A-1 Certificates, the Mezzanine Certificates, the
Class AIO Certificates, the Class P Certificates, the Class O Certificates and
the Residual Certificates shall be substantially in the forms annexed hereto as
exhibits, and shall, on original issue, be executed, authenticated and delivered
by the Trustee or by the Certificate Administrator on behalf of the Trustee to
or upon the order of the Depositor concurrently with the sale and assignment to
the Trust of the Trust Fund. The Underwritten Certificates shall be initially
evidenced by one or more Certificates representing a Percentage Interest with a
minimum dollar denomination of $25,000 and integral dollar multiples of $1,000
in excess thereof, except that one Certificate of each such Class of
Certificates may be in a different denomination so that the sum of the
denominations of all outstanding Certificates of such Class shall equal the
Certificate Principal Balance of such Class on the Closing Date. The Class AIO
Certificates, the Class P Certificates, the Class O Certificates and the
Residual Certificates are issuable in any Percentage Interests; provided,
however, that the sum of all such percentages for each such Class totals 100%
and no more than ten Certificates of each Class may be issued.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature on behalf of the Trustee by a Responsible Officer.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Certificate Administrator (or, in the case of the
initial Certificates issued on the Closing Date, by the Trustee) substantially
in the form provided for herein, and such authentication upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate has
been duly authenticated and delivered hereunder. All Certificates shall be dated
the date of their authentication. Subject to Section 5.02(c), the Underwritten
Certificates, the Class AIO Certificates and the Class P Certificates shall be
Book-Entry Certificates. The other Classes of Certificates shall be Definitive
Certificates.
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Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Certificate Administrator shall initially serve as
Certificate Registrar for the purpose of registering Certificates and transfers
and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of a Residual Certificate,
upon satisfaction of the conditions set forth below, the Certificate
Administrator on behalf of the Trust shall execute, authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Certificates of the same aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Certificate Administrator shall execute on behalf of the Trust and
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Certificate
Administrator or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer satisfactory to the Certificate
Administrator and the Certificate Registrar duly executed by, the Holder thereof
or his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of such Certificates may not
be transferred by the Certificate Administrator except to another Depository;
(ii) the Depository shall maintain book-entry records with respect to the
Certificate Owners and with respect to ownership and transfers of such
Certificates; (iii) ownership and transfers of registration of such Certificates
on the books of the Depository shall be governed by applicable rules established
by the Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Certificate
Administrator shall for all purposes deal with the Depository as representative
of the Certificate Owners of the Certificates for purposes of exercising the
rights of Holders under this Agreement, and requests and directions for and
votes of such representative shall not be deemed to be inconsistent if they are
made with respect to different Certificate Owners; (vi) the Certificate
Administrator may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect participating
firms and Persons shown on the books of such indirect participating firms as
direct or indirect Certificate Owners; and (vii) the direct participants of the
Depository shall have no rights under this Agreement under or with respect to
any of the Certificates held on their behalf by the Depository, and the
Depository may be treated by the Trustee, the Certificate Administrator and its
agents, employees, officers and directors as the absolute owner of the
Certificates for all purposes whatsoever.
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All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement, the terms of this
Agreement shall control.
(c) If (i)(x) the Depository or the Depositor advises the Certificate
Administrator in writing that the Depository is no longer willing or able to
discharge properly its responsibilities as Depository and (y) the Certificate
Administrator or the Depositor is unable to locate a qualified successor, (ii)
the Depositor, at its sole option, with the consent of the Certificate
Administrator, elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Servicing Default, the Certificate Owners of
the Book-Entry Certificates representing not less than 51% of the Voting Rights
advise the Certificate Administrator and Depository through the Financial
Intermediaries and the Depository Participants in writing that the continuation
of a book-entry system through the Depository to the exclusion of definitive,
fully registered certificates ("Definitive Certificates") to Certificate Owners
is no longer in the best interests of the Certificate Owners. Upon surrender to
the Certificate Registrar of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration,
the Trustee or the Certificate Administrator, on behalf of the Trustee, shall,
at the Depositor's expense, in the case of (ii) above, or the Seller's expense,
in the case of (i) and (iii) above, execute on behalf of the Trust and
authenticate the Definitive Certificates. None of the Depositor, the Certificate
Administrator 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 Certificate
Administrator, the Trustee, the Certificate Registrar, the Servicer, any Paying
Agent and the Depositor shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
(d) No transfer, sale, pledge or other disposition of any Class O
Certificate or Residual Certificate shall be made unless such disposition is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), and any applicable state securities laws or is made in
accordance with the 1933 Act and laws. In the event of any such transfer, except
with respect to the initial transfers of any Class O Certificate or Residual
Certificates by the Depositor to the Transferor and by the Transferor to NFRC,
unless (i) such transfer is made in reliance upon Rule 144A under the 1933 Act
and an investment letter, in substantially the form attached hereto as Exhibit
G, is delivered by the Transferee to the Certificate Administrator) or (ii) a
written Opinion of Counsel (which may be in-house counsel) acceptable to and in
form and substance reasonably satisfactory to the Certificate Administrator and
the Depositor is delivered to them stating that such transfer may be made
pursuant to (x) the 1933 Act, or an exemption thereto, describing the applicable
provision or exemption and the basis therefor, and (y) the Investment Company
Act of 1940, or an exemption thereto, describing the applicable provision or
exemption and the basis therefor, which Opinion of Counsel shall not be an
expense of the Certificate Administrator or the Depositor. The Holder of a Class
O
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Certificate or Residual Certificate desiring to effect such transfer shall,
and does hereby agree to, indemnify the Certificate Administrator, the Trustee
and the Depositor against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws.
No transfer of a Class AIO Certificate, Class O Certificate, Class P
Certificate or Residual Certificate or any interest therein shall be made to any
Plan subject to ERISA or Section 4975 of the Code, any Person acting, directly
or indirectly, on behalf of any such Plan or any Person acquiring such
Certificates with "plan assets" of a Plan within the meaning of the Department
of Labor regulation promulgated at 29 C.F.R. 'SS' 2510.3-101 or otherwise ("Plan
Assets"). Each Person who acquires any Ownership Interest in such classes of
Certificates shall be deemed, by the acceptance or acquisition of such Ownership
Interest, to represent that it is not acquiring such Ownership Interest with
Plan Assets.
Prior to the later of the expiration of the Funding Period and the
publication of final amendments to the Underwriter's exemption from the
Department of Labor to extend exemptive relief to subordinate certificates, no
transfer of Mezzanine Certificates or any interest therein shall be made to a
Person acquiring such Certificates with Plan Assets.
Each person who acquires any Ownership Interest in such class of
Certificates prior to the later of such dates shall be deemed, by the acceptance
or acquisition of such Ownership Interest, to represent that it is not acquiring
such Ownership Interest with Plan Assets.
Prior to the expiration of the Funding Period, no transfer of Class A-1
Certificates or any interest therein shall be made to any Person acquiring such
Certificates with Plan Assets. Each Person who acquires any Ownership Interest
in such class of Certificates prior to the expiration of such Period shall be
deemed, by the acceptance or acquisition of such Ownership Interest, to
represent that it is not acquiring such Ownership Interest with Plan Assets.
Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Depositor or its designee as its attorney-in-fact
to negotiate the terms of any mandatory sale under clause (v) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Residual Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly
notify the Certificate Administrator of any change or impending change in
its status as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Residual
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Residual Certificate, the Certificate Administrator shall as
a condition to registration of
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the transfer, require delivery to it, in form and substance satisfactory to
it, of each of the following:
A. an affidavit in the form of Exhibit H hereto from the proposed
transferee to the effect that such transferee is a Permitted Transferee
and that it is not acquiring its Ownership Interest in the Residual
Certificate that is the subject of the proposed transfer as a nominee,
Certificate Administrator or agent for any Person who is not a
Permitted Transferee; and
B. a covenant of the proposed transferee to the effect that the
proposed transferee agrees to be bound by and to abide by the transfer
restrictions applicable to the Residual Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest in a
Residual Certificate in violation of the provisions of this Section shall
be absolutely null and void and shall vest no rights in the purported
transferee. If any purported transferee shall, in violation of the
provisions of this Section, become a Holder of a Residual Certificate, then
the prior Holder of such Residual Certificate that is a Permitted
Transferee shall, upon discovery that the registration of transfer of such
Residual Certificate was not in fact permitted by this Section, be restored
to all rights as Holder thereof retroactive to the date of registration of
transfer of such Residual Certificate. Neither the Certificate
Administrator nor 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 or for making any distributions due on such
Residual Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as
the Certificate Administrator received the documents specified in clause
(iii). The Certificate Administrator shall be entitled to recover from any
Holder of a Residual Certificate that was in fact not a Permitted
Transferee at the time such distributions were made all distributions made
on such Residual Certificate. Any such distributions so recovered by the
Certificate Administrator shall be distributed and delivered by the
Certificate Administrator to the prior Holder of such Residual Certificate
that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section, then the Certificate Administrator shall have
the right but not the obligation, without notice to the Holder of such
Residual Certificate or any other Person having an Ownership Interest
therein, to notify the Depositor to arrange for the sale of such Residual
Certificate. The proceeds of such sale, net of commissions (which may
include commissions payable to the Depositor or its affiliates in
connection with such sale), expenses and taxes due, if any, will be
remitted by the Certificate Administrator to the previous Holder of such
Residual Certificate that is a Permitted Transferee, except that in the
event that the Certificate Administrator determines that the Holder of such
Residual Certificate may be liable for any amount due under this Section or
any other provisions of this Agreement, the Certificate Administrator may
withhold a corresponding amount from such remittance as security for such
claim. The terms and conditions of any sale under this clause (v) shall be
determined in the sole discretion of the Certificate Administrator and
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it shall not be liable to any Person having an Ownership Interest in a
Residual Certificate as a result of its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section, then the Certificate Administrator upon
receipt of reasonable compensation will provide to the Internal Revenue
Service, and to the persons specified in Sections 860E(e)(3) and (6) of the
Code, information needed to compute the tax imposed under Section
860E(e)(5) of the Code on transfers of residual interests to disqualified
organizations.
The foregoing provisions of this Section shall cease to apply to transfers
occurring on or after the date on which there shall have been delivered to the
Certificate Administrator, in form and substance satisfactory to the Certificate
Administrator, (i) written notification from each Rating Agency that the removal
of the restrictions on Transfer set forth in this Section will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause any REMIC created
hereunder to fail to qualify as a REMIC.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (ii) there is delivered to
the Trustee, the Certificate Administrator, the Depositor and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Certificate Administrator
or the Certificate Registrar that such Certificate has been acquired by a bona
fide purchaser, the Trustee or the Certificate Administrator shall execute on
behalf of the Trust, authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Percentage Interest. Upon the issuance of any new Certificate under
this Section, the Trustee, the Certificate Administrator or the Certificate
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee, the Certificate
Administrator and the Certificate Registrar) in connection therewith. Any
duplicate Certificate issued pursuant to this Section, shall constitute complete
and indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
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Section 5.04. Persons Deemed Owners.
The Servicer, the Depositor, the Trustee, the Certificate
Administrator, the Certificate Registrar, any Paying Agent and any agent of the
Servicer, the Depositor, the Trustee, the Certificate Administrator, the
Certificate Registrar, any Paying Agent or the Certificate Administrator may
treat the Person, including a Depository, in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.01 and for all other purposes whatsoever,
and none of the Servicer, the Trust, the Certificate Administrator, the Trustee
nor any agent of any of them shall be affected by notice to the contrary.
Section 5.05. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Certificateholders
from the Distribution Account pursuant to Section 4.01 and shall report the
amounts of such distributions to the Certificate Administrator. The duties of
the Paying Agent may include the obligation to distribute statements prepared by
the Certificate Administrator and delivered to the Trustee pursuant to Section
4.03 and provide information to Certificateholders as required hereunder. The
Paying Agent hereunder shall at all times be an entity duly incorporated and
validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
to act as Paying Agent, which appointment shall be reasonably satisfactory to
the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders and shall agree that it shall comply with all
requirements of the Code regarding the withholding of payments in respect of
Federal income taxes due from Certificate Owners and otherwise comply with the
provisions of this Agreement applicable to it.
ARTICLE VI
THE SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Servicer and the Depositor.
The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by Servicer
herein. The Depositor shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Depositor.
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Section 6.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or the Depositor.
Any entity into which the Servicer or Depositor may be merged or
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Servicer or the Depositor shall be a party, or any
corporation succeeding to the business of the Servicer or the Depositor, shall
be the successor of the Servicer or the Depositor, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor Servicer shall satisfy
all the requirements of Section 7.02 with respect to the qualifications of a
successor Servicer.
Section 6.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the
performance of duties of the Servicer or by reason of its reckless disregard of
its obligations and duties of the Servicer hereunder.
The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer and any director or officer or employee or agent of the Servicer
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any legal action relating to this
Agreement or the Certificates, including any amount paid to the Certificate
Administrator on behalf of the Trustee pursuant to Section 6.06(b), other than
any loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or negligence in the
performance of its duties hereunder or by reason of its reckless disregard of
its obligations and duties hereunder. The Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to service the Mortgage Loans in accordance with this
Agreement, and which in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may in its sole discretion undertake any
such action which it may deem necessary or desirable in respect of this
Agreement, and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder. In such event, the reasonable legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust, and the Servicer shall be entitled
to be reimbursed therefor. The Servicer's right to indemnity or reimbursement
pursuant to this Section 6.03 shall survive any resignation or termination of
the Servicer pursuant to Section 6.04 or 7.01 with respect to any losses,
expenses, costs or liabilities arising prior to such resignation or termination
(or arising from events that occurred prior to such resignation or termination).
Any reimbursements or indemnification to the Servicer from the Trust pursuant to
this Section 6.03 shall be payable in the priority set forth in Section 4.01
hereof.
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Section 6.04. Servicer Not to Resign.
Subject to the provisions of Section 6.02, the Servicer shall not
resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are no
longer permissible under applicable law or (ii) upon satisfaction of the
following conditions: (a) the Servicer has proposed a successor servicer to the
Trust, the Trustee and the Certificate Administrator in writing and such
proposed successor servicer is reasonably acceptable to the Trustee and the
Certificate Administrator; and (b) each Rating Agency shall have delivered a
letter to the Trust, the Trustee, and the Certificate Administrator prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Certificates; provided, however,
that no such resignation by the Servicer shall become effective until such
successor servicer or, in the case of (i) above, the Certificate Administrator
or its designee as successor Servicer shall have assumed the Servicer's
responsibilities and obligations hereunder or the Trustee or its designee as
successor Servicer shall have designated a successor servicer in accordance with
Section 7.02. Any such resignation shall not relieve the Servicer of
responsibility for any of the obligations specified in Sections 7.01 and 7.02 as
obligations that survive the resignation or termination of the Servicer. The
Servicer shall have no claim (whether by subrogation or otherwise) or other
action against any Certificateholder for any amounts paid by the Servicer
pursuant to any provision of this Pooling and Agreement. Any such determination
permitting the resignation of the Servicer under clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Certificate
Administrator, and the Trustee.
Section 6.05. Delegation of Duties.
In the ordinary course of business, the Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with the same
standards with which the Servicer complies pursuant to Section 3.01. Such
delegation shall not relieve the Servicer of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 6.04.
Section 6.06. Servicer to Pay Trustee's, and Certificate
Administrator's Fees and Expenses; Indemnification.
(a) The Servicer covenants and agrees to pay to the Certificate
Administrator, the Trustee and any co-trustee of the Trustee from time to time,
and the Certificate Administrator, the Trustee and any such co-trustee shall be
entitled to, reasonable compensation, including all indemnification payments
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each
of them in the execution of the trusts created hereunder and in the exercise and
performance of any of the powers and duties and the Servicer will pay or
reimburse the Certificate Administrator, the Trustee and any co-trustee upon
request for all reasonable expenses, disbursements and advances incurred or made
by the Certificate Administrator, the Trustee or any co-trustee of the Trustee
in accordance with any of the provisions of this Agreement except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
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(b) The Servicer agrees to indemnify the Trustee and the Certificate
Administrator for, and to defend and hold, the Trustee and the Certificate
Administrator, as the case may be, harmless against, any claim, tax, penalty,
loss, liability or expense of any kind whatsoever, incurred without gross
negligence or willful misconduct on the part of the Trustee and the Certificate
Administrator, as such and/or in its individual capacity, arising out of, or in
connection with, the failure by the Servicer to perform its duties in compliance
with this Agreement, including the reasonable costs and expenses (including
reasonable legal fees and expenses) of defending itself against any claim in
connection with the exercise or performance of any of its powers or duties
hereunder, provided that:
(i) with respect to any such claim, the Trustee or the Certificate
Administrator, as the case may be, shall have given the Servicer written
notice thereof promptly after the Certificate Administrator, or the
Trustee, as the case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Trustee or the
Certificate Administrator, as the case may be, shall cooperate and consult
fully with the Servicer in preparing such defense; and
(iii) notwithstanding anything in this Agreement to the contrary, the
Servicer shall not be liable for settlement of any claim by the Trustee or
the Certificate Administrator, as the case may be, entered into without the
prior consent of the Servicer, which consent shall not be unreasonably
withheld.
No termination of this Agreement and resignation and removal of the
Trustee and Certificate Administrator shall affect the obligations created by
this Section 6.06 of the Servicer to indemnify the Certificate Administrator and
the Trustee under the conditions and to the extent set forth herein. This
section shall survive the termination of this Agreement and resignation and
removal of the Trustee and Certificate Administrator. Any amounts to be paid by
the Servicer pursuant to this Subsection may not be paid from the Trust Fund
except as provided in Section 6.03.
Notwithstanding the foregoing, the indemnification provided by the
Servicer in this Section 6.06 shall not pertain to any loss, liability or
expense of the Trustee or the Certificate Administrator, including the costs and
expenses of defending itself against any claim, incurred in connection with any
actions taken by the Trustee or the Certificate Administrator at the direction
of the Certificateholders, as the case may be, pursuant to the terms of this
Agreement.
(c) The Servicer agrees to indemnify the Trust Fund in an amount equal
to the amount of any claim made under a MI Policy for which coverage is denied
by the MI Insurer because (and if the MI Insurer's denial of coverage is
contested by the Servicer, a court or arbitrator finally determines that
coverage is not available under the MI Policy because) of the Servicer's failure
to abide by the terms of the MI Policy or the MI Insurance Agreement or the
Servicer's failure to abide by the NFI Underwriting Guidelines or the NFI
Servicing Guidelines, as attached to the MI Insurance Agreement.
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(d) In the event the Certificate Administrator becomes the Servicer
pursuant to Section 7.02 hereof, neither the Trustee nor the Certificate
Administrator shall be obligated, in its individual capacity, to pay any
obligation of the Servicer under clause (a), (b) or (c) above.
ARTICLE VII
DEFAULT
Section 7.01. Servicing Default.
(a) If any one of the following events (a "Servicing Default") shall
occur and be continuing:
(i) Any failure by the Servicer to deposit in the Collection Account or
Payment Account (A) any Advances and Compensating Interest or (B) any other
Deposit required to be made under the terms of this Agreement, which, in
the case of this clause (B), continues unremedied for a period of three
Business Days after the date upon which written notice of such failure
shall have been given to the Servicer by the Trustee or the Certificate
Administrator or to the Servicer, the Trustee and the Certificate
Administrator the Holders of Certificates evidencing at least 25% of the
Voting Rights; or
(ii) Failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in this Agreement, which failure, in each case, materially and
adversely affects the interests of Certificateholders or the breach of any
representation or warranty of the Servicer in this Agreement which
materially and adversely affects the interests of the Certificateholders,
and which in either case continues unremedied for a period of 30 days after
the date on which written notice of such failure or breach, requiring the
same to be remedied, and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Servicer by the Certificate
Administrator or the Trustee or to the Servicer, the Certificate
Administrator and the Trustee by the Holders of Certificates evidencing at
least 25% of the Voting Rights; or
(iii) The entry against the Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt, marshaling
of assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation, consent to the
appointment of a conservator, receiver, liquidator or similar person 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 its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, liquidator or similar person in
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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, unbonded or unstayed for a
period of 60 days; or the Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment
of its obligations; or
(v) The Cumulative Loss Percentage exceeds (a) with respect to the
first 12 Distribution Dates, .70% of the Cut-off Date Aggregate Principal
Balance, (b) with respect to the next 12 Distribution Dates, 1.05% of the
Cut-off Date Aggregate Principal Balance, (c) with respect to the next 12
Distribution Dates, 1.4% of the Cut-off Date Aggregate Principal Balance,
(d) with respect to the next 12 Distribution Dates, 1.75% of the Cut-off
Date Aggregate Principal Balance, (e) with respect to the next 12
Distribution Dates, 2.3% of the Cut-off Date Aggregate Principal Balance,
(f) and with respect to all Distribution Dates thereafter, 3.5% of the
Cut-off Date Aggregate Principal Balance; or
(vi) Realized Losses on the Mortgage Loans over any twelve-month period
exceeds 1.00% of the sum of the aggregate Principal Balance of the Initial
Mortgage Loans as of the Cut-off Date and the Original Pre-Funded Amount;
or
(vii) The Rolling 90 Day Delinquency Percentage exceeds 14%.
(b) then, and in each and every such case, so long as a Servicing
Default shall not have been remedied within the applicable grace period, (x)
with respect solely to clause (i)(A) above, if such Advance is not made by 5:00
P.M., New York time, on the Business Day immediately following the Servicer
Remittance Date (provided the Certificate Administrator shall give the Servicer
notice of such failure to advance by 5:00 P.M. New York time on the Servicer
Remittance Date), the Certificate Administrator shall terminate all of the
rights and obligations of the Servicer under this Agreement and the Certificate
Administrator, or a successor servicer appointed in accordance with Section
7.02, shall assume, pursuant to Section 7.02, the duties of a successor Servicer
and (y) in the case of (i)(B), (ii), (iii), (iv) and (v) above, the Certificate
Administrator shall, at the direction of the Holders of Certificates evidencing
at least 51% of the Voters Rights, by notice then given in writing to the
Servicer (and to the Trustee or the Certificate Administrator if given by
Holders of Certificates), terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Any such notice to the Servicer shall
also be given to the Certificate Administrator, each Rating Agency, the
Depositor and the Seller. On or after the receipt by the Servicer (and by the
Trustee or the Certificate Administrator if such notice is given by the Holders)
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Certificate Administrator or other
Successor Servicer appointed in accordance with Section 7.02.
Section 7.02. Certificate Administrator to Act; Appointment of
Successor.
(a) Within 90 days of the time the Servicer (and the Trustee or the
Certificate Administrator, if notice is sent by the Holders) receives a notice
of termination pursuant to
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Section 7.01, the Certificate Administrator (or such other successor Servicer as
is approved in accordance with this Agreement) shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on and after its succession.
Notwithstanding the foregoing, the parties hereto agree that the Certificate
Administrator, in its capacity as successor Servicer, immediately will assume
all of the obligations of the Servicer to make Advances. Notwithstanding the
foregoing, the Certificate Administrator, in its capacity as successor Servicer,
shall not be responsible for the lack of information and/or documents that it
cannot obtain through reasonable efforts. As compensation therefor, the
Certificate Administrator (or such other successor Servicer) shall be entitled
to such compensation as the Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Certificate Administrator is unwilling to act as successor Servicer or (ii) if
the Certificate Administrator is legally unable so to act, the Certificate
Administrator shall appoint or petition a court of competent jurisdiction to
appoint, any established housing and home finance institution, bank or other
mortgage loan or home equity loan servicer having a net worth of not less than
$10,000,000 as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder; provided, that the appointment of any such successor Servicer will
not result in the qualification, reduction or withdrawal of the ratings assigned
to the Certificates by the Rating Agencies as evidenced by a letter to such
effect from the Rating Agencies. Pending appointment of a successor to the
Servicer hereunder, unless the Certificate Administrator is prohibited by law
from so acting, the Certificate Administrator shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage
Loans in an amount equal to the compensation which the Servicer would otherwise
have received pursuant to Section 3.18 (or such other compensation as the
Certificate Administrator and such successor shall agree, not to exceed the
Servicing Fee). The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer to pay any deductible under an insurance
policy pursuant to Section 3.14 or to indemnify the Certificate Administrator
and the Trustee pursuant to Section 3.06), nor shall any successor Servicer be
liable for any acts or omissions of the predecessor Servicer or for any breach
by such Servicer of any of its representations or warranties contained herein or
in any related document or agreement. The Certificate Administrator and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. All Servicing Transfer Costs shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs, and if such predecessor Servicer defaults in its
obligation to pay such costs, such costs shall be paid by the successor
Servicer, the Certificate Administrator or the Trustee (in which case the
successor Servicer, the Certificate Administrator or the Trustee, as applicable,
shall be entitled to reimbursement therefor from the assets of the Trust).
(b) Any successor, including the Certificate Administrator, to the
Servicer as servicer shall during the term of its service as servicer continue
to service and administer the Mortgage Loans for the benefit of
Certificateholders, and maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
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hereunder and a Fidelity Bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.14.
Section 7.03. Waiver of Defaults.
The Majority Certificateholders may, on behalf of all
Certificateholders, waive any events permitting removal of the Servicer as
servicer pursuant to this Article VII, provided, however, that the Majority
Certificateholders may not waive a default in making a required distribution on
a Certificate without the consent of the Holder of such Certificate. Upon any
waiver of a past default, such default shall cease to exist and any Servicing
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the Certificate
Administrator to the Rating Agencies.
Section 7.04. Notification to Certificateholders.
(a) Upon any termination or appointment of a successor the Servicer
pursuant to this Article VII, the Certificate Administrator shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register and each Rating Agency.
(b) No later than 60 days after the occurrence of any event which
constitutes or which, with notice or a lapse of time or both, would constitute a
Servicing Default for five Business Days after a Responsible Officer of the
Trustee becomes aware of the occurrence of such an event, the Certificate
Administrator shall transmit by mail to all Certificateholders notice of such
occurrence unless such default or Servicing Default shall have been waived or
cured.
Section 7.05. Survivability of Servicer Liabilities.
Notwithstanding anything herein to the contrary, upon termination of
the Servicer hereunder, any liabilities of the Servicer which accrued prior to
such termination shall survive such termination.
ARTICLE VIII
THE TRUSTEE AND THE CERTIFICATE ADMINISTRATOR
Section 8.01. Duties of the Trustee and the Certificate Administrator.
If a Servicing Default has occurred and is continuing, each of the
Trustee and the Certificate Administrator shall exercise the rights and powers
vested in each of them by this Agreement and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(a) Except during the continuance of a Servicing Default:
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(i) each of the Trustee and the Certificate Administrator undertake to
perform such duties and only such duties as are specifically set forth in
this Agreement with respect to the Trustee and the Certificate
Administrator, respectively, and no implied covenants or obligations shall
be read into this Agreement against the Trustee or the Certificate
Administrator; and
(ii) in the absence of bad faith on its part, each of the Trustee and
the Certificate Administrator, as the case may be, may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee
and/or the Certificate Administrator, as applicable, and conforming to the
requirements of this Agreement; provided, however, that each of the Trustee
and the Certificate Administrator, as the case may be, shall examine the
certificates and opinions delivered to it to determine whether or not they
conform to the requirements of this Agreement, provided, further, however,
that the Trustee shall have no duty or responsibility to review any
document, certificate, instrument or opinion delivered solely to the
Certificate Administrator.
(b) Neither the Trustee nor the Certificate Administrator may be
relieved from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (b) of this
Section 8.01;
(b) the Trustee and the Certificate Administrator shall not be liable
for any error of judgment made in good faith by its respective Responsible
Officer unless it is proved that the Trustee or the Certificate
Administrator, respectively, was negligent in ascertaining the pertinent
facts; and
(c) neither the Trustee nor the Certificate Administrator shall be
liable with respect to any action it takes or omits to take in good faith
in accordance with a direction received by it from the Majority
Certificateholders.
Neither the Trustee nor the Certificate Administrator shall be liable
for interest on any money received by the Trustee or the Certificate
Administrator, as the case may be, except as the Trustee or the Certificate
Administrator, respectively, may agree in writing with the Servicer.
Money held in trust by the Trustee or the Certificate Administrator
need not be segregated from other trust funds except to the extent required by
law or the terms of this Agreement.
No provision of this Agreement shall require the Trustee or the
Certificate Administrator to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
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Subject to the other provisions of this Agreement and without limiting
the generality of this Section 8.01, the Trustee and the Certificate
Administrator 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 other than
from funds available in the Payment Account, or (D) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to the
Certificate Administrator or the Trustee believed by the Certificate
Administrator or the Trustee to be genuine and to have been signed or presented
by the proper party or parties.
(c) The Certificate Administrator shall act as successor to the
Servicer to the extent provided in Section 7.02 hereof.
(d) For all purposes under this Agreement, neither the Trustee nor the
Certificate Administrator shall be deemed to have notice or knowledge of any
Servicing Default unless a Responsible Officer assigned to and working in the
Trustee's or the Certificate Administrator's, respectively, corporate trust
department has actual knowledge thereof or unless written notice of any event
which is in fact such Servicing Default is received by the Trustee or the
Certificate Administrator, respectively, at the Corporate Trust Office, and such
notice references the Certificates generally, the Trust, or this Agreement.
The Trustee and the Certificate Administrator are hereby authorized to
execute and shall execute this Agreement, the Purchase Agreement, and the
Converted Loan Purchase Agreement, and shall perform their respective duties and
satisfy their respective obligations thereunder. Every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee or the Certificate Administrator shall apply to the
Trustee's and the Certificate Administrator's execution of this Agreement, the
Purchase Agreement, and the Converted Loan Purchase Agreement, and the
performance of their respective duties and satisfaction of its obligations
hereunder and thereunder.
Notwithstanding any term or provision in this Agreement to the
contrary, the rights and obligations of the Trustee as trustee under this
Agreement shall not be diminished by the fact that the Trustee may employ the
services of the Certificate Administrator to accomplish the duties of the
Trustee hereunder. Accordingly, any references in this Agreement or the other
Basic Documents alluding to a right or obligation of the Certificate
Administrator (other than the obligation of the Certificate Administrator to act
as successor Servicer pursuant to Section 7.02 hereof in the event of a
Servicing Default) shall be construed to mean such right or obligation of the
Trustee, which right or obligation may be accepted or performed by the
Certificate Administrator on behalf of the Trustee.
Section 8.02. Rights of Trustee and Certificate Administrator.
Each of the Trustee and the Certificate Administrator may rely and
shall be protected in acting or refraining from acting on any resolution,
officer's certificate, opinion of
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counsel, certificate of auditors or other certificate, statement, instrument, or
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee and the Certificate Administrator need not
investigate any fact or matter stated in the document.
Before either the Trustee or the Certificate Administrator acts or
refrains from acting, it may require an Officer's Certificate or an Opinion of
Counsel reasonably satisfactory in form and substance to the Trustee or the
Certificate Administrator, as the case may be, which Officer's Certificate or
Opinion of Counsel shall not be at the expense of the Trustee, the Certificate
Administrator or the Trust Fund. Neither the Trustee nor the Certificate
Administrator shall be liable for any action either of them takes or omits to
take in good faith in reliance on an Officer's Certificate or Opinion of
Counsel.
The Trustee may execute any of its trusts or powers hereunder and both
the Trustee and the Certificate Administrator may perform any of their
respective duties hereunder either directly or by or through agents or attorneys
or a custodian or nominee and the Trustee and Certificate Administrator shall
have no liability for any misconduct or negligence on the part of such agent,
attorney or custodian appointed by the Trustee or Certificate Administrator with
due care.
Neither the Trustee nor the Certificate Administrator shall be liable
for any action either of them takes or omits to take in good faith which it
believes to be authorized or within its rights or powers; provided, however,
that the Trustee's conduct or the Certificate Administrator's conduct, as the
case may be, does not constitute willful misconduct, negligence or bad faith.
Each of the Trustee and the Certificate Administrator may consult with
counsel chosen by it with due care, and the advice or opinion of counsel with
respect to legal matters relating to this Agreement and the Certificates shall
be full and complete authorization and protection from liability in respect to
any action taken, omitted or suffered by either of them hereunder in good faith
and in accordance with the advice or opinion of such counsel.
The Trustee and the Certificate Administrator shall be under no
obligation to exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee and the Certificate
Administrator reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby (which in the case of the
Majority Certificateholders will be deemed to be satisfied by a letter agreement
with respect to such costs from such Majority Certificateholders); nothing
contained herein shall, however, relieve the Trustee or the Certificate
Administrator of the obligation, upon the occurrence of a Servicing Default of
which a Responsible Officer of the Trustee or the Certificate Administrator
shall have actual knowledge (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 their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
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The Trustee and the Certificate Administrator 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 by the Majority Certificateholders; provided, however, that if the payment
within a reasonable time to the Trustee and the Certificate Administrator 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 or the Certificate
Administrator, not reasonably assured to the Trustee or the Certificate
Administrator by the security afforded to it by the terms of this Agreement, the
Trustee or the Certificate Administrator may require reasonable indemnity
against such cost, 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 or the Certificate Administrator, shall be
repaid by the Servicer upon demand from the Servicer's own funds.
The rights of the Trustee or the Certificate Administrator to perform
any discretionary act enumerated in this Agreement shall not be construed as a
duty, and the Trustee and the Certificate Administrator shall not be answerable
for other than its negligence or willful misconduct in the performance of such
act.
The Trustee and the Certificate Administrator shall not be required to
give any bond or surety in respect of the execution of the Trust Fund created
hereby or the powers granted hereunder.
Section 8.03. Individual Rights of Trustee and Certificate
Administrator.
Each of the Trustee and the Certificate Administrator in its individual
or any other capacity may become the owner or pledgee of Certificates and may
otherwise deal with the Seller or its Affiliates with the same rights it would
have if it were not Trustee or Certificate Administrator, as applicable. Any
Certificates Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Trustee and the Certificate Administrator must comply
with Section 8.11 hereof.
Section 8.04. Trustee's and Certificate Administrator's Disclaimer.
Neither the Trustee nor the Certificate Administrator shall be
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Certificates, neither the Trustee nor the Certificate
Administrator shall be accountable for the use of the proceeds from the
Certificates, and neither the Trustee nor the Certificate Administrator shall be
responsible for any statement of the Trust in this Agreement or in any document
issued in connection with the sale of the Certificates or in the Certificates
other than the Trustee's or the Certificate Registrar's certificate of
authentication.
Section 8.05. Notice of Servicing Default.
The Trustee or the Certificate Administrator on behalf of the Trustee
shall mail to each Certificateholder notice of the Servicing Default within 10
days after a Responsible Officer has actual knowledge thereof unless such
Servicing Default shall have been waived or cured. Except in the case of a
Servicing Default in payment of principal of or interest on any
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Certificate, the Trustee and the Certificate Administrator may withhold the
notice if and so long as it in good faith determines that withholding the notice
is in the interests of Certificateholders.
Section 8.06. [Reserved].
Section 8.07. Compensation and Indemnity.
The amount of the Certificate Administrator Fee shall be paid to the
Certificate Administrator on each Distribution Date pursuant to Section
4.01(a)(i) of this Agreement, and all amounts owing to the Trustee and to the
Certificate Administrator hereunder in excess of such amount shall be paid
solely as provided in this Agreement. On each Distribution Date, the Trustee
shall be entitled to pay to itself the Trustee Fee pursuant to Section
4.01(a)(i). The Trustee's compensation and the Certificate Administrator's
compensation shall not be limited by any law on compensation of a trustee of an
express trust.
Section 8.08. Replacement of Trustee or Certificate Administrator.
No resignation or removal of the Trustee or the Certificate
Administrator and no appointment of a successor Trustee or successor Certificate
Administrator shall become effective until the acceptance of appointment by the
successor Trustee or successor Certificate Administrator pursuant to this
Section 8.08. The Trustee or the Certificate Administrator may resign at any
time by so notifying the Trustee, the Certificate Administrator and the
Depositor. The Majority Certificateholders may at any time remove the Trustee or
the Certificate Administrator by so notifying the Depositor and the Trustee or
the Certificate Administrator, as applicable, and the Depositor and may appoint
a successor Trustee or successor Certificate Administrator. The Depositor shall
remove the Trustee or the Certificate Administrator, as the case may be, if:
(a) the Trustee or the Certificate Administrator fails to comply with
Section 8.11 hereof;
(b) the Trustee or the Certificate Administrator is adjudged a bankrupt
or insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
the Certificate Administrator or its respective property; or
(d) the Trustee or the Certificate Administrator otherwise becomes
incapable of acting.
If the Trustee or the Certificate Administrator resigns or is removed
or if a vacancy exists in the office of the Trustee or the Certificate
Administrator for any reason (the Trustee or the Certificate Administrator, as
applicable, in such event being referred to herein as the retiring Trustee or
the retiring Certificate Administrator), the Depositor shall promptly appoint a
successor Trustee or Certificate Administrator.
A successor Trustee or successor Certificate Administrator shall
deliver a written acceptance of its appointment to the retiring Trustee or
retiring Certificate Administrator, the
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Depositor, the Trustee, the Certificate Administrator and the Servicer.
Thereupon, the resignation or removal of the retiring Trustee or retiring
Certificate Administrator shall become effective, and the successor Trustee or
successor Certificate Administrator shall have all the rights, powers and duties
of the Trustee or the Certificate Administrator under this Agreement. The
successor Trustee or successor Certificate Administrator shall mail a notice of
its succession to the Certificateholders. The retiring Trustee or retiring
Certificate Administrator shall promptly transfer all property held by it as
Trustee or Certificate Administrator to the successor Trustee or successor
Certificate Administrator.
Subject to the foregoing provisions of this Section 8.08, the Trustee
may terminate the Certificate Administrator at any time for failure to perform
its obligations hereunder or under the Basic Documents provided it or a
Certificate Administrator acceptable to the Depositor assumes the obligations of
the Certificate Administrator.
If a successor Trustee or successor Certificate Administrator does not
take office within 60 days after the retiring Trustee or retiring Certificate
Administrator resigns or is removed, the retiring Trustee or retiring
Certificate Administrator, as the case may be, the Depositor, the Trustee, the
Certificate Administrator or the Majority Certificateholders may petition any
court of competent jurisdiction for the appointment of a successor Trustee or
successor Certificate Administrator.
Section 8.09. Successor Trustee or Certificate Administrator by Merger.
If the Trustee or the Certificate Administrator consolidates with,
merges or converts into, or transfers all or substantially all of its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation, without any further act, shall
be the successor Trustee or successor Certificate Administrator, as applicable;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 8.11 hereof.
If at the time such successor or successors by merger, conversion or
consolidation to the Trustee or the Certificate Administrator, as the case may
be, shall succeed to the trusts created by this Agreement and any of the
Certificates shall have been authenticated but not delivered, any such successor
to the Trustee or the Certificate Administrator, as the case may be, may adopt
the certificate of authentication of any predecessor trustee and deliver such
Certificates so authenticated; and if at that time any of the Certificates shall
not have been authenticated, any successor to the Trustee or the Certificate
Administrator, as the case may be, may authenticate such Certificates either in
the name of any predecessor hereunder or in the name of the successor to the
Trustee or the Certificate Administrator, as the case may be; and in all such
cases such certificates shall have the full force as the Certificates or this
Agreement provide that such certificates of the Trustee or the Certificate
Administrator, as the case may be, shall have.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Fund
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may at the time be located, the Trustee shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, 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 and for the
benefit of the Certificateholders, such title to the Trust Fund, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 8.11 hereof and
notice to, and no consent of the Certificateholders of the appointment of any
co-trustee or separate trustee shall be required.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to be
performed 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 singly by such separate trustee
or co-trustee, but solely at the direction of the Trustee;
(b) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(c) the Trustee may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. 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.
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Section 8.11. Eligibility; Disqualification.
Each of the Trustee and the Certificate Administrator shall at all
times be reasonably acceptable to the Depositor and authorized to exercise
corporate trust powers. Each of the Trustee and the Certificate Administrator
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it or its parent
shall have a long-term debt rating of Baa3 or better by ▇▇▇▇▇'▇ and BBB or
better by Standard & Poor's.
Section 8.12. [Reserved]
Section 8.13. Representations and Warranties.
(a) The Trustee hereby represents that:
(i) The Trustee is duly organized and validly existing as a New York
banking corporation in good standing under the laws of the State of New
York with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted;
(ii) The Trustee has the power and authority to execute and deliver
this Agreement and to carry out its terms; and the execution, delivery and
performance of this Agreement have been duly authorized by the Trustee by
all necessary corporate action;
(iii) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
organization or bylaws of the Trustee or any agreement or other instrument
to which the Trustee is a party or by which it is bound; and
(iv) To the Trustee's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Trustee or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Trustee of its obligations under, or the validity or
enforceability of, this Agreement.
(b) The Certificate Administrator hereby represents that:
(i) The Certificate Administrator is duly organized and validly
existing as a national banking association in good standing under the laws
of the United States with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted;
(ii) The Certificate Administrator has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and
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performance of this Agreement have been duly authorized by the Certificate
Administrator by all necessary corporate action;
(iii) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
organization or bylaws of the Certificate Administrator or any agreement or
other instrument to which the Certificate Administrator is a party or by
which it is bound; and
(iv) To the Certificate Administrator's best knowledge, there are no
proceedings or investigations pending or threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Certificate Administrator or
its properties: (A) asserting the invalidity of this Agreement, (B) seeking
to prevent the consummation of any of the transactions contemplated by this
Agreement or (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Certificate Administrator of
its obligations under, or the validity or enforceability of, this
Agreement.
Section 8.14. Directions to Trustee and Certificate Administrator.
The Trustee or the Certificate Administrator on behalf of the Trustee,
as the case may be, is hereby directed:
(a) to accept the Mortgage Loans and hold the assets of the Trust Fund
in trust for the Certificateholders;
(b) to authenticate and deliver the Certificates of each Class
substantially in the forms prescribed by Exhibits ▇-▇, ▇-▇, ▇-▇, ▇-▇, ▇-▇, ▇-▇,
▇-▇, A-8 and A-9 in accordance with the terms of this Agreement; and
(c) to take all other actions as shall be required to be taken by the
terms of this Agreement.
Section 8.15. The Agents.
The provisions of this Agreement relating to the limitations of the
Trustee's and the Certificate Administrator's liability and to its indemnity
shall inure also to the Paying Agent, and the Certificate Registrar.
Section 8.16. Reports by the Certificate Administrator; Trust Fiscal
Year.
The Certificate Administrator, on behalf of the Trust, shall:
(a) file with the Commission, on behalf of the Trust, the annual
reports and information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Trust may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. Such
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filings shall be as follows: within 15 days after each Distribution Date, the
Certificate Administrator, on behalf of the Trust, shall file with the
Commission via the Electronic Data Gathering, Analysis and Retrieval System, a
Form 8-K with a copy of the statement to Certificateholders for such
Distribution Date as an exhibit thereto. Prior to July 28, 2001, the Certificate
Administrator, shall file a Form 15 Suspension Notification with respect to the
Trust Fund, if applicable. Prior to December 28, 2001, the Certificate
Administrator, on behalf of the Trust, shall file a Form 10-K, in substance
conforming to industry standards, with respect to the Trust Fund. The Trust
hereby grants to the Certificate Administrator, a limited power of attorney to
execute and file each such document on behalf of the Trust. Such power of
attorney shall continue until the termination of the Trust Fund. The Certificate
Administrator, on behalf of the Trust, shall deliver to the Seller and the
Trustee within three Business Days after filing any Form 8-K or Form 10-K
pursuant to this Section 8.16 a copy of such Form 8-K or Form 10-K, as the case
may be; and
(b) file with the Commission (with copies to the Seller and the
Depositor) in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports with
respect to compliance by the Trust with the conditions and covenants of this
Agreement as may be required from time to time by such rules and regulations.
The fiscal year of the Trust shall end on December 31 of each year.
ARTICLE IX
[Reserved]
ARTICLE X
REMIC ADMINISTRATION
Section 10.01. REMIC Administration.
(a) [Reserved].
(b) The Closing Date is hereby designated as the "Startup Day" of each
REMIC within the meaning of section 860G(a)(9) of the Code.
(c) The Servicer shall pay any and all tax related expenses (not
including taxes) of each REMIC, including but not limited to any professional
fees or expenses related to audits or any administrative or judicial proceedings
with respect to each REMIC that involve the Internal Revenue Service or state
tax authorities, but only to the extent that (i) such expenses are ordinary or
routine expenses, including expenses of a routine audit but not expenses of
litigation (except as described in (ii)); or (ii) such expenses or liabilities
(including taxes and penalties) are attributable to the negligence or willful
misconduct of the Servicer in fulfilling its duties hereunder. The Servicer
shall be entitled to reimbursement of expenses to the extent provided in clause
(i) above from the Collection Account.
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(d) The Certificate Administrator shall (a) maintain (or cause to be
maintained) the books of the Trust on a calendar year basis using the accrual
method of accounting, (b) deliver (or cause to be delivered) to each
Certificateholder as may be required by the Code and applicable Treasury
Regulations, including the REMIC Provisions, such information as may be required
to enable each Certificateholder to prepare its federal and state income tax
returns, (c) prepare and file or cause to be prepared and filed such tax returns
relating to the Trust as may be required by the Code and applicable Treasury
Regulations (including timely making one or more elections to treat the Trust as
a REMIC for federal income tax purposes and any other such elections as may from
time to time be required or appropriate under any applicable state or federal
statutes, rules or regulations), (d) collect or cause to be collected any
required withholding tax with respect to income or distributions to
Certificateholders and prepare or cause to be prepared the appropriate forms
relating thereto and (e) maintain records as required by the REMIC Provisions.
(e) The Holder of the Residual Certificate at any time holding the
largest Percentage Interest thereof shall be the "tax matters person" as defined
in the REMIC Provisions (the "Tax Matters Person") with respect to each REMIC
and shall act as Tax Matters Person for each REMIC. The Certificate
Administrator, as agent for the Tax Matters Person, shall perform on behalf of
each REMIC all reporting and other tax compliance duties that are the
responsibility of such 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, if required by the Code, the REMIC
Provisions, or other such guidance, the Certificate Administrator, as agent for
the Tax Matters Person, shall provide (i) to the Treasury or other governmental
authority such information as is necessary for the application of any tax
relating to the transfer of a Residual Certificate to any Disqualified
Organization or non-U.S. Person and (ii) to the Certificateholders such
information or reports as are required by the Code or REMIC Provisions.
(f) The Trustee, the Servicer, the Certificate Administrator and the
Holders of Certificates shall take any action or cause the REMIC to take any
action necessary to create or maintain the status of each REMIC as a REMIC under
the REMIC Provisions and shall assist each other as necessary to create or
maintain such status. Neither the Trustee, the Certificate Administrator, the
Servicer nor the Holder of any Residual Certificate shall take any action, cause
any REMIC created hereunder to take any action or fail to take (or fail to cause
to be taken) any action that, under the REMIC Provisions, if taken or not taken,
as the case may be, could (i) endanger the status of such REMIC as a REMIC or
(ii) result in the imposition of a tax upon such 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 set forth on Section 860G(d)
of the Code) (either such event, an "Adverse REMIC Event") unless the Trustee,
the Certificate Administrator and the Servicer have received an Opinion of
Counsel (at the expense of the party seeking to take such action) to the effect
that the contemplated action will not endanger such status or result in the
imposition of such a tax. In addition, prior to taking any action with respect
to any REMIC created hereunder or the assets therein, or causing such REMIC to
take any action, which is not expressly permitted under the terms of this
Agreement, any Holder of a Residual Certificate will consult with the Trustee,
the Certificate Administrator and the Servicer, or their respective designees,
in writing, with respect to whether such action could cause an Adverse REMIC
Event to occur with respect to any REMIC, and no such Person shall take any
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such action or cause any REMIC to take any such action as to which the Trustee,
the Certificate Administrator or the Servicer has advised it in writing that an
Adverse REMIC Event could occur.
(g) Each Holder of a Residual Certificate shall pay when due any and
all taxes imposed on each REMIC created hereunder by federal or state
governmental authorities. To the extent that such Trust taxes are not paid by a
Residual Certificateholder, the Certificate Administrator shall pay any
remaining REMIC taxes out of current or future amounts otherwise distributable
to the Holder of the Residual Certificate in the REMICs or, if no such amounts
are available, out of other amounts held in the Payment Account, and shall
reduce amounts otherwise payable to Holders of regular interests in the related
REMIC.
(h) The Certificate Administrator, as agent for the Tax Matters Person,
shall, for federal income tax purposes, maintain books and records with respect
to each REMIC created hereunder on a calendar year and on an accrual basis.
(i) After the Pre-Funding Period, no additional contributions of assets
shall be made to any REMIC created hereunder, except as expressly provided in
this Agreement with respect to Qualified Replacement Mortgages.
(j) None of the Trustee, the Certificate Administrator nor the Servicer
shall enter into any arrangement by which any REMIC created hereunder will
receive a fee or other compensation for services.
(k) The Certificate Administrator will apply for an Employee
Identification Number from the Internal Revenue Service via a Form SS-4 or other
acceptable method for the Lower-Tier REMIC and the Upper-Tier REMIC.
Section 10.02. Prohibited Transactions and Activities.
Neither the Depositor, the Servicer, the Certificate Administrator nor
the Trustee shall sell, dispose of, or substitute for any of the Mortgage Loans,
except in a disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii)
the bankruptcy of the Trust Fund, (iii) the termination, pursuant to Article XI
of this Agreement, of any REMIC created hereunder (iv) a substitution pursuant
to Article II of this Agreement or (v) a repurchase of Mortgage Loans pursuant
to Article II of this Agreement, nor acquire any assets for any REMIC, nor sell
or dispose of any investments in the Payment Account for gain, nor accept any
contributions to either REMIC after the Closing Date, unless it has received an
Opinion of Counsel (at the expense of the party causing such sale, disposition,
or substitution) that such disposition, acquisition, substitution, or acceptance
will not (a) affect adversely the status of any REMIC created hereunder as a
REMIC, or (b) cause any REMIC created hereunder to be subject to a tax on
prohibited transactions or prohibited contributions pursuant to the REMIC
Provisions.
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ARTICLE XI
TERMINATION
Section 11.01. Termination.
(a) The respective obligations and responsibilities of the Seller, the
Servicer, the Depositor, the Certificate Administrator and the Trustee created
hereby (other than the obligation of the Certificate Administrator to make
certain payments to Certificateholders after the final Distribution Date and the
obligation of the Servicer to send certain notices as hereinafter set forth)
shall terminate upon notice to the Trustee or the Certificate Administrator upon
the earliest of (i) the Distribution Date on which the Certificate Principal
Balances of the Regular Certificates have been reduced to zero, (ii) the final
payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the
optional purchase by the Servicer of the Mortgage Loans as described below and
(iv) the Distribution Date in January 2031. Notwithstanding the foregoing, in no
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the
late ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the
date hereof.
The Servicer may, at its option, terminate this Agreement on any date
on which the aggregate of the Principal Balances of the Mortgage Loans on such
date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding
Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value
of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
interest thereon at the weighted average of the Mortgage Rates through the end
of the Due Period preceding the final Distribution Date plus unreimbursed
Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
Mortgage Loans and REO Properties, any accrued and unpaid Available Funds Cap
Carryforward Amount and any unpaid amount due the Trustee and the Certificate
Administrator under this Agreement (the "Termination Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deposit in the Payment Account all amounts then on
deposit in the Collection Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
Any such purchase shall be accomplished by deposit into the Payment
Account on the Distribution Date of the Termination Price.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Certificate
Administrator for payment of the final distribution and cancellation, shall be
given promptly by the Certificate Administrator upon the Certificate
Administrator receiving notice of such date from the Servicer, by letter to the
Certificateholders mailed not earlier than the 15th day and not later than the
25th day of the month next preceding the month of such final distribution
specifying (1) the Distribution Date upon which final distribution of the
Certificates will be made upon presentation and surrender of such Certificates
at the office or agency of the Certificate Administrator therein designated, (2)
the amount of any
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such final distribution and (3) that the Record Date otherwise applicable to
such Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Certificates at the office or agency of the
Certificate Administrator therein specified.
(c) Upon presentation and surrender of the Certificates, the
Certificate Administrator shall cause to be distributed to the Holders of the
Certificates on the Distribution Date for such final distribution, in proportion
to the Percentage Interests of their respective Class and to the extent that
funds are available for such purpose, an amount equal to the amount required to
be distributed to such Holders in accordance with the provisions of Section 4.01
for such Distribution Date.
(d) In the event that all Certificateholders shall not surrender their
Certificates for final payment and cancellation on or before such final
Distribution Date, the Certificate Administrator shall promptly following such
date cause all funds in the Payment Account not distributed in final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining Certificateholders by depositing such funds in a separate Servicing
Account for the benefit of such Certificateholders, and the Servicer (if the
Servicer has exercised its right to purchase the Mortgage Loans) or the
Certificate Administrator (in any other case) shall give a second written notice
to the remaining Certificateholders, to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
nine months after the second notice all the Certificates shall not have been
surrendered for cancellation, the Residual Certificateholder shall be entitled
to all unclaimed funds and other assets which remain subject hereto, and the
Certificate Administrator, as agent of the Trustee upon transfer of such funds
shall be discharged of any responsibility for such funds, and the
Certificateholders shall look to the Residual Certificateholder for payment.
Section 11.02. Additional Termination Requirements.
(a) In the event that the Servicer exercises its purchase option as
provided in Section 11.01, each REMIC shall be terminated in accordance with the
following additional requirements, unless the Certificate Administrator shall
have been furnished with an Opinion of Counsel to the effect that the failure of
the Trust to comply with the requirements of this Section will not (i) result in
the imposition of taxes on "prohibited transactions" of the Trust as defined in
Section 860F of the Code or (ii) cause any REMIC constituting part of the Trust
Fund to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(i) Within 90 days prior to the final Distribution Date, the Servicer
shall adopt and the Certificate Administrator shall sign a plan of complete
liquidation of each REMIC created hereunder meeting the requirements of a
"Qualified Liquidation" under Section 860F of the Code and any regulations
thereunder; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Certificate
Administrator shall sell all of the assets of the Trust Fund to the
Servicer for cash pursuant to the terms of the plan of complete
liquidation.
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(b) By their acceptance of Certificates, the Holders thereof hereby
agree to appoint the Certificate Administrator as their attorney in fact to: (i)
adopt such a plan of complete liquidation (and the Certificateholders hereby
appoint the Certificate Administrator as their attorney in fact to sign such
plan) as appropriate and (ii) to take such other action in connection therewith
as may be reasonably required to carry out such plan of complete liquidation all
in accordance with the terms hereof.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the parties hereto,
and without the consent of the Certificateholders (i) to cure any ambiguity,
(ii) to correct or supplement any provisions herein which may be defective or
inconsistent with any other provisions herein or (iii) to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
however, that any such action listed in clause (i) through (iii) above shall be
deemed not to adversely affect in any respect the interests of any
Certificateholder, if evidenced by (i) written notice to the Depositor, the
Servicer, the Certificate Administrator and the Trustee from the Rating Agencies
that such action will not result in the reduction or withdrawal of the rating of
any outstanding Class of Certificates with respect to which it is a Rating
Agency or (ii) an Opinion of Counsel delivered to the Servicer, the Certificate
Administrator, the Depositor and the Trustee.
In addition, this Agreement may be amended from time to time by the
parties hereto with the consent of the Majority Certificateholders for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates; provided, however, that no such amendment or waiver
shall (x) reduce in any manner the amount of, or delay the timing of, payments
on the Certificates or distributions which are required to be made on any
Certificate without the consent of the Holder of such Certificate, (y) adversely
affect in any material respect the interests of the Holders of any Class of
Certificates in a manner other than as described in clause (x) above, without
the consent of the Holders of Certificates of such Class evidencing at least a
66% Percentage Interest in such Class, or (z) reduce the percentage of Voting
Rights required by clause (y) above without the consent of the Holders of all
Certificates of such Class then outstanding. Upon approval of an amendment, a
copy of such amendment shall be sent to the Rating Agencies.
Notwithstanding any provision of this Agreement to the contrary, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, delivered by (and at the expense of)
the Person seeking such Amendment, to the effect that such amendment will not
result in the imposition of a tax on any REMIC created hereunder constituting
part of the Trust Fund pursuant to the REMIC Provisions or cause any REMIC
created hereunder constituting part of the Trust to fail to qualify as a REMIC
at any
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time that any Certificates are outstanding and that the amendment is being made
in accordance with the terms hereof.
Promptly after the execution of any such amendment the Certificate
Administrator shall furnish, at the expense of the Person that requested the
amendment if such Person is Seller or the Servicer (but in no event at the
expense of the Certificate Administrator), otherwise at the expense of the
Trust, a copy of such amendment and the Opinion of Counsel referred to in the
immediately preceding paragraph to the Servicer and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 12.01 to approve the particular form of any proposed amendment;
instead it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
Neither the Certificate Administrator nor the Trustee shall be
obligated to enter into any amendment pursuant to this Section 12.01 that
affects its rights, duties and immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Trust, but only upon direction of
Certificateholders accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
Section 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not (i) operate
to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
Except as expressly provided for herein, no Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth or contained in the terms of the Certificates be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to
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any third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 15 days after
its receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding. It is understood
and intended, and expressly covenanted by each Certificateholder with every
other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, which priority or
preference is not otherwise provided for herein, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 12.03 each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 12.04. Governing Law; Jurisdiction.
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. With respect to any
claim arising out of this Agreement, each party irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in The City of New
York, and each party irrevocably waives any objection which it may have at any
time to the laying of venue of any suit, action or proceeding arising out of or
relating hereto brought in any such courts, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and further irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process has been made by any lawful means.
Section 12.05. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by certified mail, return receipt requested, or sent by reputable overnight
courier service to:
(a) in the case of the Depositor:
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Residential Asset Funding Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
(b) in the case of the Servicer or the Seller:
NovaStar Mortgage, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
(c) in the case of Rating Agencies:
▇▇▇▇▇'▇ Investors Service Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Standard & Poor's
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
(d) in the case of the Certificate Administrator:
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Structured Finance Trust Services
(NovaStar Mortgage Funding Trust, Series 2000-2)
(e) in the case of the Trustee:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services,
NovaStar 2000-2
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. Any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice. Any notice or other document required to
be delivered or mailed by the Certificate
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Administrator to any Rating Agency shall be given on a reasonable efforts basis
and only as a matter of courtesy and accommodation and the Certificate
Administrator shall have no liability for failure to deliver such notice or
document to any Rating Agency.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.07. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.08. Further Assurances.
Notwithstanding any other provision of this Agreement, neither the
Certificate Administrator nor the Trustee shall have any obligation to consent
to any amendment or modification of this Agreement unless they have been
provided reasonable security or indemnity against their out-of-pocket expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.
Section 12.09. Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Certificateholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 12.10. Acts of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing, and such action shall become effective when
such instrument or instruments are delivered to the Trustee, the Certificate
Administrator, the Seller and the Servicer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "act" of the Certificateholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee and the Trust, if made in the manner
provided in this Section 12.10.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying
106
that the individual signing such instrument or writing acknowledged to him the
execution thereof. Whenever such execution is by a signer acting in a capacity
other than his or her individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Certificateholder shall bind every future Holder
of such Certificate and the Holder of every Certificate issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done, omitted or suffered to be done by the Certificate
Administrator, the Trustee or the Trust in reliance thereon, whether or not
notation of such action is made upon such Certificate.
107
IN WITNESS WHEREOF, the Depositor, the Servicer, the Seller, the
Certificate Administrator and the Trustee have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.
RESIDENTIAL ASSET FUNDING CORPORATION,
as Depositor
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
NOVASTAR MORTGAGE, INC.,
as Servicer and as Seller
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
FIRST UNION NATIONAL BANK,
as Certificate Administrator
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
[Pooling and Servicing Agreement Signature Page]
108
STATE OF )
------------------------------ ) ss.:
COUNTY OF )
------------------------------
On the ____ day of September, 2000 before me, a notary public in and
for said State, personally appeared _________________ known to me (or proved to
me on the basis of satisfactory evidence) to be a _________________ of
Residential Asset Funding Corporation, a North Carolina corporation that
executed the within instrument, and also known to me (or proved to me on the
basis of satisfactory evidence) 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.
----------------------------------------
Seal Notary Public
109
STATE OF )
--------------------------------) ss.:
COUNTY OF )
-------------------------------
On the ____ day of September, 2000 before me, a notary public in and
for said State, personally appeared ___________________ known to me (or proved
to me on the basis of satisfactory evidence) to be a _____________________ of
NovaStar Mortgage, Inc., a Virginia corporation that executed the within
instrument, and also known to me (or proved to me on the basis of satisfactory
evidence) 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.
--------------------------------------
Seal Notary Public
110
STATE OF )
--------------------------------) ss.:
COUNTY OF )
------------------------------
On the ____ day of September, 2000 before me, a notary public in and
for said State, personally appeared ___________________ known to me (or proved
to me on the basis of satisfactory evidence) to be a _____________________ of
First Union National Bank, a national banking association that executed the
within instrument, and also known to me (or proved to me on the basis of
satisfactory evidence) 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.
------------------------------------
Seal Notary Public
111
STATE OF )
-------------------------------) ss.:
COUNTY OF )
------------------------------
On the _____ day of September, 2000 before me, a notary public in and
for said State, personally appeared __________, known to me (or proved to me on
the basis of satisfactory evidence) to be ___________________ of The Chase
Manhattan Bank, a New York banking corporation that executed the within
instrument, and also known to me (or proved to me on the basis of satisfactory
evidence) to be the person who executed it on behalf of said association, 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.
--------------------------------------
Seal Notary Public
112
Exhibit A-1
Form of Class A-1 Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS A-1 CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
UNTIL THE EXPIRATION OF THE FUNDING PERIOD, NO TRANSFER OF
THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY EMPLOYEE BENEFIT
PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS
AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN") OR TO ANY ENTITY THE ASSETS
OF WHICH CONSTITUTE ASSETS OF A PLAN.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
No.: A-1-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Original Principal Balance: Registered Owner: Final Scheduled Distribution
$316,200,000 CEDE & CO. Date: January 25, 2031
Percentage Interest: 100%
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Principal Amount of the Class A-1 Certificates on
September 28, 2000 which aggregate amount was $316,200,000. The owner hereof is
entitled to principal payments on each Distribution Date, which will fully
amortize such Original Principal Amount over the period from the date of initial
delivery hereof to the final Distribution Date of the Class A-1 Certificates.
Therefore, the actual outstanding principal amount of this Certificate, on any
date subsequent to October 25, 2000 (the first Distribution Date) will be less
than the Original Principal Amount set forth above.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class A-1 Certificates
2
(the "Class A-1 Certificates") and issued under and subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which the
owner of this Certificate, by virtue of acceptance hereof assents, and is bound.
Also issued under the Pooling and Servicing Agreement are Class AIO
Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates, Class P Certificates, Class O Certificates, Class RL Certificates
and Class RU Certificates.
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class A-1
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to the
distribution described in Section 4.01 of the Pooling and Servicing Agreement,
relating to such Distribution Date. Distributions will be made in immediately
available funds to such owners, by wire transfer or by check mailed to the
address of the person entitled thereto as it appears on the Certificate
Register.
Each owner of record of a Class A-1 Certificate will be
entitled to receive such owner's Percentage Interest in the amounts distributed
on such Distribution Date to the owners of the Class A-1 Certificates. The
Percentage Interest of each Class A-1 Certificate as of any date of
determination will be equal to the percentage obtained by dividing the Original
Principal Amount set forth on such Class A-1 Certificate by $316,200,000.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
3
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in [January 2031] and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
4
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A-1 Certificates are
exchangeable for new Class A-1 Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
--------------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
----------------------------
Name:
Title:
6
Exhibit A-2
Form of Class M-1 Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS M-1 CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
UNTIL THE LATER OF THE EXPIRATION OF THE FUNDING PERIOD AND
THE PUBLICATION BY THE U.S. DEPARTMENT OF LABOR OF A PROHIBITED TRANSFER
EXEMPTION THAT AMENDS THE UNDERWRITERS' EXEMPTIONS TO EXTEND EXEMPTIVE RELIEF TO
SUBORDINATE CERTIFICATES SUCH AS THIS CERTIFICATE, NO TRANSFER OF THIS
CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY EMPLOYEE BENEFIT PLAN
OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND
ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN") OR TO ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE ASSETS OF A PLAN.
No.: M-1-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Original Principal Balance: Registered Owner: Final Scheduled Distribution
6,800,000 CEDE & CO. Date: January 25, 2031
Percentage Interest: 100%
2
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Principal Amount of the Class M-1 Certificates on
September 28, which aggregate amount was $6,800,000. The owner hereof is
entitled to principal payments on each Distribution Date, as hereinafter
described, which will fully amortize such Original Principal Amount over the
period from the date of initial delivery hereof to the final Distribution Date
of the Class M-1 Certificates. Therefore, the actual outstanding principal
amount of this Certificate, on any date subsequent to October 25, 2000 (the
first Distribution Date) will be less than the Original Principal Amount set
forth above.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
3
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class M-1 Certificates (the "Class M-1 Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class AIO Certificates, Class A-1 Certificates, Class
M-2 Certificates, Class M-3 Certificates, Class P Certificates, Class O
Certificates, Class RL Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class M-1
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the distribution described in Section 4.01 of the Pooling and Servicing
Agreement relating to such Distribution Date. Distributions will be made in
immediately available funds to such owners, by wire transfer or by check mailed
to the address of the person entitled thereto as it appears on the Certificate
Register.
Each owner of record of a Class M-1 Certificate will be
entitled to receive such owner's Percentage Interest in the amounts distributed
on such Distribution Date to the owners of the Class M-1 Certificates. The
Percentage Interest of each Class M-1 Certificate as of any date of
determination will be equal to the percentage obtained by dividing the Original
Principal Amount set forth on such Class M-1 Certificate by $6,800,000.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as
4
otherwise provided in the Pooling and Servicing Agreement) all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
5
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
The Class M-1 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class M-1 Certificates are
exchangeable for new Class M-1 Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
6
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
----------------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
----------------------------------
Name:
Title:
7
Exhibit A-3
Form of Class M-2 Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS M-2 CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
UNTIL THE LATER OF THE EXPIRATION OF THE FUNDING PERIOD AND
THE PUBLICATION BY THE U.S. DEPARTMENT OF LABOR OF A PROHIBITED TRANSFER
EXEMPTION THAT AMENDS THE UNDERWRITERS' EXEMPTIONS TO EXTEND EXEMPTIVE RELIEF TO
SUBORDINATE CERTIFICATES SUCH AS THIS CERTIFICATE, NO TRANSFER OF THIS
CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY EMPLOYEE BENEFIT PLAN
OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND
ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN") OR TO ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE ASSETS OF A PLAN.
No.: M-2-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Original Principal Balance: Registered Owner: Final Scheduled Distribution
$6,800,000 CEDE & CO. Date: January 25, 2031
Percentage Interest: 100%
2
The registered owner named above is the registered owner of a
fractional interest in (I) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
The Original Principal Amount set forth above is equal to the
product of (I) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Principal Amount of the Class M-2 Certificates on
September 28, 2000 which aggregate amount was $6,800,000. The owner hereof is
entitled to principal payments on each Distribution Date, as hereinafter
described, which will fully amortize such Original Principal Amount over the
period from the date of initial delivery hereof to the final Distribution Date
of the Class M-2 Certificates. Therefore, the actual outstanding principal
amount of this Certificate, on any date subsequent to October 25, 2000 (the
first Distribution Date) will be less than the Original Principal Amount set
forth above.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
3
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class M-2 Certificates (the "Class M-2 Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class AIO Certificates, Class A-1 Certificates, Class
M-1 Certificates, Class M-3 Certificates, Class P Certificates, Class O
Certificates, Class RL Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class M-2
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the distribution described in Section 4.01 of the Pooling and Servicing
Agreement relating to such Distribution Date. Distributions will be made in
immediately available funds to such owners, by wire transfer or by check mailed
to the address of the person entitled thereto as it appears on the Certificate
Register.
Each owner of record of a Class M-2 Certificate will be
entitled to receive such owner's Percentage Interest in the amounts distributed
on such Distribution Date to the owners of the Class M-2 Certificates. The
Percentage Interest of each Class M-2 Certificate as of any date of
determination will be equal to the percentage obtained by dividing the Original
Principal Amount set forth on such Class M-2 Certificate by $6,800,000.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as
4
otherwise provided in the Pooling and Servicing Agreement) all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (I) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
5
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
The Class M-2 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class M-2 Certificates are
exchangeable for new Class M-2 Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
6
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
--------------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
----------------------------------
Name:
Title:
7
Exhibit A-4
Form of Class M-3 Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS M-3 CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
UNTIL THE LATER OF THE EXPIRATION OF THE FUNDING PERIOD AND
THE PUBLICATION BY THE U.S. DEPARTMENT OF LABOR OF A PROHIBITED TRANSFER
EXEMPTION THAT AMENDS THE UNDERWRITERS' EXEMPTIONS TO EXTEND EXEMPTIVE RELIEF TO
SUBORDINATE CERTIFICATES SUCH AS THIS CERTIFICATE, NO TRANSFER OF THIS
CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY EMPLOYEE BENEFIT PLAN
OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND
ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN") OR TO ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE ASSETS OF A PLAN.
No.: M-3-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Original Principal Balance: Registered Owner: Final Scheduled Distribution
$4,420,000 CEDE & CO. Date: January 25, 2031
Percentage Interest: 100%
2
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Principal Amount of the Class M-3 Certificates on
September 28, 2000 which aggregate amount was $4,420,000. The owner hereof is
entitled to principal payments on each Distribution Date, as hereinafter
described, which will fully amortize such Original Principal Amount over the
period from the date of initial delivery hereof to the final Distribution Date
of the Class M-3 Certificates. Therefore, the actual outstanding principal
amount of this Certificate, on any date subsequent to October 25, 2000 (the
first Distribution Date) will be less than the Original Principal Amount set
forth above.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
3
THIS CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER
OF THIS CERTIFICATE SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH
RESPECT TO THE MORTGAGE LOANS.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class M-3 Certificates (the "Class M-3 Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class AIO Certificates, Class A-1 Certificates, Class
M-1 Certificates, Class M-2 Certificates, Class P Certificates, Class O
Certificates, Class RL Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class M-3
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the distribution described in Section 4.01 of the Pooling and Servicing
Agreement relating to such Distribution Date. Distributions will be made in
immediately available funds to such owners, by wire transfer or by check mailed
to the address of the person entitled thereto as it appears on the Certificate
Register.
Each owner of record of a Class M-3 Certificate will be
entitled to receive such owner's Percentage Interest in the amounts distributed
on such Distribution Date to the owners of the Class M-3 Certificates. The
Percentage Interest of each Class M-3 Certificate as of any date of
determination will be equal to the percentage obtained by dividing the Original
Principal Amount set forth on such Class M-3 Certificate by $4,420,000.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or
4
any of their subsidiaries and affiliates and are not insured or guaranteed by
the Federal Deposit Insurance Corporation, the Government National Mortgage
Association, or any other governmental agency. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans and amounts on deposit in the Accounts (except as otherwise provided in
the Pooling and Servicing Agreement) all as more specifically set forth
hereinabove and in the Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
5
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
The Class M-3 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral
multiples of $1,000. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class M-3 Certificates are
exchangeable for new Class M-3 Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
6
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
------------------------------
Name:
Title:
7
Exhibit A-5
Form of Class AIO Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS AIO CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL
BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN")
OR TO ANY ENTITY THE ASSETS OF WHICH CONSTITUTE ASSETS OF A PLAN.
No.: AIO-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Notional Amount: Registered Owner: Final Scheduled Distribution
$340,000,000 CEDE & Co. Date: January 25, 2031
Percentage Interest: 100%
2
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
Each owner of record of a Class AIO Certificate will be
entitled to interest payments only on each Distribution Date, which shall be
calculated based on a notional principal balance equal to the aggregate
outstanding principal balance of the Mortgage Loans. The owner hereof will not
receive any distributions of principal.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THIS CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER
OF THIS CERTIFICATE SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH
RESPECT TO THE MORTGAGE LOANS.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class AIO Certificates
3
(the "Class AIO Certificates") and issued under and subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which
the owner of this Certificate, by virtue of acceptance hereof assents, and
is bound. Also issued under the Pooling and Servicing Agreement are Class A-1
Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates, Class P Certificates, Class O Certificates, Class RL Certificates
and Class RU Certificates, all such Certificates are collectively referred to
as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class AIO
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the Class AIO Distribution Amount relating to such Distribution Date.
Distributions will be made in immediately available funds to such owners, by
wire transfer or by check mailed to the address of the person entitled thereto
as it appears on the Certificate Register.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
4
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
5
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class AIO Certificates are
exchangeable for new Class AIO Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
6
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
------------------------------
Name:
Title:
7
Exhibit A-6
Form of Class P Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-1
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS P CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trust or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL
BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN")
OR TO ANY ENTITY THE ASSETS OF WHICH CONSTITUTE ASSETS OF A PLAN.
No.: P-1 Date: September 28, 2000 CUSIP: ▇▇▇▇▇▇▇▇▇
Percentage Interest: 100% Registered Owner: Final Scheduled Distribution
NovaStar REMIC Financing Date: January 25, 2031
Corporation
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE HOLDER OF THIS CERTIFICATE IS ENTITLED TO PREPAYMENT
CHARGES COLLECTED WITH RESPECT TO THE MORTGAGE LOANS. THE HOLDER OF THIS
CERTIFICATE IS NOT ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL OR INTEREST WITH
RESPECT TO THE MORTGAGE LOANS.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class P Certificates (the "Class P Certificates") and issued under
and subject to the terms, provisions and conditions of the Pooling and Servicing
Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing
2
Agreement are Class A-1 Certificates, Class AIO Certificates, Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class O
Certificates, Class RL Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class P
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the Prepayment Charges relating to such Distribution Date. Distributions will be
made in immediately available funds to such owners, by wire transfer or by check
mailed to the address of the person entitled thereto as it appears on the
Certificate Register.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such
3
Certificate or to institute suit for the enforcement of any such distribution,
and such right shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class P Certificates are exchangeable
for new Class P Certificates of authorized denominations evidencing the same
aggregate principal amount.
4
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
------------------------
Name:
Title:
6
Exhibit A-7
Form of Class O Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS O CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW
OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL
BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN")
OR TO ANY ENTITY THE ASSETS OF WHICH CONSTITUTE ASSETS OF A PLAN.
No.: O-1 Date: September 28, 2000 Final Scheduled Distribution Date:
January 25, 2031
Percentage Interest: 100% Registered Owner:
NovaStar REMIC Financing
Corporation
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
Each owner of record of a Class O Certificate will be entitled
to certain distributions , as described under Section 4.01 of the Pooling and
Servicing Agreement.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THIS CERTIFICATE IS A PRINCIPAL ONLY CERTIFICATE. THE HOLDER
OF THIS CERTIFICATE SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF INTEREST WITH
RESPECT TO THE MORTGAGE LOANS.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-1 Class O Certificates (the "Class O Certificates") and issued under
and subject to the terms, provisions and conditions of the Pooling and Servicing
Agreement, to which the owner of this Certificate, by virtue of
2
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class A-1 Certificates, Class AIO Certificates, Class
M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class P
Certificates, Class O Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing April 25, 2000, the owners of the Class O
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the Class O Distribution Amount relating to such Distribution Date.
Distributions will be made in immediately available funds to such owners, by
wire transfer or by check mailed to the address of the person entitled thereto
as it appears on the Certificate Register.
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such
3
Certificate or to institute suit for the enforcement of any such distribution,
and such right shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class O Certificates are exchangeable
for new Class O Certificates of authorized denominations evidencing the same
aggregate principal amount.
4
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
6
Exhibit A-8
Form of Class RL Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS RL CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW
OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL
BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN")
OR TO ANY ENTITY THE ASSETS OF WHICH CONSTITUTE ASSETS OF A PLAN.
No.: RL-1 Date: September 28, 2000 Final Scheduled Distribution Date:
January 25, 2031
Percentage Interest: 100% Registered Owner:
NovaStar REMIC Financing
Corporation
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
Each owner of record of a Class RL Certificate will be
entitled to certain distributions as described in Section 2.09 of the Pooling
and Servicing Agreement.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "RESIDUAL INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
TRANSFER OF THIS CLASS RL CERTIFICATE IS RESTRICTED AS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RL
CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION
860 E (5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH
TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CLASS RL CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED
2
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE
CLASS RL CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF
THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND
AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY
GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN
AGENT ACTING FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS RL
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED
ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
T, CHAPTER 1 OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class RL Certificates (the "Class RL Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class A-1 Certificates, Class AIO Certificates, Class
M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class P
Certificates, Class O Certificates and Class RU Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class RL
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
the distribution described in Section 4.01 of the Pooling and Servicing
Agreement relating to such Distribution Date. Distributions will be made in
immediately available funds to such owners, by wire transfer or by check mailed
to the address of the person entitled thereto as it appears on the Certificate
Register.
3
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
4
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount.
The Certificate Administrator shall give written notice of
termination of the Pooling and Servicing Agreement to each owner in the manner
set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class RL Certificates are exchangeable
for new Class RL Certificates of authorized denominations evidencing the same
aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
6
Exhibit A-9
Form of Class RU Certificate
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2000-2
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS RU CERTIFICATES
Comprised of a Certificate Representing
Certain Interests Relating to a Pool of
Mortgage Loans
The Mortgage Loans are Serviced by
NOVASTAR MORTGAGE INC., as Servicer
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation III, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a
fractional ownership interest in distributions in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans held in the Trust Fund.)
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW
OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL
BE MADE TO ANY EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES AND ▇▇▇▇▇ PLANS, THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (EACH, A "PLAN")
OR TO ANY ENTITY THE ASSETS OF WHICH CONSTITUTE ASSETS OF A PLAN.
No.: RU-1 Date: September 28, 2000 Final Scheduled Distribution Date:
January 25, 2031
Percentage Interest: 100% Registered Owner:
NovaStar REMIC Financing Corporation
The registered owner named above is the registered owner of a
fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan
Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement
dated as of September 1, 2000 (the "Pooling and Servicing Agreement") by and
among Residential Asset Funding Corporation (the "Depositor"), the Trustee, the
Certificate Administrator and NovaStar Mortgage, Inc. as servicer (the
"Servicer") and as seller (the "Seller"), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date
and all collections in respect of interest and principal due after the Cut-off
Date; (ii) property which secured each such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
interest in any insurance policies in respect of the Mortgage Loans; (iv) all
proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
Each owner of record of a Class RU Certificate will be
entitled to certain distributions as described in Section 4.01 of the Pooling
and Servicing Agreement.
In order to receive the final distribution hereon, the owner
hereof is required to present this Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled
for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "RESIDUAL INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES).
TRANSFER OF THIS CLASS RU CERTIFICATE IS RESTRICTED AS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RU
CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION
860 E (5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH
TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CLASS RU CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED
2
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE
CLASS RU CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF
THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND
AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY
GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN
AGENT ACTING FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS RU
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED
ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
T, CHAPTER 1 OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2000-2 Class RU Certificates (the "Class RU Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of
acceptance hereof assents, and is bound. Also issued under the Pooling and
Servicing Agreement are Class A-1 Certificates, Class AIO Certificates, Class
M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class P
Certificates, Class O Certificates and Class RL Certificates, all such
Certificates are collectively referred to as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Distribution Date") commencing October 25, 2000, the owners of the Class RU
Certificates as of the close of business on the business day immediately
preceding such Distribution Date (the "Record Date") will be entitled to receive
a distribution as described in Section 4.01 of the Pooling and Servicing
Agreement relating to such Distribution Date. Distributions will be made in
immediately available funds to such owners, by wire transfer or by check mailed
to the address of the person entitled thereto as it appears on the Certificate
Register.
3
The Certificate Administrator is required to duly and
punctually pay distributions with respect to this Certificate in accordance with
the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable to any owner shall be considered as having
been paid by the Certificate Administrator to such owner for all purposes of the
Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation
III, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement) all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for
the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such owner.
The Pooling and Servicing Agreement will terminate upon notice
to the Trustee or the Certificate Administrator upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular
Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase
by the Servicer of the Mortgage Loans as described below, (iv) the Distribution
Date in January 2031 and (v) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected pursuant to the Pooling
and Servicing Agreement. In addition, under certain circumstances relating to
the qualification of either the Upper-Tier REMIC or the Lower-Tier REMIC as a
REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the
early retirement of the Certificates. Notwithstanding the foregoing, in no event
shall the Trust hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
ambassador of the United States to the Court of St. ▇▇▇▇▇, living on the date of
the Pooling and Servicing Agreement.
4
The Servicer may, at its option, terminate the Pooling and
Servicing Agreement on any date on which the aggregate of the Principal Balances
of the Mortgage Loans on such date is equal to or less than 10% of the Maximum
Collateral Amount, by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the
greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued
and unpaid interest thereon at the weighted average of the Mortgage Rates
through the end of the Due Period preceding the final Distribution Date plus
unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable
to such Mortgage Loans and REO Properties and any accrued and unpaid Available
Funds Cap Carryforward Amount. The Certificate Administrator shall give written
notice of termination of the Pooling and Servicing Agreement to each owner in
the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of transfer at the office
designated as the location of the Certificate Register, and thereupon one or
more new certificates of like class, tenor and Percentage Interest will be
issued to the designated transferee or transferees.
The Certificate Administrator is required to furnish certain
information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and Class RU Certificates are
exchangeable for new Class RU Certificates of authorized denominations
evidencing the same aggregate principal amount.
Each of the Trustee, the Certificate Administrator and any
agent thereof may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of the Trustee, the Certificate
Administrator or any such agent shall be affected by notice to the contrary.
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
Trustee Authentication
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely in
its capacity as Trustee
By:
-------------------------
Name:
Title:
6
Exhibit B
Mortgage Loan Schedule
See Exhibit 1 to the Mortgage Loan Purchase Agreement
Exhibit C
Form of Addition Notice
Exhibit D
Form of Subsequent Transfer Instrument
[See Exhibits 2(A) and 2(B) to the Mortgage Loan Purchase Agreement]
Exhibit E
Request for Release
[date]
To: First Union Nation Bank,
as Certificate Administrator
Re: Pooling and Servicing Agreement, dated as of September 1, 2000
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2000-2
In connection with the administration of the pool of Mortgage
Loans held by you as Certificate Administrator, we request the release, and
acknowledge receipt, of the (Mortgage File/[specify document]) for the Mortgage
Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts received in
connection therewith have been credited to the Collection
Account and remitted to the Certificate Administrator for
deposit into the Payment Account pursuant to the Pooling and
Servicing Agreement.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds of foreclosure,
insurance or other liquidation have been finally received and
credited to the Collection Account and remitted to the
Certificate Administrator for deposit into the Payment Account
pursuant to the Pooling and Servicing Agreement.)
____ 3. Mortgage Loan in Foreclosure
____ 4. Mortgage Loan Purchased Pursuant to Section 11.01 of the Pooling and Servicing Agreement.
____ 5. Mortgage Loan Repurchased or Substituted pursuant to Article II or III of the Pooling and Servicing Agreement
(Seller hereby certifies that the repurchase price
or Substitution Adjustment has been credited to the Collection
Account and that the substituted mortgage loan is a Qualified Substitute Mortgage Loan.)
____ 6. Other (explain)________________________________________________________
If box 1 or 2 above is checked, and if all or part of the
Mortgage File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to you as Certificate Administrator, please acknowledge
your receipt by signing in the space indicated below, and returning this form.
NovaStar Mortgage, Inc.,
as [Servicer][Seller]
By:
--------------------------
Name:
Title:
Documents returned to Certificate Administrator:
First Union National Bank,
as Certificate Administrator
By:
-----------------------
Name:
Title:
Date:
---------------------
2
Exhibit F-1
Form of Trustee's Initial Certification
[Date]
NovaStar Mortgage, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Residential Asset Funding Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services, NovaStar 2000-2
Re: Pooling and Servicing Agreement, dated as of September 1, 2000
(the "Agreement"), among NovaStar Mortgage, Inc., Residential
Asset Funding Corporation, First Union National Bank (the
"Certificate Administrator") and The Chase Bank of Manhattan
(the "Trustee") NovaStar Mortgage Funding Trust, Series 2000-2
Home Equity Loan Asset-Backed Certificates
--------------------------------------------------------------
Gentlemen:
In accordance with Section 2.03 of the above-captioned
Agreement, and Section 2.01(b) of the Mortgage Loan Purchase Agreement, dated as
of March 1, 2000 (the "Purchase Agreement" and, together with the Agreement, the
"Agreements"), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding
Corporation III, the Depositor, the Certificate Administrator and the Trustee,
the undersigned, as Certificate Administrator, on behalf of the Trustee, hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or listed on the attachment hereto)
it has reviewed the Mortgage File and the Mortgage Loan Schedule and has
determined that: (i) all documents required to be included in the Mortgage File
are in its possession; (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan; and (iii) based on
examination by it, and only as to such documents, the information set forth in
items (i) - (vii) and (xiv) of the definition or description of "Mortgage Loan
Schedule" is correct.
The Certificate Administrator, on behalf of the Trustee, has
made no independent examination of any documents contained in each Mortgage File
beyond the review specifically required in the above-referenced Agreements. The
Certificate Administrator, on behalf of the Trustee, makes no representation
that any documents specified in clause (vi) of Section 2.01(b) of the Purchase
Agreement should be included in any Mortgage File. The Certificate
Administrator, on behalf of the Trustee, makes no representations as to and
shall not be responsible to verify: (i) the validity, legality, sufficiency,
enforceability, due authorization, recordability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan, or (iii) the existence
of any assumption, modification, written assurance or substitution agreement
with respect to any Mortgage File if no such documents appear in the Mortgage
File delivered to the Certificate Administrator, on behalf of the Trustee.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Agreement.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Certificate
Administrator
By:
--------------------------
Name:
Title:
2
Exhibit F-2
Form of Trustee's Final Certification
[Date]
NovaStar Mortgage, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Residential Asset Funding Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services, NovaStar 2000-2
Re: Pooling and Servicing Agreement, dated as of September 1, 2000
(the "Agreement"), among NovaStar Mortgage, Inc., Residential
Asset Funding Corporation, First Union National Bank (the
"Certificate Administrator") and The Chase Bank of Manhattan
(the "Trustee") NovaStar Mortgage Funding Trust, Series 2000-2
Home Equity Loan Asset-Backed Certificates
--------------------------------------------------------------
Gentlemen:
In accordance with Section 2.03 of the above-captioned
Agreement, and Section 2.01(b) of the Mortgage Loan Purchase Agreement, dated as
of March 1, 2000 (the " Purchase Agreement" and, together with the Agreement,
the "Agreements"), among NovaStar Mortgage, Inc., Residential Asset Funding
Corporation, the Certificate Administrator, the Trustee and NovaStar Mortgage
Funding Corporation III, the undersigned, as Certificate Administrator, on
behalf of the Trustee, hereby certifies that as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has received the documents set forth in Section
2.01(b) of the Mortgage Loan Purchase Agreement.
The Certificate Administrator, on behalf of the Trustee, has
made no independent examination of any documents contained in each Mortgage File
beyond the review specifically required in the Agreements. The Certificate
Administrator, on behalf of the Trustee, makes no representation that any
documents specified in clause (vi) of Section 2.01(b) should be included in any
Mortgage File. The Certificate Administrator, on behalf of the Trustee, makes no
representations as to and shall not be responsible to verify: (i) the validity,
legality, sufficiency, enforceability, due authorization, recordability or
genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule,
(ii) the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan or (iii) the existence of any assumption, modification, written
assurance or substitution agreement with respect to any Mortgage File if no such
documents appear in the Mortgage File delivered to the Certificate
Administrator, on behalf of the Trustee.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Agreement.
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Certificate
Administrator
By:
---------------------------
Name:
Title:
2
Exhibit G
Form of Investment Letter
Residential Asset Funding Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Structured Finance Trust Services
(NovaStar Mortgage Funding Trust, Series 2000-2)
Ladies and Gentlemen:
The undersigned (the "Transferee") has agreed to purchase from
__________ (the "Transferor") the following certificates:
Class Number
----- ------
---
---
---
---
---
I. The Transferee is (check one):
--- (i) An insurance company, as defined in
Section 2(13) of the Securities Act of 1933,
as amended (the "Securities Act"), (ii) an
investment company registered under the
Investment Company Act of 1940, as amended
(the "Investment Company Act"), (iii) a
business development company as defined in
Section 2(a)(48) of the Securities Act, (iv)
a Small Business Investment Company licensed
by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended,
(v) a plan established and maintained by a
state, its political subdivisions, or any
agency or instrumentality of a state or its
political subdivisions, for the benefit of
its employees, (vi) an employee benefit plan
within the meaning of Title I of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"),
(vii) a business development company as
defined in Section 202(a)(22) of the
Investment Advisors Act of 1940, as amended,
(viii) an organization described in Section
501(c)(3) of the Internal Revenue Code,
corporation (other than a bank as defined in
Section 3(a)(2) of the Securities Act or a
savings and loan association or other
institution referenced in Section 3(a)(2) of
the Securities Act or a foreign bank or
savings and loan association or equivalent
institution), partnership, or Massachusetts
or similar business trust; or (ix) an
investment advisor registered under the
Investment Advisors Act of 1940, as amended,
which, for each of (i) through (ix), owns
and invests on a discretionary basis at
least $100 million in securities other than
securities of issuers affiliated with the
Transferee, securities issued or guaranteed
by the United States or a person controlled
or supervised by and acting as an
instrumentality of the government of the
United States pursuant to authority granted
by the Congress of the United States, bank
deposit notes and certificates of deposit,
loan participations, repurchase agreements,
securities owned but subject to a repurchase
agreement, and currency, interest rate and
commodity swaps (collectively, "Excluded
Securities");
--- a dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that in the
aggregate owns and invests on a
discretionary basis at least $10 million of
securities other than Excluded Securities
and securities constituting the whole or
part of an unsold allotment to, or
subscription by, Transferee as a participant
in a public offering;
--- an investment company registered under the
Investment Company Act that is part of a
family of investment companies (as defined
in Rule 144A of the Securities and Exchange
Commission) which own in the aggregate at
least $100 million in securities other than
Excluded Securities and securities of
issuers that are part of such family of
investment companies;
--- an entity, all of the equity owners of which
are entities described in this Paragraph
A(I);
--- a bank as defined in Section 3(a)(2) of the
Securities Act, any savings and loan
association or other institution as
referenced in Section 3(a)(5)(A) of the
Securities Act, or any foreign bank or
savings and loan association or equivalent
institution that in the aggregate owns and
invests on a discretionary basis at least
$100 million in securities other than
Excluded Securities and has an audited net
worth of at least $25 million as
demonstrated in its latest annual financial
statements, as of a date not more than 16
months preceding the date of transfer of the
Certificates to the Transferee in
2
the case of a U.S. Bank or savings and loan
association, and not more than 18 months
preceding such date in the case of a foreign
bank or savings association or equivalent
institution.
II. The Transferee is acquiring such Certificates solely for
its own account, for the account of one or more others, all of which are
"Qualified Institutional Buyers" within the meaning of Rule 144A, or in its
capacity as a dealer registered pursuant to Section 15 of the Exchange Act
acting in a riskless principal transaction on behalf of a "Qualified
Institutional Buyer". The Transferee is not acquiring such Certificates with a
view to or for the resale, distribution, subdivision or fractionalization
thereof which would require registration of the Certificates under the
Securities Act.
D. The Transferee represents that either it is not (i) an
employee benefit plan (as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) subject to the provisions of
Title I of ERISA, (ii) a plan described in section 4975(e)(l) of the Internal
Revenue Code of 1986, or (iii) an entity whose underlying assets are deemed to
be assets of a plan described in (i) or (ii) above by reason so such plan's
investment in the entity.
Very truly yours,
By:
------------------------------
Title:
---------------------------
Dated:
----------------
3
Exhibit H
Form of Residual Certificate Transfer Affidavit
AFFIDAVIT PURSUANT TO SECTION 860E OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization"
and will not be a "disqualified organization" as of [date of transfer] (for this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class [RU] [RL] Certificate for the
account of a disqualified organization; (iii) it consents to any amendment of
the Pooling and Servicing Agreement dated as of September 1, 2000 among
Residential Asset Funding Corporation, as Depositor, NovaStar Mortgage, Inc., as
Servicer, The Chase Manhattan Bank, as Trustee and First Union National Bank, as
the Certificate Administrator, that shall be deemed necessary by the Trustee
(upon advice of counsel) to constitute a reasonable arrangement to ensure that
the Class [RU] [RL] Certificates will not be owned directly or indirectly by a
disqualified organization; and (iv) it will not transfer such Class [RU] [RL]
Certificate unless (a) it has received from the transferee an affidavit in
substantially the same form as this affidavit containing these same four
representations and (b) as of the time of the transfer, it does not have actual
knowledge that such affidavit is false.
IN WITNESS WHEREOF, the Investor has caused this instrument to
be executed on its behalf, pursuant to authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this ____ day of __________, ____.
[NAME OF INVESTOR]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
-------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act and deed
of the Investor.
Subscribed and sworn before me this ____ day of __________,
____.
-------------------------
NOTARY PUBLIC
COUNTY OF
----------------
STATE OF
----------------
My commission expires the ____ day of ____________, ____.
2