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STANDARD TERMS FOR POOLING AND
SERVICING AGREEMENTS
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Dated as of ________, 2000
REMIC Pass-Through Certificates, Series 2000-__
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions....................................................1
ARTICLE II
CONVEYANCE OF TRUST FUND; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Trust Fund......................................21
Section 2.02. Acceptance by Trustee.........................................23
Section 2.03. Representations and Warranties of CFMSI and CFM...............24
Section 2.04. Substitution of Quilified Substitute Mortgage Loans
for Nonconforming Mortgage Loans............................26
Section 2.05. Sale of Additional Mortgage Loans.............................27
Section 2.06. Authentication of Certificates................................28
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. Servicing.....................................................28
Section 3.02. Collection of Mortgage Payments...............................29
Section 3.03. Subservicing Agreements.......................................30
Section 3.04. No Contractual Relationship...................................30
Section 3.05. Assumption or Termination of Subservicing Agreement...........30
Section 3.06. P&I Account; Certificate Account..............................30
Section 3.07. Delinquency Advances; Servicing Advances......................32
Section 3.08. Compensating Interest.........................................33
Section 3.09. Maintenance of Insurance......................................33
Section 3.10. Due-on-Sale Clauses; Assumption and Substitution..............33
Section 3.11. Realization Upon Defaulted Mortgage Loans; Workouts...........34
Section 3.12. Trustee to Corporate; Release of Files........................36
Section 3.13. Servicing Compensation........................................36
Section 3.14. Annual Statement of Compliance................................37
Section 3.15. Annual Accountants' Report....................................37
Section 3.16. Access to Loan Documentation and Information..................37
Section 3.17. Inspections; Errors and Omissions Insurance...................37
Section 3.18. Additional Servicing Responsibilities for Second
Mortgage Loans..............................................38
Section 3.19. Prepayment Charges............................................38
Section 3.20. Escrow Account................................................38
Section 3.21. Refinancings of Mortgage Loans................................38
ARTICLE IV
ACCOUNT AND DISTRIBUTION
Section 4.01. Collection of Money...........................................39
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Section 4.02. Accounts......................................................39
Section 4.03. Investment of Accounts........................................39
Section 4.04. Pre-Funding Account and Capitalized Interest Account..........41
Section 4.05. Eligible Investments..........................................41
Section 4.06. Accounting and Directions by Trustee..........................43
Section 4.07. Reports by Trustee to Holders.................................45
Section 4.08. Other Reports by Trustee......................................45
Section 4.09. Commission Filings............................................45
Section 4.10. Amounts Not Distributed.......................................45
Section 4.11. Payment of Trustee Expenses...................................46
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates..............................................46
Section 5.02. Registration of Transfer and Exchange of Certificates.........47
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............50
Section 5.04. Persons Deemed Owners.........................................51
Section 5.05. Access to List of Certificateholders' Names and Addresses.....51
Section 5.06. Definitive Certificates.......................................51
Section 5.07. Notices to Clearing Agency....................................51
ARTICLE VI
CFMSI AND CFM
Section 6.01. Liability.....................................................52
Section 6.02. Merger or Consolidation, or Assumption of the Obligations.....52
Section 6.03. Limitation on Liability.......................................52
Section 6.04. CFM Not to Resign.............................................52
Section 6.05. Maintenance of Office or Agency...............................53
Section 6.06. Delegation of Duties..........................................53
ARTICLE VII
SERVICER DEFAULT; RESIGNATION
Section 7.01. Servicing Events of Default...................................53
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of the Trustee.........................................56
Section 8.02. Certain Matters Affecting the Trustee.........................57
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.........58
Section 8.04. Trustee May Own Certificates..................................59
Section 8.05. Trustee's Fees and Expenses...................................59
Section 8.06. Eligibility Requirements for Trustee..........................59
Section 8.07. Resignation or Removal of Trustee.............................59
Section 8.08. Successor Trustee.............................................60
Section 8.09. Merger or Consolidation of Trustee............................60
Section 8.10. Appointment of Co-Trustee or Separate Trustee.................61
Section 8.11. Tax Returns...................................................62
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Section 8.12. Appointment of Authenticating Agent...........................62
ARTICLE IX
TERMINATION
Section 9.01. Termination upon Repurchase by Depositor or Liquidation of
all Mortgage Loans..........................................63
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Amendment....................................................65
Section 10.02. Recordation of Agreement.....................................66
Section 10.03. Limitation on Rights of Certificateholders...................66
Section 10.04. Governing Law................................................67
Section 10.05. Intention of Parties.........................................67
Section 10.06. Notices......................................................67
Section 10.07. Severability of Provisions...................................67
Section 10.08. Assignment...................................................67
Section 10.09. Certificates Nonassessable and Fully Paid....................67
Section 10.10. No Usurious Intent...........................................68
Section 10.11. Counterparts.................................................68
ARTICLE XI
DEPOSITORIES
Section 11.01. Depositories.................................................68
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THESE STANDARD TERMS FOR POOLING AND SERVICING AGREEMENTS, dated as of
________, 2000 (the "Standard Terms Document"), declare the basic terms and
conditions upon which one or more series of pass-through certificates packaged
by CitiFinancial Mortgage Securities Inc. ("CFMSI") are to be issued,
authenticated and delivered from time to time pursuant to, with respect to each
such series, a Pooling and Servicing Agreement (a "Pooling Agreement") between
CFMSI as depositor, CitiFinancial Mortgage Company ("CFM"), as servicer, and the
institution named therein as trustee establishing such series.
This Standard Terms Document as incorporated in a Pooling Agreement shall
apply to the series of pass-through certificates established thereby to the
extent provided therein. Hereinafter, references to the "Pooling Agreement" and
the pass-through certificates executed and delivered thereunder and to terms
such as "this Agreement", "herein", "hereof" and words of similar import shall
refer only to a particular Pooling Agreement, including as and to the extent
incorporated therein this Standard Terms Document, and the series of
pass-through certificates established thereby.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless otherwise specified in Article XII or unless the
context otherwise requires, shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
form of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Defined terms used in this Standard Terms Document and
not defined herein have the respective meanings ascribed thereto in Article XII.
Accountant: A Person engaged in the practice of accounting who (except
when this Agreement provides that an Accountant must be Independent) may be
employed by or with the Depositor or an Affiliate thereof.
Act: The Securities Act of 1933, as amended.
Addition Notice: A written notice given not less than five Business Days
prior to the related Subsequent Transfer Date of the Depositor's designation of
Additional Mortgage Loans proposed to be sold to the Trust Fund, together with
information comparable to that on the Mortgage Loan Schedule for such Additional
Mortgage Loans.
Additional Loan Balance: The aggregate Loan Balances for all Additional
Mortgage Loans for all Subsequent Transfer Dates.
Additional Mortgage Loans: All Mortgage Loans designated in an Addition
Notice and actually sold to the Trust Fund pursuant to Section 2.05 on a
particular Subsequent Transfer Date.
Affiliate: For any specified Person, any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
Agent: As defined in Section 5.02.
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Aggregate Outstanding Advances: As of any Determination Date, the
aggregate of Net Delinquency Advances made for the period from the Cut-Off Date
to such Determination Date (plus any Delinquency Advances and P&I Account
Advance to be made on the next succeeding Distribution Date).
Aggregate Pool Value Change: For any Determination Date, an amount equal
to (a) the aggregate of the Pool Values of all Mortgage Loans, determined as of
the preceding Determination Date (or, in the case of the first Determination
Date, as of the Cut-Off Date), less (b) the aggregate of the Pool Values of all
Mortgage Loans, determined as of such Determination Date.
Applied Loss Amount: For any Distribution Date, any excess of (x) the
Certificate Balance, after giving effect to the application of the Principal
Distribution Amount on such date but prior to the allocation pursuant to Section
13.02, over (y) the Pool Balance as of the end of the related Collection Period.
Appraisal: For a Mortgage Loan, the appraisal conducted in connection with
the origination of such Mortgage Loan, whether conducted upon the purchase of
the related Mortgaged Property or in connection with a refinancing.
Authenticating Agent: The Authenticating Agent appointed pursuant to
Section 8.12 and identified in Article XII which is authorized by the Trustee to
authenticate the Certificates on behalf of the Trustee. The Authenticating Agent
may be an Affiliate of the Depositor.
Authorized Officer: With respect to the Servicer or the Depositor, the
Chairman of the Board of Directors, the President, any Executive Vice President,
Senior Vice President, Vice President, Controller, Assistant Controller,
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer, or any other
natural person designated in an Officer's Certificate signed by any of the
foregoing officers and furnished to the Trustee and, solely in the case of an
Officer's Certificate given pursuant to Section 3.14, any Servicing Officer.
Bankruptcy Code: The United States Bankruptcy Code of 1978, as amended.
Beneficial Owner: With respect to a Certificate held by a Clearing Agency,
the Person who is the beneficial owner of such Certificate as reflected on the
books of such Clearing Agency or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an Indirect Participant, in accordance
with the rules of such Clearing Agency).
Business Day: Any day other than a Saturday, a Sunday or a day on which
banking institutions in New York, New York or in the cities where the Trustee,
any Paying Agent and the Servicer are located are authorized or obligated by law
or executive order to be closed or, only with respect to a Distribution Date and
if there are Book-Entry Certificates, any day on which the relevant Clearing
Agency is closed.
Capitalized Interest Requirement: For a Distribution Date, any excess of
(a) interest accrued at the Capitalized Interest Rate (x) on the Pre-Funded
Amount as of the end of the related Collection Period for a period equal to such
Collection Period and (y) on the aggregate Loan Balance of all Additional
Mortgage Loans sold to the Trust Fund during the preceding calendar month for a
period from the first day of the related Collection Period to the Subsequent
Transfer Cut-Off Date (if the Subsequent Transfer Cut-Off Date is prior to or on
the first day of such Collection Period, the amount under this clause (y) shall
be zero), over
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(b) any Pre-Funding Account Earnings to be deposited into the Certificate
Account pursuant to Section 4.04(d).
Certificate: Any certificate or residual certificate identified as such in
Article XII.
Certificate Account: The account or accounts created and maintained
pursuant to Section 4.02. The term Certificate Account shall be deemed to
include an Alternative Certificate Account (as defined in Section 11.01).
Certificate Balance: As of any date, the aggregate of the Principal
Balances of all Certificates.
Certificate Rate: For any Class or Subclass of Certificates, the rate per
annum at which interest accrues on Certificates of such Class or such Subclass,
as specified in Article XII.
Certificate Register and Certificate Registrar: The register maintained
pursuant to Section 5.02 and the Certificate Registrar identified in Article
XII.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register.
Citibank: Citibank, N.A., a national banking association.
Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
Civil Relief Shortfall: For any Collection Period, and for all Mortgage
Loans for which there has been a reduction in the amount of interest collectible
for such Collection Period as a result of the Civil Relief Act, any amount by
which (x) interest collectible on such Mortgage Loans for such Collection Period
is less than (y) the sum of (i) one month's interest at the Weighted Average
Rate and (ii) the Servicing Fee, the Trustee Fee, any Insurance Premium and such
Mortgage Loans' allocable portion of Trust Expenses for such Collection Period.
Civil Relief Shortfall Amount: For any Distribution Date and any
interest-bearing Class or Subclass of Certificates, the pro rata share allocated
thereto, based on the amount of interest accrued thereon at the applicable
Certificate Rate during the related Interest Accrual Period, of the Civil Relief
Shortfall for the related Collection Period.
Class: With respect to Certificates, any group of Certificates designated
as a Class in Article XII, with respect to any Class L Regular Interests, the
regular interests in the Constituent REMIC designated as such in Article XII,
and with respect to Residual Certificates, all Residual Certificates having the
same Class designation.
Class A Certificateholder: A registered holder of a Class A Certificate.
Class A Certificate: A Certificate of any Class or Subclass designated as
a Class A Certificate in Article XII.
Class A Interest Amount: For any Distribution Date, the sum of the Class A
Subclass Interest Amounts for such Distribution Date.
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Class A Principal Balance: An amount equal to the lesser of (a) the sum of
the Class A Subclass Principal Balances and (b) the Pool Balance.
Class A Subclass Interest Amount: As to any Distribution Date and any
Class A Subclass (other than a Class A Principal-Only Subclass), (i) the amount
of interest accrued during the related Interest Accrual Period at the applicable
Certificate Rate on the Class A Subclass Principal Balance (or in the case of
any interest only Subclass, the notional amount) of such Class A Subclass minus
(ii) the sum of (x) any Non-Supported Interest Shortfall allocated to such Class
A Subclass for such Distribution Date and (y) any Civil Relief Shortfall Amount
allocated to such Class A Subclass for such Distribution Date.
Class A Subclass Interest Shortfall Amount: As to any Distribution Date
and any Class A Subclass (other than a Class A Principal-Only Subclass), any
amount by which the Class A Subclass Interest Amount of such Class A Subclass
for such Distribution Date exceeds the amount distributed in respect of such
Class A Subclass on such Distribution Date pursuant to clause second of Section
13.01(b).
Class A Subclass Principal Balance: As to the first Distribution Date and
any Class A Subclass, the Initial Principal Balance of such Class A Subclass as
set forth in Section 12.01(a). As of any subsequent Distribution Date, such
Initial Principal Balance minus the sum of (a) all amounts previously
distributed in respect of such Class A Subclass on prior Distribution Dates
pursuant to Section 13.01(c) and (b) all Applied Loss Amounts previously
allocated to such Class A Subclass pursuant to Section 13.02.
Class A Subclass Unpaid Interest Shortfall: As to any Distribution Date
and any Class A Subclass, the amount, if any, by which the aggregate of the
Class A Subclass Interest Shortfall Amounts for such Class A Subclass for prior
Distribution Dates is in excess of aggregate of the amounts distributed in
respect of such Class A Subclass on prior Distribution Dates pursuant to clause
third of Section 13.01(b).
Class A Unpaid Interest Shortfall: As to any Distribution Date, an amount
equal to the sum of the Class A Subclass Unpaid Interest Shortfalls.
Class B Certificateholder: A registered holder of a Class B Certificate.
Class B Certificate: A Certificate of any Class or Subclass designated as
a Class B Certificate in Article XII.
Class B Interest Amount: For any Distribution Date, the sum of the Class B
Subclass Interest Amounts for such Distribution Date.
Class B Principal Balance: An amount equal to the sum of the Class B
Subclass Principal Balances.
Class B Subclass Applied Losses: For any Distribution Date and any Class B
Subclass, the aggregate amount of all Applied Loss Amounts allocated to such
Class B Subclass on all prior Distribution Dates.
Class B Subclass Interest Amount: As to any Distribution Date and any
Class B Subclass, (i) the amount of interest accrued during the related Interest
Accrual Period at the applicable Certificate Rate on the Class B Subclass
Principal Balance of such Class B Subclass minus (ii) the sum of (x) any
Non-Supported Interest Shortfall allocated to such Class B Subclass for such
Distribution Date and (y) any Civil Relief Shortfall Amount allocated to such
Class B Subclass for such Distribution Date.
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Class B Subclass Interest Shortfall Amount: As to any Distribution Date
and any Class B Subclass, any amount by which the Class B Subclass Interest
Amount of such Class B Subclass for such Distribution Date exceeds the amount
distributed in respect of such Class B Subclass on such Distribution Date
pursuant to clause fifth of Section 13.01(b).
Class B Subclass Loss Amount: For any Distribution Date and any Class B
Subclass, (a) the aggregate amount of all Applied Loss Amounts allocated to such
Class B Subclass on all prior Distribution Dates minus (b) the aggregate amount
of all distributions to such Class B Subclass in reduction of such Class B
Subclass Loss Amount on all prior Distribution Dates pursuant to clause eighth
of Section 13.01(b).
Class B Subclass Principal Balance: As to the first Distribution Date and
any Class B Subclass, the Initial Principal Balance of such Class B Subclass as
set forth in Section 12.01(a). As of any subsequent Distribution Date, the
lesser of (i) such Initial Principal Balance minus the sum of (a) all amounts
previously distributed in respect of such Class B Subclass on prior Distribution
Dates pursuant to Section 13.01(c) and (b) the Class B Subclass Applied Losses
for such Class B Subclass and (ii) the Pool Balance minus the sum of the Class A
Principal Balance, the Class M Principal Balance and the Class B Subclass
Principal Balances of all Class B Subclasses with lower numerical designations,
each as of the preceding Distribution Date (after taking into account
distributions in reduction of Principal Balance and the allocation of any
Applied Loss Amounts on such date).
Class B Subclass Unpaid Interest Shortfall: As to any Distribution Date
and any Class B Subclass, the amount, if any, by which the aggregate of the
Class B Subclass Interest Shortfall Amounts for such Class B Subclass for prior
Distribution Dates is in excess of the amounts distributed in respect thereof
for such Class B Subclass on prior Distribution Dates pursuant to clause eighth
of Section 13.01(b).
Class B Unpaid Interest Shortfall: For any Distribution Date, the sum of
the Class B Subclass Unpaid Interest Shortfalls.
Class L Regular Interests: Any uncertificated REMIC regular interests
designated as such pursuant to Article XII.
Class LR Certificate: Any Residual Certificate designated as such in
Article XII.
Class M Certificateholder: A registered holder of a Class M Certificate.
Class M Interest Amount: For any Distribution Date, the sum of the Class M
Subclass Interest Amounts for such Distribution Date.
Class M Principal Balance: An amount equal to the sum of all Class M
Subclass Principal Balances.
Class M Subclass Applied Losses: For any Distribution Date and any Class M
Subclass, the aggregate amount of all Applied Loss Amounts allocated to such
Class M Subclass on all prior Distribution Dates.
Class M Subclass Interest Amount: As to any Distribution Date and any
Class M Subclass, the amount of interest accrued during the related Interest
Accrual Period at the applicable Certificate Rate on the Class M Subclass
Principal Balance of such Class M Subclass minus the sum of (x) any
Non-Supported Interest Shortfall allocated to such Class M Subclass for such
Distribution Date and (y) any Civil Relief Shortfall Amount allocated to such
Class M Subclass for such Distribution Date.
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Class M Subclass Interest Shortfall Amount: As to any Distribution Date
and any Class M Subclass, any amount by which the Class M Subclass Interest
Amount for such Class M Subclass for such Distribution Date exceeds the amount
distributed in respect of such Class M Subclass on such Distribution Date
pursuant to clause fourth of Section 13.01(b).
Class M Subclass Loss Amount: For any Distribution Date and any Class M
Subclass, (a) the aggregate amount of all Applied Loss Amounts allocated to such
Class M Subclass on all prior Distribution Dates minus (b) the aggregate amount
of all distributions to such Class M Subclass in reduction of such Class M
Subclass Loss Amount on all prior Distribution Dates pursuant to clause seventh
of Section 13.01(b).
Class M Subclass Principal Balance: As to the first Distribution Date and
any Class M Subclass, the Initial Principal Balance of such Class M Subclass as
set forth in Section 12.01(a). As of any subsequent Distribution Date, the
lesser of (a) such Initial Principal Balance minus (i) all amounts previously
distributed to holders thereof in reduction of Principal Balance and (ii) the
Class M Subclass Applied Losses for such Class M Subclass and (b) the Pool
Balance minus the sum of the Class A Principal Balance and the Class M Subclass
Principal Balances of all Class M Subclasses with lower numerical designations,
each as of the immediately preceding Distribution Date (after taking into
account distributions in reduction of Principal Balance and the allocation of
any Applied Loss Amounts on such date).
Class M Subclass Unpaid Interest Shortfall: As to any Distribution Date
and any Class M Subclass, the amount, if any, by which the aggregate of the
Class M Subclass Interest Shortfall Amounts for prior Distribution Dates for
such Class M Subclass is in excess of the amounts distributed in respect thereof
for such Class M Subclass on prior Distribution Dates pursuant to clause seventh
of Section 13.01(b).
Class M Unpaid Interest Shortfall: As to any Distribution Date, the sum of
the Class M Subclass Unpaid Interest Shortfall Amounts.
Class R Certificate: Any Residual Certificate designated as such in
Article XII.
Clean-Up Call Date: The first Distribution Date on which the Mortgage
Loans may be repurchased pursuant to Section 9.01(a).
Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act and the regulations of the
Commission thereunder. Unless otherwise specified in Article XII, the initial
Clearing Agency is The Depository Trust Company.
Clearing Agency Participant: A broker, dealer, bank or other financial
institution or other person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
CFMSI: CitiFinancial Mortgage Securities Inc., a corporation organized and
existing under the laws of the State of Delaware, or its successors in interest.
Code: The Internal Revenue Code of 1986, as it may be amended from time to
time, any successor statutes thereto, and applicable U.S. Department of the
Treasury temporary or final regulations issued pursuant thereto.
Collection Period: For a particular Distribution Date, the preceding
calendar month.
Commission: The Securities and Exchange Commission.
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Compensating Cap: For any Distribution Date, the lesser of (a) the
aggregate amount of the Servicing Fee actually received on the Mortgage Loans
for such Distribution Date and (b) the product of (x) 0.50% and (y) one-twelfth
of the Pool Balance as of the preceding Distribution Date.
Compensating Interest: As defined in Section 3.08.
Constituent REMICs: Each of the one or more segregated asset pools
designated in Article XII as a REMIC within the Trust Fund.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office on the date hereof is located at the address set forth in Article XII.
Custodian: The Mortgage Note Custodian or the Mortgage Document Custodian,
as the context may require.
Cumulative Loss Percentage: As of any date, the percentage equivalent of
Cumulative Realized Losses divided by the sum of (x) the Initial Pool Balance
and (y) the Additional Loan Balance.
Cumulative Realized Losses: As of any date, the aggregate amount of
Realized Losses for all Collection Periods ending prior to such date.
Current Interest: For any Distribution Date, the sum of the Class A
Interest Amount, Class M Interest Amount and Class B Interest Amount.
Deficiency Amount: For any Distribution Date, any excess of (x) the
Targeted Level over (y) the Overcollateralization Amount, taking into account
the reduction of the Certificate Balance by application of Principal Proceeds
but prior to applying any Extra Principal Distribution Amount or Applied Loss
Amount.
Deficient Valuation: For any Mortgage Loan, a valuation by a court of
competent jurisdiction of the Mortgaged Property in an amount less than the
then-outstanding indebtedness under the Mortgage Loan, or any reduction in the
amount of principal to be paid in connection with any scheduled Monthly Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from a proceeding under the Bankruptcy Code or any other
similar state law.
Definitive Securities: Any Class or Subclass of Certificates or the
Residual Certificates issued in definitive, fully registered form in accordance
with the provisions of Section 5.06 hereof.
Delinquency Advance: The aggregate of the advances made by the Servicer
pursuant to Section 3.07(a), the amount of any such Delinquency Advance with
respect to a particular Collection Period being no more than (a) the aggregate
of the interest portion of Monthly Payments on the Mortgage Loans that were due
during the related Collection Period and Delinquent as of the related
Determination Date, after adjustment of delinquent interest payments to interest
at the Pass-Through Rate plus the amount of any P&I Account Advance with respect
to the preceding Distribution Date, less (b) the amount of any P&I Account
Advance to be made on the particular Distribution Date.
Delinquent: A Mortgage Loan is "Delinquent" if any Monthly Payment due
thereon (or part thereof) is not received from the Mortgagor by the close of
business on the Due Date. A Mortgage Loan is "30 days Delinquent" if such
payment has not been received by the close of business on the corresponding
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day of the month following the month of such Due Date (or, if there is no
corresponding day, on the last day of such following month), and similarly for
"60 days Delinquent", "90 days Delinquent" and so on.
Deposit Date: The Business Day preceding each Distribution Date.
Depositor: CFMSI, or its successors in interest.
Depositor Order: A written order or request signed in the name of the
Depositor by an Authorized Officer.
Depository: The bank or banks (which may be Citibank, N.A., Citibank
(Delaware) or Citibank (New York State)) or savings and loan association or
associations or trust company or companies (which may be the Trustee or which
may be, directly or indirectly, controlled by or under common control with the
Depositor) at which the P&I Account, Certificate Account and Escrow Account are
established or maintained pursuant to Section 4.02, 3.19 or 3.20. Each
Depository must meet the requirements set forth in Section 11.01.
Disqualified Organization: As defined in Section 5.02.
Distribution Date Statement: The statement required to be delivered
pursuant to Section 4.07(a).
Due Date: For a Mortgage Loan, the day of each calendar month on which the
Monthly Payment is due.
Eligible Account: Either (A) a segregated account or accounts maintained
at Citibank, N.A., provided that the short-term unsecured debt obligations of
Citibank, N.A. are rated at least "A-1" by S&P if S&P is a Rating Agency, "F-l"
by Fitch if Fitch is a Rating Agency, and "P-1" by Moody's if ▇▇▇▇▇'▇ is a
Rating Agency, or (B) a segregated account or accounts maintained with an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the unsecured and uncollateralized debt
obligations of which shall be rated at least in the category of "AA" by S&P if
S&P is a Rating Agency, in the category of "AA" by Fitch if Fitch is a Rating
Agency, and in the category of "AA" by Moody's if ▇▇▇▇▇'▇ is a Rating Agency,
and which has a short term rating of at least "A-1" by S&P if S&P is a Rating
Agency, "F-1" by Fitch if Fitch is a Rating Agency, and "P-1" by Moody's if
▇▇▇▇▇'▇ is a Rating Agency and which is either (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws and (iv) a principal subsidiary of a
bank holding company or (C) a trust account (which shall be a "special deposit
account") maintained with the trust department of a federal or state chartered
depository institution or of a trust company, having capital and surplus of not
less than $50,000,000, acting in its fiduciary capacity. Any Eligible Accounts
maintained with the Trustee shall conform to the preceding clause (C).
Eligible Investments: As defined in Section 4.05.
ERISA: The applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended from time to time and any applicable rule,
regulation or order promulgated thereunder.
ERISA Prohibited Holder: As defined in Section 5.02.
Escrow Account: The account, if any, created and maintained pursuant to
Section 3.20.
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Exchange Act: The Securities Exchange Act of 1934, as amended.
Extra Principal Distribution Amount: For any Distribution Date, the lesser
of (x) Monthly Excess Interest and (y) the Deficiency Amount.
▇▇▇▇▇▇ Mae Guide: ▇▇▇▇▇▇ Mae's Servicing Guide, as the same may be amended
and supplemented by ▇▇▇▇▇▇ Mae from time to time to the extent the Servicer
shall elect to apply such amendments and supplements pursuant to Section 3.01.
FDIC: The Federal Deposit Insurance Corporation.
FHLMC: The Federal Home Loan Mortgage Corporation.
Fitch: Fitch IBCA, Inc.
Foreclosure Profits: As to any Distribution Date, any excess of (a) Net
Liquidation Proceeds for each Mortgage Loan that became a Liquidated Loan during
the related Collection Period over (b) the sum of the unpaid Loan Balance of
each such Liquidated Loan plus accrued and unpaid interest at the applicable
Mortgage Note Rate on such unpaid Loan Balance from the Due Date to which
interest was last paid by the Mortgagor (or, in the case of a Liquidated Loan
that had been an REO Mortgage Loan, from the Due Date to which interest was last
deemed to have been paid to the Due Date in the month in which such Mortgage
Loan became a Liquidated Loan).
GIC: A guaranteed investment contract or surety bond.
Holder: Has the same meaning as "Certificateholder."
Independent: When used with respect to any specified Person, means such a
Person who is "independent" within the meaning of Rule 2-01(b) of the
Commission's Regulation S-X under the Exchange Act.
Indirect Participant: A broker, dealer, bank or other financial
institution or other person who acts through a Clearing Agency Participant to
effect book-entry transfers on the Clearing Agency and pledges of securities
deposited with the Clearing Agency.
Initial Principal Balance: For any Class or Subclass of Certificates, the
amount specified in Article XII, and for any Certificate, the amount specified
thereon as the Initial Principal Balance.
Insurance Proceeds: Proceeds paid in respect of a Mortgage Loan pursuant
to any Primary Mortgage Insurance Certificates, amounts paid pursuant to hazard
insurance policies to the extent not applied to restore the related Mortgaged
Property or released to the Mortgagor in accordance with the Servicer's normal
servicing procedures, and amounts paid pursuant to any other insurance policy or
bond relating to the Mortgage Loan or the servicing thereof.
Interest Proceeds: For a Collection Period, the sum (without duplication)
of (a) all interest due and actually received on the Mortgage Loans for such
Collection Period, (b) all Compensating Interest paid by the Servicer for such
Collection Period, (c) the interest portion of any payment made during such
Collection Period in connection with the repurchase of a Mortgage Loan pursuant
to Section 2.02 or 2.03(a), (d) the interest portion of Net Liquidation Proceeds
received in such Collection Period, (e) all Delinquency Advances
9
made for such Collection Period and (f) any amount to be transferred from the
Capitalized Interest Account pursuant to Section 4.04(d).
Investment Account: As and to the extent specified in Article XII, each
account or any portion of any thereof which consists of cash or Eligible
Investments.
Investment Income: Any and all investment income and gains, net of any
losses, actually received on the investment of funds on deposit in a particular
Investment Account.
Issue Date: The date on which Certificates are first executed,
authenticated and delivered, as specified in Article XII.
Last Scheduled Distribution Date: For each Class or Subclass of
Certificates or Certificates, the date specified in Article XII.
Liquidated Loan: A Mortgage Loan (including an REO Property) with respect
to which the Servicer determines that all Liquidation Proceeds which it expects
to recover have been recovered or a Mortgage Loan for which the related
Mortgaged Property is retained or sold by the Mortgagor and for which the
Servicer has released the Mortgage as a result of a determination by the
Servicer that the potential Liquidation Expenses with respect to such Mortgage
Loan would exceed the amount by which any payment made by the Mortgagor is less
than the outstanding principal balance of such Mortgage Loan plus accrued and
unpaid interest thereon.
Liquidation Expenses: For any Liquidated Loan, expenses paid or incurred
by or for the account of the Servicer or the Trust Fund for (a) Property
Protection Expenses, (b) property sales expenses, (c) foreclosure costs,
including court costs and reasonable attorneys' fees, (d) similar expenses
reasonably paid or incurred in connection with the liquidation of such
Liquidated Loan and (e) any tax imposed on the Trust Fund with respect to a
Liquidated Loan or property received by deed in lieu of foreclosure.
Liquidation Proceeds: For any Liquidated Loan, the amounts received by the
Servicer in connection with the liquidation of such Liquidated Loan, whether
through judicial or non-judicial foreclosure, proceeds of insurance policies,
condemnation proceeds or otherwise, including payments received from the
Mortgagor in respect of such Liquidated Loan, other than amounts required to be
paid to the Mortgagor pursuant to the terms of such Liquidated Loan or to be
applied otherwise pursuant to law.
Loan Balance: For any Mortgage Loan as of any date, the actual outstanding
principal balance thereof as of the close of business on the Cut-Off Date
(excluding principal payments due on or before the Cut-Off Date, whether or not
actually received), less all principal payments received on such Mortgage Loan
and included as Principal Proceeds for all prior Deposit Dates, without regard
to any adjustments thereof in connection with Mortgagor bankruptcies (other than
a Deficient Valuation).
Loan Repurchase Price: As defined in Section 2.02.
Loan-to-Value Ratio: As of any date, (a) for a Mortgage Loan secured by a
Senior Lien, the percentage equivalent of (x) the original Loan Balance divided
by (y) the Original Value and (b) for a Second Mortgage Loan, the percentage
equivalent of (x) the sum of the original Loan Balance of the Second Mortgage
Loan and the remaining principal balance of all Senior Liens on the related
Mortgaged Property as of the date of origination of the Second Mortgage Loan,
divided by (y) the Original Value.
10
Lost Note Affidavit: For any Mortgage Loan for which the original Mortgage
Note has been permanently lost, misplaced or destroyed and has not been
replaced, an affidavit of the Originator or an Affiliate of the Originator
certifying that the original Mortgage Note has been lost, misplaced or destroyed
(attaching a copy of such Mortgage Note) and indemnifying the Trust Fund against
any loss, cost or liability resulting from the failure to deliver such original
Mortgage Note.
Monthly Deposit Amount: For any Deposit Date, the sum of Interest Proceeds
and Principal Proceeds, each for the related Collection Period.
Monthly Excess Interest: For any Distribution Date, any excess of (x)
Interest Proceeds over (y) the sum of Current Interest and all payments having a
higher priority under Section 13.01(b) than the Class A Interest Amount.
Monthly Payment: As to any Mortgage Loan (including any REO Mortgage Loan)
and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization schedule at the time applicable (after
adjustment for any partial Principal Prepayments and Deficient Valuations
occurring prior to such Due Date but before any adjustment to such amortization
schedule other than Deficient Valuations by reason of any bankruptcy, or similar
proceeding or any moratorium or similar waiver or grace period).
Monthly Prepayment Charges: For a Collection Period, the aggregate amount
actually received by the Servicer from Mortgagors as payments of Prepayment
Charges on Mortgage Loans.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc.
Mortgage: For any Mortgage Loan, the mortgage, deed of trust or other
security instrument creating a first or second lien on and an interest in real
property securing a Mortgage Note.
Mortgage Document Custodial Agreement: The Mortgage Document Custodial
Agreement from time to time in effect between the Mortgage Document Custodian,
the Depositor and the Trustee, as the same may be amended or modified from time
to time.
Mortgage Document Custodian: The person identified in Article XII or its
successors in interest named pursuant to the Mortgage Document Custodial
Agreement. The Mortgage Document Custodian may be the Trustee, any Affiliate of
the Trustee, the Servicer, any Affiliate of the Servicer or an independent
entity.
Mortgage Documents: All documents contained in the Mortgage Files.
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
such documents pursuant to this Agreement.
Mortgage Loan: At any time, the indebtedness of a Mortgagor evidenced by a
Mortgage Note which is secured by real property and which is sold and assigned
to the Trustee and held at such time in the Trust Fund pursuant to this
Agreement, the Mortgage Loans originally so held being identified in Exhibit B.
Mortgage Loan Schedule: The list of Mortgage Loans transferred to the
Trustee as part of the Trust Fund, the original list being attached hereto as
Exhibit B.
Mortgage Note: For a Mortgage Loan, the promissory note or other evidence
of indebtedness of the Mortgagor.
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Mortgage Note Custodial Agreement: The Mortgage Note Custodial Agreement
from time to time in effect between the Mortgage Note Custodian, the Depositor,
the Servicer and the Trustee, as the same may be amended or modified from time
to time.
Mortgage Note Custodian: The person identified in Article XII or its
successors in interest named pursuant to the Mortgage Note Custodial Agreement.
The Mortgage Note Custodian may be the Trustee, any Affiliate of the Trustee or
an independent entity.
Mortgage Note Rate: For a Mortgage Loan, the annual rate per annum at
which interest accrues on such Mortgage Loan.
Mortgaged Property: Any real property subject to a Mortgage.
Mortgagor: The obligor on a Mortgage Note.
Net Delinquency Advances: For any period, the amount (which may be
negative) obtained by subtracting the amount of any reimbursements of
Delinquency Advances received in such period from the aggregate amount of
Delinquency Advances made in such period.
Net Liquidation Proceeds: For any period and for any Liquidated Loan, the
aggregate amount of Liquidation Proceeds, net of related Liquidation Expenses
and related unreimbursed Delinquency Advances and unreimbursed Servicing
Advances, received by the Servicer or deposited in the P&I Account, as the case
may be, as proceeds of such Mortgage Loan. Net Liquidation Proceeds shall be
allocated first to accrued and unpaid interest on the related Mortgage Loan and
then to the unpaid principal balance thereof.
Net Servicing Advances: For any period, the amount (which may be negative)
obtained by subtracting the amount of any reimbursements of Servicing Advances
received in such period from the aggregate amount of Servicing Advances made in
such period.
Nonrecoverable Advance: Any portion of a Delinquency Advance previously
made which has not been previously reimbursed to the Servicer and which, in the
good faith judgment of the Servicer, would not be ultimately recoverable from
Liquidation Proceeds or other recoveries in respect of the related Mortgage
Loan. The determination by the Servicer that it has made a Nonrecoverable
Advance shall be evidenced by a certificate of a Servicing Officer delivered to
the Trustee and detailing the basis for such determination, but any delay or
failure to send such certificate shall not impair the right to recover such
Advance.
Non-Supported Interest Shortfall: For any Distribution Date, and any Class
or Subclass of Certificates (other than a Class A Principal-Only Subclass), the
pro rata share allocated thereto based on the amount of interest accrued thereon
during the related Interest Accrual Period at the related Certificate Rate of
the excess, if any, of the Prepayment Interest Shortfalls for such Collection
Period over the Compensating Cap (but not including any Servicing Fee received
because of a Delinquency Advance) for such Distribution Date. Any Servicing Fee
advanced by the Servicer will not be applied to reduce Prepayment Interest
Shortfalls.
Officer's Certificate: A certificate signed by an Authorized Officer of
the Depositor or the Servicer, as applicable, and delivered to the Trustee.
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Opinion of Counsel: A written opinion of counsel, who (unless otherwise
specified herein) may be counsel for, or an employee of, the Depositor or an
Affiliate thereof, which counsel shall be reasonably acceptable to the Trustee.
Original Value: For a Mortgaged Property, the lesser of the sales price of
such Mortgaged Property and the appraised value thereof determined pursuant to
an appraisal made in connection with origination of such Mortgage Loan, except
that only the original appraisal of such Mortgaged Property may be used for a
Mortgage Loan that is not a purchase money mortgage.
Originator: The Affiliate or Affiliates of CFMSI, or any third party
originators, from which CFMSI has acquired the Mortgage Loans.
Outstanding: As of any date, all Certificates theretofore authenticated
and delivered under this Agreement except:
(i) Certificates theretofore canceled by the Certificate Registrar or
delivered to the Certificate Registrar for cancellation;
(ii) Certificates with respect to which money for a distribution in the
necessary amount to reduce the Principal Balance thereof to zero has been
theretofore deposited with the Trustee or any Paying Agent in trust for the
Holders of such Certificates;
(iii) Certificates in exchange for or in lieu of which other Certificates
have been authenticated and delivered pursuant to this Agreement unless proof
satisfactory to the Certificate Registrar is presented that any such
Certificates are held by a holder in due course; and
(iv) Certificates alleged to have been destroyed, lost or stolen for which
replacement Certificates have been issued as provided for in Section 5.03 and
authenticated and delivered pursuant to this Agreement;
provided, however, that in determining whether the Holders of the requisite
percentage of the aggregate Principal Balance or Percentage Interest of any
Outstanding Certificates or of the Outstanding Certificates of any one or more
Classes thereof have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, such percentage shall be based on the
Principal Balance of such Certificate and provided, further, Certificates owned
by the Depositor or any other obligor upon the Certificates or any Affiliate of
the Depositor or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, or waiver, only Certificates which a Responsible Officer of the Trustee
has actual knowledge are so owned shall be so disregarded and except that where
the Depositor or any other obligor upon the Certificates or any Affiliate of the
Depositor or such other obligor shall be owner of 100% of the aggregate
Principal Balance or Percentage Interest of any Class or Subclass of Outstanding
Certificates, the Depositor or such other obligor or Affiliate shall be
permitted to give any request, demand, authorization, direction, notice, consent
or waiver hereunder. Certificates so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee certifies in writing to the
Trustee the pledgee's right so to act with respect to such Certificates and that
the pledgee is not the Depositor or any other obligor upon the Certificates or
any Affiliate of the Depositor or such other obligor.
Overcollateralization Amount: For any Distribution Date, any excess of (x)
the Pool Balance as of the last day of the related Collection Period plus any
Pre-Funded Amount (exclusive of any Pre-Funded Account Earnings), over (y) the
Certificate Balance (after giving effect to principal distributions on such
Distribution Date).
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Overfunded Interest Amount: For a Subsequent Transfer Date, any excess of
(a) interest accruing at a rate, equal to the sum of (x) the Capitalized
Interest Rate and (y) the per annum equivalent of any Insurance Premium, on the
aggregate Loan Balance of the related Additional Mortgage Loans for a period
from the related Subsequent Transfer Cut-Off Date to the Determination Date
specified in the related Addition Notice, over (b) the amount of interest that
would accrue on such aggregate Loan Balance during such period at the per annum
rate at which the Pre-Funded Amount is invested as of such Subsequent Transfer
Date.
P&I Account: As defined in Section 3.06.
P&I Account Advance: For any Distribution Date, the amount of any
Uncommitted Cash to be distributed to Certificateholders to cover the interest
portion of Remittance Delinquencies on such Distribution Date.
Pass-Through Rate: For a Mortgage Loan as of any date or for any period,
the applicable Mortgage Note Rate less the Servicing Fee. Any regular monthly
remittance of interest at the Pass-Through Rate for a Mortgage Loan is based
upon annual interest at such rate on the Loan Balance as of the preceding Due
Date of such Mortgage Loan divided by twelve. Interest at the Pass-Through Rate
shall be computed on the basis of a 360-day year, each month being assumed to
have 30 days; provided that in the case of Mortgage Loans designated on the
Mortgage Loan Schedule as "______", such interest shall be computed on the basis
of the actual number of days elapsed since the last receipt of a Monthly Payment
and a 360-day year.
Any partial remittance of interest at such rate by reason of a full
Principal Prepayment is based upon annual interest at such rate on the prepaid
principal balance of the related Mortgage Loan multiplied by a fraction, the
numerator of which is the actual number of days elapsed since the last Due Date
to the date of such prepayment and the denominator of which is 360.
Paying Agent: Each paying agent identified in Article XII which is
authorized to make distributions on the Certificates on behalf of the Trustee. A
Paying Agent may be an Affiliate of the Depositor and, if not an Affiliate, must
be authorized to exercise corporate trust powers under the laws of its
jurisdiction of organization.
Percentage Interest: For a Class of Residual Certificates, if the Residual
Certificate has a Principal Balance as specified in Article XII, the Initial
Principal Balance of such Residual Certificate (expressed as a percentage) of
the aggregate Initial Principal Balance of the Residual Certificates of such
Class and, if the Residual Certificate does not have a Principal Balance, the
portion represented by such Residual Certificate (expressed as a percentage) of
the total ownership interest in the applicable Constituent REMIC represented by
all Residual Certificates of such Class. For any Certificate of an interest-only
Class or Subclass of Certificates, the ratio of the notional amount of such
Certificate to the aggregate notional amount of the entire Class or Subclass.
Person: Any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Plan: As defined in Section 5.02.
Pool Balance: For the Mortgage Loans as of any date, the aggregate of the
Loan Balances of all Mortgage Loans.
14
Pool Distribution Amount: As of any Distribution Date, the funds
eligible for distribution to the Holders of the Certificates on such
Distribution Date, being all amounts deposited into the P&I Account, but
excluding the following:
(a) Uncommitted Cash which will not be used on such Distribution Date for
a P&I Account Advance; and
(b) all permitted withdrawals from the P&I Account pursuant to Section
3.06(d).
Pooling Agreement: The Pooling Agreement (as defined in the preamble to
this Standard Terms Document) entered into with respect to a particular series
of Certificates and into which this Standard Terms Document is incorporated by
reference.
Pre-Funded Amount: For any Determination Date, any amount on deposit in
the Pre-Funding Account.
Pre-Funding Account Earnings: For a Distribution Date, the actual
investment earnings on the Pre-Funded Amount during the period from the Deposit
Date in the prior calendar month (or, in the case of the first Deposit Date, the
Startup Date) to (but excluding) the related Deposit Date.
Pre-Funding Release: For the first Distribution Date following the end of
the Pre-Funding Period, all amounts remaining in the Pre-Funding Account and
released pursuant to Section 4.04(c).
Prepaid Installment: For any Mortgage Loan, any installment of principal
thereof and interest thereon received prior to the Due Date for such
installment, as an early payment thereof and not as a Principal Prepayment on
such Mortgage Loan.
Prepayment Charge: For a particular Mortgage Loan, the amount the
Mortgagor is contractually obligated to pay as a premium, charge or penalty for
the privilege of refinancing or otherwise prepaying such Mortgage Loan in whole
or in part.
Prepayment Interest Shortfall: As to any Mortgage Loan that was the
subject of a Principal Prepayment in full applied during a Collection Period
(other than a Principal Prepayment applied as of the related Due Date), an
amount (which may be negative) equal to the difference between (a) one month of
interest on such Principal Prepayment at the Mortgage Note Rate (giving effect
to the Civil Relief Act, if applicable) that would be due on the next Due Date
for such Mortgage Loan and (b) the amount of interest actually received from the
Mortgagor in connection with such Principal Prepayment.
Prepayment Principal: For any Distribution Date, the sum of all amounts
that constitute (x) full or partial Principal Prepayments received in the
related Collection Period, (y) the Loan Balance of each Mortgage Loan which
during such Collection Period was repurchased pursuant to Section 2.02 or
2.03(a) and (z) the Substitution Adjustment Amount of each Mortgage Loan which
during such Collection Period was substituted pursuant to Section 2.04.
Primary Mortgage Insurance Certificate: Any certificate of primary
mortgage insurance relating to a particular Mortgage Loan to the extent
initially set forth in the Mortgage Loan Schedule.
Principal Balance: On any Distribution Date,
15
(i) for a Class A Certificate of any Subclass, its pro rata share based on
the Initial Principal Balance of the applicable Class A Subclass Principal
Balance;
(ii) for a Class M Certificate of any Subclass, its pro rata share based
on the Initial Principal Balance of the applicable Class M Subclass Principal
Balance; and
(iii) for a Class B Certificate of any Subclass, its pro rata share based
on the Initial Principal Balance of the applicable Class B Subclass Principal
Balance.
Principal Distribution Amount: For any Distribution Date, the sum of (w)
Principal Proceeds and (x) any Extra Principal Distribution Amount and (y) any
Pre-Funding Release, less (z) for Distribution Dates on or after the Stepdown
Date, any Release Amount.
Principal Prepayment: For any Mortgage Loan, any payment of principal on
such Mortgage Loan which is received in advance of its Due Date and is not
accompanied by an amount of interest representing scheduled interest for any Due
Date in any month subsequent to the month of prepayment, excluding any proceeds
of or advances on any Liquidated Loan.
Principal Proceeds: For a Collection Period, the sum (without duplication)
of (a) all principal actually received on the Mortgage Loans during such
Collection Period, (b) the Loan Balance of each Mortgage Loan repurchased during
such Collection Period pursuant to Section 2.02 or 2.03(a), (c) any Substitution
Adjustment Amount deposited for a substitution of a Mortgage Loan during such
Collection Period pursuant to Section 2.04, (d) the principal portion of Net
Liquidation Proceeds received during such Collection Period and (e) the amount
of investment losses deposited pursuant to Section 4.03(b)(i).
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Property Protection Expenses: For Mortgage Loans prior to their becoming
Liquidated Loans, expenses paid or incurred by or for the account of the
Servicer or the Trust Fund in accordance with the related Mortgages for (a) real
estate property taxes, insurance premiums and property repair, replacement,
protection and preservation expenses and (b) similar expenses reasonably paid or
incurred to preserve or protect the value of such Mortgages or the related
Mortgaged Properties.
Qualified GIC: A GIC, assigned to the Trustee, or entered into by the
Trustee at the direction of the Depositor, on or before the Issue Date,
providing for the investment of funds ensuring a minimum or fixed rate of return
on investments of such funds, which GIC shall
(a) be an obligation of an insurance company, trust company, commercial
bank (which may be Citibank, Citibank (Delaware) or Citibank (New York State))
or other entity whose credit standing is acceptable to each Rating Agency;
(b) provide that the Trustee may exercise all of the rights of the
Depositor under such GIC without the necessity of the taking of any action by
the Depositor;
(c) provide that if at any time (subject to the second proviso of this
paragraph (c)) the then current credit standing of the obligor under such GIC is
such that continued investment of funds included in the Trust Fund would result
in a downgrading or withdrawal of any then current rating of any Class or
Subclass of the Certificates, the Trustee may terminate such GIC and be entitled
to the return of all funds previously invested thereunder, together with accrued
interest thereon at the interest rate provided under such GIC through the date
of delivery of such funds to the Trustee, provided that the Trustee shall not be
charged
16
with knowledge of any such potential downgrading or withdrawal unless it shall
have received written notice of such potentiality from the Depositor, the
Servicer or the provider of the GIC which must be obligated to give such notice
at least once per year; provided, further, that upon any such event the
Depositor, by written notice to the Trustee, may replace such GIC with a
substitute GIC having substantially the same terms (including without limitation
a rate of return at least as high as the GIC being replaced) so long as such
substitute GIC has an obligor with a credit standing no less than the credit
standing of the obligor under the GIC to be replaced at the time the GIC was
executed (or with a credit rating otherwise acceptable to each Rating Agency)
and such fact is certified by the Depositor to the Trustee;
(d) provide that the Trustee's interest therein shall be transferable to
any successor trustee hereunder;
(e) provide that the funds invested thereunder and accrued interest
thereon be available not later than the Business Day prior to any Distribution
Date on which such funds may be required for distribution hereunder; and
(f) meet such other standards as may be specified in Article XII.
Qualified Nominee: A Person (who may not be the Depositor or an Affiliate
thereof) in whose name Eligible Investments held by the Trustee may be
registered as nominee of the Trustee in lieu of registration in the name of the
Trustee, provided that the following conditions shall be satisfied in connection
with such registration:
(a) the instruments governing the creation and operation of the nominee
provide that neither the nominee nor any owner of an interest in the nominee
(other than the Trustee) shall have any interest, beneficial or otherwise, in
any Eligible Investments at any time held in the name of the nominee, except for
the purpose of transferring and holding legal title thereto;
(b) the nominee and the Trustee have entered into an agreement
establishing that any Eligible Investments held in the name of the nominee are
to be held by the nominee as agent (other than commission agent or broker) or
nominee for the account of the Trustee; and
(c) in connection with the registration of any Eligible Investment in the
name of the nominee, all requirements under applicable governmental regulations
necessary to effect a valid registration of transfer of such Eligible Investment
are complied with as evidenced to the Trustee upon its request by an Opinion of
Counsel.
Qualified Substitute Mortgage Loan: For any Mortgage Loan or Mortgage
Loans (each a "replaced Mortgage Loan") included in the Trust Fund for which
such Qualified Substitute Mortgage Loan is being substituted, a Mortgage Loan
for which all payments of principal and interest due on or before the
Substitution Day have been received and which has the following characteristics:
(a) a Mortgage Note Rate equal to or greater than that of such replaced
Mortgage Loan;
(b) a date of maturity no later than the latest Last Scheduled
Distribution Date of any Certificate;
(c) a Loan-to-Value Ratio no higher than that of such replaced Mortgage
Loan;
(d) a Loan Balance at least equal to that of such replaced Mortgage Loan;
17
(e) a credit quality classification of a same or higher classification as
that of such replaced Mortgage Loan;
(f) secured by a Mortgaged Property that is either a single family
dwelling or is of the same type as that securing such replaced Mortgage Loan;
(g) an occupancy status that is either primary residence or is the same
status as that of such replaced Mortgage Loan;
(h) a lien priority that is either first or the same as that of such
replaced Mortgage Loan;
(i) is not a "balloon" loan unless such replaced Mortgage Loan is a
"balloon" loan; and
(j) is a "qualified replacement mortgage" as defined in Code Section
860G(a)(4);
provided, that (i) except for the conditions set forth in clauses (a), (c) and
(j) above, such characteristics may be satisfied on a weighted average or other
aggregate basis, (ii) clause (d) may be satisfied by deposit in the P&I Account
of sufficient funds so that the Loan Balance (calculated by including such
funds) of such Qualified Substitute Mortgage Loan satisfies such clause (the
"Substitution Adjustment Amount") and (iii) the Trustee shall receive, not later
than the Substitution Day, (1) an Opinion of Counsel, dated the Substitution
Day, to the effect that the substitution of such Qualified Substitute Mortgage
Loans and any deposit of cash in the P&I Account will not constitute a
"prohibited transaction" within the meaning of Code Section 860F(a), will not
adversely affect the status of the Trust Fund as comprised of the Constituent
REMICs and will not otherwise subject the Trust Fund to any tax and (2) an
Officer's Certificate of the Depositor to the effect that (A) all documents
delivered to the Trustee in connection with such substitution comply as to form
with the requirements of Section 2.01(a) and (B) all conditions to such
substitution specified in Section 2.04(a) have been satisfied.
Realized Losses: For any Distribution Date, the aggregate of the amount of
losses for each Mortgage Loan which became a Liquidated Loan during the related
Collection Period, equal to the excess of (i) the unpaid principal balance of
each such Liquidated Loan, plus accrued interest thereon in accordance with the
amortization schedule at the time applicable thereto at the applicable Mortgage
Note Rate from the Due Date as to which interest was last paid through the Due
Date in the Collection Period in which such Mortgage Loan became a Liquidated
Loan, over (ii) Net Liquidation Proceeds for such Liquidated Loan.
Release Amount: For any Distribution Date, the lesser of (x) Principal
Proceeds and (y) the excess of the Overcollateralization Amount (assuming all
Principal Proceeds are applied on such date as principal payments on the
Certificates) over the Targeted Level; provided that if on such Distribution
Date a Subordinated Trigger Event is in effect, the Release Amount is zero.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Code Section 860D. References to the "REMIC" are to the Constituent REMICs
constituting the Trust Fund.
REMIC Provisions: The provisions of the federal income tax law relating to
REMICs, appearing at Code Sections 860A through 860G, and related provisions and
regulations promulgated thereunder, as may be in effect from time to time.
Remittance Delinquencies: For any Determination Date, the aggregate of the
originally scheduled interest and principal installments (as adjusted for any
Principal Prepayments) on Mortgage Loans due from
18
and payable by the Mortgagors for all Due Dates in the Collection Period next
preceding such Determination Date but not received on or before such
Determination Date.
REO Mortgage Loan: Any Mortgage Loan which is not a Liquidated Loan and as
to which the related Mortgaged Property is held as part of the Trust Fund.
REO Proceeds: Proceeds, net of any related expenses of the Servicer,
received in respect of any REO Mortgage Loan (including, without limitation,
proceeds from the rental of the related REO Property).
REO Property: A Mortgaged Property acquired by or on behalf of the Trust
Fund through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan or otherwise treated as having been acquired pursuant to
the REMIC Provisions.
Required Amount of Certificates: (i) 66 2/3% or more of the aggregate
Voting Interest of the Outstanding Certificates, if affected by the occurrence
of an actual or potential Servicing Event of Default and (ii) 66 2/3% or more of
the aggregate Outstanding Percentage Interest of the Residual Certificates, if
affected by such an actual or potential Servicing Event of Default.
Responsible Officer: For any Person, the Chairman or any Vice Chairman of
the Board of Directors or Trustee, the Chairman or Vice Chairman of the
Executive or Standing Committee of the Board of Directors or Trustee, the
President, the Chairman of the committee on trust matters, any executive vice
president, senior vice president, first vice president, second vice president,
vice president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, the Cashier, any assistant or
deputy cashier, any trust officer or assistant trust officer, the Controller and
any assistant controller or any other officer of such Person customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer of
such Person to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject; provided, however, that in
respect of the Trustee, "Responsible Officer" shall only mean any such officer
who is employed in the Corporate Trust Department or a similar group for the
Trustee.
S&P: Standard and Poor's, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
Second Mortgage Loan: A Mortgage Loan secured by a second priority lien on
the related Mortgaged Property.
Senior Lien: The mortgage loan (which may be a Mortgage Loan) on Mortgaged
Property having a first priority lien.
Servicer: CFM, or its successor in interest, or any successor servicer
appointed as herein provided.
Servicing Advance: The aggregate of the advances made by the Servicer
pursuant to Sections 3.07(b), 3.11 and 3.18.
Servicing Event of Default: An event described in Section 7.01.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Trust Fund whose name appears on a
list of servicing officers attached to an Officer's Certificate furnished to the
Trustee by the Servicer, as such list may from time to time be amended.
Similar Law: As defined in Section 5.02.
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60+ Delinquent Loans: For a Determination Date, all REO Properties and all
Mortgage Loans for which any portion of a Monthly Payment is 60 days or more
Delinquent (without regard to any grace period) as of the last day of the
preceding calendar month.
Subclass: For a Class of Certificates, any group of such Class designated
as a Subclass in Article XII.
Subordinated Percentage: For any date, 100% minus the Class A Percentage.
Subordination Depletion Date: The first Distribution Date on which the
Principal Balance of the Subordinated Certificates has been reduced to zero.
Subsequent Transfer Agreement: Each agreement between the Trustee and the
Depositor pursuant to which Additional Mortgage Loans are sold to the Trust
Fund.
Subsequent Transfer Cut-Off Date: For a Subsequent Transfer Date, the date
specified as such in the related Subsequent Transfer Agreement.
Subsequent Transfer Date: Each date on which Additional Mortgage Loans are
sold to the Trust Fund pursuant to a Subsequent Transfer Agreement.
Subservicer: Any person or persons to which the Servicer has delegated
servicing obligations hereunder pursuant to Section 3.03 or 6.06.
Subservicing Agreement: Any subservicing agreement between the Servicer
and a Subservicer.
Substitution Adjustment Amount: As defined in the definition of Qualified
Substitute Mortgage Loan.
Substitution Day: As defined in Section 2.04(a).
Trust Expenses: Any amounts payable by the Trust Fund pursuant to Section
8.05 or the Depositor pursuant to Section 12.05.
Trustee: The Person executing this Agreement as Trustee, or its successor
in interest, or any successor trustee appointed as herein provided.
Trust Fund: The corpus of the trust created by this Agreement, consisting
of the Mortgage Loans, the Certificate Account, the P&I Account, any Upper-Tier
REMIC Account, any Pre-Funding Account, any Capitalized Interest Account, any
REO Property, any Primary Mortgage Insurance Certificates, any other insurance
policies with respect to the Mortgage Loans, any Retail Reserve Fund, the rights
of the Trustee under any Reserve Fund and any Insurance Policy, (to the extent
set forth herein) any investment earnings on amounts in any Investment Account
and any other property or rights specified in Article XII as being part of the
Trust Fund.
Uncommitted Cash: As of any Determination Date, any cash in the P&I
Account representing Principal Prepayments or Liquidation Proceeds deposited
after the Collection Period immediately preceding such Determination Date and
all related payments of interest [and all Prepaid Installments for Due Dates
subsequent to the end of such Collection Period].
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Upper-Tier REMIC Account: Any account or accounts that are required to be
established (in the same manner as the Certificate Account is established) and
maintained pursuant to Section 12.04.
U.S. Person: A citizen or resident of the United States of America, a
corporation or partnership (unless, in the case of a partnership, Treasury
regulations are adopted that provide otherwise) created or organized in or under
the laws of the United States of America, any state thereof or the District of
Columbia, including an entity treated as a corporation or partnership for
federal income tax purposes, an estate whose income is subject to U.S. federal
income tax regardless of its source, or a trust if a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more such U.S. Persons have the authority to control all
substantial decisions of such trust (or, to the extent provided in applicable
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to elect to be treated as U.S. Persons).
Weighted Average Rate: For any Distribution Date, the weighted average of
the Certificate Rates for the related Interest Accrual Period for those
outstanding Certificates having a Principal Balance, calculated prior to giving
effect to any principal distributions to the Certificates on such date.
ARTICLE II
CONVEYANCE OF TRUST FUND;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Trust Fund. CFMSI, concurrently with the
execution and delivery of this Agreement, does hereby transfer, assign, set over
and otherwise convey to the Trustee without recourse all the right, title and
interest of CFMSI in and to the Trust Fund, including without limitation all of
the right, title and interest of CFMSI in the Mortgage Loans, including all
amounts received or receivable by CFMSI on or with respect to the Mortgage Loans
(other than payments of principal and interest due and payable on the Mortgage
Loans, and Principal Prepayments thereon received, on or before the Cut-Off
Date), together with all of its right, title and interest in and to the proceeds
of any title, hazard or other insurance policies, or Primary Mortgage Insurance
Certificates, related to such Mortgage Loans. The transfer of the Mortgage Loans
accomplished hereby is absolute and is intended by the parties hereto as a sale.
It is the intention of CFMSI that the Mortgage Loans transferred to the Trust
Fund be removed from CFMSI's assets and estate. CFMSI shall not transfer any
additional property to the Trust Fund except as expressly permitted by this
Agreement.
(a) In connection with such transfer and assignment of Mortgage Loans,
CFMSI does herewith deliver to the Trustee to be held in trust the following
documents or instruments with respect to each Mortgage Loan so transferred and
assigned (except where, and to the extent, CFMSI is complying with Section
2.01(b)):
(i) The Mortgage Note, endorsed by manual or facsimile signature without
recourse by the Originator or an Affiliate of the Originator in blank or to the
Trustee showing a complete chain of endorsements from the named payee to the
Trustee or from the named payee to the Affiliate of the Originator and from such
Affiliate to the Trustee or, for any lost, misplaced or destroyed Mortgage Note,
an original Lost Note Affidavit;
(ii) The original recorded Mortgage, with evidence of recording thereon or
a copy of the Mortgage certified by the public recording office in those
jurisdictions where the public recording office retains the original;
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(iii) Any original assumption or modification agreement applicable to the
Mortgage;
(iv) An assignment from the Originator to the Trustee in recordable form
of the Mortgage which may be included, where permitted by local law, in a
blanket assignment or assignments of the Mortgage to the Trustee, including any
intervening assignments and showing a complete chain of title from the original
mortgagee named under the Mortgage to CFMSI or an Affiliate of CFMSI and to the
Trustee; and
(v) The original or a copy of the title insurance policy (which may be a
certificate or a short form policy relating to a master policy of tide
insurance) or the title searches pertaining to the Mortgaged Property, or in the
event such original title policy is unavailable, a copy of the preliminary title
report and the lender's recording instructions, with the original to be
delivered within 180 days of the Closing Date or other evidence of title.
In addition, CFMSI, concurrently with the execution and delivery of this
Agreement and in connection with such transfer and assignment of Mortgage Loans
shall deposit in the P&I Account the amount of all payments received by CFMSI
after the Cut-Off Date and prior to the Issue Date with respect to the Mortgage
Loans, to the extent such payments are being transferred and assigned to the
Trustee hereunder, except any portion of such payments on Mortgage Loans
(including servicing fees) of a type not required to be deposited therein as
specified in Article XII.
(b) In instances where an original recorded Mortgage cannot be delivered
by CFMSI to the Trustee prior to or concurrently with the execution and delivery
of this Agreement, due to a delay in the recording of such Mortgage, CFMSI may,
(a) in lieu of delivering such original recorded Mortgage referred to in clause
(a)(ii) above, deliver to the Trustee a copy thereof, provided that CFMSI
certifies that the original Mortgage has been delivered to a title insurance
company for recordation after receipt of its policy of title insurance or binder
therefor (which may be a certificate relating to a master policy of title
insurance), and (b) in lieu of delivering the completed assignment in recordable
form referred to in clause (a)(iv) above to the Trustee, deliver such assignment
to the Trustee completed except for recording information. In all such
instances, CFMSI will deliver the original recorded Mortgage and completed
assignment (if applicable) to the Trustee promptly upon receipt of such
Mortgage. In instances where an original recorded Mortgage has been lost or
misplaced, CFMSI or the related title insurance company may deliver, in lieu of
such Mortgage, a copy of such Mortgage bearing recordation information and
certified as true and correct by the office in which recordation thereof was
made. In instances where the original or a copy of the title insurance policy
referred to in clause (a)(v) above (which may be a certificate relating to a
master policy of title insurance) pertaining to the Mortgaged Property relating
to a Mortgage Loan cannot be delivered by CFMSI to the Trustee prior to or
concurrently with the execution and delivery of this Agreement because such
policy is not yet available, CFMSI may, in lieu of delivering the original or a
copy of such title insurance policy, deliver to the Trustee a binder with
respect to such policy and deliver the original or a copy of such policy to the
Trustee when available. In instances where an original assumption or
modification agreement cannot be delivered by CFMSI to the Trustee prior to or
concurrently with the execution and delivery of this Agreement, CFMSI may, in
lieu of delivering the original of such agreement referred to in clause (a)(iii)
above, deliver a certified copy thereof. CFMSI will deliver the original
assumption or modification agreement to the Trustee promptly upon receipt
thereof.
CFMSI agrees, at its own expense, to prepare each assignment referred to
in clause (a)(iv) above. CFMSI shall prepare and deliver a copy of each such
assignment to the Trustee as soon as practicable but not later than 60 days
after the Issue Date of the Certificates. In the case of each Mortgage relating
to a Mortgaged Property located in the State of Maryland, CFMSI intends to
effect recordation of each such
22
assignment (or to supply the Trustee with evidence of recordation) as soon as
practicable after the Issue Date in the appropriate public office for real
property records. In addition, in the event that on a Distribution Date a
Mortgage Loan is 90 days Delinquent, CFMSI shall effect recordation of an
assignment of the related Mortgage to the Trustee promptly thereafter. Except as
provided in this paragraph, neither CFMSI nor any Originator or Affiliate of any
Originator shall have any obligation to record any assignment of any Mortgage in
order to name the Trustee as mortgagee of record. The preceding sentence shall
not be in derogation of the obligation of CFMSI, the Originators and Affiliates
of the Originators to record (and supply the Trustee with evidence thereof)
assignments of Mortgages required in order that CFMSI, an Originator or an
Affiliate of an Originator be shown as mortgagee of record of each Mortgage.
In the case of Mortgage Loans which have been prepaid in full after the
Cut-Off Date and prior to the Issue Date, CFMSI, in lieu of delivering the above
documents to the Trustee, herewith delivers to the Trustee a Request for Release
as set forth in Section 3.12.
In connection with such transfer and delivery of the balance of the Trust
Fund, CFMSI, concurrently with the execution and delivery of this Agreement,
shall deposit into the P&I Account cash in the amount (if any) specified in
Article XII.
Wherever it is provided in this Section 2.01 that any document, evidence
or information relating to a Mortgage Loan be delivered or supplied to the
Trustee, CFMSI or the Servicer, as applicable, shall do so by delivery thereof
to the Mortgage Note Custodian (in the case of items of the types described in
Sections 2.01(a)(i) and (iv)) or to the Mortgage Document Custodian (in the case
of all other items described in Section 2.01(a)), in each case to be held on
behalf of the Trustee. Except as may be specifically provided in this Agreement,
the functions of the Trustee with respect to the custody, acceptance, inspection
and release of the Mortgage Files shall be performed by the appropriate
Custodian.
Section 2.02. Acceptance by Trustee. The Trustee, by execution and
delivery hereof, acknowledges receipt, subject to the review described in the
following paragraph, of the documents and other property referred to in Section
2.01 and declares that the Trustee holds and will hold such documents and other
property, including property yet to be received in the Trust Fund, in trust,
upon the trusts herein set forth, for the benefit of all present and future
Certificateholders.
The Trustee shall, for the benefit of the Certificateholders, review each
Mortgage File within 90 days after the Issue Date, to ascertain that all
required documents have been executed, received and recorded, if applicable, and
that such documents relate to the Mortgage Loans identified in Exhibit B. If in
the course of such review the Trustee finds a document or documents constituting
a part of a Mortgage File to be defective in any material respect, the Trustee
shall promptly so notify CFMSI, whereupon CFMSI shall have a period of 180 days
within which to correct or cure any such defect (including correction or cure by
substitution of Mortgage Loans to the extent permitted by Section 2.04). If any
such material defect has not been corrected or cured, CFMSI will, not later than
180 days after the Trustee's notice respecting such defect, repurchase the
related Mortgage Loan from the Trustee at a price (the "Loan Repurchase Price")
equal to (i) the Loan Balance of such Mortgage Loan as of the date of
repurchase, plus (ii) accrued and unpaid interest thereon at the Mortgage Note
Rate to (but not including) the date of repurchase, plus (iii) any unreimbursed
payments with respect to such Mortgage Loan, to the extent not covered in (ii)
above, as part of a Servicing Advance or a Delinquency Advance whereupon all
Servicing Advances and Delinquency Advances will be deemed reimbursed to the
Servicer with respect to such Mortgage Loan by such respective amounts.
Notwithstanding the preceding two sentences, any material defect that causes a
Mortgage Loan to fail to constitute a "qualified mortgage" within the meaning of
Code Section 860G(a)(3) shall either be corrected or cured by CFMSI or, failing
such correction or cure, CFMSI shall repurchase such Mortgage Loan at the Loan
Repurchase Price (or, if within two years of the Startup Day, or such other
period as may be permitted
23
by the REMIC Provisions, substitute an Qualified Substitute Mortgage Loan
therefor pursuant to Section 2.04) no later than 90 days after the discovery of
such material defect. Any such repurchase shall be considered a prepayment in
full of such Mortgage Loan on date of repurchase and shall be deposited by CFMSI
in the P&I Account and, upon receipt by the Trustee of written notification of
such deposit signed by an Authorized Officer of CFMSI, the Trustee shall release
to CFMSI or its designee the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment furnished to the Trustee, in each
case without recourse, as CFMSI shall reasonably request, to vest in CFMSI or
such designee any Mortgage Loan so released. Any repurchase by CFMSI of a
Mortgage Loan hereunder shall be deemed to include the right to receive any
Monthly Payment or other remittance thereon payable or received after the date
of repurchase, and the Trustee shall, upon receipt thereof, promptly remit the
amount of such Monthly Payment or other remittance to CFMSI. It is understood
and agreed that the obligation of CFMSI to repurchase any Mortgage Loan or make
a substitution therefor pursuant to Section 2.04 as to which a material defect
in a constituent document exists shall constitute the sole remedy against CFMSI
with respect to such defect available to the Certificateholders or the Trustee
on behalf of the Certificateholders.
Section 2.03. Representations and Warranties of CFMSI and CFM. (a) CFMSI
makes the representations and warranties set forth in Article XIV to the Trustee
(which representations are incorporated by reference herein as though set forth
below in this Section 2.03(a)) and, in addition, CFMSI hereby represents and
warrants to the Trustee that:
(i) The information set forth in Exhibit B was true and correct in all
material respects as of the date or dates such information is furnished;
(ii) As of the Issue Date, each Mortgage is a valid first or second lien
on the property securing the related Mortgage Note subject only to (a) the lien
of current real property taxes and assessments as limited in clause (vi) below,
(b) covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal obtained in connection with
the origination of the related Mortgage Loan, (c) other matters to which like
properties are commonly subject which do not in the aggregate materially
interfere with the benefits of the security intended to be provided by such
Mortgage and (d) in the case of a second priority Mortgage, the related Senior
Lien;
(iii) Immediately prior to the transfer of the Mortgage Loans to the
Trustee, CFMSI has good title to, and is the sole owner of, each Mortgage Loan
(except as set forth in clause (v) below) and immediately upon the transfer and
assignment herein contemplated, CFMSI will have taken all steps necessary so
that the Trustee will have good title to, and will be the sole owner of, each
Mortgage Loan (except as set forth in clause (v) below);
(iv) As of the Cut-Off Date, except as stated in Article XIV, no payment
of principal of or interest on or in respect of any Mortgage Loan is 30 days or
more Delinquent;
(v) As of the Cut-Off Date, there is no mechanics' lien or claim for work,
labor or material affecting the premises subject to any Mortgage which is or may
be a lien prior to, or equal with, the lien of such Mortgage except those which
are insured against by the title insurance policy referred to in (x) below;
(vi) As of the Cut-Off Date, there is no delinquent tax or assessment lien
against any Mortgaged Property;
24
(vii) As of the Issue Date, there is no valid offset, defense or
counterclaim to any Mortgage Note or Mortgage, including the obligation of the
Mortgagor to pay the unpaid principal and interest on such Mortgage Note;
(viii) As of the Cut-Off Date, each Mortgaged Property is free of material
damage;
(ix) Each Mortgage at the time it was originated complied in all material
respects with applicable state and federal laws, including, without limitation,
consumer protection, usury, equal credit opportunity, recording and disclosure
laws;
(x) A lender's title insurance policy or binder (which policy was issued
in standard ALTA form) or other assurance of title customary in the relevant
jurisdiction therefor, was issued on the date of the origination of each
Mortgage Loan and, as of the Issue Date, each such policy, binder or assurance
is valid and remains in full force and effect;
(xi) The Mortgage Loans conform in all material respects with the
descriptions thereof in the Prospectus and the Prospectus Supplement relating to
the Certificates;
(xii) The original principal balance of each Mortgage Loan was not more
than 100% of the Original Value of such Mortgage Loan;
(xiii) For each Mortgage where a Lost Note Affidavit has been delivered to
the Trustee, the related original Mortgage Note is no longer in existence; and
(xiv) As of the Issue Date, each Mortgage was recorded in the name of
CFMSI or an Affiliate of CFMSI.
The representations and warranties set forth in, or incorporated by
reference in, this Section 2.03(a) shall survive delivery of the Mortgage Loans
to the Trustee. Upon discovery by CFMSI or the Trustee of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the interests of the Certificateholders in the related Mortgage Loan (including
any Mortgage Loan substituted for a nonconforming Mortgage Loan pursuant to
Section 2.04), the party discovering such breach shall give prompt written
notice to the other parties hereto. If within 60 days of the date of such notice
of breach or, with the prior written consent of a Responsible Officer of the
Trustee, such longer period specified in such consent, CFMSI does not cure such
breach in all material respects (including by substitution of one or more
Qualified Substitute Mortgage Loans if and to the extent permitted by Section
2.04), CFMSI shall repurchase such Mortgage Loan from the Trustee.
Any such repurchase of a Mortgage Loan by CFMSI shall be accomplished in
the manner set forth in Section 2.02 and at the Loan Repurchase Price. Any such
repurchase shall be considered a prepayment in full of such Mortgage Loan on
date of repurchase and shall be deposited by CFMSI in the P&I Account and, upon
receipt by the Trustee of written notification of such deposit signed by an
Authorized Officer of CFMSI, the Trustee shall release to CFMSI or its designee
the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as CFMSI shall reasonably
request, to vest in CFMSI or such designee any Mortgage Loan so released. Any
repurchase by CFMSI of a Mortgage Loan hereunder shall be deemed to include the
right to receive any Monthly Payment or other remittance thereon payable or
received after the date of repurchase, and the Trustee shall, upon receipt
thereof, promptly remit the amount of such Monthly Payment or other remittance
to CFMSI. It is understood and agreed that the obligation of CFMSI to repurchase
or substitute (as provided in Section 2.04) any
25
Mortgage Loan as to which a breach occurred and is continuing shall constitute
the sole remedy against CFMSI respecting such breach available to the
Certificateholders or the Trustee on behalf of the Certificateholders.
(b) CFM hereby represents and warrants to the Trustee as follows:
(i) The Servicer is a corporation validly existing and in good standing
under the laws of the state of Delaware and is duly authorized and qualified to
transact any and all business contemplated by this Agreement to be conducted by
the Servicer.
(ii) The Servicer has the full corporate power and authority to service
each Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of the Servicer the
execution, delivery and performance of this Agreement.
(iii) The execution and delivery of this Agreement by the Servicer, the
servicing of the Mortgage Loans by the Servicer under this Agreement, and the
fulfillment of or compliance with the terms hereof are in the ordinary course of
business of the Servicer and will not (A) result in a material breach of any
term or provision of the charter or by-laws of the Servicer or (B) materially
conflict with, result in a material breach, violation or acceleration of, or
result in a material default under, the terms of any other material agreement or
instrument to which the Servicer is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation applicable
to the Servicer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Servicer.
(iv) The Servicer is an approved servicer of conventional mortgage loans
for ▇▇▇▇▇▇ ▇▇▇ or FHLMC.
(v) No litigation is pending or, to the best of the Servicer's knowledge,
threatened, against the Servicer that would materially and adversely affect the
execution, delivery or enforceability of this Agreement or the ability of the
Servicer to service the Mortgage Loans or to perform any of its other
obligations under this Agreement in accordance with the terms hereof.
(vi) The information set forth in the Prepayment Charge Schedule is
complete, true and correct in all material respects at the date or dates at
which such information is furnished and each Prepayment Charge is enforceable in
accordance with its terms under applicable state law (except to the extent that
(x) enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors' rights
generally, (y) collectability may be limited due to acceleration in connection
with a foreclosure or other involuntary payment and (z) subsequent changes in
applicable law may limit or prohibit enforceability or collectability).
Section 2.04. Substitution of Qualified Substitute Mortgage Loans for
Nonconforming Mortgage Loans. (a) CFMSI shall have the right, in an event
requiring a repurchase pursuant to Section 2.02 or 2.03(a), to substitute one or
more Qualified Substitute Mortgage Loans for any one or more nonconforming
Mortgage Loans, any such substitution to take place on the day designated by
CFMSI (the "Substitution Day") occurring before a date two years after the
Startup Day (or, if the Substitution Day is not a Business Day, the next
preceding Business Day), subject to the Trustee receiving an Officer's
Certificate of CFMSI attaching as an exhibit a supplemental Mortgage Loan
schedule (the "Supplemental Mortgage Loan Schedule") setting forth the same type
of information as appears on the Mortgage Loan Schedule and representing as to
the accuracy thereof and confirming that the representations and warranties
contained in Section 2.03(a) (other than paragraphs (i) and (xi) thereof) are
true and correct in all material respects with respect to the Qualified
Substitute Mortgage Loans on and as
26
of the Substitution Day, provided that remedies for the inaccuracy of such
representation are limited as set forth in Sections 2.02, 2.03(a) and this 2.04.
(b) In the event that, on the Substitution Day, any Prepaid Installments
have been deposited for such Mortgage Loan, the full amount of such Prepaid
Installments shall be paid on the Substitution Day to CFMSI from the P&I
Account.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.04(a) above and the grant of such Qualified Substitute Mortgage Loans
to the Trustee pursuant to Section 2.04(a) above, (A) Exhibit B to this
Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Qualified Substitute Mortgage Loans and to include, pursuant to
Section 10.01, the information set forth on the Supplemental Mortgage Loan
Schedule with respect to such Qualified Substitute Mortgage Loans, and all
references in this Agreement to Mortgage Loans shall include such Qualified
Substitute Mortgage Loans and (B) the Trustee shall release to CFMSI or its
designee the nonconforming Mortgage Loan or Loans and execute and deliver such
instruments of transfer or assignment as may be required to transfer, without
recourse, to CFMSI or such designee such nonconforming Mortgage Loan or Loans.
Section 2.05. Sale of Additional Mortgage Loans. (a) If a Pre-Funding
Account has been established pursuant to Section 4.02 then the Depositor shall
on a Subsequent Transfer Date sell, transfer, assign, set over and otherwise
convey without recourse, to the Trustee, and the Trustee shall purchase on
behalf of the Trust Fund, all of the Depositor's right, title and interest in
and to any and all benefits accruing to the Depositor from and under the
Additional Mortgage Loans (other than any principal and interest due on or prior
to the relevant Subsequent Transfer Cut-Off Date) together with the related
Additional Mortgage Loan documents and the Depositor's interest in any Mortgaged
Property which secured an Additional Mortgage Loan but which has been acquired
by foreclosure or deed in lieu of foreclosure, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Additional Mortgage Loans, cash proceeds, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, right to
payment of any and every kind, and other forms of obligations and receivables
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing). There shall be no more Subsequent Transfer Dates during
the Funding Period than are specified in Section 14.03.
Each transfer of Additional Mortgage Loans by the Depositor to the Trustee
shall be absolute and is intended by the parties hereto to be treated as a sale
by the Depositor to the Trustee. It is the intention of the Depositor that the
Additional Mortgage Loans transferred to the Trust Fund be removed from its
assets and estate. The amount released from the Pre-Funding Account as the
purchase price for the Additional Mortgage Loans shall be one-hundred percent
(100%) of the aggregate Loan Balances transferred. Upon such transfer, such
Additional Mortgage Loans (and all principal and interest due thereon after the
Subsequent Transfer Cut-Off Date) and all other rights and interests for such
Additional Mortgage Loans shall for all purposes hereunder be part of the Trust
Fund.
(b) The obligation of the Trustee to accept the transfer of the Additional
Mortgage Loans is subject to the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Depositor shall have delivered to the Trustee the documents and
instruments listed in Section 2.01(a) for the Additional Mortgage Loans;
(ii) the Depositor shall have provided the Trustee with an Addition Notice
and shall have
27
provided any information reasonably requested by it for the Additional Mortgage
Loans;
(iii) the Depositor shall have delivered to the Trustee a duly executed
written Subsequent Transfer Agreement (including an acceptance by the Trustee)
which shall include a schedule of Additional Mortgage Loans;
(iv) the Depositor shall have deposited in the P&I Account all principal
and interest received by it and due on such Additional Mortgage Loans after the
related Subsequent Transfer Cut-Off Date;
(v) the Funding Period shall not have ended; and
(vi) the Depositor shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each condition precedent specified in
this paragraph (b) and paragraph (c) below.
(c) The obligation of the Trustee to accept the transfer of Additional
Mortgage Loans on any Subsequent Transfer Date is also subject to any additional
requirements set forth in Section 14.03.
(d) For each Subsequent Transfer Date and, if applicable, on the first two
Distribution Dates occurring after the Startup Date, the Trustee shall
determine: (i) the amount and correct dispositions of the Capitalized Interest
Requirement, Overfunded Interest Amount, Pre-Funding Account Earnings and the
Pre-Funded Amount and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest Account.
In the event that any amounts are released as a result of an error in
calculation to the Holders or Depositor from the Pre-Funding Account or from the
Capitalized Interest Account, such Holders or the Depositor shall immediately
repay such amounts to the Trustee or the Trustee shall have the right to
withhold such amounts from future distributions to such Persons.
(e) Upon consummation of the transfer of Additional Mortgage Loans,
Exhibit B to this Agreement shall be deemed amended to include such Additional
Mortgage Loans and the information relating thereto set forth on the related
Addition Notice, and all references in this Agreement to Mortgage Loans shall
include such Additional Mortgage Loans.
Section 2.06. Authentication of Certificates. The Trustee has
authenticated and delivered or caused to be authenticated and delivered to or
upon a Depositor Order, in exchange for the Mortgage Loans, concurrently with
the transfer and assignment to the Trustee of the Mortgage Loans, Certificates
duly authenticated by the Trustee in authorized denominations evidencing the
entire ownership of the Trust Fund.
ARTICLE III
ADMINISTRATION AND SERVICING OF
MORTGAGE LOANS
Section 3.01. Servicing. Acting directly or through one or more
Subservicers as provided in Section 3.03, the Servicer shall service and
administer the Mortgage Loans in accordance with this Agreement, the terms of
the respective Mortgage Loans and the servicing standards set forth in the
▇▇▇▇▇▇ ▇▇▇ Guide, and shall have full power and authority, acting alone, to do
or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. The Servicer shall not
be required to institute litigation for collection of any payment if it
reasonably questions its ability to enforce the provision of the Mortgage Loan
under which the payment is required. It is the intent of the parties hereto that
the Servicer shall have all of the servicing obligations hereunder which a
lender would
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have under the ▇▇▇▇▇▇ ▇▇▇ Guide (as such provisions respectively relate to first
and second lien mortgages); provided, however, that to the extent that such
standards and obligations or the ▇▇▇▇▇▇ Mae Guide are amended by ▇▇▇▇▇▇ ▇▇▇
after the date hereof and the effect of such amendment would be to impose upon
the Servicer any material additional costs or other burdens relating to such
servicing, the Servicer may, at its option, in accordance with the servicing
standards set forth herein, determine not to comply with such amendment.
Subject to Section 3.03, the Servicer may, and is hereby authorized to,
perform any of its servicing responsibilities with respect to all or certain of
the Mortgage Loans through a Subservicer as it may from time to time designate,
but no such designation of a Subservicer shall serve to release the Servicer
from any of its obligations under this Agreement. Such Subservicer shall have
the rights and powers of the Servicer which have been delegated to such
Subservicer with respect to such Mortgage Loans under this Agreement.
Without limiting the generality of the foregoing, but subject to Sections
3.11 and 3.12, the Servicer in its own name or in the name of a Subservicer may
be authorized and empowered pursuant to a power of attorney executed and
delivered by the Trustee to execute and deliver, and may be authorized and
empowered by the Trustee to execute and deliver, on behalf of itself, the
Holders and the Trustee or any of them, (i) any and all instruments of
satisfaction or cancellation or of partial or full release or discharge and all
other comparable instruments with respect to the Mortgage Loans and with respect
to the Mortgaged Properties, (ii) to institute foreclosure proceedings or obtain
a deed in lieu of foreclosure so as to effect ownership of any Mortgaged
Property in the name of the Servicer on behalf of the Trustee, and (iii) to hold
title to any Mortgaged Property upon such foreclosure or deed in lieu of
foreclosure on behalf of the Trustee. Section 3.11(a) and Section 3.12(a) shall
each constitute a revocable power of attorney from the Trustee to the Servicer
to execute an instrument of satisfaction (or assignment of mortgage without
recourse) for any Mortgage Loan held by the Trustee paid in full or foreclosed
(or for which payment in full has been escrowed). Revocation of such power of
attorney shall take effect upon (i) the receipt by the Servicer of written
notice thereof from the Trustee or (ii) the termination of the Trust. Upon
written instructions from the Servicer, the Trustee shall execute any
documentation furnished to it by the Servicer for recordation by the Servicer in
the appropriate jurisdictions as shall be necessary to effectuate the foregoing.
Subject to Sections 3.11 and 3.12, the Trustee shall execute a power of attorney
to the Servicer or any Subservicer and furnish them with any other documents as
the Servicer or such Subservicer shall reasonably request in writing to enable
the Servicer and such Subservicer to carry out their respective servicing and
administrative duties hereunder.
The Servicer shall give prompt written notice to the Trustee of any
action, of which the Servicer has actual knowledge, to (i) assert a claim
against the Trust or (ii) assert jurisdiction over the Trust.
Section 3.02. Collection of Mortgage Payments. The Servicer shall make
reasonable efforts to collect all payments called for under the terms of the
Mortgage Loans and shall, to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any insurance policy relating to
Mortgage Loan or Mortgaged Property, follow collection procedures for all
Mortgage Loans at least as rigorous as those described in the ▇▇▇▇▇▇ ▇▇▇ Guide.
Consistent with the foregoing, the Servicer may in its discretion (a) 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 or
any other fee or charge which the Servicer would be entitled to retain as
servicing compensation and (b) arrange with a Mortgagor a schedule for payment
of Delinquent sums provided that, if such arrangement is for a period of more
than 90 days, the Servicer reasonably believes that without such arrangement,
the Mortgagor would default on the Mortgage Loan. In addition, in the event the
Servicer shall consent to the deferment of the due dates for any installment due
on a Mortgage Loan, such Mortgage Loan shall be consider Delinquent hereunder to
the same extent as if such installment had not been deferred.
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Section 3.03. Subservicing Agreements. The Servicer may enter into
Subservicing Agreements for the servicing and administration of Mortgage Loans
with any institution which (x) is authorized under the laws of each state
necessary to enable it to perform its obligations under such Subservicing
Agreement and (y) has experience servicing mortgage loans that are similar to
the Mortgage Loans. The Servicer shall give written notice to the Trustee and
the Rating Agencies of the appointment of any Subservicer (and shall receive the
confirmation of the Rating Agencies that such Subservicer shall not result in a
withdrawal or downgrading by any Rating Agency of the then current rating of the
Certificates). For purposes of this Agreement, the Servicer shall be deemed to
have received payments on Mortgage Loans when a Subservicer has received such
payments. Each Subservicer shall be expressly required to service the Mortgage
Loans in accordance with this Agreement and each Subservicing Agreement shall be
consistent with and not violate the provisions of this Agreement, and shall
provide that the Trustee (if acting as successor Servicer) or any other
successor Servicer shall have the right to terminate such agreement without
payment of any penalty if the original Servicer is terminated or resigns. The
Servicer shall deliver to the Trustee copies of all Subservicing Agreements and
any amendments or modifications thereof promptly upon the execution thereof.
Section 3.04. No Contractual Relationship. Any Subservicing Agreement and
any other transactions or services relating to the Mortgage Loans involving a
Subservicer shall be between the Subservicer and the Servicer alone, and the
Trustee and the Holders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to any
Subservicer except as set forth in Section 3.05.
Section 3.05. Assumption or Termination of Subservicing Agreement. In
connection with the assumption of the responsibilities, duties and liabilities
and of the authority, power and rights of the Servicer hereunder by the Trustee
pursuant to Section 7.01, the Servicer's rights and obligations under any
Subservicing Agreement shall be assumed simultaneously by the Trustee without
act or deed on part of the Trustee; provided, however, that the Trustee (if
acting as successor Servicer) or any other successor Servicer may terminate the
Subservicer as provided in Section 3.03.
The Servicer shall at its expense, upon the reasonable request of the
Trustee, deliver to the assuming party documents and records relating to each
Subservicing Agreement and an accounting of amounts collected and held by it and
otherwise use its best reasonable efforts to effect the orderly and efficient
transfer of the Subservicing Agreements to the assuming party.
Section 3.06. P&I Account; Certificate Account. (a) The Servicer shall
establish and maintain at one or more Depositories the P&I Account to be held as
a trust account. Each P&I Account shall be established in the name of the
Trustee, as trustee for the Holders of the Series of Certificates specified in
Article XII. If the institution at any time holding the P&I Account ceases to be
eligible as a Depository, then the Servicer shall immediately name a successor
institution meeting the requirements for a Depository. If the Servicer fails to
name such a successor institution, then the P&I Account shall thenceforth be
held as a trust account with a qualifying Depository selected by the Trustee.
The Servicer shall notify the Trustee if there is a change in the name, account
number or institution holding the P&I Account.
The Depositor shall cause to be established with the Trustee on the Issue
Date, and the Trustee shall maintain, the Certificate Account, to be held by the
Trustee as trustee for the Holders of the Series of Certificates specified in
Article XII.
(b) The Servicer may deposit in each of the P&I Account and Escrow Account
the appropriate payments, collections and funds in respect of one or more series
of certificates issued under a registration statement covering the Certificates
or similar certificates; provided that the senior class of certificates of each
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such other series and the senior Class of Certificates are rated "AAA" or its
equivalent or in the category "AA" or its equivalent by each Rating Agency (with
respect to any Insured Certificates, without regard to the Insurance Policy),
and provided further that separate accounting for each series is maintained.
Funds and other property in the Certificate Account shall not be
commingled with any other moneys or property of the Trustee. However, the
Trustee may hold any funds or other property received or held by it as part of
the Certificate Account in collective accounts maintained by it in the normal
course of its business and containing funds or property held by it for other
persons; provided that such accounts are under the sole control of the Trustee
and the Trustee maintains adequate records indicating the ownership of all such
funds or property and the portions thereof held for credit to the Certificate
Account.
(c) The Servicer shall deposit to the P&I Account all Interest Proceeds
and Principal Proceeds for a Collection Period, as follows:
(w) within two Business Days of collection, all amounts representing
Monthly Payments;
(x) not later than the Business Day preceding the related Deposit Date,
all amounts representing Net Liquidation Proceeds, Loan Repurchase
Prices and Substitution Adjustment Amounts;
(y) not later than the related Deposit Date, all amounts representing
Delinquency Advances, Compensating Interest, income from REO
Properties and any net investment losses on funds held in the P&I
Account as required by Section 4.03(b); and
(z) within two Business Days of collection, any other amounts, not
enumerated above in this Section 3.06(c), representing recoveries of
amounts previously recognized as Realized Losses,
minus amounts deposited in the P&I Account in respect of this or prior
Collection Periods representing payments of principal and/or interest by a
Mortgagor which are subsequently returned by a depository institution as unpaid.
The aggregate of the amounts so deposited in respect of a particular Collection
Period pursuant to this Section 3.06(c) is the "Monthly Deposit Amount".
The foregoing requirements for deposit in the P&I Account shall be
exclusive. Amounts required to be deposited into the Escrow Account and (unless
otherwise provided in Article XII) amounts in the nature of prepayment charges,
late payment charges, assumption fees, excess interest paid by Mortgagors and
other fees and proceeds of reimbursements of Property Protection Expenses
received with respect to Mortgage Loans need not be deposited by the Servicer in
the P&I Account.
(d) (i) The Servicer may from time to time make withdrawals from the P&I
Account, only in the following order of priority and for the following purposes:
(A) to pay itself the Servicing Fee;
(B) to withdraw net investment earnings on amounts on deposit in the P&I
Account;
(C) to effect reimbursement for Liquidation Expenses theretofore
incurred in respect of any Mortgage Loan in an amount not to exceed
the amount of Liquidation Proceeds deposited in respect of such
Mortgage Loan, to withdraw any Foreclosure Profits and to pay itself
the amounts due under Section 3.11(a) relating to deficiency
actions;
(D) to effect reimbursement for Delinquency Advances, the right to
reimbursement pursuant to this clause (D) being limited to amounts
received on particular Mortgage Loans (including, for this purpose,
Insurance Proceeds and Liquidation Proceeds) that represent late
recoveries of payments of principal and/or interest respecting which
any such advance was made;
(E) to effect reimbursement for any Delinquency Advances that the
Servicer has determined to
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have become Nonrecoverable Advances;
(F) to effect reimbursement for advances made for any Mortgage Loan in
payment of taxes or assessments, pursuant to Section 3.09 in payment
of insurance premiums (except premiums on the blanket policy
referred to in Section 3.09) in any amount not theretofore
reimbursed out of the Escrow Account, in each case to the extent and
only to the extent that reimbursements of such advances have been
deposited in the P&I Account pursuant to this Section 3.06;
(G) to make payments permitted pursuant to the last sentence of Section
6.03;
(H) to withdraw amounts that have been deposited to the P&I Account in
error; and
(I) to clear and terminate the P&I Account following the termination of
the Trust pursuant to Article IX.
The Servicer shall keep and maintain (or cause to be kept and maintained)
separate accounting records, on a Mortgage Loan-by-Mortgage Loan basis, for the
purpose of accounting for withdrawals from the P&I Account pursuant to clauses
(C) and (F) of this Section; provided, however, that such records need not be
retained by the Servicer for a period longer than its five most recent fiscal
years.
(ii) The Servicer shall (x) remit to the Trustee for deposit in the
Certificate Account by wire transfer, or otherwise make funds available in
immediately available funds, the Monthly Deposit Amount for a Collection Period
not later than the related Deposit Date, and (y) on each Determination Date,
deliver to the Trustee a monthly servicing report, containing (without
limitation) the following information: principal and interest collected in
respect of the Mortgage Loans, scheduled principal and interest that was due on
the Mortgage Loans, relevant information with respect to any Liquidated Loans,
summary and detailed delinquency reports, Liquidation Proceeds and other similar
information concerning the servicing of the Mortgage Loans, including the
information set forth in Section 4.07(b). In addition, the Servicer shall inform
the Trustee on each Determination Date of the amounts of any Loan Repurchase
Prices and Substitution Adjustment Amounts for such Collection Period.
Section 3.07. Delinquency Advances; Servicing Advances. (a) On each
Determination Date, the Servicer shall elect whether to remit to the Trustee for
deposit to the P&I Account out of the Servicer's own funds any Delinquent
payment of interest on each Delinquent Mortgage Loan, which payment was not
received on or prior to the such Determination Date. The election of the
Servicer to make any Delinquency Advance will be based on its reasonable
business judgment in accordance with the servicing standards set out herein that
the related Mortgage Loan will not ultimately give rise to a Realized Loss, upon
liquidation or otherwise; in all other cases the Servicer shall not be obligated
to make such Delinquency Advance.
The Servicer may reimburse itself on any day for any Delinquency Advance
from collections on any Mortgage Loans that are not required to be remitted to
the Certificate Account during the month in which such reimbursement is
effected. This right of reimbursement is in addition to that provided in Section
3.06(d).
If the Servicer determines that Delinquency Advances previously made on a
Mortgage Loan have become Nonrecoverable Advances, the Servicer may reimburse
itself for the amount of such Nonrecoverable Advances as provided in the first
sentence of the preceding paragraph. The Servicer shall give written notice of
its determination of nonrecoverability and the factual basis therefor to the
Trustee. This right of reimbursement is in addition to that provided in Section
3.06(d) and to the Servicer's right to reimbursement from related Liquidation
Proceeds.
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(b) The Servicer will pay all "out-of-pocket" costs and expenses incurred
in the performance of its servicing obligations, including, but not limited to,
(i) Property Protection Expenses, (ii) the cost of any enforcement or judicial
proceedings, including foreclosures, (iii) the cost of the management and
liquidation of REO Property, (iv) advances required by Section 3.11(a), but only
to the extent that such amounts are determined by the Servicer in its reasonable
business judgment to be recoverable and (v) expenses incurred and funds advanced
pursuant to Section 3.18. The Servicer may recover a Servicing Advance (x) from
the Mortgagor to the extent permitted by the Mortgage Loan or, if not
theretofore recovered from such Mortgagor, from Liquidation Proceeds realized
upon the liquidation of the related Mortgage Loan and (y) as provided in Section
3.06(d)(i). The Servicer shall be entitled to recover Servicing Advances from
Liquidation Proceeds prior to the deposit of the Liquidation Proceeds hereunder.
Section 3.08. Compensating Interest. If a Principal Prepayment in full
of a Mortgage Loan occurs during any Collection Period, an amount equal to any
Prepayment Interest Shortfall for such Mortgage Loan, up to an aggregate amount
not in excess of the Compensating Cap for the related Collection Period
("Compensating Interest") shall be deposited by the Servicer to the P&I Account
(however, if such Prepayment Interest Shortfall is a negative amount, the
Servicer shall retain such amount).
Section 3.09. Maintenance of Insurance. (a) The Servicer shall cause
to be maintained for each Mortgage Loan a hazard insurance policy that provides
for fire and extended coverage, and which provides for a recovery by the Trust
of insurance proceeds relating to such Mortgage Loan, in an amount not less than
the least of (i) the outstanding principal balance of the Mortgage Loan (plus
the related senior lien loan, if any), (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis and (iii) the full
insurable value of the premises. The Servicer shall maintain such insurance
policies in the name of the Trustee, its successors and assigns, as loss payee.
The policies shall require the insurer to provide the mortgagee with 30 days'
notice prior to any cancellation or as otherwise required by law. The Servicer
may also maintain a blanket hazard insurance policy or policies if the insurer
or insurers of such policies are rated investment grade by each Rating Agency.
(b) If the Mortgage Loan at the time of origination (or if required by
federal law, at any time thereafter) relates to a Mortgaged Property in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, the Servicer will cause to be maintained thereon a
flood insurance policy in a form meeting the requirements of the then current
guidelines of the Federal Insurance Administration in an amount representing
coverage, and which provides for a recovery by the Trust of insurance proceeds
relating to such Mortgage Loan, of not less than the least of (i) the Loan
Balance of the Mortgage Loan (plus the related senior lien loan, if any), (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Servicer shall indemnify the Trust
for any loss to the Trust resulting from the Servicer's failure to advance
premiums for such insurance required by this Section when so permitted by the
terms of the related Mortgage.
Section 3.10. Due-on-Sale Clauses; Assumption and Substitution. When a
Mortgaged Property has been or is about to be conveyed by the Mortgagor, the
Servicer shall, to the extent it has knowledge of such conveyance or prospective
conveyance, exercise its rights to accelerate the maturity of the related
Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage
or Mortgage Note; provided, however, that the Servicer need not exercise any
such right if the "due-on-sale" clause is, in the reasonable belief of the
Servicer, not enforceable under applicable law. An Opinion of Counsel, provided
at the expense of the Servicer, to the foregoing effect shall conclusively
establish the reasonableness of such belief. In such event, the Servicer shall
enter into an assumption and modification agreement with the transferee to whom
such property has been or is about to be conveyed, pursuant to which such
transferee
33
becomes liable under the Mortgage Note and, unless prohibited by applicable law
or the Mortgage, the original Mortgagor remains liable thereon. If the foregoing
is not permitted under applicable law, the Servicer is authorized to enter into
a substitution of liability agreement with such transferee, pursuant to which
the original Mortgagor is released from liability and such transferee is
substituted as Mortgagor and becomes liable under the Mortgage Note. The
Servicer shall notify the Trustee that any such assumption or substitution
agreement has been completed by forwarding to the appropriate Custodian, on
behalf of the Trustee, the original copy of such assumption or substitution
agreement (indicating the Mortgage File to which it relates) which copy shall be
added 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. The Servicer shall be
responsible for any required recording of any assumption or substitution
agreement. In connection with any assumption or substitution agreement, no
material term of the Mortgage Loan (including, without limitation, the Monthly
Payment, the stated maturity, the Loan Balance or the Mortgage Note Rate) shall
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected for consenting to any such conveyance or
entering into an assumption or substitution agreement shall be retained by or
paid to the Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan, or any substitution of liability agreement or any other transfer
of a Mortgaged Property without assumption thereof, by operation of law or by
reason of any assumption or transfer (x) which the Servicer may be restricted by
law from preventing, or (y) which, if prevented, would result in non-coverage of
any resulting loss that would otherwise be covered under any mortgage pool
insurance policy, hazard insurance policy or any Primary Mortgage Insurance
Certificate, for any reason whatsoever.
Section 3.11. Realization Upon Defaulted Mortgage Loans; Workouts. (a)
The Servicer shall foreclose upon or otherwise comparably convert the ownership
in the name of, or on behalf of, the Trustee on behalf of the Trust Fund of
Mortgaged Properties relating to defaulted Mortgage Loans as to which no
satisfactory arrangements can be made for collection of Delinquent payments. In
connection with such foreclosure or other conversion, the Servicer shall
exercise such of the rights and powers vested in it hereunder, and use the same
degree of care and skill in their exercise or use, as prudent mortgage lenders
would exercise or use under the circumstances in the conduct of their own
affairs and consistent with the servicing standards set forth in the ▇▇▇▇▇▇ ▇▇▇
Guide, including, but not limited to, advancing funds for the payment of taxes,
amounts due with respect to Senior Liens, and insurance premiums. In the event a
deficiency action is available against the Mortgagor or any other person, the
Servicer may proceed for the deficiency. The Servicer may retain twenty-five
percent of the net proceeds received pursuant to a deficiency action as
compensation for entering into such action.
The Servicer shall sell any REO Property prior to the close of the third
calendar year beginning after the year of its acquisition by the Trust Fund, at
such price as the Servicer in good ▇▇▇▇▇ ▇▇▇▇▇ necessary to comply with this
covenant unless (i) the Servicer obtains for the Trustee an Opinion of Counsel
(the expense of which opinion shall be a Servicing Advance) experienced in
federal income tax matters and acceptable to the Trustee, addressed to the
Trustee and the Servicer, to the effect that the holding by the Trust Fund of
such REO Property for any greater period will not result in the imposition of
taxes on "prohibited transactions" of the Trust Fund or of any Constituent REMIC
as defined in Code Section 860F or cause any Constituent REMIC to fail to
qualify as a REMIC at any time that any Certificates are outstanding or (ii) the
Servicer shall have applied for an extension of time in the manner contemplated
by Code Section 856(e)(3), in which case such three-year period shall be
extended by the applicable period. The Servicer shall manage, conserve, protect
and operate each REO Property solely for the purpose of its prompt disposition
and sale in a manner which does not cause such REO Property to fail to qualify
as "foreclosure property"
34
within the meaning of Code Section 860G(a)(8) or result in the receipt by any
Constituent REMIC of any "income from non-permitted assets" within the meaning
of Code Section 860F(a)(2)(B) or any "net income from foreclosure property"
which is subject to taxation under the REMIC Provisions. In its efforts to sell
such REO Property, the Servicer shall either itself or through an agent protect
and conserve such REO Property in the same manner and to such extent as is
customary in the locality where such REO Property is located and may, incident
to its conservation and protection, rent the same or any part thereof as the
Servicer deems appropriate for the period prior to the sale of such REO
Property.
The Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation, on a Mortgaged Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Mortgaged
Property. The Servicer shall be under no obligation to foreclose upon or
otherwise convert the ownership of any Mortgaged Property which it believes may
be contaminated with or affected by solid wastes, hazardous wastes, hazardous
substances or other pollutants. The Servicer shall not be liable to the Holders
if, based on its belief that no such contamination or effect exists, the
Servicer forecloses on a Mortgaged Property and takes title to such Mortgaged
Property, and thereafter such Mortgaged Property is determined to be so
contaminated or affected.
In any case in which property subject to a Mortgage shall have suffered
damage, the Servicer shall not be required to expend its own funds in connection
with any foreclosure or towards the restoration of such property unless it shall
determine in its discretion (a) that such restoration and/or foreclosure will
increase the net proceeds of liquidation of the related Mortgage Loan to the
Holders after reimbursement to itself for such expenses and (b) that such
expenses will be recoverable by it through either Liquidation Proceeds or
Insurance Proceeds (with respect to each of which it shall have priority for
purposes of withdrawals from the P&I Account from the related property, as
contemplated in Section 3.06(d)). The Servicer shall be responsible for all
other costs and expenses incurred by it in any such proceedings; provided,
however, that it shall be entitled to reimbursement thereof from the related
property, as contemplated in Section 3.06(d). The Servicer shall not, however,
be entitled to recover legal expenses incurred in connection with liquidation
proceedings where the Mortgagor pays all Delinquent payments and expenses and
such proceedings are terminated prior to liquidation, other than sums received
from the Mortgagor for such expenses.
In the event the Servicer does not elect to foreclose on a Mortgaged
Property, the Servicer may, in the exercise of its judgment, elect to accept a
payment or payments, in connection with the sale by the Mortgagor of such
Mortgaged Property or the retention by the Mortgagor of such Mortgaged Property,
in aggregate amount less than the outstanding balance of the related Mortgage
Loan and accrued interest thereon.
The Trustee shall furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
efforts in realizing upon defaulted Mortgage Loans hereunder.
In addition to the foregoing provisions, the Servicer may enter into a
special servicing agreement covering any one or more Mortgage Loans in default
with a Holder of 100% of the Principal Balance of a Subclass of Class B
Certificates or a holder of a class of securities representing interests in
Class B Certificates. Such special servicing agreement shall be subject to each
Rating Agency's acknowledgement that the ratings of the Certificates in effect
immediately prior to the entering into of such agreement would not be qualified,
downgraded or withdrawn and the Certificates would not be placed on credit
review status (except for possible upgrading) as a result of such an agreement.
35
(b) The Servicer shall determine, for each defaulted Mortgage Loan and in
accordance with the procedures set forth in the ▇▇▇▇▇▇ ▇▇▇ Guide, when it has
recovered, whether through trustee's sale, foreclosure sale or otherwise, all
amounts it expects to recover from or on account of such defaulted Mortgage
Loan, whereupon such Mortgage Loan shall become a "Liquidated Loan."
(c) The Servicer shall not agree to any modification, waiver, variance or
amendment of any provision of any Mortgage Loan unless, in the Servicer's good
faith judgment, such modification, waiver, variance or amendment would mitigate
the loss that might otherwise be experienced with respect to such Mortgage Loan
and only in the event of a default with respect to such Mortgage Loan or in the
event that a default with respect to such Mortgage Loan is imminent; provided,
however, that no such modification, waiver, variance or amendment shall extend
the maturity date of such Mortgage Loan beyond the Collection Period relating to
the Last Scheduled Distribution Date of the latest Class of Outstanding
Certificates. The Servicer shall be permitted to modify, waive, vary or amend
any provision of a Mortgage Loan if required by statute or a court of competent
jurisdiction to do so.
(d) The Servicer shall provide written notice to the Trustee prior to the
execution of any modification, waiver or amendment of any material provision of
any Mortgage Loan and shall deliver to the appropriate Custodian, on behalf of
the Trustee, for deposit in the related Mortgage File, an original counterpart
of such modification, waiver or amendment, promptly following the execution
thereof.
Section 3.12. Trustee to Cooperate; Release of Files. (a) Upon the payment
in full of any Mortgage Loan (including any liquidation of such Mortgage Loan
through foreclosure or otherwise), or the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall deliver to the Custodians and the Trustee a
"Request for Release of Documents" (▇▇▇▇▇▇ Mae Form 2009). Upon receipt of such
Request for Release, the Custodians, acting for the Trustee, shall promptly
release the related Mortgage File, in trust, to the Servicer or its designee. In
these circumstances, the Servicer is authorized to give, as attorney-in-fact for
the Trustee and the mortgagee under the Mortgage, an instrument of satisfaction
(or assignment of Mortgage without recourse) regarding the related Mortgaged
Property, which instrument of satisfaction or assignment shall be delivered to
the Person or Persons entitled thereto against receipt of payment in full. No
expense incurred in connection with such instrument of satisfaction or
assignment shall be chargeable to the P&I Account or to the Trustee. In lieu of
executing any such satisfaction or assignment, the Servicer may prepare and
submit to the Trustee a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Servicer; in such
event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
File, as aforesaid.
(b) The Servicer shall have the right to accept applications of Mortgagors
for consent to (i) partial releases of Mortgages, (ii) alterations and (iii)
removal, demolition or division of properties subject to Mortgages. No
application shall be approved by the Servicer unless: (x) the provisions of the
related Mortgage Note and Mortgage have been complied with; (y) the
Loan-to-Value Ratio and debt-to-income ratio after any release does not exceed
the Loan-to-Value Ratio and debt-to-income ratio of such Mortgage on the Cut-Off
Date (or, in the case of an Additional Mortgage Loan, the related Subsequent
Transfer Cut-Off Date) and any increase in the Loan-to-Value Ratio shall not
exceed 5%; and (z) the lien priority of the related Mortgage is not adversely
affected. Upon receipt by the Trustee of an Officer's Certificate of the
Servicer setting forth the action proposed to be taken for a particular Mortgage
Loan and certifying that the criteria set forth in the preceding sentence have
been satisfied, the Trustee shall execute and deliver to the Servicer the
consent or partial release prepared by the Servicer.
Section 3.13. Servicing Compensation. As compensation for its activities
hereunder, the Servicer
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shall be entitled to retain the amount of the related Servicing Fee with respect
to each Mortgage Loan. Additional servicing compensation in the form of (i) to
the extent permitted by Section 3.19, Prepayment Charges, and (ii) release fees,
bad check charges, assumption fees, late payment charges, or any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the P&I Account and similar items may, to the extent collected from Mortgagors,
be retained by the Servicer, unless a successor Servicer is appointed pursuant
to Section 7.01 hereof, in which case the provisions of Section 7.01(g) shall
apply.
The right to receive the Servicing Fee may not be transferred in whole or
in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
Section 3.14. Annual Statement of Compliance. The Servicer, at its own
expense, will deliver to the Trustee, the Depositor, and each Rating Agency, on
or before April 30 of each year, commencing in the year which begins not less
than three months after the Issue Date, an Officer's Certificate stating that
(i) a review of the activities of the Servicer during such preceding calendar
year and of its performance under this Agreement has been made under such
officer's supervision, and (ii) to the best of such officer's knowledge, based
on such review, the Servicer has fulfilled all its obligations under this
Agreement for such year or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officer and the
nature and status thereof including the steps taken or being taken by the
Servicer to remedy such default.
The Servicer shall deliver to the Trustee, the Depositor and each Rating
Agency, promptly after having obtained knowledge thereof but in no event later
than five Business Days thereafter, written notice by means of an Officer's
Certificate of any event which with the giving of notice or the lapse of time or
both would become a Servicing Event of Default.
Section 3.15. Annual Accountants' Report. On or before April 30 of each
year, commencing in the year which begins not less than three months after the
Issue Date, the Servicer, at its own expense (or if the Trustee is then acting
as Servicer, at the expense of the Depositor, which in no event shall exceed
$1,000 per annum), shall cause to be delivered to the Trustee, the Depositor and
each Rating Agency a letter or letters of a firm of Independent, nationally
recognized certified public accountants stating that such firm has examined the
Servicer's overall servicing operations in accordance with the requirements of
the Uniform Single Audit Procedure for Mortgage Bankers, and stating such firm's
conclusions relating thereto.
Section 3.16. Access to Loan Documentation and Information. The Servicer
will provide Holders that are federally insured savings and loan associations
with certain reports, and will provide access to information and documentation
regarding the Mortgage Loans included in the Trust Fund, sufficient to permit
such associations to comply with applicable regulations of the Office of Thrift
Supervision. The Servicer shall provide to the Trustee access to the information
and documentation regarding the Mortgage Loans, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer designated by it.
Section 3.17. Inspections; Errors and Omissions Insurance. (a) At any
reasonable time and from time to time upon reasonable notice, the Trustee or any
Holder of a Class LR Certificate may inspect the Servicer's servicing operations
and discuss the servicing operations of the Servicer during the Servicer's
normal business hours with any of its officers. The costs and expenses incurred
by such a Holder (but not the Trustee) in connection with any such examinations
or discussions shall be for the account of the Holder.
(b) The Servicer (including the Trustee if it shall become the Servicer
hereunder) agrees to maintain errors and omissions coverage and a fidelity bond,
each at least to the extent required by Section 305 of Part I of the ▇▇▇▇▇▇ ▇▇▇
Guide or any successor provision thereof. If the fidelity bond or the errors
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and omissions coverage ceases to be in effect, the Servicer shall promptly give
notice thereof to the Trustee and the Holders.
Section 3.18. Additional Servicing Responsibilities for Second Mortgage
Loans. The Servicer must notify any superior lienholder in writing of the
existence of a Second Mortgage Loan and request notification of any action (as
described below) to be taken against the Mortgagor or the Mortgaged Property by
the superior lienholder.
If the Servicer is notified that any superior lienholder has accelerated
or intends to accelerate the obligations under a Senior Lien, or has declared or
intends to declare a default under the mortgage or the promissory note secured
thereby, or has filed or intends to file an election to have the Mortgaged
Property sold or foreclosed, the Servicer shall take, on behalf of the Trust
Fund, such actions are necessary to protect the interests of the Holders, and/or
to preserve the security of the related Second Mortgage Loan, subject to the
REMIC Provisions. The Servicer shall advance the necessary funds to cure the
default or reinstate the Senior Lien, if such advance is in the best interests
of the Holders; provided, however, that no such advance need be made if, in the
Servicer's reasonable business judgement, such advance would be nonrecoverable
in whole or in part. The Servicer shall thereafter take such action as is
necessary to recover the amount so advanced.
Section 3.19. Prepayment Charges. If this Section 3.19 is stated to be
applicable in Article XII, then the Servicer will not waive all or any part of
any Prepayment Charge unless, in the Servicer's reasonable judgment, such waiver
would maximize recovery of total proceeds taking into account the value of such
Prepayment Charge and the related Mortgage Loan and giving such waiver is
standard and customary in the industry under similar circumstances in connection
with mortgage loan servicing. Subject to the foregoing, the Servicer will not
waive all or any part of a Prepayment Charge in connection with the refinancing
of a Mortgage Loan unless such refinancing is related to a default or a
reasonably foreseeable default.
If the Servicer shall waive all or any part of a Prepayment Charge in
violation of the standard set forth in the preceding paragraph, then the
Servicer shall, on the second Business Day preceding the next Deposit Date,
deposit out of its own funds the amount so waived into the P&I Account. In
addition, if the representation set forth in Section 2.03(b)(vi) is incorrect as
to a Mortgage Loan and such Mortgage Loan is the subject of a voluntary
Mortgagor prepayment, then an amount equal to any excess of (a) the amount of
the Prepayment Charge that would have been collectable on such Mortgage Loan had
such representation been correct over (b) any amount of the Prepayment Charge
actually collected from the Mortgagor, shall be deposited by the Servicer out of
its own funds in the manner described in the preceding sentence.
Section 3.20. Escrow Account. The Servicer shall establish and maintain or
cause to be established and maintained with Depositories one or more Escrow
Accounts and shall deposit therein all collections of taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items for the
account of the Mortgagors. Withdrawals from an Escrow Account may be made only
to effect payment of taxes, assessments, primary mortgage or hazard insurance
premiums or comparable items, to reimburse the Servicer out of related
collections for any payments made regarding taxes and assessments, premiums on
Primary Mortgage Insurance Certificates and premiums on standard hazard
insurance policies, to refund to any Mortgagors any sums determined to be
overages, to pay interest owed to Mortgagors on such Account to the extent
required by law or to clear and terminate such Accounts at the termination of
this Agreement.
Section 3.21. Refinancings of Mortgage Loans. In addition to waivers and
arrangements permitted by Section 3.11, the Servicer reserves the right to offer
refinancings of any Mortgage Loan, if such refinancing arises out of a request
by the related Mortgagor for a refinancing or a modification, or for other
relief from the provisions of the related Mortgage Loan. For the purposes of
this Section, a "refinancing" will
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include any process with a Mortgagor that results in the refinanced Mortgage
Loan being identified and serviced as a "new mortgage loan" in the books,
records and servicing files of the Servicer.
On the Deposit Date for the Collection Period in which occurred the
effective date of the refinancing of any Mortgage Loan pursuant to this Section,
the Servicer shall deposit, or cause to be deposited, into the P&I Account an
amount equal to the prepayment in full of such Mortgage Loan (net of all
Servicing Advances and Delinquency Advances with respect to such Mortgage Loan,
which shall be deemed reimbursed to the Servicer) and, upon receipt by the
Trustee of written notification of such deposit signed by a Servicing Officer,
the related Mortgage File shall be released, and the Custodians and the Trustee
shall comply with the provisions of Section 3.12.
ARTICLE IV
ACCOUNTS AND DISTRIBUTIONS
Section 4.01. Collection of Money. The Trustee shall demand payment or
delivery of all money and other property payable to or receivable by the Trustee
pursuant to this Agreement, including all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Subservicer.
The Trustee shall hold all such money and property received by it, other than
pursuant to or as contemplated by Section 4.10, as part of the Trust Fund and
shall apply it as provided in this Agreement.
Section 4.02. Accounts. The Depositor shall cause to be established by
the Issue Date, and the Trustee shall maintain at the Corporate Trust Office,
the Certificate Account and, if applicable, the Capitalized Interest Account and
the Pre-Funding Account, each to be held by the Trustee as such for the benefit
of the Holders. The Trustee shall deposit in the Certificate Account, upon
receipt, all amounts paid to it pursuant to Section 3.06(d)(ii).
Section 4.03. Investment of Accounts. (a) Consistent with any requirements
of the Code, all or a portion of any Investment Account shall be invested and
reinvested by the Trustee in the name of the Trust Fund, as directed in writing
by the Depositor, in one or more Eligible Investments bearing interest or sold
at a discount. The Trustee (acting in its commercial capacity) may be the
obligor on any investment which otherwise qualifies as an Eligible Investment.
Except as otherwise provided in this Section 4.03, no investment in any
Investment Account shall mature later than the Business Day immediately
preceding the next Distribution Date.
If the Depositor shall fail to give investment directions to the Trustee
then the Trustee shall invest in money market funds described in Section 4.05(j)
to be redeemable without penalty no later than the Business Day immediately
preceding the next Distribution Date.
If any amounts are needed for disbursement from any Investment Account
held by the Trustee and sufficient uninvested funds are not available to make
such disbursement, the Trustee shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Account. No investments will
be liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
The Trustee shall have no liability for any loss incurred in connection
with any investment or any sale or liquidation thereof, or for any insufficiency
in any Investment Account, except for (x) any loss or insufficiency caused by
its negligence or willful misconduct or (y) any loss on investments which are
liabilities of the Trustee in its commercial capacity.
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(b) (i) If the P&I Account is an Investment Account, then all funds
therein shall be held (i) uninvested up to the amount insured by the FDIC or
(ii) invested in Eligible Investments. Any investments of funds in the P&I
Account shall mature or be withdrawable at par on or prior to the immediately
succeeding Deposit Date. Any investment earnings on funds held in the P&I
Account shall be for the account of the Servicer and may only be withdrawn from
the P&I Account by the Servicer immediately following the remittance of the
Monthly Deposit Amount. Any investment losses on funds held in the P&I Account
shall be for the account of the Servicer and promptly upon the realization of
such loss shall be contributed by the Servicer to the P&I Account. Any
references herein to amounts on deposit in the P&I Account shall refer to
amounts net of investment earnings.
(ii) If the Certificate Account is an Investment Account, then funds
therein shall be invested and reinvested by the Trustee at the Depositor's
written direction in one or more Eligible Investments bearing interest or sold
at discount. No investment of any amount held in the Certificate Account may
mature later than the Business Day immediately preceding the next Distribution
Date; provided, however, that investments (including repurchase agreements) on
which the Trustee, in its commercial capacity, is the obligor,
may mature on a Distribution Date.
All income from investment of moneys deposited in the Certificate Account,
and all proceeds of disposition of any assets in the Certificate Account, shall
be deposited in the Certificate Account immediately upon receipt, and any loss
resulting from such investment shall be charged to the Certificate Account.
(iii) If a Pre-Funding Account and a Capitalized Interest Account are
established on the Startup Day, then funds on deposit in each such account shall
be invested in Eligible Investments as set forth in subsection (a) above. All
income or other gain from such investment shall be deposited in such account by
the Trustee immediately upon receipt (except that Pre-Funding Account Earnings
shall be deposited as provided in Section 4.04(d)) and any loss from such
investment shall be charged to such account. For federal income tax purposes,
investment earnings on the Pre-Funding Account and the Capitalized Interest
Account shall be deemed income of the [Depositor][Servicer].
(c) The Depositor will not direct the Trustee to make any investment of
any funds or to sell any investment held in an Investment Account except under
the following terms and conditions:
(i) each such investment shall be made in the name of the Trustee (in its
capacity as such) or in the name of a Qualified Nominee of the Trustee; and
(ii) each such investment shall be a "cash flow investment" as defined in
Code Section 860G(a)(6).
(d) Generally, no Eligible Investment shall be disposed of prior to its
maturity; provided, however, if any amounts are needed for disbursement from an
Investment Account and sufficient uninvested funds are not available therein to
make such disbursement, in the absence of a Depositor Order for the liquidation
of investments held therein in an amount sufficient to provide the required
funds, the Trustee shall cause to be sold or otherwise converted to cash a
sufficient amount of the investments in such Investment Account; provided,
further, however, that prior to any such sale or conversion to cash, the Trustee
shall have received (i) an Opinion of Counsel that such sale or conversion to
cash shall not constitute a "prohibited transaction" under Code Section 860F(a),
or (ii) (a) if such sale or conversion to cash constitutes such a "prohibited
transaction", the consent of the Holders of 100% Percentage Interest of the
Residual Certificates to the prohibited transaction together with each such
Holder's proportionate share of any tax imposed on the Trust Fund attributable
to such transaction and (b) an Opinion of Counsel that such transaction will not
40
disqualify any Constituent REMIC as a REMIC.
Section 4.04. Pre-Funding Account and Capitalized Interest Account. (a)
Upon Depositor Order, on the Startup Date the Trustee will deposit in the
Pre-Funding Account the Original Pre-Funded Amount from the proceeds of the sale
of the Class A Certificates and in the Capitalized Interest Account the Original
Capitalized Interest Amount.
(b) On each Subsequent Transfer Date, the Depositor shall instruct the
Trustee to withdraw from the Pre-Funding Account the purchase price for the
related Additional Mortgage Loans pursuant to Section 2.05(a) and pay such
amount to or upon the order of the Depositor upon satisfaction of the conditions
set forth in Section 2.05.
(c) If the Pre-Funded Amount has been reduced to $100,000 or less on or
before any Deposit Date occurring during the Funding Period, and otherwise on
the first Deposit Date occurring after the end of the Funding Period, the
Depositor shall instruct the Trustee to withdraw the Pre-Funding Amount
(exclusive of any Pre-Funding Account Earnings on deposit therein) from the
Pre-Funding Account and deposit such amount to the Certificate Account on such
Deposit Date.
(d) On the Distribution Dates during and immediately following the Funding
Period, the Trustee shall transfer (x) from the Pre-Funding Account to the
Capitalized Interest Account any Pre-Funding Account Earnings for such
Distribution Date and (y) from the Capitalized Interest Account to the
Certificate Account, the sum of any Capitalized Interest Requirement and any
Pre-Funding Account Earnings for such Distribution Date.
(e) On each Subsequent Transfer Date the Trustee shall distribute any
Overfunded Interest Amount (calculated by the Trustee on the day prior to such
Subsequent Transfer Date) from the Capitalized Interest Account to the Depositor
and on the first Distribution Date following the end of the Funding Period the
Trustee shall close the Capitalized Interest Account and distribute to the
Depositor any amounts remaining therein after taking into account the transfers
on such Distribution Date described in subsection (d) above.
(f) Any amounts transferred to the Certificate Account from the
Capitalized Interest Account pursuant to clause (d)(y) above shall be
transferred and distributed in accordance with Section 13.01(b).
Section 4.05. Eligible Investments. The following are Eligible
Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States, FHLMC
senior debt obligations, and ▇▇▇▇▇▇ ▇▇▇ senior debt obligations, but excluding
any of such securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or redemption;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guarantee timely payment of
principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan Bank;
(e) ▇▇▇▇▇▇ Mae mortgage-backed securities (other than stripped mortgage
securities which are
41
valued greater than par on the portion of unpaid principal) and senior debt
obligations;
(f) Federal funds, certificates of deposit, time deposits, and bankers'
acceptances (having original maturities of not more than 365 days) of any
domestic bank, the short-term debt obligations of which have been rated at least
F-1 by Fitch, A-1 by S&P and P-1 by ▇▇▇▇▇'▇;
(g) Deposits of any bank or savings and loan association (the long-term
deposit rating of which is at least Baa3 by ▇▇▇▇▇'▇ and BBB by S&P and by Fitch)
which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are insured by the FDIC and held up to the limits
insured by the FDIC;
(h) Repurchase agreements collateralized by securities described in (a),
(c) or (e) above with any registered broker/dealer subject to the Securities
Investors Protection Corporation's jurisdiction and subject to applicable limits
therein promulgated by Securities Investors Protection Corporation or any
commercial bank, if such broker/dealer or bank has an uninsured, unsecured and
unguaranteed short-term or long-term obligation rated at least P-1 or Aa2,
respectively, by ▇▇▇▇▇'▇, at least A- or AA, respectively, by S&P and at least
F-1 or AA, respectively, by Fitch, provided:
a. A master repurchase agreement or specific written repurchase
agreement governs the transaction,
b. The securities are held, free and clear of any lien, by the
Trustee or an independent third party acting solely as agent for the
Trustee, and such third party is (a) a Federal Reserve Bank or (b) a bank
which is a member of the FDIC and which has combined capital, surplus and
undivided profits of not less than $125 million, and the Trustee shall
have received written confirmation from such third party that it holds
such securities, free and clear of any lien, as agent for the Trustee,
c. A perfected first security interest under the Uniformed
Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et
seq. or 31 C.F.R. 350.0 et seq., in such securities is created for the
benefit of the Trustee, and
d. The repurchase agreement has a term of thirty days or less and
the Trustee will value the collateral securities no less frequently than
weekly and will liquidate the collateral securities if any deficiency in
the required collateral percentage is not restored within two Business
Days of such valuation, and
e. The fair market value of the collateral securities in relation to
the amount of the repurchase obligation, including principal and interest,
is equal to at least 106%.
(i) Commercial paper (having original maturities of not more than 270
days) rated in one of the two highest short-term rating categories of each
Rating Agency;
(j) Investments in no load money market funds registered under the
Investment Company Act of 1940 whose shares are registered under the Securities
Act and rated AAAm or AAAm-G by S&P, AAA by Fitch and Aaa by ▇▇▇▇▇'▇;
(k) A Qualified GIC; and
(l) Any other investment permitted by each Rating Agency;
42
provided, that no instrument described above shall evidence the right to receive
(a) only interest with respect to the obligations underlying such instrument or
(b) both principal and interest payments derived from obligations underlying
such instrument and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of the yield to
maturity at par of the underlying obligations; and provided, further, that no
instrument described herein may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Section 4.06. Accounting and Directions by Trustee. By noon New York time,
on each Deposit Date (or such earlier date as shall be agreed by the Servicer
and the Trustee), the Trustee shall, based on information provided to the
Trustee by the Servicer, notify the Depositor and each Holder of the following
information with respect to the next Distribution Date (which notification may
be given by facsimile, or by telephone promptly confirmed in writing):
(1) Each Class A Subclass Interest Amount, Class M Subclass Interest
Amount and Class B Subclass Interest Amount;
(2) The Class A Principal Distribution Amount;
(3) The application of the Class A Principal Distribution Amount in
respect of each Class A Subclass, together with each Class M Subclass
Principal Distribution Amount and each Class B Subclass Principal
Distribution Amount, on such Distribution Date;
(4) The Principal Balance (or notional amount, as applicable) of
each Class and Subclass of Certificates following such payment;
(5) The amount of any Realized Losses for the related Collection
Period; and
(6) The amount of 60+ Day Delinquent Loans.
Section 4.07. Reports by Trustee to Holders. (a) On each Deposit Date the
Trustee shall transmit a report in writing to each Holder and the Rating
Agencies setting forth:
(i) the amount of the distribution with respect to such Holders'
Certificates (based on a Certificate in the original principal (or
notional) amount of $1,000);
(ii) the amount of such Holder's distributions allocable to
principal, separately identifying the aggregate amount of any Principal
Prepayments in full or other Principal Prepayments or other recoveries of
principal included therein (based on a Certificate in the original
principal amount of $1,000);
(iii) the amount of such Holder's distributions allocable to
interest (based on a Certificate in the original principal (or notional)
amount of $1,000);
(iv) the Interest Shortfall Amount for each Class and Subclass;
(v) the Principal Balance (or notional amount) of each Class and
Subclass (based on a Certificate in the original principal (or notional)
amount of $1,000) which will be Outstanding after giving effect to the
payment of principal on such Distribution Date;
43
(vi) the aggregate Loan Balance of each Loan Group as of the related
Determination Date, and the aggregate Loan Balance of all Mortgage Loans
as of the related Determination Date;
(vii) based upon information furnished by the Servicer, such
information as may be required by Code Section 6049(d)(7)(C) and the
regulations thereunder to assist the Holders in computing their market
discount;
(viii) the total of any Substitution Adjustment Amounts and any Loan
Repurchase Prices included in such distribution;
(ix) the weighted average Mortgage Note Rate of the Mortgage Loans;
(x) whether a Trigger Event or Subordinated Trigger Event has
occurred;
(xi) the Senior Enhancement Percentage;
(xii) the Overcollateralization Amount or, if applicable, the
Deficiency Amount;
(xiii) the amount of any Applied Loss Amount to each Class and
Subclass as of the close of such Distribution Date; and
(xiv) for each Class and Subclass, any amount applied in reduction
of the Class B Subclass Loss Amount or Class M Subclass Loss Amount
pursuant to Section 13.01(b) on such Distribution Date, and each Class B
Subclass Loss Amount and Class M Subclass Loss Amount after giving effect
to such application.
The Servicer shall provide to the Trustee the information described in
Section 3.06(d)(ii) and in subsection (b) below to enable the Trustee to perform
its reporting obligations under this Section, and such obligations of the
Trustee under this Section are conditioned upon such information being received
and the information provided in clauses (ii), (ix) and (x) shall be based solely
upon information contained in the monthly servicing report provided by the
Servicer to the Trustee pursuant to Section 3.06(d)(ii).
(b) On each Deposit Date the Trustee will distribute to each Holder and
the Rating Agencies, together with the information described in subsection (a)
above, the following information (calculated as of the close of business on the
last Business Day of the month preceding such Deposit Date) prepared by the
Servicer and furnished to the Trustee for such purpose:
(i) the number and aggregate Loan Balances of Mortgage Loans (a) 30
days Delinquent, (b) 60 days Delinquent and (c) 90 days Delinquent, (d)
the number and aggregate Loan Balances of all Mortgage Loans and (e) the
percentage that each of the amounts represented by clauses (a), (b) and
(c) represent as a percentage of the amount in clause (d);
(ii) the status, number and Loan Balances of all Mortgage Loans in
foreclosure proceedings, separately stating those Mortgage Loans for which
foreclosure proceedings were commenced in the preceding calendar month;
(iii) the number and Loan Balances of (a) Mortgages involved in
bankruptcy proceedings and (b) Mortgage Loans that are "balloon" loans;
(iv) the status of any REO Properties;
44
(v) the Loan Balance and book value of any REO Property;
(vi) the Cumulative Loss Percentage, Cumulative Realized Losses and
the Realized Losses for the preceding calendar month; and
(vii) the aggregate Loan Balance of 60+ Day Delinquent Loans.
(c) The Trustee, in addition to the distribution of information under
subsections (a) and (b), shall distribute any Additional Pool Information and
any Additional Certificate Information specified in Article XIV, to the persons
and by the dates respectively specified. The Servicer agrees to provide to the
Trustee such information on the Mortgage Loans and the Certificates as will
enable the Trustee to perform its obligations under the preceding sentence.
(d) The Servicer shall provide (or cause to be provided) to any Insurer
the Insurer Deliverables.
Section 4.08. Other Reports by Trustee. (a) The Trustee shall report, to
the Depositor and each Holder, the amount on deposit in the Certificate Account
and the identity of the investments included therein, as the Depositor or any
Holder may from time to time reasonably request. The Trustee shall, at the
reasonable request of the Depositor or any Holder, transmit promptly to such
Person copies of all accountings of receipts in respect of the Mortgage Loans
furnished to it by the Servicer and shall notify the Depositor if any Monthly
Deposit Amount has not been received by the Trustee when due.
(b) The Trustee shall report to each Holder regarding any written notices
it may from time to time receive which provide a Responsible Officer with actual
knowledge that any of the statements set forth in Section 2.03(a) are
inaccurate.
Section 4.09. Commission Filings. Within 15 days after each Distribution
Date, the Trustee shall file with the Commission through the Electronic Data
Gathering 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
January 30 of the year following the year of this Agreement, the Trustee shall
file a Form 15 Suspension Notification for the Trust Fund, if applicable. Prior
to March 30 in the same year, the Trustee shall file a Form 10-K, in substance
conforming to industry standards, for the Trust Fund. The Depositor hereby
grants to the Trustee a limited power of attorney to execute and file each such
document on behalf of the Depositor. Such power of attorney shall continue until
the earlier of (a) receipt by the Trustee from the Depositor of a written
termination of such power of attorney and (b) termination of the Trust Fund. At
least three Business Days prior to filing any Form 8-K or Form 10-K pursuant to
this Section, the Trustee shall deliver a copy thereof to the Depositor and the
Servicer. The Depositor agrees to promptly furnish to the Trustee, from time to
time upon request, such information, reports and financial data within its
control relating to this Agreement and the Mortgage Loans as the Trustee
reasonably deems necessary or appropriate to prepare and file all required
reports with the Commission.
Section 4.10. Amounts Not Distributed. Any amount withdrawn for
distribution as payment of interest or principal on any Certificate but which is
not distributed because of the non-presentation of such Certificate, because the
check for payment is returned undelivered or because the Holder thereof has
failed to deliver payment instructions to the Trustee, shall be set aside and
held by the Trustee in a separate trust account for the benefit of the Holder.
Any such amount shall be deemed to have been duly distributed for the purpose of
all calculations under this Agreement and will not be available for application
to any other amounts payable under this Agreement. If such amount is an amount
representing part of a final distribution pursuant to Section 9.01, the Trustee
shall comply with the
45
procedure set forth in the last paragraph of Section 9.01. After two years from
the original date on which such amount was due and payable to the Holder, any
amount remaining in such separate trust account shall be distributed to the
Class LR or Class R Certificates, as appropriate, and after such distribution
such Holder shall be required to seek payment as an unsecured general creditor
of the Class LR or Class R Certificateholders, as applicable.
Section 4.11. Payment of Trust Expenses. If and only to the extent not
otherwise paid under this Agreement, the Trustee shall make demand on the
Depositor to pay the Trust Expenses, and the Depositor shall promptly pay such
expenses directly to the Persons to whom such amounts are due.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates. (a) The Certificates and Residual
Certificates shall be substantially in the forms set forth as Exhibits hereto.
The Certificates shall be issued in the denominations specified in Article XII
and shall be executed by manual or facsimile signature on behalf of CFMSI by its
Chairman, President, a Senior Vice President, Treasurer or one of its Vice
Presidents. 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 CFMSI shall bind CFMSI, 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 Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form set forth
in the following paragraph executed by the Trustee or, if an Authenticating
Agent is appointed pursuant to Section 8.12, executed by the Authenticating
Agent, in each case by manual signature, and such certificate 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. The Certificates
shall be engraved, printed or lithographed in such manner as to comply with the
requirements of The Depository Trust Company or other Clearing Agency if such
Certificates are Book-Entry Certificates.
The form of authentication by the Trustee referenced in the preceding
paragraph is as follows: "This is one of the Certificates referred to in
the within-mentioned Agreement.
________________________, as Trustee"
Until such time as Definitive Certificates are issued pursuant to Section
5.06, each Certificate designated as a Book-Entry Certificate in Article XII
shall be held in book-entry form and shall bear a legend in substantially the
following form:
"Unless this certificate is presented by an authorized representative of
[the Clearing Agency] to the Depositor or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of [Clearing Agency or nominee] or such other name as requested by an
authorized representative of [Clearing Agency] and any payment is made to
[Clearing Agency or nominee], any transfer, pledge or other use hereof for value
or otherwise by or to any person is wrongful since the registered owner hereof,
[Clearing Agency or nominee], has an interest herein."
(b) Upon original issuance, the Book-Entry Certificates shall be issued in
the form of one or more typewritten certificates, to be delivered to the initial
Clearing Agency by, or on behalf of, the Depositor.
46
Such Certificates shall initially be registered on the Certificate Register in
the name of the nominee of the initial Clearing Agency, and no Beneficial Owner
will receive a definitive certificate representing such Beneficial Owner's
interest in the Book-Entry Certificates, except as provided in Section 5.06.
Unless and until definitive, fully registered certificates ("Definitive
Certificates") have been issued to Beneficial Owners pursuant to Section 5.06:
(i) the provisions of this Section 5.01(b) shall be in full force and
effect;
(ii) the Depositor, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the making
of distributions on the Book-Entry Certificates and the taking of actions by the
Holders of Book-Entry Certificates) as the authorized representative of the
Beneficial Owners;
(iii) to the extent that the provisions of this Section 5.01(b) conflict
with any other provisions of this Agreement, the provisions of this Section
5.01(b) shall control;
(iv) the rights of Beneficial Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law, the rules,
regulations and procedures of the Clearing Agency and agreements between such
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants, and all references in this Agreement to actions by
Certificateholders shall, with respect to the Book-Entry Certificates, refer to
actions taken by the Clearing Agency upon instructions from the Clearing Agency
Participants, and all references in this Agreement to distributions, notices,
reports and statements to Certificateholders shall, with respect to the
Book-Entry Certificates, refer to distributions, notices, reports and statements
to the Clearing Agency or its nominee, as registered holder of the Book-Entry
Certificates, as the case may be, for the distribution to Beneficial Owners in
accordance with the procedures of the Clearing Agency; and
(v) the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of principal
and interest on the Certificates to the Clearing Agency Participants, for
distribution by such Clearing Agency Participants to the Beneficial Owners or
their nominees.
For purposes of any provision of this Agreement requiring or permitting
actions with the consent of, or at the direction of, Holders of Book-Entry
Certificates evidencing specified voting interests, such direction or consent
shall be given by Beneficial Owners having the requisite percentage interests.
Unless and until Definitive Certificates have been issued to Beneficial
Owners pursuant to Section 5.06, copies of the reports or statements referred to
in Section 4.07 shall be available to Beneficial Owners upon written request to
the Trustee at the Corporate Trust Office.
Section 5.02. Registration of Transfer and Exchange of Certificates. The
Depositor shall maintain or cause to be maintained in accordance with the
provisions of Section 6.05 a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Depositor shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided.
Upon surrender for registration of transfer of any Certificate at the
office or agency of the Certificate Registrar, the Depositor shall execute and
the Trustee or the Authenticating Agent shall authenticate and deliver, in the
name of the designated transferee or transferee, one or more new Certificates in
authorized denominations of the same aggregate number of Single Certificates or
the same aggregate Percentage Interest, as the case may be.
47
At the option of the Certificateholder, Certificates may, be exchanged for
other Certificates of authorized denominations evidencing the same aggregate
number of Single Certificates or the same aggregate Percentage Interest, as the
case may be, upon surrender of the Certificates to be exchanged at any such
office or agency. Whenever any Certificates are so surrendered for exchange, the
Depositor shall execute and the Trustee or Authenticating Agent shall
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 be accompanied by a written
instrument of transfer in form satisfactory to the Trustee, the Depositor and
the Certificate Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing. Notwithstanding the foregoing, no transfer or
exchange of any Certificate shall be made by the Trustee or Authenticating Agent
unless the Certificateholder making the exchange has complied with the
provisions of this Agreement, the respective Certificate and applicable
securities laws.
No service charge shall be made for any registration of transfer or
exchange of the Certificates, 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 and exchange
shall be canceled and, subject to any record retention requirements of the
Exchange Act, subsequently destroyed by the Trustee or, at its direction, by the
Certificate Registrar.
The Depositor and the Trustee will cause the Certificate Registrar to
provide to the Paying Agent, if the Paying Agent is not the Certificate
Registrar, not later than the third Business Day next preceding each
Distribution Date, the names and addresses of the Certificateholders as of the
Record Date and the number of Single Certificates or Percentage Interest held of
record by each of them.
Notwithstanding the foregoing, no legal or beneficial interest in all or
any portion of a Residual Certificate may be transferred, directly or
indirectly, to a "disqualified organization" within the meaning of Code Section
860E(e)(5), or to an agent of a disqualified organization (including a broker,
nominee, or other middleman) (an "Agent") and any such purported transfer shall
be void and of no effect. Further, no legal or beneficial interest in all or any
portion of a Residual Certificate may be registered in the name of a Plan or a
Person investing the assets of a Plan (such Plan or Person an "ERISA Prohibited
Holder") or in the name of a person that is not (i) a U.S. Person or (ii) a
non-U.S. Person that holds the Residual Certificate in connection with the
conduct of a trade or business within the United States and has furnished the
transferor and the Trustee with an effective Internal Revenue Service Form 4224
or (iii) a non-U.S. Person that has delivered to both the transferor and the
Trustee an opinion of a nationally recognized tax counsel to the effect that the
transfer of the Residual Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of the Residual Certificate will not be disregarded for federal
income tax purposes (any such person who is not described in clauses (i), (ii)
or (iii) above being referred to herein as a "Non-permitted Foreign Holder").
The Depositor shall not execute and the Trustee or Authenticating Agent shall
not authenticate and deliver, a new Residual Certificate in connection with any
transfer of a Residual Certificate, and neither the Depositor nor the Trustee
shall accept a surrender for transfer or registration of transfer, or register
the transfer of, any Residual Certificate unless the transferor shall have
provided to the Depositor and the Trustee an affidavit, substantially in the
form marked as Appendix 1 hereto, signed by the transferee, to the effect that
the transferee is not such a disqualified organization, an agent for any entity
as to which the transferee has not received a substantially similar affidavit,
an ERISA Prohibited Holder or a Non-permitted Foreign Holder, accompanied by a
written statement signed by the transferor to the effect that, as of the time of
the transfer, the transferor has no actual knowledge that such affidavit is
false. Upon notice by the Depositor that any legal or beneficial interest in any
portion of a Residual Certificate has been transferred, directly or indirectly,
to a disqualified organization
48
or an Agent in contravention of the foregoing restrictions, the Trustee shall
furnish to the Internal Revenue Service and the transferor of such Residual
Certificate or to such Agent, within 60 days of the request therefor by such
transferor or such Agent, and the Depositor agrees to provide the Trustee with,
the computation of such information necessary to the application of Code Section
860E(e) as may be required by the Code, including but not limited to the present
value of the total anticipated excess inclusions with respect to such Residual
Certificate (or portion thereof) for periods after such transfer. At the
election of the Depositor, the reasonable cost of computing and furnishing such
information may be charged to the transferor or such Agent; however, the Trustee
and the Depositor shall in no event be excused from furnishing such information.
Every holder of a Residual Certificate shall be deemed to have consented to such
amendments to the Pooling Agreement as may be required to further effectuate the
restrictions on transfer of Residual Certificates to a disqualified
organization, an Agent, an ERISA Prohibited Holder or a Non-permitted Foreign
Holder.
The affidavit described in the preceding paragraph shall also contain the
statement of the transferee that it (i) has historically paid its debts as they
have come due and intends to do so in the future, (ii) understands that it may
incur liabilities in excess of cash flows generated by the Residual Certificate,
(iii) intends to pay taxes associated with holding the Residual Certificate as
they become due and (iv) will not transfer the Residual Certificate to any
person or entity that does not provide a similar affidavit. The transferor's
statement to the Trustee accompanying the affidavit shall state that the
transferor has no knowledge or reason to know that the statements made by the
transferee with respect to clauses (i) and (iii) of the preceding sentence are
false. Each Residual Certificate shall bear a legend referring to the
restrictions contained in this paragraph and the preceding paragraph.
No transfer of any Private Certificate may be made unless such Private
Certificate has been registered under the Act and applicable state securities or
"blue sky" laws, or an exemption from the Act and applicable state securities or
"blue sky" laws is available. Upon surrender for registration of transfer of any
Private Certificate, (1) the Trustee shall not accept surrender for transfer or
registration of transfer of, or register the transfer of, any Private
Certificate and (2) the Depositor shall not execute, and the Trustee shall not
authenticate and deliver, any new Private Certificate in connection with the
transfer of any Private Certificate, unless either (A) such Private Certificate
has been registered under the Act and applicable state securities or "blue sky"
laws, or (B) an exemption from the registration requirements of the Act and
applicable state securities or "blue sky" laws is available, and the transferee
delivers to the Depositor and the Trustee a letter substantially to the effect
set forth in Exhibit E to this Agreement and (x) if such transferee is not a
"Qualified Institutional Buyer" within the meaning of Rule 144A of the Act, and
if so requested by the Depositor, in its sole discretion, an opinion of counsel
acceptable to the Depositor shall have been delivered to it and the Trustee to
the effect that such transfer is in compliance with either subclause (A) or
subclause (B) above; or (y) if such transfer is to a non-institutional investor,
unless such investor is an accredited investor (as defined in Regulation D under
the Act) and has a net worth (exclusive of primary residence) of at least
$1,000,000 as confirmed in writing to the Trustee.
No transfer of an ERISA Restricted Certificate may be made unless any
proposed transferee (i) executes a representation letter in substantially the
form of Exhibit F hereto and in substance satisfactory to the Trustee and the
Depositor either stating (a) that it is not, and is not acting on behalf of, any
employee benefit plan subject to Title I of ERISA or Section 4975 of the Code,
or a governmental plan, as defined in Section 3(32) of ERISA, subject to any
federal, state or local law ("Similar Law") which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (collectively, a
"Plan") or using the assets of any such Plan to effect such purchase or (b) as
to the Class M or Class B Certificates only, it is an insurance company and the
source of funds used to purchase the Class M Certificates or the Class B
Certificates is an "insurance company general account" (as such term is defined
in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"),
60 Fed. Reg. 35925 (July 12, 1995)) and there is no Plan
49
with respect to which the amount of such general accounts reserves and
liabilities for the contracts) held by or on behalf of such Plan and all other
Plans maintained by the same employer (or affiliate thereof as defined in
Section V(a)(1) of PTE 95-60) or by the same employee organization, exceed 10%
of the total of all reserves and liabilities of such general account (as such
amounts are determined under Section I(a) of PTE 95-60) at the date of
acquisition or (ii) provides (A) an opinion of counsel in form and substance
satisfactory to the Trustee, the Servicer and the Depositor that the purchase or
holding of ERISA Restricted Certificate by or on behalf of such Plan will not
result in the assets of the Trust being deemed to be "plan assets" and subject
to the prohibited transaction provisions of ERISA and the Code or Similar Law
and will not subject the Servicer, the Depositor or the Trustee to any
obligation in addition to those undertaken in this Agreement and (B) such other
opinions of counsel, officers' certificates and agreements as the Servicer, the
Depositor or the Trustee may require in connection with such transfer.
For purposes of clause (i) of the preceding paragraph, such representation
shall be deemed to have been made to the Servicer, the Depositor and the Trustee
by the transferee's acceptance of an ERISA Restricted Certificate (or the
acceptance by a Beneficial Owner of the beneficial interest in any such Class of
ERISA Restricted Certificates) unless the Servicer, the Depositor and the
Trustee shall have received from the transferee an alternative representation
acceptable in form and substance to them. Notwithstanding anything else to the
contrary herein, any purported transfer of an ERISA Restricted Certificate to or
on behalf of a Plan without the delivery to the Servicer, the Depositor and the
Trustee of an Opinion of Counsel satisfactory to them as described above shall
be void and of no effect; provided, however, that the restriction set forth in
this sentence shall not be applicable if there has been delivered to the
Servicer, the Depositor and the Trustee an Opinion of Counsel satisfactory to
them to the effect that the purchase or holding of an ERISA Restricted
Certificate will not result in a prohibited transaction under ERISA or the Code
and will not subject the Servicer or the Trustee to any obligation in addition
to those expressly undertaken in this Agreement. The Servicer and the Trustee
shall be under no liability to any Person for any registration of transfer of
any ERISA Restricted Certificate that is in fact not permitted by this Section
5.02 or for making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the provisions of this
Agreement so long as the transfer was registered by the Trustee in accordance
with the foregoing requirements. Each of the Servicer and the Trustee shall be
entitled, but not obligated, to recover from any Holder of any ERISA Restricted
Certificate that was in fact a Plan or a Person acting on behalf of a Plan at
the time it became a Holder or, at such subsequent time as it became a Plan or
Person acting on behalf of a Plan, all payments made on such ERISA Restricted
Certificate at and after either such time. Any such payments so recovered shall
be paid and delivered by the Trustee to the last preceding Holder of such
Certificate that is not a Plan or Person acting on behalf of a Plan.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
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 (b) there is delivered to the Depositor,
the Certificate Registrar and the Trustee 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 Registrar or the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Depositor shall execute and the Trustee
or Authenticating Agent shall authenticate and deliver, in exchange for or in
lieu of such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like tenor and Initial Principal Balance, initial notional amount or
Percentage Interest. In connection with the issuance of any new Certificate
under this Section 5.03, the Certificate Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee and the Certificate Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 5.03 shall constitute complete and
indefeasible evidence of ownership in the Trust Fund, as if originally issued on
the Issue Date, whether or not the lost, stolen or destroyed Certificate shall
be found at any time.
50
Section 5.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Depositor, the Trustee, any
Insurer, the Certificate Registrar and any agent of any of them may treat the
Person in whose name such Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions and for all other
purposes whatsoever, and none of the Depositor, the Trustee, any Insurer, the
Certificate Registrar nor any agent of any of them shall be affected by any
notice to the contrary.
Section 5.05. Access to List of Certificateholders' Names and Addresses.
If the Trustee is not the Certificate Registrar and at any time requests the
Depositor or the Certificate Registrar in writing to provide a list of the names
and addresses of Certificateholders, the Depositor will furnish or (if the
Certificate Registrar is not the Depositor) cause the Certificate Registrar to
furnish to the Trustee, within 15 days after receipt of a request, such list as
of the most recent Record Date, in such form as the Trustee may reasonably
require. If three or more Certificateholders (i) request such information in
writing from the Trustee, (ii) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and (iii) provide a copy of the
communication which such Certificateholders propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such request,
afford such Certificateholders access during normal business hours to the most
recent list held by the Trustee, if any. If such list is as of a date more than
90 days prior to the date of receipt of such Certificateholders' request, the
Trustee shall promptly request from the Depositor or the Certificate Registrar a
current list and shall afford such Certificateholders access to such list
promptly upon its receipt by the Trustee. Every Certificateholder, by receiving
and holding a Certificate, agrees that neither the Depositor, the Certificate
Registrar nor the Trustee shall be held accountable by reason of the disclosure
of any such information as to the list of the Certificateholders hereunder,
regardless of the source from which such information was derived.
Section 5.06. Definitive Certificates. If (i)(A) the Depositor advises the
Trustee in writing that the Clearing Agency is no longer willing or able
properly to discharge its responsibilities as depository with respect to the
Book-Entry Certificates, and (B) the Depositor is unable to locate a qualified
successor, (ii) the Depositor, at its option, advises the Trustee in writing
that it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of dismissal or resignation of the Servicer,
Beneficial Owners representing an aggregate Principal Balance of not less than
51% of the aggregate Voting Interest of each outstanding Subclass of Book-Entry
Certificates advise the Trustee through the Clearing Agency and Clearing Agency
Participants in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of the Beneficial Owners, the
Trustee shall notify the Beneficial Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Certificates
to Beneficial Owners requesting the same. Upon surrender to the Trustee by the
Clearing Agency of the Certificates held of record by its nominee, accompanied
by re-registration instructions and directions to authenticate new Certificates
from the Depositor, the Trustee shall authenticate Definitive Certificates for
delivery, at its Corporate Trust Office. The Depositor shall arrange for, and
will bear all costs of, the printing and issuance of such Definitive
Certificates. Neither the Depositor, the Servicer nor the Trustee shall be
liable for any delay in delivery of such instructions by the Clearing Agency and
may conclusively rely on, and shall be protected in relying on, such
instructions.
Section 5.07. Notices to Clearing Agency. Whenever notice or other
communication to the Holders of Book-Entry Certificates is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Beneficial Owners pursuant to Section 5.06, the Trustee shall have all such
notices and communications specified herein to be given to Holders of Book-Entry
Certificates to the Clearing Agency.
51
ARTICLE VI
CFMSI AND CFM
Section 6.01. Liability. CFMSI and CFM shall be liable in accordance
herewith only to the extent of the respective obligations specifically
undertaken by them herein.
Section 6.02. Merger or Consolidation, or Assumption of the Obligations.
Any corporation into which CFMSI may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
CFMSI shall be a party, or any corporation succeeding to the business of CFMSI,
or any corporation, more than 50% of the voting stock of which is, directly or
indirectly, owned by Citicorp, which executes an agreement of assumption to
perform every obligation of CFMSI hereunder, shall be the successor of CFMSI
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, that in the event that any such successor corporation
executes such agreement of assumption, CFMSI shall not thereby be released from
any of its obligations or liabilities hereunder.
Any corporation into which CFM may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which CFM
shall be a party, or any corporation succeeding to the business of CFM, or any
corporation, more than 50% of the voting stock of which is, directly or
indirectly, owned by Citicorp, which executes an agreement of assumption to
perform every obligation of CFM hereunder, shall be the successor of CFM
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, that in the event that any such successor corporation
executes such agreement of assumption, CFM shall not thereby be released from
any of its obligations or liabilities hereunder.
Section 6.03. Limitation on Liability. Neither CFMSI, CFM nor any of their
respective directors, officers, employees and agents shall be under any
liability to the Trust Fund or the Certificateholders for any action taken or
for refraining from the taking of any action pursuant to this Agreement, or for
errors in judgment, provided, however, that neither CFMSI, CFM nor any such
person will be protected against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. CFMSI, CFM and any director or officer or employee or agent of
either of them 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. CFMSI, CFM and any of their respective directors, officers, employees
or agents shall be indemnified and held harmless by the Trust Fund against any
loss, liability or expense incurred in connection with any suit in equity,
action at law or other proceedings relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or reckless disregard of obligations and duties hereunder. CFM 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 respective opinion may involve
it in any expense or liability, provided, however, that CFM 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 legal
expenses and costs of such whom and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund and CFM shall be entitled to
be reimbursed therefor out of the P&I Account.
Section 6.04. CFM Not to Resign. Subject to the provisions of Sections
6.02 and 6.06, CFM shall not resign from the obligations and duties hereby
imposed on it without the consent of the Trustee, any Insurer, the Holders of
more than 66-2/3% of the Voting Interests of the Certificates then Outstanding
and 66-2/3% of the Percentage Interests of the Residual Certificates, except
upon a determination that the performance of its duties hereunder is no longer
permissible under applicable law or are in material conflict
52
by reason of applicable law with any other activities carried on by it, such
other activities being of a type and nature carried on by CFM at the date
hereof. Any such determination permitting the resignation of CFM shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No
resignation by CFM shall become effective until the Trustee or a successor
servicer shall have assumed the responsibilities and obligations of CFM in
accordance with Section 7.01.
Section 6.05. Maintenance of Office or Agency. CFMSI shall maintain or
cause to be maintained at its expense an office or offices or agency or agencies
where the Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon CFMSI in respect of the
Certificates and this Agreement may be served. CFMSI initially appoints the
Certificate Registrar designated in Article XII as its office for purposes of
receipt of notices and demands. CFMSI will give prompt written notice to the
Trustee and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 6.06. Delegation of Duties. In addition to arrangements pursuant
to Section 3.03, CFM may at any time without notice or consent delegate any
duties hereunder to any entity, including an entity more than 50% of the stock
of which is owned, directly or indirectly, by Citicorp; provided that such
entity has been approved as a seller/servicer by ▇▇▇▇▇▇ ▇▇▇ or FHLMC. Such
delegation shall not, however, relieve CFM of its responsibility with respect to
such duties.
ARTICLE VII
SERVICER DEFAULT; RESIGNATION
Section 7.01. Servicing Events of Default. (a) If any one of the following
events ("Servicing Events of Default") shall occur and be continuing:
(i) Any failure by the Servicer, if the Servicer is the Paying Agent, to
distribute to Certificateholders any payment required under the terms of this
Agreement or, if the Servicer is not the Paying Agent, to pay over or to cause
to be paid over to the Paying Agent for such distribution, any payment so
required or to remit to the Trustee for deposit in the Certificate Account any
payment required to be made under the terms of this Agreement (including any
payment required to be made by the Servicer pursuant to Section 3.08) which
failure continues unremedied for a period of (A) ten Business Days after the
date on which written notice of such failure shall have been given to the
Servicer by or on behalf of the Trustee, or to the Servicer and the Trustee by
the Holders of the Required Amount of Certificates if the Servicer falls to
distribute or remit the full amount of a required payment as the result of an
error in calculating the amount of such required payment or (B) three Business
Days after written notice of such failure shall have been given to the Servicer
as provided above if the Servicer falls to distribute or remit the full amount
of a required payment for any reason other than as a result of an error in
calculation; or
(ii) Failure on the part of the Servicer duly to observe or perform in any
material respect any of its covenants or agreements set forth in this Agreement,
which failure (A) materially adversely affects the rights of the
Certificateholders and (B) continues unremedied for a period of 60 Business Days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by or on behalf of the Trustee,
or to the Servicer and the Trustee by the Holders of the Required Amount of
Certificates; or
(iii) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver or liquidator for the Servicer in any
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insolvency, 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 consent to the appointment of a conservator or
receiver or liquidator in any insolvency readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to substantially all of its property, 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) On any date, the Cumulative Loss Percentage is greater than the
Maximum Loss Percentage; or
(vi) The occurrence of any other event specified in Section 14.02 as a
Servicing Event of Default;
then the Trustee, acting upon the instructions of the Required Amount of
Certificates, may remove the Servicer as such under this Agreement. The Servicer
shall continue to act as servicer under this Agreement for a period commencing
on the date on which such Servicing Event of Default occurred and ending on the
last day of the calendar quarter in which such Servicing Event of Default
occurred, unless prior to the end of such period a successor Service shall have
been appointed pursuant to this Section 7.01 or the Trustee shall have notified
the Servicer of the Trustee's election to assume the Servicer's servicing
responsibilities and obligations at an earlier date.
(b) Each party agrees to use its best efforts to inform the Trustee of any
materially adverse information regarding the Servicer's servicing activities
that comes to the attention of such party from time to time.
(c) The Servicer shall not resign from the obligations and duties hereby
imposed on it, except upon determination that its duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Servicer so causing such a conflict being of a type and nature carried on
by the Servicer at the date of this Agreement. Any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel
acceptable to the Trustee at the expense of the Servicer to such effect.
(d) No removal or resignation of the Servicer shall become effective until
the Trustee or a successor Servicer shall have assumed the Servicer's
responsibilities and obligations in accordance with this Section.
(e) Upon removal or resignation of the Servicer, the Servicer at its own
expense also shall promptly deliver or cause to be delivered to a successor
servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has maintained
for the Mortgage Loans, including all tax bills, assessment notices, insurance
premium notices and all other documents as well as all original documents then
in the Servicer's possession.
(f) Any collections then being held by the Servicer prior to its removal
or resignation and any collections received by the Servicer thereafter shall be
endorsed by it to the Trustee and remitted directly and immediately to the
Trustee or the successor Servicer.
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(g) Upon removal or resignation of the Servicer, the Trustee may (A)
solicit bids for a successor servicer as described below or (B) assume the
servicing responsibilities and obligations hereunder as Servicer. If the Trustee
elects to solicit bids for a successor Servicer, the Trustee agrees to act as
Servicer during the solicitation process and shall assume all duties of the
Servicer (except as otherwise provided in this Agreement). The Trustee shall, if
it is unable to obtain a qualifying bid and is prevented by law from acting as
Servicer, appoint, or petition a court of competent jurisdiction to appoint, any
housing and home finance institution, bank or mortgage servicing institution
which has been designated as an approved seller-servicer by ▇▇▇▇▇▇ Mae or FHLMC
for first and second mortgage loans and having equity of not less than
$5,000,000, as determined in accordance with generally accepted accounting
principles, as the successor to the Servicer in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer hereunder.
The compensation of any successor Servicer (other than the Trustee as successor
Servicer) so appointed shall be the amount agreed to between the successor
Servicer and the Trustee (up to a maximum equal to the Servicing Fee) together
with the other servicing compensation provided in Section 3.13; provided, that
if the Trustee becomes the successor Servicer it shall receive as its
compensation the same compensation paid to the Servicer immediately prior to the
Servicer's removal or resignation; provided, further, that if the Trustee
becomes the successor Servicer then the Servicer agrees to pay to the Trustee at
such time that the Trustee becomes successor Servicer a set-up fee of
twenty-five dollars ($25.00) for each Mortgage Loan then included in the Trust
Fund. The Trustee shall be obligated to serve as successor Servicer whether or
not such set-up fee is paid, but shall in any event be entitled to receive, and
to enforce payment of, such fee first from the Servicer and, to the extent not
paid by the Servicer, from the Trust Fund.
(h) In the event the Trustee elects to solicit bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Servicer shall be entitled to servicing compensation in accordance
with subsection (g) above. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the transfer and assignment
of the servicing rights and responsibilities hereunder to the qualified party
submitting the highest satisfactory bid as to the price it will pay to obtain
servicing. The Trustee shall deduct from any sum received from the successor
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum less any amounts due the Trustee or the Trust from the
Servicer shall be paid by the Trustee to the Servicer at the time of such sale,
transfer and assignment to the Servicer's successor.
(i) The Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors and each Rating Agency
of the transfer of servicing. The Servicer agrees to cooperate with the Trustee
and any successor Servicer in effecting the termination of the Servicer's
servicing responsibilities and rights and shall promptly provide the Trustee or
such successor Servicer, as applicable, all documents and records reasonably
requested by it to enable it to assume the Servicer's functions and shall
promptly transfer to the Trustee or such successor Servicer, as applicable, all
amounts which then have been or should have been deposited in the P&I Account by
the Servicer or which are thereafter received with respect to the Mortgage
Loans. Neither the Trustee nor any other successor Servicer shall be held liable
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer. If the Servicer resigns or is removed, the Servicer agrees to
reimburse the Trust, the Trustee and the Holders for the costs and expenses
associated with the transfer of servicing to the successor Servicer (less any
amount paid to the Trustee pursuant to the last two sentences of subsection (g)
above).
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(j) The Trustee or other successor Servicer, upon assuming the duties of
Servicer, shall (i) unless each Rating Agency has confirmed that recordation is
not required, record all assignments of Mortgage Loans not previously recorded
in the name of the Trustee and (ii) make all Delinquency Advances and
Compensating Interest payments and deposit them to the P&I Account which the
Servicer has theretofore failed to remit with respect to the Mortgage Loans;
provided, however, that the Trustee or such successor Servicer shall only be
required to make Delinquency Advances (including Delinquency Advances described
in this subsection (j)) if, in it's good faith judgment, such Delinquency
Advances will ultimately be recoverable from the Mortgage Loans.
(k) The Trustee shall give notice to the Holders, the Depositor and each
Rating Agency of the occurrence of any event described in subsection (a) above
of which the Trustee has knowledge.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of the Trustee. The Trustee, prior to the occurrence
of an Servicing Event of Default and after the curing of all Servicing Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement. If a Servicing Event of
Default has occurred (which has not been cured), the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. The Trustee shall not be
responsible for the accuracy or content of any such instrument furnished by the
Servicer or the Depositor. If any such instrument is found not to confirm in any
material respect to the requirements of this Agreement, the Trustee shall
request a satisfactorily corrected instrument.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own misconduct; provided, however, that:
(a) Prior to the occurrence of a Servicing Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates, statements or opinions
furnished to the Trustee and conforming to the requirements of this Agreement;
(b) The Trustee shall not be personally liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be personally liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance with
the direction of the Holders of the Required
56
Amount of Certificates relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement;
(d) The Trustee shall not be charged with knowledge of any default (other
than a default in payment to the Trustee) or a Servicing Event of Default unless
a Responsible Officer of the Trustee obtains actual knowledge of such failure or
the Trustee receives written notice of such failure at its Corporate Trust
Office from the Depositor, the Servicer or the Holders of the Required Amount of
Certificates;
(e) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
nothing in this Agreement shall in any event require the Trustee to perform, or
be responsible for the manner of performance of, any of the obligations of the
Servicer under this Agreement, except during such time, if any, as the Trustee
shall be the successor to, and be vested with the rights, duties, powers and
privileges of, the Servicer in accordance with the terms of this Agreement; and
(f) Except as specifically required by this Agreement, and without
limiting the generality of this Section 8.01, the Trustee shall have no duty to
(A) see to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement, or to see to the maintenance of any thereof or to any refiling,
rerecording or redepositing of any thereof, (B) see to any insurance, or (C) see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance owing with respect to, assessed or levied against,
any part of the Trust Fund other than from funds available in the Certificate
Account.
Section 8.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 8.01:
(a) The Trustee may rely and shall be protected in acting, or refraining
from acting upon any resolution, Officer's Certificate, certificate of auditors
or any other certificate, statement, instruments, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) The Trustee may consult with counsel and any written advice or Opinion
of Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such written advice or Opinion of Counsel;
(c) Whenever in the administration of this Agreement the Trustee or its
agent shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, including any action by the
Trustee pursuant to Section 10.01, the Trustee or its agent (unless other
evidence be herein specifically prescribed) may request and, in the absence of
bad faith on its part, rely upon any Officer's Certificate;
(d) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; nothing herein shall, however, relieve the Trustee
of the obligations, upon the occurrence of a Servicing Event of Default (which
has not been cured), to exercise such of the rights and powers vested in it by
this Agreement, and to use the same
57
degree of care and skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs;
(e) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(f) Prior to the occurrence of a Servicing Event of Default and after the
curing of all Servicing Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or documents, unless
requested in writing so to do by the Holders of the Required Amount of
Certificates; provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable security or indemnity from
such Holders against such cost, expense or liability as a condition to such
investigation. Nothing in this subsection (f) shall derogate the obligation of
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors;
(g) The Trustee may appoint agents (which may include the Depositor and
its Affiliates) to perform any of the responsibilities of the Trustee, which
agents shall have any or all of the rights, powers, duties and obligations of
the Trustee conferred on them by such appointment, provided that the Trustee
shall continue to be responsible for its duties and obligations under this
Agreement;
(h) The Trustee shall not be required to give any bond or surety in
connection with the execution of the Trust created hereby or the powers granted
hereunder; and
(i) The Trustee shall in no event be liable to any Holder for any special,
indirect or consequential loss or damage of any kind whatsoever (including,
without limitation, lost profits), even if the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of CFMSI and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement, the Mortgage Document Custodial Agreement or
of the Certificates (other than the certificate of authentication on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by CFMSI of any of the Certificates or
of the proceeds of such Certificates or for the use or application of any funds
paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the P&I Account or Escrow Account. The Trustee shall have no
liability for any losses incurred as a result of (i) any failure of the Trust
Fund to qualify as the specified separate Constituent REMICs, (ii) any
termination, inadvertent or otherwise, of the status of the Trust Fund as the
specified separate Constituent REMICs, (iii) any tax on prohibited transactions
imposed by Code Section 860F(a)(1), (iv) any tax on net income from foreclosure
property imposed by Code Section 860G(c), (v) any tax on contributions to any
Constituent REMIC after the Startup Day imposed by Code Section 860G(d) or (vi)
any erroneous calculation or determination or any act or omission of the
Servicer hereunder; provided, that the Trustee shall not be excused hereby from
liability for its own negligence, bad faith or failure to perform its duties as
specified herein.
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Section 8.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of one or more of the
Certificates with the same rights as it would have if it were not Trustee and
may otherwise deal with the Depositor and its Affiliates as if it were not the
Trustee.
Section 8.05. Trustee's Fees and Expenses. The Trustee shall receive
compensation and reimbursement of expenses pursuant to Section 13.01 and Section
4.11. The Trustee and any director, officer or employee of the Trustee shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred or paid to third parties (other than salaries paid to
employees, and allocable overhead, of the Trustee) in connection with its
acceptance and administration of its trusts hereunder or under the Certificates,
except any such expense, loss or liability as may arise from its negligence, bad
faith or willful misconduct or which is the responsibility of the
Certificateholders hereunder. The Trustee and any director, officer or employee
of the Trustee shall be indemnified by the Depositor and held harmless against
any loss, liability or reasonable expense incurred by the Trustee in performing
its duties as tax matters partner for each Constituent REMIC, except for any
such expense, loss or liability as may arise from its negligence, bad faith or
willful misconduct in the performance of such duties. The provisions of this
Section 8.05 shall survive the termination of this Agreement and the resignation
or removal of the Trustee.
The Trustee, each Co-Certificate Registrar, the Mortgage Note Custodian,
the Mortgage Document Custodian, each Depository, each Co-Paying Agent, each
Authenticating Agent and any agent appointed pursuant to Section 8.02 are
entitled to indemnification from the Depositor, and will be held harmless
against any loss, liability or expense incurred without negligence, bad faith or
willful misconduct on their part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
hereunder. Such indemnification shall survive the payment of the Certificates
and termination of the Trust Fund, as well as the resignation or removal of CFM
as Servicer, and for purposes of such indemnification the negligence, bad faith
or willful misconduct of any of the entities enumerated in the preceding
sentence shall not be imputed to, or adversely affect, the right of any other
enumerated entity to be entitled to indemnification.
Section 8.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation or a national banking association, other
than an Affiliate of the Depositor, having its principal office in the same
state as that in which the initial Trustee under this Agreement has its
principal office (or in the State of New York) and organized and doing business
under the laws of such State or the United States of America, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $30,000,000 and subject to supervision or examination by
federal or state authority and having a deposit rating in the category of at
least "A" from each Rating Agency. If such corporation or national banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 8.06, the combined capital and surplus of such
corporation or national banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.06, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.07.
Section 8.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Depositor. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and having accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
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If at any time the Trustee shall cease to be eligible in accordance with
Section 8.06 and shall fail to resign after written request therefor by the
Depositor, or if at any time the Trustee shall be legally unable to act, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conversion or liquidation, then the Depositor may remove the
Trustee. If the Depositor removes the Trustee under the authority of the
preceding sentence, the Depositor shall promptly appoint a successor Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor Trustee.
The Trustee may also be removed at any time (i) by the Depositor, (a) if
the Trustee ceases to be eligible to continue as such under this Agreement or if
the Trustee becomes insolvent, (b) if the Trustee breaches any of its duties
under this Agreement, which breach materially adversely affects the
Certificateholders, (c) if through the performance or nonperformance of certain
actions by the Trustee, the rating assigned to the Certificates would be lowered
or (d) if the credit rating of the Trustee is downgraded to a level which would
result in the rating assigned to the Certificates to be lowered; or (ii) by the
holders of Certificates evidencing more than 50% of the Voting Interest of the
Certificates then outstanding and more than 50% of the Percentage Interests of
the Residual Certificates.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 8.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 8.08.
Section 8.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the Depositor
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
as Trustee. The predecessor Trustee shall deliver to the successor Trustee all
Mortgage Files and related documents and statements held by it hereunder; and
the predecessor Trustee shall amend the Mortgage Document Custodial Agreement
and the Mortgage Note Custodial Agreement to make the successor Trustee the
successor to the predecessor Trustee thereunder; and the Depositor and the
predecessor Trustee shall execute and deliver such instruments and do other such
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this Section
8.08 unless at the time of such acceptance such successor Trustee shall be
eligible under Section 8.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 8.08, the Depositor shall mail notice of the succession of such Trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail such notice within 10 days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Depositor.
Section 8.09. Merger or Consolidation of Trustee. Any corporation or
national banking association into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation or national banking
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or national banking association
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
60
corporation or national banking association shall be eligible under Section
8.06, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing any Mortgage Note may at the time be
located, the Depositor and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust 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
thereof, and, subject to the other provisions of this Section 8.10, such powers,
duties, obligations, rights and trusts as the Depositor and the Trustee may
consider necessary and desirable. If the Depositor shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case a Servicing Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 8.06 and no notice to the Certificateholders
of the appointment of any co-trustee or separate trustee shall be required under
Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted by
law and by the instrument appointing such separate trustee or co-trustee, 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 such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be performed
(whether as Trustee or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of title to
the Trust Fund or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(b) No trustee hereunder shall be held personally liable by reason of any
act or omission of any other trustee hereunder; and
(c) The Depositor and the Trustee acting jointly 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 of the provisions of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Depositor.
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
61
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee to the extent permitted by law, without the appointment
of a new or successor trustee.
Section 8.11. Tax Returns. (a) The Trustee shall prepare and file or cause
to be prepared and filed with the Internal Revenue Service and applicable state
or local tax authorities income tax or information returns for each taxable year
for each Constituent REMIC, containing such information and at the times and in
the manner as may be required by the Code or state or local tax laws,
regulations, or rules, and shall furnish or cause to be furnished to
Certificateholders, the schedules, statements or information at such times and
in such manner as may be required thereby. Within 30 days of the Startup Day,
the Servicer shall furnish or cause to be furnished to the Internal Revenue
Service, on Form 8811 or as may otherwise be required by the Code, the name,
title, address, and telephone number of the person that the Holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and shall update
such information at the time or times and in the manner required by the Code.
Such federal, state or local income tax or information returns shall be signed
by the Trustee or such other person as may be required to sign such returns by
the Code or state or local tax laws, regulations or rules.
(b) In the first federal income tax return of each of the Constituent
REMICs for its short taxable year ending December 31 in the year in which the
Startup Day occurs, REMIC status shall be elected for such taxable year and all
succeeding taxable years.
(c) The Trustee will maintain such records relating to each of the
Constituent REMICs, including but not limited to the income, expenses, assets
and liabilities thereof, and the adjusted basis of the property thereof
determined at such intervals as may be required by the Code, as may be necessary
to prepare the foregoing returns, schedules, statements or information.
(d) Each Holder of a Residual Certificate shall be deemed to have agreed,
by acceptance thereof, to be bound by this Section 8.11, by Section 5.02 and by
the "REMIC-Related Provisions" set forth in Section 12.04.
Section 8.12. Appointment of Authenticating Agent. At any time when any of
the Certificates remain outstanding the Trustee may appoint an Authenticating
Agent or Agents (which may include CFMSI or any of its Affiliates) which shall
be authorized to act on behalf of the Trustee to authenticate Certificates, and
Certificates so authenticated shall be entitled to the benefit of this Agreement
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference made in this Agreement to the
authentication and delivery of Certificates by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Depositor and shall at all times be a corporation or national banking
association organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to act as Authenticating Agent, having a combined capital and surplus of
not less than $15,000,000, authorized under such laws to conduct a trust
business and subject to supervision or examination by federal or state
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 8.12, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section 8.12, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section 8.12.
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Any corporation or national banking association into which an
Authenticating Agent may be merged in or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, conversion or consolidation to which such Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation or national
banking association shall be otherwise eligible under this Section 8.12, without
the execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Depositor. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Depositor. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with this Section
8.12, the Trustee may appoint a successor acceptable to the Depositor and shall
mail written notice of such appointment by first-class mail, postage prepaid to
all Certificateholders as their names and addresses appear in the Certificate
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 8.12.
Any reasonable compensation paid to an Authenticating Agent for its
services under this Section 8.12 shall be a reimbursable expense pursuant to
Section 8.05 if paid by the Trustee.
If an appointment is made pursuant to this Section 8.12, the Certificates
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
"This is one of the Certificates referred to in the within-mentioned Agreement.
_______________________
As Trustee
By_______________________
Authenticating Agent
By_______________________
Authenticating Signature"
ARTICLE IX
TERMINATION
Section 9.01. Termination upon Repurchase by Depositor or Liquidation of
all Mortgage Loans. The respective obligations and responsibilities of the
Depositor, the Servicer and the Trustee created hereby and the Trust Fund
created hereby shall terminate upon (a) the repurchase on a Distribution Date by
the Depositor of all of the Mortgage Loans in each Loan Group and all property
acquired in respect of any Mortgage Loan remaining in the Trust Fund in each
Loan Group at a price equal to the sum of (i) 100% of the Loan Balance of each
Mortgage Loan as of the related Determination Date, together with accrued
interest
63
thereon to (but not including) such Distribution Date at the related Mortgage
Note Rate, (ii) unreimbursed Servicing Advances and Delinquency Advances (other
than such payments and advances in respect of interest in excess of the Investor
Rate on the Mortgage Loans made prior to the date of repurchase, whereupon such
Delinquency Advances and Servicing Advances will be deemed reimbursed to the
Servicer), and (iii) the appraised value of any REO Property in the Trust Fund
(up to the related Loan Balance, and less the good faith estimate of the
Depositor of liquidation expenses to be incurred in connection with its disposal
thereof), such appraisal to be conducted by an appraiser mutually agreed upon by
the Depositor and the Trustee, or (b) the later of (i) the maturity or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all property acquired upon
foreclosure or by deed in lieu of foreclosure of any Mortgage Loan and (ii) the
payment to the Certificateholders and to the Insurer, as subrogee of any Insured
Certificates, of all amounts required to be paid to them pursuant to this
Agreement; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the lawful descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late Ambassador of the
United States of America to the Court of St. James's, living on the date of this
Agreement. Such termination shall occur only in connection with a "qualified
liquidation" of each Constituent REMIC within the meaning of Code Section
860F(a)(4)(A), pursuant to which the Trustee shall sell or otherwise dispose of
all of the remaining assets of the Trust Fund and make all required
distributions to Certificateholders within 90 days of the adoption of a plan of
complete liquidation. For this purpose, the notice of termination described in
the next paragraph shall be the adoption of a plan of complete liquidation
described in Code Section 860F(a)(4)(A)(i), which shall be deemed to occur on
the date the first such notice is mailed. Such date shall be specified in the
final federal income tax return of each Constituent REMIC constituting the Trust
Fund. The right of the Depositor to repurchase all of the Mortgage Loans on any
Distribution Date pursuant to clause (a) above shall be conditioned upon (A) the
Pool Balance, at the time of such repurchase and after giving effect to
distributions to be made on such Distribution Date, being less than 5% of the
Initial Pool Balance plus any Additional Loan Balance and (B) any other
condition set forth in Article XII. Any other method of termination or
repurchase of the Trust Fund than as set forth above must be based on the
receipt by the Trustee of an Opinion of Counsel or other evidence that such
termination or repurchase will be part of a "qualified liquidation" within the
meaning of Code Section 860F(a)(4)(A), will not adversely affect the status of
the Trust Fund as the separate Constituent REMICs under the Code and will not
otherwise subject the Trust Fund to any tax. The payment made by the Depositor
under clause (a) above shall be in addition to (but not in duplication of any
part of) the distribution that would otherwise be made on the Certificates on
such Distribution Date. The Depositor shall have the right, in its sole
discretion, to transfer its right to repurchase the Mortgage Loans pursuant to
clause (a) above to any third party of its choice.
Notice of any termination, specifying the Distribution Date upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee by letter to the Certificateholders mailed not earlier than 30 days nor
more than 60 days prior to such Distribution Date specifying (A) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation arid surrender of the Certificates at the office therein
designated, (B) the amount of such final payment and (C) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Paying Agent therein specified. The Depositor shall provide such notice to
the Trustee prior to the time at which such notice is required to be given to
Certificateholders and, if applicable, to the Certificate Registrar, the
Mortgage Note Custodian and the Paying Agent at the time such notice given to
the Certificateholders. In the event such notice is given, the Depositor shall
deposit in the Certificate Account or the account designated by the Paying Agent
if the Depositor is not the Paying Agent, on the Business Day preceding the
Distribution Date for such final distribution, an amount equal to the final
payment in respect of the Certificates. Upon certification to the Trustee by an
Authorized Officer of the Depositor following
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such final deposit to the effect that all conditions set forth in this Article
IX have been met, the Trustee shall promptly release to the Depositor or its
designee the Mortgage Files for the Mortgage Loans.
In the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above-mentioned notice, the Trustee 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 one year
after the second notice all the Certificates shall not have been surrendered for
cancellation, the Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets which remain subject hereto. Interest shall not accrue
for the period of any delay in the payment of a Certificate resulting from the
failure of a Holder to surrender the Certificate in accordance herewith.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Amendment. This Agreement may be amended from time to time
by the Depositor, the Servicer and the Trustee, without the consent of any of
the Certificateholders, (a) to cure any ambiguity or error, (b) to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein, (c) to add any other provisions with respect
to matters or questions arising under this Agreement, which shall not be
inconsistent with the provisions of this Agreement, (d) to comply with any
requirements imposed by the Code, (e) to establish a "qualified reserve fund"
within the meaning of Code Section 860G(a)(7)(B) or (f) to maintain the status
of the Trust Fund as separate Constituent REMICs. This Agreement may also be
amended by the Depositor, the Servicer and the Trustee, without
Certificateholder consent, if the Depositor delivers an Opinion of Counsel
acceptable to the Trustee and any Insurer to the effect that such amendment will
not materially adversely affect the interests of the Certificateholders or the
Insurer, respectively. The Trustee hereby agrees to execute and deliver any
amendment to this Agreement provided by the Depositor to it, that conforms to
the applicable provisions of the preceding two sentences of this paragraph
provided, however, that the Trustee may, but shall not be obligated to, enter
into any such amendment that affects the Trustee's own rights, duties or
immunities under this Agreement.
This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing, in the aggregate, not less than 66-2/3% of the Voting Interest of
the Certificates affected by such amendment (after giving effect to the first
proviso to the definition of "Outstanding"; and provided that if any Class of
Certificates is affected differently in any material respect by such amendment
than the other affected Classes, the consent of the Holders of Certificates
evidencing 66-2/3% of the Voting Interest of each such differently affected
Class shall be required) and, if the Residual Certificates or any Insurer are
materially and adversely affected by such amendment, 66-2/3% of the Percentage
Interests of the Residual Certificates so affected, or such Insurer,
respectively, 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 the Certificates; provided, however,
that (i) in connection with any such amendment, the Depositor shall deliver an
Opinion of Counsel acceptable to the Trustee (x) identifying any Class of
Certificates that may be affected differently in any material respect than the
other affected Classes (or stating that there is no such differently affected
Class) and (y) identifying any Class whose Certificateholders would not be
affected by such amendment and (ii) no such amendment shall, without the consent
of the Holders of all Certificates then Outstanding, (a) reduce in any manner
the amount of, or delay the timing of, collections or payments received on
Mortgage Loans or distributions which are required to be made on any Certificate
or (b) reduce the aforesaid percentage required to consent to any
65
such amendment. Promptly after the execution of any such amendment or consent
the Trustee shall furnish or cause to be furnished written notification of the
substance of such amendment (or a copy thereof) to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under this
Section 10.01 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by the Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe. Any proposed amendment is subject to
the receipt by the Trustee, at the expense of the party proposing such amendment
(or at the expense of the Trust Fund if proposed by the Trustee) that the
amendment will not cause any Constituent REMIC to fail to qualify as a REMIC or
subject any Constituent REMIC to tax.
Prior to entering into any amendment pursuant to this Section, the Trustee
may request and rely upon an Opinion of Counsel stating that the proposed
amendment is permissible under this Agreement and that all conditions precedent,
if any, to the entering into of such amendment have been fulfilled.
Section 10.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated and in which this Agreement may
be recorded, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Depositor and at its expense upon request
of the Trustee, who will act at the direction of the Holders of a majority by
Percentage Interest of the Residual Certificates, but only upon request of the
Trustee accompanied by an Opinion of Counsel, provided at the expense of such
Holders, to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders; provided, however, that recordation of
this Agreement shall not be required unless recordation of each assignment
relating to the Mortgages is required to be made pursuant to Section 7.01.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 10.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust
Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Section 10.01) or in any manner otherwise control the operation and management
of the Trust Fund or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners (except to
the extent provided in Code Section 860F(e) with respect to Holders of Residual
Certificates) or members of an association; nor shall any Certificateholder be
under any liability to any third person by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of
66
the continuance thereof as hereinbefore provided, and unless also the Holders of
the Required Amount of Certificates shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 10.03, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 10.04. Governing Law. This Agreement and the Certificates issued
pursuant to this Agreement shall be construed in accordance with the laws of the
State of New York, provided that the immunities and standards of care of the
Trustee shall be governed by the law of the jurisdiction in which is located its
Corporate Trust Office.
Section 10.05. Intention of Parties. The execution and delivery of this
Agreement shall constitute an acknowledgment by CFMSI on behalf of the
Certificateholders that it intends hereby to establish and maintain (for federal
income tax purposes) one or more "real estate mortgage investment conduits"
within the meaning of Code Section 860D and CFMSI and the Trustee are hereby
granted all necessary powers to further such intent.
Section 10.06. Notices. All communications relating to this Agreement
including all demands and notices shall be in writing and shall be deemed to
have been duly given if personally delivered at or mailed by first class mail,
to the applicable address for notices set forth in Article XII 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 Holder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice; provided that notices to the Trustee shall be effective only upon
receipt.
Section 10.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions and 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 10.08. Assignment. Except as provided in Sections 6.02, 6.04 and
6.06, this Agreement may not be assigned by CFMSI or CFM without the prior
written consents of the Trustee and the Holders of Certificates aggregating not
less than 66-2/3% of the Principal Balance then Outstanding (after giving effect
to the first proviso to the definition of "Outstanding") and 66-2/3% of the
Percentage Interests of the Residual Certificates then Outstanding.
Section 10.09. Certificates Nonassessable and Fully Paid. It is the
intention of the Trustee that the Certificateholders shall not be personally
liable for obligations of the Trust Fund, that the interests
67
represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates upon due authentication thereof by the
Trustee are and shall be deemed fully paid.
Section 10.10. No Usurious Intent. The amount of interest paid or payable
on any Certificate shall be limited to an amount that shall not exceed the
maximum nonusurious rate of interest which, under applicable New York law or any
applicable United States federal law, could be lawfully contracted for, charged
or received.
Section 10.11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which will be deemed an original, which taken together
shall constitute one and the same instrument.
ARTICLE XI
DEPOSITORIES
Section 11.01. Depositories. The Depositor may at any time and from time
to time in its discretion transfer the Certificate Account, the P&I Account or
any Escrow Account to a bank, savings and loan association or trust company
organized under the laws of the United States or any State thereof (an "eligible
depository"). Upon such transfer, such transferee bank, savings and loan
association or trust company shall be deemed to be a Depository with respect to
the account or accounts so transferred. In the event that the long-term debt
obligations of any Depository of the Certificate Account, P&I Account or Escrow
Account shall be rated at less than A by Fitch if Fitch is a Rating Agency, or
the short-term debt obligations of such Depository shall be rated by S&P at less
than A-1 if S&P is a Rating Agency, by Fitch at less than F-1 if Fitch is a
Rating Agency and by Moody's at less than P-1 if ▇▇▇▇▇'▇ is a Rating Agency (the
"Ratings Requirements") and such account does not otherwise meet the
requirements of this Section 11.01, then within five Business Days of such
reduction, the Depositor shall (A) transfer or direct the Trustee in writing to
transfer the Certificate Account, P&I Account or Escrow Account to an eligible
depository satisfying the Ratings Requirements, (B) establish another account in
the corporate trust department of the Trustee or if such Trustee has a long-term
and short-term debt rating at least equal to the Rating Requirements, in any
department of the Trustee (the "Alternative Certificate Account", the
"Alternative P&I Account" or the "Alternative Escrow Account", as the case may
be) and direct the Servicer to remit in accordance with this Agreement any funds
deposited into the Escrow Account to the Alternative Escrow Account, and direct
the Servicer to remit in accordance with this Agreement any funds deposited into
the Certificate Account or the P&I Account to the Alternative Certificate
Account or Alternative P&I Account, respectively, (C) (i) cause such Depository
to pledge securities in the manner provided by applicable law or (ii) pledge or
cause to be pledged securities, which shall be held by the Trustee or its agent
free and clear of the lien of any third party, in a manner conferring on the
Trustee a perfected first lien and otherwise reasonably satisfactory to the
Trustee; such pledge in either case to secure such Depository's performance of
its obligations in respect of the Certificate Account, P&I Account or Escrow
Account to the extent, if any, that such obligation is not fully insured by the
FDIC; provided, however, that prior to the day a Depository or CFMSI, as the
case may be, pledges securities pursuant to this subsection (C), the Depositor,
any Insurer and the Trustee shall have received the written assurance of each
Rating Agency that the pledging of such securities and any arrangements or
agreements relating thereto will not result in a reduction or withdrawal of the
then-current rating of the Certificates (with respect to any Insured
Certificates, without reference to the Insurance Policy), (D) establish an
account or accounts or enter into an agreement so that the existing Certificate
Account, P&I Account or Escrow Account is supported by a letter of credit or
some other form of credit support which Depositor of such letter of credit or
other form of credit support has a long-term and short-term debt rating at least
equal to the Rating Requirements; provided, however, that prior to the
establishment of such an account or the entering into of such an agreement, the
Depositor, any Insurer and the Trustee shall have received written assurance
from each Rating Agency that the establishment of such an account or the
entering into of such an agreement so that the existing Certificate Account, P&I
Account or Escrow Account is
68
supported by a letter of credit or some other form of credit support will not
result in a reduction or withdrawal of the then-current rating on the
Certificates (with respect to any Insured Certificates, without reference to the
Insurance Policy), (E) establish another account which constitutes an Eligible
Account or (F) make such other arrangements as to which the Depositor, any
Insurer and the Trustee have received prior written assurance from each Rating
Agency that such arrangement will not result in a reduction or withdrawal of the
then-current rating on the Certificates. In the event that the rating on the
Certificates has been downgraded as a result of a rating downgrade of the
Depository, for purposes of this paragraph, the then-current rating on the
Certificates shall be the rating assigned to the Certificates prior to any such
downgrade (and with respect to any Insured Certificates, without reference to
the Insurance Policy).
69
Appendix 1
TRANSFEREE'S AFFIDAVIT
AFFIDAVIT PURSUANT TO SECTION
860E(e)(4) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED
STATE OF )
):
COUNTY OF )
[ ], being first duly sworn, deposes and says:
1. That he is [______________] of [_____________] (the "Investor"), a
[state type of entity] duly organized and existing under the laws of the [State
of ____________] [United States], on behalf of which he makes this affidavit.
2. That the Investor's Taxpayer Identification Number is [______________].
3. That the Investor is not a "disqualified organization" within the
meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code") or an ERISA Prohibited Holder, and will not be a "disqualified
organization" or an ERISA Prohibited Holder as of [ , ], and that the Investor
is not acquiring a CitiFinancial Mortgage Securities Inc. REMIC Pass-Through
Certificates, Series 2000-__ Class [LR] [R] Certificate (the "Residual
Certificate") for the account of, or as agent (including a broker, nominee or
other middleman) for, any person or entity from which it has not received an
affidavit substantially in the form of this affidavit. For these purposes, a
"disqualified organization" means the United States, any state or political
subdivision thereof, any foreign governments any international organization, any
agency or instrumentality of any of the foregoing (other than an instrumentality
if all of its activities are subject to tax and a majority of its board of
directors is not appointed by such governmental entity), any cooperative
organization furnishing electric energy or providing telephone service to
persons in rural areas described in Code Section 1381(a)(2)(C), or any
organization (other than a farmers' cooperative described in Code Section 521)
that is exempt from federal income tax unless such organization is subject to
the tax on unrelated business income imposed by Code Section 511. For these
purposes, an "ERISA Prohibited Holder" means an employee benefit plan the
investment of which is regulated under Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, and/or Code Section 4975 or a
governmental plan, as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (collectively, a "Plan") or a Person investing
the assets of a Plan.
4. That the Investor historically has paid its debts as they have come due
and intends to pay its debts as they come due in the future and the Investor
intends to pay taxes associated with holding the Residual Certificate as they
become due.
5. That the Investor understands that it may incur tax liabilities with
respect to the Residual Certificate in excess of cash flows generated by the
Residual Certificate.
6. That the Investor will not transfer the Residual Certificate to any
person or entity as to which the Investor has actual knowledge that the
requirements set forth in paragraph 3, paragraph 4 or paragraph 7 hereof are not
satisfied or that the Investor has reason to know does not satisfy the
requirements set forth in paragraph 4 hereof.
1
7. That the investor (i) is not a Non-U.S. Person or (ii) is a Non-U.S.
Person that holds the Residual Certificate in connection with the conduct of a
trade or business within the United States and has furnished the transferor and
the Trustee with an effective Internal Revenue Service Form 4224 or (iii) is a
Non-U.S. Person that has delivered to both the transferor and the Trustee an
opinion of a nationally recognized tax counsel to the effect that the transfer
of the Residual Certificate to it is in accordance with the requirements of the
Code and the regulations promulgated thereunder and that such transfer of the
Residual Certificate will not be disregarded for federal income tax purposes.
"Non-U.S. Person" shall mean an individual, corporation, partnership or other
person other than a "U.S. Person." "U.S. Person" shall mean a citizen or
resident of the United States, a corporation, partnership (except to the extent
provided in applicable Treasury regulations) or other entity created or
organized in or under the laws of the United States or any jurisdiction thereof,
an estate that is subject to U.S. federal income tax regardless of the source of
its income or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more such
U.S. Persons have the authority to control all substantial decisions of such
trust (or, to the extent provided in applicable Treasury regulations, certain
trusts in existence on August 20, 1996 which are eligible to be treated as U.S.
Persons).
8. That the Investor agrees to such amendments of the Pooling and
Servicing Agreement dated as of ________1 , 2000 between CitiFinancial Mortgage
Securities Inc., CitiFinancial Mortgage Company and The Chase Manhattan Bank, as
Trustee (the "Pooling and Servicing Agreement") as may be required to further
effectuate the restrictions on transfer of the CitiFinancial Mortgage Securities
Inc. REMIC Pass-Through Certificates, Series 2000-__ Residual Certificate to
such a "disqualified organization," an agent thereof, an "ERISA Prohibited
Holder" or a person that does not satisfy the requirements of paragraphs 4, 5
and 7 hereof.
9. That the Investor consents to the irrevocable designation of the
Trustee as its agent to act as "tax matters person" of the [Lower-Tier]
[Upper-Tier] REMIC pursuant to the Pooling and Servicing Agreement.
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
[________] this ____ day of 20__.
[________________]
By:_______________
Name:
Title:
COUNTY OF )
):
STATE OF )
Personally appeared before me the above-named [___________], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [___________] 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 to before me this ___ day of ________ 20___.
2