POOLING AND SERVICING AGREEMENT
Relating to
BLOCK MORTGAGE FINANCE ASSET BACKED CERTIFICATES, SERIES 1997-1
Among
BLOCK MORTGAGE FINANCE, INC.,
as Depositor
COMPANION MORTGAGE CORPORATION,
as Seller,
BLOCK FINANCIAL CORPORATION,
as Master Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
Dated as of January 1, 1997
CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION...................................... 3
Section 1.01 Definitions.......................................................................... 3
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST................................. 32
Section 2.01 Establishment of the Trust........................................................... 32
Section 2.02 Office............................................................................... 32
Section 2.03 Purposes and Powers.................................................................. 32
Section 2.04 Appointment of the Trustee; Declaration of Trust..................................... 32
Section 2.05 Expenses of the Trust................................................................ 32
Section 2.06 Ownership of the Trust............................................................... 33
Section 2.07 Situs of the Trust................................................................... 33
Section 2.08 Miscellaneous REMIC Provisions....................................................... 33
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS................................. 36
Section 3.01 Representations and Warranties of the Depositor...................................... 36
Section 3.02 Representations and Warranties of the Master Servicer................................ 38
Section 3.03 Representations and Warranties of the Seller......................................... 40
Section 3.04 Covenants of Seller to Take Certain Actions with Respect to the
Mortgage Loans In Certain Situations................................................. 43
Section 3.05 Conveyance of the Mortgage Loans and Qualified Replacement
Mortgages............................................................................ 44
Section 3.06 Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee............................................................. 47
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES...................................... 49
Section 4.01 Issuance of Certificates............................................................. 49
Section 4.02 Sale of Certificates................................................................. 49
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ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS.................................... 50
Section 5.01 Terms................................................................................ 50
Section 5.02 Forms................................................................................ 50
Section 5.03 Execution, Authentication and Delivery............................................... 50
Section 5.04 Registration and Transfer of Certificates............................................ 51
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates.................................... 53
Section 5.06 Persons Deemed Owners................................................................ 54
Section 5.07 Cancellation......................................................................... 54
Section 5.08 Limitation on Transfer of Ownership Rights........................................... 54
Section 5.09 Assignment of Rights................................................................. 55
ARTICLE VI
COVENANTS.................................................. 56
Section 6.01 Distributions........................................................................ 56
Section 6.02 Money for Distributions to be Held in Trust; Withholding............................. 56
Section 6.03 Protection of Trust Estate........................................................... 57
Section 6.04 Performance of Obligations........................................................... 58
Section 6.05 Negative Covenants................................................................... 58
Section 6.06 No Other Powers...................................................................... 58
Section 6.07 Limitation of Suits.................................................................. 59
Section 6.08 Unconditional Rights of Owners to Receive Distributions.............................. 59
Section 6.09 Rights and Remedies Cumulative....................................................... 60
Section 6.10 Delay or Omission Not Waiver......................................................... 60
Section 6.11 Control by Owners.................................................................... 60
Section 6.12 Indemnification...................................................................... 60
Section 6.13 Access to Owners of Certificates' Names and Addresses................................ 61
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES..................................... 62
Section 7.01 Collection of Money.................................................................. 62
Section 7.02 Establishment of Accounts............................................................ 62
Section 7.03 Flow of Funds........................................................................ 63
Section 7.04 Reserved............................................................................. 67
Section 7.05 Investment of Accounts............................................................... 67
Section 7.06 Payment of Trust Expenses............................................................ 67
Section 7.07 Eligible Investments................................................................. 67
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Section 7.08 Accounting and Directions by Trustee................................................. 69
Section 7.09 Reports by Trustee to Owners and Certificate Insurer................................. 70
Section 7.10 Reports by Trustee................................................................... 72
Section 7.11 Preference Payments.................................................................. 72
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS.............................................. 74
Section 8.01 Master Servicer and Sub-Servicers.................................................... 74
Section 8.02 Collection of Certain Mortgage Loan Payments......................................... 75
Section 8.03 Sub-Servicing Agreements Between Master Servicer and Sub-Servicers................... 75
Section 8.04 Successor Sub-Servicers.............................................................. 75
Section 8.05 Liability of Master Servicer; Indemnification ....................................... 76
Section 8.06 No Contractual Relationship Between Sub-Servicer, Trustee or the
Owners............................................................................... 77
Section 8.07 Assumption or Termination of Sub-Servicing Agreement by Trustee...................... 77
Section 8.08 Collection Account................................................................... 77
Section 8.09 P&I Advances and Servicing Advances.................................................. 79
Section 8.10 Compensating Interest: Repurchase of Mortgage Loans.................................. 80
Section 8.11 Maintenance of Insurance............................................................. 81
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution Agreements.......................... 83
Section 8.13 Realization Upon Defaulted Mortgage Loans; Inspection................................ 84
Section 8.14 Trustee to Cooperate; Release of Files............................................... 85
Section 8.15 Servicing Compensation............................................................... 86
Section 8.16 Annual Statement as to Compliance.................................................... 86
Section 8.17 Annual Independent Certified Public Accountants' Reports............................. 86
Section 8.18 Access to Certain Documentation and Information Regarding the
Mortgage Loans....................................................................... 87
Section 8.19 Merger or Consolidation of the Master Servicer; Assignment........................... 87
Section 8.20 Removal of Master Servicer; Resignation of Master Servicer........................... 87
Section 8.21 Inspections by Certificate Insurer; Errors and Omissions Insurance................... 92
ARTICLE IX
TERMINATION OF TRUST............................................. 93
Section 9.01 Termination of Trust................................................................. 93
Section 9.02 Termination Upon Option of Owners of Class R Certificates and
Market Services...................................................................... 93
Section 9.03 Termination Auction.................................................................. 94
Section 9.04 Termination Upon Loss of REMIC Status................................................ 95
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Section 9.05 Disposition of Proceeds.............................................................. 97
ARTICLE X
THE TRUSTEE................................................. 98
Section 10.01 Certain Duties and Responsibilities.................................................. 98
Section 10.02 Removal of Trustee for Cause......................................................... 99
Section 10.03 Certain Rights of the Trustee........................................................100
Section 10.04 Not Responsible for Recitals or Issuance of Certificates.............................102
Section 10.05 May Hold Certificates................................................................102
Section 10.06 Money Held in Trust..................................................................102
Section 10.07 Compensation and Reimbursement; No Lien for Fees.....................................102
Section 10.08 Corporate Trustee Required; Eligibility..............................................102
Section 10.09 Resignation and Removal; Appointment of Successor....................................103
Section 10.10 Acceptance of Appointment by Successor Trustee.......................................104
Section 10.11 Merger, Conversion, Consolidation or Succession to Business of the
Trustee..............................................................................105
Section 10.12 Reporting; Withholding...............................................................105
Section 10.13 Liability of the Trustee.............................................................105
Section 10.14 Appointment of Co-Trustee or Separate Trustee .......................................106
ARTICLE XI
MISCELLANEOUS................................................108
Section 11.01 Compliance Certificates and Opinions.................................................108
Section 11.02 Form of Documents Delivered to the Trustee...........................................108
Section 11.03 Acts of Owners.......................................................................109
Section 11.04 Notices, etc.........................................................................109
Section 11.05 Notices and Reports to Owners; Waiver of Notices.....................................110
Section 11.06 Rules by Trustee and Seller..........................................................110
Section 11.07 Successors and Assigns...............................................................110
Section 11.08 Severability.........................................................................110
Section 11.09 Benefits of Agreement................................................................111
Section 11.10 Legal Holidays.......................................................................111
Section 11.11 Governing Law; Submission to Jurisdiction............................................111
Section 11.12 Counterparts.........................................................................112
Section 11.13 Usury................................................................................112
Section 11.14 Amendment............................................................................112
Section 11.15 Paying Agent; Appointment and Acceptance of Duties...................................113
Section 11.16 REMIC Status.........................................................................114
Section 11.17 Additional Limitation on Action and Imposition of Tax................................115
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Section 11.18 Appointment of Tax Matters Person....................................................116
Section 11.19 The Certificate Insurer..............................................................116
Section 11.20 Reserved.............................................................................116
Section 11.21 Third Party Rights...................................................................116
Section 11.22 Notices..............................................................................116
v
SCHEDULE I REPRESENTATIONS AND WARRANTIES AS TO THE MORTGAGE
LOANS
SCHEDULE I-A SCHEDULE OF FIXED RATE GROUP MORTGAGE LOANS
SCHEDULE I-B SCHEDULE OF ADJUSTABLE RATE GROUP MORTGAGE LOANS
SCHEDULE II RESERVED
SCHEDULE III MORTGAGE LOANS WITH DELINQUENCY CHARACTERISTICS
SCHEDULE IV MORTGAGE LOANS WITH 15-YEAR "BALLOON" PAYMENTS
EXHIBIT A FORM OF CLASS A CERTIFICATE
EXHIBIT B FORM OF CLASS X CERTIFICATE
EXHIBIT C FORM OF CLASS R CERTIFICATE
EXHIBIT D CERTIFICATION RE: PAYOFF MORTGAGE LOAN
EXHIBIT E TRUSTEE RECEIPT
EXHIBIT F POOL CERTIFICATION
EXHIBIT G DELIVERY ORDER
EXHIBIT H AFFIDAVIT FOR TAX MATTERS PERSON
EXHIBIT I NOTICE TO CERTIFICATE INSURER
EXHIBIT J RESERVED
EXHIBIT K TERMINATION AUCTION PROCEDURES
vi
POOLING AND SERVICING AGREEMENT, relating to BLOCK MORTGAGE FINANCE
ASSET BACKED CERTIFICATES, SERIES 1997-1, dated as of January 1, 1997 by and
among BLOCK MORTGAGE FINANCE, INC., a Delaware corporation, in its capacity as
Depositor (the "Depositor"), COMPANION MORTGAGE CORPORATION, a Delaware
corporation, in its capacities as Seller (in such capacity, the "Seller"), BLOCK
FINANCIAL CORPORATION, a Delaware corporation, as Master Servicer (in such
capacity, the "Master Servicer") and BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
a national banking corporation, in its capacity as the trustee (the "Trustee").
WHEREAS, the Depositor wishes to establish a trust and provide for the
allocation and sale of the beneficial interests therein and the maintenance and
distribution thereof;
WHEREAS, the Master Servicer has agreed to service the Mortgage Loans,
which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
by the Depositor and authenticated by the Trustee, valid instruments, and to
make this Agreement a valid agreement, in accordance with their and its terms,
have been done;
WHEREAS, Bankers Trust Company of California, N.A. is willing to serve
in the capacity of Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation is intended to be a third-party
beneficiary of this Agreement and is hereby recognized by the parties hereto to
be a third-party beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Seller, the Master Servicer, and
the Trustee hereby agree as follows:
CONVEYANCE
To provide for the distribution of the principal of and/or interest on
the Class A Certificates, the Class X Certificates and the Class R Certificates
in accordance with their terms, all of the sums distributable under this
Agreement with respect to the Certificates and the performance of the covenants
contained in this Agreement, the Seller hereby bargains, sells, conveys, assigns
and transfers to the Depositor and the Depositor hereby bargains, sells,
conveys, assigns and transfers to the Trustee, in trust, without recourse and
for the exclusive benefit of the Owners of the Certificates, all of its
respective right, title and interest in and to any and all benefits accruing to
it from (a) the Mortgage Loans (other than any principal and interest payments
received thereon prior to the Cut-Off Date) listed in Schedules I-A and I-B to
this Agreement which the Seller is causing to be delivered to the Depositor and
the Depositor is causing to be delivered to the Trustee herewith (and all
substitutions therefor as provided by Sections 3.03, 3.04 and 3.06), together
with the related Mortgage Loan documents and the Seller's and Depositor's
interest in any Mortgaged Property which secures a 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; (b) such amounts as may be held by the Trustee in the Distribution
Account together with investment earnings on such amounts and such amounts as
may be held by the Master Servicer in the name of the Trustee in the Collection
Account, if any, exclusive of
investment earnings thereon (except as otherwise provided herein), whether in
the form of cash, instruments, securities or other properties (including any
Eligible Investments held by the Master Servicer); (c) the Certificate Insurance
Policies and (d) 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 Mortgage Loans, cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, rights 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) to pay the Certificates as
specified herein ((a)-(d) above shall be collectively referred to herein as the
"Trust Estate").
The Trustee acknowledges such sale, accepts the Trust hereunder in
accordance with the provisions hereof and agrees to perform the duties herein to
the best of its ability to the end that the interests of the Owners may be
adequately and effectively protected.
2
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.02 or
8.08 hereof.
"Accrual Period": With respect to the Fixed Rate Certificates and any
Distribution Date, the calendar month immediately preceding the month in which
the Distribution Date occurs; a "calendar month" shall be deemed to be 30 days.
With respect to the Adjustable Rate Certificates and any Distribution Date, the
period commencing on the immediately preceding Distribution Date (or the Closing
Date in the case of the first Distribution Date) and ending on the day
immediately preceding the current Distribution Date. All calculations of
interest on the Fixed Rate Certificates will be made on the basis of a 360-day
year assumed to consist of twelve 30 day months and calculations of interest on
the Adjustable Rate Certificates will be made on the basis of the actual number
of days elapsed in the related Accrual Period and a year of 360 days.
"Adjustable Rate Certificates": The Class A-5 Certificates.
"Adjustable Rate Group": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to the Adjustable
Rate Group in Schedule I-B hereto, including any Qualified Replacement Mortgages
delivered in replacement thereof.
"Adjustable Rate Group Available Funds": As defined in Section
7.02(d) hereof.
"Adjustable Rate Group Available Funds Shortfall": As defined in
Section 7.03(c)(i)(A) hereof.
"Adjustable Rate Group Certificate Insurance Policy": The certificate
guaranty insurance policy (number ________) dated January ___, 1997 issued by
the Certificate Insurer for the benefit of the Owners of the Adjustable Rate
Certificates pursuant to which the Certificate Insurer guarantees Insured
Payments.
"Adjustable Rate Group Initial Specified Subordinated Amount": As
defined in the Insurance Agreement.
"Adjustable Rate Group Interest Remittance Amount": As of any Monthly
Remittance Date, the sum, without duplication, of (i) all interest due during
the related Due Period with respect to the Mortgage Loans in the Adjustable Rate
Group (less the Expense Rate with respect to such Mortgage Loans), (ii) all
Compensating Interest paid by the Master Servicer on such Monthly Remittance
Date with respect to the Adjustable Rate Group and (iii) the portion of the
Substitution Amount relating to interest on the Mortgage Loans in the Adjustable
Rate Group.
3
"Adjustable Rate Group Monthly Remittance Amount": As of any Monthly
Remittance Date, the sum of (i) the Adjustable Rate Group Interest Remittance
Amount and (ii) the Adjustable Rate Group Principal Remittance Amount for such
Monthly Remittance Date.
"Adjustable Rate Group Principal Distribution Amount": With respect
to the Class A-5 Certificates for any Distribution Date, the lesser of:
(a) the Adjustable Rate Group Total Available Funds plus any Insured
Payment with respect to the Class A-5 Certificates minus the Class A-5 Current
Interest; and
(b) the excess, if any, of (i) the sum of:
(A) the Preference Amount owed to the Owners of the
Class A-5 Certificates as such amounts relate to principal
previously distributed on the Class A-5 Certificates,
(B) the principal collected by the Master Servicer on
or prior to the related Determination Date with respect to
Mortgage Loans in the Adjustable Rate Group that was due
during the related Due Period or advanced by the Master
Servicer for such Distribution Date,
(C) the principal portion of all Prepayments received
by the Master Servicer during the Prepayment Period and
remitted to the Trustee as of the Monthly Remittance Date;
(D) the Loan Purchase Price of each Mortgage Loan in
the Adjustable Rate Group that was repurchased by the Seller
or purchased by the Master Servicer on or prior to the related
Monthly Remittance Date, to the extent such Loan Purchase
Price is actually received by the Trustee on or prior to the
related Monthly Remittance Date,
(E) any Substitution Adjustments delivered by the
Seller on or prior to the related Monthly Remittance Date in
connection with a substitution of a Mortgage Loan in the
Adjustable Rate Group (to the extent such Substitution
Adjustments relate to principal), to the extent such
Substitution Adjustments are actually received by the Trustee
on or prior to the related Monthly Remittance Date,
(F) all Net Liquidation Proceeds actually collected
by the Master Servicer with respect to Mortgage Loans in the
Adjustable Rate Group during the related Due Period (to the
extent such Net Liquidation Proceeds relate to principal) to
the extent such Net Liquidation Proceeds are actually received
by the Trustee on or prior to the related Monthly Remittance
Date,
(G) the amount of any Subordination Deficit with
respect to the Adjustable Rate Group for such Distribution
Date,
4
(H) the portion of the proceeds received by the
Trustee with respect to the Adjustable Rate Group from any
termination of the Trust (to the extent such proceeds related
to principal),
(I) the amount of any Subordination Increase Amount
with respect to the Adjustable Rate Group for such
Distribution Date, to the extent of any Net Monthly Excess
Cashflow available for such purpose, and
(J) the portion of any Carry Forward Amount relating
to principal with respect to the Adjustable Rate Group for
such Distribution Date;
over
(ii) the amount of any Subordination Reduction Amount with
respect to the Adjustable Rate Group for such Distribution Date.
"Adjustable Rate Group Principal Remittance Amount": As of any Monthly
Remittance Date, the sum, without duplication, of (i) the principal actually
collected by the Master Servicer on or prior to the related Determination Date
with respect to Mortgage Loans in the Adjustable Rate Group to the extent that
it was due during the related Due Period, (ii) the Loan Purchase Price of each
Mortgage Loan in the Adjustable Rate Group that was purchased from the Trust
during the related Due Period, to the extent such Loan Purchase Price was
actually deposited in the Collection Account, (iii) any Substitution Adjustments
relating to principal delivered by the Seller in connection with a substitution
of a Mortgage Loan in the Adjustable Rate Group, to the extent such Substitution
Adjustments were actually deposited in the Collection Account during the related
Due Period, and (iv) all Net Liquidation Proceeds actually collected by the
Master Servicer with respect to the Mortgage Loans in the Adjustable Rate Group
during the related Due Period (to the extent such Net Liquidation Proceeds
related to principal).
"Adjustable Rate Group Specified Subordinated Amount": As defined in
the Insurance Agreement.
"Adjustable Rate Group Subordinated Amount": As of any Distribution
Date, the excess, if any, of (x) the aggregate Loan Balances of the Mortgage
Loans in the Adjustable Rate Group as of the close of business on the last day
of the related Due Period (taking into account all amounts received on or prior
to the related Determination Date) over (y) the Class A-5 Certificate Principal
Balance as of such Distribution Date (after taking into account the payment of
the Class A-5 Distribution Amount thereon (except for any Subordination Deficit
with respect to the Adjustable Rate Group and Subordination Increase Amount with
respect to the Adjustable Rate Group) on such Distribution Date).
"Adjustable Rate Group Total Available Funds": As defined in Section
7.02(d) hereof.
"Adjustable Rate Group Total Monthly Excess Spread": With respect to
the Adjustable Rate Group and any Distribution Date, the excess, if any, of (i)
the interest which is collected on the Mortgage Loans in such Group prior to the
related Determination Date for payment due during the related Due Period less
the Expense Rate with respect to Mortgage Loans in the Adjustable Rate Group
plus (x) the interest component of any P&I Advances and (y) Compensating
Interest paid by the Master Servicer with
5
respect to the Adjustable Rate Group for such Due Period over (ii) the interest
accrued on the Class A-5 Certificates during the Accrual Period for such
Distribution Date.
"Adjusted Pass-Through Rate": A rate equal to the sum of (a) the
Weighted Average Pass-Through Rate plus (b) any portion of the Premium Amount
and the Trustee Fee (calculated as a percentage of the outstanding principal
amount of the Certificates) then accrued and outstanding.
"Advisor": As defined in Section 9.03 hereof.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, including the Exhibits and Schedules hereto.
"Applicant": As defined in Section 6.13 hereof.
"Appraised Value": The appraised value of any Mortgaged Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Mortgaged Property at such time of
origination, if such sales price is less than such appraised value.
"Assignment Event": The calendar day on which any of the following
occur: (i) the occurrence and continuation of an Event of Default, (ii) the
reduction of the Master Servicer's long-term, unsecured debt rating below A3 by
▇▇▇▇▇'▇ and A-1 by S&P, (iii) the suspension, termination or withdrawal of the
Master Servicer's long-term, unsecured debt rating by ▇▇▇▇▇'▇ or S&P, (iv) the
request of the Certificate Insurer to file any assignment of the Mortgage Loans
and (v) a change in the ownership of the Master Servicer.
"Auction Date": As defined in Section 9.03 hereof.
"Auction Procedures": As defined in Section 9.03 hereof.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to the
Agreement, and whose action is binding upon such Person, with respect to the
Depositor, the Seller and the Master Servicer, initially including those
individuals whose names appear on the lists of Authorized Officers delivered at
the Closing; with respect to the Trustee, any Vice President, Assistant Vice
President, Trust Officer or any Officer of the Trustee located at the Corporate
Trust Office.
"Available Funds": The Fixed Rate Group Available Funds or the
Adjustable Rate Group Available Funds, as the case may be.
"Available Funds Shortfall": A Fixed Rate Group Available Funds
Shortfall or Adjustable Rate Group Available Funds Shortfall, as the case may
be.
"Basis Risk Carryover Amount": With respect to any Distribution Date,
the sum of the Basis Risk Excess for such Distribution Date and any Basis Risk
Excess from prior Distribution Dates.
6
"Basis Risk Excess": With respect to any Distribution Date as to which
the Class A-5 Pass-Through Rate is the Class A-5 Available Funds Cap Rate, the
excess of (i) (a) the lesser of (a) the Net Lifetime Cap for such Distribution
Date and (b) the amount of interest the Class A-5 Certificates would be entitled
to receive on such Distribution Date at the then-applicable Class A-5
Pass-Through Rate without reference to the Class A-5 Available Funds Cap Rate
over (ii) the amount of interest the Class A-5 Certificates will receive on such
Distribution Date at the Class A-5 Available Funds Cap Rate.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in The City of New York, or in the city in
which the principal Corporate Trust Office of the Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Carry Forward Amount": With respect to any Class of the Class A
Certificates for any Distribution Date, the sum of (x) the amount, if any, by
which (i) the Class A Distribution Amount allocable to such Class as of the
immediately preceding Distribution Date exceeded (ii) the amount of the actual
distribution made to the Owners of such Class of the Class A Certificates on
such immediately preceding Distribution Date plus (y) 30 days' interest on such
amount at the Pass-Through Rate in effect with respect to such Class of Class A
Certificates.
"Certificate": Any one of the Class A Certificates, Class X
Certificates or Class R Certificates, each representing the interests and the
rights described in this Agreement.
"Certificate Insurance Policies": The Adjustable Rate Group
Certificate Insurance Policy and the Fixed Rate Group Certificate Insurance
Policy.
"Certificate Insurer": MBIA Insurance Corporation, the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed company, or
any successor thereto, as issuer of the Certificate
Insurance Policies.
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) the Certificate Insurer fails to make a payment
required under either of the Certificate Insurance Policies in accordance with
their terms: or
(b)(i) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Certificate
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, rehabilitation, reorganization or other
similar law or (B) a decree or order adjudging the Certificate Insurer as
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganizing, rehabilitation, arrangement, adjustment or composition of or in
respect of the Certificate Insurer under any applicable United States federal or
state law, or appointing a custodian, receiver, liquidator, rehabilitator,
assignee, trustee, sequestrator or other similar official of the Certificate
Insurer or of any substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period
of 60 consecutive days; or
(ii) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law
7
or of any other case or proceeding to be adjudicated as bankrupt or insolvent,
or the consent of the Certificate Insurer to the entry of a decree or order for
relief in respect of the Certificate Insurer in an involuntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency case or proceeding against the Certificate Insurer, or the
acquiescence by the Certificate Insurer to the filing of such petition or to the
appointment of or the taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Certificate Insurer
or of any substantial part of its property, or the failure of the Certificate
Insurer to pay debts generally as they become due, or the admission by the
Certificate Insurer in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Certificate Insurer in
furtherance of any such action.
"Certificate Principal Balance": As of the Start-up Day as to each of
the following Classes of Class A Certificates, the principal balances thereof,
as follows:
Class A-1 Certificates - $
Class A-2 Certificates - $
Class A-3 Certificates - $
Class A-4 Certificates - $
Class A-5 Certificates - $
The Class X Certificates and the Class R Certificates do not have a
Certificate Principal Balance.
"Class": Any class of the Class A Certificates, the Class X
Certificates or the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates or Class A-5
Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A Certificates less any amounts actually distributed on such Class A
Certificates with respect to the Class A Distribution Amount pursuant to Section
7.03(c)(iii)(C) with respect to principal thereon on all prior Distribution
Dates (except, for purposes of effecting the Certificate Insurer's subrogation
rights, that portion of Insured Payments made in respect of principal).
"Class A Certificate Termination Date": With respect to the Class A-1
Certificates, the Class A-1 Certificate Termination Date, with respect to the
Class A-2 Certificates, the Class A-2 Certificate Termination Date, with respect
to the Class A-3 Certificates, the Class A-3 Certificate Termination Date, with
respect to the Class A-4 Certificates, the Class A-4 Certificate Termination
Date and with respect to the Class A-5 Certificates, the Class A-5 Certificate
Termination Date.
8
"Class A Distribution Amount": The sum of the Class A-1 Distribution
Amount, Class A-2 Distribution Amount, Class A-3 Distribution Amount, Class A-4
Distribution Amount and Class A-5 Distribution Amount.
"Class A-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-1 Certificate, substantially in the form annexed
hereto as Exhibit A, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A-1 Certificates less any amounts actually distributed with respect to the
Class A-1 Distribution Amount pursuant to Section 7.03(c)(iii)(C) hereof with
respect to principal thereon on all prior Distribution Dates (except, for
purposes of effecting the Certificate Insurer's subrogation rights, that portion
of Insured Payments made in respect of principal).
"Class A-1 Certificate Termination Date": The Distribution Date on
which the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to any Distribution Date,
the amount of interest accrued on the Class A-1 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual Period at
the Class A-1 Pass-Through Rate plus the Preference Amount owed to the Owners of
the Class A-1 Certificates as it relates to interest previously paid on the
Class A-1 Certificates plus the Carry Forward Amount, if any, with respect to
the Class A-1 Certificates.
"Class A-1 Distribution Amount": The sum of (x) Class A-1 Current
Interest and (y) the Fixed Rate Group Principal Distribution Amount payable to
the Owners of the Class A-1 Certificates pursuant to Section 7.03(c)(iii)(C)
hereof.
"Class A-1 Pass-Through Rate": _______% per annum.
"Class A-2 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-2 Certificate, substantially in the form annexed
hereto as Exhibit A, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A-2 Certificates less any amounts actually distributed with respect to the
Class A-2 Distribution Amount pursuant to Section 7.03(c)(iii)(C) hereof with
respect to principal thereon on all prior Distribution Dates (except, for
purposes of effecting the Certificate Insurer's subrogation rights, that portion
of Insured Payments made in respect of principal).
"Class A-2 Certificate Termination Date": The Distribution Date on
which the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Distribution Date,
the amount of interest accrued on the Class A-2 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual Period at
the Class A-2 Pass-Through Rate plus the Preference Amount owed to the
9
Owners of the Class A-2 Certificates as it relates to interest previously paid
on the Class A-2 Certificates plus the Carry Forward Amount, if any, with
respect to the Class A-2 Certificates.
"Class A-2 Distribution Amount": The sum of (x) Class A-2 Current
Interest and (y) the Fixed Rate Group Principal Distribution Amount payable to
the Owners of the Class A-2 Certificates pursuant to Section 7.03(c)(iii)(C)
hereof.
"Class A-2 Pass-Through Rate": _______% per annum.
"Class A-3 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-3 Certificate, substantially in the form annexed
hereto as Exhibit A, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A-3 Certificates less any amounts actually distributed with respect to
the Class A-3 Distribution Amount pursuant to Section 7.03(c)(iii)(C) hereof
with respect to principal thereon on all prior Distribution Dates (except, for
purposes of effecting the Certificate Insurer's subrogation rights, that
portion of Insured Payments made in respect of principal).
"Class A-3 Certificate Termination Date": The Distribution Date on
which the Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to any Distribution Date,
the amount of interest accrued on the Class A-3 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual Period at
the Class A-3 Pass-Through Rate plus the Preference Amount owed to the Owners of
the Class A-3 Certificates as it relates to interest previously paid on the
Class A-3 Certificates plus the Carry Forward Amount, if any, with respect to
the Class A-3 Certificates.
"Class A-3 Distribution Amount": The sum of (x) Class A-3 Current
Interest and (y) the Fixed Rate Group Principal Distribution Amount payable to
the Owners of the Class A-3 Certificates pursuant to Section 7.03(c)(iii)(C)
hereof.
"Class A-3 Pass-Through Rate": _______% per annum.
"Class A-4 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-4 Certificate, substantially in the form annexed
hereto as Exhibit A, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A-4 Certificates less any amounts actually distributed with respect to the
Class A-4 Distribution Amount pursuant to Section 7.03(c)(iii)(C) hereof with
respect to principal thereon on all prior Distribution Dates (except, for
purposes of effecting the Certificate Insurer's subrogation rights, that portion
of Insured Payments made in respect of principal).
"Class A-4 Certificate Termination Date": The Distribution Date on
which the Class A-4 Certificate Principal Balance is reduced to zero.
10
"Class A-4 Current Interest": With respect to any Distribution Date,
the amount of interest accrued on the Class A-4 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual Period at
the Class A-4 Pass-Through Rate plus the Preference Amount owed to the Owners of
the Class A-4 Certificates as it relates to interest previously paid on the
Class A-4 Certificates plus the Carry Forward Amount, if any, with respect to
the Class A-4 Certificates.
"Class A-4 Distribution Amount": The sum of (x) Class A-4 Current
Interest and (y) the Fixed Rate Group Principal Distribution Amount payable to
the Owners of the Class A-4 Certificates pursuant to Section 7.03(c)(iii)(C)
hereof.
"Class A-4 Pass-Through Rate": _______% per annum.
"Class A-5 Available Funds Cap Rate": On any Distribution Date prior to
the [seventh] Distribution Date, the weighted average of the Mortgage Rates of
the Mortgage Loans in the Adjustable Rate Group less the sum of the Expense Rate
and, on any Distribution Date on and after the [seventh] Distribution Date,
________% per annum.
"Class A-5 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-5 Certificate, substantially in the form annexed
hereto as Exhibit A, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Start-up Day of all
Class A-5 Certificates less any amounts actually distributed with respect to the
Class A-5 Distribution Amount pursuant to Section 7.03(c)(iii)(C) hereof with
respect to principal thereon on all prior Distribution Dates (except, for
purposes of effecting the Certificate Insurer's subrogation rights, that portion
of Insured Payments made in respect of principal).
"Class A-5 Certificate Termination Date": The Distribution Date on
which the Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Current Interest": With respect to any Distribution Date,
the amount of interest accrued on the Class A-5 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual Period at
the Class A-5 Pass-Through Rate plus the Preference Amount owed to the Owners of
the Class A-5 Certificates as it relates to interest previously paid on the
Class A-5 Certificates plus the Carry Forward Amount, if any, with respect to
the Class A-5 Certificates.
"Class A-5 Distribution Amount": The sum of (x) Class A-5 Current
Interest and (y) the Adjustable Rate Group Principal Distribution Amount
payable to the Owners of Class A-5 Certificates pursuant to Section
7.03(c)(iii)(C) hereof.
"Class A-5 Pass-Through Rate": For any Distribution Date in any month
prior to the month in which the Optional Termination Date occurs, the lesser of
(i) LIBOR plus ______% per annum and (ii) the Class A-5 Available Funds Cap Rate
for such Distribution Date and for any Distribution Date in any month commencing
with the month in which the Optional Termination Date occurs, the lesser of (i)
LIBOR plus ____% per annum and (ii) the Class A-5 Available Funds Cap Rate for
such Distribution Date.
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"Class R Certificate": Any one of the Certificates designated on the
face thereof as a Class R Certificate, substantially in the form annexed hereto
as Exhibit C, authenticated and delivered by the Trustee, representing the right
to distributions as set forth herein, and evidencing an interest designated as
the "residual interest" in the REMIC for the purposes of the REMIC Provisions.
"Class X Certificate": Any one of the Class X-1 Certificates or Class
X-2 Certificates.
["Class X-1 Carry Forward Amount": With respect to any Distribution
Date the sum of (a) the amount, if any, by which (x) the Class X-1 Distribution
Amount as of the immediately preceding Distribution Date exceeded (y) the
amount of the actual distribution made to Owners of the Class X-1 Certificates
on such immediately preceding Distribution Date plus (b) 30 days' interest on
such amount at the Late Payment Rate.]
"Class X-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class X-1 Certificate, substantially in the form annexed
hereto as Exhibit B, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
["Class X-1 Distribution Amount": With respect to any Distribution
Date, the sum of:
(i) with respect to the Mortgage Loans in the Fixed Rate
Group, one-twelfth of the product of (x) the sum of the aggregate
outstanding Loan Balances of such Mortgage Loans on the immediately
preceding Distribution Date and (y) the excess of (I) the weighted
average of the Mortgage Rates of such Mortgage Loans on such
immediately preceding Distribution Date over (II) the sum of the
following payments allocable to the Fixed Rate Group on or in respect
of the related Distribution Date (in the case of (A), (B), (C) and (D)
expressed as a percentage of such aggregate outstanding Loan Balance):
(A) the Servicing Fee, (B) the Premium Amount, (C) the Trustee Fee, (D)
any Reimbursement Amount and (E) the weighted average of the Class A-1
Pass-Through Rate, Class A-2 Pass-Through Rate, Class A-3 Pass-Through
Rate and Class A-4 Pass-Through Rate for such Distribution Date; and
(ii) the Class X-1 Carry Forward Amount.]
["Class X-2 Carry Forward Amount": With respect to any Distribution
Date the sum of (a) the amount, if any, by which (x) the Class X-2 Distribution
Amount as of the immediately preceding Distribution Date exceeded (y) the amount
of the actual distribution made to Owners of the Class X-2 Certificates on such
immediately preceding Distribution Date plus (b) 30 days' interest on such
amount at the Late Payment Rate.]
"Class X-2 Certificate": Any one of the Certificates designated on the
face thereof as a Class X-2 Certificate, substantially in the form annexed
hereto as Exhibit B, authenticated and delivered by the Trustee, representing
the right to distribution as set forth herein.
["Class X-2 Distribution Amount": With respect to any Payment Date,
the sum of:
(i) with respect to the Mortgage Loans in the
Adjustable Rate Group, one-twelfth of the product of (x) the sum of
the aggregate outstanding Loan Balances of such Mortgage Loans
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on the immediately preceding Distribution Date and (y) the excess of
(I) the weighted average of the Mortgage Rates of such Mortgage Loans
on such immediately preceding Distribution Date over (II) the sum of
the following payments allocable to the Adjustable Rate Group on or in
respect of the related Distribution Date (in the case of (A), (B), (C)
and (D) expressed as a percentage of such aggregate outstanding Loan
Balance); (A) the Servicing Fee, (B) the Premium Amount, (C) the
Trustee Fee, (D) any Reimbursement Amount and (E) the Class A-5
Pass-Through Rate for such Distribution Date; and
(ii) the Class X-2 Carry Forward Amount.]
"Closing": As defined in Section 4.02 hereof.
"Code": The Internal Revenue Code of 1986, as amended.
"Collection Account": The collection account created by the Master
Servicer pursuant to Section 8.08(a) hereof.
"Compensating Interest": As defined in Section 8.10(a) hereof.
"Corporate Trust Office": The principal office of the Trustee at ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Cumulative Realized Losses": As of any date of determination, the
aggregate amount of Realized Losses with respect to the Mortgage Loans since
the Cut-Off Date.
"Current Interest": With respect to any Distribution Date, the sum of
the Class A-1 Current Interest, Class A-2 Current Interest, Class A-3 Current
Interest, Class A-4 Current Interest, and Class A-5
Current Interest.
"Cut-Off Date": As of the close of business on [December 31, 1996].
"Daily Collections": As defined in Section 8.08(c) hereof.
"Delinquent": A Mortgage Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days Delinquent," "90
days Delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as Exhibit
G hereto and delivered by the Depositor to the Trustee on the Startup Day
pursuant to Section 4.01 hereof.
"Depositor": Block Mortgage Finance, Inc., a Delaware corporation, or
any successor thereto.
13
"Depository": The Depository Trust Company, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and any successor Depository hereafter named.
"Determination Date": The [15th] day of any month, or if such [15th]
day is not a Business Day, the Business Day immediately preceding such [15th]
day, commencing on February [14,] 1997.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Class A Certificates
from time to time as a securities depository
"Disqualified Organization": Shall have the meaning set forth from
time to time in the definition thereof at Section 860E(e)(5) of the Code (or
any successor statute thereto) and applicable to the Trust.
"Distribution Account": The distribution account established in
accordance with Section 7.02(a) hereof and maintained in the corporate trust
department of the Trustee; provided that the funds in such account shall not be
commingled with other funds held by the Trustee.
"Distribution Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month or if
such day is not a Business Day, the next Business Day thereafter, commencing in
the month following the Startup Day.
"Due Period": With respect to any Monthly Remittance Date, the
calendar month immediately preceding the calendar month in which such Monthly
Remittance Date occurs.
"Eligible Account": Either (i) an account maintained with a federally
or state-chartered depository institution or trust company, the short term
unsecured debt obligations of which are rated "A-1" by Standard & Poor's and
"P-1" by ▇▇▇▇▇'▇, (ii) one or more accounts maintained with a federally or
state-chartered depository institution which accounts are fully insured by
either the Savings Association Insurance Fund or the Bank Insurance Fund of the
FDIC with a minimum long-term unsecured debt rating of "Baa3" by ▇▇▇▇▇'▇ and
"BBB-" by Standard & Poor's, (iii) a segregated trust account maintained with
the Trustee or an affiliate of the Trustee in its fiduciary capacity or (iv)
otherwise confirmed in writing by each of the Rating Agencies that the
maintenance of such account shall not, in and of itself, result in a
downgrading, withdrawal or qualification of the rating then assigned by such
Rating Agency to any Class of Certificates. Eligible Accounts may bear interest.
"Eligible Investments": Those investments so designated pursuant to
Section 7.07 hereof.
"Event of Default": Any one of the events described in Section
8.20(a) or 8.20(b).
"Excess Subordinated Amount": With respect to any Mortgage Loan Group
and Distribution Date, the excess, if any, of (x) the Subordinated Amount that
would apply to the related Mortgage Loan Group on such Distribution Date after
taking into account the payment of the related Class A Distribution Amounts on
such Distribution Date (except for any distributions of related Subordination
Reduction Amounts on such Distribution Date), over (y) the related Specified
Subordinated Amount for such Distribution Date.
14
"Expense Rate": For any Distribution Date and each of the Fixed Rate
Group and the Adjustable Rate Group, the sum of the rates at which the Servicing
Fee, the Premium Amount and the Trustee Fee applicable to each of the Fixed Rate
Group and the Adjustable Rate Group are calculated.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to Section
3.06 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the File pursuant to this Agreement.
"Final Certification": As defined in Section 3.06(c) hereof.
"Final Determination": As defined in Section 9.04(a) hereof.
"Final Scheduled Distribution Date": For each Class of Class A
Certificates, as set out in Section 2.08(e).
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to the related Mortgaged Property.
"Fixed Rate Certificate": Any one of the Class A-1 Certificates,
Class A-2 Certificates, Class A-3 Certificates and Class A-4 Certificates.
"Fixed Rate Group": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to the Fixed Rate
Group in Schedule l-A hereto, including any Qualified Replacement Mortgages
delivered in replacement thereof.
"Fixed Rate Group Available Funds": As defined in Section 7.02(c)
hereof.
"Fixed Rate Group Available Funds Shortfall": As defined in Section
7.03(c)(i)(A) hereof.
"Fixed Rate Group Certificate Insurance Policy": The certificate
guaranty insurance policy (number ____________) dated January __, 1997 issued by
the Certificate Insurer for the benefit of the owners of the Fixed Rate
Certificates pursuant to which the Certificate Insurer guarantees Insured
Payments.
"Fixed Rate Group Current Interest": With respect to any Distribution
Date, the sum of the Class A-1 Current Interest, Class A-2 Current Interest,
Class A-3 Current Interest and Class A-4 Current Interest.
"Fixed Rate Group Initial Specified Subordinated Amount": As defined
in the Insurance Agreement.
15
"Fixed Rate Group Interest Remittance Amount": As of any Monthly
Remittance Date, the sum, without duplication, of (i) all interest due during
the related Due Period with respect to the Mortgage Loans in the Fixed Rate
Group (less the Expense Rate with respect to such Mortgage Loans), (ii) all
Compensating Interest paid by the Master Servicer on such Monthly Remittance
Date with respect to the Fixed Rate Group and (iii) the portion of the
Substitution Amount relating to interest on the Mortgage Loans in the Fixed Rate
Group.
"Fixed Rate Group Monthly Remittance Amount": As of any Monthly
Remittance Date, the sum of (i) the Fixed Rate Group Interest Remittance Amount
and (ii) the Fixed Rate Group Principal Remittance Amount for such Monthly
Remittance Date.
"Fixed Rate Group Principal Distribution Amount": With respect to the
Fixed Rate Certificates for any Distribution Date, the lesser of:
(a) the Fixed Rate Group Total Available Funds plus any Insured
Payment with respect to the Fixed Rate Certificates minus the Fixed Rate Group
Current Interest; and
(b) the excess, if any, (i) the sum of:
(A) the Preference Amount owed to the Owners of the
Fixed Rate Certificates as such amounts relate to principal
previously distributed on the Fixed Rate Certificates,
(B) the principal collected by the Master Servicer on
or prior to the related Determination Date with respect to
Mortgage Loans in the Fixed Rate Group that was due during the
related Due Period or advanced by the Master Servicer for such
Distribution Date,
(C) the principal portion of all Prepayments received
by the Master Servicer during the Prepayment Period and
remitted to the Trustee as of the Monthly Remittance Date;
(D) the Loan Purchase Price of each Mortgage Loan in
the Fixed Rate Group that was repurchased by the Seller or
purchased by the Master Servicer on or prior to the related
Monthly Remittance Date, to the extent such Loan Purchase
Price is actually received by the Trustee on or prior to the
related Monthly Remittance Date,
(E) any Substitution Adjustments delivered by the
Seller on or prior to the related Monthly Remittance Date in
connection with a substitution of a Mortgage Loan in the Fixed
Rate Group (to the extent such Substitution Adjustments relate
to principal), to the extent such Substitution Adjustments are
actually received by the Trustee on or prior to the related
Monthly Remittance Date,
(F) all Net Liquidation Proceeds actually collected
by the Master Servicer with respect to Mortgage Loans in the
Fixed Rate Group during the related Due Period (to the extent
such Net Liquidation Proceeds relate to principal) to the
extent such Net
16
Liquidation Proceeds are actually received by the Trustee on
or prior to the related Monthly Remittance Date,
(G) the amount of any Subordination Deficit
with respect to the Fixed Rate Group for such Distribution
Date,
(H) the portion of the proceeds received by the
Trustee with respect to the Fixed Rate Group from any
termination of the Trust (to the extent such proceeds related
to principal),
(I) the amount of any Subordination Increase Amount
with respect to the Fixed Rate Group for such Distribution
Date, to the extent of any Net Monthly Excess Cashflow
available for such purpose, and
(J) the portion of any Carry Forward Amount relating
to principal with respect to the Fixed Rate Group for such
Distribution Date;
over
(ii) the amount of any Subordination Reduction Amount with
respect to the Fixed Rate Group for such Distribution Date.
"Fixed Rate Group Principal Remittance Amount": As of any Monthly
Remittance Date, the sum, without duplication, of (i) the principal actually
collected by the Master Servicer on or prior to the related Determination Date
with respect to Mortgage Loans in the Fixed Rate Group during the related Due
Period, (ii) the Loan Purchase Price of each Mortgage Loan in the Fixed Rate
Group that was purchased from the Trust during the related Due Period, to the
extent such Loan Purchase Price was actually deposited in the Collection
Account, (iii) any Substitution Adjustments relating to principal delivered by
the Seller in connection with a substitution of a Mortgage Loan in the Fixed
Rate Group, to the extent such Substitution Adjustments were actually deposited
in the Collection Account during the related Due Period, and (iv) all Net
Liquidation Proceeds actually collected by the Master Servicer with respect to
the Mortgage Loans in the Fixed Rate Group during the related Due Period (to the
extent such Net Liquidation Proceeds related to principal).
"Fixed Rate Group Specified Subordinated Amount": As defined in the
Insurance Agreement.
"Fixed Rate Group Subordinated Amount": As of any Distribution Date,
the excess, if any, of (x) the aggregate Loan Balances of the Mortgage Loans in
the Fixed Rate Group as of the close of business on the last day of the related
Due Period (taking into account all amounts received on or prior to the related
Determination Date) over (y) the sum of the Class A-1 Certificate Principal
Balance, Class A-2 Certificate Principal Balance, Class A-3 Certificate
Principal Balance and Class A-4 Certificate Principal Balance as of such
Distribution Date (after taking into account the payment of the Fixed Rate Group
Principal Distribution Amount thereon (except for any Subordination Deficit with
respect to the Fixed Rate Group and Subordination Increase Amount with respect
to the Fixed Rate Group) on such Distribution Date).
17
"Fixed Rate Group Total Available Funds": As defined in Section
7.02(c) hereof.
"Fixed Rate Group Total Monthly Excess Spread": With respect to the
Fixed Rate Group and any Distribution Date, the excess, if any, of (i) the
interest which is collected on the Mortgage Loans in such Group during the
related Due Period less the Expense Rate with respect to Mortgage Loans in the
Fixed Rate Group plus (x) the interest component of any P&I Advances and (y)
Compensating Interest paid by the Master Servicer with respect to the Fixed Rate
Group for such Due Period over (ii) the interest accrued on the Fixed Rate
Certificates during the Accrual Period for such Distribution Date.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor
thereof.
"FNMA Guide": FNMA's Servicing Guide, as the same may be amended by
FNMA from time to time, and the Master Servicer shall elect to apply such
amendments in accordance with Section 8.01 hereof.
"Highest Lawful Rate": As defined in Section 11.13.
"Indemnification Agreement": The Indemnification Agreement dated as
of January __, 1997 among the Certificate Insurer, the Depositor and the
Underwriters.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
"Insurance Agreement": The Insurance Agreement dated as of January
__, 1997, among the Depositor, the Seller, the Master Servicer, the Certificate
Insurer and the Trustee, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Mortgage Loan plus any amount remitted under
Section 8.11 hereof.
"Insurance Proceeds": Proceeds of any Insurance Policy or other
insurance policy relating to a Mortgage Loan and/or the Mortgaged Property
securing any Mortgage Loan, to the extent proceeds are not to be applied to the
restoration of the related Mortgaged Property in accordance with the express
requirements of the related Mortgage or Note or other documents included in the
related File or in accordance with prudent and customary servicing practices.
"Insured Payment": With respect to the related Mortgage Loan Group and
as to any Distribution Date (i) the excess, if any, of (a) the sum of the
related Current Interest (net of Prepayment Interest Shortfalls and interest
reductions arising under the Relief Act) and the then existing related
Subordination Deficit, if any, over (b) the Total Available Funds with respect
to such Group (net of the Premium Amount allocable to such Group) after taking
into account (x) the cross-collateralization provisions of Sections
7.03(c)(i)(A) and (B) and 7.03(c)(ii)(A) and (B) hereof and (y) the portion of
any Fixed Rate Group Principal Distribution Amount or Adjustable Rate Group
Principal Distribution Amount, as the case may be, to be actually distributed
on such Distribution Date without regard to any related Insured Payment
18
to be made with respect to such Distribution Date plus (ii) an amount equal to
the Preference Amount with respect to the related Class of Class A Certificates.
"Interest Remittance Amount": The sum of the Fixed Rate Group
Interest Remittance Amount and the Adjustable Rate Group Interest Remittance
Amount.
"Late Payment Rate": For any Distribution Date, the fluctuating rate of
interest, as it is published from time to time in the New York, New York edition
of The Wall Street Journal under the caption "Money Rates" as the "prime rate,"
to change when and as such published prime rate changes plus ____%. The Late
Payment Rate shall be computed on the basis of a year of 360 days calculating
the actual number of days elapsed. In no event shall the Late Payment Rate
exceed the Highest Lawful Rate.
"LIBOR": With respect to any Accrual Period for the Class A-5
Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the quotations, as set forth on the Telerate
Screen Page 3750, offered by the principal London office of each of the
Reference Banks for making one-month United States dollar deposits in leading
banks in the London interbank market, as of 11:00 a.m. (London time) on such
LIBOR Determination Date.
"LIBOR Business Day": Any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in the City of New York, New York, or
the City of London, England are authorized or obligated by law or executive
order to be closed.
"LIBOR Determination Date": With respect to any Accrual Period for
the Class A-5 Certificates, the second LIBOR Business Day preceding the
commencement of such Accrual Period.
"Liquidated Loan": As defined in Section 8.13(b) hereof.
"Liquidation Expenses": Expenses, not to exceed the Liquidation
Proceeds, which are incurred by the Master Servicer in connection with the
liquidation of any defaulted Mortgage Loan or property acquired in respect
thereof, such expenses including, without limitation, legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes, and any Servicing Advances expended by the Master Servicer
pursuant to this Agreement with respect to such Mortgage Loan not previously
reimbursed from collection or other proceeds therefrom.
"Liquidation Proceeds": Any amounts (including Insurance Proceeds)
recovered by the Master Servicer in connection with (i) the taking of a
Mortgaged Property by exercise of the power of eminent domain or condemnation,
(ii) any Liquidated Loan, whether through trustee's sale, foreclosure sale or
otherwise, (iii) the sale of a defaulted Mortgage Loan or an REO Property in
accordance with Section 8.13, or (iv) the sale of all of the Mortgage Loans in
accordance with Article IX.
"Loan Balance": With respect to each Mortgage Loan and as of any date
of determination, the outstanding principal balance thereof on the Cut-Off Date,
less any principal payments relating to such Mortgage Loan included in previous
Monthly Remittance Amounts, provided, however, that the Loan Balance for any
Mortgage Loan that has become a Liquidated Loan shall be zero as of the first
day of the Due Period following the Due Period in which such Mortgage Loan
becomes a Liquidated Loan, and at all times thereafter.
19
"Loan Purchase Price": With respect to any Mortgage Loan purchased from
the Trust on a Monthly Remittance Date pursuant to Section 3.03, 3.04, 3.06(b),
8.10(b) or 8.13(a) hereof, an amount equal to the Loan Balance of such Mortgage
Loan as of the date of purchase (assuming that the Monthly Remittance Amount
remitted by the Master Servicer on such Monthly Remittance Date has already been
remitted), plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the related Due Period computed at the then applicable
Mortgage Rate, together with (without duplication) the aggregate amounts of (i)
all ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇ Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan, (ii) all P&I Advances and Servicing Advances
which the Master Servicer has theretofore failed to remit with respect to such
Mortgage Loan and (iii) all reimbursed P&I Advances to the extent that
reimbursement is not made from the Mortgagor or from Liquidation Proceeds from
the respective Mortgage Loan.
"Loan-to-Value Ratio": As of any particular date (i) with respect to
any First Mortgage Loan, the percentage obtained by dividing the Appraised Value
into the original principal balance of the Note relating to such First Mortgage
Loan and (ii) with respect to any Second Mortgage Loan, the percentage obtained
by dividing the Appraised Value as of the date of origination of such Second
Mortgage Loan into an amount equal to the sum of (a) the remaining principal
balance of the note relating to the related Senior Lien as of the date of
origination of the related Second Mortgage Loan and (b) the original principal
balance of the Note relating to such Second Mortgage Loan.
"Master REMIC": As described in Section 2.08 hereof.
"Master Servicer": Block Financial Corporation, a Delaware
corporation, and its permitted successors and assigns.
"Master Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Master Servicer and (ii) which is qualified to
service residential mortgage loans.
"Minimum Termination Amount": As of any time after the Optional
Termination Date, an amount equal to the sum of (a) the Class A-1 Certificate
Principal Balance, (b) any shortfall in interest due to the Owners of the Class
A-1 Certificates in respect of prior Distribution Dates, (c) one month's
interest on the Class A-1 Certificate Principal Balance at the Class A-1
Pass-Through Rate, (d) the Class A-2 Certificate Principal Balance, (e) any
shortfall in interest due to the Owners of the Class A-2 Certificates in respect
of prior Distribution Dates, (f) one month's interest on the Class A-2
Certificate Principal Balance at the Class A-2 Pass-Through Rate, (g) the Class
A-3 Certificate Principal Balance, (h) any shortfall in interest due to the
Owners of the Class A-3 Certificates in respect of prior Distribution Dates, (i)
one month's interest on the Class A-3 Certificate Principal Balance at the Class
A-3 Pass-Through Rate, (j) the Class A-4 Certificate Principal Balance, (k) any
shortfall in interest due to the Class A-4 Certificates in respect of prior
Distribution Dates, (l) one month's interest on the Class A-4 Certificate
Principal Balance at the Class A-4 Pass-Through Rate, (m) the Class A-5
Certificate Principal Balance, (n) any shortfall in interest due to the Owners
of the Class A-5 Certificates in respect of prior Distribution Dates, (o) one
month's interest on the Class A-5 Certificate Principal Balance at the Class A-5
Pass-Through Rate, (p) any shortfall in interest due to the Owners of the Class
X-1 Certificates in respect of prior Distribution Dates, and (q) any shortfall
in interest due to the Owners of the Class X-2 Certificates in respect of prior
Distribution Dates.
20
"Monthly Remittance Amount": The sum of the Fixed Rate Group Monthly
Remittance Amount and the Adjustable Rate Group Monthly Remittance Amount.
"Monthly Remittance Date": With respect to any Distribution Date, the
Business Day immediately prior to such Distribution Date.
"Moody's": ▇▇▇▇▇'▇ Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first or second lien on an estate in fee simple interest in real property
securing a Note.
"Mortgage Loan Group" or "Group": The Fixed Rate Group or the
Adjustable Rate Group, as the case may be. References herein to the related
Class of Class A Certificates, when used with respect to a Mortgage Loan Group,
shall mean (A) in the case of the Fixed Rate Group, the Fixed Rate Certificates
and (B) in the case of the Adjustable Rate Group, the Class A-5 Certificates.
"Mortgage Loans": Such of the mortgage loans transferred and assigned
to the Trust pursuant to Section 3.05(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the mortgage loans
originally so held being identified in the Schedules of Mortgage Loans. The term
"Mortgage Loan" includes the terms "First Mortgage Loan" and "Second Mortgage
Loan". The term "Mortgage Loan" includes any Mortgage Loan which is Delinquent,
which relates to a foreclosure or which relates to a Mortgaged Property which is
REO Property prior to such Mortgaged Property's disposition by the Trust. Any
mortgage loan which, although intended by the parties hereto to have been, and
which purportedly was, transferred and assigned to the Trust by the Depositor,
in fact was not transferred and assigned to the Trust for any reason whatsoever,
including, without limitation, the incorrectness of the statement set forth in
Section 3.04(b)(x) hereof with respect to such mortgage loan, shall nevertheless
be considered a "Mortgage Loan" for all purposes of this Agreement.
"Mortgage Rate": The rate of interest borne by each Note.
"Mortgaged Property": The underlying property securing a Mortgage Loan.
"Mortgagor": The obligor on a Note.
"MR Interest": The sole class of "residual interest" in the Master
REMIC.
"Net Lifetime Cap": With respect to any Distribution Date, the weighted
average of the maximum Mortgage Rates on the Mortgage Loans in the Adjustable
Rate Group as of the first day of the related Due Period, minus the sum of (a)
the Servicing Fee, (b) the Trustee Fee, (c) the Premium Amount and (d)
commencing on the [seventh] Distribution Date, 0.50% per annum.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of Liquidation Expenses and ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇ Advances relating to
such Mortgage Loan. In no event shall Net Liquidation Proceeds with respect to
any Liquidated Loan be less than zero.
21
"Net Monthly Excess Cashflow": As defined in Section 7.03(c)(ii)
hereof.
"Nonrecoverable Advance": Any portion of a P&I Advance or a Servicing
Advance proposed to be made or previously made which has not been previously
reimbursed to the Master Servicer, and which the Master Servicer has determined
in its good faith business judgment will not or, in the case of a proposed P&I
Advance or Servicing Advance, would not be ultimately recoverable by the Master
Servicer from late payments, Insurance Proceeds, condemnation proceeds,
Liquidation Proceeds and other collections on or in respect of the related
Mortgage Loan. The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed P&I Advance or Servicing Advance, if
made, would constitute a Nonrecoverable Advance shall be evidenced by an
Officer's Certificate delivered to the Trustee and the Depositor setting forth
such determination and the procedures and considerations of the Master Servicer
forming the basis of such determination, which shall include a copy of any
information or reports obtained by the Master Servicer which may support such
determinations. Notwithstanding the above, the Trustee shall be entitled to rely
upon any determination of the Master Servicer that any P&I Advance or Servicing
Advance previously made is a Nonrecoverable Advance or that any proposed Advance
or Servicing Advance, if made, would constitute a Nonrecoverable Advance.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the Certificate
Insurance Policy, the Certificates, the Indemnification Agreement and the
Insurance Agreement.
"Optional Termination Date": The first Monthly Remittance Date on
which the aggregate of the Loan Balances of the Mortgage Loans is less than 10%
of the Original Aggregate Loan Balance.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Mortgage Loans as of the Startup Day, i.e., $________________________________.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore cancelled by the Registrar or
delivered to the Registrar for cancellation;
(ii) Certificates or portions thereof for which full and final
payment of money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent in trust for the Owners of such
Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser;
22
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.05 hereof; and
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such certificate is ever returned
to the Trustee.
"Owner": The Person in whose name a Certificate is registered in the
Register, and the Certificate Insurer, to the extent described in Section 5.06
and Section 7.03(e) hereof, respectively; provided that solely for the purposes
of determining the exercise of any voting rights hereunder, if Class A
Certificates are beneficially owned by the Depositor, the Seller or any
affiliate thereof. Neither the Depositor, the Seller nor such affiliate shall be
considered an Owner hereunder.
"Pass-Through Rate": Any of the Class A-1 Pass-Through Rate, the Class
A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate or the Class A-5 Pass-Through Rate.
"Paying Agent": Initially, the Trustee, and thereafter, the Trustee or
any other Person that meets the eligibility standards for the Paying Agent
specified in Section 11.15 hereof and is authorized by the Trustee and the
Depositor to make payments on the Certificates on behalf of the Trustee.
"Percentage Interest": With respect to a Class A Certificate, a
fraction, expressed as a percentage, the numerator of which is the Class A
Certificate Principal Balance represented by such Class A Certificate on such
date of determination and the denominator of which is the aggregate of the
Certificate Principal Balance of all classes of Class A Certificates as of such
date of determination. With respect to a Class X or a Class R Certificate, the
portion of the Class evidenced thereby, expressed as a percentage, as stated on
the face of such Certificate, all of which shall total 100% with respect to the
related Class.
"Person": Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"P&I Advance": As defined in Section 8.09(a) hereof.
"Pool Certification": As defined in Section 3.06(a) hereof.
"Preference Amount": With respect to the Class A Certificates, any
amounts of Current Interest and principal included in previous distributions of
any Class A Distribution Amounts to the Owners of the Class A Certificates which
are recovered from such Owners as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction and which
have not theretofore been repaid to such Owners and for which there has been
full compliance with the provisions of Section 7.11 (including the receipt of
payment therefor from the Certificate Insurer).
"Premium Amount": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Master
Servicer prior to the scheduled due date for such installment,
23
intended by the Mortgagor as an early payment thereof and not as a Prepayment
with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal (other than the principal portion of any Prepaid
Installment), Substitution Amounts, the portion of the purchase price of any
Mortgage Loan purchased from the Trust pursuant to Section 3.03, 3.04, 3.06(b)
or 8.10(b) hereof representing principal and the proceeds of any Insurance
Policy which are to be applied as a payment of principal on the related Mortgage
Loan shall be deemed to be Prepayments for all purposes of this Agreement.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, the amount of any shortfall in the payment of interest on a Mortgage Loan
which arises from a Prepayment on such Mortgage Loan.
"Prepayment Period": With respect to any Distribution Date, the period
commencing on the prior Determination Date and ending on the calendar day
immediately prior to the related Determination Date.
"Preservation Expenses": Expenditures made by the Master Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal Remittance Amount": The sum of the Fixed Rate Group
Principal Remittance Amount and the Adjustable Rate Group Principal Remittance
Amount.
"Prohibited Transaction": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(2) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Prospectus": The Prospectus dated January __, 1997 constituting part
of the Registration Statement.
"Prospectus Supplement": The Block Mortgage Finance Asset Backed
Certificates, Series 1997-1 Prospectus Supplement dated January __, 1997 to the
Prospectus.
"Purchase Option Period": As defined in Section 9.04(a) hereof.
"Qualified Insurer": An insurance company or security or bonding
company qualified to write the related insurance policy in the relevant
jurisdiction, which shall have a claims paying ability of "AA" or better by each
Rating Agency, unless each of the Rating Agencies has confirmed in writing that
an insurance company with a lower claims paying ability shall not result, in an
of itself, in a downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of Certificates.
"Qualified Liquidation": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Qualified Mortgage": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code (or any successor statute
thereto) and applicable to the Trust.
24
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.03, 3.04 or 3.06(b) hereof, which (i) has a
Mortgage Rate at least equal to the Mortgage Rate of the Mortgage Loan being
replaced, (ii) is of the same property type (or is a single family dwelling) and
the same occupancy status (or is a primary residence) as the replaced Mortgage
Loan, (iii) shall mature no later than ______________ 1, 2026, (iv) has a
Loan-to-Value Ratio as of the Replacement Cut-Off Date no higher than the
Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (v) shall be of
the same or higher credit quality classification (determined in accordance with
(i) the credit underwriting guidelines pursuant to which the replaced Mortgage
Loan was underwritten at the time the replaced Mortgage Loan was underwritten,
or (ii) the standards acceptable to the Rating Agencies, which would not cause a
downgrade or removal of the ratings assigned to the Class A Certificates
(without giving effect to any Certificate Insurance Policy) as the Mortgage Loan
which such Qualified Replacement Mortgage replaces, (vi) has a Loan Balance as
of the related Replacement Cut-Off Date equal to or less than the Loan Balance
of the replaced Mortgage Loan as of such Replacement Cut-Off Date, (vii) shall
not provide for a "balloon" payment if the related Mortgage Loan did not provide
for a "balloon" payment (and if such related Mortgage Loan provided for a
"balloon" payment, such Qualified Replacement Mortgage shall have an original
maturity of not greater than (and not more than one year less than) the original
maturity of such related Mortgage Loan), (viii) shall be a fixed rate Mortgage
Loan with the same lien priority as the replaced Mortgage Loan if the Mortgage
Loan being replaced is in the Fixed Rate Group and shall be a first lien
adjustable rate Mortgage Loan if the Mortgage Loan being replaced is in the
Adjustable Rate Group and (ix) satisfies the criteria set forth from time to
time in the definition thereof at Section 860G(a)(3) of the Code (or any
successor statute hereto) and applicable to the Trust.
"Rating Agencies": Collectively, Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon applied in reduction of such Loan Balance.
"Record Date": With respect to the Fixed Rate Certificates and each
Distribution Date, the last day of the calendar month immediately preceding the
calendar month in which such Distribution Date occurs and with respect to the
Class A-5 Certificates, the day immediately preceding such Distribution Date.
"Reference Banks": Bankers Trust Company, Barclays Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC, provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank pursuant to the
following criteria, then any leading banks selected by the Trustee which are
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market (i) with an established place of business in London, (ii) not
controlling, under the control of or under common control with the Seller or any
affiliate thereof, (iii) whose quotations appear on Telerate Page 3750 on the
relevant LIBOR Determination Date and (iv) which have been designated as such by
the Trustee.
"Register": The register maintained by the Registrar in accordance
with Section 5.04 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Registrar
appointed pursuant to Section 5.04 hereof, or any duly appointed and eligible
successor thereto.
25
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-14041), including all amendments thereto and including the Prospectus
Supplement relating to the Class A Certificates constituting a part thereof.
"Reimbursement Amount": As of any Distribution Date, the sum of (x)(i)
all Insured Payments previously paid to the Trustee by the Certificate Insurer
and not previously repaid to the Certificate Insurer pursuant to Section
7.03(c)(i)(C) and (D) hereof plus (ii) interest accrued on each such Insured
Payment not previously repaid calculated at the Reimbursement Late Payment Rate
and (y)(i) any amounts then due and owing to the Certificate Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate.
The Certificate Insurer shall notify the Trustee, the Depositor and the Seller
of the amount of any Reimbursement Amount.
"Reimbursement Late Payment Rate": Means for any Distribution Date,
the rate of interest as it is publicly announced by Citibank, N.A., or any
successor thereto, at its principal office in New York, New York as its prime
rate (any change in such prime rate of interest to be effective on the date
such change is announced by Citibank, N.A.) plus _____%. The Reimbursement Late
Payment Rate shall be computed on the basis of a year of 365 days elapsed. In
no event shall the Reimbursement Late Payment Rate exceed the maximum rate
permissible under any applicable law limiting interest rates.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Opinion": As defined in Section 3.03 hereof.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations and revenue rulings promulgated thereunder, as the foregoing may
be in effect from time to time.
"REO Property": A Mortgaged Property acquired by the Master Servicer on
behalf of the Trust through foreclosure or deed-in-lieu of foreclosure in
connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Residual Net Monthly Excess Cashflow": With respect to any
Distribution Date, the aggregate Net Monthly Excess Cashflow, if any, remaining
after the making of all applications, transfers and disbursements described in
Sections 7.03(c)(i), 7.03(c)(ii), 7.03(c)(iii), 7.03(c)(iv)(A) and
7.03(c)(iv)(B) hereof.
"Schedules of Mortgage Loans": The schedules of Mortgage Loans,
separated by Mortgage Loan Group listing each Mortgage Loan in the related
Mortgage Loan Group to be conveyed on the Startup
26
Day. Such Schedules of Mortgage Loans shall identify each Mortgage Loan by the
Master Servicer's loan number and the Mortgagor's name and address (including
the state) of the Mortgaged Property and shall set forth as to each Mortgage
Loan the lien status thereof, the Loan-to-Value Ratio and the Loan Balance as of
the Cut-Off Date or Replacement Cut-Off Date, the Mortgage Rate thereof (and
with respect to the Mortgage Loans in the Adjustable Rate Group the margin), the
current scheduled monthly payment of principal and interest and the maturity of
the related Note, the property type, occupancy status, Appraised Value and
original term-to-maturity thereof and whether or not such Mortgage Loan
(including related Note) has been modified.
"Scheduled Payment": As of any date of calculation, with respect to a
Mortgage Loan, the then stated scheduled monthly installment of principal and
interest payable thereunder which, if timely paid, would result in the full
amortization of principal over the term thereof (or, in the case of a "balloon"
Note, the term to the nominal maturity date for amortization purposes, without
regard to the actual maturity date).
"Second Mortgage Loan": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": Companion Mortgage Corporation, a Delaware corporation.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Mortgaged Property having a first priority
lien.
"Servicing Advance": As defined in Section 8.09(b) and Section
8.13(a) hereof.
"Servicing Fee": With respect to any Mortgage Loan, an amount retained
by the Master Servicer as compensation for servicing and administration duties
relating to such Mortgage Loan pursuant to Section 8.15 and equal to 0.50% per
annum of the then outstanding principal amount of such Mortgage Loan as of the
first day of each calendar month payable on a monthly basis; provided, however,
that in the event that, as of any Distribution Date, (i) the sum of (x) the
Fixed Rate Group Current Interest applicable to such Distribution Date
(expressed as a percentage of the aggregate outstanding Loan Balance) and (y)
the annualized rate at which the Servicing Fee would otherwise be calculated
exceeds (ii) the weighted average Mortgage Rate of the Mortgage Loans in the
Fixed Rate Group for the related Due Period, then the aggregate Servicing Fee
with respect to the Mortgage Loans in the Fixed Rate Group for the related Due
Period shall be reduced by an amount equal to the product of (a) one-twelfth of
such excess (not to exceed ____ basis points on a per annum basis) and (b) the
aggregate Loan Balances of the Mortgage Loans in the Fixed Rate Group of the
opening of business on the first day of such related Due Period.
"Simple Interest Loans": Any Mortgage Loan as to which, pursuant to the
Note relating thereto, interest is computed and charged to the Mortgagor at the
Mortgage Rate on the outstanding principal balance of such Note based on the
number of days elapsed between receipt of the Mortgagor's last payment through
receipt of the Mortgagor's most current payment.
27
"Specified Subordinated Amount": As applicable, the Fixed Rate Group
Specified Subordinated Amount or the Adjustable Rate Group Specified
Subordinated Amount.
"SR Interest": The sole class of "residual interest" in the
Subsidiary REMIC.
"Standard & Poor's": Standard & Poor's Rating Services, a Division of
the ▇▇▇▇▇▇-▇▇▇▇ Companies.
"Startup Day": January __, 1997.
"Subordinate Certificates": Collectively, the Class R Certificates
and the Class X Certificates.
"Subordinated Amount": The Fixed Rate Group Subordinated Amount or
the Adjustable Rate Group Subordinated Amount, as the case may be.
"Subordination Deficiency Amount": With respect to any Mortgage Loan
Group and Distribution Date, the excess, if any, of (i) the Specified
Subordinated Amount applicable to such Mortgage Loan Group and Distribution Date
over (ii) the Subordinated Amount applicable to such Mortgage Loan Group and
Distribution Date prior to taking into account the payment of any related
Subordination Increase Amounts on such Distribution Date.
"Subordination Deficit": With respect to any Mortgage Loan Group and
Distribution Date, the amount, if any, by which (x) the aggregate of the related
Class A Certificate Principal Balances, after taking into account the payment of
the Class A Distribution Amount with respect to such Mortgage Loan Group on such
Distribution Date (except for any Subordination Deficit with respect to such
Mortgage Loan Group and Subordination Increase Amount with respect to such
Mortgage Loan Group), exceeds (y) the aggregate Loan Balances of the Mortgage
Loans in the related Mortgage Loan Group as of the close of business on the last
day of the related Due Period.
"Subordination Increase Amount": With respect to any Mortgage Loan
Group and Distribution Date, the aggregate amount of Net Monthly Excess Cashflow
allocated to such Mortgage Loan Group pursuant to Sections 7.03(c)(ii)(A) and
(B) on such Distribution Date.
"Subordination Reduction Amount": With respect to any Mortgage Loan
Group and Distribution Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Distribution Date and (y)
the Principal Remittance Amount with respect to such Mortgage Loan Group for the
related Due Period.
"Subsidiary REMIC": As described in Section 2.08 hereof.
"Subsidiary REMIC Interest": Any one of the Subsidiary REMIC Regular
Interests or the SR Interest.
Principal of and interest on the Subsidiary REMIC Regular Interests and
the SR Interest shall be allocated to the Corresponding Classes of Certificates
in the manner set forth in the following table:
28
Corresponding Class of Certificates(1)
Subsidiary REMIC Initial Principal Allocation Allocation
Interest Balance Interest Rate of Principal of ▇▇▇▇▇▇▇▇
▇ ▇-▇ ▇-▇
▇ ▇-▇ ▇-▇
3 A-3 A-3
4 ▇-▇ ▇-▇
▇ ▇-▇ ▇-▇
6 (2) (3) ___ X-1
7 (2) (3) ___ X-2
8 (4) (4) M-R(5) M-R(5)
SR (4) (4) A-R A-R
(1) The amount of principal and interest allocable from a Subsidiary REMIC
Regular Interest to its Corresponding Class of Certificates on any
Distribution Date shall be 100%.
(2) The Notional Amount of the Subsidiary REMIC Interest 6 and Subsidiary
REMIC Interest 7 with respect to any Distribution Date will be equal to
the Notional Amount of the Class X-1 and Class X-2 Certificates,
respectively, with respect to such Distribution Date.
(3) The Interest Rate for Subsidiary REMIC Interest 6 and Subsidiary REMIC
Interest 7 for any Distribution Date will be equal to the Pass-Through
Rate applicable to the Class 5 Certificates with respect to such
Distribution Date.
(4) The MR Interest and the SR Interest will have no principal balance and
will not bear interest.
(5) The beneficial ownership of the MR Interest and the SR Interest is
represented by the Class A-R Certificates.
"Subsidiary REMIC Regular Interest": Any one of the "regular
interests" in the Subsidiary REMIC described in Section 2.08 hereof.
"Sub-Servicer: Any Person with whom the Master Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 8.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Master
Servicer and any Sub-Servicer relating to servicing and/or administration of
certain Mortgage Loans as permitted by Section 8.03.
"Substitution Adjustment": As defined in Section 3.03 hereof.
29
"Tax Matters Certificate": The Certificate representing the Tax
Matters Person Residual Interest, initially issued to the Trustee as the initial
Tax Matters Person.
"Tax Matters Person": The Person appointed for the Trust pursuant to
Section 11.18 hereof to act as the Tax Matters Person under the Code.
"Tax Matters Person Residual Interest": The 0.001% interest in the
"residual interest" in the REMIC, which shall be issued to and held by [the
Trustee] throughout the term hereof unless another Person shall accept an
assignment of such interest and the designation of Tax Matters Person pursuant
to Section 11.18 hereof.
"Termination Auction": As defined in Section 9.03 hereof.
"Termination Notice": As defined in Section 9.04(a) hereof.
"Total Available Funds": As defined in Section 7.02(d) hereof.
"Total Monthly Excess Cashflow": As defined in Section 7.03(c)(i)
hereof.
"Total Monthly Excess Spread": The Fixed Rate Group Total Monthly
Excess Spread or the Adjustable Rate Group Total Monthly Excess Spread, as the
case may be.
"Trust": Block Mortgage Finance Asset Backed Certificates, Series
1997-1, the trust created under this Agreement.
"Trust Estate": As defined in the conveyance clause under this
Agreement.
"Trustee": Bankers Trust Company of California, N.A., a national
banking corporation, the Corporate Trust Office of which is located on the date
of execution of this Agreement at ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, not in
its individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee Fee": The fee payable monthly on each Distribution Date in an
amount equal to one-twelfth of the sum of (i) ______________% multiplied by the
then-outstanding Class A Certificate Principal Balance and (ii) $______________.
"Underwriters": ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and Salomon Brothers
Inc.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, the Voting Rights shall be allocated among the Owners of the
Certificates in proportion to the Percentage Interests of their respective
Certificates on such date.
"Weighted Average Pass-Through Rate": As to the Class A Certificates
and any Distribution Date, the weighted average of the Class A-1 Pass-Through
Rate, Class A-2 Pass-Through Rate, Class A-3 Pass-Through Rate, Class A-4
Pass-Through Rate, and Class A-5 Pass-Through Rate (such rate calculated for
this purpose on the basis of a 360-day year assumed to consist of twelve 30 day
months) weighted by
30
the respective Certificate Principal Balances of the related Class, as of such
Distribution Date prior to taking into account any distributions to be made on
such Distribution Date.
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ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01 Establishment of the Trust.
The parties hereto do hereby create and establish, pursuant to the laws
of the State of New York and this Agreement, the Trust, which, for convenience,
shall be known as "Block Mortgage Finance Asset Backed Certificates, Series
1997-1," which shall contain two separate pools of Mortgage Loans.
Section 2.02 Office.
The office of the Trust shall be in care of the Trustee, addressed to ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department, or
at such other address as the Trustee may designate by notice to the Depositor,
the Seller, the Master Servicer, the Owners and the Certificate Insurer.
Section 2.03 Purposes and Powers.
The purpose of the Trust is to engage in the following activities and
only such activities: (i) the issuance of the Certificates and the acquiring,
owning and holding of Mortgage Loans and the Trust Estate in connection
therewith; (ii) activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith,
including the investment of moneys in accordance with this Agreement; and (iii)
such other activities as may be required in connection with conservation of the
Trust Estate and distributions to the Owners; provided, however, that nothing
contained herein shall permit the Trustee to take any action which would
adversely affect either the Master REMIC's or the Subsidiary REMIC's status as a
REMIC.
Section 2.04 Appointment of the Trustee; Declaration of Trust.
The Depositor hereby appoints the Trustee as trustee of the Trust
effective as of the Startup Day, to have all the rights, powers and duties set
forth herein. The Trustee hereby acknowledges and accepts such appointment,
represents and warrants its eligibility as of the Startup Day to serve as
Trustee pursuant to Section 10.08 hereof and declares that it will hold the
Trust Estate in trust upon and subject to the conditions set forth herein for
the benefit of the Owners.
Section 2.05 Expenses of the Trust.
The expenses of the Trust, including (i) any portion of the Trustee Fee
not paid pursuant to Section 7.03(c)(iii)(D) hereof, (ii) any reasonable
expenses of the Trustee, and (iii) any other expenses of the Trust that have
been reviewed by the Master Servicer, which review shall not be required in
connection with the enforcement of a remedy by the Trustee resulting from a
default under this Agreement, shall be paid directly by the Master Servicer. The
Master Servicer shall pay directly the reasonable fees and expenses of counsel
to the Trustee. The reasonable fees and expenses of the Trustee's counsel in
connection with the review and delivery of this Agreement and related
documentation shall be paid by the Master Servicer on the Startup Day. In
addition, any expense of the Trust arising from the
32
breach of a representation and warranty relating to the Mortgage Loans, shall be
paid by the [Master Servicer]. In addition, if any assignment of Mortgage is
required to be filed pursuant to the terms of this Agreement, the Master
Servicer shall pay, or shall reimburse the Trustee, for all costs and expenses
associated with filing such assignment in the appropriate recording office.
Section 2.06 Ownership of the Trust.
On the Startup Day, the ownership interests in the Trust shall be
transferred as set forth in Section 4.02 hereof, such transfer to be evidenced
by sale of the Certificates as described therein. Thereafter, transfer of any
ownership interest shall be governed by Sections 5.04 and 5.08 hereof.
Section 2.07 Situs of the Trust.
It is the intention of the parties hereto that the Trust constitute a
trust under the laws of the State of New York. The Trust will be created and
administered in, and all Accounts maintained by the Trustee on behalf of the
Trust will be located in, the State of New York. The Trust will not have any
employees and will not have any real or personal property (other than property
acquired pursuant to Section 8.13 hereof) located in any state other than in the
State of New York and payments will be received by the Trustee only in the State
of New York and payments from the Trustee will be made only from the State of
New York. The Trust's only office will be at the office of the Trustee as set
forth in Section 2.02 hereof.
Section 2.08 Miscellaneous REMIC Provisions.
(a) The Trust for federal income tax purposes will consist of two
REMICs. The Subsidiary REMIC will consist of all of the assets constituting the
Trust Estate and will be evidenced by the Subsidiary REMIC Regular Interests
(which will be uncertificated and will represent the "regular interests" in the
Subsidiary REMIC) and the SR Interest as the single "residual interest" in the
Subsidiary REMIC. The Trustee will hold the Subsidiary REMIC Regular Interests.
The Trustee will hold the Subsidiary REMIC Regular Interests. The Master REMIC
will consist of the Subsidiary REMIC Regular Interests and will be evidenced by
the Regular Certificates (which will represent the "regular interests" in the
Master REMIC) and the MR Interest as the single "residual interest" in the
Master REMIC. The Class R Certificates will represent beneficial ownership of
the SR Interest and the MR Interest. The Owner of the Tax Matters Person
Residual Interest is hereby designated as "tax matters person" as defined in the
REMIC Provisions with respect to the Trust.
(b) The Trust shall, for federal income tax purposes, maintain books on
a calendar year basis and report income on an accrual basis.
(c) The Trustee shall cause each of the Master REMIC and the Subsidiary
REMIC to elect to be treated as a REMIC under Section 860D of the Code. Any
inconsistencies or ambiguities in this Agreement or in the administration of the
Trust shall be resolved in a manner that preserves the validity of such election
to be treated as a REMIC.
(d) The Trustee shall provide to the Internal Revenue Service and to
the person described in Section 860(E)(e)(3) and (6) of the Code the information
described in Treasury Regulation Section
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1.860D-l(b)(5)(ii), or any successor regulation thereto with respect to the
Trust. Such information will be provided in the manner described in Treasury
Regulation Section 1.860E-2(a)(5), or any successor regulation thereto.
(e) For federal income tax purposes, the Final Scheduled Distribution
Date for each Class of Certificates is hereby set to be the Distribution Date
indicated below:
Final Scheduled
Class Distribution Date
Class A-1 Certificates
Class A-2 Certificates
Class A-3 Certificates
Class A-4 Certificates
Class A-5 Certificates
Class X-1 Certificates
Class X-2 Certificates
Class R Certificates
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the Trustee,
the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Depositor is a corporation duly organized, validly existing and
in good standing under the laws governing its creation and existence and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it make such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect on the Depositor, the Owners or the Certificate Insurer. The
Depositor has all requisite corporate power and authority to own and operate its
properties, to carry out its business as presently conducted and as proposed to
be conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by the Depositor and
its performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Depositor and will not (i) violate
the Depositor's Certificate of Incorporation or Bylaws, (ii) constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in a breach of, any material contract,
agreement or other instrument to which the Depositor is a party or by which the
Depositor is bound or (iii) violate any statute or any order, rule or regulation
of any court, governmental agency or body or other tribunal having jurisdiction
over the Depositor or any of its properties, except where the failure to so
comply would not have a material adverse effect on the Depositor, the Owners or
the Certificate Insurer.
(c) This Agreement and the other Operative Documents to which the
Depositor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Depositor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Depositor or its properties
or the consequences of which would materially and adversely affect its
performance hereunder or under the other Operative Documents to which the
Depositor is a party.
35
(e) No litigation is pending with respect to which the Depositor has
received service of process or, to the best of the Depositor's knowledge,
threatened against the Depositor which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Depositor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Depositor or matters or activities for which the Depositor is
responsible in accordance with the Operative Documents or which are attributable
to the Depositor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Depositor required to be stated therein or necessary to make
the statements contained therein with respect to the Depositor, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained to or by the Depositor, as the case may be, by or from
any federal, state or other governmental authority or agency (other than any
such actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Depositor makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Depositor of the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and effect on
the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the other Operative Documents on the part of the Depositor and the
performance by the Depositor of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(i) The Depositor is not insolvent, nor will it be made insolvent by
the transfer of the Mortgage Loans, nor is the Depositor aware of any pending
insolvency of the Depositor, the Seller or the Master Servicer.
(j) The transactions contemplated by the Agreement are in the ordinary
course of business of the Depositor.
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(k) The transfer, assignment and conveyance of the Notes and the
Mortgages by the Depositor hereunder are not subject to the bulk transfer laws
or any similar statutory provisions in effect in any applicable jurisdiction.
It is understood and agreed that the representations and warranties set
forth in this Section 3.01 shall survive delivery of the respective Mortgage
Loans to the Trustee.
Section 3.02 Representations and Warranties of the Master
Servicer.
The Master Servicer hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is, and
each Sub-Servicer is, in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to enable it to perform
its obligations hereunder and is in good standing as a foreign corporation in
each jurisdiction in which the nature of its business, or the properties owned
or leased by it make such qualification necessary, except where to failure to so
qualify would not have a material adverse effect on the Master Servicer, the
Sub-Servicer, if applicable, the Owners, the Trust or the Certificate Insurer.
The Master Servicer and each Sub-Servicer has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party. [Either the Master Servicer or a Sub-Servicer is
designated as an approved seller-servicer by FNMA for first and second mortgage
loans and has combined equity and subordinated debt of at least $1,500,000, as
determined in accordance with generally accepted accounting principles.]
(b) The execution and delivery of this Agreement by the Master Servicer
and its performance and compliance with the terms of this Agreement have been
duly authorized by all necessary corporate action on the part of the Master
Servicer and will not (i) violate the Master Servicer's Certificate of
Incorporation or Bylaws (ii) constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or result
in the breach of, any material contract, agreement or other instrument to which
the Master Servicer is a party or by which the Master Servicer is bound or (iii)
violate any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Master Servicer or
any of its properties, except where the failure to so comply would not have a
material adverse effect on the Master Servicer, the Owners, the Trust or the
Certificate Insurer.
(c) This Agreement and the Operative Documents to which the Master
Servicer is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Master Servicer, enforceable against it in accordance with the
terms hereof and thereof, except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Master Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default
37
might have consequences that would materially and adversely affect the condition
(financial or otherwise) or operations of the Master Servicer or its properties
or might have consequences that would materially and adversely affect its
performance hereunder or under the other Operative Documents to which the Master
Servicer is a party.
(e) No litigation is pending with respect to which the Master Servicer
has received service of process or, to the best of the Master Servicer's
knowledge, threatened against the Master Servicer which litigation might have
consequences that would prohibit its entering into this Agreement or any other
Operative Documents to which the Master Servicer is a party or that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Master Servicer or its properties or might have consequences
that would materially and adversely affect its performance hereunder and the
other Operative Documents to which the Master Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Master Servicer contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Document or which are
attributed to the Master Servicer therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue statement
of a material fact with respect to the Master Servicer or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein with respect to the Master Servicer, in light of the
circumstances under which they were made, not misleading.
(h) The Servicing Fee is a "current (normal) servicing fee rate" as
that term is used in Statement of Financial Accounting Standards No. 65 issued
by the Financial Accounting Standards Board. Neither the Master Servicer nor any
affiliate thereof will report on any financial statements any part of the
Servicing Fee as an adjustment to the sales price of the Mortgage Loans.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained to or by the Master Servicer, as the case may be, by or
from any federal, state or other governmental authority or agency (other than
any such actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Master Servicer makes no
such representation or warranty), that are necessary or advisable in connection
with the execution and delivery by the Master Servicer of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Master Servicer and the performance by the Master Servicer of
its obligations under this Agreement and such of the other Operative Documents
to which it is a party.
38
(j) The collection practices used by the Master Servicer and each
Sub-Servicer with respect to the Mortgage Loans have been, in all material
respects, legal, proper, prudent and customary in the mortgage servicing
business and in conformity with relevant FNMA guidelines.
(k) The Transactions contemplated by this Agreement are in the ordinary
course of business of the Master Servicer.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the Mortgage Loans to the
Trustee.
Upon discovery by any of the Depositor, the Seller, the Master
Servicer, the Certificate Insurer, any Owner or the Trustee (each, for purposes
of this paragraph, a party) of a breach of any of the representations and
warranties set forth in this Section 3.02 which materially and adversely affects
the interests of the Owners or of the Certificate Insurer, the party discovering
such breach shall give prompt written notice to the other parties. Within 60
days of its discovery or its receipt of notice of breach, the Master Servicer
shall cure such breach in all material respects and, upon the Master Servicer's
continued failure to cure such breach, may thereafter be removed by the Trustee
pursuant to Section 8.20 hereof; provided, however, that if any party can
establish to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended with
the written approval of the Certificate Insurer.
Section 3.03 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Trustee,
the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws governing its creation and existence and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
its business, or the properties owned or leased by it, make such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect on the Seller, the Owners, the Trust and the Certificate Insurer.
The Seller has all requisite corporate power and authority to own and operate
its properties, to carry out its business as presently conducted and as proposed
to be conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by the Seller and its
performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Seller and will not (i) violate
the Seller's Certificate of Incorporation or Bylaws (ii) constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which the Seller is a party or by which the Seller is bound
or (iii) violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Seller or any of its properties, except where the failure to so comply would not
have a material adverse effect on the Seller, the Owners, the Trust and the
Certificate Insurer.
39
(c) This Agreement and the other Operative Documents to which the
Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Seller is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Seller or its properties or
the consequences of which would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Seller is a
party.
(e) No litigation is pending with respect to which the Seller has
received service of process or, to the Seller's knowledge, threatened against
the Seller which litigation might have consequences that would prohibit its
entering into this Agreement or any other Operative Documents to which it is a
party or that would materially and adversely affect the condition (financial or
otherwise) or operations of the Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Seller is a
party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Seller contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Seller or matters or activities for which the Seller is responsible
in accordance with the Operative Documents or which are attributable to the
Seller therein are true and correct in all material respects. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein, or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(h) Upon the receipt of each Mortgage Loan (including the related Note)
and other items of the Trust Estate by the Trustee under this Agreement, the
Trust will have good title to such Mortgage Loan (including the related Note)
and such other items of the Trust Estate free and clear of any lien, charge,
mortgage, encumbrance or rights of others, except as set forth in Section 3.04
(b) (ix) (other than liens which will be simultaneously released).
(i) Neither the Seller nor any affiliate thereof will report on any
financial statement any part of the Servicing Fee as an adjustment to the sales
price of the Mortgage Loans.
(j) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained to or by the Seller, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Seller of
40
the Operative Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of the Seller and the performance by the Seller
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(k) The origination practices used by the Seller or the Person from
whom the Seller purchased the Mortgage Loans with respect to such Mortgage Loans
have been in all material respects, legal, proper, prudent and customary in the
mortgage lending business in the jurisdiction in which the related Mortgage
Properties are located.
(l) The Seller is not insolvent, nor will it be made insolvent by the
transfer of the Mortgage Loans, nor is the Seller aware of any pending
insolvency of the Seller, the Depositor or the Master Servicer.
(m) The transfer, assignment and conveyance of the Notes and the
Mortgages by the Seller hereunder are not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(n) The transactions contemplated by this Agreement are in the ordinary
course of business of the Seller.
It is understood and agreed that the representations and warranties set
forth in this Section 3.03 shall survive delivery of the respective Mortgage
Loans to the Trustee.
Upon discovery by any of the Master Servicer, the Seller, the
Depositor, the Certificate Insurer or the Trustee (each, for purposes of this
paragraph, a "party") of a breach of any of the representations and warranties
set forth in this Section 3.03 which materially and adversely affects the
interests of the Owners or the Certificate Insurer, the party discovering such
breach shall give prompt written notice to the other parties. The Seller hereby
covenants and agrees that within 60 days of its discovery or its receipt of
notice of breach, it shall cure such breach in all material respects or, with
respect to a breach of clause (h) above, the Seller may (or may cause an
affiliate of the Seller to) on the Monthly Remittance Date next succeeding such
discovery or receipt of notice (i) substitute in lieu of any Mortgage Loan not
in compliance with clause (h) a Qualified Replacement Mortgage and, if the
outstanding principal amount of such Qualified Replacement Mortgage as of the
applicable Replacement Cut-Off Date is less than the Loan Balance of such
Mortgage Loan as of such Replacement Cut-Off Date, deliver an amount equal to
such difference together with the aggregate amount of (A) all P&I Advances and
Servicing Advances theretofore made with respect to such Mortgage Loan, to the
extent unreimbursed to the Master Servicer and (B) all P&I Advances and
Servicing Advances which the Master Servicer has theretofore failed to remit
with respect to such Mortgage Loan (a "Substitution Adjustment") to the Master
Servicer for deposit in the Collection Account or (ii) purchase such Mortgage
Loan from the Trust at the Loan Purchase Price, which purchase price shall be
delivered to the Master Servicer for deposit in the Collection Account.
Notwithstanding any provision of this Agreement to the contrary, with respect to
any Mortgage Loan which is not in default or as to which no default is imminent,
no repurchase or substitution pursuant to
41
Section 3.03, 3.04 or 3.06 shall be made unless the Seller obtains for the
Trustee and the Certificate Insurer an opinion of counsel experienced in federal
income tax matters to the effect that such a repurchase or substitution would
not constitute a Prohibited Transaction for the Trust or otherwise subject the
Trust to tax and would not jeopardize the status of the Trust as a REMIC (a
"REMIC Opinion") addressed to the Trustee and the Certificate Insurer and
acceptable to the Certificate Insurer and the Trustee. Any Mortgage Loan as to
which repurchase or substitution was delayed pursuant to this Section shall be
repurchased or substituted for (subject to compliance with Sections 3.03, 3.04
or 3.06, as the case may be) upon the earlier of (a) the occurrence of a default
or imminent default with respect to such Mortgage Loan and (b) receipt by the
Trustee and the Certificate Insurer of a REMIC Opinion.
Section 3.04 Covenants of Seller to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations.
(a) The Seller hereby makes the representations set forth on Schedule I
hereto with respect to the Mortgage Loans.
(b) Upon the discovery by the Seller, the Master Servicer, the
Certificate Insurer, or the Trustee (i) that any of the statements set forth in
Schedule I hereto were untrue as of the Startup Day with the result that the
interests of the Owners or the Certificate Insurer are materially and adversely
affected or (ii) that statements set forth in clauses (ix), (x), (xiii),
(xxxvi), (xl), or (xli) of Schedule I hereto were untrue in any material respect
as of the Startup Day, the party discovering such breach shall give prompt
written notice to the other parties. Upon the earliest to occur of the Seller's
discovery or its receipt of notice of breach from any one of the other parties,
the Seller hereby covenants and warrants that it shall promptly cure such breach
in all material respects or, subject to the last two sentences of Section 3.03,
it shall on the second Monthly Remittance Date next succeeding such discovery or
receipt of notice (i) substitute in lieu of each Mortgage Loan which has given
rise to the requirement for action by the Seller a Qualified Replacement
Mortgage and deliver the Substitution Adjustment to the Master Servicer for
deposit in the Collection Account or (ii) purchase such Mortgage Loan from the
Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Collection Account. Other than as specified in Section 6.12 hereof, it is
understood and agreed that the foregoing obligation of the Seller so to
substitute or purchase any Mortgage Loan shall constitute the sole remedy
respecting a discovery of any such statement which is untrue in any material
respect in this Section 3.04 available to the Owners, the Trustee and the
Certificate Insurer.
(c) In the event that any such repurchase results in a prohibited
transaction tax, the Trustee shall immediately notify the Seller in writing
thereof and the Seller will, within 10 days of receiving notice thereof from the
Trustee deposit the amount due from the Trust with the Trustee for the payment
thereof, including any interest and penalties, in immediately available funds.
In the event that any Qualified Replacement Mortgage is delivered by the Seller
to the Trust pursuant to Section 3.03, Section 3.04 or Section 3.06 hereof, the
Seller shall be obligated to take the actions described in Section 3.04(b) with
respect to such Qualified Replacement Mortgage upon the discovery by any of the
Owners, the Seller, the Master Servicer, the Certificate Insurer, or the Trustee
that the statements set forth in clause (ix), (x), (xiii), (xxxvi), (xl) or
(xli) of Schedule I hereto are untrue in any material respect on the date such
Qualified Replacement Mortgage is conveyed to the Trust or that any of the other
statements set forth in Schedule I hereto are untrue on the date such Qualified
Replacement Mortgage is conveyed to the Trust such that the interests of the
Owners or the Certificate Insurer in the related Qualified Replacement
42
Mortgage are materially and adversely affected; provided, however, that for the
purposes of this subsection (c) the statements in Schedule I hereto referring to
items "as of the Cut-Off Date" or "as of the Startup Day" shall be deemed to
refer to such items as of the date such Qualified Replacement Mortgage is
conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 3.04 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgages) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any
Mortgage Loan pursuant to this Article III or the eligibility of any Mortgage
Loan for the purpose of this Agreement.
Notwithstanding the fact that a representation contained in Schedule I
hereto may be limited to the Seller's knowledge, such limitation shall not
relieve the Seller of its repurchase obligation under the Section 3.05 hereof,
or its obligations under Section 6.12 hereof.
Section 3.05 Conveyance of the Mortgage Loans and Qualified
Replacement Mortgages.
(a) On the Startup Day the Seller, concurrently with the execution and
delivery hereof, hereby transfers, assigns, sets over and otherwise conveys to
the Depositor and the Depositor, concurrently with the execution and delivery
hereof, transfers, assigns, sets over and otherwise conveys, without recourse,
to the Trustee for the benefit of the Owners all of their respective right,
title and interest in and to the Trust Estate; provided, further, however, that
the Seller reserves and retains all of its right, title and interest in and to
principal (including Prepayments) collected and interest on each Mortgage Loan
collected on or prior to the Cut-Off Date. The transfer by the Depositor of the
Mortgage Loans set forth on the Schedule of Mortgage Loans to the Trustee is
absolute and is intended by the Owners and all parties hereto to be treated as a
sale by the Depositor.
It is intended that the sale, transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans conveying good title
thereto free and clear of any liens and encumbrances from the Seller to the
Depositor and from the Depositor to the Trust and that the Mortgage Loans not be
part of the Depositor's or the Seller's estate in the event of insolvency. In
the event that such conveyance is deemed to be a loan, the parties intend that
the Seller shall be deemed to have granted to the Depositor and the Depositor
shall be deemed to have granted to the Trustee a first priority perfected
security interest in the Trust Estate, and that this Agreement shall constitute
a security agreement under applicable law.
[In connection with such sale, transfer, assignment, and conveyance
from the Seller to the Depositor, the Seller has filed, in the appropriate
office or offices in the States of _____________________ and
_____________________, a UCC-1 financing statement executed by the Seller as
debtor, naming the Depositor as secured party and listing the Mortgage Loans and
the other property described above as collateral. The characterization of the
Seller as debtor and the Depositor as secured party on such financing statements
is solely for protective purposes and shall in no way be construed as being
contrary to the intent of the parties that this transaction be treated as a sale
of the Seller's entire right, title and interest in and to the Trust Estate. In
connection with such filing, the Seller agrees that it shall cause to be filed
all necessary continuation statements thereof and to take or cause to
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be taken such actions and execute such documents as are necessary to perfect and
protect the Trustee's, the Owners' and the Certificate Insurer's interest in the
Trust Estate.]
[In connection with such sale, transfer, assignment, and conveyance
from the Depositor to the Trustee, the Depositor has filed, in the appropriate
office or offices in the States of ______________________ and
______________________, a UCC-1 financing statement executed by the Depositor as
debtor, naming the Trustee as secured party and listing the Mortgage Loans and
the other property described above as collateral. The characterization of the
Depositor as debtor and the Trustee as secured party in such financing
statements is solely for protective purposes and shall in no way be construed as
being contrary to the intent of the parties that this transaction be treated as
a sale of the Depositor's entire right, title and interest in and to the Trust
Estate. In connection with such filing, the Depositor agrees that it shall cause
to be filed all necessary continuation statements thereof and to take or cause
to be taken such actions and execute such documents as are necessary to perfect
and protect the Trustee's, the Owners' and the Certificate Insurer's interest in
the Trust Estate.]
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Depositor agrees to:
(i) deliver without recourse to the Trustee on the Startup Day
with respect to each Mortgage Loan, (A) the original Mortgage Note,
endorsed by the Seller or the originator of such Mortgage Loan, without
recourse, in the following form: "Pay to the order of
________________________ without recourse", with all intervening
endorsements that show a complete chain of endorsement from the
originator to the Seller; (B) the original recorded Mortgage; (C) a
duly executed assignment of the Mortgage to "Bankers Trust Company of
California, N.A., a national banking corporation, as trustee under the
Pooling and Servicing Agreement dated as of January 1, 1997, Block
Mortgage Finance, Asset Backed Certificate, Series 1997-1, without
recourse" (each such assignment, when duly and validly completed, to be
in recordable form and sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which such
assignment relates); (D) the original recorded assignment or
assignments of the Mortgage together with all interim recorded
assignments of such Mortgage; (E) the original or copies of each
assumption, modification, written assurance or substitution agreement,
if any; and (F) the original or duplicate original lender's title
policy and all riders thereto or, in the event such original title
policy has not been received from the insurer, any one of an original
title binder, an original preliminary title report or an original title
commitment, or a copy thereof certified by the title company, with the
original policy of title insurance to be delivered within one year of
the Closing Date.
(ii) cause, within two days following an Assignment Event, the
assignments of the Mortgages referred to in (C) above to be submitted
for recording in the appropriate jurisdictions; provided, however, that
the Depositor shall not be required to record an assignment of a
Mortgage if the Depositor furnishes to the Trustee, the Rating Agencies
and the Certificate Insurer, on an Assignment Event, at the Depositor's
expense an opinion of counsel with respect to the relevant jurisdiction
that such recording is not necessary to perfect the Trustee's interest
in the related Mortgage Loans (in form and substance and from counsel
satisfactory to the Certificate Insurer and the Rating Agencies);
notwithstanding the furnishing of such opinion of counsel, however, the
Certificate Insurer may, in its reasonable discretion after
consultation with the Depositor prior
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to the date on which all assignments of Mortgages are required to be
filed hereunder, require the filing of assignments of Mortgages in any
state that is the subject of such opinions; and
(iii) deliver the title insurance policy or title searches,
the original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments, to
the Trustee within 15 days of receipt thereof by the Depositor (but in
any event, with respect to any Mortgage as to which original recording
information has been made available to the Depositor, within one year
after the Startup Day.
Notwithstanding anything to the contrary contained in this Section
3.05, in those instances where the public recording office retains the original
Mortgage, the assignment of a Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Depositor shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
The Depositor hereby appoints the Trustee its attorney-in-fact for the
purpose of, and with full power in, preparing, executing and recording, on its
behalf, all assignments of Mortgages in the event that the Depositor fails to do
so on a timely basis.
Copies of all Mortgage assignments received by the Trustee shall be
retained in the related File.
All recording required pursuant to this Section 3.05 shall be
accomplished at the expense of the Seller.
(c) In the case of Mortgage Loans which have been prepaid in full after
the Cut-Off Date and prior to the Startup Day, the Depositor, in lieu of the
foregoing, will deliver within six (6) days after the Startup Day to the Trustee
a certification of an Authorized Officer of the Depositor in the form set forth
in Exhibit D.
(d) The Seller shall transfer, assign, set over and otherwise convey,
without recourse, to the Trustee all right, title and interest of the Seller in
and to any Qualified Replacement Mortgage delivered to the Trustee on behalf of
the Trust by the Seller pursuant to Section 3.03, 3.04 or 3.06 hereof and all
its right, title and interest to principal and interest due on such Qualified
Replacement Mortgage after the applicable Replacement Cut-Off Date; provided,
however, that the Seller shall reserve and retain all right, title and interest
in and to payments of principal and interest due or received on such Qualified
Replacement Mortgage on or prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage therefor, the Trustee will
transfer, assign, set over and otherwise convey without recourse or
representation, on the Seller's order, all of its right, title and interest in
and to such released Mortgage Loan and all the Trust's right, title and interest
to principal and interest due on such released Mortgage Loan after the
applicable Replacement Cut-Off Date; provided, however, that the Trust shall
reserve and retain all right, title and interest in and to payments of principal
and interest due on such released Mortgage Loan on or prior to the applicable
Replacement Cut-Off Date.
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(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Seller agrees to
(i) deliver without recourse to the Trustee on the date of delivery of such
Qualified Replacement Mortgage the original Note relating thereto, endorsed in
blank or to the order of the Trustee, deliver an assignment in blank with
respect to such Qualified Replacement Mortgage, (ii) deliver the original
Qualified Replacement Mortgage, together with original or duly certified copies
of any and all prior assignments, to the Trustee within 15 days of receipt
thereof by the Seller (but in any event within 120 days after the date of
conveyance of such Qualified Replacement Mortgage) and (iv) deliver the title
insurance policy, or where no such policy is required to be provided under
Section 3.05(b)(i)(F), the other evidence of title in the same manner required
in Section 3.05(b)(i)(F).
(g) As to each Mortgage Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage, the Trustee shall deliver on
the date of conveyance of such Qualified Replacement Mortgage and on the order
of the Seller (i) the original Note relating thereto, endorsed without recourse
or representation, to the Seller, (ii) the original Mortgage so released and all
assignments relating thereto and (iii) such other documents as constituted the
File with respect thereto.
(h) If a Mortgage assignment is lost or is returned from the recorder's
office unrecorded due to a defect therein, the Seller shall prepare a substitute
assignment or cure such defect, as the case may be, and thereafter cause such
substitute or cured assignment to be duly recorded.
Section 3.06 Acceptance by Trustee; Certain Substitutions of Mortgage
Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver on the Startup Day an
acknowledgment of receipt of the items delivered by the Seller or the Depositor
in the form attached as Exhibit E hereto, and declares that it will hold such
documents and any amendments, replacement or supplements thereto, as well as any
other assets included in the definition of Trust Estate and delivered to the
Trustee, as Trustee in trust upon and subject to the conditions set forth herein
for the benefit of the Owners. The Trustee agrees, for the benefit of the
Owners, to review such items within 45 days after the Startup Day (or, with
respect to any document delivered after the Startup Day, within 45 days of
receipt and with respect to any Qualified Replacement Mortgage, within 45 days
after the assignment thereof) and to deliver to the Depositor, the Seller, the
Master Servicer and the Certificate Insurer a certification in the form attached
hereto as Exhibit F (a "Pool Certification") to the effect that, as to each
Mortgage Loan listed in the Schedule of Mortgage Loans (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such Pool
Certification as not covered by such Pool Certification), (i) all documents
required to be delivered to it pursuant to Section 3.05(b)(i) of this Agreement
are in its possession, (ii) such documents have been reviewed by it and have not
been mutilated, damaged or torn and relate to such Mortgage Loan and (iii) based
on its examination and only as to the foregoing documents, the information set
forth on the Schedule of Mortgage Loans accurately reflects the information set
forth in the File. The Trustee shall have no responsibility for reviewing any
File except as expressly provided in this subsection 3.06(a). Without limiting
the effect of the preceding sentence, in reviewing any File, the Trustee shall
have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment is in proper form (except to
determine if the Trustee is the assignee), whether any document has been
recorded in accordance with the requirements of any applicable jurisdiction or
whether a blanket assignment is permitted in any applicable jurisdiction, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports
46
to be and, where applicable, that it purports to be recorded. The Trustee shall
be under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face, nor shall the Trustee be under any
duty to determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage Loan.
(b) If the Trustee during such 45-day period finds any document
constituting a part of a File which is not executed, has not been received, or
is unrelated to the Mortgage Loans identified in the Schedule of Mortgage Loans,
or that any Mortgage Loan does not conform to the description thereof as set
forth in the Schedule of Mortgage Loans, the Trustee shall promptly so notify
the Depositor, the Seller, the Certificate Insurer and the Owners. In performing
any such review, the Trustee may conclusively rely on the Seller as to the
purported genuineness of any such document and any signature thereon. It is
understood that the scope of the Trustee's review of the items delivered by the
Seller pursuant to Section 3.05(b)(i) is limited solely to confirming that the
documents listed in Section 3.05(b)(i) have been executed and received, relate
to the Files identified in the Schedule of Mortgage Loans and conform to the
description thereof in the Schedule of Mortgage Loans. The Seller agrees to use
reasonable efforts to remedy a material defect in a document constituting part
of a File of which it is so notified by the Trustee. If, however, within 60 days
after the Trustee's notice to it respecting such defect the Seller has not
remedied the defect and the defect materially and adversely affects the interest
in the related Mortgage Loan of the Owners or of the Certificate Insurer, the
Seller will (or will cause an affiliate of the Seller to) on the next succeeding
Monthly Remittance Date (i) substitute in lieu of such Mortgage Loan a Qualified
Replacement Mortgage and deliver the Substitution Adjustment to the Master
Servicer for deposit in the Collection Account or (ii) purchase such Mortgage
Loan at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Collection Account.
(c) In addition to the foregoing, the Trustee also agrees to make a
review during the 12th month after the Startup Day indicating the current status
of the exceptions previously indicated on the Pool Certification (the "Final
Certification"). After delivery of the Final Certification, the Trustee shall
provide to the Certificate Insurer no less frequently than monthly updated
certifications indicating the then current status of exceptions, until all such
exceptions have been eliminated.
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ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01 Issuance of Certificates.
On the Startup Day, upon the Trustee's receipt from the Depositor of an
executed Delivery Order in the form set forth as Exhibit G hereto, the Trustee
shall authenticate and deliver the Certificates on behalf of the Trust.
Section 4.02 Sale of Certificates.
At __ a.m. New York City time on the Startup Day (the "Closing"), at
the offices of ▇▇▇▇▇ & ▇▇▇▇ LLP, One World Trade Center, New York, New York (or
at such other location acceptable to the Seller), the Seller will sell and
convey the Mortgage Loans and the money, instruments and other property related
thereto to the Depositor and the Depositor will sell and convey the Mortgage
Loans and the money, instruments and other property related thereto to the
Trustee, and the Trustee will deliver (i) to the Underwriters the Class A
Certificates with an aggregate Percentage Interest in each Class equal to 100%,
registered in the name of Cede & Co., or in such other names as the Underwriters
shall direct, against payment of the purchase price thereof by wire transfer of
immediately available funds to the Trustee, and (ii) to the respective
registered owners thereof, a Class X-1 Certificate and a Class X-2 Certificate,
each with a Percentage Interest equal to 100%, registered in the name of the
Seller, a Class R Certificate with a Percentage Interest equal to 99.999%,
registered in the name of the Seller and a Class R Certificate with a Percentage
Interest equal to .001%, registered in the name of the Trustee.
Upon the Trustee's receipt of the entire net proceeds of the sale of
the Class A Certificates, the Trustee shall remit the entire balance of such net
proceeds to the Depositor in accordance with instructions delivered by the
Depositor.
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ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01 Terms.
(a) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein with
respect to the Certificates to "principal" and "interest", no debt of any Person
is represented thereby, nor are the Certificates or the underlying Notes
guaranteed by any Person (except that the Notes may be recourse to the
Mortgagors thereof to the extent permitted by law and except for the rights of
the Trustee on behalf of the Owners of the Class A Certificates with respect to
the Certificate Insurance Policy). Subject to Section 8.08, the Certificates are
payable solely from payments received on or with respect to the Mortgage Loans,
moneys in the Collection Account, earnings on moneys and the proceeds of
property held as a part of the Trust Estate and, with respect to the Class A
Certificates upon the occurrence of certain events, from Insured Payments. Each
Certificate entitles the Owner thereof to receive monthly on each Distribution
Date, in order of priority of distributions with respect to such Class of
Certificates as set forth in Section 7.03, a specified portion of such payments
with respect to the Mortgage Loans (and, with respect to the Owners of the Class
A Certificates, Insured Payments deposited in the Distribution Account), pro
rata in accordance with such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to the Trustee
any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement and the related Certificate
Insurance Policy, whether or not such Certificate is ever returned to the
Trustee, except to the extent of a Reimbursement Amount on such Class of
Certificates, in which case the Certificate Insurer will be subrogated to the
rights of such Owner and the Class of Certificate will not be deemed cancelled.
Section 5.02 Forms.
The Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates and Class A-5 Certificates, the Class X
Certificates and the Class R Certificates shall be in substantially the forms
set forth in Exhibits A, B and C hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Trustee's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any applicable securities laws or as may, consistently herewith, be
determined by the Authorized Officer of the Trustee executing such Certificates,
as evidenced by his execution thereof.
Section 5.03 Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the
manual or facsimile signature of one of the Trustee's Authorized Officers and
shall be authenticated by the manual or facsimile signature of one of the
Trustee's Authorized Officers.
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Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Trustee shall, upon proper authentication by
the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.02 hereof.
Subsequently issued Certificates will be dated as of the issuance of the
Certificate.
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.04 Registration and Transfer of Certificates.
(a) The Trustee shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby initially appointed Registrar
for the purpose of registering Certificates and transfers of Certificates as
herein provided. The Certificate Insurer, the Owners and the Trustee shall have
the right to inspect the Register during the Trustee's normal hours and to
obtain copies thereof, and the Trustee shall have the right to rely upon a
certificate executed on behalf of the Registrar by an Authorized Officer thereof
as to the names and addresses of the Owners of the Certificates and the
principal amounts and numbers of such Certificates.
If a Person other than the Trustee is appointed as Registrar by the
Owners of a majority of the aggregate Percentage Interests represented by the
Class A Certificates then Outstanding with the consent of the Certificate
Insurer, or if there are no longer any Class A Certificates then outstanding, by
such majority of the Percentage Interests represented by each of the Class X
Certificates and Class R Certificates, the Trustee will give the Certificate
Insurer and the Owners prompt written notice of the appointment of such
Registrar and of the location, and any change in the location, of the Register.
In connection with any such appointment the annual fees of the bank then serving
as Trustee and Registrar shall thenceforth be reduced by the amount to be agreed
upon by the Trustee and the Depositor at such time and the reasonable fees of
the Registrar shall be paid, as expenses of the Trust, pursuant to Section 7.05
hereof.
(b) Subject to the provisions of Section 5.08 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, upon the direction of the Registrar the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount or percentage interest of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by such
Owner may be exchanged for other Certificates authorized of like Class and tenor
and a like aggregate original principal amount or percentage interest and
bearing numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location of the
Register. Whenever any Certificate is so surrendered for exchange, upon the
direction of the Registrar, the Trustee shall execute, authenticate and deliver
the Certificate or Certificates which the Owner making the exchange is entitled
to receive.
50
(d) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration of
transfer or exchange of Certificates, but the Registrar or Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so as to
participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in Subsection (h), be initially issued in the form of a single fully registered
Class A Certificate of such Class. Upon initial issuance, the ownership of each
such Class A Certificate shall be registered in the Register in the name of Cede
& Co., or any successor thereto, as nominee for the Depository.
On the Startup Day, the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, Class A-4 Certificates and Class A-5 Certificates shall
be issued in denominations of no less than $25,000 and multiples of $1,000 in
excess thereof (except that one certificate in each class may be issued in an
amount less than $25,000 or in an integral multiple other than $1,000).
The Depositor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to the Class A Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Depositor, the Master
Servicer, the Seller and the Trustee shall have no responsibility or obligation
to Direct or Indirect Participants or beneficial owners for which the Depository
holds Class A Certificates from time to time as a Depository. Without limiting
the immediately preceding sentence, the Depositor, the Master Servicer, the
Seller and the Trustee shall have no responsibility or obligation with respect
to (i) the accuracy of the records of the Depository, Cede & Co., or any Direct
or Indirect Participant with respect to the ownership interest in the Class A
Certificates, (ii) the delivery to any Direct or Indirect Participant or any
other Person, other than a registered Owner of a Class A Certificate as shown in
the Register, of any notice with respect to the Class A Certificates or (iii)
the payment to any Direct or Indirect Participant or any other Person, other
than a registered Owner of a Class A Certificate as shown in the Register, of
any amount with respect to any distribution of principal or interest on the
Class A Certificates. No Person other than a registered Owner of a Class A
Certificate as shown in the Register shall receive a certificate evidencing such
Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice to the
effect that the Depository has determined to substitute a new nominee in place
of Cede & Co., and subject to the provisions hereof with respect to the payment
of interest by the mailing of checks or drafts to the registered Owners of Class
A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the
51
close of business on a Record Date, the name "Cede & Co." in this Agreement
shall refer to such new nominee of the Depository.
(h) In the event that (i) the Depository or the Depositor advises the
Trustee in writing that the Depository is no longer willing, qualified or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Depositor or the Trustee is unable
to located a qualified successor, (ii) the Depositor at its sole option elects
to terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, beneficial owners having not less than 51% of
the Voting Rights evidenced by the Class A Certificates advise the Trustee and
the Depository through the Direct Participants in writing that the continuation
of a book-entry system through the Depository is no longer in the best interests
of beneficial owners, the Class A Certificates shall no longer be restricted to
being registered in the Register in the name of Cede & Co. (or a successor
nominee) as nominee of the Depository. At that time, the Depositor may determine
that the Class A Certificates shall be registered in the name of and deposited
with a successor depository operating a global book-entry system, as may be
acceptable to the Depositor and at the Depositor's expense, or such depository's
agent or designee but, if the Depositor does not select such alternative global
book-entry system, then the Class A Certificates may be registered in whatever
name or names registered Owners of Class A Certificates transferring Class A
Certificates shall designate, in accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates and all notices with respect to such Class A
Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) in the case of any mutilated Certificate, such
mutilated Certificate shall first be surrendered to the Trustee, and in the case
of any destroyed, lost or stolen Certificate, there shall be first delivered to
the Trustee such security or indemnity as may be reasonably required by it to
hold the Trustee and the Certificate Insurer harmless, then, in the absence of
notice to the Trustee or the Registrar that such Certificate has been acquired
by a bona fide purchaser, the Trustee shall execute, authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Class, tenor and aggregate principal
amount, bearing a number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Registrar or Trustee may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto; any
other expenses in connection with such issuance shall be an expense of the
Trust.
Every new Certificate issued pursuant to this Section in exchange for
or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.06 Persons Deemed Owners.
The Certificate Insurer, the Trustee and any agent of the Trustee may
treat the Person in whose name any Certificate is registered as the Owner of
such Certificate for the purpose of receiving distributions with respect to such
Certificate and for all other purposes whatsoever, and neither the Certificate
Issuer, the Trustee nor any agent of the Trustee shall be affected by notice to
the contrary.
Section 5.07 Cancellation.
All Certificates surrendered for registration of transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. No Certificate shall be
authenticated in lieu of or in exchange for any Certificate cancelled as
provided in this Section, except as expressly permitted by this Agreement. All
cancelled Certificates may be held by the Trustee in accordance with its
standard retention policy.
Section 5.08 Limitation on Transfer of Ownership Rights.
(a) No sale or other transfer of record or beneficial ownership of a
Class R Certificate (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate (whether pursuant
to a purchase, a transfer resulting from a default under a secured lending
agreement or otherwise) to a Disqualified Organization shall be deemed to be of
no legal force or effect whatsoever and such transferee shall not be deemed to
be an Owner for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class R Certificate. Furthermore, in no event
shall the Trustee accept surrender for transfer or registration of transfer, or
register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee in the form attached hereto as Exhibit H.
Each holder of a Class R Certificate by his acceptance thereof, shall be deemed
for all purposes to have consented to the provisions of this Section 5.08(a).
(b) No other sale or other transfer of record or beneficial ownership
of a Class X Certificate or a Class R Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee shall require a written opinion of counsel
acceptable to and in form and substance satisfactory to the Depositor, the
Registrar, the Trustee and the Certificate Insurer in the event that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which opinion of counsel shall not be an expense
of the Trustee, the Trust Estate, the Registrar, the Servicer, the Seller, the
Depositor or the Certificate Insurer, and (ii) the Trustee shall require the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Depositor, the Registrar, the Trustee and the
Certificate Insurer certifying to the Trustee, the Certificate Insurer, the
Registrar and the Depositor the facts surrounding such transfer, which
investment letter shall not be an expense of the Trustee, the Trust
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Estate, the Certificate Insurer, the Registrar,the Servicer, the Seller, the
Depositor. The Owner of a Class X Certificate or a Class R Certificate desiring
to effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Certificate Insurer, the Depositor, the Servicer, the Registrar and the
Seller against any liability that may result if the transfer is not so exempt or
is not made in accordance with such federal and state laws.
(c) No transfer of a Class X or Class R Certificate shall be made
unless the Registrar shall have received either: (i) a representation letter
from the transferee of such Class X or Class R Certificate, acceptable to and in
form and substance satisfactory to the Registrar, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA nor a
plan or other arrangement subject to Section 406 of ERISA nor a plan or other
arrangement subject to Section 4975 of the Code (collectively, a "Plan"), nor is
acting on behalf of any Plan nor using the assets of any Plan to effect such
transfer or in the case of an insurance company purchasing such Certificates,
with funds from its general account, the transfer is covered by the Prohibited
Transaction Class Exemption 95-60 or (ii) in the event that any Class X or Class
R Certificates is purchased by a Plan, or by a person or entity acting on behalf
of any Plan or using the assets of any Plan to effect such transfer, an Opinion
of Counsel, acceptable to and in form and substance satisfactory to the
Depositor, the Trustee and the Registrar, which Opinion of Counsel shall not be
at the expense of the Trustee or the Trust, to the effect that the purchase or
holding of any Class X or Class R Certificates will not result in the assets of
the Trust being deemed to be "plan assets," will not cause the Trust to be
subject to the fiduciary requirements and prohibited transaction provisions of
ERISA and the Code, and will not subject the Depositor, Seller, Registrar,
Servicer, Certificate Insurer or the Trustee to any obligation or liability in
addition to those expressly undertaken under this Agreement. Notwithstanding
anything else to the contrary herein, any purported transfer of a Certificate to
or on behalf of any Plan without the delivery to the Trustee of an Opinion of
Counsel as described above shall be null and void and of no effect.
(d) No sale or other transfer of any Class A Certificate may be made to
the Depositor, the Seller or the Master Servicer. No sale or other transfer of
any Class A Certificate may be made to an affiliate of the Seller unless the
Trustee and the Certificate Insurer shall have been furnished with an opinion of
counsel acceptable to the Certificate Insurer and the Trustee experienced in
federal bankruptcy matters to the effect that such sale or transfer would not
adversely affect the character of the conveyance of the Mortgage Loans to the
Trust as a sale. To the extent any payment to an Owner of a Class A Certificate
constitutes an Insured Payment, such payment will not be made to the Seller, the
Depositor or the Master Servicer or any Subservicer. The Class R Certificate
issued to Trustee on the Startup Day may not be transferred or sold to any
Person, except to a Person who accepts the appointment of Tax Matters Person
pursuant to Section 11.18 hereof.
Section 5.09 Assignment of Rights.
An Owner may pledge, encumber, hypothecate or assign all or any part of
its right to receive distributions hereunder, but such pledge, encumbrance,
hypothecation or assignment shall not constitute a transfer of an ownership
interest sufficient to render the transferee an Owner of the Trust without
compliance with the provisions of Section 5.04 and Section 5.08 hereof.
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ARTICLE VI
COVENANTS
Section 6.01 Distributions.
On each Distribution Date, the Trustee will withdraw amounts from the
Distribution Account and make the distributions with respect to the Certificates
in accordance with the terms of the Certificates and this Agreement. Such
distributions shall be made (i) by check or draft mailed on each Distribution
Date or (ii) if requested by any Owner of (A) a Class A-1, Class A-2, Class A-3,
Class A-4 or Class A-5 Certificate having an original principal balance of not
less than $1,000,000 or (B) a Class X Certificate or Class R Certificate having
a Percentage Interest of not less than 10% in writing not later than one
Business Day prior to the applicable Record Date (which request does not have to
be repeated unless it has been withdrawn), to such Owner by wire transfer to an
account within the United States designated no later than five Business Days
prior to the related Record Date, made on each Distribution Date, in each case
to each Owner of record on the immediately preceding Record Date.
Section 6.02 Money for Distributions to be Held in Trust;
Withholding.
(a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Distribution
Account or from Insured Payments shall be made by and on behalf of the Trustee,
and no amounts so withdrawn from the Distribution Account for payments of
Certificates and no Insured Payment shall be paid over to the Trustee except as
provided in this Section
(b) Whenever the Trustee has appointed one or more Paying Agents
pursuant to Section 11.15 hereof, the Trustee will, on the Business Day
immediately preceding each Distribution Date, cause to be deposited with such
Paying Agents in immediately available funds an aggregate sum sufficient to pay
the amounts then becoming due (to the extent funds are then available for such
purpose in the Distribution Account for the Class to which such amounts are due)
such sum to be held in trust for the benefit of the Owners entitled thereto.
(c) The Trustee may at any time direct any Paying Agent to pay to the
Trustee all sums held in trust by such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
(d) Each Paying Agent, including the Trustee on behalf of the Trust,
shall comply with all requirements of the Code and applicable state and local
law with respect to the withholding from any distributions made by it to any
Owner of any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
(e) Any money held by the Trustee or any Paying Agent in trust for the
payment of any amount due with respect to any Class A Certificate and remaining
unclaimed by the Owner of such Class A Certificate for the period then specified
in the escheat laws of the State of New York after such amount has become due
and payable shall be discharged from such trust and be paid to the Owners of the
Class R Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the Owners of the
Class R Certificates for payment thereof (but only to the extent of the
55
amounts so paid to the Owners of the Class R Certificates) and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent before
being required to make any such payment, may, at the expense of the Trust, cause
to be published once, in the eastern edition of The Wall Street Journal, notice
that such money remains unclaimed and that, after a date specified therein,
which shall be not fewer than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be paid to the Owners of the
Class R Certificates. The Trustee shall also adopt and employ, at the expense of
the Trust, any other reasonable means of notification of such payment (including
but not limited to mailing notice of such payment to Owners whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Registrar, the Trustee or any Paying Agent, at the last address
of record for each such Owner).
Section 6.03 Protection of Trust Estate.
(a) The Trustee will hold the Trust Estate in trust for the benefit of
the Owners and the Certificate Insurer and, upon request of the Certificate
Insurer or, with the consent of the Certificate Insurer, at the request of the
Depositor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 11.14 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request from the Depositor or the Certificate Insurer, to:
(i) more effectively hold in trust all or any portion
of the Trust Estate;
(ii) perfect, publish notice of, or protect the validity
of any grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Trustee, and the ownership interests of the Owners represented
thereby, in such Trust Estate against the claims of all Persons and
parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Depositor to take any action pursuant to this Section
6.03 to the other parties hereto.
(b) The Trustee shall have the power to enforce, and shall enforce the
obligations and rights of the other parties to this Agreement, and of the
Certificate Insurer or the Owners, by action, suit or proceeding at law or
equity, and shall also have the power to enjoin, by action or suit in equity,
any acts or occurrences which may be unlawful or in violation of the rights of
the Certificate Insurer as such rights are set forth in this Agreement;
provided, however, that nothing in this Section shall require any action by the
Trustee unless the Trustee shall first (i) have been furnished indemnity
satisfactory to it and (ii) when required by this Agreement, have been requested
by the Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Class A
Certificates then outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates; provided, further, however, that if
there is a dispute with respect to payments under the Certificate Insurance
Policy the Trustee's sole responsibility is to the Owners.
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(c) The Trustee shall execute any instrument required pursuant to this
Section so long as such instrument does not conflict with this Agreement or with
the Trustee's fiduciary duties hereunder, or adversely affect its rights and
immunities hereunder.
Section 6.04 Performance of Obligations.
The Trustee will not take any action that would release any Person from
any of such Person's covenants or obligations under any instrument or document
relating to the Certificates or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in performing
its duties hereunder pursuant to Section 10.03(g).
Section 6.05 Negative Covenants.
The Trustee will not permit the Trust to:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on, or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Owner by reason of the payment
of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty any indebtedness of any Person
except pursuant to this Agreement;
(iv) dissolve or liquidate in whole or in part, except pursuant
to Article IX hereof; or
(v) (A) permit the validity or effectiveness of this Agreement
to be impaired, or permit any Person to be released from any covenants
or obligations with respect to the Trust or to the Certificates under
this Agreement, except as may be expressly permitted hereby or (B)
permit any lien, charge, adverse claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the Trust Estate or any part thereof or any interest therein
or the proceeds thereof.
Section 6.06 No Other Powers.
The Trustee will not permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.03
hereof.
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Section 6.07 Limitation of Suits.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Agreement or the Certificate Insurance Policy,
or for the appointment of a receiver or trustee of the Trust, or for any other
remedy with respect to an event of default hereunder, unless:
(1) such Owner has previously given written notice to the
Depositor and the Trustee of such Owner's intention to
institute such proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the Class A Certificates then Outstanding or,
if there are no Class A Certificates then Outstanding, by such
percentage of the Percentage Interests represented by the
Class X Certificates and the Class R Certificates, shall have
made written request to the Trustee to institute such
Proceeding in its own name as Trustee establishing the Trust;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer consented in writing thereto (unless
the Certificate Insurer is the party against whom the
proceeding is directed): and
(6) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Owners
of a majority of the Percentage Interests represented by the
Class A Certificates or, if there are no Class A Certificates
then Outstanding, by such majority of the Percentage Interests
represented by the Class X Certificates and the Class R
Certificates:
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing less
than a majority of the applicable Class of Certificates and each conforming to
paragraphs (1)-(6) of this Section 6.07, the Certificate Insurer in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provision of this Agreement (unless the Certificate Insurer is the
party against whom the proceeding is directed).
Section 6.08 Unconditional Rights of Owners to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Owner of any
Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and
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therein with respect to such Certificate or to institute suit for the
enforcement of any such distribution, and such right shall not be impaired
without the consent of such Owner.
Section 6.09 Rights and Remedies Cumulative.
Except as otherwise provided herein, no right or remedy herein
conferred upon or reserved to the Trustee, the Certificate Insurer or the Owners
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. Except as otherwise provided herein, the assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver.
No delay of the Trustee, the Certificate Insurer or any Owner of any
Certificate to exercise any right or remedy under this Agreement with respect to
any event described in Section 8.20(a) or (b) shall impair any such right or
remedy or constitute a waiver of any such event or an acquiescence therein.
Every right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer or the
Owners, as the case may be.
Section 6.11 Control by Owners.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class X Certificates and the Class R Certificates then
Outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Certificates or
exercising any trust or power conferred on the Trustee with respect to the
Certificates or the Trust Estate, including, but not limited to, those powers
set forth in Section 6.03 and Section 8.20 hereof, provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Agreement;
(ii) the Trustee shall have been provided with indemnity
satisfactory to it; and
(iii) the Trustee may take any other action deemed proper by the
Trustee, as the case may be, which is not inconsistent with
such direction; provided, however, that the Seller or the
Trustee, as the case may be, need not take any action which it
determines might involve it in liability or may be unjustly
prejudicial to the Owners not so directing.
Section 6.12 Indemnification.
The Depositor agrees to indemnify and hold the Trustee, the Certificate
Insurer and each Owner harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Trustee, the Certificate Insurer and any Owner
may sustain in any way related to the negligent or willful failure of the
Depositor to perform its duties
59
in compliance with the terms of this Agreement. The Depositor shall immediately
notify the Trustee, the Certificate Insurer and each Owner if such a claim is
made by a third party with respect to this Agreement, and the Depositor shall
assume (with the consent of the Trustee) the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Master Servicer, the Seller, the Trustee, the Certificate Insurer
and/or any Owner in respect of such claim. The Trustee may, if necessary,
reimburse the Depositor from amounts otherwise distributable on the Class X or
Class R Certificates for all amounts advanced by it pursuant to the preceding
sentence, except when the claim relates directly to the failure of the Depositor
to perform its duties in compliance with the terms of this Agreement. In
addition to the foregoing, the Seller agrees to indemnify and hold the Trustee,
the Certificate Insurer and each Owner harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs, judgments,
and other costs, fees and expenses that the Trustee, the Certificate Insurer and
any Owner may sustain in any way related to the breach by the Seller of its
representations and warranties set forth in Section 3.04(a) hereof with respect
to a Mortgage Loan if such Mortgage Loan qualifies as a "high cost mortgage"
pursuant to Section 226.32 of the Truth-in-Lending Act, as amended. The
provisions of this Section 6.12 shall survive the termination of this Agreement
and the payment of the outstanding Certificates.
Section 6.13 Access to Owners of Certificates' Names and Addresses. (a)
If any Owner (for purposes of this Section 6.13, an "Applicant") applies in
writing to the Trustee, and such application states that the Applicant desires
to communicate with other Owners with respect to their rights under this
Agreement or under the Certificates and is accompanied by a copy of the
communication which such Applicant proposes to transmit, then the Trustee shall,
at the expense of such Applicant, within ten (10) Business Days after the
receipt of such application, furnish or cause to be furnished to such Applicant
a list of the names and addresses of the Owners of record as of the most recent
Distribution Date.
(b) Every Owner, by receiving and holding such list, agrees with the
Trustee that the Trustee shall not be held accountable in any way by reason of
the disclosure of any information as to the names and addresses of the owners
hereunder, regardless of the source from which such information was derived.
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ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01 Collection of Money.
Except as otherwise expressly provided herein, the Trustee shall demand
payment or delivery of all money and other property payable to or receivable by
the Trustee pursuant to this Agreement or the Certificate Insurance Policies,
including (a) all payments due on the Mortgage Loans in accordance with the
respective terms and conditions of such Mortgage Loans and required to be paid
over to the Trustee by the Master Servicer or by any Sub-Servicer and (b)
Insured Payments. The Trustee shall hold all such money and property received by
it, other than pursuant to or as contemplated by Section 6.02(e) hereof, as part
of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.02 Establishment of Accounts;
(a) The Depositor shall cause to be established on the Startup Day, and
the Trustee shall maintain, at the Corporate Trust Office, the Distribution
Account, which is to be held by the Trustee on behalf of the Owners of the
Certificates, the Trustee and the Certificate Insurer, as their interests may
appear.
(b) [Reserved.]
(c) On the Business Day after each Determination Date the Trustee shall
determine (subject to the terms of Section 10.03(j) hereof, based solely on
information provided to it by the Master Servicer) with respect to the
immediately following Distribution Date, the amount that is expected to be on
deposit in the Distribution Account as of such Distribution Date for the Fixed
Rate Group (disregarding the amount of any Insured Payments), which amount will
be equal to the sum of (x) the amount on deposit therein with respect to such
Fixed Rate Group excluding the amount of any Total Monthly Excess Cashflow from
the Fixed Rate Group included in such amount plus (y) any amount of Total
Monthly Excess Cashflow from the Adjustable Rate Group to be applied on such
Distribution Date to the Fixed Rate Certificates. The amount described in clause
(x) of the preceding sentence with respect to each Distribution Date is the
"Fixed Rate Group Available Funds"; the sum of the amounts described in clauses
(x) and (y) of the preceding sentence with respect to each Distribution Date is
the "Fixed Rate Group Total Available Funds."
(d) On the Business Day after each Determination Date the Trustee shall
determine (subject to the terms of Section 10.03(j) hereof, based solely on
information provided to it by the Master Servicer) with respect to the
immediately following Distribution Date, the amount that is expected to be on
deposit in the Distribution Account as of such Distribution Date for the
Adjustable Rate Group (disregarding the amount of any Insured Payments), which
amount will be equal to the sum of (x) the amount on deposit therein with
respect to such Group excluding the amount of any Total Monthly Excess Cashflow
from the Adjustable Rate Group included in such amount plus (y) any amount of
Total Monthly Excess Cashflow from the Fixed Rate Group to be applied on such
Distribution Date to the Class A-5 Certificates. The amount described in clause
(x) of the preceding sentence with respect to each Distribution Date is the
"Adjustable Rate Group Available Funds"; the sum of the amounts described in
clauses (x) and (y) of the preceding sentence with respect to each Distribution
Date is the "Adjustable Rate Group Total Available
61
Funds." Collectively, the Fixed Rate Group Total Available Funds and the
Adjustable Rate Group Total Available funding is the "Total Available Funds."
Section 7.03 Flow of Funds.
(a) With respect to the Fixed Rate Group, the Trustee shall deposit to
the Distribution Account, without duplication, upon receipt, any Insured
Payments relating to such Group, the proceeds of any liquidation of the assets
of the Trust insofar as such assets relate to the Fixed Rate Group, all
remittances made to the Trustee pursuant to Section 8.08(d)(ii) insofar as such
assets relate to the Fixed Rate Group, and the Fixed Rate Group Monthly
Remittance Amount remitted by the Master Servicer.
(b) With respect to the Adjustable Rate Group, the Trustee shall
deposit to the Distribution Account without duplication, upon receipt, any
Insured Payments relating to such Group, the proceeds of any liquidation of the
assets of the Trust insofar as such assets relate to the Adjustable Rate Group,
all remittances made to the Trustee pursuant to Section 8.08(d)(ii) insofar as
such assets relate to the Adjustable Rate Group and the Adjustable Rate Group
Monthly Remittance Amount remitted by the Master Servicer.
(c) With respect to the Distribution Account, on each Distribution
Date, the Trustee shall make the following allocations, disbursements and
transfers for each Mortgage Loan Group from amounts deposited therein pursuant
to subsections (a) and (b), respectively, in the following order of priority,
and each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) first, on each Distribution Date, the Trustee shall
allocate an amount equal to the sum of (x) the Total Monthly Excess Spread with
respect to such Mortgage Loan Group and Distribution Date plus (y) any
Subordination Reduction Amount with respect to such Mortgage Loan Group and
Distribution Date (such sum (net of the related Premium Amount paid pursuant to
clause (iii)(B) below, as applicable, and the Trustee Fee allocable to such
Mortgage Loan Group then payable under clause (iii)(D) below) being the "Total
Monthly Excess Cashflow" with respect to such Mortgage Loan Group and
Distribution Date) with respect to such Mortgage Loan Group in the following
order of priority:
(A) first, such Total Monthly Excess Cashflow with
respect to each Mortgage Loan Group shall be
allocated to the payment of the related Class A
Distribution Amount pursuant to clauses (iii)(A) or
(iii)(C), as applicable, below on such Distribution
Date with respect to the related Mortgage Loan Group
in an amount equal to the amount, if any, by which
(x) the related Class A Distribution Amount
(calculated for this purpose only by reference to
clause (b) of the definition of the Fixed Rate Group
Principal Distribution Amount or Adjustable Rate
Group Principal Distribution Amount, as the case may
be, and without any Subordination Increase Amount
with respect to the related Mortgage Loan Group) for
such Distribution Date exceeds (y) the Available
Funds with respect to such Mortgage Loan Group for
such Distribution Date (the amount of such
difference being the "Fixed Rate Group Available
Funds Shortfall" with respect to the Fixed Rate
Group, and the "Adjustable Rate Group Available
Funds Shortfall" with respect to the Adjustable Rate
Group);
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(B) second, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocation described in clause
(A) above shall be allocated against any Available
Funds Shortfall with respect to the other Mortgage
Loan Group and to the payment of the related Class A
Distribution Amount with respect to the other
Mortgage Loan Group pursuant to clause (iii) below;
(C) third, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A) and (B) above shall be disbursed to the
Certificate Insurer in respect of amounts owed on
account of any Reimbursement Amount with respect to
the related Mortgage Loan Group; and
(D) fourth, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A), (B) and (C) above shall be disbursed to the
Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group.
(ii) second, on each Distribution Date, the Trustee shall apply the
amount, if any, of the Total Monthly Excess Cashflow with
respect to a Mortgage Loan Group on a Distribution Date
remaining after the allocations described in clause (i) above
(the "Net Monthly Excess Cashflow") for such Mortgage Loan
Group and Distribution Date in the following order of
priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the allocation of a
Subordination Increase Amount to the payment of the
related Class A Distribution Amount pursuant to
clause (iii) below, any Subordination Deficiency
Amount with respect to the related Mortgage Loan
Group as of such Distribution Date;
(B) second, any Net Monthly Excess Cashflow remaining
after the application described in clause (A) above
shall be used to reduce to zero, through the
allocation of a Subordination Increase Amount to the
payment of the related Class A Distribution Amount
pursuant to clause (iii) below, the Subordination
Deficiency Amount, if any, with respect to the other
Mortgage Loan Group; and
(C) third, any Net Monthly Excess Cashflow remaining
after the applications described in clauses (A) and
(B) above shall be paid to the Master Servicer to the
extent of any ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇ Advances and
unreimbursed Servicing Advances:
(iii) third, following the making by the Trustee of all allocations,
transfers and disbursements described above under this
subsection (c), from amounts (including any related Insured
Payment) then on deposit in the Distribution Account with
respect to the related Mortgage Loan Group, the Trustee shall
distribute:
(A) to the Owners of the Class A Certificates of the
related Mortgage Loan Group, the Fixed Rate Group
Current Interest or Class A-5 Current Interest, as
applicable,
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on a pro rata basis without any priority among such
Class A Certificates, until the applicable Class A
Certificate Termination Date;
(B) to the Certificate Insurer, on each Distribution Date
for the related Mortgage Loan Group, the prorated
Premium Amount determined by the relative Certificate
Principal Balance of the related Classes of Class A
Certificates for such Distribution Date;
(C) to the Owners of the related Class of Class A
Certificates, (I) the Fixed Rate Group Principal
Distribution Amount shall be distributed as follows:
(a) first, to the Owners of the Class A-1
Certificates until the Class A-1 Certificate
Termination Date, (b) second, to the Owners of the
Class A-2 Certificates until the Class A-2
Certificate Termination Date, (c) third, to the
Owners of the Class A-3 Certificates until the Class
A-3 Certificate Termination Date and (d) fourth, to
the Owners of the Class A-4 Certificates until the
Class A-4 Certificate Termination Date and (II) the
Adjustable Rate Group Principal Distribution Amount
shall be distributed to the Owners of the Class A-5
Certificates until the Class A-5 Certificate
Termination Date;
(D) to the Trustee, the Trustee Fees with respect to such
Mortgage Loan Group then due (plus any expenses owing
to the Trustee pursuant to Section 3.02(e) of the
Insurance Agreement);
(E) to the Class A-5 Certificates, the Basis Risk
Carryover Amount outstanding on such Distribution
Date;
(F) to the Owners of the Class X Certificates, the Class
X-1 Distribution Amount and Class X-2 Distribution
Amount; and
(G) to the Owners of the Class R Certificates, any
amounts remaining in the Distribution Account.
(d) On any Distribution Date during the continuance of any
Certificate Insurer Default:
(i) Any amounts otherwise payable to the Certificate
Insurer as Premium Amounts or Reimbursement Amounts
shall be retained in the Distribution Account as
Total Available Funds; and
(ii) If there is a Subordination Deficit, then the Class A
Principal Distribution Amount for such Distribution
Date shall be distributed pro rata to the Owners of
any Outstanding Class A Certificates on such
Distribution Date.
(e) Notwithstanding clause (c)(iii) above, the aggregate amounts
distributed on all Distribution Dates to the Owners of the Class A Certificates
on account of principal pursuant to clause (c)(iii)(C) shall not exceed the
original Certificate Principal Balance of the related Certificates.
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(f) Upon receipt of Insured Payments from the Certificate Insurer on
behalf of the Owners of the Class A Certificates, the Trustee shall deposit such
Insured Payments in the Distribution Account and shall distribute such Insured
Payments, or the proceeds thereof, (i) in the case of the Fixed Rate
Certificates, through the Distribution Account to the Owners of such
Certificates and (ii) in the case of the Class A-5 Certificates, through the
Distribution Account to the Owners of such Certificates.
(g) Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Certificate Insurance
Policy shall not be considered payment of such Certificates from the Trust and
shall not result in the payment of or the provision for the payment of the
principal of or interest on such Certificates within the meaning of Section
7.03. The Depositor, the Master Servicer and the Trustee acknowledge, and each
Owner by its acceptance of a Certificate agrees, that without the need for any
further action on the part of the Certificate Insurer, the Depositor, the Master
Servicer, the Trustee or the Registrar (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Class A Certificates to the Owners of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Owners to receive such
principal and interest [together with any interest thereon at the applicable
Pass-Through Rate from the Trust] and (b) the Certificate Insurer shall be paid
such principal and interest only from the sources and in the manner provided
herein for the payment of such principal and interest.
It is understood and agreed that the intention of the parties is that
the Certificate Insurer shall not be entitled to receive all or any portion of
Reimbursement Amounts unless on such Distribution Date the Owners of the Class A
Certificates shall also have received the full amount of the Class A
Distribution Amount for such Distribution Date.
The Trustee or Paying Agent shall (i) receive as attorney-in-fact of
each Owner of Class A Certificates any Insured Payment from the Certificate
Insurer and (ii) disburse the same to the Owners of the related Class A
Certificates as set forth in Section 7.03(c)(iii). Insured Payments disbursed by
the Trustee or Paying Agent from proceeds of the Certificate Insurance Policy
shall not be considered payment by the Trust, nor shall such payments discharge
the obligation of the Trust with respect to such Class A Certificates; provided,
however, that in the event that the Owners of the Class A Certificates shall
have received the full amount of the Class A Distribution Amount for such
Distribution Date, the Certificate Insurer shall be entitled to receive the
related Reimbursement Amount pursuant to Section 7.03(c)(i) hereof.
The rights of the Owners to receive distributions from the proceeds of
the Trust Estate, and all ownership interests of the Owners in such
distributions, shall be as set forth in this Agreement. In this regard, all
rights of the Owners of the Class X Certificates and the Class R Certificates to
receive distributions in respect of the Class X Certificates and the Class R
Certificates, and all ownership interests of the Owners of the Class X
Certificates and the Class R Certificates in and to such distributions, shall be
subject and subordinate to the preferential rights of the holders of the Class A
Certificates to receive distributions thereon and the ownership interests of
such Owners in such distributions, as described herein. In accordance with the
foregoing, the ownership interests of the Owners of the Class X Certificates and
the Class R Certificates in amounts deposited in the Accounts from time to time
shall not vest unless and until such amounts are distributed in respect of the
Class X Certificates and the Class R Certificates in accordance with the terms
of this Agreement. Notwithstanding anything contained in this Agreement to the
contrary, the Owners of the Class X Certificates and the Class R Certificates
shall not be required to
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refund any amount properly distributed on the Class X Certificates and the Class
R Certificates pursuant to this Section 7.03.
Section 7.04 Reserved.
Section 7.05 Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
the Distribution Account held by the Trustee for the benefit of the Owners shall
be invested and reinvested by the Trustee in the name of the Trustee for the
benefit of the Owners, as directed in writing by the Depositor, in one or more
Eligible Investments bearing interest or sold at a discount. If the Depositor
shall have failed to give investment directions to the Trustee then the Trustee
shall invest in money market funds described in Section 7.07(i); to be
redeemable without penalty no later than the Business Day immediately preceding
the next Distribution Date. The bank serving as Trustee or any affiliate thereof
may be the obligor on any investment which otherwise qualifies as an Eligible
Investment. No investment in any Account shall mature later than the Business
Day immediately preceding the next Distribution Date.
(b) If any amounts are needed for disbursement from any Account held by
the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.01 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except to
the extent that the bank serving as Trustee is the obligor thereon).
(d) All income or other gain from investments in any Account held by
the Trustee shall be deposited in such Account immediately on receipt, and any
loss resulting from such investments shall be charged to such Account, as
appropriate, subject to the provisions of Section 8.08(b) requiring that the
Master Servicer contribute funds in an amount equal to such loss in the case of
the Collection Account and permitting the Master Servicer to retain all income
or gain with respect to investments of funds in the Collection Account.
Section 7.06 Payment of Trust Expenses.
(a) The Trustee shall make demand on the Master Servicer to pay the
amount of the expenses of the Trust (other than payments of premiums to the
Certificate Insurer) (including Trustee's fees and expenses not covered by
Section 7.03(c)(iii)(D)) and the Master Servicer shall promptly pay such
expenses directly to the Persons to whom such amounts are due.
(b) The Master Servicer shall pay directly the reasonable fees and
expenses of counsel to the Trustee.
Section 7.07 Eligible Investments.
The following are Eligible Investments:
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(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,
Federal Housing Administration debentures, FHLMC senior debt obligations, and
FNMA senior debt obligations, but excluding any of such securities whose terms
do not provide for payment of a fixed dollar amount upon maturity or call for
redemption;
(b) Federal Housing Administration debentures;
(c) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(d) 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 A-1 or
better by Standard & Poor's and P-1 by Moody's;
(e) Deposits of any bank or savings and loan association (the long-term
deposit rating of which is Baa3 or better by Moody's and BBB by Standard &
Poor's) 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;
(f) Investment agreements approved by the Certificate Insurer provided:
1. The agreement is with a bank or insurance company which has
unsecured, uninsured and unguaranteed senior debt obligation rated Aa2 or better
by Moody's and AA or better by Standard & Poor's, or is the lead bank of a
parent bank holding company with an uninsured, unsecured and unguaranteed senior
debt obligation meeting such rating requirements, and
2. Moneys invested thereunder may be withdrawn without any penalty,
premium or charge upon not more than one day's notice (provided such notice may
be amended or canceled at any time prior to the withdrawal date), and
3. The agreement is not subordinated to any other obligations of such
insurance company or bank, and
4. The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
5. The Trustee receives an opinion of counsel that such agreement is
an enforceable obligation of such insurance company or bank;
(g) Repurchase agreements collateralized by securities described in (a)
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 P-1 or Aa2, respectively, or better by
Moody's and A-1+ or AA, respectively, or better by Standard & Poor's, provided:
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a. A master repurchase agreement or specific written
repurchase agreement governs the transaction, and
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, (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, or (c) a bank
approved in writing for such purpose by the Certificate Insurer, 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, and
c. A perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 CFR 306.1 et
seq. or 31 CFR 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%.
(h) Commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of Standard & Poor's and
Moody's; and
(i) Investments in no load money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa by Moody's;
provided that no instrument described above shall evidence either the right to
receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument 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 all instruments described hereunder shall mature at par on or prior to the
next succeeding Distribution Date unless otherwise provided in this Agreement
and that no instrument described hereunder may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Section 7.08 Accounting and Directions by Trustee.
(a) On the Business Day after each Determination Date occurring on or
prior to the later to occur of the Class A-1 Certificate Termination Date, Class
A-2 Certificate Termination Date, Class A-3 Certificate Termination Date, Class
A-4 Certificate Termination Date and Class A-5 Certificate Termination Date, the
Trustee shall determine, no later than 12:00 noon on such Determination Date,
whether an Insured Payment will be required to be made by the Certificate
Insurer on the following Distribution Date. If the Trustee determines that an
Insured Payment will be required to be made by the Certificate Insurer on the
following Distribution Date then no later than 12:00 noon on the Business Day
immediately preceding the related Distribution Date the Trustee shall furnish
the Certificate Insurer and
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the Depositor with a completed Notice in the form set forth as Exhibit I hereto.
The Notice shall specify the amount of Insured Payment and shall constitute a
claim for an Insured Payment pursuant to the Certificate Insurance Policy.
(b) By 12:00 noon New York time, on the Business Day preceding each
Distribution Date (or such earlier period as shall be agreed by the Depositor
and the Trustee), the Trustee shall notify (subject to the terms of Section
10.03(j) hereof, based solely on information provided to the Trustee by the
Master Servicer) the Depositor, the Seller, the Certificate Insurer and each
Owner 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) The aggregate amount then on deposit in the
Distribution Account;
(2) The Class A Distribution Amount, with respect to each
Class individually, and all Classes in the aggregate,
on the next Distribution Date;
(3) The amount of any Subordination Increase Amount;
(4) The amount of any Insured Payment to be made by the
Certificate Insurer on such Distribution Date;
(5) The application of the amounts described in clauses
(1), (3) and (4) preceding to the allocation and
distribution of the related Class A Distribution
Amounts on such Distribution Date in accordance with
Section 7.03 hereof;
(6) The Certificate Principal Balance of each Class of
Class A Certificates, the aggregate amount of the
principal of each Class of Class A Certificates to be
paid on such Distribution Date and the remaining
Certificate Principal Balance of each Class of Class
A Certificates following any such payment;
(7) The amount, if any, of any Realized Losses for the
related Due Period; and
(8) The amount of any Subordination Reduction Amount.
Section 7.09 Reports by Trustee to Owners and Certificate Insurer.
(a) On each Distribution Date the Trustee shall report in writing to
the Depositor, each Owner, the Certificate Insurer, the Underwriters, Standard &
Poor's and Moody's:
(i) the amount of the related distribution to Owners of each
Class of Certificates allocable to principal, separately identifying
the aggregate amount of any principal prepayments included therein, any
principal portion of any Carry Forward Amount included in such
distribution and any remaining principal portion of any Carry Forward
Amount after giving effect to such distribution;
(ii) the amount of such distribution to Class A
Certificateholders of such Class of Certificates allocable to interest,
any interest portion of any Carry Forward Amount included in such
distribution, any remaining interest portion of any Carry Forward
Amount after giving effect
69
to such distribution, any amount paid on account of any outstanding
Basis Risk Carryover Amount and any remaining Basis Risk Carryover
Amount after giving effect to such distribution;
(iii) the Certificate Principal Balance of each Class of Class A
Certificates after giving effect to the distribution of principal on
such Distribution Date;
(iv) the aggregate Certificate Principal Balance for the
following Distribution Date;
(v) the related amount of the Servicing Fees paid to or retained
by the Master Servicer;
(vi) the Pass-Through Rate for each such Class of Class A
Certificates with respect to the current Due Period;
(vii) the amount of P&I Advances and Servicing Advances, stated
separately, included in the distribution on such Distribution Date and
the aggregate amount of P&I Advances and Servicing Advances, stated
separately, outstanding as of the close of business of such
Distribution Date;
(viii) the number and aggregate principal amounts of Mortgage Loans
(A) delinquent (exclusive of Mortgage Loans in foreclosure)(1) 1 to 30
days, (2) 31 to 60 days, (3) 61 to 90 days and (4) 91 or more days and
(B) in foreclosure and delinquent (1) 1 to 30 days, (2) 31 to 60 days,
(3) 61 to 90 days and (4) 91 or more days, as of the close of business
on the last day of the calendar month preceding such Distribution Date;
(ix) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number and
principal balance of such Mortgage Loan as of the close of business on
the Determination Date preceding such Distribution Date;
(x) the total number and principal balance of any REO Properties
as of the close of business on the Determination Date preceding such
Distribution Date;
(xi) the amount of any Insured Payment included in the amounts
distributed to the holders of each Class of the Class A Certificates on
such Payment Date;
(xii) the aggregate loan balance of all Mortgage Loans and the
aggregate loan balance of the Mortgage Loans in each Loan Group after
giving effect to any payment of principal on such Distribution Date;
(xiii) the Subordinated Amount and Subordination Deficit for each
Loan Group, if any, remaining after giving effect to all distributions
and transfers on such Distribution Date;
(xiv) based upon information furnished by the Master Servicer such
information as may be required by Section 6049(d)(7)(C) of the Code and
the regulations promulgated thereunder to assist the holders of the
Class A Certificates in computing their market discount;
(xv) the total of any Substitution Adjustments or Loan Purchase
Price amounts included in such distribution with respect to each Loan
Group;
70
(xvi) the weighted average Mortgage Rate of the Mortgage Loans
with respect to each Loan Group; and
(xvii) such other information as the Certificate Insurer may
reasonably request with respect to delinquent Mortgage Loans.
The Master Servicer shall provide to the Trustee the information
described in Section 8.08(d)(iii) and in clause (b) below no later than the
Determination Date 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
shall be based solely upon information contained in the monthly servicing report
provided by the Master Servicer to the Trustee pursuant to Section 8.01 hereof.
(b) The Master Servicer shall furnish to the Trustee and to the
Certificate Insurer, during the term of this Agreement, such periodic, special,
or other reports or information not specifically provided for herein, as any be
necessary, reasonable, or appropriate with respect to the Trustee or the
Certificate Insurer, as the case may be, or otherwise with respect to the
purposes of this Agreement, all such reports or information to be provided by
and in accordance with such applicable instructions and directions as the
Trustee or the Certificate Insurer may reasonably require; provided, that the
Master Servicer shall be entitled to be reimbursed by the requesting party for
the fees and actual expenses associated with providing such reports, if such
reports are not generally produced in the ordinary course of business.
Section 7.10 Reports by Trustee.
(a) The Trustee shall report to the Depositor, the Seller, the
Underwriters, the Certificate Insurer and each Owner, with respect to the amount
on deposit in the Distribution Account, the amount therein relating to each
Group and the identity of the investments included therein, as the Depositor,
the Seller or the Certificate Insurer may from time to time request. Without
limiting the generality of the foregoing, the Trustee shall, at the request of
the Depositor, the Seller or the Certificate Insurer transmit promptly to the
Depositor, the Seller and the Certificate Insurer copies of all accountings of
receipts in respect of the Mortgage Loans furnished to it by the Master Servicer
and shall notify the Seller and the Certificate Insurer if any Monthly
Remittance Amount has not been received by the Trustee when due.
(b) The Trustee shall report to the Certificate Insurer and each Owner
with respect to any written notices it may from time to time receive which
provide an Authorized Officer with actual knowledge that any of the statements
set forth in Section 3.04(b) hereof are inaccurate.
Section 7.11 Preference Payments.
The Certificate Insurer will pay any Insured Payment that is a
Preference Amount on the Business Day following receipt on a Business Day by the
Certificate Insurer of (i) a certified copy of such order, (ii) an opinion of
counsel satisfactory to the Certificate Insurer that such order is final and not
subject to appeal, (iii) an assignment in such form as is reasonably required by
the Certificate Insurer, irrevocably assigning to the Certificate Insurer all
rights and claims of the Owners relating to or arising under the Class A
Certificates against the debtor which made such Preference Amount or otherwise
with respect to such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Certificate Insurer as agent for such owner in any
legal proceeding related to such Preference Amount, such
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instruments being in a form satisfactory to the Certificate Insurer, provided
that if such documents are received after 12:00 noon New York City time on such
Business Day, they will be deemed to be received on the following Business Day.
Such payment shall be disbursed to the receiver, conservator,
debtor-impossession or trustee in bankruptcy named in the Order and not to the
Trustee or any Owner of Class A Certificate directly (unless an Owner of a Class
A Certificate has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Owner
upon proof of such payment reasonably satisfactory to the Certificate Insurer).
Each Owner of a Class A Certificate, by its purchase of Class A
Certificates, the Master Servicer and the Trustee hereby agree that the
Certificate Insurer may at any time during the continuation of any proceeding
relating to a preference claim direct all matters relating to such preference
claim, including, without limitation, the direction of any appeal of any order
relating to such preference claim and the posting of any surety or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Certificate Insurer shall be subrogated to the rights of the
Master Servicer, the Trustee and the Owner of each Class A Certificate in the
conduct of any such preference claim, including, without limitation, all rights
of any party to an adversary proceeding action with respect to any court order
issued in connection with any such preference claim.
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ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.01 Master Servicer and Sub-Servicers.
Acting directly or through one or more Sub-Servicers as provided in
Section 8.03, the Master Servicer shall service and administer the Mortgage
Loans in accordance with this Agreement and the servicing standards set forth in
the FNMA 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 in its reasonable opinion, necessary or
desirable. It is the intent of the parties hereto that the Master Servicer shall
have all of the servicing obligations hereunder which a lender would have under
the FNMA Guide (as such provisions relate to second lien mortgages); provided,
however, that to the extent that such standards, such obligations or the FNMA
Guide are amended by FNMA after the date hereof and the effect of such amendment
would be to impose upon the Master Servicer any material additional costs or
other burdens relating to such servicing obligations, the Master Servicer may,
at its option, determine not to comply with such amendment.
Subject to Section 8.03 hereof, the Master Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to all
or certain of the Mortgage Loans through a Sub-Servicer as it may from time to
time designate, but no such designation of a Sub-Servicer shall serve to release
the Master Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have all the rights and powers of the Master Servicer with
respect to such Mortgage Loans under this Agreement.
Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Master Servicer in its own name or in the name of a
Sub-Servicer 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 Owners 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, and (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 Trustee; provided, however, [that to
the extent any instrument described in clause (i) preceding would be delivered
by the Master Servicer outside of its usual procedures for mortgage loans held
in its own portfolio, the Master Servicer shall, prior to executing and
delivering such instrument, obtain the prior written consent of the Certificate
Insurer, and provided further, however,] that Section 8.14(a) shall constitute
an authorization from the Trustee to the Master Servicer to execute an
instrument of satisfaction (or assignment of mortgage without recourse) with
respect to any Mortgage Loan paid in full (or with respect to which payment in
full has been escrowed). The Trustee shall execute any documentation furnished
to it by the Master Servicer for recordation by the Master Servicer in the
appropriate jurisdictions as shall be necessary to effectuate the foregoing.
Subject to Sections 8.13 and 8.14, the Trustee shall execute any authorizations
and other documents as the Master Servicer or such Sub-Servicer shall reasonably
request that are furnished to the Trustee to enable the Master Servicer and such
Sub-Servicer to carry out their respective servicing and administrative duties
hereunder.
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The Master Servicer shall give prompt notice to the Trustee and the
Certificate Insurer of any action, of which the Master Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
Servicing Advances incurred by the Master Servicer or any Sub-Servicer
in connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Mortgaged Property shall be recoverable by the Master Servicer or such
Sub-Servicer to the extent described in Section 8.09(b) hereof.
Section 8.02 Collection of Certain Mortgage Loan Payments.
The Master Servicer shall use reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any applicable Insurance Policy, follow collection
procedures for all Mortgage Loans at least as rigorous as those described in the
FNMA Guide. Consistent with the foregoing, the Master Servicer may in its
discretion 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 Master Servicer would be
entitled to retain hereunder as servicing compensation. In the event the Master
Servicer shall consent to the deferment of the due dates for payments due on a
Note, the Master Servicer shall nonetheless make payment of any required P&I
Advance with respect to the payments so extended to the same extent as if such
installment were due, owing and Delinquent and had not been deferred, and shall
be entitled to reimbursement therefor in accordance with Section 8.09(a) hereof.
Section 8.03 Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers.
The Master Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage Loans with one or more institutions
that are in compliance with the laws of each state necessary to enable each of
them to perform their obligations under such Sub-Servicing Agreements and either
(x) is NF Investments, Inc., (y) has (i) been designated an approved
seller-servicer by FHLMC or FNMA and (ii) has equity of at least $1,500,000, as
determined in accordance with generally accepted accounting principles or (z) is
a Master Servicer Affiliate. The Master Servicer shall give notice to the
Trustee, the Certificate Insurer and the Rating Agencies of the appointment of
any Sub-Servicer. For purposes of this Agreement, the Master Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. Each Sub-Servicer shall be required to service the
Mortgage Loans in accordance with this Agreement and any such Sub-Servicing
Agreement shall be consistent with and not violate the provisions of this
Agreement. Each Sub-Servicing Agreement shall provide that a successor Master
Servicer shall have the option to terminate such agreement without payment of
any termination fees if the original Master Servicer is terminated or resigns.
Section 8.04 Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the
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related Mortgage Loans or enter into a Sub-Servicing Agreement with a successor
Sub-Servicer which qualifies under Section 8.03.
Section 8.05 Liability of Master Servicer; Indemnification.
(a) The Master Servicer shall not be relieved of its obligations under
this Agreement notwithstanding any Sub-Servicing Agreement or any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a Sub-Servicer and the Master Servicer shall be obligated to
the same extent and under the same terms and conditions as if it alone were
servicing and administering the Mortgage Loans. The Master Servicer shall be
entitled to enter into any agreement with a Sub-Servicer for indemnification of
the Master Servicer by such Sub-Servicer and nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
(b) The Master Servicer (except the Trustee if it is required to
succeed the Master Servicer hereunder) agrees to indemnify and hold the Trustee,
the Certificate Insurer and each Owner harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs, Judgments,
and any other costs, fees and expenses that the Trustee, the Certificate Insurer
and any Owner may sustain in any way related to the failure of the Master
Servicer to perform its duties and service the Mortgage Loans in compliance with
the terms of this Agreement. The Master Servicer shall immediately notify the
Trustee, the Certificate Insurer and each Owner if a claim is made by a third
party with respect to this Agreement, and the Master Servicer shall assume (with
the consent of the Trustee and the Certificate Insurer) the defense of any such
claim and pay all expenses in connection therewith, including reasonable counsel
fees, and promptly pay, discharge and satisfy any judgment or decree which may
be entered against the Master Servicer, the Trustee, the Certificate Insurer
and/or Owner in respect of such claim. The Trustee may, if necessary, reimburse
the Master Servicer from amounts otherwise distributable on the Class R
Certificates for all amounts advanced by it pursuant to the preceding sentence
except when the claim relates directly to the failure of the Master Servicer to
service and administer the Mortgage Loans in compliance with the terms of this
Agreement. The provisions of this Section 8.05 shall survive the termination of
this Agreement and the payment of the outstanding Certificates.
(c) Neither the Depositor, the Master Servicer, nor any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Owners for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor or Master Servicer or any such Person
against any breach of warranties or representations made herein, or against any
specific liability imposed on the Master Servicer for a breach of the servicing
standards set forth in the FNMA Guide, or against any liability which would
otherwise be imposed by reason of its respective willful misfeasance, bad faith,
fraud or negligence in the performance of its duties or by reasons of negligent
disregard of its respective obligations or duties hereunder.
[The Depositor, the Master Servicer, and any director, officer,
employee or agent of the Depositor or the Master Servicer, may rely in good
faith on any document of any kind which, prima face, is properly executed and
submitted by any appropriate Person with respect to any matters arising
hereunder. The Depositor, the Master Servicer and any director, officer,
employee or agent of the
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Depositor or the Master Servicer shall be indemnified and held harmless by the
Trust Fund against any loss, liability or expense incurred in connection with
any legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense incurred in connection with any legal action incurred
by reason of its respective misfeasance, bad faith, fraud or negligence, a
breach of a representation or warranty hereunder or (in the case of the Master
Servicer) a breach of the servicing standards set forth in the FNMA Guide in the
performance of its respective duties or by reason of negligent disregard or its
respective obligations or duties hereunder. Neither the Depositor nor the Master
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action unless such action is related to its respective duties under this
Agreement and in its opinion does not expose it to any expense or liability;
provided, however, that the Depositor or the Master Servicer may in its
discretion undertake any action related to its obligations hereunder which it
may deem necessary or desirable with respect to 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 action and any
liability resulting therefrom (except any liability related to the Master
Servicer's obligations under Section 8.01) shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor and the Master Servicer shall
be entitled to be reimbursed therefor from the Collection Account as provided in
Section 8.08(d)(i)(D) of this Agreement.]
Section 8.06 No Contractual Relationship Between Sub-Servicer,
Trustee or the Owners.
Any Sub-Servicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Master Servicer alone and the Trustee, the
Certificate Insurer and the Owners shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer except as set forth in Section 8.07.
Section 8.07 Assumption or Termination of Sub-Servicing Agreement
by Trustee.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer shall be
assumed simultaneously by the Trustee without act or deed on the part of the
Trustee; provided, however, that the successor Master Servicer may terminate the
Sub-Servicer as provided in Section 8.03.
The terminated Master Servicer shall, upon the reasonable request of
the Trustee, but at the expense of the Master Servicer, deliver to the assuming
party documents and records relating to each Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 8.08 Collection Account.
(a) The Master Servicer shall establish and maintain [with the Trustee]
the Collection Account to be held as an Eligible Account. The Collection Account
shall be entitled "Bankers Trust Company of California, N.A., as Trustee under
the Pooling and Servicing Agreement dated as of January ___, 1997". The Master
Servicer shall notify the Trustee (who will in turn notify the Owners) and the
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Certificate Insurer if there is a change in the name, account number or
institution holding the Collection Account.
Subject to subsection (c) below, the Master Servicer shall deposit all
receipts pursuant to subsection (c) below and related to the Mortgage Loans to
the Collection Account on a daily basis (but no later than the first Business
Day after receipt).
(b) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested in Eligible Investments. Any investments of funds in the
Collection Account shall mature or be withdrawable at par on or prior to the
immediately succeeding Monthly Remittance Date. The Collection Account shall be
held in trust in the name of the Trustee for the benefit of the Owners. Any
investment earnings on funds held in the Collection Account shall be for the
account of the Master Servicer and may only be withdrawn from the Collection
Account by the Master Servicer immediately following the remittance of the
Monthly Remittance Amount (and the Total Monthly Excess Spread included therein)
by the Master Servicer. Prior to each Monthly Remittance Date, the Master
Servicer shall deposit into the Collection Account the net amount of any
investment losses on such funds during the related Due Period. Any references
herein to amounts on deposit in the Collection Account shall refer to amounts
net of such investment earnings.
(c) The Master Servicer shall deposit to the Collection Account on the
Business Day after receipt all principal and interest collections on the
Mortgage Loans received after the Cut-Off Date including any Prepayments and Net
Liquidation Proceeds, other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer and any income from REO Properties, but net of
(i) the Servicing Fee with respect to each Mortgage Loan and other servicing
compensation to the Master Servicer as permitted by Section 8.15 hereof, (ii)
principal due and interest on any Mortgage Loan on or prior to the Cut-Off Date,
(iii) Net Liquidation Proceeds to the extent such Net Liquidation Proceeds
exceed the sum of (I) the Loan Balance of the related Mortgage Loan immediately
prior to liquidation, (II) accrued and unpaid interest on such Mortgage Loan
(net of the Servicing Fee) to the date of such liquidation, and (III) any
Realized Losses incurred during the related Due Period, (iv) reimbursements for
P&I Advances and (v) reimbursements for amounts deposited in the Collection
Account representing payments of principal and/or interest on a Note by a
Mortgagor which are subsequently returned by a depository institution as unpaid
(all such net amount herein referred to as "Daily Collections").
(d) (i) The Master Servicer may make withdrawals for its own account
from the amounts on deposit in the Collection Account, with respect to each
Mortgage Loan Group, for the following purposes:
(A) to withdraw investment earnings on amounts on deposit in the
Collection Account:
(B) [to reimburse itself pursuant to Section 8.09 for
unrecovered P&I Advances and Servicing Advances;]
[(C) to the extent not reimbursed or paid pursuant to any other
clause of this Section 8.08(d)(i), to reimburse or pay the
Master Servicer, the Trustee and/or the Depositor for unpaid
items incurred by or on behalf of such Person pursuant to any
provision of this Agreement pursuant to which such Person is
entitled to reimbursement or payment
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from the Trust Fund, in each case only to the extent
reimbursable under such Section, it being acknowledged that
this clause (D) shall not be deemed to modify the substance of
any such Section, including the provisions of such Section
that set forth the extent to which one of the foregoing
Persons is or is not entitled to payment or reimbursement;]
(D) to withdraw amounts that have been deposited to the
Collection Account in error; and
(E) to clear and terminate the Collection Account following the
termination of the Trust pursuant to Article IX.
(ii) The Master Servicer shall (a) remit to the Trustee for deposit in
the Distribution Account by wire transfer, or otherwise make funds available in
immediately available funds, without duplication, the Daily Collections
allocable to a Due Period not later than the related Monthly Remittance Date and
Loan Purchase Prices and Substitution Adjustments two Business Days following
the related purchase or substitution, and (b) no later than the Determination
Date immediately preceding the related Distribution Date, deliver to the Trustee
and the Certificate Insurer a monthly servicing report, with respect to each
Mortgage Loan Group, containing the following information: (i) principal and
interest collected, scheduled interest, Liquidated Loans, summary and detailed
delinquency reports, Liquidation Proceeds and other similar information
concerning the servicing of the Mortgage Loans and (ii) the information
described in Section 7.09(b). In addition, the Master Servicer shall inform the
Trustee and the Certificate Insurer on each Monthly Remittance Date, with
respect to each Mortgage Loan Group, of the amounts of any Loan Purchase Prices
or Substitution Adjustments so remitted during the related Due Period.
Section 8.09 P&I Advances and Servicing Advances.
(a) If the amount on deposit in the Distribution Account as of any
Monthly Remittance Date is less than the sum of (I) the Interest Remittance
Amount on such Monthly Remittance Date and (II) the Principal Remittance Amount
on such Monthly Remittance Date, the Master Servicer shall remit to the Trustee
for deposit into the Distribution Account a sufficient amount of its own funds
to make the total amount remitted to the Trustee equal to such sum. Such amounts
of the Master Servicer's own funds so deposited are "P&I Advances", including
but not limited to any amount advanced due to the invocation by a Mortgagor of
the relief provisions provided by the Soldiers' and Sailors' Civil Relief Act of
1940.
The Master Servicer shall be permitted to reimburse itself for any P&I
Advances paid from the Master Servicer's own funds from collections on any
Mortgage Loan in the related Mortgage Loan Group deposited to the Collection
Account subsequent to the related Due Period, and shall deposit into the
Collection Account with respect thereto (i) collections from the Mortgagor whose
Delinquency gave rise to the shortfall which resulted in such P&I Advance and
(ii) Net Liquidation Proceeds recovered on account of the related Mortgage Loan
to the extent of the amount of P&I Advances related thereto. If not recovered
from the related Mortgagor or the related Net Liquidation Proceeds, the Master
Servicer shall recover P&I Advances pursuant to Section 7.03(c)(ii)(C).
Notwithstanding the foregoing, the Master Servicer shall not be
obligated to make a P&I Advance as to any Mortgage Loan if the Master Servicer
determines that such P&I Advance, if made,
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would be a Nonrecoverable Advance. The Master Servicer shall give written notice
of such determination to the Trustee and the Certificate Insurer; and the
Trustee shall promptly furnish a copy of such notice to the Owners; provided,
that the Master Servicer shall be entitled to recover any ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇
Advances from the aforesaid Liquidation Proceeds prior to the payment of the
Liquidation Proceeds to any other party to this Agreement.
(b) The Master Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, (each such
expenditure, a "Servicing Advance") including, but not limited to, the cost of
(i) Preservation Expenses, (ii) any enforcement or judicial proceedings,
including foreclosures, (iii) the management and liquidation of REO Property and
(iv) advances required by Section 8.13(a), but the Master Servicer shall not be
obligated to make any such Servicing Advance if the Master Servicer determines
that such Servicing Advance, if made, would be a Nonrecoverable Advance. The
Master Servicer may recover Servicing Advances (x) from the Mortgagors to the
extent permitted by the Mortgage Loans or, if not recovered from the Mortgagor
on whose behalf such Servicing Advance was made, from Liquidation Proceeds
realized upon the liquidation of the related Mortgage Loan and (y) as provided
in Section 7.03(c)(ii)(C). The Master Servicer shall be entitled to recover the
Servicing Advances from the aforesaid Liquidation Proceeds prior to the payment
of the Liquidation Proceeds to any other party to this Agreement. Except as
provided in the previous sentence, in no case may the Master Servicer recover
Servicing Advances from the principal and interest payments on any Mortgage Loan
or from any amounts relating to any other Mortgage Loan except as provided in
Section 7.03(c)(ii)(C).
Section 8.10 Compensating Interest: Repurchase of Mortgage Loans.
(a) If a Prepayment of a Mortgage Loan occurs during any Prepayment
Period which gives rise to a Prepayment Interest Shortfall or if the amount
received prior to the related Determination Date with respect to a Simple
Interest Loan represents less than a full month's interest due during the
related Due Period, any difference between the interest collected from the
Mortgagor and the full month's interest at the Mortgage Rate less the Servicing
Fee ("Compensating Interest") that is due shall be deposited by the Master
Servicer (but not in excess of one-half of the Servicing Fee for the related Due
Period on such Mortgage Loan) to the Collection Account on the related Monthly
Remittance Date and shall be included in the Monthly Remittance to be made
available to the Trustee on such Monthly Remittance Date.
(b) The Master Servicer, and in the absence of the exercise thereof
by the Master Servicer, the Certificate Insurer, has the right and the option,
but not the obligation, to purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Master Servicer pursuant to Section 8.13; provided, however, that
the Master Servicer or the Certificate Insurer, as the case may be, may not
purchase any such Mortgage Loan unless the Master Servicer or the Certificate
Insurer, as the case may be, has delivered to the Trustee an opinion of counsel
experienced in federal income tax matters acceptable to the Master Servicer or
the Certificate Insurer, as the case may be, and the Trustee to the effect that
such a purchase would not constitute a Prohibited Transaction for the Trust or
otherwise subject the Trust to tax and would not jeopardize the status of the
Trust as a REMIC. Any such Mortgage Loan so purchased shall be purchased by the
Master Servicer or the Certificate Insurer as the case may be on a Monthly
Remittance Date at a
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purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Collection Account.
(c) The Net Liquidation Proceeds from the disposition of any REO
Property shall be deposited in the Collection Account and remitted to the
Trustee as part of the Daily Collections remitted by the Master Servicer to the
Trustee.
Section 8.11 Maintenance of Insurance.
(a) The Master Servicer on behalf of the Trustee, as mortgagee, shall
use its reasonable efforts in accordance with the servicing standards set forth
in the FNMA Guide to cause the related Mortgagor to maintain for each Mortgage
Loan (other than any Mortgage Loan as to which the related Mortgaged Property
has become an REO Property), and if the Mortgagor does not so maintain, shall
itself maintain (subject to the provisions of this Agreement concerning
Nonrecoverable dances) to the extent the Trustee as mortgagee has an insurable
interest and to the extent available at commercially reasonable rates (A) fire
and hazard insurance with extended coverage on the related Mortgaged Property in
an amount which is at least equal to the lesser of (i) 100% of the then "full
replacement cost" of the improvements and equipment (excluding foundations,
footings and excavation costs), without deduction for physical depreciation, and
(ii) the outstanding principal balance of the related Mortgage Loan or such
other amount as is necessary to prevent any reduction in such policy by reason
of the application of co-insurance and to prevent the Trustee thereunder from
being deemed to be a co-insurer, in each case with a replacement cost rider and
(B) such other insurance as provided in the related Mortgage Loan. The Master
Servicer shall maintain, to the extent available at commercially reasonable
rates, fire and hazard insurance from a Qualified Insurer with extended coverage
on each REO Property in an amount which is at least equal to 100% of the then
"full replacement cost" of the improvements and equipment (excluding
foundations, footings and excavation costs), without deduction for physical
depreciation. The Master Servicer shall maintain, to the extent available at
commercially reasonable rates, from a Qualified Insurer, with respect to each
REO Property such other insurance as provided in the related Mortgage Loan. In
the case of any insurance otherwise required to be maintained pursuant to this
Section that is not being so maintained because the Master Servicer has deemed
that it is not available at commercially reasonable rates, the Master Servicer
shall deliver an Officer's Certificate to the Trustee detailing the steps that
the Master Servicer took in seeking such insurance and the factors which led to
its determination that such insurance is not so available. Any amounts collected
by the Master Servicer under any such policies (other than amounts to be applied
to the restoration or repair of the related Mortgaged Property or amounts to be
released to the Borrower in accordance with the terms of the related Mortgage)
shall be deposited into the Collection Account pursuant to Section 8.08(c),
subject to withdrawal pursuant to Section 8.08(d). Any cost incurred by the
Master Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Owners, be added to the unpaid principal balance of
the related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan
so permit. It is understood and agreed that no earthquake or other additional
insurance other than flood insurance is to be required of any Mortgagor or to be
maintained by the Master Servicer other than pursuant to the terms of the
related Mortgage, Note or other Mortgage Loan documents and pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property is located in a
federally designated special flood hazard area, the Master Servicer will use its
reasonable efforts in accordance with the servicing standards set forth in the
FNMA Guide to cause the related Mortgagor to maintain or will itself obtain
(subject to the provisions of this Agreement concerning
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Nonrecoverable Advances) flood insurance in respect thereof to the extent
available at commercially reasonable rates. Such flood insurance shall be in an
amount equal to the lesser of (i) the unpaid principal balance of the related
Mortgage Loan and (ii) the maximum amount of such insurance required by the
terms of the related Mortgage and as is available for the related property under
the national flood insurance program (assuming that the area in which such
property is located is participating in such program). If an REO Property is
located in a federally designated special flood hazard area, the Master Servicer
will obtain flood insurance in respect thereof providing substantially the same
coverage as described in the preceding sentences. If at any time during the term
of this Agreement a recovery under a flood or fire and hazard insurance policy
in respect of an REO Property is not available but would have been available if
such insurance were maintained thereon in accordance with the standards applied
to Mortgaged Properties described herein, the Master Servicer shall either (i)
immediately deposit into the Collection Account from its own funds the amount
that would have been recovered or (ii) apply to the restoration and repair of
the property from its own funds the amount that would have been recovered, if
such application would be consistent with the servicing standard set forth in
Section 8.01; provided, however, that the Master Servicer shall not be
responsible for any shortfall in insurance proceeds resulting from an insurer's
refusal or inability to pay a claim. Costs of the Master Servicer of maintaining
insurance policies pursuant to this Section 8.11 shall be paid by the Master
Servicer as a Servicing Advance and shall be reimbursable to the Master
Servicer.
The Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee and the Owners, claims under each related insurance policy
maintained pursuant to this Section 8.11 in a timely fashion in accordance with
the terms of such policy and to take such reasonable steps as are necessary to
receive payment or to permit recovery thereunder.
The Master Servicer shall require that all insurance policies required
hereunder shall name the Trustee or the Master Servicer, on behalf of the
Trustee as the mortgagee, as loss payee and that all such insurance policies
require that 30 days' notice be given to the Master Servicer before termination
to the extent required by the related Mortgage, Note, or other Mortgage Loan
documents.
(b) (I) If the Master Servicer obtains and maintains a blanket
insurance policy with a Qualified Insurer at its own expense insuring against
fire and hazard losses or other required insurance on all of the Mortgage Loans,
it shall conclusively be deemed to have satisfied its obligations concerning the
maintenance of such insurance coverage set forth in Section 8.11(a), it being
understood and agreed that such policy may contain a deductible clause, in which
case the Master Servicer shall, in the event that (i) there shall not have been
maintained on one or more of the related Mortgaged Properties a policy otherwise
complying with the provisions of Section 8.11(a), and (ii) there shall have been
one or more losses which would have been covered by such a policy had it been
maintained, immediately deposit into the Collection Account from its own funds
the amount not otherwise payable under the blanket policy because of such
deductible clause to the extent that any such deductible exceeds the deductible
limitation that pertained to the related Mortgage Loan, or, in the absence of
such deductible limitation, the deductible limitation which is consistent with
the servicing standard set forth in Section 8.01. In connection with its
activities as Master Servicer hereunder, the Master Servicer agrees to prepare
and present, on behalf of itself, the Trustee and Owners, claims under any such
blanket policy which it maintains in a timely fashion in accordance with the
terms of such policy and to take such reasonable steps as are necessary to
receive payment or permit recovery thereunder.
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(II) If the Master Servicer causes any Mortgaged Property or REO
Property to be covered by a master force placed insurance policy, which policy
is issued by a Qualified Insurer and provides no less coverage in scope and
amount for such Mortgaged Property or REO Mortgaged Property than the insurance
required to be maintained pursuant to Section 8.11(a), the Master Servicer shall
conclusively be deemed to have satisfied its obligations to maintain insurance
pursuant to Section 8.11(a). Such policy may contain a deductible clause, in
which case the Master Servicer, shall, in the event that (i) there shall not
have been maintained on the related Mortgaged Property or REO Property a policy
otherwise complying with the provisions of Section 8.11(a), and (ii) there shall
have been one or more losses which would have been covered by such a policy had
it been maintained, immediately deposit into the Collection Account from its own
funds the amount not otherwise payable under such policy because of such
deductible to the extent that any such deductible exceeds the deductible
limitation that pertained to the related Mortgage Loan, or, in the absence of
any such deductible limitation, the deductible limitation which is consistent
with the servicing standard set forth in Section 8.01.
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if the "due-on-sale" clause, in the reasonable
belief of the Master Servicer, is not enforceable under applicable law. An
opinion of counsel to the foregoing effect shall conclusively establish the
reasonableness of such belief. ln such event, the Master Servicer shall make
reasonable efforts to enter into an assumption and modification agreement with
the person to whom such property has been or is about to be conveyed, pursuant
to which such person becomes liable under the Note and, unless prohibited by
applicable law or the Mortgage Documents, the Mortgagor remains liable thereon.
If the foregoing is not permitted under applicable law, the Master Servicer is
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Note; provided,
however, that to the extent any such substitution of liability agreement would
be delivered by the Master Servicer outside of its usual procedures for mortgage
loans held in its own portfolio the Master Servicer shall, prior to executing
and delivering such agreement, obtain the prior written consent of the
Certificate Insurer. The Mortgage Loan, as assumed, shall conform in all
respects to the requirements, representations and warranties of this Agreement.
The Master Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee the
original copy of such assumption or substitution agreement (indicating the File
to which it relates) which copy shall be added by the Trustee to the related
File and which shall, for all purposes, be considered a part of such File to the
same extent as all other documents and instruments constituting a part thereof.
The Master Servicer shall be responsible for recording any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Mortgage Loan shall not
be changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding principal amount of such
Mortgage Loan shall not be changed nor shall any required monthly payments of
principal or interest be deferred or forgiven. Any fee collected by the Master
Servicer or the Sub-Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Master Servicer as additional servicing compensation.
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Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Master Servicer
may be restricted by law from preventing, for any reason whatsoever.
Section 8.13 Realization Upon Defaulted Mortgage Loans; Inspection.
(a) The Master Servicer shall foreclose upon or otherwise comparably
effect the ownership in the name of the Trustee on behalf of the Trust of
Mortgaged Properties relating to defaulted Mortgage Loans as to which no
satisfactory arrangements can be made for collection of Delinquent payments and
which the Master Servicer has not purchased pursuant to Section 8.10(b) subject
to Section 8.09, in connection with such foreclosure or other conversion, the
Master 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 FNMA Guide, including, but not limited to, advancing funds for the
payment of taxes, amounts due with respect to Senior Liens, and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the meaning of Section 8.09(b) hereof. The Master Servicer shall sell any REO
Property within 23 months of its acquisition by the Trust, at such price as the
Master Servicer deems necessary to comply with this covenant unless the Trustee
obtains for the Certificate Insurer, Trustee and the Master Servicer an opinion
of counsel experienced in federal income tax matters acceptable to the
Certificate Insurer and the Trustee, addressed to the Certificate Insurer, the
Trustee and the Master Servicer, to the effect that the holding by the Trust of
such REO Property for any greater period will not result in the imposition of
taxes on "Prohibited Transactions" of the Trust or any REMIC therein as defined
in Section 860F of the Code or cause the Trust to fail to qualify as a REMIC
under the REMIC Provisions at any time that any Certificates are outstanding.
Notwithstanding the generality of the foregoing provisions, the Master Servicer
shall manage, conserve, protect and operate each REO Property for the Owners
solely for the purpose of its prompt disposition and sale in a manner which does
not cause such REO Property to fail to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code or result in the receipt by the
Trust of any income from "non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code or any "net income from foreclosure property" which is
subject to taxation under the REMIC Provisions. Pursuant to its efforts to sell
such REO Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Owners, rent the same, or any part thereof, as the Master
Servicer deems to be in the best interest of the Owners for the period prior to
the sale of such REO Property. The Master 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 or under a Mortgaged
Property in determining whether to foreclose upon or otherwise comparably
convert the ownership of such Mortgaged Property. The Master Servicer shall not
take any such action with respect to any Mortgaged Property known by the Master
Servicer to contain such wastes or substances or to be within one mile of the
site of such wastes or substances, without the prior written consent of the
Certificate Insurer.
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(b) The Master Servicer shall determine, with respect to each defaulted
Mortgage Loan and in accordance with the procedures set forth in the FNMA 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". After a Mortgage Loan has become a Liquidated Loan, the Master Servicer
shall promptly prepare and forward to the Depositor, the Trustee and the
Certificate Insurer a report detailing the Liquidation Proceeds received from
the Liquidated Loan, expenses incurred with respect thereto, and any loss
incurred in connection therewith.
(c) The Master Servicer shall not acquire any personal property
pursuant to this Section 8.13 unless either: (i) such personal property is
incident to real property (within the meaning of Section 856(e)(1) of the Code)
so acquired by the Master Servicer; or (ii) the Master Servicer shall have
obtained an opinion of counsel experienced in federal income tax matters
acceptable to the Certificate Insurer and the Trustee addressed to the
Certificate Insurer, the Trustee and the Master Servicer, to the effect that the
holding of such personal property as part of the Trust will not cause the
imposition of taxes on a Prohibited Transaction or cause either the Master REMIC
or the Subsidiary REMIC to fail to qualify as a REMIC under the REMIC
provisions.
Section 8.14 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 Master Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Master Servicer shall
deliver to the Trustee a completed FNMA "Request for Release of Documents" (FNMA
Form 2009). Upon receipt of such Request for Release of Documents, the Trustee
shall promptly release the related File, in trust, in its reasonable discretion
to (i) the Master Servicer, (ii) an escrow agent or (iii) any employee, agent or
attorney of the Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Mortgaged Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Collection Account.
In lieu of executing any such satisfaction or assignment, as the case may be,
the Master Servicer may prepare and submit to the Trustee a satisfaction (or
assignment without recourse, if requested by the Person or Persons entitled
thereto) in form for execution by the Trustee with all requisite information
completed by the Master Servicer; in such event, the Trustee shall execute and
acknowledge such satisfaction or assignment, as the case may be, and deliver the
same with the related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Trustee shall (except in the case of the payment or liquidation
pursuant to which the related File is released to an escrow agent or an
employee, agent or attorney of the Trustee), upon request of the Master Servicer
and delivery to the Trustee of a receipt signed by an Authorized Officer of the
Master Servicer, release the related File to the Master Servicer and shall
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execute such documents as shall be necessary to the prosecution of any such
proceedings, including, without limitation, an assignment without recourse of
the related Mortgage to the Master Servicer; provided that there shall not be
released and unreturned at any one time more than 10% of the entire number of
Files. Such receipt shall obligate the Master Servicer to return the File to the
Trustee when the need therefor by the Master Servicer no longer exists unless
the Mortgage Loan shall be liquidated, in which case, upon receipt of the FNMA
"Liquidation Schedule" relating to such liquidation, the receipt shall be
released by the Trustee to the Master Servicer.
(c) The Master Servicer shall have the right to accept applications
of Mortgagors for consent to (i) partial releases of Mortgages, (ii)
alterations, (iii) removal, demolition or division of properties subject to
Mortgages and (iv) second mortgage subordination agreements. No application for
approval shall be considered by the Master Servicer unless: (x) the provisions
of the related 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 maximum
Loan-to-Value Ratio and debt-to-income ratio established in accordance with the
underwriting standards of the Mortgage Loans and any increase in the
Loan-to-Value Ratio shall not exceed 15% unless approved in writing by the
Certificate Insurer; and (z) the lien priority of the related Mortgage is not
affected. Upon receipt by the Trustee of an Officer's Certificate executed on
behalf of the Master Servicer setting forth the action proposed to be taken in
respect of a particular Mortgage Loan and certifying that the criteria set forth
in the immediately preceding sentence have been satisfied, the Trustee shall
execute and deliver to the Master Servicer the consent or partial release so
requested by the Master Servicer. A proposed form of consent or partial release,
as the case may be, shall accompany any Officer's Certificate delivered by the
Master Servicer pursuant to this paragraph. The Master Servicer shall notify the
Certificate Insurer and the Rating Agencies if an application is approved under
clause (y) above without approval in writing by the Certificate Insurer.
Section 8.15 Servicing Compensation.
As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain the amount of the Servicing Fee with respect to each
Mortgage Loan. The Master Servicer shall be entitled to retain additional
servicing compensation in the form of prepayment charges, release fees, bad
check charges, assumption fees, late payment charges, prepayment penalties, or
any other servicing-related fees, Net Liquidation Proceeds not required to be
deposited in the Collection Account pursuant to Section 8.08(c)(iii) and similar
items, to the extent collected from Mortgagors.
Section 8.16 Annual Statement as to Compliance.
The Master Servicer, at its own expense, will deliver to the Trustee,
the Depositor, the Certificate Insurer and the Rating Agencies, on or before
March 31 of each year, commencing in 1997, an Officer's Certificate stating, as
to each signer thereof, that (i) a review of the activities of the Master
Servicer during such preceding calendar year and of performance under this
Agreement has been made under such officers' supervision, and (ii) to the best
of such officers' knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement for such year, or, if there
has been a default in the fulfillment of all such obligations, specifying each
such default known to such officers and the nature and status thereof including
the steps being taken by the Master Servicer to remedy such default.
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Section 8.17 Annual Independent Certified Public Accountants' Reports.
(a) On or before July 31 of any year, commencing in 1997, the Master
Servicer, at its own expense (or if the Trustee is then acting as Master
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 Certificate Insurer
and the Rating Agencies a letter or letters of a firm of independent, nationally
recognized certified public accountants reasonably acceptable to the Certificate
Insurer, dated as of the date of the Master Servicer's fiscal audit for
subsequent letters, stating that such firm has examined the Master Servicer's
overall servicing operations in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers, and stating, such firm's conclusions
relating thereto.
(b) As long as Block Financial Corporation is acting as Master
Servicer, all references in subsection (a) above to the "Master Servicer" shall
be deemed to be references to the Sub-Servicer.
Section 8.18 Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Master Servicer shall provide to the Trustee, the Certificate
Insurer and the supervisory agents and examiners of each of the foregoing
(which, in the case of supervisory agents and examiners, may be required by
applicable state and federal regulations) access to the documentation regarding
the Mortgage Loans, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer designated by it.
Section 8.19 Merger or Consolidation of the Master Servicer;
Assignment.
Subject to the following paragraph, the Master Servicer will keep in
full effect its existence, rights and good standing as a corporation under the
laws of the State of Delaware and will not jeopardize its ability to do business
in each jurisdiction in which one or more of the Mortgaged Properties are
located or to protect the validity and enforceability of this Agreement, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.
The Master Servicer may be merged or consolidated with or into any
Person, or transfer all or substantially all of its assets to any Person, in
which case any Person resulting from any merger or consolidation to which it
shall be a party, or any Person succeeding to its business, shall be the
successor of the Master Servicer and shall be deemed to have assumed all of the
liabilities of the Master Servicer hereunder, if each of he Rating Agencies has
confirmed in writing that such merger, consolidation or transfer and succession
shall not result, in and of itself, in a downgrading, withdrawal or
qualification of the rating then assigned by such Rating Agency to any Class of
Certificates.
Section 8.20 Removal of Master Servicer; Resignation of Master
Servicer.
(a) The Certificate Insurer (or the Owners, with the consent of the
Certificate Insurer pursuant to Section 6.11 hereof) may direct the Trustee to
remove the Master Servicer upon the occurrence of any of the following events:
(i) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit
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in writing its inability to pay its debts generally as they become due,
(III) make a general assignment for the benefit of creditors, (IV) be
adjudicated a bankrupt or insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (VI) take corporate action
for the purpose of effecting any of the foregoing; or
(ii) If without the application, approval or consent of the
Master Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Master Servicer an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or similar
entity with respect to the Master Servicer or of all or any substantial
part of its assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such proceeding is being
contested by the Master Servicer in good faith, the same shall (A)
result in the entry of an order for relief or any such adjudication or
appointment or (B) continue undismissed or pending and unstayed for any
period of seventy-five (75) consecutive days; or
(iii) The Master Servicer shall fail to perform in any material
respect any one or more of its obligations hereunder and shall continue
in default thereof for a period of thirty (30) days or in the case of a
delay in making a required payment to the Trustee under Section
8.08(d)(ii)(a), one (1) Business Day) after the earlier of (a) actual
knowledge of an officer of the Master Servicer or (b) receipt of notice
from the Trustee or the Certificate Insurer of said failure; provided,
however, that if the Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written
approval of the Certificate Insurer; or
(iv) The Master Servicer shall fail to cure any breach of any of
its representations and warranties set forth in Section 3.02 which
materially and adversely affects the interests of the Owners or the
Certificate Insurer for a period of sixty (60) days after the earlier
of the Master Servicer's discovery or receipt of notice thereof;
provided, however, that if the Master Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Certificate Insurer; or
(v) The merger, consolidation or other combination of the Master
Servicer with or into any other entity, unless such merger,
consolidation or other combination is in accordance with Section 8.19.
(b) The Certificate Insurer may instruct the Trustee to remove the
Master Servicer upon (a) the failure by the Master Servicer to make any required
Servicing Advance when due or (b) the failure of the Master Servicer to make any
required P&I Advance or to pay any Compensating Interest when due.
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(c) If any event described in subsection (b) above occurs and is
continuing, during the thirty (30) day period following receipt of notice, the
Trustee, the Owners of the Class R Certificates and the Certificate Insurer
shall cooperate with each other to determine if the occurrence of such event is
more likely than not the result of the acts or omissions of the Master Servicer
or more likely than not the result of events beyond the control of the Master
Servicer. If the Trustee, the Owners of the Class R Certificates and the
Certificate Insurer conclude that the event is the result of the latter, the
Master Servicer shall not be terminated. If the Trustee, the Owners of the Class
R Certificates and the Certificate Insurer conclude that the event is the result
of the former, the Certificate Insurer may terminate the Master Servicer in
accordance with this Section and the Trustee shall act as successor Master
Servicer, provided that the Trustee shall have until the 30th day following the
date of receipt of notice of the event to become the successor Master Servicer
or to appoint a successor Master Servicer pursuant to this Section.
If the Trustee, the Owners of the Class R Certificates and the
Certificate Insurer cannot agree, and the basis for such disagreement is not
arbitrary or unreasonable, as to the cause of the event, the decision of the
Certificate Insurer shall control; provided, however, that if the Certificate
Insurer decides to terminate the Master Servicer, the Trustee shall be relieved
of its obligation to act as successor Master Servicer or to appoint a successor,
which shall be the exclusive obligation of the Certificate Insurer.
The Certificate Insurer agrees to use its best efforts to inform the
Trustee of any materially adverse information regarding the Master Servicer's
servicing activities that comes to the attention of the Certificate Insurer from
time to time.
(d) If any event described in sections (a) and (b) above occurs and
is continuing, the Certificate Insurer shall notify the Owners of the Class R
Certificates in writing if the Certificate Insurer intends to terminate the
Master Servicer in its capacity as Master Servicer under this Agreement. During
the 30 day period following receipt of such notice by the Owners of the Class R
Certificates, such Owners and the Certificate Insurer shall cooperate with each
other to determine if the occurrence of such event is more likely than not the
result of the acts or omissions of the Master Servicer or more likely than not
the result of events beyond the control of the Master Servicer. If the Owners of
the Class R Certificates and the Certificate Insurer conclude that the event is
the result of the latter, the Master Servicer shall not be terminated. If the
Owners of the Class R Certificates and the Certificate Insurer conclude that the
event is the result of the former, the Certificate Insurer may terminate the
Master Servicer in accordance with this Section and the Trustee shall act as
successor Master Servicer, provided that the Trustee shall have until the 30th
day following the date of receipt of notice of the event to become the successor
Master Servicer or to appoint a successor Master Servicer pursuant to this
Section. If the Owners of the Class R Certificates and the Certificate Insurer
cannot agree as to the cause of the event, the decision of the Certificate
Insurer shall control.
(e) The Master Servicer may assign its rights and delegate its duties
and obligations under this Agreement in connection with the sale or transfer of
a substantial portion of its mortgage servicing or asset management portfolio,
provided that: (i) the purchaser or transferee accepting such assignment and
delegation (A) shall be satisfactory to the Trustee, (B) shall be (I) an
established mortgage finance institution, bank or mortgage servicing
institution, organized and doing business under the laws of any state of the
United States or the District of Columbia, authorized under such laws to perform
the duties of a servicer of mortgage loans or (II) a Person resulting from a
merger, consolidation or succession
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that is permitted under Section 8.19, and (C) shall execute and deliver to the
Trustee an agreement, in form and substance reasonably satisfactory to the
Trustee, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Master Servicer under this Agreement from and after the date of
such agreement; (ii) as evidenced by a letter from each Rating Agency delivered
to the Trustee, each Rating Agency's rating or ratings of the Certificates in
effect immediately prior to such assignment and delegation will not be
qualified, downgraded or withdrawn as a result of such assignment and
delegation; (iii) the Master Servicer shall not be released from its obligations
under this Agreement that arose prior to the effective date of such assignment
and delegation under this Section 8.20(e); and (iv) the rate at which the
Servicing Fee (or any component thereof) is calculated shall not exceed the rate
in effect prior to such assignment and delegation. Upon acceptance of such
assignment and delegation, the purchaser or transferee shall be the successor
Master Servicer hereunder. The Master Servicer shall not resign from the
obligations and duties hereby imposed on it, except upon determination that its
duties hereunder are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of this
Agreement. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an opinion of counsel to such effect which shall
be delivered to the Trustee and the Certificate Insurer.
(f) No removal or resignation of the Master Servicer shall become
effective until the Trustee or a successor Master Servicer shall have assumed
the Master Servicer's responsibilities and obligations in accordance with this
Section.
(g) Upon removal or resignation of the Master Servicer, the Master
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 Master Servicer
has maintained for the Mortgage Loans, including all tax bills, assessment
notices, insurance premium notices and all other documents as well as all
original documents then in the Master Servicer's possession.
(h) Any collections then being held by the Master Servicer prior to its
removal and any collections received by the Master Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the successor Master Servicer.
(i) Upon removal or resignation of the Master Servicer, the Trustee (x)
may solicit bids for a successor servicer as described below, and (y) pending
the appointment of a successor servicer as a result of soliciting such bids,
shall serve as Master Servicer. The Trustee shall, if it is unable to obtain a
qualifying bid and is prevented by law from acting as Master Servicer, appoint,
or petition a court of competent jurisdiction to appoint, any housing and home
finance institution, bank or mortgage servicing institution which has been
designated as an approved seller-servicer by FNMA or FHLMC for first and second
mortgage loans and having equity of not less than $1,500,000 (or such lower
level as may be acceptable to the Certificate Insurer), as determined in
accordance with generally accepted accounting principles and acceptable to the
Certificate Insurer and the Owners of the Class R Certificates (provided that if
the Certificate Insurer and such Owners cannot agree within a reasonable period
of time as to the acceptability of such successor Master Servicer, the decision
of the Certificate Insurer shall control) as the successor to the Master
Servicer hereunder in the assumption of all or any
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part of the responsibilities, duties or liabilities of the Master Servicer
hereunder. The compensation of any successor Master Servicer (including, without
limitation, the Trustee) so appointed shall be the aggregate Servicing Fee,
together with the other servicing compensation in the form of assumption fees,
late payment charges or otherwise as provided in Sections 8.08 and 8.15;
provided, however, that if the Trustee acts as successor Master Servicer then
the Seller agrees to pay to the Trustee at such time that the Trustee becomes
such successor Master Servicer a set-up fee of twenty-five dollars ($25.00) for
each Mortgage Loan then included in the Trust Estate. The Trustee shall be
obligated to serve as successor Master Servicer whether or not the fee described
in the preceding sentence is paid by the Seller, but shall in any event be
entitled to receive, and to enforce payment of, such fee from the Seller.
(j) ln the event the Trustee solicits bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.08 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain servicing. The Trustee shall deduct from any sum received by
the Trustee from the successor Master Servicer in respect of such sale, transfer
and assignment all costs and expenses of any public announcement and of any
sale, transfer and assignment of the servicing rights and responsibilities
hereunder. After such deductions, the remainder of such sum less any amounts due
the Trustee or the Trust from the Master Servicer shall be paid by the Trustee
to the removed Master Servicer at the time of such sale, transfer and assignment
to the successor Master Servicer.
(k) The Trustee and such successor Master Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession, including the notification to all Mortgagors of the transfer of
servicing. The Master Servicer agrees to cooperate with the Trustee and any
successor Master Servicer in effecting the termination of the Master Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor Master Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Master Servicer, as applicable, all amounts which then have been or
should have been deposited in the Collection Account by the Master Servicer or
which are thereafter received with respect to the Mortgage Loans. Neither the
Trustee nor any other successor Master Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Master Servicer to deliver,
or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Master Servicer. Subject to subsection (j), if the Master Servicer resigns or is
replaced hereunder, the Master Servicer agrees to reimburse the Trust, the
Owners and the Certificate Insurer for the costs and expenses associated with
the transfer of servicing to the replacement Master Servicer, but subject to a
maximum reimbursement to all such parties in the amount of twenty-five dollars
($25.00) for each Mortgage Loan then included in the Trust Estate.
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(l) The Trustee or any other successor Master Servicer, upon assuming
the duties of Master Servicer hereunder, shall immediately make all required P&I
Advances and deposit them to the Collection Account which the Master Servicer
has theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make P&I Advances (including the P&I Advances
described in this clause (I)) if, in the Trustee's reasonable good faith
judgment, such P&I Advances will ultimately be recoverable from the Mortgage
Loans.
(m) The Trustee shall give notice to the Certificate Insurer, to the
Mortgagors, to ▇▇▇▇▇'▇ and to Standard & Poor's of the transfer of the servicing
to the successor Master Servicer.
(n) The Trustee shall give notice to the Certificate Insurer, the
Owners, the Trustee, the Seller, ▇▇▇▇▇'▇ and Standard & Poor's of the occurrence
of any event described in paragraphs (a) or (b) above of which the Trustee is
aware.
Section 8.21 Inspections by Certificate Insurer; Errors and Omissions
Insurance. (a) Upon reasonable notice, the Trustee, the Certificate Insurer or
any agents thereof may inspect the Master Servicer's servicing operations and
discuss the servicing operations of the Master Servicer during the Master
Servicer's normal business hours with any of its officers or directors;
provided, however, that the costs and expenses incurred by the Master Servicer
or its agents or representatives in connection with any such examinations or
discussions shall be paid by the Master Servicer;
(b) The Master Servicer 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 FNMA Guide or any successor provision thereof; provided,
however, that if the Trustee shall become the Master Servicer, any customary
insurance coverage that the Trustee maintains shall be deemed sufficient
hereunder; provided, further, that in the event that the fidelity bond or the
errors and omissions coverage is no longer in effect, the Trustee shall promptly
give such notice to the Certificate Insurer and the Owners. Upon the request of
the Trustee or the Certificate Insurer, the Master Servicer shall cause to be
delivered to such requesting Person a certified true copy of such fidelity bond
or errors and omission policy.
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ARTICLE IX
TERMINATION OF TRUST
Section 9.01 Termination of Trust.
The Trust created hereunder and all obligations created by this
Agreement will terminate upon the payment to the Owners of all Certificates,
from amounts other than those available under the Certificate Insurance Policy,
of all amounts held by the Trustee and required to be paid to such Owners
pursuant to this Agreement upon the latest to occur of (a) the final payment or
other liquidation (or any advance made with respect thereto) of the last
Mortgage Loan in the Trust Estate, (b) the disposition of all property acquired
in respect of any Mortgage Loan remaining in the Trust Estate, (c) at any time
when a Qualified Liquidation of both Mortgage Loan Groups included within the
Trust is effected as described below and (d) the final payment to the
Certificate Insurer of all amounts then owing to it. To effect a termination of
this Agreement pursuant to clause (c) above, the Owners of all Certificates then
Outstanding shall (i) unanimously direct the Trustee on behalf of the Trust to
adopt a plan of complete liquidation for each of the Mortgage Loan Groups, as
contemplated by Section 860F(a)(4) of the Code and (ii) provide to the Trustee
an opinion of counsel experienced in federal income tax matters acceptable to
the Certificate Insurer and the Trustee to the effect that each such liquidation
constitutes a Qualified Liquidation, and the Trustee either shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, or shall distribute equitably in kind all of the assets of the Trust
Estate to the remaining Owners of the Certificates each in accordance with such
plan, so that the liquidation or distribution of the Trust Estate, the
distribution of any proceeds of the liquidation and the termination of this
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation. In no event, however, will the Trust created by this
Agreement continue beyond the expiration of twenty-one (21) years from the death
of the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late
Ambassador of the United States to the Court of Saint ▇▇▇▇▇, living on the date
hereof. The Trustee shall give written notice of termination of the Agreement to
each Owner in the manner set forth in Section 11.05.
Section 9.02 Termination Upon Option of Owners of Class R Certificates
and Market Servicer. (a) On any Monthly Remittance Date on or after the Optional
Termination Date, the Owners of a 99.999% Percentage Interest represented by the
Class R Certificates then outstanding may determine to purchase and may cause
the purchase from the Trust of all (but not fewer than all) Mortgage Loans and
all property theretofore acquired in respect of any Mortgage Loan by
foreclosure, deed in lieu of foreclosure, or otherwise then remaining in the
Trust Estate on terms agreed upon between the Certificate Insurer and such
Owners of the Class R Certificates at a price no less than 100% of the aggregate
Loan Balances of the Mortgage Loans as of the day of purchase minus amounts
remitted from the Collection Account to the Distribution Account representing
collections of principal on the Mortgage Loans during the current Due Period,
plus one month's interest on such amount computed at the Adjusted Pass-Through
Rate, plus all accrued and unpaid Servicing Fees plus the aggregate amount of
any unreimbursed Trust Estate expenses, P&I Advances and Servicing Advances and
any P&I Advances which the Master Servicer has theretofore failed to remit. In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Collection Account for deposit to the
Distribution Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
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(b) In addition to the foregoing, following the Optional Termination
Date, upon the first Monthly Remittance Date on which the aggregate of the Loan
Balances of the Mortgage Loans is less than 5% of the Original Aggregate Loan
Balance, the Master Servicer may determine to purchase and may cause the
purchase from the Trust of all (but not fewer than all) Mortgage Loans and all
property theretofore acquired in respect of any Mortgage Loan by foreclosure,
deed in lieu of foreclosure, or otherwise then remaining in the Trust Estate at
terms agreed upon between the Certificate Insurer and the Master Servicer, at a
price no less than 100% of the aggregate Loan Balances of the Mortgage Loans as
of the day of purchase minus amounts remitted from the Collection Account to the
Distribution Account representing collections of principal on the Mortgage Loans
during the current Due Period, plus one month's interest on such amount computed
at the Adjusted Pass-Through Rate, plus all accrued and unpaid Servicing Fees
plus the aggregate amount of any unreimbursed First Estate expenses, P&I
Advances and Servicing Advances and any P&I Advances which Master Servicer has
theretofore failed to remit.
(c) In connection with any such purchase, such Owners of the Class R
Certificates or the Master Servicer, as applicable, shall adopt and the Trustee
shall adopt, as to the Trust, a plan of complete liquidation for all of the
Mortgage Loan Groups as contemplated by Section 860F(a)(4) of the Code and shall
provide to the Trustee an opinion of counsel experienced in federal income tax
matters acceptable to the Trustee to the effect that such purchase and
liquidations constitutes, as to the Trust, a Qualified Liquidation. In addition,
such Owners of the Class R Certificates, the Master Servicer or the Certificate
Insurer, as applicable, shall provide to the Trustee an opinion of counsel
acceptable to the Trustee to the effect that such purchase and liquidation does
not constitute a preference payment pursuant to the United States Bankruptcy
Code.
(d) Promptly following any purchase described in this Section 9.02, the
Trustee will release the Files to the Owners of such Class R Certificates or the
Master Servicer, as the case may be, or otherwise upon their order, in a manner
similar to that described in Section 8.14 hereof.
Section 9.03 Termination Auction.
The Trustee shall, in accordance with the procedures and schedule set
forth in Exhibit K hereto (the "Auction Procedures") and upon written notice
from the Master Servicer, make a commercially reasonable effort to sell at fair
market value in a commercially reasonable manner and upon commercially
reasonable terms, by conducting an auction (the "Termination Auction") of the
Mortgage Loans remaining in the Trust in order to effect a termination of the
Trust on a date selected by the Trustee (the "Auction Date"), but in any case
within ninety days following the Optional Termination Date. The Seller (and the
Master Servicer if Block Financial Corporation is not the Master Servicer) may,
but shall not be required to, bid at the Termination Auction. The Trustee shall
be entitled to retain counsel of its choice to represent it in the Termination
Auction, and the fees and expenses of such counsel shall be paid by the Seller.
The Trustee shall sell and transfer the Mortgage Loans to the highest bidder
therefor at the Termination Auction provided that:
(1) the Termination Auction has been conducted in accordance
with the Auction Procedures;
(2) the Trustee has received good faith bids for the Mortgage
Loans from at least two prospective purchasers that are considered by
the Trustee, in its sole discretion, to be
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competitive participants in the market for manufactured housing
installment sale contracts; provided, that at least one of such
prospective purchasers shall not be an Affiliate of the Seller;
(3) a financial advisor selected by the Trustee, the fees of
whom shall be an expense of the Seller, as advisor to the Trustee (in
such capacity, the "Advisor"), shall have advised the Trustee in
writing that at least two of such bidders are participants in the
market for mortgage loans and are willing and able to purchase the
Mortgage Loans (the Trustee may in its discretion select itself or an
affiliate thereof as Advisor);
(4) the highest bid in respect of the Mortgage Loans is not
less than the aggregate fair market value of the Mortgage Loans (as
determined by the Trustee in its sole discretion);
(5) any bid submitted by the Seller or any Affiliate thereof
shall be independently verified and represented in writing by a
qualified independent third party evaluator (which may include the
Advisor or an investment banking firm) selected by the Trustee and may
only be considered if such evaluator determines that the bid reasonably
represents the fair market value of the Mortgage Loans;
(6) the highest bid would result in proceeds from the sale of
the Mortgage Loans which will be at least equal to the Minimum
Termination Amount;
(7) such sale and consequent termination of the Trust must
constitute a "qualified liquidation" of the Trust under Section 860F of
the Code, including the requirement that such qualified liquidation
take place over a period not to exceed 90 days (the Trustee may, in its
discretion, require that the purchaser of such Mortgage Loans provide
an Opinion of Counsel to that effect); and
(8) the terms of the Termination Auction must be made
available to all bidders and must stipulate that the Master Servicer be
retained to service the Mortgage Loans on terms substantially similar
to those in this Agreement.
Provided that all of the conditions set forth in clauses (1) through
(8) have been met, the Trustee shall sell and transfer the Mortgage Loans,
without representation, warranty or recourse of any kind whatsoever, to such
highest bidder in accordance with and upon completion of the Auction Procedures.
The Trustee shall deposit the purchase price for the Mortgage Loans in the
Distribution Account at least one Business Day prior to the fourth Distribution
Date following the Optional Termination Date. In the event that any of such
conditions are not met or such highest bidder fails or refuses to comply with
any of the Auction Procedures, the Trustee shall decline to consummate such sale
and transfer. In such case the Termination Auction shall be concluded and the
Trustee shall be under no further duty to solicit bids for or otherwise to
attempt to sell the Mortgage Loans.
Section 9.04 Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service or
by a court of competent jurisdiction, in either case from which no appeal is
taken within the permitted time for such appeal or, if any appeal is taken,
following a final determination of such appeal from which no further
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appeal can be taken, to the effect that the Trust does not and will no longer
qualify as a REMIC pursuant to Section 860D of the Code (the "Final
Determination"), at any time on or after the date which is 30 calendar days
following such Final Determination (i) the Certificate Insurer or the Owners of
a majority in Percentage Interests represented by the Class A Certificates then
Outstanding with the consent of the Certificate Insurer and the Master Servicer
may direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation, as contemplated by Section 860F(a)(4) of the Code the Master
Servicer or (ii) the Master Servicer or the Certificate Insurer may notify the
Trustee of the Certificate Insurer's, as applicable, determination to purchase
from the Trust all (but not fewer than all) Mortgage Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining in the Trust Estate at a price equal to the sum of (x) the
greater of (I) 100% of the aggregate Loan Balances of the Mortgage Loans as of
the day of purchase minus amounts remitted from the Collection Account
representing collections of principal on the Mortgage Loans during the current
Due Period, and (II) the fair market value of such Mortgage Loans (disregarding
accrued interest), (y) one month's interest on such amount computed at the
Adjusted Pass-Through Rate and (z) the aggregate amount of any ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇
Advances and Servicing Advances and any P&I Advances which the Master Servicer
has theretofore failed to remit.
Upon receipt of such direction or notice, the Trustee shall notify the
Owners of the Class R Certificates of such election to liquidate or such
determination to purchase, as the case may be (the "Termination Notice"). The
Owners of a majority of the Percentage Interests of the Class R Certificates
then Outstanding may, within 60 days from the date of receipt of the Termination
Notice (the "Purchase Option Period"), at their option, purchase from the Trust
all (but not fewer than all) Mortgage Loans and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise then
remaining in the Trust Estate at a purchase price equal to the aggregate Loan
Balances of all Mortgage Loans as of the date of such purchase, plus (a) one
month's interest on such amount at the Adjusted Pass-Through Rate, (b) the
aggregate amount of any ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇ Advances and Servicing Advances and (c)
any P&I Advances which the Master Servicer has theretofore failed to remit. If,
during the Purchase Option Period, the Owners of the Class R Certificates have
not exercised the option described in the immediately preceding paragraph, then
upon the expiration of the Purchase Option Period (i) in the event that neither
the Master Servicer nor the Certificate Insurer have elected to purchase the
Mortgage Loans, the Trustee shall sell the Mortgage Loans and distribute the
proceeds of the liquidation of the Trust Estate, each in accordance with the
plan of complete liquidation, such that, if so directed, the liquidation of the
Trust Estate, the distribution of the proceeds of the liquidation and the
termination of this Agreement occur no later than the close of the 60th day, or
such later day as the Certificate Insurer or the Owners of the Class A
Certificates with the consent of the Certificate Insurer shall permit or direct
in writing, after the expiration of the Purchase Option Period and (ii) in the
event that the Master Servicer or the Certificate Insurer, as applicable, has
given the Trustee notice of the Certificate Insurer's determination to purchase
the Trust Estate, the Master Servicer or the Certificate Insurer shall, within
60 days, purchase all (but not fewer than all) Mortgage Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure or otherwise
then remaining in the Trust Estate for the price calculated as described in
clause (a)(ii) above. In connection with such purchase, the Master Servicer
shall remit to the Trustee all amounts then on deposit in the Collection Account
for deposit to the Distribution Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(b) Following a Final Determination, the Owners of a majority of the
Percentage Interests of the Class R Certificates then Outstanding may, at their
option and upon delivery to the Certificate
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Insurer of an opinion of counsel experienced in federal income tax matters
acceptable to the Certificate Insurer selected by the Owners of the Class R
Certificates, which opinion shall be reasonably satisfactory in form and
substance to the Certificate Insurer, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of the Trust will be subject to federal taxation, purchase from the Trust all
(but not fewer than all) Mortgage Loans and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise then remaining in the
Trust Estate at a purchase price equal to the aggregate Loan Balances of all
Mortgage Loans as of the date of such purchase, plus (a) one month's interest on
such amount computed at the Adjusted Pass-Through Rate, (b) the aggregate amount
of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇ Advances and (c) any P&I Advances which the Master Servicer
has theretofore failed to remit. In connection with such purchase, the Master
Servicer shall remit to the Trustee all amounts then on deposit in the
Collection Account for deposit to the Distribution Account, which deposit shall
be deemed to have occurred immediately preceding such purchase. The foregoing
opinion shall be deemed satisfactory unless the Certificate Insurer gives the
Owners of a majority of the Percentage Interests of the Class R Certificates
notice that such opinion is not satisfactory within thirty days after receipt of
such opinion. In connection with any such purchase, such Owners shall direct the
Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.05 Disposition of Proceeds.
The Trustee shall, upon receipt thereof, deposit the proceeds of any
liquidation of the Trust Estate pursuant to this Article IX to the Distribution
Account; provided, however, that any amounts representing ▇▇▇▇▇▇▇▇▇▇▇▇ ▇&▇
Advances and Servicing Advances theretofore funded by the Master Servicer from
the Master Servicer's own funds shall be paid by the Trustee to the Master
Servicer from the proceeds of the Trust Estate.
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ARTICLE X
THE TRUSTEE
Section 10.01 Certain Duties and Responsibilities.
(a) The Trustee (i) (A) undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee and (B) the
banking institution that is the Trustee shall serve as the Trustee at all times
under this Agreement, and (ii) in the absence of bad faith on its part, may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished pursuant to
and conforming to the requirements of this Agreement; but in the case of any
such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Agreement.
(b) Notwithstanding the appointment of the Master Servicer hereunder,
the Trustee is hereby empowered to perform the duties of the Master Servicer it
being expressly understood, however, that the foregoing describes a power and
not an obligation of the Trustee, and that all parties hereto agree that, prior
to any termination of the Master Servicer, the Master Servicer and, thereafter,
the Trustee or any other successor servicer shall perform such duties.
Specifically, and not in limitation of the foregoing, the Trustee shall upon
termination or resignation of the Master Servicer, and pending the appointment
of any other Person as successor Master Servicer, have the power and duty during
its performance as successor Master Servicer:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) To enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted by
Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to
Section 8.14;
(v) to enforce the Mortgage Loans; and
(vi) to make P&I Advances and Servicing Advances and to pay
Compensating Interest.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be personally liable for any error
of judgment made in good faith by an Authorized Officer of
the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in
accordance with any direction given pursuant to Section
6.11.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. None of the provisions contained in this Agreement
shall in any event require the Trustee to perform, or be responsible for the
manner of performance of, any of the obligations of the Master Servicer 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 Master Servicer in accordance with the terms of this Agreement.
(f) The permissive right of the Trustee to take actions enumerated in
this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit, or
to take any remedial proceeding under this Agreement, or to take any steps in
the execution of the trusts hereby created or in the enforcement of any rights
and powers hereunder until it shall be indemnified to its satisfaction against
any and all costs and expenses, outlays and counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
Section 10.02 Removal of Trustee for Cause.
(a) The Trustee may be removed pursuant to paragraph (b) hereof upon
the occurrence of any of the following events (whatever the reason for such
event and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners
entitled hereto on any Distribution Date amounts available for
distribution in accordance with the terms hereof; (provided, however,
that any such failure which is due to circumstances beyond the control
of the Trustee shall not be a cause for removal hereunder); or
(2) the Trustee shall breach or fail in the performance of any
covenant or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or in
any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material respect
as of the time when the same shall have been made, and such failure or
breach shall continue or not be cured for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Trustee by the
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Seller, the Certificate Insurer, or by the Owners of at least 25 % of
the aggregate Percentage Interests in the Trust Estate represented by
the Class A Certificates then Outstanding, or, if there are no Class A
Certificates then Outstanding, by such Percentage Interests represented
by the Class R Certificates, a written notice specifying such failure
or breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Trustee, and such decree or order shall have remained in
force undischarged or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Trustee or relating to all
or substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file or
consent to the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Depositor shall give to the Certificate Insurer, Moody's and
Standard & Poor's notice of the occurrence of any such event of which the
Depositor is aware.
(b) If any event described in paragraph (a) occurs and is continuing,
then and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer, the Depositor and the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or if there are no Class A Certificates
then outstanding by such majority of the Percentage Interests represented by
each of the Class X Certificates and the Class R Certificates, may, whether or
not the Trustee resigns pursuant to Section 10.09(b) hereof, immediately,
concurrently with the giving of notice to the Trustee, and without delaying the
30 days required for notice therein, appoint a successor Trustee pursuant to the
terms of Section 10.09 hereof.
(c) The Master Servicer shall not be liable for any costs relating to
the removal of the Trustee or the appointment of a new Trustee.
Section 10.03 Certain Rights of the Trustee.
Except as otherwise provided in Section 10.01 hereof:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting based upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
99
(b) any request or direction of the Depositor, the Seller, the
Certificate Insurer, or the Owners of any Class of Certificates mentioned herein
shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel (selected in good faith by the Trustee) shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Owners pursuant to this Agreement, unless such Owners shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document, but the Trustee in its discretion may make such further
inquiry or investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys
or custodians;
(h) the Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of the
Certificates;
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act;
(j) pursuant to the terms of this Agreement, the Master Servicer is
required to furnish to the Trustee from time to time certain information and to
make various calculations which are relevant to the performance of the Trustee's
duties under this Agreement. The Trustee shall be entitled to rely in good faith
on any such information and calculations in the performance of its duties
hereunder, (i) unless and until an Authorized Officer of the Trustee has actual
knowledge, or is advised by any Owner of a Certificate (either in writing or
orally with prompt written or telecopies confirmation), that such information or
calculations is or are incorrect, or (ii) unless there is a manifest error in
any such information: and
(k) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Estate created hereby or the powers
granted hereunder.
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Section 10.04 Not Responsible for Recitals or Issuance of
Certificates.
The recitals and representations contained herein and in the
Certificates, except any such recitals and representations relating to the
Trustee, shall be taken as the statements of the Depositor and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representation as to the validity or sufficiency of this Agreement, of the
Certificates, or any Mortgage Loan or document related thereto other than as to
validity and sufficiency of its authentication of the Certificates. The Trustee
shall not be accountable for the use or application by the Depositor of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor, the Seller or the Master
Servicer in respect of the Mortgage Loans or deposited into or withdrawn from
the Collection Account by the Depositor, the Master Servicer or the Seller, and
shall have no responsibility for filing any financing or continuation statement
in any public office at any time or otherwise to perfect or maintain the
perfection of any security interest or lien or to prepare or file any tax
returns or Securities and Exchange Commission filings for the Trust or to record
this Agreement. The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default unless an Authorized Officer of the
Trustee shall have received written notice thereof or an Authorized Officer has
actual knowledge thereof. In the absence of receipt of such notice, the Trustee
may conclusively assume that no default has occurred.
Section 10.05 May Hold Certificates.
The Trustee, any Paying Agent, Registrar or any other agent of the
Trust, in its individual or any other capacity, may become an Owner or pledgee
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee, any Paying Agent, Registrar or such other
agent.
Section 10.06 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other trust funds except to the extent required herein or required by law.
The Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Seller and except to the extent of
income or other gain on investments which are deposits in or certificates of
deposit of the Trustee in its commercial capacity.
Section 10.07 Compensation and Reimbursement; No Lien for Fees.
The Trustee shall receive compensation for fees and reimbursement for
expenses pursuant to Section 2.05, Section 7.03(c)(iv)(A) and Section 7.06
hereof. The Trustee shall have no lien on the Trust Estate for the payment of
such fees and expenses.
Section 10.08 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation or association organized and doing business under the laws of the
United States of America or of any State authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 subject to supervision or examination by the United States of
America, acceptable to the Certificate Insurer and having a deposit rating of at
least A- from Standard & Poor's
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(or such lower rating as may be acceptable to Standard & Poor's) and A2 by
Moody's (or such lower rating as may be acceptable to Moody's). If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall, upon the request of the Depositor with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) or of the
Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
Section 10.09 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Depositor and
by mailing notice of resignation by first-class mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register;
provided, that the Trustee cannot resign solely for the failure to receive the
Trustee Fee. A copy of such notice shall be sent by the resigning Trustee to the
Rating Agencies. Upon receiving notice of resignation, the Depositor shall
promptly appoint a successor trustee or trustees acceptable to the Certificate
Insurer by written instrument, in duplicate, executed on behalf of the Trust by
an Authorized Officer of the Seller, one copy of which instrument shall be
delivered to the Trustee so resigning, one copy to the successor trustee or
trustees and one copy to the Master Servicer. If no successor trustee shall have
been appointed and have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any Owner
may, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. A copy of any such petition
shall be promptly delivered to the Master Servicer. Such court may thereupon,
after such notice, if any, as it may deem proper and appropriate, appoint a
successor trustee.
(c) If at any time the Trustee shall cease to be eligible under Section
10.08 hereof and shall fail to resign after written request therefor by the
Depositor or by the Certificate Insurer, the Certificate Insurer or the
Depositor with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor trustee acceptable to the Certificate Insurer by
written instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the Depositor, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests represented by
the Class A Certificates with the consent of the Certificate Insurer, or, if
there are no Class A Certificates then Outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates, may at any time
remove the Trustee and appoint a successor trustee acceptable to the Certificate
Insurer by delivering to the Trustee to be removed, to the successor trustee so
appointed, to the Depositor, to the Master Servicer and to the Certificate
Insurer, copies of the record of the act taken by the Owners, as provided for in
Section 11.03 hereof.
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(e) If the Trustee fails to perform its duties in accordance with the
terms of this Agreement, or becomes ineligible pursuant to Section 10.08 to
serve as Trustee, the Certificate Insurer may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, signed by the
Certificate Insurer duly authorized, one complete set of which instruments shall
be delivered to the Depositor, one complete set to the Trustee so removed, one
complete set to the successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Depositor shall promptly appoint a successor trustee acceptable to the
Certificate Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor trustee shall be
appointed by act of the Certificate Insurer or the Owners of a majority of the
Percentage Interests represented by the Class A Certificates then Outstanding
with the consent of the Certificate Insurer, the successor trustee so appointed
shall forthwith upon its acceptance of such appointment become the successor
trustee and supersede the successor trustee appointed by the Depositor. If no
successor trustee shall have been so appointed by the Depositor or the Owners
and shall have accepted appointment in the manner hereinafter provided, any
Owner may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(g) The Depositor shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Certificate Insurer, to the Rating Agencies and to the Owners as their names and
addresses appear in the Register. Each notice shall include the name of the
successor Trustee and the address of its corporate trust office.
Section 10.10 Acceptance of Appointment by Successor Trustee.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor on behalf of the Trust and to its predecessor
Trustee an instrument accepting such appointment hereunder and stating its
eligibility to serve as Trustee hereunder, and thereupon the resignation or
removal of the predecessor Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts, duties and obligations of its predecessor
hereunder; but, on request of the Depositor or the successor Trustee, such
predecessor Trustee shall, upon payment of its charges then unpaid, execute and
deliver an instrument transferring to such successor trustee all of the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver to such successor trustee all property and money held by
such Trustee so ceasing to act hereunder. Upon request of any such successor
trustee, the Depositor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Depositor shall mail notice thereof by first-class mail,
postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Depositor shall send a copy of such notice to the Rating Agencies.
If the Depositor fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Trust.
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No successor trustee shall accept its appointment unless at the time of
such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11 Merger, Conversion, Consolidation or Succession to
Business of the Trustee.
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12 Reporting; Withholding.
(a) The Trustee shall timely provide to the Owners the Internal Revenue
Service's Form 1099 and any other statement required by applicable Treasury
regulations as determined by the Tax Matters Person, and shall withhold, as
required by applicable law, federal, state or local taxes, if any, applicable to
distributions to the Owners, including but not limited to backup withholding
under Section 3406 of the Code and the withholding tax on distributions to
foreign investors under Sections 1441 and 1442 of the Code.
(b) As required by law or upon request of the Tax Matters Person and
except as otherwise specifically set forth in subsection (a) above, the Trustee
shall prepare and timely file all reports required to be filed by the Trust with
any federal, state or local governmental authority having jurisdiction over the
Trust, including other reports that must be filed with the Owners, such as the
Internal Revenue Service's Form 1066 and Schedule Q and the form required under
Section 6050K of the Code, if applicable to REMICs. Furthermore, the Trustee
shall report to Owners, if required, with respect to the allocation of expenses
pursuant to Section 212 of the Code. The Trustee shall collect any forms or
reports from the Owners it determines to be required under applicable federal,
state and local tax laws.
Section 10.13 Liability of the Trustee.
The Trustee shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Trustee
herein. Neither the Trustee nor any of the directors, officers, employees or
agents of the Trustee shall be under any liability on any Certificate or
otherwise to the Certificate Insurer, the Depositor, the Seller, the Master
Servicer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee, its
directors, officers, employees or agents or any such Person against any
liability which would otherwise be imposed by reason of negligent action,
negligent failure to act or willful misconduct in the performance of duties or
by reason of reckless disregard of obligations and duties
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hereunder. Subject to the foregoing sentence, the Trustee shall not be liable
for losses on investments of amounts in the Distribution Account (except for any
losses on obligations on which the bank serving as Trustee is the obligor). In
addition, the Depositor, the Seller and the Master Servicer covenant and agree
to indemnify the Trustee, and when the Trustee is acting as Master Servicer, the
Master Servicer, from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including legal fees and expenses) of
whatsoever kind arising out of or in connection with the performance of its
duties hereunder other than those resulting from the negligence or bad faith of
the Trustee and the Depositor shall pay all amounts not otherwise paid pursuant
to Sections 2.05 and 7.06 hereof. The Trustee and any director, officer,
employee or agent of the Trustee may rely and shall be protected in acting or
refraining from acting in good faith on any certificate, notice or other
document of any kind prima facie properly executed and submitted by the
Authorized Officer of any Person respecting any matters arising hereunder.
Section 10.14 Appointment of Co-Trustee or Separate Trustee .
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate or Mortgaged Property may at the time be located,
the Master Servicer and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee and reasonably acceptable to the Certificate Insurer to
act as co-Trustee or co-Trustees, jointly with the Trustee, of all or any part
of the Trust Estate or separate Trustee or separate Trustees of any part of the
Trust Estate, and to vest in such Person or Persons, in such capacity and for
the benefit of the Owners, such title to the Trust Estate, or any part thereof,
and, subject to the other provisions of this Section 10.14, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. If the Master Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case any event indicated in Section 8.20(a) shall have occurred and be
continuing, the Trustee subject to reasonable approval of the Certificate
Insurer 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 10.08 and no notice to Owners of the
appointment of any co-Trustee or separate Trustee shall be required under
Section 10.09.
Every separate Trustee and co-Trustee shall, to the extent permitted,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
Trustee or co-Trustee jointly (it being understood that such separate
Trustee or co-Trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Master
Servicer hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust Estate or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
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(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other co-Trustee
hereunder; and
(iii) The Master Servicer, the Certificate Insurer 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 Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or co-Trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions.
Upon any application or request by the Depositor, the Seller, the
Certificate Insurer or the Owners to the Trustee to take any action under any
provision of this Agreement, the Depositor, the Seller, the Certificate Insurer
or the Owners, as the case may be, shall furnish to the Trustee a certificate
stating that all conditions precedent, if any, provided for in this Agreement
relating to the proposed action have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement (including one furnished pursuant to specific requirements of
this Agreement relating to a particular application or request) shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto:
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with in all
material respects.
Section 11.02 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Trustee may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such Authorized Officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of an Authorized
Officer of the Trustee or any opinion of counsel may be based, insofar as it
relates to factual matters upon a certificate or opinion of, or representations
by, one or more Authorized Officers of the Depositor, the Seller or the Master
Servicer, stating that the information with respect to such factual matters is
in the possession of the Depositor, the Seller or the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with
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respect to such matters are erroneous. Any opinion of counsel may also be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.03 Acts of Owners.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Owners in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Depositor.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.04 Notices, etc. to Trustee.
Any request, demand, authorization, direction, notice, consent, waiver
or act of the Owners or other documents provided or permitted by this Agreement
to be made upon, given or furnished to, or filed with the Trustee by any Owner,
the Certificate Insurer, the Depositor or the Seller shall be
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sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with and received by the Trustee at the Corporate Trust Office.
Section 11.05 Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such report. In
any case where a notice or report to Owners is mailed in the manner provided
above, neither the failure to mail such notice or report nor any defect in any
notice or report so mailed to any particular Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided. Notwithstanding the foregoing, if the Master
Servicer is removed or resigns or the Trust is terminated, notice of any such
events shall be made by overnight courier, registered mail or telecopy followed
by a telephone call.
Where this Agreement provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any Rating Agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.06 Rules by Trustee and Seller.
The Trustee may make reasonable rules for any meeting of Owners.
Section 11.07 Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto
shall bind its successors and assigns, whether so expressed or not.
Section 11.08 Severability.
In case any provision in this Agreement or in the Certificates shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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Section 11.09 Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Owners, the Certificate Insurer and the
parties hereto and their successors hereunder, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 11.10 Legal Holidays.
In any case where the date of any Monthly Remittance Date, any
Distribution Date, any other date on which any distribution to any Owner is
proposed to be paid, or any date on which a notice is required to be sent to any
Person pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this Agreement)
payment or mailing need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made or mailed on
the nominal date of any such Monthly Remittance Date, such Distribution Date, or
such other date for the payment of any distribution to any Owner or the mailing
of such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 11.11 Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many
states and outside the United States and the desire to establish with certainty
that this Agreement will be governed by and construed and interpreted in
accordance with the law of a state having a well-developed body of commercial
and financial law relevant to transactions of the type contemplated herein, this
Agreement and each Certificate shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein, without giving effect to the conflicts of law
principles thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction of
the United States District Court for the Southern District of New York and any
court in the State of New York located in the City and County of New York, and
any appellate court from any thereof, in any action, suit or proceeding brought
against them or in connection with this Agreement or any of the related
documents or the transactions contemplated hereunder or for recognition or
enforcement of any judgment, and the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. The parties hereto agree that a
final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. To the extent permitted by applicable law, the parties
hereto hereby waive and agree not to assert by way of motion, as a defense or
otherwise in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the related documents or the subject
matter thereof may not be litigated in or by such courts.
(c) Each of the Depositor, the Seller and the Master Servicer hereby
irrevocably appoints and designates the Trustee as its true and lawful attorney
and duly authorized agent for acceptance of service of legal process with
respect to any action, suit or proceeding set forth in paragraph (b) hereof.
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Each of the Seller and the Master Servicer agrees that service of such process
upon the Trustee shall constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect the right
of the Depositor, the Seller, the Master Servicer or the Certificate Insurer or
any third-party beneficiary hereunder, as the case may be, to serve process in
any other manner permitted by law or to start legal proceedings relating to any
of the Mortgage Loans against any Mortgagor in the courts of any jurisdiction.
Section 11.12 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.13 Usury.
The amount of interest payable or paid on any Certificate
under the terms of this Agreement shall be limited to an amount which shall not
exceed the maximum nonsurious rate of interest allowed by the applicable laws of
the State of New York or any applicable law of the United States permitting a
higher maximum nonsurious rate that preempts such applicable New York laws,
which could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Certificate exceeds the
Highest Lawful Rate, the Trust stipulates that such excess amount will be deemed
to have been paid to the Owner of such Certificate as a result of an error on
the part of the Trustee acting on behalf of the Trust and the Owner receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Trustee on behalf of the Trust, refund the amount of such
excess or, at the option of such Owner, apply the excess to the payment of
principal of such Certificate, if any, remaining unpaid. In addition, all sums
paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Certificates.
Section 11.14 Amendment.
(a) The Trustee, the Depositor, the Seller and the Master Servicer may,
at any time and from time to time, and without notice to or the consent of the
Owners but with the consent of the Certificate Insurer, amend this Agreement,
subject to the provisions of Section 11.16 and 11.17 and the Trustee shall
consent to such amendment, for the purpose of (i) curing any ambiguity,
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or adding provisions hereto which are not
inconsistent with the provisions hereof; (ii) upon receipt of an opinion of
counsel experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the Trust or upon the transferor of a Class
R Certificate as a result of the ownership of any Class R Certificate by a
Disqualified Organization, removing the restriction on transfer set forth in
Section 5.08(b) hereof or (iii) complying with the requirements of the Code and
the regulations proposed or promulgated thereunder including any amendments
necessary to maintain REMIC status or (iv) for any other purpose, provided that
in the case of this clause (iv) the Person requesting such amendment delivers
(A) an opinion of counsel acceptable to the Trustee that such amendment will not
adversely affect in any material respect the interest of the Owners and (B) such
amendment will not
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result in a withdrawal or reduction of the rating of the Class A Certificates
without regard to the Certificate Insurance Policy. Notwithstanding anything to
the contrary herein, no such amendment shall (a) change in any manner the amount
of, or change the timing of, payments which are required to be distributed to
any Owner without the consent of the Owner of such Certificate, or (b) which
affects in any the manner the terms or provisions of the Certificate Insurance
Policy.
(b) Promptly after the execution of any such amendment, the Trustee
shall furnish written notification of the substance of such amendment to each
Owner in the manner set forth in Section 11.05, and to the Rating Agencies.
(c) The Certificate Insurer, the Owners and the Rating Agencies shall
be provided with copies of any amendments to this Agreement, together with
copies of any opinions or other documents or instruments executed in connection
therewith.
Section 11.15 Paying Agent; Appointment and Acceptance of Duties.
The Trustee is hereby appointed Paying Agent. The Trustee may, subject
to the eligibility requirements for the Trustee set forth in Section 10.08
hereof, appoint one or more other Paying Agents or successor Paying Agents.
Each Paying Agent, immediately upon such appointment, shall signify its
acceptance of the duties and obligations imposed upon it by this Agreement by
written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and deliver
to the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of Section 6.02, that such Paying Agent will:
(a) allocate all sums received for distribution to the Owners of
Certificates of each Class for which it is acting as Paying Agent on each
Distribution Date among such Owners in the proportion specified by the Trustee;
and
(b) hold all sums held by it for the distribution of amounts due with
respect to the Certificates in trust for the benefit of the Owners entitled
thereto until such sums shall be paid to such Owners or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided.
Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent and signed
by the Trustee.
In the event of the resignation or removal of any Paying Agent other
than the Trustee such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
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Upon the appointment, removal or notice of resignation of any Paying
Agent, the Trustee shall notify the Certificate Insurer and the Owners by
mailing notice thereof at their addresses appearing on the Register.
Section 11.16 REMIC Status.
(a) The parties hereto intend that each of the Master REMIC and the
Subsidiary REMIC constitute, and that the affairs of the Trust shall be
conducted so as to qualify each as a REMIC in accordance with the REMIC
Provisions. In furtherance of such intention, the Trustee or such other person
designated pursuant to Section 11.18 hereof shall act as agent for the Trust and
as "tax matters person" (as defined in the REMIC Provisions) for the Trust and
in such capacity it shall: (i) prepare or cause to be prepared and filed, in a
timely manner, annual tax returns and any other tax return required to be filed
by the Trust established hereunder using a calendar year as the taxable year for
the Trust established hereunder; (ii) in the first such tax return, make (or
cause to be made) an election satisfying the requirements of the REMIC
Provisions, on behalf of the Trust, for it to be treated as a REMIC; (iii)
prepare and forward, or cause to be prepared and forwarded, to the Owners all
information, reports or tax returns required with respect to the Trust as, when
and in the form required to be provided to the Owners, and to the Internal
Revenue Service and any other relevant governmental taxing authority in
accordance with the REMIC Provisions and any other applicable federal, state or
local laws, including without limitation information reports relating to
"original issue discount" as defined in the Code based upon the prepayment
assumption and calculated by using the "Issue Price" (within the meaning of
Section 1273 of the Code) of the Certificates of the related Class; (iv) not
take any action or omit to take any action that would cause the termination of
the REMIC status of the Trust, except as provided under this Agreement; (v)
represent the Trust in any administrative or judicial proceedings relating to an
examination or audit by any governmental taxing authority, request an
administrative adjustment as to a taxable year of the Trust, enter into
settlement agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of the Trust, and otherwise act on behalf
of the Trust or any REMIC therein in relation to any tax matter involving the
Trust or any REMIC therein; (vi) comply with all statutory or regulatory
requirements with regard to its conduct of activities pursuant to the foregoing
clauses of this Section 11.16, including, without limitation, providing all
notices and other information to the Internal Revenue Service and Owners of
Class R Certificates required of a "tax matters person" pursuant to subtitle F
of the Code and the Treasury Regulations thereunder; (vii) make available
information necessary for the computation of any tax imposed (A) on transferors
of residual interests to certain Disqualified Organizations or (B) on
pass-through entities, any interest in which is held by a Disqualified
Organization; and (viii) acquire and hold the Tax Matters Person Residual
Interest. The obligations of the Trustee or such other designated Tax Matters
Person pursuant to this Section 11.16 shall survive the termination or discharge
of this Agreement.
(b) The Seller, the Depositor, the Trustee and the Master Servicer
covenant and agree for the benefit of the Owners and the Certificate Insurer (i)
to take no action which would result in the termination of "REMIC" status for
the Trust, (ii) not to engage in any prohibited transaction", as such term is
defined in Section 860F(a)(2) of the Code, subject to the exceptions set forth
in Section 860F(a)(5) of the Code, and (iii) not to engage in any other action
which may result in the imposition on the Trust of any other taxes under the
Code.
113
(c) The Trust shall, for federal income tax purposes, maintain books on
a calendar year basis and report income on an accrual basis.
(d) Except as otherwise permitted by Section 7.05(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereto).
(e) Neither the Depositor, the Seller nor the Trustee shall enter into
any arrangement by which the Trustee will receive a fee or other compensation
for services rendered pursuant to this Agreement, other than as expressly
contemplated by this Agreement.
(f) Notwithstanding the foregoing clauses (d) and (e), the Trustee,
Depositor, Master Servicer or the Seller may engage in any of the transactions
prohibited by such clauses, provided that the Trustee shall have received an
opinion of counsel experienced in federal income tax matters acceptable to the
Certificate Insurer to the effect that such transaction does not result in a tax
imposed on the Trustee or cause a termination of REMIC status for the Trust;
provided, however, that such transaction is otherwise permitted under this
Agreement.
(g) The Master Servicer, Trustee and Tax Matters Person agree to
indemnify the Trust for any tax imposed on the Trust as a result of their
negligence.
Section 11.17 Additional Limitation on Action and Imposition of Tax.
Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters acceptable to the Certificate Insurer to the effect
that such transaction does not result in a tax imposed on the Trust or cause a
termination of REMIC status for the Trust, (i) sell any assets in the Trust
Estate, (ii) accept any contribution of assets after the Startup Day or (iii)
agree to any modification of this Agreement. To the extent that sufficient
amounts cannot be so retained to pay or provide for the payment of such tax, the
Trustee is hereby authorized to and shall segregate, into a separate
non-interest bearing account, the net income from any such Prohibited
Transactions of the Trust and use such income, to the extent necessary, to pay
such tax; provided that, to the extent that any such income is paid to the
Internal Revenue Service, the Trustee shall retain an equal amount from future
amounts otherwise distributable to the Owners of Class R Certificates and shall
distribute such retained amounts to the Owners of Class A Certificates to the
extent they are fully reimbursed and then to the Owners of the Class R
Certificates. If any tax, including interest penalties or assessments,
additional amounts or additions to tax, is imposed on the Trust, such tax shall
be charged against amounts otherwise distributable to the owners of the Class R
Certificates on a pro rata basis. The Trustee is hereby authorized to and shall
retain from amounts otherwise distributable to the Owners of the Class R
Certificates sufficient funds to pay or provide for the payment of, and to
actually pay, such tax as is legally owed by the Trust (but such authorization
shall not prevent the Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings).
114
Section 11.18 Appointment of Tax Matters Person.
A Tax Matters Person will be appointed for the Trust for all purposes
of the Code and such Tax Matters Person will perform, or cause to be performed,
such duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for the Trust shall be [Trustee] as long as it owns a Class R
Certificate. If [Trustee] does not own a Class R Certificate, the Tax Matters
Person may be any other entity that owns a Class R Certificate and accepts a
designation hereunder as Tax Matters person by delivering an affidavit in the
form of Exhibit 1. [Trustee] shall notify the Trustee in writing of the name and
address of another person who accepts a designation as Tax Matters Person
hereunder.
Section 11.19 The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder shall be
suspended and shall run to the benefit of the Owners during any period in which
the Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy. At such time as the Class A Certificates are no
longer Outstanding hereunder, the Certificate Insurer's rights hereunder shall
terminate.
Section 11.20 Reserved.
Section 11.21 Third Party Rights.
The Trustee, the Seller, the Depositor, the Master Servicer and the
Owners agree that the Certificate Insurer shall be deemed a third party
beneficiary of this Agreement as if it were a party hereto.
Section 11.22 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
The Trustee: Bankers Trust Company of California, N.A.
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: __________
Tel:
Fax:
The Depositor: Block Mortgage Finance, Inc.
One Main Plaza
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: __________
Tel:
Fax:
115
The Seller: Companion Mortgage Corporation
One Main Plaza
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel:
Fax:
The Master Servicer: Block Financial Corporation
One Main Plaza
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel:
Fax:
The Rating Agencies: ▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel:
Fax:
Standard & Poor's Ratings Services,
a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel:
Fax:
Owners: As set forth in the Register.
116
IN WITNESS WHEREOF, the Depositor, the Seller, the Master Servicer and
the Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
BLOCK MORTGAGE FINANCE, INC.,
as Depositor
By:
------------------------------------
Title:
----------------------------------
COMPANION MORTGAGE CORPORATION, as
Seller
By:
------------------------------------
Title:
----------------------------------
BLOCK FINANCIAL CORPORATION, as Master
Servicer
By:
------------------------------------
Title:
----------------------------------
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By:
------------------------------------
Title:
----------------------------------
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ of ________, 1997, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________________; that he/she is a
________________________of ____________________, a Delaware corporation; and
that he signed his name thereto by order of the respective Boards of Directors
of said corporation.
IN WITNESS WHEREOF, I have hereunto set any hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ of ________, 1997, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________________; that he/she is a
________________________of ____________________, a Delaware corporation; and
that he signed his name thereto by order of the respective Boards of Directors
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ of ________, 1997, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________________; that he/she is a
________________________of ____________________, a Delaware corporation, and
that he signed his name thereto by order of the respective Boards of Directors
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ of ________, 1997, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________________; that he/she is a
________________________of ____________________, a Delaware corporation, and
that he signed his name thereto by order of the respective Boards of Directors
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
SCHEDULE I
REPRESENTATIONS AND WARRANTIES AS TO THE MORTGAGE LOANS
(i) The information with respect to each Mortgage Loan set
forth in the related Schedule of Mortgage Loans is true and correct as
of the Cut-Off Date;
(ii) All the original or certified documentation set forth in
Section 3.05 (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Trustee on the Startup Day or as otherwise provided in Section 3.05;
(iii) Each Mortgage Loan being transferred to the Trust is a
Qualified Mortgage;
(iv) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include
condominiums and townhouses, small multifamily or mixed-use property or
manufactured homes (provided that such manufactured home is attached to
the property and the manufactured home is encumbered by and secured by a
Mortgage) but shall not include co-operatives; provided, however, that
as of the Cut-Off Date not more than ___% and __% of the aggregate Loan
Balance of the Mortgage Loans in the Fixed Rate Group and Adjustable
Rate Group, respectively, are secured by condominiums with more than 4
stories, not more than ___% and __%, respectively, are secured by
condominiums of less than 4 stories, and not more than ___% and __% of
the aggregate Loan Balance of the Mortgage Loans in the Fixed Rate Group
and Adjustable Rate Group, respectively, are secured by manufactured
homes;
(v) As of the Cut-Off Date no Mortgage Loan in the Fixed Rate
Group has a Loan-to-Value Ratio in excess of 80%, except ___% of such
Mortgage Loans which have a Loan-to-Value Ratio not greater than 95%; as
of the Cut-Off Date no Mortgage Loan in the Adjustable Rate Group has a
Loan-to-Value Ratio greater than 85%.
(vi) Each Mortgage Loan is being master serviced by the
Master Servicer and serviced by a Sub-Servicer;
(vii) The Note related to each Mortgage Loan in the Fixed Rate
Group bears a fixed Mortgage Rate of at least ______% per annum, and the
Note related to each Mortgage Loan in the Adjustable Rate Group bears a
current Mortgage Rate of at least __________% per annum. The weighted
average Mortgage Rate of the Mortgage Loans in the Fixed Rate Group is
at least __________% and the current weighted average Mortgage Rate of
the Mortgage Loans in the Adjustable Rate Group is at least __________%;
(viii) Each Note with respect to the Mortgage Loans will
provide for a schedule of substantially level and equal monthly
Scheduled Payments which are sufficient to amortize fully the principal
balance of such Note on or before its maturity date (other than Notes
representing not more than __________% and __________% of the aggregate
Loan Balance as of the CutOff Date of the Mortgage Loans in the Fixed
Rate Group and the Adjustable Rate Group,
respectively, which may provide for a "balloon" payment due at the end
of the 15th year, which maturity date is not more than 15 years from the
date of origination);
(ix) As of the Startup Day, each Mortgage is a valid and
subsisting first or second lien of record on the Mortgaged Property
subject in the case of any Second Mortgage Loan only to a Senior Lien on
such Mortgaged Property and subject in all cases to the exceptions to
title set forth in the title insurance policy or attorney's opinion of
title with respect to the related Mortgage Loan, which exceptions are
generally acceptable to banking institutions in connection with their
regular mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not individually,
or in the aggregate, materially and adversely affect the benefits of the
security intended to be provided by such Mortgage;
(x) Immediately prior to the transfer and assignment of the
Mortgage Loans by the Seller to the Depositor and by the Depositor to
the Trust herein contemplated, the Seller and the Depositor, as the case
may be, held good and indefeasible title to, and was the sole owner of,
each Mortgage Loan (including the related Note) conveyed by the Seller
subject to no liens, charges, mortgages, encumbrances or rights of
others except as set forth in clause (ix) or other liens which will be
released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the
Trustee will hold good and indefeasible title to, and be the sole owner
of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except as set forth in paragraph (ix)
or other liens which will be released simultaneously with such transfer
and assignment;
(xi) As of the Startup Day, (a) no more than __________ and
__________ of the Mortgage Loans in the Fixed Rate Group and the
Adjustable Rate Group, respectively, as a percentage of the outstanding
aggregate Loan Balance of the Mortgage Loans in such Group, are 30-59
days Delinquent, (b) no more than __________% of the Mortgage Loans in
the Fixed Rate Group, as a percentage of the outstanding aggregate Loan
Balances of the Mortgage Loans in such Group, are 60-89 days Delinquent
and none of the Mortgage Loans in the Adjustable Rate Group is 60+ days
Delinquent, (c) none of the Mortgage Loans in the Fixed Rate Group, is
90+ days Delinquent, (d) none of the Mortgage Loans in the Adjustable
Rate Group are 90 or more days Delinquent, (e) no Obligor of any
Mortgage Loan has been 30 days or more Delinquent more than once during
the 12 months immediately preceding the Startup Day except as indicated
on Schedule III attached hereto and (f) no Obligor of any Mortgage Loan
has been 90 or more days Delinquent during the 12 months immediately
preceding the Startup Day except as indicated on Schedule III attached
hereto.
(xii) There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial
damage and is in good repair;
(xiii) There is no valid and enforceable offset, defense or
counterclaim to any Note or Mortgage, including the obligation of the
related Mortgagor to pay the unpaid principal of or interest on such
Note;
(xiv) There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien
prior to, or equal with, the lien of the related
Mortgage except those which are insured against by any title insurance
policy referred to in paragraph (xvi) below;
(xv) Each Mortgage Loan at the time it was made complied in
all material respects with applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending
Act and other consumer protection laws, usury, equal credit opportunity,
disclosure and recording laws;
(xvi) With respect to each Mortgage Loan either (a) an
attorney's opinion of title has been obtained but no title policy has
been obtained (provided that no title policy has been obtained with
respect to not more than 1.0% of the Original Aggregate Loan Balance of
the Mortgage Loans), or (b) a lender's title insurance policy, issued in
standard American Land Title Association form by a title insurance
company authorized to transact business in the state in which the
related Mortgaged Property is situated, in an amount at least equal to
the original balance of such Mortgage Loan together, in the case of a
Second Mortgage Loan, with the then-current principal balance of the
mortgage note relating to the Senior Lien, insuring the mortgagee's
interest under the related Mortgage Loan as the holder of a valid first
or second mortgage lien of record on the real property described in the
related Mortgage, as the case may be, subject only to exceptions of the
character referred to in paragraph (ix) above, was effective on the date
of the origination of such Mortgage Loan, and, as of the Startup Day,
such policy is valid and thereafter such policy shall continue in full
force and effect;
(xvii) Each Sub-Servicer, if any, is a qualified servicer as
defined in Section 8.03 with respect to the Mortgage Loans serviced by
it;
(xviii) The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in the case of
a Second Mortgage Loan, with the outstanding principal balance of the
Senior Lien), (B) the minimum amount required to compensate for damage
or loss on a replacement cost basis or (C) the full insurable value of
the Mortgaged Property;
(xix) If any Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form meeting
the requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the outstanding principal balance of the
related Mortgage Loan (together, in the case of a Second Mortgage Loan,
with the outstanding principal balance of the Senior Lien), (B) the
minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973;
(xx) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general principles
of equity (whether
considered in a proceeding or action in equity or at law), and, to the
best of the Seller's knowledge, all parties to each Mortgage Loan had
full legal capacity to execute all documents relating to such Mortgage
Loan and convey the estate therein purported to be conveyed;
(xxi) As of the Startup Day, no more than __________% and
__________% of the aggregate Loan Balance of the Mortgage Loans in the
Fixed Rate Group and the Adjustable Rate Group, respectively, will be
secured by Properties located within any single zip code area;
(xxii) Each original Mortgage was recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage have either been delivered for recordation, have been
recorded in the appropriate jurisdictions wherein such recordation is
necessary to perfect the lien thereof as against creditors of or
purchasers from the Seller (or, subject to Section 3.05 hereof, are in
the process of being recorded) or such assignment is in blank and is in
recordable form and has been delivered to the Trustee with the file;
(xxiii) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interest of the Owners and the Certificate Insurer and which has been
delivered to the Trustee. The substance of any such alteration or
modification is reflected on the related Schedule of Mortgage Loans;
(xxiv) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording such
Mortgage Loans were paid;
(xxv) The related Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxvi) No Mortgage Loan has a shared appreciation feature,
or other contingent interest feature;
(xxvii) Each Mortgaged Property is located in the state
identified in the respective Schedule of Mortgage Loans and consists of
one or more parcels of real property with a residential dwelling, as
that term is defined in item (iv) of this Schedule I, erected thereon;
(xxviii) Each Mortgage contains a provision for the
acceleration, subject to federal law, of the payment of the unpaid
principal balance of the related Mortgage Loan in the event the related
Mortgaged Property is sold without the prior consent of the mortgagee
thereunder;
(xxix) Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-Off Date have been consolidated with
the outstanding principal amount secured by the related Mortgage, and
the secured principal amount, as consolidated, bears a single interest
rate and single repayment term reflected on the respective Schedule of
Mortgage Loans. The consolidated principal amount does not exceed the
original principal amount of the related
Mortgage Loan. No Note permits or obligates the Master Servicer to
make future advances to the related Mortgagor at the option of the
Mortgagor;
(xxx) There is no proceeding pending or threatened for the
total or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is undamaged
by waste, fire, water, flood, earthquake or earth movement.
(xxxi) All of the improvements which were included for the
purposes of determining the Appraised Value of any Mortgaged Property
lie wholly within the boundaries and building restriction lines of such
Mortgaged Property, and no improvements on adjoining properties encroach
upon such Mortgaged Property, and are stated in the title insurance
policy and affirmatively insured;
(xxxii) No improvement located on or being part of any
Mortgaged Property is in violation of any applicable zoning law or
regulation. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of each Mortgaged
Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
(xxxiii) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in
such Mortgage, and no fees or expenses are or will become payable by the
Owners or the Trust to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the related Mortgagor;
(xxxiv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. there is no homestead or other exemption available
to the related Mortgagor which would materially interfere with the right
to sell All the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage;
(xxxv) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and, to the
best of the Seller's knowledge, no event which, with the passage of time
or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and
neither the Master Servicer nor the Seller has waived any default,
breach, violation or event of acceleration;
(xxxvi) No instrument of release or waiver has been executed
in connection with any Mortgage Loan, and no Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement which has been approved by the primary mortgage guaranty
insurer, if any, and which has been delivered to the Trustee;
(xxxvii) The maturity date of each Mortgage Loan is at least
twelve months prior to the maturity date of the related first mortgage
loan if such first mortgage loan provides for a balloon payment;
(xxxviii) Each Mortgage Loan conforms, and all such Mortgage
Loans in the aggregate conform, in all material respects to the
description thereof set forth in the Prospectus Supplement;
(xxxix) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the description
thereof set forth in the Prospectus Supplement;
(xl) Each Mortgage Loan was originated based upon a full
appraisal, which included an interior inspection of the subject
property;
(xli) The Mortgage Loans were not selected for inclusion in
the Trust by the Seller on any basis intended to adversely affect the
Trust;
(xlii) No more than __________% and __________% of the
aggregate Loan Balances of the Mortgage Loans in the Fixed Rate Group
and the Adjustable Rate Group, respectively, are secured by Properties
that are non-owner occupied Properties (investor-owned and vacation);
(xliii) No more than __________% and __________% of the
aggregate Loan Balances of the Mortgage Loans in the Fixed Rate Group
and the Adjustable Rate Group, respectively, were originated under the
Seller's non-income verification program;
(xliv) The Seller has no actual knowledge that there exist 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 any Mortgaged
Property;
(xlv) The Seller was properly licensed or otherwise
authorized, to the extent required by applicable law, to originate or
purchase each Mortgage Loan and the communication of the transactions
herein contemplated, including, without limitation, the receipt of
interest by the Owners and the ownership of the Mortgage Loans by the
Trustee as trustee of the Trust will not involve the violation of such
laws;
(xlvi) With respect to each Mortgaged Property subject to a
ground lease (i) the current ground lessor has been identified and all
ground rents which have previously become due and owing have been paid;
(ii) the ground lease term extends, or is automatically renewable, for
at least five years beyond the maturity date of the related Initial
Mortgage Loan; (iii) the ground lease has been duly executed and
recorded; (iv) the amount of the ground rent and any increases therein
are clearly identified in the lease and are for predetermined amounts at
predetermined times; (v) the ground rent payment is included in the
borrower's monthly payment as an expense item; (vi) the Trust has the
right to cure defaults on the ground lease; and (vii) the terms and
conditions of the leasehold do not prevent the free and absolute
marketability of the Mortgaged Property. As of the Cut-Off Date, the
Loan Balance of the
Initial Mortgage Loans with related Properties subject to ground leases
does not exceed 1 % of the Original Aggregate Loan Balance;
(xlvii) All taxes, governmental assessments, insurance
premiums, leasehold payments or ground rents which previously became due
and owing have been paid or are not yet delinquent, or an escrow of
funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet
delinquent;
(xlviii) As of the Startup Day, the Seller has not received a
notice of default of any first mortgage loan secured by any Mortgaged
Property which has not been cured by a party other than the Seller:
(xlix) All of the Initial Mortgage Loans in the Adjustable
Rate Group are in a first lien position;
(l) As of the Cut-off Date, each Mortgage Loan has an
outstanding balance of less than $500,000, except for two Mortgage Loans
with outstanding balances in excess of $500,000;
(li) Each Mortgage Loan is secured by a mortgage on property
which, at the time of origination of each Mortgage Loan, has an
appraised value of less than $1 million;
(lii) No more than ___% of the Fixed Rate Group Mortgage
Loans are in a second priority position; and
(liii) The weighted average margin of the Adjustable Rate
Group Mortgage Loans is ----%.
SCHEDULE I-A
SCHEDULE OF FIXED RATE GROUP MORTGAGE LOANS
SCHEDULE I-B
SCHEDULE OF ADJUSTABLE RATE GROUP MORTGAGE LOANS
SCHEDULE II
[RESERVED]
SCHEDULE III
MORTGAGE LOANS WITH DELINQUENCY CHARACTERISTICS
SCHEDULE IV
MORTGAGE LOANS WITH 15-YEAR "BALLOON" PAYMENTS
A copy of this Schedule is maintained by the Trustee at the Corporate
Trust Office and by the Seller at its principal office.
SCHEDULE V
MORTGAGE LOANS WITH 5-YEAR "BALLOON" PAYMENTS
A copy of this Schedule is maintained by the Trustee at the Corporate
Trust Office and by the Seller at its principal office.
EXHIBIT A
FORM OF CLASS A CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
BLOCK MORTGAGE FINANCE
ASSET BACKED CERTIFICATES, SERIES 1997-1
CLASS A-[ ]
(____% Pass-Through Rate)
Representing Certain Interests in a Pool of [Fixed]
[Adjustable] Rate Group Mortgage Loans Formed by
Block Mortgage Finance, Inc.
and Serviced by
BLOCK FINANCIAL CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, Block
Mortgage Finance, Inc., Companion Mortgage Corporation or Block Financial
Corporation. This Certificate represents a fractional ownership interest in the
[Fixed] [Adjustable] Rate Group Mortgage Loans and certain other property held
by the Trust.)
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Depositor
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof. Cede & Co., has an interest herein.
No: A-[ ]-[ ]
--------------------------------------------------------------------------------------------------------------------------------
CUSIP
--------------------------------------------------------------------------------------------------------------------------------
$
--------------------------------------------------------------------------------------------------------------------------------
Original Certificate Date Final Scheduled
Principal Balance Distribution Date
--------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Registered Owner
------------------------------------------------------------------------------------------------------------------------
A-1
Trustee Authentication
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:__________________________________
Name: _______________________________
Title: ______________________________
Date of Authentication ______________
A-2
The registered Owner named above is the registered beneficial Owner of a
fractional interest in (a) the Mortgage Loans in the [Fixed] [Adjustable] Rate
Group (other than any principal and interest payments received thereon prior to
the Cut-Off Date) listed in Schedule I-[A][B] to the Pooling and Servicing
Agreement which the Seller has caused to be delivered to the Depositor and the
Depositor has caused to be delivered to the Trustee (and all substitutions
therefor as provided by Section 3.03, 3.04 and 3.06 of the Pooling and Servicing
Agreement), together with the related Mortgage Loan documents and the Seller's
and Depositor's interest in any Mortgaged Property which secured a Mortgage Loan
in the [Fixed] [Adjustable] Rate Group 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; (b) such
amounts as may be held by the Trustee in the Distribution Account, together with
investment earnings on such amounts and such amounts as may be held in the name
of the Trustee in the Collection Account, if any, (exclusive of investment
earnings thereon except as otherwise provided herein), whether in the form of
cash, instruments, securities or other properties (including any Eligible
Investments held by the Master Servicer); (c) the [Fixed] [Adjustable] Rate
Group Certificate Insurance Policy; and (d) 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 Mortgage
Loans in the [Fixed] [Adjustable] Rate Group, cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
rights 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) to pay the Certificates as specified in the
Pooling and Servicing Agreement.
The Owner hereof is entitled to principal payments on each Distribution
Date, as hereinafter described, which will fully amortize such original
Certificate Principal Balance over the period from the date of initial issuance
of the Certificates to the final Distribution Date for the Class A-[ ]
Certificates. Therefore, the actual outstanding principal amount of this
Certificate may, on any date subsequent to February __, 1997 (the first
Distribution Date) be less than the original Certificate Principal Balance set
forth above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of the
final distribution due on this Certificate, this Certificate shall be deemed
cancelled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS. THEREFORE,
THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON ANY DATE
SUBSEQUENT TO FEBRUARY __, 1997 (THE FIRST DISTRIBUTION DATE) BE LESS THAN ITS
ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
A-3
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT
OF ANY PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Block Mortgage Finance Asset Backed Certificates, Series 1997-1,
Class A-[ ] (the "Class A-[ ] Certificates") and issued under and subject to the
terms, provisions and conditions of that certain Pooling and Servicing Agreement
dated as of January 1, 1997 (the "Pooling and Servicing Agreement") by and among
Block Mortgage Finance, Inc., in its capacity as Depositor (the "Depositor"),
Companion Mortgage Corporation, in its capacity as the Seller (the "Seller"),
Block Financial Corporation, in its capacity as the Master Servicer (the "Master
Servicer"), and Bankers Trust Company of California, N.A., in its capacity as
the Trustee (the "Trustee"), to which Pooling and Servicing Agreement the Owner
of this Certificate by virtue of acceptance hereof assents and by which such
Owner is bound. Also issued under the Pooling and Servicing Agreement are
Certificates designated as Block Mortgage Finance Asset Backed Certificates,
Series 1997-1, Class A-[ ] (the "Class A-[ ] Certificates"), Class A-[ ] (the
"Class A-[ ] Certificates"), Class A-[ ] (the "Class A-[ ] Certificates"), Class
A-[ ] (the "Class A-[ ] Certificates"), Class X-1 (the "Class X-1
Certificates"), Class X-2 (the "Class X-2 Certificates" and, with the Class X-1
Certificates, the "Class X Certificates") and Class R (Residual Interest) (the
"Class R Certificates"). The Class A-1 Certificates, the Class A-2 Certificates,
the Class A-3 Certificates, the Class A-4 Certificates, and the Class A-5
Certificates are together referred to as the "Class A Certificates" and the
Class A Certificates, the Class X Certificates and the Class R Certificates are
together referred to herein as the "Certificates." Terms capitalized herein and
not otherwise defined herein shall have the respective meanings set forth in the
Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Distribution
Date") commencing February __, 1997, the Owners of the Class A-[ ] Certificates
as of the close of business on the [last day of the calendar month immediately
preceding the calendar month in which a Distribution Date occurs] [day
immediately preceding such Distribution Date] (the "Record Date") will be
entitled to receive the Class A-[ ] Distribution Amount relating to such
Certificate on such Distribution Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original Class A-[
] Certificate Principal Balance of at least $1,000,000 (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-[ ] Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Distribution
Date to the Owners of the Class A-[ ] Certificates. The Percentage Interest of
each Class A-[ ] Certificate as of any date of determination will be equal to
the percentage obtained by dividing the original Certificate Principal Balance
of such Class A-[ ] Certificate on the Startup Day by the aggregate Class A-[ ]
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policies, to make Insured Payments available to the
Trustee on or prior to the related Distribution Date for distribution to the
Owners. "Insured Payment" means with respect to either Mortgage Loan Group and
as to any Distribution Date (i) the excess, if any, of (a) the sum of the
related Current Interest and the
A-4
then existing related Subordination Deficit, if any, over (b) the Total
Available Funds with respect to such Group (net of the Premium Amount allocable
to such Group) after taking into account (x) the cross-collateralization
provisions of Sections 7.03(c)(i)(A) and (B) and 7.03(c)(ii)(A) and (B) of the
Pooling and Servicing Agreement and (y) the portion of any Fixed Rate Group
Principal Distribution Amount or Adjustable Rate Group Principal Distribution
Amount, as the case may be, to be actually distributed on such Distribution Date
without regard to any related Insured Payment to be made with respect to such
Distribution Date, plus (ii) an amount equal to the Preference Amount with
respect to the related Class of Class A Certificates.
Upon receipt of amounts under the Certificate Insurance Policies on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly or
through a Paying Agent) to the Owners of the appropriate Class of the Class A
Securities.
The Trustee or any duly-appointed Paying Agent will duly and punctually
pay distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code by any Person from a distribution to any Owner shall be considered as
having been paid by the Trustee to such Owner for all purposes of the Pooling
and Servicing Agreement.
The Mortgage Loans will be serviced by the Master Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Master Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Master Servicer from any of its obligations under the Pooling
and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
Block Mortgage Finance, Inc., Companion Mortgage Corporation, Block Financial
Corporation or any of their affiliates. This Certificate is limited in right of
payment to certain collections and recoveries relating to the Mortgage Loans and
amounts on deposit in the Distribution Account and the Collection Account
(except as otherwise provided in the Pooling and Servicing Agreement) and
payments received by the Trustee pursuant to the [Fixed] [Adjustable] Rate Group
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner. The Owner of this Certificate, by
its acceptance hereof, agrees, however, that to the extent the Certificate
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Trustee or Paying Agent), to the Owners of such Class A-[ ]
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-[ ] Certificates with respect to such
A-5
Insured Payment, shall be deemed to the extent of the payments so made to be a
registered Owner of such Class A-[ ] Certificates and shall receive all future
distributions of the Class A-[ ] Distribution Amount until all such Insured
Payments by the Certificate Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust Estate is effected as described below. To effect a termination of
the Pooling and Servicing Agreement pursuant to clause (ii) above, the Owners of
all Certificates then Outstanding shall unanimously direct the Trustee on behalf
of the Trust to adopt a plan of complete liquidation, as contemplated by Section
860F(a)(4) of the Code, and the Trustee shall either sell the Mortgage Loans and
distribute the proceeds of the liquidation of the Trust, or shall distribute
equitably in kind all of the assets of the Trust Estate to the remaining Owners
of the Certificates, each in accordance with such plan, so that the liquidation
or distribution of the Trust Estate, the distribution of any proceeds of the
liquidation and the termination of the Pooling and Servicing Agreement occur no
later than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that (i)
certain Owners of the Class R Certificates and the Master Servicer may, at their
option, purchase, and the Trustee may sell at auction, from the Trust all
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, after the Optional
Termination Date and (ii) under certain circumstances relating to the
qualification of the Trust Estate as a REMIC under the Code the Mortgage Loans
may be sold, thereby effecting the early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the Percentage
Interests represented by the Class A Certificates with the prior written consent
of the Certificate Insurer have the right to exercise any trust or power set
forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage Interest
will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Master Servicer at any time and from time to time, with
A-6
the prior written approval of the Certificate Insurer and without the consent of
the Owners; provided, that in certain circumstances provided for in the Pooling
and Servicing Agreement, such consent of the Owners will be required prior to
amendments. Any such consent by the Owner at the time of the giving thereof, of
this Certificate shall be conclusive and binding upon such Owner and upon all
future Owners of the Certificate and of any Certificate issued upon the
registration of Transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Certificate.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this certificate as more fully described in
the Pooling and Servicing Agreement.
The Class A-[ ] Certificates are issuable only as registered
Certificates in minimum denominations of $25,000 original Certificate Principal
Balance and multiples of $1,000 in excess thereof. As provided in the Pooling
and Servicing Agreement and subject to certain limitations therein set forth,
Class A-[ ] Certificates are exchangeable for new Class A-[ ] Certificates of
authorized denominations evidencing the same aggregate principal amount.
No service charge will be made for any such registration of transfer or
exchange, but the Registrar or Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
A-7
EXHIBIT B
FORM OF CLASS X CERTIFICATE
BLOCK MORTGAGE FINANCE
ASSET BACKED CERTIFICATES, SERIES 1997-1
INTEREST-ONLY CLASS X-[ ] CERTIFICATE
Representing Certain Interests Relating to a Pool
of Mortgage Loans formed by Block Mortgage
Finance, Inc.
and Serviced by
BLOCK FINANCIAL CORPORATION
This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, Block Mortgage
Finance, Inc., Companion Mortgage Corporation or Block Financial Corporation.
This certificate represents a fractional ownership interest in the Mortgage
Loans and certain other property held by the Trust.
No.: X-[ ]-[ ]
-------------
Date
-------------------- -------------------
Percentage Interest Final Scheduled
Distribution Date
-------------------
Registered Holder
Trustee Authentication
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By: __________________________
Name: __________________________
Title: __________________________
Date of Authentication: ___________________
B-1
The registered Owner named above is the registered Owner of a fractional
interest in (a) the Mortgage Loans in the [Fixed] [Adjustable] Rate Group (other
than any principal and interest payments received thereon on or prior to the
Cut-Off Date) listed in Schedule I-[A][B] to the Pooling and Servicing Agreement
which the Seller has caused to be delivered to the Depositor and the Depositor
has caused to be delivered to the Trustee (and all substitutions therefor as
provided by Section 3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement),
together with the related Mortgage Loan documents and the Seller's and
Depositor's interest in any Property which secured a Mortgage Loan in the
[Fixed] [Adjustable] Rate Group 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; (b) such amounts as may
be held by the Trustee in the Distribution Account, together with investment
earnings on such amounts and such amounts may be held in the name of the Trustee
in the Collection Account, if any, exclusive of investment earnings thereon
(except as otherwise provided herein), whether in the form of cash, instruments,
securities or other properties (including any Eligible Investments held by the
Master Servicer); (c) the [Fixed] [Adjustable] Rate Group Certificate Insurance
Policy; and (d) 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 Mortgage Loans, cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, rights 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) to pay the Certificates as
specified in the Pooling and Servicing Agreement.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A-1, CLASS A-2, CLASS A-3,
CLASS A-4, AND CLASS A-5 CERTIFICATES OF THIS SERIES TO THE EXTENT DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY
STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES
NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
B-2
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF
ANY PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THIS CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS
CERTIFICATE SHALL NOT BE ENTITLED TO ANY DISTRIBUTION OF PRINCIPAL WITH
RESPECT TO THE MORTGAGE LOANS.
This Certificate is one of a Class of duly-authorized Certificates
designated as Block Mortgage Finance, Inc., Asset Backed Certificates, Series
1997-1, Class X-[ ] (the "Class X-[ ] Certificates") and issued under and
subject to the terms, provisions and conditions of that certain Pooling and
Servicing Agreement dated as of January 1, 1997 (the "Pooling and Servicing
Agreement") by and among Block Mortgage Finance, Inc., in its capacity as
Depositor (the "Depositor"), Companion Mortgage Corporation, in its capacity as
the Seller (the "Seller"), Block Financial Corporation, in its capacity as the
Master Servicer (the "Master Servicer"), and Bankers Trust Company of
California, N.A., in its capacity as the Trustee (the "Trustee"), to which
Pooling and Servicing Agreement the Owner of this Certificate by virtue of
acceptance hereof assents and by which such Owner is bound. Also issued under
the Pooling and Servicing Agreement are Certificates designated as Block
Mortgage Finance Asset Backed Certificates, Series 1997-1, Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 (collectively, the "Class A Certificates"),
Class X-[ ] (the "Class X-[ ] Certificates" and, with the Class X-[ ]
Certificates, the "Class X Certificates") and Class R (the "Class R
Certificates"). The Class A Certificates, the Class X Certificates and the Class
R Certificates are together referred to herein as the "Certificates." Terms
capitalized herein and not otherwise defined herein shall have the respective
meanings set forth in the Pooling and Servicing Agreement.
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Distribution
Date") commencing February __, 1997, the Owners of the Class X-[ ] Certificates
as of the close of business on the [last business day of the calendar month
immediately preceding the calendar month in which such Distribution Date occurs]
[day immediately preceding such Distribution Date] (the "Record Date") will be
entitled to receive the Class X-[ ] Distribution Amount relating to such
Distribution Date. Distributions will be made in immediately available funds to
such Owners, by wire transfer or otherwise, to the account of an Owner at a
domestic bank or other entity having appropriate facilities therefor, if such
Owner has so notified the Trustee at least 5 business days prior to the related
Record Date, or by check mailed to the address of the person entitled thereto as
it appears on the Register.
Each Owner of record of a Class X-[ ] Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Distribution
Date to the Owners of the Class X-[ ]
B-3
Certificates. The Percentage Interest of each Class X-[ ] Certificate as of any
date of determination will be equal to the percentage interest set forth on such
Class X-[ ] Certificate.
The Trustee or any duly appointed Paying Agent will duly and punctually
pay distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable to any Holder shall be considered as having been paid by
the Trustee to such Owner for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Master Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Master Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Master Servicer from any of its obligations under the Pooling
and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
Block Mortgage Finance, Inc., Companion Mortgage Corporation or Block Financial
Corporation or any of their affiliates. This Certificate is limited in right of
payment to certain collections and recoveries relating to the Mortgage Loans and
amounts on deposit in the Distribution Account and the Collection Account
(except as otherwise provided in the Pooling and Servicing Agreement), all as
more specifically set forth hereinabove and in the Pooling and Servicing
Agreement.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust Estate is effected as described below. To effect a termination of
the Pooling and Servicing Agreement pursuant to clause (ii) above, the Owners of
all Certificates then Outstanding shall unanimously direct the Trustee on behalf
of the Trust to adopt a plan of complete liquidation, as contemplated by Section
860F(a)(4) of the Code, and the Trustee shall either sell the Mortgage Loans and
distribute the proceeds of the liquidation of the Trust, or shall distribute
equitably in kind all of the assets of the Trust Estate to the remaining Owners
of the Certificates, each in accordance with
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such plan, so that the liquidation or distribution of the Trust Estate, the
distribution of any proceeds of the liquidation and the termination of the
Pooling and Servicing Agreement occur no later than the close of the 90th day
after the date of adoption of the plan of liquidation and such liquidation
qualifies as a Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that (i)
certain Owners of the Class R Certificates or the Master Servicer may, at their
option, purchase, and the Trustee may sell at auction, from the Trust all
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, after the Optional
Termination Date and (ii) under certain circumstances relating to the
qualification of the Trust Estate as a REMIC under the Code the Mortgage Loans
may be sold, thereby effecting the early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then outstanding with the
prior written consent of the Certificate Insurer have the right to exercise any
trust or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage Interest
will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Master Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and not less than a majority of the
Percentage Interest represented by each affected Class of Certificates then
Outstanding, and in certain other circumstances provided for in the Pooling and
Servicing Agreement may be amended without the consent of the Owners. Any such
consent by the Owner at the time of the giving thereof, of this Certificate
shall be conclusive and binding upon such Owner and upon all future Owners of
the Certificate and of any Certificate issued upon the registration of Transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Certificate.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class X-[ ] Certificates are issuable only as registered
Certificates in minimum percentage interests of all interests in the Class X-[ ]
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class X-[ ] Certificates are
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exchangeable for new Class X-[ ] Certificates of the same percentage interest as
the Class X-[ ] Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Registrar or Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose
name this certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
B-6
EXHIBIT C
FORM OF CLASS R CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN TWO CLASSES OF "RESIDUAL INTERESTS" IN TWO SEPARATE "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.08 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE
MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH TERM INCLUDES THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY
OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE
ORGANIZATION FURNISHING ELECTRIC ENERGY OR PROVIDING TELEPHONE SERVICE TO
PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER THAN A ▇▇▇▇▇▇'▇ COOPERATIVE
THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO
THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF THIS CLASS R CERTIFICATE
WILL BE REGISTERED BY THE CERTIFICATE REGISTRAR UNLESS THE PROPOSED TRANSFEREE
HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE PROPOSED
TRANS-FEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CLASS R
CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM
OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM
THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO
A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R CERTIFICATE
AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR
GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF
(A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS
CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORA-
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TIONS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY
INCLUDES REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON
TRUST FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF
SUBCHAPTER 1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
BLOCK MORTGAGE FINANCE
ASSET BACKED CERTIFICATES, SERIES 1997-1
CLASS R
(Residual Interest)
Representing Certain Interests Relating to a Pool
of Mortgage Loans formed by Block Mortgage
Finance, Inc.
and Serviced by
BLOCK FINANCIAL CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, Block
Mortgage Finance, Inc., Companion Mortgage Corporation or Block Financial
Corporation. This Certificate represents a fractional residual ownership
interest in the Trust Estate as defined below.)
No: R-__ _________________
Date
Percentage Interest ________% _________________________________
Final Scheduled Distribution Date
-----------------------
Registered Owner
The registered Owner named above is the registered Owner of a fractional
interest in (a) the Mortgage Loans (other than any principal and interest
payments received thereon on or prior to the Cut-Off Date) listed in Schedule
I-A and Schedule I-B to the Pooling and Servicing Agreement which the Seller has
caused to be delivered to the Depositor and the Depositor has caused to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Mortgage Loan documents and the Seller's and Depositor's interest in any
Property which secured a 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; (b) such
amounts as may be held by the Trustee in the Distribution Account, together with
investment earnings on such amounts and such amounts may be
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held in the name of the Trustee in the Collection Account, if any, exclusive of
investment earnings thereon (except as otherwise provided herein), whether in
the form of cash, instruments, securities or other properties (including any
Eligible Investments held by the Master Servicer); (c) the Certificate Insurance
Policies; and (d) 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 Mortgage Loans, cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, rights 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) to pay the Certificates as
specified in the Pooling and Servicing Agreement.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITH-
STANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
Trustee Authentication
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:_______________________
Name:_____________________
Title:____________________
Date of Authentication___________________
This Certificate is one of a Class of duly-authorized Certificates
designated as Block Mortgage Finance Asset Backed Certificates, Series 1997-1,
Class R (the "Class R Certificates") and issued under and subject to the terms,
provisions and conditions of that certain Pooling and Servicing Agreement dated
as of January 1, 1997 (the "Pooling and Servicing Agreement") by and among Block
Mortgage Finance, Inc., in its capacity as Depositor (the "Depositor"),
Companion Mortgage Corporation, in its capacity as the Seller (the "Seller"),
Block Financial Corporation, in its capacity as the Master Servicer (the "Master
Servicer"), and Banker Trust Company of California, N.A., in its capacity as the
Trustee (the "Trustee"), to which Pooling and Servicing Agreement the Owner of
this Certificate by virtue of acceptance hereof assents and by which such Owner
is bound. Also issued under the Pooling and Servicing Agreement are Certificates
designated as Block Mortgage Finance, Inc., Asset Backed Certificates, Series
1997-1, Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 (collectively,
the "Class A Certificates") and Class X-1 and Class X-2 (collectively, the
"Class X Certificates"). The Class A Certificates, the Class X Certificates and
the Class R Certificates are together referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Distribution
Date") commencing February __, 1997, each Owner of a Class R Certificate as of
the close of business on the last day of the calendar month immediately
preceding the calendar month in which a Distribution Date occurs (the "Record
Date") will be entitled to receive the Residual Net Monthly Excess Cashflow
relating to such Certificate on such Distribution Date.
C-3
Distributions will be made in immediately available funds to Owners of
Class R Certificates having an aggregate Percentage Interest of at least 10% (by
wire transfer or otherwise) to the account of an Owner at a domestic bank or
other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee, or by check mailed to the address of the person entitled
thereto as it appears on the Register.
The Trustee or any duly-appointed Paying Agent will duly and punctually
pay distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement.
Amounts properly withheld under the Code by any Person from a
distribution to any Owner shall be considered as having been paid by the Trustee
to such Owner for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Master Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Master Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Master Servicer from any of its obligations under the Pooling
and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, Block Mortgage Finance, Inc., Companion Mortgage Corporation, Block
Financial Corporation or any of their affiliates. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans and amounts on deposit in the Distribution Account and the Collection
Account, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust Estate is effected as described below. To effect a termination of
the Pooling and Servicing Agreement pursuant to clause (ii) above, the Owners of
all Certificates then Outstanding shall
C-4
unanimously direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation, as contemplated by Section 860F(a)(4) of the Code, and the
Trustee shall either sell the Mortgage Loans and distribute the proceeds of the
liquidation of the Trust, or shall distribute equitably in kind all of the
assets of the Trust Estate to the remaining Owners of the Certificates, each in
accordance with such plan, so that the liquidation or distribution of the Trust
Estate, the distribution of any proceeds of the liquidation and the termination
of the Pooling and Servicing Agreement occur no later than the close of the 90th
day after the date of adoption of the plan of liquidation and such liquidation
qualifies as a Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that (i)
certain Owners of the Class R Certificates or the Master Servicer may at their
option, purchase, and the Trustee may sell at auction, from the Trust all
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, on any Monthly
Remittance Date after the Optional Termination Date and (ii) under certain
circumstances relating to the qualification of Trust Estate as a REMIC under the
Code the Mortgage Loans may be sold, thereby effecting the early retirement of
the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then outstanding with the
prior written consent of the Certificate Insurer have the right to exercise any
trust or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage Interest
will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Master Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and not less than a majority of the
Percentage Interest represented by each affected Class of Certificates then
Outstanding, and in certain other circumstances provided for in the Pooling and
Servicing Agreement may be amended without the consent of the Owners. Any such
consent by the Owner at the time of the giving thereof, of this Certificate
shall be conclusive and binding upon such Owner and upon all future Owners of
the Certificate and of any Certificate issued upon the registration of Transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Certificate.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificates as more fully described in
the Pooling and Servicing Agreement.
C-5
The Class R Certificates are issuable only as registered Certificates.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class R Certificates are exchangeable for new
Class R Certificates evidencing the same Percentage Interest as the Class R
Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Registrar or Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee nor any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
C-6
EXHIBIT D
FORM OF CERTIFICATE RE: MORTGAGE LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
CERTIFICATE RE: PREPAID LOANS
I, _________________________, ___________________ of Block Mortgage
Finance, Inc. ("Block Mortgage"), hereby certify that between the "Cut-Off Date"
(as defined in the Pooling and Servicing Agreement dated as of January 1, 1997
among Block Mortgage, as Depositor, Companion Mortgage Corporation, as Seller,
Block Financial Corporation, as Master Servicer, and Bankers Trust Company of
California, N.A., as Trustee) and the "Startup Day," the following schedule of
"Mortgage Loans" (each as defined in the Pooling and Servicing Agreement) have
been prepaid in full.
Account Original Current Date Paid
Number Name Amount Balance Off
---------------------- ---------------------- ---------------------- -------------------- -------------------
Dated: January __, 1997
By:___________________________
Title:________________________
D-1
EXHIBIT E
FORM OF TRUSTEE'S RECEIPT
TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
Bankers Trust Company of California, N.A., a national banking
corporation, in its capacity as trustee (the "Trustee") under that certain
Pooling and Servicing Agreement dated as of January 1, 1997 (the "Pooling and
Servicing Agreement") among Block Mortgage Finance, Inc., as Depositor,
Companion Mortgage Corporation, as Seller, Block Financial Corporation, as
Master Servicer, and the Trustee, hereby acknowledges receipt (subject to review
as required by Section 3.06(a) of the Pooling and Servicing Agreement) of the
items delivered to it by the Seller and the Depositor with respect to the
Mortgage Loans pursuant to Section 3.05(b)(i) of the Pooling and Servicing
Agreement.
The Schedule of Mortgage Loans is attached to this Receipt.
The Trustee hereby additionally acknowledges that it shall review such
items as required by Section 3.06(a) of the Pooling and Servicing Agreement and
shall otherwise comply with Section 3.06(b) of the Pooling and Servicing
Agreement as required thereby.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:_____________________________________
Title:__________________________________
Dated: January ___, 1997
E-1
EXHIBIT F
FORM OF POOL CERTIFICATION
POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bankers Trust
Company of California, N.A., a national banking corporation, acting in its
capacity as trustee (the "Trustee") of a certain pool of mortgage loans (the
"Pool") heretofore conveyed in trust to the Trustee, pursuant to that certain
Pooling and Servicing Agreement dated as of January 1, 1997 (the "Pooling and
Servicing Agreement") among Block Mortgage Finance, Inc., as Depositor (the
"Depositor"), Companion Mortgage Corporation, as Seller, Block Financial
Corporation, as Master Servicer, and the Trustee; and
WHEREAS, the Trustee is required, pursuant to Section 3.06(a) of the
Pooling and Servicing Agreement, to review the Mortgage Files relating to the
Pool within a specified period following the Startup Day and to notify the
Seller promptly of any defects with respect to the Pool, and the Seller is
required to remedy such defects or take certain other action, all as set forth
in Section 3.06(b) of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.06(a) of the Pooling and Servicing Agreement requires
the Trustee to deliver this Pool Certification upon the satisfaction of certain
conditions set forth therein.
NOW, THEREFORE, the Trustee hereby certifies that it has determined that
all required documents (or certified copies of documents listed in Section 3.05
of the Pooling and Servicing Agreement) have been executed or received, and that
such documents relate to the Mortgage Loans identified in the Schedule of
Mortgage Loans pursuant to Section 3.06(a) of the Pooling and Servicing
Agreement or, in the event that such documents have not been executed and
received or do not so relate to such Mortgage Loans, any remedial action by the
Seller pursuant to Section 3.06(b) of the Pooling and Servicing Agreement has
been completed. The Trustee makes no certification hereby, however, with respect
to any intervening assignments or assumption and modification agreements.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:________________________________
Title:_____________________________
Dated: January ___, 1997
F-1
EXHIBIT G
FORM OF DELIVERY ORDER
DELIVERY ORDER
Bankers Trust Company of California, N.A., as Trustee
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trustee Department
Dear Sirs:
Pursuant to Section 4.01 of the Pooling and Servicing Agreement, dated
as of January 1, 1997 (the "Pooling and Servicing Agreement") among Block
Mortgage Finance, Inc., as Depositor (the "Depositor"), Companion Mortgage
Corporation, as Seller, Block Financial Corporation, as Master Servicer, and
Bankers Trust Company of California, N.A., a national banking corporation, as
Trustee (the "Trustee"), the Depositor HEREBY CERTIFIES that all conditions
precedent to the issuance of the Block Mortgage Finance, Inc., Asset Backed
Certificates, Series 1997-1, Class A, Class X and Class R (the "Certificates"),
HAVE BEEN SATISFIED, and HEREBY REQUESTS YOU TO AUTHENTICATE AND DELIVER said
Certificates, and to RELEASE said Certificates to the owners thereof, or
otherwise upon their order.
Very truly yours,
BLOCK MORTGAGE FINANCE, INC.
By:___________________________
Title:________________________
Dated: January ___, 1997
G-1
EXHIBIT H
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION
860E(e) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization"
and will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class R Certificate for the account of a
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer such Class R Certificate unless (a)
it has received from the transferee an affidavit in substantially the same form
as this affidavit containing these same four representations and (b) as of the
time of the transfer, it does not have actual knowledge that such affidavit is
false.
H-1
IN WITNESS WHEREOF, the Investor has caused this instrument to
be executed on its behalf, pursuant to authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this _ day of _______, _______.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
H-2
EXHIBIT I
FORM OF NOTICE
TO: [_______________________]
RE: Block Mortgage Finance, Inc., Asset Backed Certificates, Series 1997-1,
Class ▇-▇, ▇-▇, ▇-▇, ▇-▇ and A-5 Policy No.____________
Determination Date:_________________
Distribution Date:_______________________
We refer to that certain Pooling and Servicing Agreement by and among
Block Mortgage Finance, Inc., as depositor, Companion Mortgage Corporation, as
seller, Block Financial Corporation, as Master Servicer, and Bankers Trust
Company of California, N.A., as Trustee (the "Trustee"), relating to Block
Mortgage Finance, Inc., Asset Backed Certificates, Series 1997-1, and dated as
of January 1, 1997; all capitalized terms not otherwise defined herein shall
have the same respective meanings as set forth in such Pooling and Servicing
Agreement.
An Insured Payment, as defined in the Pooling and Servicing Agreement,
is required to be paid and, pursuant to Section 7.08(a) of the Pooling and
Servicing Agreement, this statement constitutes a claim for such Insured Payment
in the amount of $_____ under the Certificate Insurance Policy.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:___________________________________
Name:_________________________________
Title:________________________________
Telephone Number:_____________________
[Corporate Seal]
Attest:
----------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known
or proved to be the same person who executed the foregoing instrument and to be
the [Title of Officer] of the Trustee, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Trustee.
I-1
Subscribed and sworn before me this _ day of, _.
---------------------
NOTARY PUBLIC
COUNTY OF____________
STATE OF_____________
My commission expires the _ day of _____________, _____.
I-2
EXHIBIT J
RESERVED
J-1
EXHIBIT K
TERMINATION AUCTION PROCEDURES
The following sets forth the auction procedures to be followed in
connection with a sale effected pursuant to Section 9.03 of the Pooling and
Servicing Agreement (the "Agreement"), dated as of January 1, 1997, among Block
Mortgage Finance, Inc., as Depositor, Companion Mortgage Corporation, as Seller,
Block Financial Corporation, as Master Servicer, and Bankers Trust Company of
California, N.A., as Trustee. Capitalized terms used herein that are not
otherwise defined shall have the meanings described thereto in the Agreement.
1. Pre-Auction Process
(a) Upon receiving notice of the Auction Date, the Advisor will
initiate its general Terminal Auction procedures consisting
of the following: (i) with the assistance of the Master
Servicer, prepare a general solicitation package along with a
confidentiality agreement; (ii) develop a list of qualified
bidders, in a commercially reasonable manner; (iii) initiate
contact with all qualified bidders; (iv) send a
confidentiality agreement to all qualified bidders; (v) upon
receipt of a signed confidentiality agreement, send
solicitation packages to all interested bidders on behalf of
the Trustee; and (vi) notify the Master Servicer of all
potential bidders and anticipated timetable.
(b) The general solicitation package will include: (i) the
prospectus supplement and prospectus from the initial public
offering of any of the Certificates; (ii) a copy of all
monthly servicing reports or a copy of all annual servicing
reports and the prior year's monthly servicing reports; (iii)
a form of a Sale and Servicing Agreement prepared by the
Trustee and the Master Servicer (or prepared by the Advisor
and approved by the Trustee and the Master Servicer); (iv) a
description of the minimum purchase price required to cause
the Trustee to sell the Mortgage Loans as set forth in
Section 9.03 of the Agreement; (v) a formal bidsheet; (vi) a
detailed timetable; and (vii) a preliminary data tape of the
aggregate Loan Balance of the Mortgage Loans as of a recent
Distribution Date reflecting the same data attributes used to
create the Cut-Off Date tables for the prospectus supplement
dated January ___, 1997 relating to the public offering of
certain of the Certificates. None of the Trustee, the Master
Servicer, the Depositor or the Seller shall be required to
produce an updated prospectus or prospectus supplement, and
the auction procedures shall be carried out in a manner that
does not constitute a public offering of securities.
(c) The Trustee, with the assistance of the Master Servicer and
the Advisor, will maintain an auction package beginning at the
time of closing of the transaction, which will contain the
documents listed under clauses (i)-(ii) of the preceding
paragraph. If the Advisor is unable to perform its role as
advisor to the Trustee, the Master Servicer acting in its
capacity under the Agreement will select a successor Advisor
and inform the Trustee of its actions.
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(d) The Advisor will send solicitation packages to all bidders at
least 15 Business Days before the Auction Date. Bidders will
be required to submit any due diligence questions in writing
to the Advisor for determination of their relevancy, no later
than 10 Business Days before the Auction Date. The Master
Servicer and the Advisor will be required to satisfy all
relevant questions at least five Business Days prior to the
Auction Date and distribute the questions and answers to all
bidders.
2. Auction Process
(a) The Advisor, any underwriter, or any Owner will be allowed to
bid in the Auction, but will not be required to do so.
(b) The Master Servicer will also be allowed to bid in the
Termination Auction if it deems appropriate, but will not be
required to do so.
(c) On the Auction Date, all bids will be due by facsimile to the
offices of the Trustee by 1:00 p.m. New York City time, with
the winning bidder to be notified by 2:00 p.m. New York City
time. All acceptable bids (as described in Section 9.03 of the
Agreement) will be due on a conforming basis on the bid sheet
contained in the solicitation package.
(d) If the Trustee receives fewer than two market value bids from
participants in the market for mortgage loans willing and able
to purchase the Mortgage Loans, the Trustee shall decline to
consummate the sale.
(e) Upon notification to the winning bidder, a good faith deposit
equal to one percent (1%) of the aggregate Loan Balance of
the Mortgage Loans will be required to be wired to the
Trustee upon acceptance of the bid. This deposit, along with
any interest income attributable to it, will be credited to
the purchase price but will not be refundable. The Trustee
will establish a separate account for the acceptance of the
good faith deposit, until such time as the account is fully
funded and all monies are transferred into the Collection
Account, such time not to be later than one Business Day
before the related Distribution Date (as described above).
(f) The winning bidder will receive on the Auction Date a copy of
the draft Sale and Servicing Agreement and Master Servicer's
Representations and Warranties (which shall be substantially
identical to the representations and warranties set forth in
Section 3.02 of the Agreement).
(g) The Advisor will provide to the Trustee a letter concluding
whether or not the winning bid is a fair market value bid. The
Advisor will also provide such letter if it is the winning
bidder. In the case where the Advisor or the Master Servicer
is the winning bidder it will provide for market comparables
and valuations in its letter.
(h) The Auction will stipulate that the Master Servicer be
retained to service the Mortgage Loans sold pursuant to the
terms of the Sale and Servicing Agreement.
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(i) The Auction will stipulate that such sale and consequent
termination of the Trust must constitute a "qualified
liquidation" of the Trust under Section 860F of the Code,
including the requirement that such liquidation take place
over a period not to exceed 90 days. The Trustee may, in its
discretion, require that the purchaser of the Mortgage Loans
provide the Trustee with an Opinion of Counsel to that effect.
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