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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
Reported) June 27, 1996
FINANCIAL ASSET SECURITIES CORP., (as depositor under
the Pooling and Servicing Agreement, dated as of June
21, 1996, which forms Cityscape Home Equity Loan Trust
1996-2, which will issue the Cityscape Home Equity
Loan Trust 1996-2, Home Equity Loan Pass-Through
Certificates, Series 1996-2).
FINANCIAL ASSET SECURITIES CORP.
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(Exact name of registrant as specified in its charter)
Delaware 33-99018 06-1442101
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 Steamboat Road
Greenwich, Connecticut 06830
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (203) 625-2700
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Item 5. Other Events.
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On June 27, 1996 Financial Asset Securities Corp. (the "Company")
entered into a Pooling and Servicing Agreement dated as of June 21, 1996 (the
"Pooling and Servicing Agreement"), by and among, the Company, as depositor,
Cityscape Corp., as servicer and seller, and Harris Trust and Savings Bank,
as trustee. The Pooling and Servicing Agreement is annexed hereto as Exhibit
1.
Incorporation of Certain Documents by Reference
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Pursuant to Rule 411 of Regulation C under the Securities Act of 1933,
Financial Asset Securities Corp. (the "Registrant") will incorporate by
reference the opinion of Brown & Wood, dated June 27, 1996, attached hereto
as Exhibit 2, into the Registrant's registration statement (File No. 33-
99018).
2
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Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibit:
1. Pooling and Servicing Agreement
2. Opinion of Brown & Wood
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINANCIAL ASSET SECURITIES CORP.
By: /s/ Charles A. Forbes, Jr.
----------------------------------
Charles A. Forbes, Jr.
Dated: June 27, 1996
4
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Exhibit Index
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Exhibit Page
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1. Pooling and Servicing Agreement
2. Opinion of Brown & Wood
5
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EXHIBIT 1
EXECUTION COPY
FINANCIAL ASSET SECURITIES CORP.,
Depositor
CITYSCAPE CORP.,
Seller and Servicer
and
HARRIS TRUST AND SAVINGS BANK,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of June 21, 1996
_________________________________
CITYSCAPE HOME EQUITY LOAN TRUST, SERIES 1996-2
HOME EQUITY PASS-THROUGH CERTIFICATES
1
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . I-1
SECTION 1.02. Accounting . . . . . . . . . . . . . . . . . . . . . . . I-26
ARTICLE II
ESTABLISHMENT OF THE TRUST;
PURCHASE AND SALE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Establishment of the Trust . . . . . . . . . . . . . . . II-1
SECTION 2.02. Purchase and Sale of Mortgage Loans . . . . . . . . . . II-1
SECTION 2.03. Grant of Security Interest . . . . . . . . . . . . . . . II-1
SECTION 2.04. Document Delivery Requirements . . . . . . . . . . . . . II-2
SECTION 2.05. Acceptance by Trustee . . . . . . . . . . . . . . . . . II-5
SECTION 2.06. Repurchase or Substitution of Mortgage Loans by the
Seller or the Servicer . . . . . . . . . . . . . . . . II-6
SECTION 2.07. Representations and Warranties with respect to the
Mortgage Loans . . . . . . . . . . . . . . . . . . . . II-9
SECTION 2.08. Representations and Warranties of the Seller . . . . . . II-17
SECTION 2.09. Representations, Warranties and Covenants of
the Servicer . . . . .. . . . . . . . . . . . . . . . . II-20
SECTION 2.10. Representations and Warranties of the Depositor . . . . II-22
SECTION 2.11. Execution of Certificates . . . . . . . . . . . . . . . II-24
SECTION 2.12. Miscellaneous REMIC Provisions . . . . . . . . . . . . . II-24
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST
SECTION 3.01. Administration of the Trust; Servicing of the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . . . III-1
SECTION 3.02. Sub-Servicing Agreements Between Servicer and Sub-
Servicers . . . . . . . . . . . . . . . . . . . . . . . III-4
SECTION 3.03. Termination of Sub-Servicing Agreement . . . . . . . . . III-5
SECTION 3.04. Liability of the Servicer . . . . . . . . . . . . . . . III-5
SECTION 3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders . . .. . . . . . . . . . . III-5
SECTION 3.06. Assumption or Termination of Sub-Servicing Agreements by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . III-6
SECTION 3.07. Collection of Certain Mortgage Loan Payments . . . . . . III-6
SECTION 3.08. Sub-Servicing Accounts . . . . . . . . . . . . . . . . . III-7
SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts . . . . . . . . . . . . . . . . . . . III-7
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SECTION 3.10. Collection Account . . . . . . . . . . . . . . . . . . . III-8
SECTION 3.11. Withdrawals from the Collection Account . . . . . . . . III-9
SECTION 3.12. Investment of Funds in the Accounts . . . . . . . . . III-11
SECTION 3.13. Maintenance of Hazard Insurance and Errors and Omissions
and Fidelity Coverage . . . . . . . . . . . . . . . . III-12
SECTION 3.14. Enforcement of Due-On-Sale Clauses; Assumption
Agreements. . . . . . . . . . . . . . . . . . . . . . III-13
SECTION 3.15. Realization Upon Defaulted Mortgage Loans . . . . . . III-14
SECTION 3.16. Trustee to Cooperate; Release of Mortgage Files . . . III-16
SECTION 3.17. Servicing Compensation . . . . . . . . . . . . . . . . III-17
SECTION 3.18. Reports to the Trustee; Collection Account Statements III-17
SECTION 3.19. Statement as to Compliance and Financial Statements . III-18
SECTION 3.20. Independent Public Accountants' Servicing Report . . . III-18
SECTION 3.21. Access to Certain Documentation . . . . . . . . . . . III-19
SECTION 3.22. Title, Management and Disposition of REO Property . . III-19
SECTION 3.23. Prepayment Interest Shortfalls . . . . . . . . . . . . III-21
SECTION 3.24. Superior Liens . . . . . . . . . . . . . . . . . . . . III-21
SECTION 3.25. Indemnification . . . . . . . . . . . . . . . . . . . III-22
SECTION 3.26. Certain Procedures Relating to Successor Sub-Servicers
and Successor Servicers . . . . . . . . . . . . . . . III-23
ARTICLE IV
FLOW OF FUNDS
SECTION 4.01. Establishment of Accounts . . . . . . . . . . . . . . . IV-1
SECTION 4.02. The Certificate Insurance Policy . . . . . . . . . . . . IV-1
SECTION 4.03. Deposits To, and Transfers Among, the Accounts . . . . . IV-3
SECTION 4.04. Flow of Funds and Distributions . . . . . . . . . . . . IV-3
SECTION 4.05. Statements to Certificateholders. . . . . . . . . . . . IV-5
SECTION 4.06. Remittance Reports; Delinquency Advances by the Servicer
and Insurance Claims . . . . . . . . . . . . . . . . . IV-8
SECTION 4.07. Compliance with Withholding Requirements . . . . . . . . IV-9
SECTION 4.08. Capitalized Interest Account . . . . . . . . . . . . . . IV-9
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates . . . . . . . . . . . . . . . . . . . . . V-1
SECTION 5.02. Registration of Transfer and Exchange of Certificates . . V-1
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates . . . . V-4
SECTION 5.04. Persons Deemed Certificateholders . . . . . . . . . . . . V-4
ii
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SECTION 5.05. Book-Entry Certificates . . . . . . . . . . . . . . . . . V-4
SECTION 5.06. Notices to Depository . . . . . . . . . . . . . . . . . . V-5
SECTION 5.07. Definitive Certificates . . . . . . . . . . . . . . . . . V-6
ARTICLE VI
THE SELLER AND THE SERVICER
SECTION 6.01. Liability of the Seller, the Depositor and the
Servicer . . . . . . . . . . . . . . . . . . . . . . . VI-1
SECTION 6.02. Merger or Consolidation of the Seller or the Servicer . VI-1
SECTION 6.03. Limitation on Liability of the Seller, the Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . VI-1
SECTION 6.04. Limitation on Resignation of the Servicer; No Assignment
or Delegation of Duties by Servicer . . . . . . . . . . VI-2
SECTION 6.05. Rights of the Seller, the Depositor, the
Certificateholders and Others in Respect of
the Servicer . . . . . . . . . . . . . . . . . . . . . VI-3
SECTION 6.06. Eligibility Requirements for Servicer . . . . . . . . . VI-3
ARTICLE VII
DEFAULT
SECTION 7.01. Servicer Defaults; Certain Matters Affecting the
Servicer . . . . . . . . . . . . . . . . . . . . . . . VII-1
SECTION 7.02. Trustee to Act; Appointment of Successor . . . . . . . . VII-3
SECTION 7.03. Notification to Mortgagors and Certificateholders . . . VII-4
SECTION 7.04. Additional Remedies of Trustee Upon Servicer Defaults . VII-5
SECTION 7.05. Waiver of Servicer Defaults . . . . . . . . . . . . . . VII-5
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee . . . . . . . . . . . . . . . . . . VIII-1
SECTION 8.02. Certain Matters Affecting the Trustee . . . . . . . . VIII-2
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . . VIII-3
SECTION 8.04. Trustee May Own Certificates . . . . . . . . . . . . . VIII-3
SECTION 8.05. Expenses of Trustee . . . . . . . . . . . . . . . . . VIII-4
SECTION 8.06. Trustee Eligibility Requirements . . . . . . . . . . . VIII-4
SECTION 8.07. Resignation and Removal of the Trustee . . . . . . . . VIII-4
SECTION 8.08. Successor Trustee . . . . . . . . . . . . . . . . . . VIII-5
SECTION 8.09. Merger or Consolidation of Trustee . . . . . . . . . . VIII-6
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee . . . . VIII-6
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SECTION 8.11. Trustee Records . . . . . . . . . . . . . . . . . . . VIII-7
SECTION 8.12. Appointment of Office or Agency . . . . . . . . . . . VIII-7
SECTION 8.13. Exercise of Trustee Powers by Certificate Insurer and
Certificateholders . . . . . . . . . . . . . . . . . . VIII-8
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Certain Rights of the Certificate Insurer . . . . . . . IX-1
SECTION 9.02. Trustee To Act Solely with Consent of the Certificate
Insurer . . . . . . . . . . . . . . . . . . . . . . . . IX-1
SECTION 9.03. Trust Estate and Accounts Held for Benefit of the
Certificate Insurer . . . . . . . . . . . . . . . . . . IX-2
SECTION 9.04. Effect of Payments by the Certificate Insurer;
Subrogation . . . . . . . . . . . . . . . . . . . . . . IX-2
SECTION 9.05. Notices to the Certificate Insurer . . . . . . . . . . . IX-3
SECTION 9.06. Third-Party Beneficiary . . . . . . . . . . . . . . . . IX-3
ARTICLE X
TERMINATION
SECTION 10.01. Termination . . . . . . . . . . . . . . . . . . . . . . . X-1
SECTION 10.02. Additional Termination Requirements . . . . . . . . . . . X-3
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . XI-1
SECTION 11.02. Recordation of Agreement; Counterparts . . . . . . . . . XI-2
SECTION 11.03. Limitation on Rights of Certificateholders . . . . . . . XI-2
SECTION 11.04. Governing Law; Jurisdiction . . . . . . . . . . . . . . XI-3
SECTION 11.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . XI-3
SECTION 11.06. Severability of Provisions . . . . . . . . . . . . . . . XI-4
SECTION 11.07. Article and Section References . . . . . . . . . . . . . XI-4
SECTION 11.08. Notice to S&P and Moody's . . . . . . . . . . . . . . . XI-4
SECTION 11.09. Further Assurances . . . . . . . . . . . . . . . . . . . XI-5
SECTION 11.10. Benefits of Agreement . . . . . . . . . . . . . . . . . XI-5
SECTION 11.11. Acts of Certificateholders . . . . . . . . . . . . . . . XI-5
SECTION 11.12. Appointment of Tax Matters Person . . . . . . . . . . . XI-6
iv
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EXHIBITS:
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Exhibit A Form of Class A Certificate
Exhibit B (Reserved)
Exhibit C Form of Class R Certificate
Exhibit D Mortgage Loan Schedule
Exhibit E-1 Request for Release (for Trustee)
Exhibit E-2 Request for Release (Mortgage Loans Paid in Full)
Exhibit F-1 Form of Trustee's Receipt
Exhibit F-2 Form of Trustee's Preliminary Certification
Exhibit F-3 Form of Trustee's Certification Re: Exceptions
Exhibit G Form of Collection Account Certification
Exhibit H Form of Liquidation Report
Exhibit I Form of Collection Account Activity Report
Exhibit J Form of Transfer Certification
Exhibit K Form of Class R Certificate Transfer Affidavit
Exhibit L Form of Written Order to Authenticate
Exhibit M Seller's Underwriting Guidelines
Exhibit N Depository Agreement
Exhibit O Form of Servicer Request for Reimbursement
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This Pooling and Servicing Agreement, dated as of June 21, 1996,
among FINANCIAL ASSET SECURITIES CORP., as Depositor, CITYSCAPE CORP., as
Seller and Servicer, and HARRIS TRUST AND SAVINGS BANK, as Trustee.
PRELIMINARY STATEMENT:
WHEREAS, the Seller is in the business of originating or purchasing
from others certain Mortgage Loans; and
WHEREAS, the Depositor has purchased such Mortgage Loans from the
Seller and wishes to establish a trust administered by the Trustee, which
trust will (i) purchase the Mortgage Loans from the Depositor with the result
that the entire beneficial ownership of the Mortgage Loans will be in the
Trust Estate and (ii) issue pass-through certificates which in the aggregate
will evidence the entire beneficial ownership in the Trust Estate, with the
result that, following such purchase from the Depositor the Trustee will hold
legal title to the Trust Estate and the Certificateholders will hold
beneficial title to the Trust Estate; and
WHEREAS, the Servicer wishes to service the Mortgage Loans on the
terms and conditions herein set forth; and
WHEREAS, Financial Security Assurance Inc. 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.
WITNESSETH, THEREFORE, that in consideration of the mutual
agreements herein contained, the Seller, the Depositor, the Servicer and the
Trustee agree as follows:
1
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement or in the Preliminary Statement,
the following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
"1933 Act": The Securities Act of 1933, as amended.
"Accepted Servicing Procedures": Servicing procedures that meet
at least the same standards the Servicer would follow in servicing first and
second lien residential mortgage loans held for its own account, giving due
consideration to standards of practice of prudent mortgage lenders and loan
servicers that originate and service mortgage loans comparable to the
Mortgage Loans and to the reliance placed by the Certificateholders and the
Certificate Insurer on the Servicer for the servicing of the Mortgage Loans
but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or any
affiliate of the Servicer or any Sub-Servicer may have with the related
Mortgagor;
(ii) the ownership of any Certificate by the Servicer or any
affiliate of the Servicer;
(iii) the Servicer's obligation to make Delinquency Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
"Account": Any of the Collection Account, Certificate Account,
Distribution Account, Policy Payments Account and Capitalized Interest
Account.
"Additional Servicing Compensation": As defined in Section 3.17.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to
reflect of record the sale of the Mortgage.
<PAGE>
"Available Funds": As defined in Section 4.02 hereof.
"Available Funds Shortfall": As defined in Section 4.02 hereof.
"Balloon Mortgage Loan": Any Mortgage Loan that provided on the
date of origination for scheduled monthly payments in level amounts
substantially lower than the amount of the final scheduled payment.
"Balloon Payment": With respect to any Balloon Mortgage Loan, as
of any date of determination, the Monthly Payment payable on the stated
maturity date of such Mortgage Loan.
"Bankruptcy Code": The Bankruptcy Code, as amended (Title 11 to
the United States Code).
"BIF": The Bank Insurance Fund of the FDIC.
"Book-Entry Certificates": Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of
which is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with
the rules of the Depository and as described in Section 5.06). On the
Closing Date, Class A Certificates shall be Book-Entry Certificates.
"Business Day": Any day other than a Saturday, a Sunday or a day
on which banking or savings and loan institutions in the City of New York or
in the city in which the corporate trust office of the Trustee is located,
are authorized or obligated by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 4.01 hereof and maintained by the
Trustee.
"Capitalized Interest Requirement": With respect to the July 1996
Distribution Date, the excess, if any, of (i) the product of (x) 10/360ths
of the weighted average of the Net Mortgage Rates of all the Mortgage Loans
(weighted on the basis of the Cut-Off Date Loan Balances thereof) and (y) the
Original Class A Certificate Principal Balance over (ii) the product of (x)
one-twelfth of the weighted average of the Net Mortgage Rates of all Mortgage
Loans having Due Dates during the period from and including June 22, 1996 to
and including June 30, 1996 (weighted on the basis of the Cut-Off Date Loan
Balances thereof) and (y) the aggregate of the Cut-Off Date Loan Balances of
such Mortgage Loans.
"Carry-Forward Amount": With respect to any Distribution Date, the
sum of (i) the amount, if any, by which (x) the Class A Distribution Amount
as of the immediately preceding Distribution
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Date exceeded (y) the amount of the actual aggregate distributions made to
the Holders of the Class A Certificates on such immediately preceding
Distribution Date, and (ii) 30 days' interest (or 10 days' interest with
respect to the Distribution Date occurring in July 1996) on the amount of
such excess calculated on the basis of an annual rate equal to the related
Pass-Through Rate.
"Certificate": Any Class A Certificate or Class R Certificate.
"Certificate Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 4.01 which shall be entitled
"Certificate Account, Harris Trust and Savings Bank, as Trustee, in trust for
the registered Certificateholders of Cityscape Home Equity Loan Trust, Series
1996-2" and which must be an Eligible Account.
"Certificate Insurer": Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New
York, and any successor thereto.
"Certificate Insurer Default": The existence and continuance of
any of the following:
(a) the Certificate Insurer fails to make a payment required under
the Policy in accordance with its 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 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 filing
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by the Certificate Insurer or the consent of 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 by 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 Register": The register maintained pursuant to
Section 5.02.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or non-U.S. Person shall not be a Holder of a Class
R Certificate for any purpose hereof.
"Certificate Owner": With respect to each Book-Entry Certificate,
any beneficial owner thereof.
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"Class": Collectively, Certificates having the same priority of
payment and bearing the same class designation and whose form is identical
except for variation in the Percentage Interest evidenced thereby.
"Class A Certificates": The Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates.
"Class A-1 Certificate": Any one of the Class A-1 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-1, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein, and
evidencing an interest designated as a "regular interest" in the Trust for
purposes of the REMIC Provisions.
"Class A-2 Certificate": Any one of the Class A-2 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-2, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein, and
evidencing an interest designated as a "regular interest" in the Trust for
purposes of the REMIC Provisions.
"Class A-3 Certificate": Any one of the Class A-3 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-3, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein, and
evidencing an interest
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designated as a "regular interest" in the Trust for purposes of the REMIC
Provisions.
"Class A-4 Certificate": Any one of the Class A-4 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-4, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein, and
evidencing an interest designated as a "regular interest" in the Trust for
purposes of the REMIC Provisions.
"Class A-5 Certificate": Any one of the Class A-5 Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit A-5, executed by the Trustee and authenticated and delivered by the
Trustee, representing the right to distributions as set forth herein, and
evidencing an interest designated as a "regular interest" in the Trust for
purposes of the REMIC Provisions.
"Class A Certificate Principal Balance": As of any date of
determination, the Original Class A Certificate Principal Balance less any
amounts actually distributed with respect to the Principal Distribution
Amount pursuant to Section 4.04(b) hereof on all preceding Distribution
Dates.
"Class A Certificateholder": Any holder of a Class A Certificate.
"Class A Current Interest": With respect to any Distribution Date
and any Class of Class A Certificates, the sum of (i) the amount of interest
accrued on the related Class Certificate Principal Balance immediately prior
to such Distribution Date during the related Due Period at one-twelfth of the
related Pass-Through Rate (or in the case of the first Distribution Date, at
10/360ths of the related Pass-Through Rate), (ii) the Preference Amount owed
to the Holders of such Class of Class A Certificates as it relates to
interest previously paid on the Class A Certificates and (iii) the Carry-
Forward Amount as it relates to interest.
"Class A Distribution Amount": As of any Distribution Date, the
sum of (i) the Class A Current Interest and (ii) the Principal Distribution
Amount for such Distribution Date.
"Class Certificate Principal Balance": With respect to any Class
of Certificates (other than the Class R Certificates) and any date of
determination, the Original Class Certificate Principal Balance of such
Class, less any amounts actually distributed with respect to such Class from
the Principal Distribution Amount pursuant to Section 4.04(b) hereof on all
preceding Distribution Dates.
"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, executed,
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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 Trust for the purposes of the REMIC
Provisions.
"Closing Date": June 27, 1996.
"Code": The Internal Revenue Code of 1986 as it may be amended
from time to time.
"Collection Account": The account or accounts created and
maintained pursuant to Section 3.10(a), which shall be entitled "Collection
Account, Harris Trust and Savings Bank, as Trustee, in trust for the
registered Certificateholders of Cityscape Home Equity Loan Trust, Series
1996-2", and which must be an Eligible Account.
"Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business with
respect to the Certificates shall be administered, which office at the date
of the execution of this instrument is located at 311 West Monroe Street,
12th Floor, Chicago, Illinois 60606 Attention: Indenture Trust Administration
or at such other address as the Trustee may designate from time to time by
notice to the Certificateholders, the Seller, the Depositor, the Servicer and
the Certificate Insurer.
"Cram Down Loss": With respect to a Mortgage Loan, the amount of
reduction of a Loan Balance or the Coupon Rate (or both) of a Mortgage Loan
resulting from an order being issued by a court of appropriate jurisdiction
in an insolvency proceeding. A "Cram Down Loss" shall be deemed to have
occurred on the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination
thereof, the aggregate of all Realized Losses since the Startup Date as a
percentage of the Maximum Collateral Amount.
"Cumulative Loss Test": The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
<TABLE>
<CAPTION>
Period Percentage
------ ----------
<S> <C>
June 21, 1996 - May 31, 1998 1.00%
June 1, 1998 - May 31, 1999 1.50%
June 1, 1999 - May 31, 2000 1.75%
June 1, 2000 - May 31, 2001
and thereafter 2.00%
</TABLE>
I-6
<PAGE>
"Cumulative Net Losses:" As of any date of determination, the
amount by which the aggregate Loan Balances of, and accrued interest on, all
Mortgage Loans on which Final Recovery Determinations have been made exceeds
(x) the Net Recovery Proceeds for such Mortgage Loans allocated to principal
and accrued interest and (y) the total of all payments of Make-Whole Amounts.
"Cut-Off Date": The close of business on June 21, 1996.
"Cut-Off Date Loan Balance": As to any Mortgage Loan, the
outstanding principal balance thereof at the Cut-Off Date.
"Definitive Certificates": As defined in Section 5.05.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by one or more Qualified Substitute Mortgage Loans.
"Delinquency Advance": As defined in Section 4.06(b) hereof.
"Delinquency Report": The monthly report described in Section
3.18(a).
"Depositor": Financial Assets Securities Corp, a Delaware
corporation, or any successor in interest.
"Depository": The initial Depository shall be the Depository Trust
Company ("DTC"), the nominee of which is Cede & Co., or any other
organization registered as a "clearing agency" pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository shall initially
be the registered Holder of the Book-Entry Certificates. The Depository
shall at all times be a "clearing corporation" as defined in Section 8-102(3)
of the Uniform Commercial Code of the State of New York.
"Depository Agreement": With respect to the Book-Entry
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository, dated as of the Closing Date, substantially in the form of
Exhibit N.
"Depository Participant": A broker, dealer, bank or other
financial institution or other person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to any Distribution Date, the
close of business on the fourteenth day of the calendar month in which such
Distribution Date occurs
I-7
<PAGE>
or, if such fourteenth day is not a Business Day, the close of business on
the Business Day immediately preceding such fourteenth day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management
or operation of such REO Property, the holding of such REO Property primarily
for sale to customers, the performance of any construction work thereon or
any use of such REO Property in a trade or business conducted by the Trust
other than through an Independent Contractor; provided, however, that the
-------- -------
Trustee (or the Servicer on behalf of the Trustee) shall not be considered
to Directly Operate an REO Property solely because the Trustee (or the
Servicer on behalf of the Trustee) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to such REO
Property.
"Disqualified Organization": A "disqualified organization" under
Section 860E of the Code, which as of the Closing Date is either (i) the
United States, any state or political subdivision thereof, foreign
government, any international organization, or any agency or instrumentality
of any of the foregoing, (ii) any organization (other than a cooperative
described in Section 521 of the Code) which is exempt from the tax imposed
by Chapter 1 of the Code unless such organization is subject to the tax
imposed by Section 511 of the Code or (iii) any organization described in
Section 1381(a)(2)(C) of the Code or (iv) any other Person so designated by
the Trustee based upon an Opinion of Counsel provided by nationally
recognized counsel to the Trustee that the holding of an ownership interest
in a Class R Certificate by such Person may cause the Trust Estate or any
Person having an ownership interest in any Class of Certificates (other than
such Person) to incur liability for any federal tax imposed under the Code
that would not otherwise be imposed but for the transfer of an ownership
interest in the Class R Certificate to such Person. A corporation will not
be treated as an instrumentality of the United States, or of any state or
political subdivision thereof, if all of its activities are subject to tax
and, a majority of its board of directors is not selected by a governmental
unit. The term "United States", "state" and "international organizations"
shall have the meanings set forth in Section 7701 of the Code.
"Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 4.01 which shall be entitled
"Distribution Account, Harris Trust and Savings Bank, as Trustee, in trust
for the registered Certificateholders of Cityscape Home Equity Loan Trust,
Series 1996-2" and which must be an Eligible Account.
I-8
<PAGE>
"Distribution Date": The 25th day of any calendar month, or if
such 25th day is not a Business Day, the Business Day immediately following
such 25th day, commencing on July 25, 1996.
"Due Date": With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month
in which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due, exclusive of any days of grace.
"Due Period": With respect to the Distribution Date occurring in
July 1996, the period commencing on the day following the Cut-Off Date and
ending on June 30, 1996. With respect to any other Distribution Date, the
period commencing on the first day of the calendar month preceding the
calendar month in which such Distribution Date occurs and ending on the last
day of such preceding calendar month.
"Eligible Account": Either (A) a segregated account or accounts
maintained with an institution whose deposits are insured by the BIF or the
SAIF of the FDIC, the unsecured and uncollateralized long term debt
obligations of which shall be rated "A" or better by S&P and "A2" or better
by Moody's and in one of the two highest short term rating categories by S&P
and P-1 by Moody's, and which is any of (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing
and in good standing under the applicable banking laws of any state, (iii)
a national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a
bank holding company, and (v) approved in writing by the Certificate Insurer
or (B) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $100,000,000, acting in its fiduciary
capacity. Any Eligible Account maintained by the Trustee shall comply with
the provisions of clause (B) hereof.
"Estate in Real Property": A fee simple estate or a leasehold
estate in a parcel of real property.
"Excess Overcollateralized Amount": With respect to the Mortgage
Loans and any Distribution Date, the excess, if any, of (x) the
Overcollateralized Amount that would apply on such Distribution Date after
taking into account the payment of the related Class A Distribution Amount
on such Distribution Date (except for any distributions of related
Overcollateralized Reduction Amounts on such Distribution Date) over (y) the
related Specified Overcollateralized Amount for such Distribution Date;
provided, however, that the Excess Overcollateralization Amount for the
period beginning with the
I-9
<PAGE>
Distribution Date in July 1998 and ending on the Distribution Date in
December 1998 (inclusive) shall be limited to the amount obtained using the
following formula.
n-24 X E.O.A.
----
6
Where "n" is equal to the number of Distribution Dates that have occurred
since the Startup Day and "E.O.A." is equal to the amount of Excess
Overcollateralized Amount that would otherwise be obtained (e.g., in July
1998, n=25) for such Distribution Date without regard to the provisions of
this proviso.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Recovery Determination": A determination by the Servicer
with respect to any defaulted Mortgage Loan or REO Property (other than a
Mortgage Loan purchased or replaced by the Seller or the Servicer pursuant
to Section 2.06 or 3.15(c)) that all Net Recovery Proceeds and other payments
or recoveries that the Servicer, in its reasonable judgment, expects to be
finally recoverable have been recovered or that the Servicer, in its
reasonable judgment as evidenced by an Officers' Certificate which
accompanies the related Liquidation Report in the form of Exhibit H hereto,
believes the cost of obtaining any additional recoveries would exceed the
amount of such recoveries. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination.
"First Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Mortgaged Property having a first
priority lien.
"First Mortgage Loan": Any Mortgage Loan that is secured by a
first lien on or first priority security interest in the related Mortgaged
Property.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Independent": When used with respect to any specified Person, any
such Person who (i) is in fact independent of the Seller, the Depositor, the
Servicer and the Underwriter, (ii) does not have any direct financial
interest or any material indirect financial interest in the Seller, the
Depositor, the Servicer or in any affiliate of either, and (iii) is not
connected with the Seller, the Depositor, the Servicer or the Underwriter as
an officer, employee, promoter,
I-10
<PAGE>
underwriter, trustee, partner, director or Person performing similar
functions.
"Independent Contractor": Either (i) any Person (other than the
Servicer, the Depositor and the Seller) that would be an "independent con-
tractor" with respect to the Trust within the meaning of Section 856(d)(3)
of the Code if the Trust were a real estate investment trust (except that the
ownership tests set forth in that section shall be considered to be met by
any Person that owns, directly or indirectly, 35 percent or more of any Class
of Certificates), so long as the Trust does not receive or derive any income
from such Person and provided that the relationship between such Person and
the Trust is at arm's length, all within the meaning of Treasury Regulation
Section 1.856-4(b)(5), or (ii) any other Person (including the Servicer, the
Depositor and the Seller) if the Trustee, the Certificate Insurer and the
Certificateholders have each received an Opinion of Counsel to the effect
that the taking of any action in respect of any REO Property by such Person,
subject to any conditions therein specified, that is otherwise herein
contemplated to be taken by an Independent Contractor will not cause such REO
Property to cease to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code), or cause any income
realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Initial Certificate Principal Balance": With respect to any Class
A Certificate, the Initial Certificate Principal Balance set forth on the
face thereof.
"Initial Specified Overcollateralized Amount": Shall be an amount
equal to the product of (x) 4.2% and (y) the Maximum Collateral Amount.
"Insurance Agreement": The Insurance and Indemnity Agreement dated
as of June 21, 1996 between the Certificate Insurer and the Seller.
"Insurance Premium": With respect to any Distribution Date, the
product of (x) the Class A Certificate Principal Balance, after taking into
account all distributions to be made on such Distribution Date and (y) one-
twelfth of the Premium Rate (or 10/360ths of the Premium Rate, in the case of
the first Distribution Date).
"Insured Distribution Amount": With respect to any Distribution
Date, the sum of (i) the Class A Current Interest and (ii) the
Overcollateralization Deficit, if any for such Distribution Date.
I-11
<PAGE>
"Insured Payment": As of any Distribution Date, (i) any Available
Funds Shortfall plus (ii) any Preference Amount not otherwise paid to a
Certificateholder.
"Interest Remittance Amount": As defined in Section 3.11(a)(i)(A)
hereof.
"Late Collection": With respect to any Mortgage Loan and the
Monthly Payment due thereon during any Due Period, all amounts received
subsequent to the Determination Date immediately following such Due Period,
whether as a late payment of such Monthly Payment or as Property Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent the late payment
or collection of such Monthly Payment.
"Late Payment Rate": For any Distribution Date, the lesser of (i)
the rate of interest set forth in the Eastern Edition of The Wall Street
Journal in its "Money Rates" section as the "prime rate" on the first
Business Day preceding such Distribution Date that such rate is so published
plus 2% and (ii) the maximum rate permissible under any applicable law
limiting interest rates. The Late Payment Rate shall be computed on the
basis of a year of 365 days calculating the actual number of days elapsed.
"Lien": As defined in Section 2.08(b).
"Liquidation Proceeds": The amount (other than Property Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all
or a part of Mortgaged Property by exercise of the power of eminent domain
or condemnation or (ii) the liquidation of a defaulted Mortgage Loan through
a trustee's sale, foreclosure sale, REO Disposition or otherwise.
"Liquidation Report": The report in the form of Exhibit H annexed
hereto delivered by the Servicer pursuant to Section 3.15(e).
"Loan Balance": With respect to each Mortgage Loan, the
outstanding principal balance thereof calculated in accordance with the terms
of the related Mortgage Note; provided, however, that the Loan Balance for
-------- -------
any Mortgage Loan upon which a Final Recovery Determination has been made
shall be zero as of the last day of the Due Period in which such Final
Recovery Determination was made, and at all times thereafter.
"Loan-to-Value Ratio": With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the Loan
Balance of the related Mortgage Loan on the date of origination of such
Mortgage Loan or (in the event the Value for the related Mortgaged Property
is based on an appraisal conducted at the time of the purchase by the Seller
I-12
<PAGE>
of such Mortgage Loan) the Loan Balance of such Mortgage Loan at the time of
such purchase, plus, in the case of a Second Mortgage Loan, the outstanding
principal balance of the related First Lien on such date of origination or
purchase, as the case may be, of the Mortgage Loan, and the denominator of
which is the Value of the related Mortgaged Property.
"Majority Certificateholders": The Holders of Certificates
evidencing at least 51% of the Voting Rights.
"Majority Class R Certificateholders": The Holders of Class R
Certificates evidencing at least 75% of the Voting Percentage.
"Make-Whole Amount": As defined in Section 3.17 hereof.
"Maximum Collateral Amount": The aggregate Loan Balances of all
Mortgage Loans as of the Cut-Off Date.
"Monthly Excess Spread": With respect to any Distribution Date,
the excess of (i) the interest which is collected on the Mortgage Loans, less
the related Servicing Fees, during the prior Due Period, plus any Delinquency
Advances, and any amount covering a Prepayment Interest Shortfall paid by the
Servicer with respect to such Due Period, over (ii) the sum of (x) the Class
A Current Interest for such Distribution Date, (y) the amount to be
distributed to the Certificate Insurer pursuant to Section 4.04(a)(i) on such
Distribution Date and (z) the amount to be distributed to the Trustee
pursuant to Section 4.04(a)(ii) on such Distribution Date.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan
which is payable by a Mortgagor from time to time under the related Mortgage
Note, determined: (i) without giving effect to any extension, deferral,
modification, waiver or amendment granted or agreed to by the Servicer
pursuant to Section 3.01 or 3.07; and (ii) after giving effect to any
reduction in the amount of interest collectible from the related Mortgagor
as a result of the application of the Civil Relief Act.
"Moody's": Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors, and, if such corporation shall for any reason no longer perform
the functions of a securities rating agency, "Moody's" shall be deemed to
refer to any other "nationally recognized rating organization," as set forth
on the most current list of such organizations released by the Securities and
Exchange Commission and designated by the Certificate Insurer, notice of
which
I-13
<PAGE>
designation shall be given to the Trustee and the Servicer by the Certificate
Insurer.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on, or first or second priority security
interest in, a Mortgaged Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.04
pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan sold, transferred and assigned
to the Trust pursuant to Section 2.02 as from time to time is held as a part
of the Trust, the Mortgage Loans so held being identified in the Mortgage
Loan Schedule. Any mortgage loan which, although intended by the parties
hereto to have been, and which purportedly was, sold to the Trust by the
Depositor (as indicated by Exhibit D), that in fact was not transferred and
assigned to the Trust for any reason whatsoever, shall nevertheless be
considered a "Mortgage Loan" for all purposes of this Agreement. As
applicable, "Mortgage Loan" shall be deemed to refer to the related REO
Property.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust on such date, attached hereto as Exhibit D, which
list shall set forth the following information with respect to each Mortgage
Loan:
(i) the loan number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property, including
the city, state and zip code;
(iv) the type of Mortgaged Property;
(v) the Mortgage Rate;
(vi) the occupancy status;
(vii) the original term;
(viii) as of the Cut-Off Date the remaining number of months to
stated maturity;
(ix) the original principal balance (except with respect to any
Mortgage Loan purchased by the Seller, such balance at the time of
acquisition by the Seller of such Mortgage Loan);
I-14
<PAGE>
(x) the paid through date;
(xi) the amount of the Monthly Payment;
(xii) the unpaid principal balance as of the Cut-Off Date;
(xiii) the Loan-to-Value Ratio;
(xiv) the stated maturity date;
(xv) the Due Date;
(xvi) the Value, if available;
(xvii) the lien priority of the Mortgage Loan;
(xviii) the Net Mortgage Rate;
(xix) the origination date; and
(xx) balloon amortization, which is the number of months it would
take a Mortgagor making timely and equal payments without any reference
to the Balloon Payment and the number of scheduled months which the
Mortgagor has to pay off such Mortgage Loan including the Balloon
Payment (e.g., "360 months due in 180 months").
----
Such schedule shall also set forth the total of the amounts described under
(xii) above for all of the Mortgage Loans as of the specified date. Such
schedule may be in the form of more than one list, which list or lists may
have one or more attachments, collectively setting forth all of the
information required. Such list of information contained in a Mortgage Loan
Schedule shall also be provided to the Trustee in a computer-readable format
on a tape or disk. The Mortgage Loan Schedule shall be amended from time to
time by the Trustee in accordance with Section 2.07. With respect to any
Qualified Substitute Mortgage Loan, the amounts described in clauses (viii)
and (xii) shall be set forth as of the date of substitution.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i)
the Rolling Six Month Delinquency Rate is less than 13.5%, (ii) the O/C Loss
Test is satisfied, (iii) the Rolling Twelve Month Loss Rate for the twelve
month period immediately preceding the date of determination thereof is not
greater than or equal to 1.25% and (iv) no more than 25% of the aggregate
current principal balance of Mortgage
I-15
<PAGE>
Loans which are secured by Small Mixed-Use Properties is 30 days or more
Delinquent.
"Mortgage Rate": With respect to each Mortgage Loan, the fixed
annual rate at which interest accrues on such Mortgage Loan, as shown on the
Mortgage Loan Schedule.
"Mortgaged Property": The underlying property securing a Mortgage
Loan, including any REO Property, consisting of an estate in Real Property
improved by a Residential Dwelling.
"Mortgagor": The obligor or obligors on a Mortgage Note.
"Net Mortgage Rate": With respect to each Mortgage Loan, a per
annum rate of interest equal to the Mortgage Rate minus the Servicing Fee
Rate.
"Net Recovery Proceeds": The amount of any gross Property
Insurance Proceeds, or Liquidation Proceeds received with respect to any
Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Delinquency Advances or accrued and unpaid Servicing
Fees and, without duplication, liquidation expenses.
"New Lease": Any lease of REO Property entered into on behalf of
the Trust, including any lease renewed or extended on behalf of the Trust if
the Trust has the right to renegotiate the terms of such lease.
"Nonrecoverable Delinquency Advance": Any Delinquency Advance
previously made in respect of a Mortgage Loan or REO Property which the
Servicer determines, in connection with a Final Recovery Determination with
respect to such Mortgage Loan (such determination to be evidenced by a
certificate of a Servicing Officer delivered to the Trustee and the
Certificate Insurer), will not be recovered from Late Collections, Property
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO
Property.
"Notice": As defined in Section 4.02.
"O/C Loss Test": The O/C Loss Test for any period set out below
is satisfied if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below:
I-16
<PAGE>
<TABLE>
<CAPTION>
Period Percentage
------ ----------
<S> <C>
June 21, 1996 - May 31, 1997 0.75%
June 1, 1997 - May 31, 1998 1.25%
June 1, 1998 - May 31, 1999 1.75%
June 1, 1999 - May 31, 2000 2.00%
June 1, 2000 - May 31, 2001
and thereafter 2.50%
</TABLE>
"Officers' Certificate": With respect to the Seller or the
Servicer, a certificate signed by the Chairman of the Board, the President
or a vice president (however denominated), and by the Treasurer or the
Secretary of the Seller or the Servicer, as the case may be.
"Opinion of Counsel": A written opinion of counsel, who (unless
such Opinion of Counsel is required to be an Independent Opinion of Counsel)
may be counsel for the Seller, the Depositor, the Trustee, the Servicer or
the Certificate Insurer (including, except as otherwise expressly provided
in this Agreement, the in-house general counsel for the Seller, the Servicer,
the Depositor, the Trustee, any Certificateholder or the Certificate Insurer,
as the case may be), and who shall be reasonably acceptable to the parties
to which such opinion is addressed; except that any opinion of counsel
relating to (a) qualification of the Trust as a REMIC, or compliance with the
REMIC Provisions, must be an opinion of counsel who is a tax counsel
experienced in REMIC matters, and (b) the qualification of any account
required to be maintained pursuant to this Agreement as an Eligible Account
or the resignation of the Servicer pursuant to 6.04 must be delivered by an
Independent counsel who is counsel experienced in federal income tax matters.
"Original Class Certificate Principal Balance": With respect to
any Class of Certificates (other than the Class R Certificates), the
corresponding amounts set forth opposite such Class in the table below:
<TABLE>
<CAPTION>
Original Class
Class Certificate Principal
----- Balance
-------
<S> <C>
Class A-1 $ 113,650,000
Class A-2 $ 62,600,000
Class A-3 $ 31,460,000
Class A-4 $ 20,850,000
Class A-5 $ 23,391,733
</TABLE>
I-17
<PAGE>
"Original Class A Certificate Principal Balance": $251,951,733.
"Original Class A Certificates": The Class A Certificates issued
on the Closing Date.
"OTS": The Office of Thrift Supervision or any successor.
"Overcollateralization Deficit": With respect to any Distribution
Date, the amount, if any, by which (x) the Class A Certificate Principal
Balance, after taking into account the payment of the Class A Distribution
Amount on such Distribution Date (except for the amount of any Insured
Payment to be paid on such Distribution Date to reduce the
Overcollateralization Deficit), exceeds (y) the aggregate Loan Balance of the
Mortgage Loans as of the close of business on the last day of the immediately
preceding Due Period.
"Overcollateralization Increase Amount": With respect to any
Distribution Date the lesser of (i) the Specified Overcollateralization
Deficiency Amount as of such Distribution Date and (ii) the amount of Monthly
Excess Spread on deposit in the Certificate Account on such Distribution Date
after the payment of any Reimbursement Amount.
"Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (x) the Excess
Overcollateralized Amount for such Distribution Date and (y) the Principal
Remittance Amount transferred from the Collection Account to the Certificate
Account on the Servicer Remittance Date immediately preceding such
Distribution Date.
"Overcollateralized Amount": As of any Distribution Date, the
excess, if any, of (x) aggregate Loan Balance of all the Mortgage Loans as
of the close of business on the last day of the immediately preceding Due
Period (y) the Class A Certificate Principal Balance as of such Distribution
Date (after taking into account the payment of the Class A Distribution
Amount on such Distribution Date).
"Pass-Through Rate": Class A-1: 6.90% per annum
Class A-2: 7.20% per annum
Class A-3: 7.60% per annum
Class A-4: 7.85% per annum
Class A-5: 8.10% per annum.
"Percentage Interest": With respect to any Class A Certificate,
a fraction, expressed as a decimal, the numerator of which is the Initial
Certificate Principal Balance represented by such Class A Certificate and the
denominator of which is the Original Class Certificate Principal Balance of
I-18
<PAGE>
the related Class. With respect to 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. The Class A Certificates are issuable only in minimum Percentage
Interests corresponding to minimum initial Class A Certificate Principal
Balances of $1,000. The Class R Certificates are issuable only in minimum
Percentage Interests equal to 10% of all of the interests represented by the
Certificates of such Class.
"Permitted Investments": As used herein, Permitted Investments
shall include the following:
(i) 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;
(ii) federal funds, certificates of deposit, time and demand
deposits and banker's acceptances (in each case having original maturities
of not more than 365 days) of any bank or trust company incorporated under
the laws of the United States or any state thereof, provided that the
short-term debt obligations of such bank or trust company at the
date of acquisition thereof have been rated "A-1+" or better by S&P and
"Prime-1" or better by Moody's;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $100,000,000
which deposits are held up to the applicable limits insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC and
a rating, with respect to its long-term, unsecured, debt obligations, of
"A" or better by S&P and "A2" or better by Moody's;
(iv) commercial paper (having original maturities of not more than
180 days) rated "A-1+" or better by S&P and "Prime-1" by Moody's; and
(v) investments in money market funds rated "AAAm" or "AAAm-G" by
S&P and "Aaa" by Moody's;
provided that no instrument described hereunder shall evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal
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and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
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. Permitted Investments shall mature not later than the Business Day
prior to the earliest date on which such monies may be needed to make
payments.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The Financial Guaranty Insurance Policy No. 50476-N and
all endorsements thereto, dated the Startup Date, issued by the Certificate
Insurer to the Trustee for the benefit of the Holders of the Class A
Certificates.
"Policy Payments Account": As defined in Section 4.02(b) hereof.
"Pool Delinquency Rate": With respect to any Due Period, the
fraction, expressed as a percentage, equal to (x) the aggregate Loan Balances
of all Mortgage Loans 60 or more days delinquent, in foreclosure or relating
to REO Properties as of the close of business on the last day of such Due
Period over (y) the aggregate Loan Balances of all Mortgage Loans as of the
close of business on the last day of such Due Period.
"Preference Amount": Any amount previously distributed on the
Class A Certificates that is recovered as a voidable preference by a trustee
in bankruptcy pursuant to the Bankruptcy Code in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Premium Rate": With respect to any Distribution Date, a per annum
rate equal to 0.15%.
"Prepayment Assumption": As defined in the Prospectus Supplement.
"Prepayment Interest Shortfall": With respect to any Servicer
Remittance Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment an amount equal to the excess,
if any, of (i) a full month's interest on the amount of such Principal
Prepayment at a per annum rate equal to the Mortgage Rate (or at such lower
rate as may be in effect for such Mortgage Loan pursuant to application of
the Civil Relief Act) minus the Servicing Fee Rate over (ii) the amount of
interest actually
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remitted by the Mortgagor in connection with such Principal Prepayment less the
Servicing Fee for such Mortgage Loan in such month.
"Principal Distribution Amount": With respect to the Class A
Certificates and any Distribution Date, the lesser of:
(a) the Available Funds plus any Insured Payment minus the
Class A Current Interest; and
(b) the excess, if any, of the sum, without duplication, of:
(i) (A) the Carry-Forward Amount for the Class A
Certificates as it relates to principal,
(B) the Preference Amount owed to the Holders of the
Class A Certificates as such amounts relate to
principal previously distributed on the Class A Certificates,
(C) all principal (including any Principal Prepayment)
actually collected by the Servicer during the related Due
Period,
(D) the Loan Balance of each Mortgage Loan that was
repurchased by the Seller or purchased by the Servicer during
the related Due Period, to the extent such Loan Balance is
actually received by the Trustee on or prior to the related
Servicer Remittance Date,
(E) any Substitution Shortfall Amounts delivered by the
Seller during the related Due Period in connection with a
substitution of a Mortgage Loan (to the extent such Substitution
Shortfall Amounts relate to principal), to the extent such
Substitution Shortfall Amounts are actually received by the
Trustee on or prior to the related Servicer Remittance Date,
(F) the Net Recovery Proceeds actually collected by the
Servicer during the related Due Period with respect to each
Mortgage Loan remaining after prior application thereof to all
accrued and unpaid interest on the related Mortgage Loan (but
not in excess of the Loan Balance of the related Mortgage Loan
immediately prior to the end of the related Due Period), to the
extent such Net Recovery Proceeds are actually received by the
Trustee
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on or prior to the related Servicer Remittance Date,
(G) the amount of any Overcollateralization Deficit for
such Distribution Date,
(H) the portion of the proceeds received by the Trustee
from any termination of the Trust (to the extent such proceeds
related to principal), and
(I) the amount of any Overcollateralization Increase
Amount for such Distribution Date, to the extent of any
Monthly Excess Spread;
over
----
(ii) the amount of any Overcollateralization Reduction Amount
for such Distribution Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled
Due Date and which is not accompanied by an amount of interest representing
the full amount of scheduled interest due on any Due Date in any month or
months subsequent to the month of prepayment.
"Principal Remittance Amount": As defined in Section 3.11(a)(i)(B)
hereof.
"Prospectus Supplement": That certain prospectus supplement dated
June 25, 1996 relating to the public offering of the Class A Certificates.
"Property Insurance Proceeds": Proceeds of any title policy,
hazard policy or other insurance policy covering a Mortgage Loan, other than
any payments under the Policy, to the extent such proceeds are not to be
applied to the restoration of the related Mortgaged Property or released to
the Mortgagor in accordance with the Accepted Servicing Procedures, subject
to the terms and conditions of the related Mortgage Note and Mortgage.
"Purchase Price": With respect to any Mortgage Loan required to
be purchased pursuant to Section 2.06 or to be purchased pursuant to Section
3.15(c) and as confirmed by an Officers' Certificate, an amount equal to the
sum, without duplication, of (i) 100% of the Loan Balance as of the date of
purchase, (ii) interest from the date interest was last paid by the Mortgagor
through the day before the Due Date in the calendar month in which such
purchase occurs, at a per annum rate equal to the Mortgage Rate, (iii) any
unreimbursed
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Servicing Advances allocable to such Mortgage Loan and (iv) in the event the
Mortgage Loan is required to be purchased pursuant to Section 2.06, expenses
reasonably incurred or to be incurred by the Servicer or the Trustee in respect
of the breach or defect giving rise to the purchase obligation, including any
reasonable expenses arising out of the enforcement of the purchase
obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which
must, on the date of such substitution, (i) have an outstanding principal
balance (when taken together with any other Qualified Substitute Mortgage
Loan being substituted for such Deleted Mortgage Loan), after deduction of
all scheduled payments of principal due in the month of substitution, not in
excess of and not substantially less than the unpaid principal balance of the
Deleted Mortgage Loan as of the date of substitution, (ii) have a Mortgage
Rate not less than (and not more than one percentage point in excess of) the
Mortgage Rate of the Deleted Mortgage Loan, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) have a Loan-to-Value Ratio equal to or lower than
the Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (v)
satisfy the criteria set forth from time to time in the definition of
"qualified replacement mortgage" at Section 860G(a)(4) of the Code, (vi) have
the same or a superior lien priority as the Deleted Mortgage Loan, (vii)
comply as of the date of substitution with each representation and warranty
set forth in Section 2.07 hereof, (viii) have the same or better property
type as the Deleted Mortgage Loan, (ix) have the same or better occupancy
status, (x) have the same Due Date as the Deleted Mortgage Loan and (xi) be
of the same or of a better credit quality (determined in accordance with the
Seller's credit underwriting guidelines as attached hereto as Exhibit M) as
the Mortgage Loan being replaced. In the event that one or more mortgage
loans are proposed to be substituted for one or more Deleted Mortgage Loans,
the Certificate Insurer may allow the tests set forth in (i)-(iii) above to
be met on a weighted average basis or other aggregate basis (based on the
mortgage loans substituted in any one Due Period) acceptable to the
Certificate Insurer.
"Rating Agency": Each of S&P and Moody's.
"Realized Loss": As to any Mortgage Loan on which a Final Recovery
Determination has been made, the amount, if any, by which the Loan Balance
of such Mortgage Loan as of the date of such Final Recovery Determination
exceeds the Net Recovery Proceeds allocable to principal for such Mortgage
Loan.
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"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reimbursement Amount": As of any Distribution Date, the sum of
(x) (i) the aggregate of all Insured Payments previously received by the
Trustee and not previously repaid to the Certificate Insurer pursuant to
Section 4.04(a)(vi) hereof plus (ii) interest accrued on each Insured Payment
not previously repaid calculated at a rate equal to the Late Payment Rate
from the date the Trustee received such Insured Payment, (y) (i) the amount
of any Insurance Premium not paid on the date due and (ii) interest on such
amount at the Late Payment Rate from the date such Insurance Premium was due
to be paid and (z) the amount of any amounts owing and unpaid under the
Insurance Agreement. The Certificate Insurer shall notify the Trustee, the
Depositor and the Seller of the amount of any Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations and rulings promulgated thereunder, as the
foregoing may be in effect from time to time.
"REMIC Trust": The segregated pool of assets consisting of the
Trust Estate except for the Distribution Account and the Capitalized Interest
Account.
"Remittance Report": A report prepared by the Trustee pursuant to
Section 4.06(a).
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code.
"REO Disposition": The receipt by the Servicer of all Net Recovery
Proceeds and other payments or recoveries (including proceeds of a final
sale) which the Servicer expects to be finally recoverable from the sale or
other disposition of the related REO Property.
"REO Property": A Mortgaged Property acquired by the Servicer in
the name of the Trustee on behalf of the Certificateholders through
foreclosure or deed-in-lieu of foreclosure, as described in Section 3.22.
"Request for Release": A release signed by a Servicing Officer,
in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
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<PAGE>
"Residential Dwelling": Any one of the following: (i) a detached
or semi-detached single-family dwelling, (ii) a two- to four-unit dwelling,
(iii) a townhouse, (iv) a unit in a condominium or a planned unit develop-
ment, none of which is a co-operative unit or a mobile home, but which may
be a pre-fabricated manufactured unit affixed to a permanent foundation or
(v) a Small Mixed-Use Property where generally at least 60% of the gross
income arises from residential purposes in accordance with the Seller's
Underwriting Guidelines attached hereto as Exhibit M.
"Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors, the President, any vice
president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, the Controller and any
assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also to whom, with respect to a particular matter,
such matter is referred because of such officers' knowledge of and
familiarity with the particular subject.
"Rolling Six Month Delinquency Rate": Beginning with the sixth
Determination Date and as of each Determination Date thereafter the average
of the Pool Delinquency Rates for each of the six immediately preceding Due
Periods.
"Rolling Twelve Month Loss Rate": Beginning with the twelfth
Determination Date and as of each Determination Date thereafter the fraction,
expressed as a percentage, equal to (x) the dollar amount of all Realized
Losses for the preceding twelve months over (y) the aggregate Loan Balances
of the Mortgage Loans as of the opening of business on the first day of the
preceding twelfth month.
"S&P": Standard & Poor's, a division of McGraw Hill, and its
successors, and, if such division shall for any reason no longer perform the
functions of a securities rating agency, "S&P" shall be deemed to refer to
any other "nationally recognized rating organization," as set forth on the
most current list of such organizations released by the Securities and
Exchange Commission and designated by the Certificate Insurer, notice of
which designation shall be given to the Trustee and the Servicer by the
Certificate Insurer.
"SAIF": The Savings Association Insurance Fund of the FDIC.
"Second Mortgage Loan": Any Mortgage Loan that is secured by a
second lien on or second priority security interest in the related Mortgaged
Property.
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<PAGE>
"Seller": Cityscape Corp., a corporation organized under the laws
of New York, or its successor in interest, in its capacity as the seller of
the Mortgage Loans. The Seller is also recognized in certain states as
Cityscape Mortgage Corp.
"Servicer": Cityscape Corp., or its successor in interest, in its
capacity as Servicer of the Mortgage Loans, which term shall also include any
successor servicer appointed hereunder.
"Servicer Default": One or more of the events described in Section
7.01.
"Servicer Information": Any information contained in a Liquidation
Report, a Servicer Remittance Report or a Delinquency Report.
"Servicer Loss Test": The Servicer Loss Test for any period set
out below is satisfied, if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below (provided, that
for purposes of the calculation of the Servicer Loss Test, Realized Losses
attributable solely to Cram Down Losses should be excluded from the
calculation of Cumulative Loss Percentage):
<TABLE>
<CAPTION>
Cumulative Loss
Period Percentage
------ ---------------
<S> <C>
June 21, 1996 - May 31, 1997 1.00%
June 1, 1997 - May 31, 1998 1.50%
June 1, 1998 - May 31, 1999 2.25%
June 1, 1999 - May 31, 2000 3.00%
June 1, 2000 - May 31, 2001 3.75%
and thereafter
</TABLE>
"Servicer Remittance Date": With respect to any Distribution Date,
the fifth Business Day preceding such Distribution Date.
"Servicer Remittance Report": The monthly report described in
Section 3.18(a).
"Servicer Termination Event": As defined in Section 8.20(a)
hereof.
"Servicer Termination Test": The Servicer Termination Test is
satisfied for any date of determination thereof if (x) as of the immediately
preceding Determination Date, the Rolling Six Month Delinquency Rate is less
than 15.75%, (y) the Servicer Loss Test is satisfied and (z) as of
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<PAGE>
the immediately preceding Determination Date, the Rolling Twelve Month Loss
Rate is not greater than 1.75%.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The costs and expenses incurred by the
Servicer in connection with (i) the preservation, restoration and protection
of a Mortgaged Property or REO Property, (ii) any enforcement or judicial
proceedings, including foreclosures, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
(iv) the payment of any taxes or insurance premiums, and the performance of
its obligations under Sections 3.01(b)(ii), 3.09, 3.13, 3.15(a) and 3.22, and
(v) in connection with the liquidation of a Mortgage Loan, expenditures
relating to the purchase or maintenance of the First Lien pursuant to Section
3.24.
"Servicing Fee": With respect to each Mortgage Loan and for any
Due Period, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the Servicing Fee Rate on that
principal amount on which interest on such Mortgage Loan accrues during such
calendar month. A portion of such Servicing Fee may be paid to any Sub-
Servicer as its servicing compensation.
"Servicing Fee Rate": With respect to each Mortgage Loan and Due
Period a per annum rate equal to 0.50%.
"Servicing Officer": Any officer of the Servicer or any Sub-
Servicer involved in, or responsible for, the administration and servicing
of the Mortgage Loans, whose name and specimen signatures appear on a list
of servicing officers furnished to the Trustee and the Certificate Insurer
by the Servicer or such Sub-Servicer, as such list may from time to time be
amended. There shall at no time be fewer than two Servicing Officers.
"Small Mixed-Use Property": A Mortgaged Property with improvements
consisting of a two to four unit residential dwelling and not more than three
non-residential units.
"Special Advance": As defined in Section 4.06 hereof.
"Specified Overcollateralization Amount": With respect to a
Distribution Date (x) prior to the Stepdown Date, the amount which is equal
to 4.20% of the Maximum Collateral Amount and (y) after the Stepdown Date (i)
if the Stepdown Requirement is satisfied, the lesser of (A) the amount equal
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to 8.40% of the then outstanding aggregate Loan Balances of the Mortgage
Loans or (B) the Initial Specified Overcollateralization Amount or (ii) if
the Stepdown Requirement is not satisfied, the amount which is equal to 4.20%
of the Maximum Collateral Amount; provided, however, that such amount will
not be reduced below the product of 0.50% and the Maximum Collateral Amount;
provided further, however, that if on any Distribution Date, the Mortgage
Portfolio Performance Test is not satisfied, then the Specified
Overcollateralization Amount will be unlimited during the period that such
Mortgage Portfolio Performance Test is not satisfied.
"Specified Overcollateralization Deficiency Amount": With respect
to any Distribution Date, the excess, if any, of (i) the Specified
Overcollateralized Amount applicable to such Distribution Date over (ii) the
Overcollateralized Amount for such Distribution Date prior to taking into
account the payment of any related Overcollateralization Increase Amounts on
such Distribution Date.
"Startup Date": June 27, 1996.
"Stepdown Date": The Determination Date occurring in June 1998.
"Stepdown Requirement": The Stepdown Requirement is satisfied for
any date of determination thereof if as of such date of determination (x) the
Rolling Six Month Delinquency Rate as of the immediately preceding
Determination Date is less than 11.25%, (y) the Cumulative Loss Test is
satisfied and (z) the Rolling Twelve Month Loss Rate is not greater than or
equal to 0.75%.
"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a Sub-
Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub-Servicer and any successor Sub-Servicer relating to
servicing and administration of certain Mortgage Loans as provided in Section
3.02.
"Substitution Shortfall Amount": As defined in Section 2.06(d)
hereof.
"Tax Matters Person": The Tax Matters Person appointed pursuant
to Section 11.12 hereof.
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<PAGE>
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of REMIC Trust in its capacity as a REMIC under
the REMIC Provisions, together with any and all other information reports or
returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax
laws.
"Termination Price": As defined in Section 10.01(b) hereof.
"30 Days Delinquent": A Mortgage Loan is "30 Days Delinquent" if
any Monthly Payment due thereon has not been received by the close of
business on the corresponding day of the month immediately succeeding the
month in which such Monthly Payment was due corresponding to the day that
such monthly 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.
"Trust": Cityscape Home Equity Loan Trust, Series 1996-2, the
trust created hereunder.
"Trust Estate": The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder, con-
sisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together
with all collections thereon and proceeds thereof, (ii) any REO Property,
together with all collections thereon and proceeds thereof, (iii) the
Trustee's rights with respect to the Mortgage Loans under all insurance
policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Policy, (v) the rights and remedies of the Trustee
against any person making any representation or warranty to the Trustee
hereunder, to the extent provided herein, and (vi) each Account, together
with such assets that are deposited therein from time to time and any
investments thereof, together with any and all income, proceeds and payments
with respect thereto.
"Trustee": Harris Trust and Savings Bank, an Illinois banking
corporation, or any successor trustee appointed as herein provided.
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<PAGE>
"Trustee's Fee": With respect to any Distribution Date, the
product of (x) one-twelfth of the Trustee's Fee Rate and (y) the aggregate
Loan Balances of all Mortgage Loans as of the opening of business on the
first day of the related Due Period.
"Trustee's Fee Rate": With respect to any Distribution Date, the
greater of (x) 0.012% and (y) the fraction, expressed as a percentage, the
numerator of which is $10,000 and the denominator of which is the aggregate
Loan Balance of all Mortgage Loans as of opening of business on the first day
of the related Due Period.
"Underwriter": Greenwich Capital Markets, Inc., a Delaware
corporation , in its capacity as underwriter of the Class A Certificates.
"United States Person or U.S. Person": A citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in, or under the laws of, the Unites States or any political
subdivision thereof, or an estate or trust whose income from sources without
the United States is includible in gross income for United States federal
income tax purposes regardless of its connection with the conduct of a trade
or business within the United States. The term "United States" shall have
the meaning set forth in Section 7701 of the Code or successor provisions.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable
by the hazard insurance policies required to be maintained pursuant to
Section 3.13.
"Value": With respect to any Mortgaged Property, the value thereof
as determined by an independent appraisal made at the time of the origination
of the related Mortgage Loan; except that, with respect to any Mortgage Loan
that is a purchase money mortgage loan, the lesser of (i) the value thereof
as determined by an independent appraisal made at the time of the origination
of such Mortgage Loan, and (ii) the sales price of the related Mortgaged
Property.
"Voting Percentage": With respect to a Class A Certificate, a
fraction, expressed as a decimal, the numerator of which is the Certificate
Principal Balance represented by such Class A Certificate and the denominator
of which is the Class A Certificate Principal Balance of the related Class.
With respect to a Class R Certificate, the Percentage Interest set forth on
such Certificate.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. Except as otherwise
expressly provided for herein, for so long as the Class A Certificates are
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<PAGE>
outstanding, 100% of the Voting Rights shall be allocated among Holders of
Class A Certificates in proportion to their respective Voting Percentage,
provided, however, that any Class A Certificate registered in the name of the
Servicer, the Depositor or the Trustee or any of their respective affiliates
shall not be included in the calculation of Voting Rights; when the Class A
Certificates are no longer outstanding 100% of the Voting Rights shall be
allocated among Holders of the Class R Certificates in accordance with their
respective Voting Percentage.
"Written Order to Authenticate": A written order in the form of
Exhibit L hereto by which the Depositor directs the Trustee to issue the
Certificates.
SECTION 1.02 Accounting.
Unless otherwise specified herein, for the purpose of any
definition or calculation, whenever amounts are required to be netted,
subtracted or added or any distributions are taken into account such
definition or calculation and any related definitions or calculations shall
be determined without duplication of such functions.
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<PAGE>
ARTICLE II
ESTABLISHMENT OF THE TRUST;
PURCHASE AND SALE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Establishment of the Trust.
The Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an
express trust to be known, for convenience, as "Cityscape Home Equity Loan
Trust, Series 1996-2" and does hereby appoint Harris Trust and Savings Bank
as Trustee in accordance with the provisions of this Agreement.
SECTION 2.02. Purchase and Sale of Mortgage Loans.
The Depositor, concurrently with the execution and delivery hereof,
does hereby sell, transfer, assign, set over and otherwise convey to the
Trust without recourse, but subject to the terms of this Agreement, all
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to the Mortgage Loans
identified on the Mortgage Loan Schedule delivered on the Startup Day,
including, without limitation, all principal outstanding as of the Cut-Off
Date and interest due after the Cut-Off Date.
In consideration of such sale of the Mortgage Loans, the Trustee
shall pay to the Depositor the purchase price.
SECTION 2.03. Grant of Security Interest.
In the event that any conveyance pursuant to Section 2.02 hereof
is deemed by a court of competent jurisdiction to be a loan, the parties
intend that the Depositor shall be deemed to have granted to the Trustee on
behalf of the Certificateholders and the Certificate Insurer a security
interest in the related Mortgage Loans, including, without limitation, all
interest accrued thereon and that this Agreement shall constitute a security
agreement under applicable law. The Depositor and the Trustee shall, to the
extent consistent with this Agreement, take such actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest
in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of the Agreement.
Except as may otherwise expressly be provided herein, neither the
Seller, the Depositor, the Servicer nor the Trustee shall (and the Servicer
shall ensure that no Sub-Servicer shall) assign, sell, dispose of or transfer
any interest in the Trust Estate or any portion thereof, or permit
<PAGE>
the Trust Estate or any portion thereof to be subject to any lien, claim,
mortgage, security interest, pledge or other encumbrance of, any other
Person.
In the event that the parties hereto have failed to transfer the
entire legal ownership in and to each Mortgage Loan to the Trust Estate, the
parties hereto intend that this document operate to transfer the entire
equitable ownership interest in and to each Mortgage Loan to the Trust
Estate.
SECTION 2.04. Document Delivery Requirements.
(a) In connection with each conveyance pursuant to Section 2.02
hereof, the Seller does hereby agree to deliver to, and deposit with, the
Trustee, no later than two Business Days prior to the Closing Date, the
following documents or instruments with respect to each Mortgage Loan (a
"Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in blank or in the
following form: "Pay to the order of Harris Trust and Savings Bank, as
Trustee under the Pooling and Servicing Agreement, dated as of June 21,
1996, Cityscape Home Equity Loan Trust, Series 1996-2, without recourse",
with all prior and intervening endorsements showing a complete chain of
endorsement from origination of the Mortgage Loan to the Seller;
(ii) the original Mortgage with evidence of recording thereon (or,
if the original Mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of
the Mortgage certified by a Responsible Officer of the Seller or by the
closing attorney or by an officer of the title insurer or agent of the
title insurer which issued the related title insurance policy or
commitment therefor to be a true and complete copy of the original
Mortgage submitted for recording) and, if the Mortgage was executed
pursuant to a power of attorney, the original power of attorney with
evidence of recording thereon (or, if the original power of attorney has
not been returned from the applicable public recording office or is not
otherwise available, a copy of the power of attorney certified by a
Responsible Officer of the Seller or by the closing attorney or by an
officer of the title insurer or agent of the title insurer which issued
the related title insurance policy or commitment therefor, to be a
true and complete copy of the original power of attorney submitted for
recording);
(iii) the original executed Assignment of the Mortgage, acceptable for
recording except with respect to any currently unavailable recording
information, from the Seller to the Trustee in blank or in the following
form:
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<PAGE>
"Harris Trust and Savings Bank, as Trustee under the Pooling and
Servicing Agreement, dated as of June 21, 1996, Cityscape Home Equity
Loan Trust, Series 1996-2";
(iv) the original Assignment and any intervening Assignments of the
Mortgage, with evidence of recording thereon, showing a complete chain
of assignment from origination of the Mortgage Loan to the Seller (or, if
any such Assignment has not been returned from the applicable public
recording office or is not otherwise available, a copy of such Assignment
certified by a Responsible Officer of the Seller or by the closing
attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy or commitment
therefor to be a true and complete copy of the original Assignment
submitted for recording);
(v) the original, or a copy certified by the Seller to be a true
and correct copy of the original, of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) an original, or a copy certified by the Seller to be a true
and correct copy of the original, of a lender's title insurance policy,
or if a lender's title policy has not been issued as of the Closing Date
of a commitment (binder) (including any marked additions thereto or
deletions therefrom) to issue such policy;
(vii) either: (A) an original hazard insurance policy; (B) a
certificate of insurance issued by the related insurer or its agent
as to such policy; or (C) an Officers' Certificate of the Seller
certifying that a hazard insurance policy is in effect as to the Mortgaged
Property (in which case such Officers' Certificate shall be accompanied by
a copy of such hazard insurance policy); and
(viii) if required because a Mortgaged Property is located in
a federally designated special flood zone, either: (A) an original
flood insurance policy or (B) a certificate of insurance issued by the
related insurer or its agent as to such policy; or (C) an Officers'
Certificate of the Seller certifying that a flood insurance policy is in
effect covering the Mortgaged Property (in which case such Officers'
Certificate shall be accompanied by a copy of such flood insurance
policy).
(b) With respect to any Mortgage referred to in Section
2.04(a)(ii) above as to which the original Mortgage is not available as of
the Closing Date, and with respect to any Assignment referred to in Section
2.04(a)(iii) or 2.04(a)(iv) as to which the original Assignment is not
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available as of the Closing Date, the Seller shall deliver, prior to the
Closing Date, a copy of such Mortgage or such Assignment, as the case may be,
certified by the Seller to be a true and correct copy, to the Trustee and
shall also deliver the original Mortgage, or where the original Mortgage is
unavailable a copy thereof certified by the applicable public recording
office, and the original Assignment, or where the original Assignment is
unavailable a copy thereof certified by the applicable public recording
office, to the Trustee within five Business Days of receipt thereof by the
Seller but in no event later than 360 days (or such longer period, up to an
additional 360 days, as the Certificate Insurer may approve and any longer
period as approved by the Certificate Insurer in writing with respect to
specific Mortgage Loans upon the request of the Seller) following the date
of origination of the related Mortgage Loan or the date of such Assignment
to the Seller, as the case may be. The failure of the Seller to deliver to
the Trustee (x) any original Mortgage under Section 2.04(a)(ii) (or where the
original is unavailable a copy thereof certified by the applicable public
recording office), or (y) any original Assignment under Section 2.04(a)(iii)
and (iv) (or where the original is unavailable a copy thereof certified by
the applicable public recording office), shall not be deemed a breach of this
Agreement for any purpose whatsoever until the expiration of such 360 day
period (or such longer period, up to an additional 360 days, as the
Certificate Insurer may approve and any longer period as approved by the
Certificate Insurer in writing with respect to specific Mortgage Loans upon
the request of the Seller).
The Trustee shall promptly (and in no event later than five
Business Days following the Closing Date) submit for recording, at the
Seller's own expense, in the appropriate public office for real property
records, each original Assignment referred to in Section 2.04(a)(iii) above,
as well as each original Assignment referred to in Section 2.04(a)(iv) above
that was not previously submitted for recording. With respect to any
original Assignment referred to in Section 2.04(a)(iii) above as to which the
related recording information is unavailable within five Business Days
following the Closing Date, such original Assignment shall be submitted for
recording within five Business Days after receipt of such information but in
no event later than 180 days (or such longer period, up to an additional 180
days, as the Certificate Insurer may approve and any longer period as
approved by the Certificate Insurer and the Majority Certificateholders in
writing with respect to specific Mortgage Loans upon the request of the
Seller) after the Closing Date. The Seller shall deliver each recorded
Assignment referred to in Section 2.04(a)(iii) or, where the original is
unavailable, a copy thereof certified by the applicable public recording
office to be a true and correct copy of the original, to the Trustee within
360 days (or such longer period, up to an additional 360 days, as the
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Certificate Insurer may approve and any longer period as approved by the
Certificate Insurer in writing with respect to specific Mortgage Loans upon
the request of the Seller) of the Closing Date, and any failure of the Seller
to deliver to the Trustee, prior to the expiration of such 360 day period (or
any such longer period as the Certificate Insurer may have approved in
accordance with the terms set forth above), any such recorded Assignment, or
such certified copy if such recorded Assignment has not been received by it,
shall not be deemed a breach of this Agreement for any purpose. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Seller shall promptly prepare a substitute Assignment or cure
such defect, as the case may be, and thereafter cause each such Assignment
to be duly recorded.
The Trustee shall promptly upon receipt thereof, with respect to
each Mortgage Note and Assignment of Mortgage delivered in blank in
accordance with Section 2.04(a)(i) and (iii), respectively, endorse each such
Mortgage Note and Assignment in the form described therein.
The Servicer shall promptly upon receipt thereof (and in no event
later than the earlier of (i) five Business Days following such receipt and
(ii) 360 days after the Closing Date or Subsequent Transfer Date (or such
longer period up to an additional 360 days as the Certificate Insurer may
approve and any longer period as approved by the Certificate Insurer in
writing with respect to specific Mortgage Loans upon the request of the
Seller), deliver to the Trustee (a) the original recorded Mortgage in those
instances where a certified copy thereof was delivered to the Trustee; (b)
the original recorded Assignment of Mortgage to the Trustee; (c) the original
recorded Assignment or Assignments of the Mortgage showing a complete chain
of assignment from origination of a Mortgage Loan to the Seller in those
instances where certified copies thereof were delivered to the Trustee; (d)
the original policy of title insurance or a copy certified by the Seller to
be a true and correct copy in those instances where a commitment (binder)
(including any marked additions thereto or deletions therefrom) to issue such
policy was delivered to the Trustee; and (e) any other original documents
constituting a part of a Mortgage File received with respect to any Mortgage
Loan, including, but not limited to, any original documents evidencing an
assumption or modification of any Mortgage Loan.
In the event that the Certificate Insurer approve in writing of any
extension of time for delivery of any document as provided for in this
Section 2.04(b), a copy of such written approval shall be sent to the
Trustee.
All original documents relating to the Mortgage Loans that are not
delivered to the Trustee are and shall be
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held by the Seller or the Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders. In the event
that any such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be delivered
promptly to the Trustee. Any original document that is not required pursuant
to the terms of this Section to be a part of a Mortgage File delivered to or
held by the Trustee shall be delivered promptly to the Servicer.
In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver on the Closing Date the Policy to the Trustee
for the benefit of the Certificateholders.
If the Seller has not delivered all required documentation with
respect to any Mortgage Loan within the time periods, if any, specified in
this Agreement, the Seller shall be required to take action with respect to
such Mortgage Loan as and to the extent provided in Section 2.06 hereof.
SECTION 2.05. Acceptance by Trustee.
The Trustee acknowledges receipt by it on the Closing Date, in good
faith without notice of adverse claims, subject to the provisions of Sections
2.02 and 2.04 and to any exceptions noted on the Trustee's certification in
the form annexed hereto as Exhibit F-1 delivered to the Seller, the
Depositor, the Servicer and the Certificate Insurer on the Closing Date, of
(x) the documents referred to in Section 2.04(a)(i), (ii) and (iii) above
(except that such documents may be endorsed in blank upon receipt) with
respect to the Mortgage Loans listed on the Mortgage Loan Schedule delivered
to the Trustee on the Closing Date as well as acknowledges the assignment to
it of all other assets included in clauses (i) and (iii) of the definition
of "Trust Estate", (y) the Certificate Account, and (z) the Policy and
declares that it holds and will hold the Policy and such documents and the
other documents delivered to it constituting the Mortgage Files, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Estate" that are delivered to it, in trust for the
exclusive use and benefit of all present and future Certificateholders and
the Certificate Insurer.
Within 10 Business Days of the Closing Date the Trustee shall
deliver to the Seller, the Depositor, the Servicer and the Certificate
Insurer a Final Certification in the form annexed hereto as Exhibit F-2, with
any applicable exceptions noted thereon.
After the delivery of the final certification, a form of which is
attached hereto as Exhibit F-3, the Trustee shall provide to the Servicer,
the Seller, the Depositor, the
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Certificate Insurer and the Seller shall provide to the Trustee, no less
frequently than quarterly, updated certifications indicating the then current
status of exceptions until all such exceptions have been eliminated; provided
that the delivery of the final certification shall not act as a waiver of any
of the rights the Certificate Insurer may have with respect to such
exceptions, and all rights are reserved with respect thereto.
If in the process of reviewing the Mortgage Files and making or
preparing the certifications referred to above the Trustee finds any document
or documents constituting a part of a Mortgage File to be missing or
defective in any material respect, or at the end of any 360 day period (or
any later period as approved by the Certificate Insurer, notice of which has
been provided to the Trustee in writing) referenced above finds that all
recorded Assignments and all original Mortgages or certified copies thereof
have not been delivered to it, the Trustee shall promptly so notify the
Seller, the Depositor, the Certificate Insurer and the Servicer. 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 to the Trustee pursuant to this Section 2.05, unless
otherwise expressly stated, shall be limited solely to confirming that the
documents listed in this Section 2.05 have been executed and received, relate
to the Mortgage Loans in the Mortgage Loan Schedule and conform as to the
loan number and address and description thereof in the Mortgage Loan
Schedule. In addition, upon the discovery by the Seller, the Depositor, the
Servicer, the Certificate Insurer or the Trustee of a breach of any of the
representations and warranties made by the Seller pursuant to Sections 2.07
and 2.08 hereof in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan or the interests of the
Certificateholders or of the Certificate Insurer in such Mortgage Loan, the
Person discovering such breach shall give prompt written notice to the other
Persons set forth in this sentence.
The Trustee shall, upon the written request of the Certificate
Insurer and, at the expense of such requesting party, provide a written
report to the Certificate Insurer of each Mortgage File released to the
Servicer for servicing purposes.
At such time as any Mortgage Loan becomes 90 days Delinquent, the
Servicer shall make, or cause to be made, a reasonable investigation to
determine whether such Mortgage Loan satisfied the representations and
warranties of the Seller set forth in Section 2.07 as of the Closing Date;
provided, however, that only one such investigation shall be required for any
- -------- -------
Mortgage Loan.
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If the Seller has not delivered all required documentation with
respect to any Mortgage Loan within the time periods specified in this
Agreement (as such may have been extended pursuant to Section 2.04(b)
hereof), the Seller shall be required to take action with respect to such
Mortgage Loan as and to the extent provided in Section 2.06 hereof.
SECTION 2.06. Repurchase or Substitution of Mortgage Loans by the
Seller or the Servicer.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a required document is missing (after
expiration of the applicable time period set forth in Section 2.04 hereof)
from, a Mortgage File, the Trustee shall promptly notify the Seller, the
Depositor, the Certificate Insurer, and the Servicer of such defect or
missing document and request that the Seller deliver such missing document
or cure such defect within 60 days (which period may be extended for up to
60 days by the Certificate Insurer (or any longer period as the Certificate
Insurer may consent to), if in its reasonable judgment it believes that the
Seller is proceeding diligently to cure any such breach or missing document)
from the date the Seller was notified of such missing document or defect, and
if the Seller does not deliver such missing document or cure such defect in
all material respects during such period, the Seller shall repurchase the
related Mortgage Loan from the Trust at the Purchase Price promptly but no
later than 10 days after the end of such period. The Purchase Price for the
repurchased Mortgage Loan shall be deposited in the Collection Account by the
Seller, and the Trustee, upon (i) receipt of an Officers' Certificate of the
Servicer as to the making of such deposit and (ii) confirmation that such
deposit has been made, shall release or cause to be released to the Seller
the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment as are furnished by the Seller, in each case without
recourse, as shall be reasonably necessary to vest in the Seller any Mortgage
Loan released pursuant hereto, and the Trustee shall have no further
responsibility or liability (except as to its own negligence or willful
misconduct) with regard to such Mortgage File and such Mortgage Loan.
In lieu of repurchasing any such Mortgage Loan as provided above,
the Seller may cause such Mortgage Loan to be removed from the Trust (in
which case it shall become a Deleted Mortgage Loan) and substitute one or
more Qualified Substitute Mortgage Loans in the manner and subject to the
limitations set forth in Section 2.06(d).
(b)(i) Except as otherwise provided in Section 2.06(e), within 60
days of the earlier of discovery by the Seller or receipt of notice by the
Seller of the breach of any representation or warranty of the Seller set
forth in Section
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2.07 or Section 2.08 with respect to any Mortgage Loan (notwithstanding that
such representation and warranty was made to the Seller's best knowledge),
the Seller shall either (x) cure such breach in all material respects, (y)
subject to the restrictions set forth in Section 2.06(d) repurchase the
Mortgage Loan from the Trustee at the Purchase Price or (z) remove such
Mortgage Loan from the Trust (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans
in the manner and subject to the limitations set forth in Section 2.06(d).
If any such breach is a breach of any of the representations and warranties
included in the second sentence of Section 2.07(cc) and subsections (ll) or
(uu) of Section 2.07, and the Seller is unable to cure such breach, the
Seller shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and cor-
rect. The Purchase Price for any repurchased Mortgage Loan shall be
deposited in the Collection Account by the Seller, and the Trustee, upon (i)
receipt of an Officers' Certificate of the Seller as to the making of such
deposit and (ii) confirmation that such deposit has been made, shall release
or cause to be released to the Seller the related Mortgage File and shall
execute and deliver such instruments of transfer or assignment as furnished
by the Seller, in each case without recourse, as shall be necessary to vest
in the Seller any Mortgage Loan released pursuant hereto.
(ii) If any Mortgagor on a Mortgage Loan fails to make the first
payment (as determined in accordance with the terms of the related Mortgage
Note) within 90 days of the Due Date of such first payment, the Seller shall,
prior to the Determination Date related to the next succeeding Distribution
Date, repurchase such Mortgage Loan from the Trustee at the Purchase Price.
(c) Within 60 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation,
warranty or covenant of the Servicer set forth in Section 2.09, which breach
materially and adversely affects the value of any Mortgage Loan or the
interests of the Certificateholders or of the Certificate Insurer therein,
the Servicer shall (i) cure such breach in all material respects or
(ii) subject to the restrictions set forth in Section 2.06(d), purchase any
affected Mortgage Loan from the Trust at the Purchase Price. The Purchase
Price for the purchased Mortgage Loan shall be deposited by the Servicer in
the Collection Account, and the Trustee, upon (i) receipt of an Officers'
Certificate of the Servicer as to the making of such deposit and (ii)
confirmation that such deposit has been made, shall release or cause to be
released to the Servicer the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment as furnished by the
Seller, in each case without recourse, as
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shall be necessary to vest in the Servicer any Mortgage Loan released
pursuant hereto.
(d)(i) No purchase or repurchase of any Mortgage Loan shall occur
if the Seller or the Servicer delivers (at it own expense) to the Trustee and
the Certificate Insurer an Independent Opinion of Counsel, addressed to the
Trustee, to the effect that such purchase or repurchase of such Mortgage Loan
will (x) result in the imposition of taxes on a "prohibited transaction" for
the REMIC Trust as defined in Section 860F of the Code, (y) result in the
imposition of taxes on contributions to the Trust under Section 860G(d) of
the Code or (z) cause the REMIC Trust to fail to qualify as a REMIC at any
time that the Certificates are outstanding. The Seller or the Servicer,
whichever is the entity delivering the Independent Opinion of Counsel
described in the preceding sentence, shall indemnify and hold harmless the
Trust for any Realized Loss occurring on a Mortgage Loan which the Seller or
the Servicer does not purchase or repurchase due to the delivery of such
Independent Opinion of Counsel.
Notwithstanding the provisions of this subsection (i) of Section
2.06(d), if either the Seller or the Servicer delivers an Opinion of Counsel
stating that the proposed purchase or repurchase of a Mortgage Loan by the
Seller or the Servicer would result in the imposition of the taxes described
in clauses (x) or (y) of this subsection (i) and that such proposed purchase
or repurchase would not cause the REMIC Trust to fail to qualify as a REMIC
at any time that the Certificates are outstanding, the Seller or the Servicer
(A) may purchase or repurchase such Mortgage Loan and (B) shall pay any of
the taxes described in clauses (x) and (y) of this subsection (i) which are
imposed as result of such purchase or repurchase.
(ii) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.06(a) or Section 2.06(b)
must be effected prior to the date that is two years after the Startup Date
or such other period as may be specified therefor in the REMIC Provisions.
With respect to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Seller by delivering to the Trustee for such
Qualified Substitute Mortgage Loan or Loans the Mortgage Note, the Mortgage,
the related Assignment, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.04, together
with an Officers' Certificate providing that each such Qualified Substitute
Mortgage Loan satisfies the definition thereof and specifying the Substitu-
tion Shortfall Amount (as described below), if any, in connection with such
substitution. The Trustee shall acknowledge receipt
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for such Qualified Substitute Mortgage Loan or Loans and, within five
Business Days thereafter, shall review such documents (or shall cause such
documents to be reviewed) as specified in Section 2.04 and shall deliver to
the Seller, the Depositor, the Servicer and the Certificate Insurer, with
respect to such Qualified Substitute Mortgage Loan or Loans, a certification
substantially similar to that made by the Trustee in the second paragraph of
Section 2.05. Within one year of the date of substitution, the Trustee shall
deliver to the Seller, the Depositor, the Servicer and the Certificate
Insurer a certification in the form of Exhibit F-3 hereto with respect to
such Qualified Substitute Mortgage Loan or Loans pursuant to Section 2.05.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in
the month of substitution are not part of the Trust Estate and will be
retained by the Seller. For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such Deleted
Mortgage Loan on or before the Due Date of such Deleted Mortgage Loan in the
month of substitution, and the Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan.
The Seller shall give or cause to be given written notice to the Certificate
Insurer, the Certificateholders and the Depositor that such substitution has
taken place, and the Trustee shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the Trust and the
substitution of the Qualified Substitute Mortgage Loan or Loans. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects, including, but not
limited to, the representations and warranties set forth in Section 2.07, as
of the date of substitution.
For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Trustee
will determine, based upon information supplied by the Servicer, and inform
the Seller of, the amount (the "Substitution Shortfall Amount"), if any, by
which the aggregate unpaid principal balance of all such Qualified Substitute
Mortgage Loans as of the date of substitution is less than the aggregate
unpaid principal balance of all such Deleted Mortgage Loans as of such date
plus the aggregate amount of all unreimbursed Servicing Advances, Delinquency
Advances and Reimbursement Amounts relating to such Deleted Mortgage Loans
as of such date. On the date of such substitution, the Seller will deposit
or cause to be deposited from the Seller's own funds into the Collection
Account pursuant to Section 3.10(a)(viii) an amount equal to the Substitution
Shortfall Amount, if any, without reimbursement therefor, and the Trustee,
upon (i) receipt of (A) the related Qualified Substitute Mortgage Loan or
Loans and (B) an Officers' Certificate of the Seller as to the deposit of
such Substitution Shortfall Amount into the
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Collection Account and (ii) confirmation that such deposit has been made,
shall release or cause to be released to the Seller, the related Mortgage
File or Files and shall execute and deliver such instruments of transfer or
assignment as are furnished by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller any Deleted Mortgage Loan released
pursuant hereto and the Trustee shall have no further responsibility or
liability (except as to its own acts) with regard to such Mortgage.
Notwithstanding any contrary provision of this Agreement, with
respect to any Mortgage Loan, no substitution pursuant to this Section 2.06
shall be made unless the Seller obtains an Independent Opinion of Counsel,
addressed to the Trustee, the Seller, the Depositor, the Servicer and the
Certificate Insurer, to the effect that such substitution would not (i)
result in the imposition of taxes on "prohibited transactions" of the REMIC
Trust, as defined in Section 860F of the Code, (ii) result in the imposition
of taxes on contributions to the Trust under Section 860G(d) of the Code, or
(iii) cause the REMIC Trust to fail to qualify as a REMIC at any time that
any Certificates are outstanding.
(e) Upon discovery by the Seller, the Depositor, the Servicer, the
Trustee or the Certificate Insurer that any Mortgage Loan does not constitute
a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code,
the Person discovering such fact shall promptly (and in any event within five
Business Days of the discovery) give written notice thereof to the other
Persons set forth in this sentence. In connection therewith, the Seller
shall repurchase the affected Mortgage Loan within 60 days of the earlier of
such discovery by the Seller or the receipt of notice in the same manner as
the Seller would for a breach of representation or warranty contained in
Section 2.07. The Trustee shall reconvey to the Seller the Mortgage Loan to
be released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Section 2.07.
SECTION 2.07. Representations and Warranties with respect to the
Mortgage Loans.
The Seller hereby represents and warrants, with respect to each
Mortgage Loan, to the Depositor, to the Trustee, to the Certificateholders
and to the Certificate Insurer that as of the Closing Date or as of such
other date specifically provided herein (except that with respect to any
Qualified Substitute Mortgage Loan such representations and warranties shall
be as of the date of substitution and made by the Seller or the Servicer,
whichever is making the substitution):
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(a) The information set forth on the Mortgage Loan Schedule
relating to the Mortgage Loans is complete, true and correct as of the
Cut-Off Date;
(b) The Mortgage Note and the Mortgage are not assigned or pledged
by the Seller to a Person other than the Trust, and immediately prior to the
transactions herein contemplated, the Depositor had good and marketable title
thereto, and was the sole owner and holder of the Mortgage Loan free and
clear of any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature (collectively,
a "Lien"), other than any such Lien released simultaneously with the sale
contemplated herein, and had full right and authority, subject to no interest
or participation of, or agreement with, any other party, to sell and assign
the same pursuant to this Agreement, and immediately upon the transfer and
assignment of each Mortgage Loan as herein contemplated, the Trustee shall
have good title to, and will be the sole legal owner of, each Mortgage Loan
free and clear of any Lien;
(c) The Mortgage is a valid and existing lien on the property
therein described, and the Mortgaged Property is free and clear of all
encumbrances and liens having priority over the lien of the Mortgage, except
liens for real estate taxes and special assessments not yet due and payable,
in the case of a Mortgaged Property that is a condominium or an individual unit
in a planned unit development, liens for common charges permitted by statute,
and in the case of a Second Mortgage Loan, the lien securing the related
First Lien. Any security agreement, chattel mortgage or equivalent document
related to the Mortgage and delivered to the Trustee establishes in the
Seller a valid and subsisting lien on the property described therein, and the
Seller has full right to sell and assign the same to the Trustee;
(d) The terms of the Mortgage Note and the Mortgage have not been
impaired, altered or modified in any respect which would have any adverse
effect on the Certificateholders or the Certificate Insurer, except by a
written instrument which has been recorded, if necessary to protect the
interests of the Certificateholders, and which has been delivered to the
Trustee. The substance of any such alteration or modification is reflected
on the Mortgage Loan Schedule;
(e) No instrument of release or waiver has been executed in
connection with the Mortgage Loan, and no Mortgagor has been released, in whole
or in part, 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;
(f) Except with respect to delinquencies described in clause (m)
hereof, no Mortgagor is in default in complying
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with the terms of the Mortgage Note or the Mortgage, and the Seller has not
waived any default, breach, violation or event of acceleration except that
the Seller may have accepted late payments. At origination all taxes,
governmental assessments, insurance premiums, or water, sewer and municipal
charges and rents under all ground leases which previously became due and
owing have been paid, and each Mortgage Note and/or the related Mortgage
obligate the related Mortgagor to pay all similar amounts as they become due.
The Seller has not advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the Mortgagor, directly
or indirectly, for the payment of any amount required by the Mortgage, except
for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage proceeds, whichever is more recent, to the day
which precedes by one month the Due Date of the first installment of
principal and interest;
(g) There is no proceeding pending or, to the best of Seller's
knowledge, threatened for the total or partial condemnation of the Mortgaged
Property, nor is such a proceeding currently occurring, and such property is
undamaged by waste, fire, water, earthquake or earth movement, windstorm,
flood, tornado, or otherwise, so as to affect adversely the value of the
Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended;
(h) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that
under law could give rise to such lien) affecting the Mortgaged Property which
are, or may be, liens prior or equal to, or coordinate with, the lien of the
Mortgage except those that are stated in the title insurance policy and for
which related losses are affirmatively insured against by such policy;
(i) All of the improvements that were included for the purpose of
determining the Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged Property
except those that are stated in the title insurance policy and for which
related losses are affirmatively insured against by such policy;
(j) (Reserved)
(k) No improvement located on or being part of the 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 the Mortgaged Property and, with respect
to the use and occupancy of the same, including, but not limited to,
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certificates of occupancy and fire underwriting certificates, have been made
or obtained from the appropriate authorities and the Mortgaged Property is
lawfully occupied under applicable law;
(l) All parties that have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in
compliance with any and all licensing requirements of the United States and
of the laws of the state wherein the Mortgaged Property is located that are
applicable to such parties, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state or exempt from such
qualification in a manner so as not to affect adversely the enforceability
of such Mortgage Loan, or (C) federal savings and loan associations or
national banks having principal offices in such state, or (D) not doing
business in such state;
(m) As of the Cut-Off Date, no payment required to be made on any
Mortgage Loan is 30 days or more Delinquent;
(n) The Mortgage File contains each of the documents and
instruments specified to be included therein duly executed and in due and
proper form and each such document or instrument is in a form generally
acceptable to prudent institutional mortgage lenders that regularly originate
or purchase mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
Mortgage Loans;
(o) The Mortgage Note and the related Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof, enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or other
similar laws relating to or affecting the rights of creditors generally, and
by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law). All parties to the Mortgage
Note and the Mortgage had legal capacity (and, with respect to any Mortgage
Loan secured by a Small Mixed-Use Property, such party had full power and
authority and had been duly authorized) to execute the Mortgage Note and the
Mortgage, and each Mortgage Note and Mortgage has been duly and properly
executed by such parties. The Mortgagor is a natural person (except with
respect to Mortgage Loans secured by Small Mixed-Use Properties) who is a
party to the Mortgage Note and the Mortgage in an individual capacity, and
not in the capacity of a trustee or otherwise;
(p) Any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit
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protection, equal credit opportunity or disclosure laws, applicable to the
Mortgage Loan have been complied with, and the Seller has and shall maintain
in its possession, available for the Trustee's inspection, and shall deliver
to the Trustee upon demand, evidence of compliance with all such
requirements;
(q) The proceeds of the Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making, closing or recording the
Mortgage Loan were paid;
(r) Any future advances made prior to the Cut-Off Date have been
consolidated with the outstanding principal amount secured by the Mortgage,
and the secured principal amount, as consolidated, bears a single interest
rate and single repayment term reflected on the Mortgage Loan Schedule. The
lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority, except in the case of a Second
Mortgage Loan where such lien is expressly insured as having second lien
priority subject only to the lien of the related First Lien, by a title
insurance policy or an endorsement to the policy insuring the mortgagee's
consolidated interest. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan. The Seller shall not be
obligated to make future advances after the Cut-Off Date;
(s) Each Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other form of policy acceptable to FNMA or FHLMC,
issued by and constituting the valid and binding obligation of a title insurer
generally acceptable to prudent mortgage lenders that regularly originate or
purchase mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
Mortgage Loans and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Seller, its successors and
assigns, as to the first priority lien of the Mortgage in the case of a First
Mortgage Loan and the second priority lien of the Mortgage in the case of a
Second Mortgage Loan, in the original principal amount of the Mortgage Loan.
The Seller is the sole payee of such mortgage title insurance policy, the
assignment to the Trustee of the Seller's interest in such mortgage title
insurance policy does not require the consent of or notification to the
insurer or the same has been obtained, and such mortgage title insurance
policy is in full force and effect and will be in full force and effect and
inure to the benefit of the Trustee upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such mortgage
title insurance policy and
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no prior holder of the related Mortgage, including the Seller, has done, by
act or omission, anything that would impair the coverage of such mortgage
title insurance policy;
(t) All improvements upon the Mortgaged Property are insured by an
insurer who meets FNMA and/or FHLMC guidelines against loss by fire, hazards
of extended coverage and such other hazards as are customary in the area
where the Mortgaged Property is located pursuant to insurance policies
conforming to the requirements of Section 3.13 hereof. If the Mortgaged
Property was, at the time of origination of the related Mortgage Loan, in an
area identified on a Flood Hazard Boundary Map or Flood Hazard Rate Map
issued by the Federal Emergency Management Agency as having special flood
hazards (and if the flood insurance policy referenced herein has been made
available), a flood insurance policy is in effect with respect to such
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Section 3.13. All individual insurance
policies (collectively, the "hazard insurance policy") are the valid and
binding obligation of the insurer and contain a standard mortgagee clause
naming the Seller, its successors and assigns, as mortgagee. All premiums
thereon have been paid. The Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and upon the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain
and maintain such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
(u) The Mortgage Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(v) At least 87.61% of the Mortgage Loans were originated or
purchased and re-underwritten by the Seller in accordance with the Seller's
underwriting guidelines attached hereto as Exhibit M and, to the best of the
Seller's knowledge, the remaining Mortgage Loans comply with such
underwriting guidelines. No Mortgage Loan has been modified except as such
modification may be reflected in the related Mortgage File. No more than
54.87% of the Mortgage Loans, measured by outstanding principal balances
thereof as of the Cut-Off Date, were originated by Independent originators
and acquired by the Seller;
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(w) The Mortgage Loan is a closed-end First Mortgage Loan or closed-
end Second Mortgage Loan having an original term of not more than 30 years to
maturity. Except with respect to any Balloon Mortgage Loan, each Mortgage
Loan is payable in equal monthly installments of principal and interest which
would be sufficient, in the absence of late payments, to fully amortize such
loan within the term thereof, beginning no later than 60 days after
disbursement of the proceeds of the Mortgage Loan and bears a fixed interest
rate for the term of the Mortgage Loan. As of the Cut-Off Date,
approximately 74.95% of the Mortgage Loans, measured by outstanding principal
balances, are Balloon Mortgage Loans each of which has an original term of
not less than fifteen (15) years (except for one Balloon Mortgage Loan having
an original term of five (5) years and one Balloon Mortgage Loan having an
original term of ten (10) years) and which provides for level monthly
payments based on a thirty (30) year amortization schedule and a final
Monthly Payment substantially greater than the preceding Monthly Payments;
(x) The Mortgage contains a customary provision for the acceleration
of the payment of the unpaid principal balance of the Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
holder thereunder;
(y) With respect to at least 86.82% of the Mortgage Loans, at the
time that each such Mortgage Loan was originated the related Mortgagor
represented that such Mortgagor would occupy the related Mortgaged Property as
such Mortgagor's primary residence, and the Seller has no reason to believe
that such representation of the Mortgagor is no longer true. No Mortgage Loan
is a construction loan. Each Mortgaged Property is lawfully occupied under
applicable law;
(z) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the cor-
responding Mortgage and the security interest of any applicable security
agreement or chattel mortgage referred to in Section 2.07(c);
(aa) The Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial or non-judicial foreclosure.
Other than applicable homestead provisions which may delay the realization
against the Mortgaged Property, or exemptions that may arise in the event a
petition under the Bankruptcy Code is filed with respect to the Mortgagor,
there is no homestead or other exemption available to the Mortgagor that
would interfere with the right to sell
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<PAGE>
the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(bb) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Trustee or the
Certificateholders to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor, which fees
and expenses shall constitute Servicing Advances;
(cc) The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of at least one parcel of real property
with a one family residence erected thereon, a two- to four-family dwelling,
a Small Mixed-Use Property or an individual condominium unit; provided,
--------
however, that no residence or dwelling is a co-operative unit or a mobile
- -------
home, but which may be a pre-fabricated manufactured unit affixed to a
permanent foundation. As of the Cut-Off Date with respect to the aggregate
Loan Balance of all Mortgage Loans, (i) no more than 13.69% are secured by
real property improved by two- to four-family dwellings (except that up to
0.64% may be secured by real property improved by Small Mixed-Use
Properties), (ii) no more than 1.23% are secured by real property improved
by individual condominium or townhouse units, (iii) at least 84.44% are
secured by real property with a detached or attached single-family residence
erected thereon, (iv) not more than 3.17% are subject to a ground lease and
the remainder of the Mortgaged Properties are fee simple estates, (v) not
more than 2.0% are secured by a property with a pre-fabricated manufactured
unit affixed to a permanent foundation; (vi) not more than 0.5% are subject
to a leasehold mortgage; and (vii) not more than 20.04% were originated as
a purchase money mortgage. 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 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; (vii) the
terms and conditions of the leasehold do not prevent the free and absolute
marketability of the Mortgaged Property; (viii) each Mortgage Loan secured
by a Small Mixed-Use Property is a first lien on such Mortgaged Property;
(ix) no more than 19.94% by aggregate principal balance of the Mortgage Loans
will be
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originated under a non-income verification program; the weighted average
Loan-to-Value Ratio of the Mortgage Loans is 74.62%;
(dd) The Loan-to-Value Ratio as of the date of origination of each
Mortgage Loan was not more than 90.00%;
(ee) (Reserved);
(ff) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no escrow deposits or payments of
other charges or payments due the Seller have been capitalized under the
Mortgage or the related Mortgage Note;
(gg) No Mortgage Loan was originated under a buydown plan;
(hh) Other than as provided by this Agreement, there is no obligation
on the part of the Seller or any other party to make payments in addition to
those made by the Mortgagor;
(ii) Subject to the provisions of Section 2.04 hereof, the Mortgage
Note, the Mortgage, the Assignment of Mortgage and any other documents
required to be delivered have been delivered to the Trustee. The Seller is
in possession of a complete Mortgage File, except those documents delivered
to the Trustee, and there are no custodial agreements in effect adversely
affecting the right or ability of the Seller to make the document deliveries
required hereby. Each original Mortgage was recorded, and all subsequent
Assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien
thereof as against creditors of the Seller (subject to the provisions of
Section 2.04 hereof with respect to Mortgages which are in the process of
being recorded);
(jj) No Mortgage Loan was selected for inclusion under this Agreement
on any basis which was intended to have a material adverse effect on the
Certificateholders;
(kk) No Mortgage Loan has a shared appreciation or other contingent
interest feature;
(ll) No more than 0.41% of the aggregate Loan Balance of all the
Mortgage Loans as of the Cut-Off Date is secured by Mortgaged Properties
located within any single zip code area;
(mm) The weighted average Mortgage Rate of all the Mortgage Loans as
of the Cut-Off Date is approximately 11.70%, and no Mortgage Rate was greater
than 18.10% or less than 8.99%;
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<PAGE>
(nn) With respect to each Second Mortgage Loan:
(i) if the related First Lien provides for negative amortization
the Loan-to-Value Ratio was calculated at the maximum principal balance of
such First Lien that could result upon application of such negative
amortization feature;
(ii) either no consent for the Second Mortgage Loan is required by
the holder of the related First Lien or such consent has been obtained and
is contained in the Mortgage File; and
(iii) no notice of default has been delivered to the Seller
that has not been cured with respect to the related First Lien.
(oo) The Seller has caused or will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
Trustee in any insurance policies applicable to the Mortgage Loans,
including, without limitation, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of co-
insured, joint loss payee and mortgagee rights in favor of the Trustee;
(pp) All amounts received after the Cut-Off Date (and all interest
payments received on or before the Cut-Off Date that are due after the Cut-
Off Date) with respect to the Mortgage Loans to which the Seller is not
entitled have been deposited into the Collection Account and are, as of the
Closing Date, in the Collection Account or the Capitalized Interest Account,
as applicable;
(qq) Each Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform, to the description thereof set forth in the Prospectus
Supplement;
(rr) A full appraisal on forms approved by FNMA or FHLMC was performed
in connection with the origination of the related Mortgage Loan. Each
appraisal meets guidelines that would be generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Mortgage Loans;
(ss) To the best of the Seller's knowledge, no Mortgaged Property was,
as of the Cut-Off Date located within a one-mile radius of any site listed
in the National Priorities List as defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
or on any similar state list of hazardous
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waste sites which are known to contain any hazardous substance or hazardous
waste;
(tt) None of the Mortgage Loans are subject to a bankruptcy plan;
(uu) No more than 19.94% of the aggregate Loan Balance of all the
Mortgage Loans as of the Cut-Off Date relates to Mortgage Loans originated
or purchased under the Seller's limited documentation program;
(vv) To the best of the Seller's knowledge, no statement, report or
other document constituting a part of the Mortgage File contains any untrue
statement of fact or omits to state a fact necessary to make the statements
contained therein not misleading;
(ww) The range of points financed or "net funded" on Mortgage Loans
originated after January 1, 1994 is 0% to 13.0%;
(xx) Each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code;
(yy) The Seller has the full authority to sell and transfer each
Mortgage Note and Mortgage and such transfer and sale will not impair the
enforceability of any Mortgage.
(zz) With respect to each Mortgage Loan secured by a Mortgaged
Property which is a Small Mixed-Use Property, (i) such Mortgaged Property is in
compliance with all environmental laws, statutes, ordinances, regulation,
orders, rules, decrees and similar requirements of federal, state, municipal
and any other governmental authorities relating thereto, (ii) no hazardous
material or oil was or is incorporated in, stored on, transported to or from,
or disposed of on or from (except if the same was or is in compliance with
all laws, ordinances, and regulations pertaining thereto), the Mortgaged
Property, (iii) neither the Seller nor, to the best of its knowledge, any
Mortgagor has received notification from any federal, state or other
governmental authority of any potential, known, or threat of, release of
hazardous material on or from the Mortgaged Property or any potential or
known liability that has resulted in or may result in a lien on the Mortgaged
Property, (iv) the Mortgaged Property is a separate tax parcel, separate and
apart from any other property owned by the Mortgagor or any other Person; (v)
the liability and rent coverage insurance is consistent with Accepted
Servicing Procedures and (vi) the security documentation includes an
assignment of leases and rents. For purposes of this representation, the
term hazardous material (a) shall have the meaning defined under any
applicable federal, state, municipal, or other
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jurisdictions, laws, rules or regulations and (b) shall include asbestos.
It is understood and agreed that the representations and warranties
set forth in this Section 2.07 shall survive delivery of the respective
Mortgage Files to the Trustee and shall inure to the benefit the Certificate
Insurer, the Depositor, the Certificateholders and the Trustee,
notwithstanding any restrictive or qualified endorsement or assignment. Upon
discovery by any of the Seller, either Depositor, the Servicer, the
Certificate Insurer or the Trustee of a breach of any of the foregoing
representations and warranties that materially and adversely affects the
value of any Mortgage Loan or the interests of the Certificateholders or of
the Certificate Insurer therein (without giving effect to any qualification
contained in such representation or warranty relating to the Seller's
knowledge), the party discovering such breach shall give prompt written
notice to the other parties, and in no event later than two Business Days
from the date of such discovery. It is understood and agreed that the
obligations of the Seller set forth in Section 2.07(b) to cure any breach or
to substitute for or repurchase a defective Mortgage Loan constitute the sole
remedies available to the Certificateholders, the Servicer, the Certificate
Insurer, or to the Trustee respecting a breach of the representations and
warranties contained in this Section 2.08.
SECTION 2.08. Representations and Warranties of the Seller.
The Seller hereby represents and warrants to the Trustee, to the
Certificateholders, to the Depositor and to the Certificate Insurer that as
of the Closing Date or as of such date specifically provided herein:
(a) The Seller is a corporation licensed as a mortgage banker
duly organized, validly existing and in good standing under the laws of
the State of New York and has, and had at all relevant times, full
corporate power to originate the Mortgage Loans, to own its property,
to carry on its business as presently conducted and to enter into and
perform its obligations under this Agreement and to create the Trust
pursuant hereto;
(b) The execution and delivery of this Agreement by the Seller
and its performance of and compliance with the terms of this Agreement
will not violate the Seller's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Seller is a
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party or which may be applicable to the Seller or any of its assets;
(c) The Seller has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered
this Agreement. This Agreement, assuming due authorization, execution
and delivery by the Trustee and the Depositor, constitutes a valid, legal
and binding obligation of the Seller, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Seller is not in violation of, and the execution and
delivery of this Agreement by the Seller and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely affect
the condition (financial or otherwise) or operations of the Seller or its
properties or materially and adversely affect the performance of its
duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Seller pending or, to the knowledge of the Seller, threatened,
before any court, administrative agency or other tribunal (A) that, if
determined adversely, would prohibit its entering into this Agreement or
render the Certificates invalid, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or (C) that, if determined adversely, would
prohibit or materially and adversely affect the performance by the Seller
of its obligations under, or the validity or enforceability of, this
Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller with, this
Agreement or the Certificates, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
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<PAGE>
(g) The Seller did not sell the Mortgage Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the Seller
will not be rendered insolvent as a result of the sale of the Mortgage
Loans to the Trust;
(h) As of the Closing Date, the Depositor had good title to, and was
the sole owner of, each Mortgage Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Seller will have taken all steps necessary so that the
Trust will have good title to, and will be the sole owner of, each
Mortgage Loan free and clear of any lien (except for such liens as may
exist consistent with the representations and warranties made in Sections
2.08(c) and (h) hereof);
(i) The Seller acquired title to the Mortgage Loans in good faith,
without notice of any adverse claim;
(j) The collection practices used by the Seller with respect to
the Mortgage Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing business;
(k) No Officers' Certificate, statement, report or other document
prepared by the Seller and furnished or to be furnished by it pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading;
(l) The transfer, assignment and conveyance of the Mortgage Notes
and the Mortgages by the Seller pursuant to this Agreement are not subject
to the bulk transfer laws or any similar statutory provisions in effect in
any applicable jurisdiction;
(m) The Seller is duly licensed where required as a "Licensee" or
is otherwise qualified in each state in which it transacts business and is
not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a
material adverse effect on the ability of the Seller to conduct its
business or perform its obligations hereunder;
(n) The Seller is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution
and delivery of this Agreement or by the performance of its obligations
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<PAGE>
hereunder; no petition of bankruptcy (or similar insolvency proceeding)
has been filed by or against the Seller prior to the date hereof;
(o) The information under the captions "Summary of Terms -- The
Mortgage Pool," "The Seller's Portfolio of Mortgage Loans," "The Seller
and the Servicer" and "The Mortgage Pool" in the Prospectus Supplement
contains no untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(p) Neither the Seller nor the Trust is required to be registered
as an "investment company" under the Investment Company Act of 1940, as
amended.
It is understood and agreed that the representations and warranties
set forth in this Section 2.08 shall survive delivery of the respective
Mortgage Files to the Trustee and shall inure to the benefit of the
Certificate Insurer, the Certificateholders, the Depositor, the Servicer and
the Trustee. Upon discovery by any of the Seller, the Depositor, the
Servicer, the Certificate Insurer or the Trustee of a breach of any of the
foregoing representations and warranties materially and adversely affects the
value of any Mortgage Loan or the interests of the Certificateholders or of
the Certificate Insurer therein, the party discovering such breach shall give
prompt written notice (but in no event later than two Business Days following
such discovery) to the other parties. The obligations of the Seller set
forth in Section 2.06(b) to cure any breach or to substitute for or
repurchase an affected Mortgage Loan shall constitute the sole remedies
available to the Certificateholders, the Servicer, to the Certificate
Insurer, or to the Trustee respecting a breach of the representations and
warranties contained in this Section 2.08.
SECTION 2.09. Representations, Warranties and Covenants of
the Servicer.
The Servicer hereby represents and warrants to and covenants with
the Trustee, the Certificateholders, the Depositor, the Seller and to and
with the Certificate Insurer that as of the Closing Date or as of such date
specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and is or
will be in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the enforceability
of each Mortgage Loan in accordance with the terms of this Agreement;
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<PAGE>
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Servicer is a party or which may be applicable to the Servicer
or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement, and
has duly executed and delivered this Agreement. This Agreement, assuming
due authorization, execution and delivery by the Trustee, constitutes a
valid, legal and binding obligation of the Servicer, enforceable against
it in accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely affect
the condition (financial or otherwise) or operations of the Servicer or
materially and adversely affect the performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Servicer pending, or, to the knowledge of the Servicer,
threatened, before any court, administrative agency or other tribunal (A)
that, if determined adversely, would prohibit its entering into this
Agreement or render the Certificates invalid, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates;
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(f) The Servicer will examine each Sub-Servicing Agreement and
will be familiar with the terms thereof. Each designated Sub-Servicer and
the terms of each Sub-Servicing Agreement will be required to comply with
the provisions of Section 3.02. The terms of any Sub-Servicing Agreement
will not be inconsistent with any of the provisions of this Agreement;
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Certificates, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
(h) The Servicer believes that the Servicing Fee Rate provides a
reasonable level of base compensation to the Servicer for servicing the
Mortgage Loans on the terms set forth herein; and
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer;
(j) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business and
is not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a
material adverse effect on the ability of the Servicer to conduct its
business or perform its obligations hereunder;
(k) The Servicer services mortgage loans in accordance with
Accepted Servicing Practices;
(l) The information under the captions "The Seller and The
Servicer" in the Prospectus Supplement contains no untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(m) No Officers' Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading;
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(n) The Servicer is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.09 shall survive delivery of the
respective Mortgage Files to the Trustee and shall inure to the benefit of
the Certificate Insurer, the Depositor, the Certificateholders and the
Trustee. Upon discovery by any of the Seller, the Depositor, the Servicer,
the Certificate Insurer or the Trustee of a breach of any of the foregoing
representations, warranties and covenants that materially and adversely
affects the value of any Mortgage Loan or the interests of the Certificate-
holders or of the Certificate Insurer therein, the party discovering such
breach shall give prompt written notice (but in no event later than two
Business Days following such discovery) to the other parties. The
obligations of the Servicer set forth in (x) Section 2.06(c) to cure any
breach or to purchase an affected Mortgage Loan, (y) Section 2.06(d)(i) to
indemnify and hold harmless the Trust and (z) Section 3.25 to indemnify and
hold harmless the Certificate Insurer, the Seller, the Trustee, and the
Certificateholders shall constitute the sole remedies available to the
Certificate Insurer, the Seller, the Certificateholders, or the Trustee
respecting a breach of the representations, warranties and covenants
contained in this Section 2.09.
SECTION 2.10. Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Seller, to the
Trustee, to the Certificateholders and to the Certificate Insurer that as of
the Closing Date or as of such date specifically provided herein:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has, and had at all relevant times, full power to own its property, to
carry on its business as presently conducted, to enter into and perform
its obligations under this Agreement and to create the Trust pursuant
hereto;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Depositor is a party or which may be applicable to the Depositor
or any of its assets;
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(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement, and
has duly executed and delivered this Agreement. This Agreement, assuming
due authorization, execution and delivery by the Trustee, the Seller and
the Servicer, constitutes a valid, legal and binding obligation of the
Depositor, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to
or affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely affect
the condition (financial or otherwise) or operations of the Depositor or
its properties or materially and adversely affect the performance of its
duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Depositor pending with regard to which the Depositor has received
service of process, or, to the knowledge of the Depositor, threatened,
before any court, administrative agency or other tribunal (A) that, if
determined adversely, would prohibit its entering into this Agreement or
render the Certificates invalid, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or (C) that, if determined adversely, would
prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of,
this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the Certificates, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
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(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution
and delivery of this Agreement or its obligations hereunder; no petition
of bankruptcy (or similar insolvency proceeding) has been filed by or
against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Mortgage Loans to the Trust
with any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the
Mortgage Loans to the Trust;
(i) As of the Closing Date, or the Depositor had good title to,
and were the sole owner of, each Mortgage Loan free and clear of any Lien
other than any such Lien released simultaneously with the sale
contemplated herein, and, immediately upon each transfer and assignment
herein contemplated, the Depositor will have taken all steps necessary so
that the Trust will have good title to, and will be the sole owner of,
each Mortgage Loan free and clear of any lien (except for such liens as
may exist consistent with the representations and warranties made in
Sections 2.07(c) and (h) hereof);
(j) The Depositor acquired title to each of the Mortgage Loans in
good faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.10 shall survive delivery of the
respective Mortgage Files to the Trustee and shall inure to the benefit of
the Certificate Insurer, the Servicer, the Trustee and the
Certificateholders. Upon discovery by any of the Seller, the Depositor, the
Servicer, the Certificate Insurer or a Responsible Officer of the Trustee who
must have actual knowledge of a breach of any of the representations and
warranties set forth in this Section 2.10(g), (h), (i) and (j) with respect
to any Mortgage
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Loan which materially and adversely affects the value of any Mortgage Loan
or the interests of the Certificateholders or of the Certificate Insurer
therein, the party discovering such breach shall give prompt written notice
(but in no event later than two Business Days following such discovery) to
the other parties.
SECTION 2.11. Execution of Certificates.
(a) The Trustee acknowledges (x) the assignment to the Trust of
the Mortgage Loans and the delivery to it of the Mortgage Files relating
thereto, subject to the provisions of Section 2.04 hereof, (y) and receipt
of the Policy and, concurrently with such delivery, has executed,
authenticated and delivered to or upon the order of the Depositor, in
exchange for such property, receipt of which is hereby acknowledged,
Certificates in authorized denominations evidencing ownership of the Trust.
(b) In connection with the issuance of the original Certificates,
the Depositor shall furnish the Trustee with a Written Order to Authenticate
in the form set forth as Exhibit L hereto (a) directing the Trustee to issue
the original Certificates to the Persons designated in the Written Order to
Authenticate and (b) informing the Trustee of the Percentage Interest with
respect to such Original Class A Certificates.
SECTION 2.12. Miscellaneous REMIC Provisions.
(a) The Class A Certificates are hereby designated as "regular
interests" for purposes of Section 860G(a)(1) of the Code and the Class R
Certificates as the single class of "residual interests" in the REMIC Trust
for purposes of Section 860G(a)(2) of Subchapter M of Chapter 1 of Subtitle
A of the Code.
(b) The Closing Date is hereby designated as the "startup day" of
the REMIC Trust within the meaning of Section 860G(a)(9) of the Code.
(c) The REMIC Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual
basis.
(d) The REMIC Trust shall 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 REMIC Trust shall be resolved in
a manner that preserves the validity of such election to be treated as REMIC.
The Distribution Account and Capitalized Interest Account shall not
be part of the segregated pool of assets
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which constitutes the REMIC Trust, although such Accounts do constitute part
of the Trust Estate.
(e) The Trustee shall provide to the Internal Revenue Service (the
"IRS") and to the person described in Section 860E(e)(3) and (6) of the Code
the information described in Treasury Regulation Section 1.860D-1(b)(5)(ii),
or any successor regulation thereto and the Trustee shall be reimbursed by
such Person for the cost of providing such information. Such information
will be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto. The Trustee shall have
no responsibility or liability for incorrect information supplied to the IRS
where such information was supplied to the Trustee by the Servicer, and the
Trustee shall have no responsibility or liability for information required
to be supplied to the IRS and not so supplied where such information was
known to the Servicer and not supplied by it despite the Trustee's request
for such information.
(f) The assumed final scheduled Distribution Dates for the Class
A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates are April 25,
2011, April 25, 2011, April 25, 2011, April 25, 2011 and August 25, 2026,
respectively.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST
SECTION 3.01. Administration of the Trust; Servicing of the
Mortgage Loans.
(a) The parties hereto intend that the REMIC Trust shall
constitute, and that the affairs of the REMIC Trust shall be conducted so as
to qualify it as, a REMIC in accordance with the REMIC Provisions. In
furtherance of such intention, the parties hereto each covenants and agree
that they shall not knowingly take any actions or omit to take any actions
that would disqualify the Trust for REMIC election or status and the Trustee
covenants and agrees that it shall act in its capacity as Tax Matters Person,
as agent for the REMIC Trust and as the "tax matters person" (as defined in
the REMIC Provisions) and that in such capacity it shall: (i) prepare or
cause to be prepared, execute and file, in a timely manner, an annual Tax
Return and any other Tax Return required to be filed by the Trust established
hereunder using a calendar year as the taxable year for the REMIC Trust
established hereunder; (ii) in the related first such Tax Return, make (or
cause to be made) an election satisfying the requirements of the REMIC
Provisions, on behalf of the Trust, to be treated as a REMIC; (iii) prepare
and forward, or cause to be prepared and forwarded, to the Certificateholders
all information, reports or Tax Returns required with respect to the REMIC
Trust as, when and in the form required to be provided to the
Certificateholders, 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 1275 of the Code)
of the Certificates of the related Class; (iv) not knowingly take any action
or omit to take any action that would cause the termination of the REMIC
status of the REMIC Trust, except as provided under this Agreement; (v) pay,
from the sources specified in the last paragraph of this Section 3.01(a), the
amount of any and all other federal, state and local taxes imposed on the
REMIC Trust, its assets or transactions, including, without limitation, the
tax on "prohibited transactions" imposed by Section 860F of the Code, the tax
on "contributions" imposed by Section 860G(d) of the Code and the tax on "net
income from foreclosure property" imposed by Section 860G(c) of the Code when
and as the same shall be due and payable (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any such
tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings);
<PAGE>
(vi) 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 in relation to any tax matter involving the Trust;
(vii) comply with all statutory or regulatory requirements with regard to its
conduct of activities pursuant to the foregoing clauses of this Section
3.01(a), including, without limitation, providing all notices and other
information to the Internal Revenue Service and Holders of Class R
Certificates required of a "tax matters person" pursuant to subtitle F of the
Code and the Treasury Regulations thereunder; and (viii) make available
information necessary for the computation of any tax imposed (A) on a
transferor of residual interests to certain Disqualified Organizations or
(B) on pass-through entities, any interest in which is held by a Disqualified
Organization. The obligations of the Trustee pursuant to this Section
3.01(a) shall survive the termination or discharge of this Agreement.
In order to enable the Trustee to perform its duties as set forth
herein, the Seller shall provide or cause to be provided to the Trustee or
its designee, within ten (10) days after the Closing Date, all information
or data that the Trustee or its designee reasonably determines to be relevant
for tax purposes as to the valuations and offering prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flows of the Certificates and the Mortgage
Loans. Thereafter, the Seller shall provide to the Trustee, promptly upon
request therefor, any such additional information or data that the Trustee
may from time to time reasonably request in order to enable the Trustee to
perform its duties as set forth herein. The Seller shall indemnify the
Trustee and hold it harmless for any loss, liability, damage, claim or
expense of the Trustee arising from any failure of it to provide, or to cause
to be provided, in response to the reasonable requests of the Trustee made
pursuant to this paragraph, accurate information or data to the Trustee on
a timely basis. The indemnification provisions hereunder shall survive the
termination of this Agreement.
In the event that any tax is imposed on "prohibited transactions"
of the REMIC Trust as defined in Section 860F(a)(2) of the Code, on the "net
income from foreclosure property" of the REMIC Trust as defined in Section
860G(c) of the Code, on any gain recognized by the REMIC Trust pursuant to
Section 860F(c) of the Code, on any contribution to the REMIC Trust after the
Startup Day pursuant to Section 860G(d) of the Code, or any other tax is
imposed, if not paid as otherwise provided for herein, such tax shall be paid
by (i) the Trustee, if any such tax arises out of or results from the
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willful malfeasance, bad faith or negligence in the performance by the
Trustee of any of its obligations under this Section 3.01(a), (ii) the
Servicer or the Depositor, as applicable, if such tax arises out of or
results from a breach by the Servicer or the Depositor of any of their
respective obligations under this Agreement or (iii) in all other cases, or
in the event that the Trustee, the Servicer or the Depositor fails to honor
its obligations under the preceding clauses (i) or (ii), any such tax will
be paid with amounts otherwise to be distributed to the Holders of the Class
R Certificates pursuant to Section 4.04(a)(ix) or, in the event of an
insufficiency in such amounts, such tax shall be paid directly by such Class
R Certificateholders.
(b)(i) The Servicer shall service and administer the Mortgage
Loans in accordance with the terms of this Agreement and in accordance
with the respective Mortgage Loans and in accordance with the instructions
of the Trustee and the Certificate Insurer. Unless otherwise specified
herein with respect to specific obligations of the Servicer, the Servicer
shall service and administer the Mortgage Loans in the best interests of
and for the benefit of the Holders and the Certificate Insurer in
accordance with Accepted Servicing Procedures. To the extent consistent
with the foregoing, the Servicer also shall seek to maximize the timely
and complete recovery of principal and interest on the Mortgage Notes.
Subject only to the above-described servicing standards and the terms of
this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone and/or through Sub-Servicers
as provided in Section 3.02, to do or cause to be done any and all things
in connection with such servicing and administration which it may deem
necessary or desirable. The Servicer shall promptly notify the Depositor,
the Certificate Insurer, the Trustee and each Rating Agency in writing of
(i) any event, circumstance or occurrence which may materially and
adversely affect the ability of the Servicer to service any Mortgage Loan
or to otherwise perform and carry out its duties, responsibilities and
obligations under and in accordance with this Agreement and (ii) any
attempt by a court or by a regulatory authority of which it has actual
knowledge to assert jurisdiction over the Trust.
Without limiting the generality of the foregoing, the Servicer, in
its own name or in the name of a Sub-Servicer, is hereby authorized and
empowered when the Servicer believes it appropriate in its best judgment
and subject to the requirements of Section 3.07 hereof, to execute and
deliver, on behalf of the Certificateholders and the Trust or any of them,
and upon notice to the Trustee, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge,
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and all other comparable instruments, with respect to the Mortgage Loans
and the Mortgaged Properties and to institute foreclosure proceedings or
obtain a deed-in-lieu of foreclosure so as to convert the ownership of
such properties, and to hold or cause to be held title to such properties,
on behalf of the Trust and Certificateholders. The Servicer shall service
and administer the Mortgage Loans in accordance with applicable state and
federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. Subject to Section 3.16, the Trustee shall
execute, at the written direction of the Servicer, any limited or special
powers of attorney and other documents reasonably acceptable to the
Trustee to enable the Servicer or any Sub-Servicer to carry out their
servicing and administrative duties hereunder, including, without
limitation, limited or special powers of attorney with respect to any REO
Property, and the Trustee shall not be accountable for the actions of the
Servicer or any Sub-Servicers under such powers of attorney and shall be
indemnified by such parties with respect to such actions.
(ii) Subject to Section 3.24 and in accordance with the standards
of the preceding paragraph, the Servicer shall advance or cause to be
advanced funds as necessary for the purpose of effecting the payment of
taxes, assessments and insurance premiums on the Mortgaged Properties
which advances shall be made in a timely fashion so as to not adversely
affect the Value of the Mortgaged Property or the interests of the
Certificateholders and which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section
3.09, and further as provided in Section 3.11; provided that the Servicer
shall not be required to advance such funds to the extent it reasonably
believes such funds will not be recoverable as evidenced by a
certification of a Servicing Officer delivered to the Trustee and the
Certificate Insurer. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes, assessments and
insurance premiums on a Mortgaged Property shall not, for the purpose of
calculating distributions to Certificateholders, be added to the Loan
Balance of the related Mortgage Loan, notwithstanding that the terms of
such Mortgage Loan so permit.
(iii) Notwithstanding anything in this Agreement to the contrary,
the Servicer shall not make any future advances to the Mortgagors with
respect to a Mortgage Loan, and the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance or change the
maturity date on such Mortgage Loan, unless (x) the Mortgagor is in
default with respect to the
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Mortgage Loan or such default is, in the judgment of the Servicer,
imminent and (y) the Certificate Insurer consents to such modification in
writing and if modifications pursuant to this Section 3.01 or Section 3.07
have previously been made which affect Mortgage Loans having an aggregate
Loan Balance in excess of 10% of the Maximum Collateral Amount.
(iv) All accounting and loan servicing records pertaining to each
Mortgage Loan shall be maintained in such manner as will permit the
Trustee, the Depositor, the Certificate Insurer, the Certificateholders or
their duly authorized representatives and designees to examine and audit
and make legible reproductions of records during reasonable business
hours. All such records shall be maintained until the termination of this
Agreement or such longer period as is required under applicable law,
including, but not limited to, all transaction registers and loan ledger
histories.
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the
-------- -------
Servicer from the responsibilities or liabilities arising under this
Agreement.
SECTION 3.02. Sub-Servicing Agreements Between Servicer and Sub-
Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements with Sub-
Servicers acceptable to the Certificate Insurer with notice of any Sub-
Servicing Agreement or amendment thereof promptly sent to the Trustee, for
the servicing and administration of the Mortgage Loans. Each Sub-Servicer
shall (i) be authorized to transact business in the state or states where the
related Mortgaged Properties it is to service are situated, if and to the
extent required by applicable law to enable the Sub-Servicer to perform its
obligations hereunder and under the Sub-Servicing Agreement, (ii) have been
designated an approved seller-servicer by FHLMC or FNMA for second mortgage
loans, (iii) have equity of at least $5,000,000, as determined in accordance
with generally accepted accounting principles and (iv) be approved pursuant
to the provisions of Section 3.26 hereof. Each Sub-Servicing Agreement must
impose on the Sub-Servicer requirements conforming to the provisions set
forth in Section 3.08 and provide for servicing of the Mortgage Loans
consistent with the terms of this Agreement and be approved in writing by the
Certificate Insurer. The Servicer and the Sub-Servicers may enter into and
make amendments to the Sub-Servicing Agreements or enter into different forms
of Sub-Servicing Agreements; provided, however, that any such amendments or
-------- -------
different forms shall be consistent with and not violate the provisions of
this Agreement and be approved in writing by the Certificate Insurer.
Without limiting the foregoing, any
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variation without the consent of the Certificate Insurer from the provisions
set forth in Section 3.08 relating to insurance or priority requirements of
Sub-Servicing Accounts, or credits and charges to the Sub-Servicing Accounts
or the timing and amount of remittances by the Sub-Servicers to the Servicer,
are conclusively deemed to be inconsistent with this Agreement and therefore
prohibited.
(b) As part of its servicing activities hereunder, the Servicer,
for the benefit of the Trustee, the Depositor, the Certificate Insurer and
the Certificateholders, shall enforce the obligations of each Sub-Servicer
under the related Sub-Servicing Agreement, including, without limitation, any
obligation of the Sub-Servicer to make advances in respect of delinquent
Mortgage Loans as required by a Sub-Servicing Agreement. Such enforcement,
including, without limitation, the legal prosecution of claims, termination
of Sub-Servicing Agreements, and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such time as
the Servicer, in its good faith business judgment, would require were it the
owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense, and shall be reimbursed therefor only
(i) from a general recovery resulting from such enforcement, to the extent,
if any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loans, or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
Anything contained in this Agreement which restricts or prohibits the
Servicer's right to reimbursement or indemnity shall not apply to any
reimbursement or indemnity of the Servicer by any Sub-Servicer.
SECTION 3.03. Termination of Sub-Servicing Agreement.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and if such termination is without cause, only with
the written consent of the Certificate Insurer. In the event of termination
of any Sub-Servicer, and unless a successor Sub-Servicer has otherwise been
appointed pursuant to Section 3.26 hereof, all servicing obligations of such
Sub-Servicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Sub-Servicer or the Servicer, and
the Servicer shall service directly the related Mortgage Loans.
Each Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee at the request of the
Certificate Insurer in the event that the Servicer shall, for any reason, no
longer be
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the Servicer (including termination due to a Servicer Default). In no event
shall any Sub-Servicing Agreement require the Trustee, as Successor Servicer,
for any reason whatsoever to pay compensation to a Sub-Servicer in order to
terminate such Sub-Servicer.
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer, including, without limitation, any provisions to the
effect that the Sub-Servicer is acting for the benefit of the
Certificateholders, or reference to actions taken through a Sub-Servicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Certificate Insurer and Certificateholders for the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
Article III without diminution of such obligation or liability by virtue of
such Sub-Servicing Agreements or arrangements, or by virtue of indemnifica-
tion from the Sub-Servicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Mortgage Loans. The Servicer shall be entitled to enter into any agreement
with a Sub-Servicer for indemnification of the Servicer by such Sub-Servicer
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
SECTION 3.05. No Contractual Relationship Between Sub-Servicers
and Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-
Servicer in its capacity as such and not as an originator shall be deemed to
be between the Sub-Servicer and the Servicer alone, and the Trustee, the
Certificate Insurer and Certificateholders shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Sub-Servicer except as set forth in Section 3.06
notwithstanding any provisions hereof or in any Sub-Servicing Agreement to
the effect that the Sub-Servicer is acting for the benefit of the
Certificateholders. The Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's
compensation pursuant to this Agreement is sufficient to pay such fees.
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SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of a Servicer Default), the Trustee or any
designee consented to by the Certificate Insurer, except that if a
Certificate Insurer Default has occurred and is continuing, the consent of
the Majority Certificateholders alone, shall thereupon assume all of the
rights and obligations of the Servicer under each Sub-Servicing Agreement
that the Servicer may have entered into, unless the Trustee elects to
terminate any subservicing agreement or unless the Trustee is directed by the
Certificate Insurer to terminate any Sub-Servicing Agreement and provided
that the Trustee shall not be required to assume any obligation to pay
compensation to any Sub-Servicer in order to terminate any such Sub-Servicer.
To the extent any subservicing agreement is not so terminated, the Trustee,
its designee or the successor servicer for the Trustee appointed pursuant to
Section 7.02 shall be deemed to have assumed all of the Servicer's interest
therein and to have replaced the Servicer as a party to each Sub-Servicing
Agreement to the same extent as if each Sub-Servicing Agreement had been
assigned to the assuming party, except that the Servicer shall not thereby
be relieved of any liability or obligations under any Sub-Servicing Agreement
with regard to events occurring prior to the date the Servicer ceased to be
the servicer hereunder.
The Servicer at its expense shall, upon request of the Trustee,
promptly deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and
an accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonably diligent 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,
follow Accepted Servicing Procedures. The Servicer may in its discretion
waive or permit to be waived any penalty interest or any other fee or charge
which the Servicer would be entitled to retain hereunder as servicing
compensation and extend the Due Date on a Mortgage Note for a period (with
respect to each payment as to which the Due Date is extended) not greater
than 90 days after the initially scheduled due date for such payment;
provided, however, that such extension shall not result in the imposition of
- -------- -------
a tax on a "prohibited transaction" of the Trust or affect the qualification
of the
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<PAGE>
Trust as a REMIC. Notwithstanding anything in this Agreement to the
contrary, the Servicer shall not permit any additional extension or
modification with respect to any Mortgage Loan other than that permitted by
the immediately preceding sentence unless (i) the Mortgage Loan is in default
or, in the judgment of the Servicer, default is imminent, and (ii) the
Servicer shall have given the Certificate Insurer telephonic and telecopied
notice of its intent to make such additional extension or modification and
the Certificate Insurer shall not, within two Business Days after such notice
was given, have given telephonic and telecopied notice to the Servicer that
it disapproves of such extension or modification.
No such extension or modification shall affect the amortization of
any Mortgage Loan for the purposes of any computation hereunder. In the
event of any such extension or modification, the Servicer shall make timely
Delinquency Advances on the related Mortgage Loan during the period of such
extension or modification.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account. The
Sub-Servicer will be required to deposit into the Sub-Servicing Account no
later than the first Business Day after receipt all proceeds of Mortgage
Loans received by the Sub-Servicer, less its servicing compensation to the
extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the
second Business Day following receipt thereof by the Sub-Servicer.
Notwithstanding anything in this Section 3.08 to the contrary, the Sub-
Servicer shall only be able to withdraw funds from the Sub-Servicing Account
for the purpose of remitting such funds to the Servicer for deposit into the
Collection Account. The Servicer shall require the Sub-Servicer to cause any
collection agent of the Sub-Servicer to send a copy to the Servicer of each
statement of Monthly Payments collected by or on behalf of the Sub-Servicer
within five Business Days after the end of every month, and the Servicer
shall compare the information provided in such reports with the deposits made
by the Sub-Servicer into the Collection Account for the same period. For
purposes of this Agreement other than Section 3.10, the Servicer shall be
deemed to have received payments on the Mortgage Loans on the date on which
the Sub-Servicer has received such payments.
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<PAGE>
SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
The Servicer may and, if required by the Servicer, the Sub-
Servicers shall, establish and maintain one or more accounts (the "Servicing
Accounts"), into which any collections from the Mortgagors (or related
advances from Sub-Servicers) for the payment of taxes, assessments, hazard
insurance premiums, and comparable items for the account of the Mortgagors
shall be deposited and retained. Servicing Accounts shall be Eligible
Accounts. Withdrawals of amounts so collected from a Servicing Account may
be made only to (i) effect timely payment of taxes, assessments, hazard
insurance premiums, and comparable items; (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement)
out of related collections for any advances made pursuant to Section 3.01(b)
(with respect to taxes, assessments and insurance premiums) and Section 3.13
(with respect to hazard insurance); (iii) refund to Mortgagors any sums as
may be determined to be overages; (iv) pay interest, if required and as
described below, to Mortgagors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of this
Agreement in accordance with Section 10.01. As part of its servicing duties,
the Servicer or Sub-Servicers shall pay to the Mortgagors interest on funds
in Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement from the
Trust, the Trustee, the Depositor, any Certificateholder or the Certificate
Insurer therefor. Upon request of the Trustee, the Seller or the Certificate
Insurer, the Servicer shall cause the bank, savings association or other
depository for each Servicing Account to forward to the Trustee and the
Certificate Insurer copies of such statements or reports as the Trustee, the
Depositor, the Underwriter, any Certificateholder or the Certificate Insurer
shall reasonably request.
SECTION 3.10. Collection Account.
(a) The Servicer shall establish and maintain one or more accounts
to conform to the definition of Collection Account, held in the name of the
Cityscape Home Equity Loan Trust, Series 1996-2 on behalf of the Trustee in
trust for the benefit of the Certificateholders and the Certificate Insurer,
as their interests may appear. The establishment of the Collection Account
shall be evidenced by a certification of the Servicer in the form attached
hereto as Exhibit G. The Servicer shall deposit or cause to be deposited in
the Collection Account as soon as practicable, but in no event later than the
close of business on the second Business Day after its receipt thereof (or,
if applicable, on or prior to the date otherwise specified herein), the
follow-
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<PAGE>
ing payments and collections received or required to be made by it subsequent
to the Cut-Off Date (other than the amounts described in the penultimate
paragraph of this Sub-Section due and owing on or prior to the Cut-Off Date):
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on each Mortgage Loan;
(iii) any Delinquency Advances, as required pursuant to Section
4.06;
(iv) any amounts required to be deposited pursuant to Section 3.23
by the Servicer in connection with any Prepayment Interest Shortfalls;
(v) all Net Recovery Proceeds;
(vi) any amounts required to be deposited by the Servicer pursuant
to the fourth paragraph of Section 3.13 in respect of any blanket policy
deductibles;
(vii) all Purchase Prices paid by the Seller or the Servicer;
(viii) all Substitution Shortfall Amounts paid by the Seller or the
Servicer; and
(ix) any amounts required to be deposited by the Servicer pursuant
to Section 3.10(b) in respect of investment losses.
For purposes of the immediately preceding sentence, the Cut-Off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the
date of substitution, but the unpaid principal balance of such Qualified
Substitute Mortgage Loan shall not include the principal portion of any
Monthly Payment made, or the scheduled principal portion of any Monthly
Payment that was due to be made but was not received by the Servicer, in such
month of substitution.
It being further understood and agreed that the amounts of
principal collected and interest due on the Mortgage Loans on or before the
Cut-Off Date, need not be deposited into the Collection Account by the
Servicer.
The foregoing requirements for deposit in the Collection Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment or late
payment charges, penalty interest, extension fees or assumption fees need not
be deposited by the Servicer in the Collection Account.
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<PAGE>
(b) Not later than 12:00 noon, New York time, on each Servicer
Remittance Date the Servicer shall deposit in the Collection Account the
amount of any net loss incurred in connection with the investment of funds
in the Collection Account since the prior Servicer Remittance Date; such
amounts shall be funded from the Servicer's own funds without any right to
reimbursement. The Servicer shall give prompt notice to each of the Rating
Agencies, the Certificate Insurer and the Underwriter of the amount of any
such net loss.
(c) Funds in the Collection Account shall be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Trustee, the Underwriter, the
Certificateholders, the Seller, the Depositor and the Certificate Insurer of
the location of the Collection Account on or before the Closing Date, and
prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Trustee for deposit in the Certificate
Account and for all purposes of this Agreement shall be deemed to be a part
of the Collection Account.
SECTION 3.11. Withdrawals from the Collection Account.
(a) The Servicer or the Trustee at the written request of the
Servicer shall, from time to time, make withdrawals from the Collection
Account for any of the following purposes:
(i) to deposit into the Certificate Account on or prior to 12:00
noon, New York time, on the Servicer Remittance Date:
(A) an amount with respect to interest (the "Interest
Remittance Amount") equal to the product of (x) the aggregate Loan
Balances of the Mortgage Loans as of the opening of business on the
first day of the calendar month preceding the calendar month in which
such Servicer Remittance Date occurs (or as of the Cut-Off Date with
respect to the Servicer Remittance Date occurring in July 1996) and
(y) one-twelfth (or 10/360 with respect to Servicer Remittance Date
occurring in July 1996) of the weighted average Net Mortgage Rate on
the Mortgage Loans as of the opening of business on the first day of
the calendar month preceding the calendar month in which such
Servicer Remittance Date occurs (or as of the Cut-Off Date, in the
case of the Servicer Remittance Date occurring in July 1996), minus
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<PAGE>
the amount, if any, by which (1) the aggregate of the Prepayment
Interest Shortfalls resulting from Principal Prepayments during the
Due Period beginning on the first day of the calendar month preceding
the calendar month in which such Servicer Remittance Date occurs
exceeds (2) the aggregate Servicing Fee received by the Servicer with
respect to such Due Period and
(B) an amount with respect to principal (the "Principal
Remittance Amount") equal to (I) the sum, without duplication, of the
amounts described in Sections 3.10(a)(i), 3.10(a)(v) remaining after
prior application thereof to all accrued and unpaid interest on the
related Mortgage Loan (but not in excess of the then-outstanding Loan
Balance of the related Mortgage Loan), 3.10(a)(vi) (insofar as such
amounts relate to principal), 3.10(a)(vii) (insofar as such amounts
relate to principal), 3.10(a)(viii) (insofar as such amounts relate
to principal) and 3.10(a)(ix), in each case to the extent actually
received in the related Due Period, minus (II) the amounts described
in clause (iii) of this Section 3.11 (insofar as such amounts relate
to principal) withdrawn by the Servicer from the Collection Account
since the prior Servicer Remittance Date (or, in the case of the
first Servicer Remittance Date, since the Closing Date);
(ii) to pay to the Servicer (x) when collected on the related
Mortgage Loan, all recovered and previously unreimbursed Delinquency
Advances, Servicing Advances, prepayment penalties and, as servicing
compensation, the Servicing Fee and (y) any interest or investment income
earned on funds deposited in the Collection Account (net of investment
losses);
(iii) to pay to the Servicer or the Seller, as the case may be, with
respect to each Mortgage Loan that has previously been purchased or
replaced pursuant to Section 2.06 or Section 3.15(c) all amounts received
thereon in any month subsequent to the month of such purchase or
substitution, as the case may be;
(iv) to reimburse the Servicer for any Delinquency Advance
previously made that the Servicer has determined to be a Nonrecoverable
Delinquency Advance or a nonrecoverable Servicing Advance;
(v) to reimburse the Servicer or the Trustee, as the case may be,
for expenses reasonably incurred in respect of the breach or defect giving
rise to the
III-13
<PAGE>
purchase obligation under Section 2.06 of this Agreement that were
included in the Purchase Price of the Mortgage Loan, including any
expenses arising out of the enforcement of the purchase obligation, but
only to the extent included in the related Purchase Price;
(vi) subject to the Servicer's obligation to deposit any Make-Whole
Amount into the Certificate Account pursuant to Section 3.17 hereof, to
pay to the Servicer the excess, if any, of any Net Recovery Proceeds over
the sum of (a) the Loan Balance of the related Mortgage Loan, (b) accrued
and unpaid interest on the related Mortgage Loan;
(vii) to withdraw any amount not required to be deposited in the
Collection Account, which amount shall include all interest payments as to
which the related Due Date occurs on or prior to the Cut-Off Date;
(viii) to clear and terminate the Collection Account pursuant to
Section 10.01; and
(ix) in the event of a prepayment or satisfaction of a Mortgage
Loan, to pay the refunds and expenses to which the Mortgagor is entitled
as set forth on requests submitted by the Servicer which requests shall be
substantially in the form of Exhibit O attached hereto.
SECTION 3.12. Investment of Funds in the Accounts.
(a) The Servicer may direct in writing any depository institution
maintaining the Collection Account, Certificate Account, Distribution Account
or the Capitalized Interest Account, to invest the funds held therein in one
or more Permitted Investments bearing interest or sold at a discount, and
maturing, unless payable on demand, (i) if such Permitted Investments are not
obligations of the institution maintaining the account from which the funds
are required to be withdrawn, no later than the Business Day immediately
preceding the earliest date on which such funds may be required to be
withdrawn from such account pursuant to this Agreement but in no event later
than the Business Day immediately preceding the next Distribution Date, and
(ii) if such Permitted Investments are obligations of the institution
maintaining the account from which the funds are required to be withdrawn,
no later than the earliest date on which such funds may be required to be
withdrawn from such account pursuant to this Agreement, but in no event later
than the next Distribution Date. All such Permitted Investments shall be
held to maturity, unless payable on demand.
If the Servicer, with respect to the Collection Account,
Certificate Account, the Distribution Account or the Capitalized Interest
Account, does not provide investment
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<PAGE>
directions to the depository institution with respect to the funds on deposit
therein, such funds shall be invested in the Permitted Investments specified in
clause (v) of the definition thereof, which may be administered by an affiliate
of such depository institution.
Any investment of funds on deposit in any Account shall be made in
the name of the Trustee, in trust for the benefit of the Certificateholders.
With respect to any Account held by the Trustee, the Trustee shall have sole
control (except with respect to investment direction) over each such
investment, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent, together
with any document of transfer necessary to transfer title to such investment
to the Trustee or its nominee. In the event amounts from funds on deposit
in any Account are at any time invested in a Permitted Investment payable on
demand, the Trustee shall:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the lesser
of (1) all amounts then payable thereunder and (2) the amount required to
be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly by a
Responsible Officer of the Trustee having actual knowledge that such
Permitted Investment would not constitute a Permitted Investment.
(b) All net income and net gain realized from investment of funds
deposited in the Collection Account shall be for the benefit of the Servicer
and shall be subject to its withdrawal in accordance with Section 3.11. Net
income or net gain realized from investment of funds deposited in the
Certificate Account shall be treated in accordance with Article IV.
(c) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under
any Permitted Investment, the Trustee shall take such action as it is
directed in writing by the Servicer or the Seller, as appropriate, to enforce
such payment or performance, including the initiation and prosecution of
appropriate proceedings; provided, however, that the Trustee shall be
-------- -------
indemnified and reimbursed for any costs, expenses, losses, or liabilities
as provided in Section 8.05.
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<PAGE>
SECTION 3.13. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
The Servicer shall cause to be maintained for each Mortgage Loan,
hazard insurance with insurers meeting FNMA or FHLMC guidelines with extended
coverage on the related Mortgaged Property in an amount which is at least
equal to the lesser of (a) the Loan Balance of such Mortgage Loan and any
First Lien, (b) the maximum insurable value of such Mortgaged Property, and
(c) the amount necessary to fully compensate for any damage or loss to the
improvements which are a part of such property on a replacement cost basis,
in each case in an amount not less than such amount as is necessary to avoid
the application of any co-insurance clause contained in the related hazard
insurance policy. The Servicer shall also cause to be maintained fire
insurance with extended coverage on each REO Property in an amount which is
at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) the sum of the Loan
Balance of the related Mortgage Loan and any First Lien at the time it became
an REO Property, plus (x) accrued interest at the Mortgage Rate as of the
time the Mortgage Loan became an REO Property and (y) related Servicing
Advances as of the time the Mortgage Loan became an REO Property.
Any amounts to be collected by the Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the prop-
erty subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with Accepted Servicing Procedures, subject to the
terms and conditions of the related Mortgage and Mortgage Note) shall be
deposited in the Collection Account, subject to withdrawal pursuant to
Section 3.11.
Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificate-
holders, be added to the Loan 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 is to
be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such addi-
tional insurance. If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated
special flood hazard area (and if the flood insurance policy referenced
herein has been made available), the Servicer will cause to be maintained
flood insurance in respect thereof. Such flood insurance shall be in an
amount equal to the lesser of (i) the sum of the Loan Balance of the related
Mortgage Loan and any First Lien, (ii) the maximum insurable value of the
related Mortgaged Property, and (iii) the maximum amount
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<PAGE>
of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such
Mortgaged Property is located is participating in such program).
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:VIII or better in
Best's Key Rating Guide insuring against fire and hazard losses on all of the
Mortgage Loans, or such other insurer as the Certificate Insurer may allow,
it shall conclusively be deemed to have satisfied its obligations as set
forth in the first two sentences of this Section 3.13, it being understood
and agreed that such policy may contain a deductible clause that is in form
and substance consistent with standard industry practice for servicers of
mortgage loans comparable to the Mortgage Loans, in which case the Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.13, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection
Account from its own funds the amount not otherwise payable under the blanket
policy because of such deductible clause without any right of reimbursement
therefor. In connection with its activities as administrator and servicer
of the Mortgage Loans, the Servicer agrees to prepare and present, on behalf
of itself, the Trustee, the Certificate Insurer and Certificateholders,
claims under any such blanket policy in a timely fashion in accordance with
the terms of such policy.
The Servicer shall keep in force during the term of this Agreement
a policy or policies of insurance covering errors and omissions for failure
in the performance of the Servicer's obligations under this Agreement, which
policy or policies shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of FNMA or FHLMC if it were the purchaser of the
Mortgage Loans. The Servicer shall be deemed to have complied with this
provision if an affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. Any such
errors and omissions policy and fidelity bond shall not be canceled without
thirty days' prior written notice to the Trustee and the Certificate Insurer.
Upon the request of the Trustee, any Certificateholder or the Certificate
Insurer, the Servicer shall furnish to the requesting party copies of all
binders and policies or certificates evidencing that such bonds and insurance
policies are in full force and effect. The Servicer shall also cause each
Sub-Servicer to maintain a policy of
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<PAGE>
insurance covering errors and omissions and a fidelity bond which would meet
the requirements set forth above.
SECTION 3.14. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(a) Except as otherwise provided in the next sentence, the
Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether
by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage
Loan under the "due-on-sale" clause, if any, applicable thereto. If the
Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause or enforcement would materially increase the risk
of default or delinquency on, or impair the security for, the Mortgage Loan,
the Servicer will enter into an assumption and modification agreement from
or with the person to whom such property has been conveyed or is proposed to
be conveyed, pursuant to which such person becomes liable under the Mortgage
Note and, to the extent permitted by applicable state law, the Mortgagor
remains liable thereon. The Servicer is also 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 the Mortgagor and becomes liable under the Mortgage Note, provided that
no such substitution shall be effective unless such person satisfies the
underwriting criteria of the Servicer as of the date of substitution which
shall not be less restrictive than such criteria as set forth on Exhibit M
hereof. In connection with any assumption or substitution, the Servicer
shall apply Accepted Servicing Procedures. Any fee collected by the Servicer
in respect of an assumption or substitution of liability agreement will be
retained by the Servicer as additional servicing compensation. In connection
with any such assumption, no material term of the Mortgage Note (including,
but not limited to, the related Mortgage Rate and the amount of the Monthly
Payment) may be amended or modified, except as otherwise required pursuant
to the terms thereof. The Servicer shall notify the Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original copy of such substitution or assumption agreement, which
copy shall be added to the related Mortgage File and shall, for all purposes,
be considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption
of a
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<PAGE>
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer believes in good faith that it may be
restricted by law from preventing, for any reason whatever. For purposes of
this Section 3.14, the term "assumption" is deemed to also include a sale (of
the Mortgaged Property) subject to the Mortgage that is not accompanied by
an assumption or substitution of liability agreement.
SECTION 3.15. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standards
set forth in Section 3.01(b), foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into
and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. In
connection with realization upon defaulted Mortgage Loans, the Servicer shall
follow such practices and procedures as it shall deem necessary or advisable,
as shall be normal and usual in accordance with Accepted Servicing Practices
and the requirements of insurers under any insurance policy required to be
maintained hereunder with respect to the related Mortgage Loan. The Servicer
shall be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
-------- -------
recoverable as Servicing Advances by the Servicer as contemplated in this
Section 3.15.
The Servicer shall not be required to make any Servicing Advance,
to foreclose upon any Mortgaged Property, or otherwise expend its own funds
toward the restoration of any Mortgaged Property that shall have suffered
damage from an Uninsured Cause, unless it shall determine in its reasonable
judgment, as evidenced by a certificate of a Servicing Officer, that such
foreclosure or restoration, as the case may be, will increase the proceeds
of liquidation of the related Mortgage Loan after reimbursement to itself for
Servicing Advances. Any Servicing Advances made with respect to a Mortgage
Loan shall be recoverable by the Servicer only from recoveries on such
Mortgage Loan.
(b) Prior to conducting any sale in a foreclosure proceeding or
accepting a deed-in-lieu of foreclosure with respect to any Mortgaged
Property, the Servicer shall cause a review to be performed, in accordance
with Accepted Servicing Practices, on the Mortgaged Property by a company
such as Equifax, Inc. or Toxicheck, and the scope of such review shall be
limited to the review of public records and documents for indications that
such Mortgaged Property has on it, or is near, hazardous or toxic material
or waste. If such review reveals that the Mortgaged Property has on it,
under it or is near hazardous or toxic material or
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<PAGE>
waste or reveals any other environmental problem, the Servicer shall provide
a copy of the related report with an attached certification of a Responsible
Officer that based on an analysis of all available information at the time
it is the best judgment of such Responsible Officer that such foreclosure
shall increase Net Recovery Proceeds to the Trustee and the Certificate
Insurer and the Trust shall take title to such Mortgaged Property only after
the Trustee has obtained the prior written consent of the Certificate
Insurer. The Trustee shall promptly forward such report and certification
to the Certificateholders.
(c) The Servicer may at its option purchase from the Trust any
Mortgage Loan which is 90 days or more Delinquent and which the Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings at a price equal to the Purchase Price (evidence of such
determination to be delivered in writing to the Trustee, the Seller and the
Certificate Insurer prior to purchase); provided, however, that the aggregate
Loan Balance of Mortgage Loans that may be so purchased by the Servicer shall
not exceed an amount equal to 10% of the aggregate of the Cut-Off Date Loan
Balances of all Mortgage Loans. The Purchase Price for any Mortgage Loan
purchased hereunder shall be deposited into the Collection Account and the
Trustee, upon (i) receipt of an Officer's Certificate of the Servicer as to
the making of such deposit and (ii) confirmation that such deposit has been
made, shall release or cause to be released to the Servicer the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment as are furnished by the Servicer, in each case without recourse,
as shall be necessary to vest in the Servicer title to any Mortgage Loan
released pursuant hereto, and the Trustee shall have no further
responsibility or liability (except as to its own acts) with regard to such
Mortgage Loan.
(d) Unless otherwise required pursuant to the Mortgage Note, any
Property Insurance Proceeds or Liquidation Proceeds received with respect to
a Mortgage Loan or REO Property (other than received in connection with a
purchase by the Class R Certificateholders of all the Mortgage Loans and REO
Properties in the Trust Estate pursuant to Section 10.01) will be allocated
in the following order of priority, in each case to the extent of available
funds: first, to reimburse the Servicer or any Sub-Servicer for any related
unreimbursed Servicing Advances, and any related unreimbursed Delinquency
Advances theretofore funded by the Servicer or any Sub-Servicer from its own
funds, in each case, with respect to the related Mortgage Loan; second, to
accrued and unpaid interest on the Mortgage Loan, at the Mortgage Rate (or
at such lesser rate as may be in effect for such Mortgage Loan pursuant to
application of the Civil Relief Act) on the Loan Balance of such Mortgage
Loan, to the date of the Final Recovery Determination if one has been made,
or to the Due Date in the
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Due Period prior to the Distribution Date on which such amounts are to be
distributed if a Final Recovery Determination has not been made, minus any
accrued and unpaid Servicing Fees with respect to such Mortgage Loan; third,
to the extent of the Loan Balance of the Mortgage Loan outstanding immediate-
ly prior to the receipt of such proceeds, as a recovery of principal of the
related Mortgage Loan; and fourth, to any prepayment or late payment charges
or penalty interest payable in connection with the receipt of such proceeds
and to all other fees and charges due and payable with respect to such
Mortgage Loan.
(e) The Servicer shall deliver to the Trustee, the Seller and the
Certificate Insurer on each Servicer Remittance Date a Liquidation Report in
the form annexed as Exhibit H hereto as well as an electromagnetic tape in
computer readable format (along with the Officers' Certificate referenced in
the definition of Final Recovery Determination) with respect to each Mortgage
Loan as to which the Servicer made a Final Recovery Determination during the
related Due Period.
SECTION 3.16. Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will notify the Trustee by
a certification in the form of Exhibit E-2 (which certification shall include
a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.10 have been or will be so deposit-
ed) of a Servicing Officer and shall request delivery to it of the Mortgage
File. Upon receipt of such certification and request, the Trustee shall
promptly release the related Mortgage File to the Servicer. The Servicer
shall provide for preparation of the appropriate instrument of satisfaction
covering any Mortgage Loan which pays in full and the Trustee shall cooperate
in the execution and return of such instrument to provide for its delivery
or recording as may be required. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to any
Account or shall be otherwise chargeable to the Trust, the Trustee, the
Certificateholders or the Certificate Insurer.
From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a Request for Release in the form of
Exhibit E-1, release the related Mortgage File to the Servicer, and the Trustee
shall, at the direction of the Servicer, execute such documents as shall be
necessary to the prosecution of any such
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proceedings. Such Request for Release shall obligate the Servicer to return
each and every document previously requested from the Mortgage File to the
Trustee when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Net Recovery Proceeds relating to
the Mortgage Loan have been deposited in the Collection Account or the
Mortgage File or such document has been delivered to an attorney, or to a
public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property either judicially or non-judicially, and the
Servicer has delivered to the Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage
File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that
such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation which are required to be
deposited into the Collection Account have been so deposited, a copy of the
Request for Release shall be released by the Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer any court pleadings, requests for
trustee's sale or other documents necessary to the foreclosure or trustee's
sale in respect of a Mortgaged Property or to any legal action brought to
obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or
in equity. Each such certification shall include a request that such plead-
ings or documents be executed by the Trustee and a statement as to the reason
such documents or pleadings are required and that the execution and delivery
thereof by the Trustee will not invalidate or otherwise affect the lien of
the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.
SECTION 3.17. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan, subject to Section 3.23, payable from payments of interest, Property
Insurance Proceeds or Liquidation Proceeds in respect of such Mortgage Loan
and from amounts distributable in accordance with Section 4.04(a)(v). The
right to receive the Servicing Fee may not be transferred in whole or in part
except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement, although any portion
thereof may be paid to a Sub-Servicer as provided in the related Sub-
Servicing Agreement.
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Additional servicing compensation in the form of Net Recovery
Proceeds in excess of the Loan Balance of the related Mortgage Loan,
prepayment charges, penalty interest, assumption fees, late payment charges
or otherwise shall be retained by the Servicer only to the extent such fees
or charges are received by the Servicer (such amounts, "Additional Servicing
Compensation"); provided, however, that on each Servicer Remittance Date, the
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Servicer shall transfer from the Collection Account to the Certificate Account
the amount of any Additional Servicing Compensation, up to the amount equal to
the Cumulative Net Losses (calculated before application of such amounts) (such
amount, the "Make-Whole Amount"). The Make-Whole Amount shall be paid only
from any amounts otherwise available for withdrawal on such Servicer Remittance
Date from the Collection Account by the Servicer pursuant to 3.11(a)(vi)
hereof. The Servicer shall also be entitled pursuant to Section 3.11(a)(ii) to
interest or other investment income earned from the investment of funds on
deposit in the Collection Account as additional servicing compensation. The
Servicer shall be required to pay all expenses incurred by it in connection
with its servicing activities hereunder (including, without limitation, (x)
payment of premiums for the insurance required by Section 3.13, to the extent
such premiums are not paid by the related Mortgagors or by a Sub-Servicer and
(y) servicing compensation of each Sub-Servicer) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
SECTION 3.18. Reports to the Trustee; Collection Account
Statements.
(a) On or before each Determination Date, the Servicer shall
deliver to the Trustee (i) a computer-readable magnetic tape setting forth
the payments and collections received with respect to the Mortgage Loans
during the Due Period for the month immediately preceding the month in which
such Determination Date occurs (such tape, a "Servicer Remittance Report")
and (ii), if not included in the Servicer Remittance Report, a report and an
electromagnetic tape in computer readable format, setting forth the
information described in clauses (A) - (G) of Section 4.05 for the month
immediately preceding the month in which such Determination Date occurs and
such other information as the Trustee may request in order to fulfill its
Obligations hereunder (such report, a "Delinquency Report").
(b) If funds in the Collection Account during a Due Period have
been invested in investments other than bank deposits of the depository
institution maintaining the Collection Account or money market funds (as
described in the definition of Permitted Investments), then, on or before the
related Distribution Date, the Servicer shall forward to the Trustee, the
Certificate Insurer and the Seller a statement in the form annexed hereto as
Exhibit I setting forth the
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activity in the Collection Account during the preceding calendar month.
SECTION 3.19. Statement as to Compliance and Financial
Statements.
The Servicer will deliver to the Trustee, the Certificate Insurer,
the Depositor and the Seller not later than 90 days following the end of each
fiscal year of the Servicer, an Officers' Certificate stating, as to each
signatory thereof, that (i) a review of the activities of the Servicer during
the preceding year and of performance under this Agreement has been made
under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the
Trustee and the Certificate Insurer a copy of its annual audited financial
statements prepared in the ordinary course of business. The Servicer shall,
upon the request of the Depositor, deliver to such party any unaudited
quarterly financial statements of the Servicer.
The Servicer shall forward to the Certificate Insurer a copy of any
audited annual financial statements, as well as any unaudited quarterly
financial statements, of any Sub-Servicer received by the Servicer, both at
the Servicer's expense.
The Servicer agrees to make available on a reasonable basis to the
Depositor or the Certificate Insurer a knowledgeable officer of the Servicer
for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the
Servicer and to permit the Certificate Insurer or the Depositor or the
Underwriter on reasonable notice to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer or the Depositor that the Servicer has the ability to
service the Mortgage Loans in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party
such other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder,
(ii) its financial condition, (iii) the Mortgage Loans and (iv) the
performance of the obligations of any Sub-Servicer under the related Sub-
Servicing Agreement, in each case as the Trustee,
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the Depositor or the Certificate Insurer may reasonably request from time to
time.
SECTION 3.20. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, the Servicer at its expense shall cause any of Arthur Andersen &
Co., Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick
and Price Waterhouse & Co. or such other nationally recognized firm of
Independent Certified Public Accountants (which may also render other servic-
es to the Servicer) to furnish a statement to the Trustee, the Certificate
Insurer, the Seller and the Depositor to the effect that such firm has
examined certain documents and records relating to the servicing of the
Mortgage Loans under this Agreement or of mortgage loans under pooling and
servicing agreements (including the Mortgage Loans and this Agreement)
substantially similar to one another (such statement to have attached thereto
a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially
in compliance with the Uniform Single Audit Program for Mortgage Bankers or
the Audit Program for Mortgages serviced for FHLMC, such firm confirms that
such servicing has been conducted in compliance with such pooling and
servicing agreements except for such significant exceptions or errors in
records that, in the opinion of such firm, the Uniform Single Audit Program
for Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC
requires it to report, each of which errors and omissions shall be specified
in such statement. In rendering such statement, such firm may rely, as to
matters relating to direct servicing of mortgage loans by Sub-Servicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Audit Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC (rendered within one year of such
statement) of independent public accountants with respect to the related Sub-
Servicer.
SECTION 3.21. Access to Certain Documentation.
The Servicer shall provide to the OTS, the FDIC, and any other
federal or state banking or insurance regulatory authority that may exercise
authority over any Certificateholder or the Certificate Insurer, access to
the documentation regarding the Mortgage Loans required by applicable state
and federal laws and regulations. The Servicer shall similarly provide to
the Trustee, the Depositor and the Certificate Insurer such access to the
documentation regarding the Mortgage Loans as such Persons may reasonably
require. Such access shall in each case be afforded without charge, but only
upon reasonable request and during normal
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business hours at the offices of the Servicer or of a Sub-Servicer, as
applicable, designated by it.
SECTION 3.22. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trust, on behalf of the Certificateholders. The
Servicer, on behalf of the Trust, shall sell any REO Property within two
years after the Trust acquires ownership of such REO Property for purposes
of Section 860G(a)(8) of the Code, unless the Servicer has delivered to the
Trustee, the Depositor and the Certificate Insurer an Independent Opinion of
Counsel, addressed to the Trustee, the Certificate Insurer, the Depositor and
the Servicer, to the effect that holding such REO Property for more than two
years after its acquisition will not result in the imposition of taxes on
"prohibited transactions" of the Trust as defined in Section 860F of the Code
or cause the REMIC Trust to fail to qualify as a REMIC under federal law at
any time that any Certificates are outstanding. The Servicer shall manage,
conserve, protect and operate each REO Property for the Certificateholders
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 REMIC 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.
(b) The Servicer shall have full power and authority, subject only
to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by
the Servicer or any of its affiliates, all on such terms and for such period
as the Servicer deems to be in the best interests of Certificateholders and
the Certificate Insurer.
Notwithstanding the foregoing, the Servicer shall not:
(i) permit the Trust to enter into, renew or extend any New Lease
with respect to any REO Property, if the New Lease by its terms will give
rise to any income that does not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real Property;
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(iii) authorize or permit any construction on any REO Property,
other than the completion of a building or other improvement thereon, and
then only if more than ten percent of the construction of such building or
other improvement was completed before default on the related Mortgage
Loan became imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) allow any Person to Directly Operate any REO Property on any
date more than 90 days after its date of acquisition by the Trust;
unless, in any such case, the Servicer has obtained an Independent Opinion
of Counsel, addressed to itself, the Trustee and the Certificate Insurer, to
the effect that such action will not cause such REO Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8)
of the Code at any time that it is held by the Trust, in which case the
Servicer may take such actions as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii) any such contract shall require, or shall be administered to
require, that the Independent Contractor pay all costs and expenses
incurred in connection with the operation and management of such REO
Property, including those listed above and remit all related revenues (net
of such costs and expenses) to the Servicer as soon as practicable, but in
no event later than thirty days following the receipt thereof by such
Independent Contractor;
(iii) none of the provisions of this Section 3.22(b) relating to any
such contract or to actions taken through any such Independent Contractor
shall be deemed to relieve the Servicer of any of its duties and
obligations to the Trustee on behalf of the Certificateholders with
respect to the operation and management of any such REO Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such REO Property.
The Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for
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indemnification of the Servicer by such Independent Contractor, and nothing
in this Agreement shall be deemed to limit or modify such indemnification.
The Servicer shall be solely liable for all fees owed by it to any such
Independent Contractor, irrespective of whether the Servicer's compensation
pursuant to Section 3.17 is sufficient to pay such fees.
(c) Subject to the time constraints set forth in Section 3.22(a),
each liquidation of an REO Property shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities, and the resulting Liquidation Proceeds shall be distributed in
accordance with Section 3.15(d).
(d) The Servicer shall prepare and file reports of foreclosure and
abandonment in accordance with Section 6050(J) of the Code and shall provide
written notice to the Trustee that such reports have been filed or that no
filing was required.
SECTION 3.23. Prepayment Interest Shortfalls.
The Servicer shall deposit into the Collection Account on or before
12:00 noon, New York time, on each Servicer Remittance Date an amount equal
to the lesser of (i) the aggregate of the Prepayment Interest Shortfalls
resulting from Principal Prepayments during the related Due Period and (ii)
its aggregate Servicing Fee received in such Due Period.
SECTION 3.24. Superior Liens.
The Servicer shall file (or cause to be filed) or record a request
for notice of any action by a superior lienholder under a First Lien for the
protection of the Trustee's interest, if (i) local law provides that the
filing of such a request will result in notification of junior lienholders
in the event foreclosure proceedings are instituted and (ii) applicable state
law does not require that a junior lienholder be named as a party defendant
in foreclosure proceedings in order to foreclose such junior lienholder's
equity of redemption. The Servicer shall also notify any such superior
lienholder in writing of the existence of the Mortgage Loan and request
notification of any action (as described below) to be taken against the
Mortgagor or the Mortgaged Property by the superior lienholder.
Subject to the remainder of this Section 3.24, if the Servicer is
notified that any superior lienholder has accelerated or intends to
accelerate the obligations secured by the First Lien, or has declared or
intends to declare a default under the mortgage or the promissory note
secured thereby, or has filed or intends to file an election to have
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the Mortgaged Property sold or foreclosed, the Servicer shall take, on behalf
of the Trust, whatever actions are necessary to protect the interests of the
Certificateholders, and/or to preserve the security of the related Mortgage
Loan, subject to the application of the REMIC Provisions. The Servicer shall
advance the necessary funds to cure the default or reinstate the superior
lien, if such advance would have the effect of increasing the Net Recovery
Proceeds.
No advance shall be required to be made hereunder if such advance
would, if made, constitute a nonrecoverable Servicing Advance. The
determination by the Servicer that it has made a nonrecoverable Servicing
Advance or that any proposed advance, if made, would constitute a
nonrecoverable Servicing Advance, shall be evidenced by a certification of
a Servicing Officer delivered to the Certificate Insurer, the Seller, the
Depositor, the Rating Agencies and the Trustee no later than the Business Day
following such determination.
SECTION 3.25. Indemnification.
(a) The Servicer shall indemnify the Seller, the Trust, the
Certificate Insurer, the Depositor and the Trustee (each an "Indemnified
Party") and hold harmless each of them against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable legal fees and related
costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from,
a breach of any of the Servicer's representations and warranties and
covenants contained in this Agreement or in any way relating to the failure
of the Servicer to perform its duties and service the Mortgage Loans in
compliance with the terms of this Agreement; provided, however, that if the
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Servicer is not liable pursuant to the provisions of Section 6.03 hereof for
its failure to perform its duties and service the Mortgage Loans in
compliance with the terms of this Agreement, then the provisions of this
Section 3.25 shall have no force and effect with respect to such failure.
(b) The Seller, the Certificate Insurer, the Depositor or the
Trustee, as the case may be, shall promptly notify the Servicer if a claim
is made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or
in any way relating to the failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement.
The Servicer shall promptly notify the Certificate Insurer, the Trustee and
the Depositor of any claim of which it has been notified pursuant to this
Section 3.25 by a Person other than the Certificate Insurer or the Depositor
as the case may be, and, in any event, shall promptly notify the Certificate
Insurer and the Depositor of its intended course of action with respect to
any claim. If
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the Certificate Insurer so directs the Servicer in writing within ten
Business Days of such notice to the Certificate Insurer, the Servicer shall
refrain from defending, and in any case if the Certificate Insurer so directs
in writing at any time the Servicer shall cease defending (but only if the
Servicer is not judicially or legally prohibited from doing so), such claim
or shall settle such claim on terms acceptable to the Certificate Insurer;
provided, however, that the Servicer need not comply with the Certificate
- -------- -------
Insurer's directions unless it is indemnified to its reasonable satisfaction
by the Certificate Insurer against any liability that the Servicer may incur
as a consequence of such compliance.
(c) The Servicer shall be entitled to participate in and, upon
notice to the Indemnified Party, assume the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Indemnified Party. The Indemnified Party will have the right to employ
its own counsel in any such action in addition to the counsel of the
Servicer, but the fees and expenses of such counsel will be at the expense
of such Indemnified Party, unless (a) the employment of counsel by the
Indemnified Party at its expense has been authorized in writing by the
Servicer, (b) the Servicer has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, or (c) the named parties to any such action or
proceeding (including any impleaded parties) include both the Servicer and
one or more Indemnified Parties, and the Indemnified Parties shall have been
advised by counsel that there may be one or more legal defenses available to
them which are different from or additional to those available to the
Servicer. The Servicer shall not be liable for any settlement of any such
claim or action unless the Servicer shall have consented thereto or be in
default on its obligations hereunder. Any failure by an Indemnified Party
to comply with the provisions of this Section shall relieve the Servicer of
liability only if such failure is materially prejudicial to the position of
the Servicer and then only to the extent of such prejudice.
SECTION 3.26. Certain Procedures Relating to Successor Sub-
Servicers and Successor Servicers.
(a) In the event that any Sub-Servicer is to be terminated the
Certificate Insurer and the Servicer shall consult among themselves with
respect to the appointment of a successor Sub-Servicer (it being acknowledged
that the Servicer is obligated to service directly the Mortgage Loans
pursuant to Section 3.03 hereof if no successor Sub-Servicer is appointed
pursuant to this Section). In the event that such parties cannot, with
reasonable promptness (but in no event later than 30 days), agree on the
identity of the
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successor Sub-Servicer (or whether the Servicer shall be required to service
directly the Mortgage Loans) the decision of the Certificate Insurer shall
control.
(b) In the event that the Servicer is to be replaced, the
Certificate Insurer and the Trustee shall consult among themselves with
respect to the appointment of a successor Servicer (it being acknowledged
that the Trustee is obligated to act as successor Servicer pursuant to
Section 7.02 hereof, if no other successor Servicer is appointed pursuant to
this Section). In the event that such parties cannot, with reasonable
promptness (but in no event later than 30 days), agree on the identity of the
successor Servicer, the decision of the Certificate Insurer shall control
except that if a Certificate Insurer Default has occurred and is continuing,
the decision of the Trustee shall control.
(c) In connection with any change in the Servicer's servicing
software, the Servicer shall promptly deliver to the Trustee and the
Certificate Insurer an Officer's Certificate detailing the substance of such
change and the Servicer shall cooperate fully with the Trustee in any manner
as the Trustee reasonably deems necessary with respect to such change.
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ARTICLE IV
FLOW OF FUNDS
SECTION 4.01. Establishment of Accounts.
The Trustee shall establish on the Closing Date, and thereafter
maintain the Certificate Account, the Distribution Account, the Capitalized
Interest Account and the Policy Payments Account, each of which shall conform
to the definition of Eligible Account and shall be held by the Trustee for
the benefit of the Certificateholders and the Certificate Insurer, as their
interests may appear.
SECTION 4.02. The Certificate Insurance Policy.
(a) Not later than 3:00 p.m., New York time, on the third Business
Day immediately preceding each Distribution Date, the Trustee shall determine
the amount to be on deposit in the Distribution Account on such Distribution
Date after taking into account the deposits described in Section 4.04 hereof
relating to such Distribution Date but net of, without duplication, the
amount of any Insured Payments and any investment earnings (such amount, the
"Available Funds").
If the Insured Distribution Amount for any Distribution Date
exceeds the Available Funds for such Distribution Date (such event being an
"Available Funds Shortfall"), the Trustee shall complete a notice in the form
attached to the Policy (the "Notice") and shall submit such Notice to the
Certificate Insurer no later than 10:00 a.m., New York time, on the second
Business Day preceding such Distribution Date. Such Notice may be delivered
by electronic facsimile (in which case the original shall be sent by
overnight courier). The Notice shall constitute a claim for an Insured
Payment pursuant to the Policy for an amount equal to the Available Funds
Shortfall. Upon receipt of Insured Payments on behalf of the Class A
Certificateholders, the Trustee shall deposit such Insured Payments in the
Policy Payments Account, and shall thereafter transfer such Insured Payments
to the Distribution Account for distribution solely to the Class A
Certificateholders in accordance with Section 4.04(b).
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of the Holders of the Class A Certificates and the
Certificate Insurer (the "Policy Payments Account") over which the Trustee
shall have exclusive control and sole right of withdrawal. The Trustee shall
deposit any amount paid under the Policy in the Policy Payments Account and
distribute such amount only for purposes of payment to the Holders of Class
A Certificates of the Insured Payment for which a claim was made and such
amount may
<PAGE>
not be applied to satisfy any costs, expenses or liabilities of the Servicer,
the Trustee or the Trust. Amounts paid under the Policy shall be transferred
to the Distribution Account in accordance with the next succeeding paragraph
and thereafter disbursed by the Trustee to the Holders of the Class A
Certificates in accordance with Section 4.04(b). It shall not be necessary
for such payments to be made by checks or wire transfers separate from the
checks or wire transfers used to pay any Class A Distribution Amount with
other funds available to make such payment. However, the amount of any
payment of principal of or interest on the Class A Certificates to be paid
from funds transferred from the Policy Payments Account shall be noted in the
statement to be furnished to related Holders of the Class A Certificates
pursuant to Section 4.05. Funds held in the Policy Payments Account shall
not be invested by the Trustee.
On any Distribution Date with respect to which a claim has been
made under the Policy, the amount of any funds received by the Trustee as a
result of any claim under the Policy, to the extent required to make the
Class A Distribution Amount on such Distribution Date shall be withdrawn from
the Policy Payments Account and deposited in the Distribution Account and
applied by the Trustee, together with the other funds to be deposited in the
Distribution Account, directly to the payment of the Class A Distribution
Amount due on the Class A Certificates. Funds received by the Trustee as a
result of any claim under the Policy shall be deposited by the Trustee in the
Policy Payments Account and then transferred to the Distribution Account and
used solely for payment to the related Holders of the Class A Certificates
and may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Trustee or the Trust. Any funds remaining in the Policy
Payments Account on the first Business Day following a Distribution Date
shall be remitted to the Certificate Insurer, pursuant to the instructions
of the Certificate Insurer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Certificate from
moneys received under the Policy. The Certificate Insurer shall have the
right to inspect such records at reasonable times during normal business
hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall receive, as attorney-in-fact of each Holder
of a Class A Certificate, any Insured Payment from the Certificate Insurer
and disburse the same to each Holder of a Class A Certificate in accordance
with the provisions of this Article IV. Insured Payments disbursed by the
Trustee from proceeds of the Policy shall not be considered payment by the
Trust nor shall such payments discharge the obligation of the Trust with
respect to such
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Class A Certificates, and the Certificate Insurer shall be entitled to
receive the Reimbursement Amount pursuant to Section 4.04(a)(vi). By
acceptance of a Certificate, each Holder of a Certificate agrees and
recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the
Class A Certificateholders, the Certificate Insurer will be entitled to
receive the Reimbursement Amount pursuant to Section 4.04(a)(vi).
(e) The Trustee shall promptly notify the Certificate Insurer of
any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any distribution made with respect
to the Class A Certificates. Each Holder of a Class A Certificate, by its
purchase of such Certificate, the Servicer and the Trustee agree that, the
Certificate Insurer (so long as no Certificate Insurer Default exists) may
at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Holder, the Servicer and the Trustee hereby delegate
and assign to the Certificate Insurer, to the fullest extent permitted by
law, the rights of the Servicer, the Trustee and each Holder in the conduct
of any such Preference Claim, including, without limitation, all rights of
any party to any adversary proceeding or action with respect to any court
order issued in connection with any such Preference Claim.
(f) It is understood and agreed that the intention of the parties
is that the Certificate Insurer shall not be entitled to reimbursement on any
Distribution Date for amounts previously paid by it unless on such
Distribution Date the Class A Certificateholders shall also have received the
full amount of the Insured Distribution Amount for such Distribution Date.
SECTION 4.03. Deposits To, and Transfers Among, the Accounts.
(a) The Trustee shall deposit to the Certificate Account, upon
receipt, the Interest Remittance Amount, the Principal Remittance Amount, any
Make-Whole Amount required to be paid by the Servicer pursuant to Section
3.17, the Termination Price received by the Trustee in connection with a
termination of the Trust pursuant to Article X hereof, any amounts received
by the Trustee from the Servicer pursuant
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to Section 4.04(i) hereof and any amounts transferred on such Distribution
Date from the Capitalized Interest Account pursuant to Section 4.08 hereof.
(b) Prior to 1:00 p.m. New York time on any Distribution Date, the
Trustee shall make all transfers required in order to make the payments
required pursuant to Section 4.04.
SECTION 4.04. Flow of Funds and Distributions.
(a) No later than 1:00 p.m., New York time, on each Distribution
Date (or as described below) the Trustee shall apply the amounts on deposit
in the Certificate Account in the following order of priority:
(i) first, from amounts then on deposit in the Certificate
Account, the Trustee shall pay to the Certificate Insurer the Insurance
Premium, provided that no Certificate Insurer Default has occurred and is
continuing;
(ii) second, from amounts then on deposit in the Certificate
Account, the Trustee shall pay itself the Trustee's Fee then due and any
payments required to be paid from the Trust pursuant to Section 8.05 up to
$50,000 cumulative payments for the preceding 12 month period and any
expenses incurred at the direction of the Certificate Insurer;
(iii) third, the Trustee shall distribute, from funds then on
deposit in the Certificate Account as follows:
(A) to the Distribution Account, an amount equal to the Class A
Current Interest for such Distribution Date (other than any
portion thereof to be funded from transfers directly to the
Distribution Account pursuant to Section 4.02(b)); and
(B) to the Distribution Account, the Principal Distribution Amount
(other than any portion thereof to be funded from transfers
directly to the Distribution Account pursuant to Section
4.02(b));
(iv) fourth, to the Trustee any payments required to be paid from
the Trust pursuant to Section 8.05 not paid in (ii) above;
(v) fifth, to the Certificate Insurer, the amount of any
Reimbursement Amount then owed to the Certificate Insurer;
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(vi) sixth, to the Servicer, reimbursement for any indemnity
payments made by it hereunder, to the extent the Servicer has certified to
the Trustee that such amounts are owing to it; and
(vii) seventh, pro rata to the Holders of the Class R Certificates,
the amount remaining, if any, in the Certificate Account after making the
distributions in (i) through (vi) above.
(b) After making the transfers to the Distribution Account
pursuant to Section 4.04(a)(iii) above and, if an Insured Payment was made
with respect to such Distribution Date, the amount deposited to the
Distribution Account from the Policy Payments Account pursuant to Section
4.02(b) above, the Trustee shall distribute such amounts as follows:
(i) to the Holders of each Class of the Class A Certificates,
their pro rata share (based on the amount of interest each such Class is
entitled to receive) of the Class A Current Interest for such Distribution
Date; and
(ii) sequentially, to the Holders of the Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 Certificates, in that order, pro rata
among the Certificateholders of each applicable Class, the Principal
Distribution Amount, until their respective Class Certificate Principal
Balances have been reduced to zero.
(c) Notwithstanding Section 4.04(b)(ii) above, (x) in the event
an Overcollateralization Deficit exists on any Distribution Date and the
aggregage amount distributable as principal (including any Insured Payments)
of the Class A Certificates is not sufficient to reduce such
Overcollateralization Deficit to zero, then all amounts distributable as
principal of the Class A Certificates on such Distribution Date shall be
allocated concurrently to the outstanding Classes of Class A Certificates,
pro rata, on the basis on their respective Class Certificate Principal
Balances and (y) the aggregate amounts distributed on all Distribution Dates
to the Holders of the Class A Certificates on account of principal shall not
exceed the related Original Certificate Principal Balance existing on the
Closing Date.
(d) Whenever in the administration of the Trust the Trustee comes
into possession of money or other property not otherwise required to be paid
to the Class A Certificateholders, the Certificate Insurer, the Servicer or
any other Person, or not required to be otherwise applied at any time
pursuant to the provisions of this Agreement, the
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Trustee shall promptly distribute such money or other property to the Class R
Certificateholders pro rata.
(e) Payments to the Certificateholders of each Class on each
Distribution Date will be made to the Certificateholders of the respective
Class of record on the related Record Date (other than as provided in Section
4.04(g) or Section 10.01 respecting the final distribution on such Class),
and shall be made to each such Certificateholder (x) by wire transfer of
immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, if such Certifi-
cateholder shall have so notified the Trustee in writing in the case of the
first Distribution Date, by the Closing Date, and, in the case of all
subsequent Distribution Dates, at least five Business Days prior to the
Record Date immediately prior to such Distribution Date and is the registered
owner of a Class R Certificate, or the registered owner of Class A
Certificates evidencing a Percentage Interest aggregating at least 10%; or
(y) otherwise by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. Payments to the
Certificate Insurer on any Distribution Date will be made by wire transfer
of immediately available funds to the account designated by the Certificate
Insurer.
(f) The rights of the Certificateholders to receive distributions
from the proceeds of the Trust in respect of the Certificates, and all
interests of the Certificateholders in and to such distributions, shall be
as set forth in this Agreement. In no event shall the Holders of any Class
of Certificates, the Trustee, the Certificate Insurer, the Seller, the
Depositor or the Servicer in any way be responsible or liable to the Holders
of any other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.
(g) Except as otherwise provided in Section 10.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall,
no later than four days prior to the related Distribution Date, send, by
overnight delivery or by registered mail, to each Holder on such date of such
Class of Certificates and to the Certificate Insurer a notice to the effect
that:
(i) the Trustee expects that the final distribution with respect
to such Class of Certificates will be made on such Distribution Date, and
requesting that such Holder send its Certificates to the Trustee
immediately following such final Distribution Date, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Due Period, and
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upon the Trustee's making of such final distribution with respect to
such Class of Certificates, such Certificates will be absolutely null and
void and of no further effect thereafter.
(h) The Trustee shall distribute to the respective Class A
Certificateholder any payment disbursed to it by the Certificate Insurer
in respect of any previous distribution to a Class A Certificateholder
that was avoided as a preference pursuant to a final, non-appealable order
of a court of competent jurisdiction under applicable bankruptcy,
insolvency, receivership or similar law, and that such Certificateholder
has repaid to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy, as the case may be.
(i) With respect to each Account, the Servicer shall deliver to
the Trustee for deposit in the Certificate Account the amount of any
losses incurred in connection with the investment of funds in such Account
within one Business Day of receipt from the Trustee of notice of any such
losses. The Trustee shall not be responsible for and shall be indemnified
by the Servicer for any expenses or liability incurred with respect to
such investment losses.
SECTION 4.05. Statements to Certificateholders.
On each Distribution Date the Trustee shall forward by mail to each
Holder of a Class A Certificate and to the Certificate Insurer, a statement,
parts of which shall be based upon Servicer Information and upon which the
Trustee shall conclusively rely without independent verification, as to the
distributions made on such Distribution Date setting forth the following
information:
(a) the amount of the distribution;
(b) the amount of the distribution allocable to principal,
separately identifying the aggregate amount of any Principal Prepayments
or other recoveries of principal included therein and separately
identifying any Overcollateralization Increase Amounts;
(c) the amount of the distribution allocable to interest;
(d) the amount of any Insured Payment included in the amounts
distributed to the Holders of Class A Certificates on such Distribution
Date;
(e) the principal amount of each Class A Certificate (based on a
Certificate in the original principal amount of $1,000) which will be
outstanding and the Class A Certificate Principal Balance, in each case
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after giving effect to any payment of principal on such Distribution
Date;
(f) the amount of any Overcollateralization Reduction Amount;
(g) the amount of any Overcollateralization Deficit;
(h) the amount of any Specified Overcollateralization Deficiency
Amount;
(i) the amount, if any, of any Realized Losses for the related Due
Period;
(j) the Overcollateralized Amount, if any, remaining after giving
effect to all distributions on such Distribution Date;
(k) the Class A Carry-Forward Amount, if any;
(l) the total of any Substitution Shortfall Amounts or Purchase
Price amounts paid or received by the Servicer with respect to the related
Due Period;
(m) the weighted average Mortgage Rate of the Mortgage Loans as
of the last day of the calendar month preceding the month of such
Distribution Date;
(n) the current weighted average of the remaining terms of the
Mortgage Loans;
(o) the number of Mortgage Loans outstanding;
(p) the cumulative number and Loan Balances of liquidated Mortgage
Loans;
(q) the amount of cumulative Realized Losses and its percentage
of the Maximum Collateral Amount and in total dollar amount;
(r) the sum of the outstanding Loan Balances of the three Mortgage
Loans having the largest Loan Balances as of the last day of the
immediately preceding Due Period;
(s) the amount of the Monthly Excess Spread for such Distribution
Date;
(t) the current outstanding aggregate Loan Balances of the
Mortgage Loans as of the last day of the related Due Period;
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(v) the original Cut-Off Date Loan Balance of each Mortgage Loan
which was modified or extended pursuant to Section 2.11 or 3.07 hereof;
(w) the Remittance Report (defined in Section 4.06); and
(x) the Reimbursement Amount, if any.
Items (a), (b) and (c) above shall be presented on the basis of a
certificate having a $1,000 denomination.
In addition, on each Distribution Date the Trustee shall distribute
to each Holder, together with the information described above, the following
information based solely upon Servicer Information provided to the Trustee
pursuant to Section 3.18(a) hereof upon which the Trustee may conclusively
rely without independent verification:
(A) the number of, and aggregate Loan Balance (including the
percentage equivalent relative to the aggregate Loan Balance of all
Mortgage Loans) of, Mortgage Loans (i) 30-59 days delinquent, (ii) 60-89
days delinquent and (iii) 90 days or more delinquent (which statistics
shall include Mortgage Loans in foreclosure but which shall exclude REO
Properties), as of the close of business on the last day of the calendar
month next preceding such Distribution Date and the aggregate Loan
Balances of all Mortgage Loans as of such date;
(B) the number of, and aggregate Loan Balance of, all Mortgage
Loans in foreclosure proceedings (other than any Mortgage Loans described
in clause (C)) and the percent of the aggregate Loan Balances of such
Mortgage Loans to the aggregate Loan Balances of all Mortgage Loans, all
as of the close of business on the last day of the calendar month next
preceding such Distribution Date;
(C) the number of, and the aggregate Loan Balance of, the related
Mortgage Loans in bankruptcy proceedings (other than any Mortgage Loans
described in clause (B)) and the percent of the aggregate Loan Balances of
such Mortgage Loans to the aggregate Loan Balances of all Mortgage Loans,
all as of the close of business on the last day of the calendar month next
preceding such Distribution Date;
(D) the number of REO Properties, the aggregate Loan Balances of
the related Mortgage Loans, the book value of such REO Properties and the
percent of the aggregate Loan Balances of such Mortgage Loans to the
aggregate Loan Balances of all Mortgage Loans, all as of
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the close of business on the last day of the calendar month next
preceding such Distribution Date;
(E) for each Mortgage Loan which is an REO Property, the Loan
Balance of such Mortgage Loan, the Value of the Mortgaged Property, the
value established by any new appraisal, the estimated cost of disposing of
the Mortgage Loan and the amount of any unreimbursed Delinquency Advances
and Servicing Advances;
(F) for each Mortgage Loan which is in foreclosure, the Loan
Balance of such Mortgage Loan, the Value of the Mortgaged Property, the
Loan-to-Value Ratio as of the date of origination, the Loan-to-Value Ratio
as of the close of business on the last day of the calendar month next
preceding such Distribution Date and the last paid-to-date;
(G) the principal balance of each Mortgage Loan that was modified
or extended pursuant to Section 2.10 or 3.01 hereof; and
(H) the number of, and aggregate Loan Balance of, all Mortgage
Loans that are 30 days or more delinquent and that are secured by Small
Mixed-Use Properties, together with the loan number of each such Mortgage
Loan and the number of days delinquent.
Within a reasonable period (which shall not be more than 45 days)
of time after the end of each calendar year, the Trustee shall furnish to
each Person who at any time during the calendar year was a Holder of a Class
A Certificate a statement containing the information set forth in subclauses
(a)-(c) above, aggregated for such calendar year or applicable portion
thereof during which such person was a Certificateholder. Such obligation
of the Trustee shall be deemed to have been satisfied to the extent that sub-
stantially comparable information shall be provided by the Trustee pursuant
to any requirements of the Code as from time to time are in force.
On each Distribution Date the Trustee shall forward to the
Certificate Insurer, to the Depositor, to the Seller, to each Holder of a
Class R Certificate and to the Servicer a copy of the reports forwarded to
the Class A Certificateholders on such Distribution Date, and a report of the
amounts, if any, actually distributed with respect to the Class R
Certificates on such Distribution Date.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to any Person who at any time during the
calendar year was a Holder of a Class R Certificate a statement containing
the information provided pursuant to the previous paragraph aggregated for
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such calendar year or applicable portion thereof during which such Person was
a Certificateholder.
The Trustee shall forward to each Certificateholder within five
Business Days after the furnishing or receipt thereof by the Trustee, as the
case may be, copies of any (i) directions, notices, certificates, opinions
or reports furnished hereunder by the Trustee to the Servicer, the Seller,
the Depositor, the Certificate Insurer or to the Rating Agencies,
(ii) directions, notices, certificates, reports, opinions or any other
information or document furnished to the Trustee by the Servicer, the Seller,
the Depositor, the Certificate Insurer or the Rating Agencies and (iii)
anything requested in writing by any Certificateholder which the Trustee
otherwise sends to some other Person pursuant to this Agreement (excluding,
however, routine items sent to Mortgagors, taxing or local property records
authorities and similar items) which, in the case of clause (iii), such
Certificateholder is not otherwise receiving; provided, however, that any
-------- -------
such documents or information requested under clause (iii) shall be at the
expense of the requesting Certificateholder; provided, further, that the
-------- -------
Trustee shall not be required to provide any document or information which
it is otherwise legally prohibited from providing.
SECTION 4.06. Remittance Reports; Delinquency Advances by the
Servicer and Insurance Claims.
(a) The Trustee shall, not later than four Business Days prior to
each Distribution Date, prepare and furnish by telecopy a statement (with
respect to such Distribution Date, the "Remittance Report") to the Seller,
the Certificate Insurer and the Servicer setting forth: (i) the Insured
Distribution Amount for such Distribution Date, separately identifying the
portions thereof allocable to principal and interest; (ii) whether the
Available Funds expected to be on deposit in the Distribution Account on such
Distribution Date will be sufficient to cover the Insured Distribution Amount
and, if not, the amount of the resulting Available Funds Shortfall; (iii) the
amount of Delinquency Advances to be made by the Servicer in respect of the
related Distribution Date, the aggregate amount of Delinquency Advances
outstanding after giving effect to such Delinquency Advances, and the
aggregate amount of Nonrecoverable Delinquency Advances in respect of such
Distribution Date; (iv) the Reimbursement Amount due and owing to the
Certificate Insurer on such Distribution Date; (v) with respect to any
reimbursement to be made to the Certificate Insurer for any part or all of
the Reimbursement Amount on such Distribution Date, the amount, if any,
allocable to principal and the amount allocable to interest; (vi) the
aggregate amount of payments in respect of Prepayment Interest Shortfalls to
be
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deposited in the Collection Account by the Servicer on the related Servicer
Remittance Date pursuant to Section 3.23; and (vii) the amount of any
Overcollateralization Increase Amount to be paid from Monthly Excess Spread
on such Distribution Date and the Overcollateralized Amount after giving
effect to all distributions on such Distribution Date.
(b) On or before 12:00 noon, New York time, on the Servicer
Remittance Date, the Servicer shall deposit to the Collection Account, for
inclusion in the Interest Remittance Amount on such Servicer Remittance Date,
in immediately available funds, the amount necessary to make the amount then
on deposit in the Collection Account with respect to interest collections
received on the Mortgage Loans that were due during the immediately preceding
Due Period equal to the Interest Remittance Amount with respect to such Due
Period, after taking into account all amounts in respect of Prepayment
Interest Shortfalls paid by the Servicer pursuant to Section 3.23 (any such
deposit made by the Servicer, a "Delinquency Advance"). The Servicer is
permitted to fund its payment of Delinquency Advances from amounts then on
deposit in the Collection Account representing collections on the Mortgage
Loans relating to the then-current or any subsequent Due Period; any such
amounts shall be replaced by Servicer on or prior to the next Servicer
Remittance Date. The Servicer shall be required to make Delinquency Advances
from its own funds (subject to reimbursement from subsequent collections on
the Mortgage Loans, when available) to the extent that such amounts in the
Collection Account are insufficient.
(c) The obligation of the Servicer to make such Delinquency
Advances is mandatory, notwithstanding any other provision of this Agreement
and, with respect to any Mortgage Loan or REO Property, shall continue until
a Final Recovery Determination or an REO Disposition in connection therewith
or the purchase or repurchase thereof from the Trust pursuant to any
applicable provision of this Agreement.
(d) In addition to the Delinquency Advances, the Servicer shall
deposit into the Collection Account a special advance of $51,799.72 (the
"Special Advance") on the Servicer Remittance Date occurring in August 1996
with respect to Mortgage Loans as to which the first Due Date is August 1,
1996. The Special Advance shall be made without regard to recoverability and
shall not be reimbursable. In no event shall the Trustee, as successor
Servicer, be liable for the payment of the Special Advance.
SECTION 4.07. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Trustee
shall comply with all federal withholding requirements respecting payments
to
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Certificateholders of interest or original issue discount that the Trustee
reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event
the Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate to such
Certificateholders the amount withheld. Any amounts so withheld shall be
deemed to have been distributed to the related Certificateholders for all
purposes of this Agreement and the Policy.
SECTION 4.08. Capitalized Interest Account.
On the Closing Date, the Seller shall deposit into the Capitalized
Interest Account an amount equal to $480,022.41. On or prior to 1:00 p.m.,
New York time, on the Distribution Date occurring in July 1996, the Trustee
shall transfer from the Capitalized Interest Account to the Certificate
Account the Capitalized Interest Requirement. The Capitalized Interest
Account shall not be an asset of the REMIC Trust. Any reinvestment earnings
on the amounts in the Capitalized Interest Account shall be taxable to the
Seller. Any amount remaining in the Capitalized Interest Account after
giving effect to the withdrawal therefrom on the Distribution Date in July
1996 shall be distributed to the Seller on such date.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
The Certificates consist of the Class A Certificates and the
Class R Certificates. The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other
assets included in the Trust Estate.
The Certificates will be substantially in the forms annexed hereto
as Exhibits A, B and C. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in
all rights of the related Class.
Upon original issue, the Certificates shall be executed,
authenticated and delivered by the Trustee upon the Written Order to
Authenticate and upon receipt of the documents specified in Section 2.04.
The Certificates shall be executed by manual or facsimile signature on behalf
of the Trustee by an authorized signatory. Certificates bearing the manual
or facsimile signatures of individuals who were at any time the proper offi-
cers of the Trustee shall bind the Trustee, notwithstanding that such indivi-
duals or any of them have ceased to hold such offices prior to the authen-
tication and delivery of such Certificates or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any
benefit under this Agreement or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in
the form provided herein executed by the Trustee by manual signature, and
such certificate of authentication shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Interest shall accrue on the Certificates on the basis of a 360-day
year consisting of twelve 30-day months except as otherwise provided herein.
The interest accrual period with respect to the Certificates shall be the
related Due Period.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the office or agency
appointed by the Trustee in accordance with the provisions of Section 8.12
a Certificate Register in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of
<PAGE>
Certificates and of transfers and exchanges of Certificates as herein
provided. The Depositor, each Certificateholder and the Certificate Insurer
shall have the right to inspect the Certificate Register or to obtain a copy
thereof at all reasonable times, and to rely conclusively upon a certificate
of the Trustee as to the information set forth in the Certificate Register.
The Trustee shall furnish or cause to be furnished to the Depositor and to
the Certificate Insurer and to any Certificateholder a listing of the names
and addresses of the Certificateholders on reasonable request.
(b) (i) The Class R Certificates have not been registered or
qualified under the Securities Act of 1933, as amended (the
"1933 Act"), or any state securities laws or "Blue Sky"
laws. No transfer, sale, pledge or other disposition of
any Class R Certificate shall be made unless such
disposition is made pursuant to an effective registration
statement under the 1933 Act and effective registration or
qualification under applicable state securities laws or
"Blue Sky" laws, or is made in a transaction which does
not require such registration or qualification. In the
event that a transfer is to be made in reliance upon an
exemption from the 1933 Act, the Trustee shall not register
such transfer unless:
(A) the Class R Certificateholder desiring to effect such
disposition and such Class R Certificateholder's
prospective transferee each certify to the Trustee in
writing the facts surrounding such disposition, which
certification shall be substantially in the form of Exhibit
J hereto; or
(B) the Class R Certificateholder desiring to effect such
disposition delivers to the Trustee an Opinion of Counsel
satisfactory to the Trustee that such transfer may be made
pursuant to an exemption from the 1933 Act, which Opinion
of Counsel shall not be an expense of the Trustee
Neither the Seller, the Depositor, the Servicer nor the
Trustee are obligated under this Agreement to register the
Class R Certificates under the 1933 Act or any other securities
law or to take any action not otherwise required
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<PAGE>
under this Agreement to permit the transfer of Class R
Certificates without such registration or qualification. Any
such Class R Certificateholder desiring to effect such transfer
shall, and does hereby agree to, promptly indemnify and
reimburse the Trustee, the Seller, the Depositor and the
Servicer for costs and expenses incurred in connection with
any liability that results if the transfer is not so exempt or
is not made in accordance with such applicable federal and state
laws.
(ii) Notwithstanding anything to the contrary herein, the
Trustee shall not register the transfer of any Certificate
unless it shall have received (a) a representation letter
substantially in the form of Exhibit J hereto or (b) in the
case of a transfer to an insurance company general account,
either a representation letter as described in (a) above
or, if such representation letter does not contain the
representation provided for in item D of such Exhibit J,
then in lieu thereof, an Opinion of Counsel from the
prospective transferee of such Certificate, acceptable to,
and in form and substance satisfactory to, the Trustee and
the Seller, to the effect that the acquisition and holding
of the Certificate and the servicing, management and
operation of the Trust with respect to such prospective
transferee are exempt from the "prohibited transaction"
provisions of ERISA and the Code pursuant to Prohibited
Transaction Class Exemption 95-60 (relating to insurance
company general accounts).
(c) Notwithstanding anything to the contrary contained herein,
except for the transfer on the Closing Date of the Class R Certificates to
the Seller, prior to registration of any transfer, sale or other disposition
of a Class R Certificate, the proposed transferee shall provide to the
Servicer, the Seller, the Class R Certificateholders and the Trustee: (i)
an affidavit substantially in the form of Exhibit K hereto to the effect that
such transferee is not a Disqualified Organization or a non-U.S. Person or
an agent or a non-U.S. Person (including a broker, nominee or middleman) of
a Disqualified Organization; and (ii) a certificate which acknowledges that
(A) the Class R Certificates have each been designated as a residual interest
in a REMIC, (B) it will include in its income the entire net income of the
REMIC Trust and that such income may be an "excess inclusion", as defined
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<PAGE>
in the Code, that, with certain exceptions, cannot be offset by other losses
or benefits from any tax exemption, (C) it expects to have the financial
means to satisfy all of its tax obligations including those relating to
holding Class R Certificates, and (D) no purpose of the acquisition of a
Class R Certificate is to avoid or impede the assessment or collection of
tax. Notwithstanding the registration in the Certificate Register of any
transfer, sale or other disposition of a Class R Certificate to a
Disqualified Organization or an agent or a non-U.S. Person (including a
broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose
hereunder, including, but not limited to, the receipt of distributions in
respect of such Class R Certificate. If any purported transfer shall be in
violation of the provisions of this Section 5.02(c), then the prior Holder
of the Class R Certificate purportedly transferred shall, upon discovery that
the transfer of the Class R Certificate was not in fact permitted by this
Section 5.02(c), be restored to all rights as Holder thereof retroactive to
the date of the purported transfer of the Class R Certificate. The Trustee,
the Depositor (except in its capacity as transferor of such Certificate), the
Seller and the Servicer shall have no liability to any Person for any
registration or transfer of a Class R Certificate that is not permitted by
this Section 5.02(c) or for making payments due on such Class R Certificate
to the purported Holder thereof or taking any other action with respect to
such purported Holder under the provisions of this Agreement if the Trustee,
the Seller and the Servicer have received the affidavit and certificate
referenced above. The prior Holder shall be entitled to recover from any
purported Holder of a Class R Certificate that was in fact not a permitted
transferee under this Section 5.02(c) at the time it became a Holder, all
payments made on the Class R Certificate. The Holder of a Class R
Certificate, by its acceptance thereof, shall be deemed for all purposes to
have consented to the provisions of this Section 5.02(c) and to any amendment
of this Agreement deemed necessary by counsel to the Seller to ensure that
the transfer of a Class R Certificate to a Disqualified Organization or any
other Person will not cause the REMIC Trust to cease to qualify as a REMIC
or cause the imposition of a tax upon the REMIC Trust.
(d) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate (duly endorsed, or accompanied
by an executed assignment, as specified in the Certificate) at any agency or
office appointed by the Trustee for such purpose pursuant to Section 8.12,
the Trustee or its agent shall execute, authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Certificates of
the same Class of a like aggregate Percentage Interest.
V-4
<PAGE>
(e) At the option of the Certificateholders, each Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of
such Certificate to be exchanged at any office or agency appointed by the
Trustee for such purpose pursuant to Section 8.12. Whenever any Certificates
are so surrendered for exchange the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for transfer
or exchange shall (if so required by the Trustee or its agent) be duly
endorsed by, or be accompanied by an assignment in the form attached to the
Certificate or by a written instrument of transfer in the form reasonably
satisfactory to the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing.
(f) No service charge to the Certificateholders shall be made for
any transfer or exchange of Certificates, but the Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
(g) All Certificates surrendered for transfer and exchange shall
be canceled and destroyed by the Trustee in accordance with its customary
procedures.
(h) The Trustee shall not register any Class A Certificate in the
name of the Trust, the Servicer, the Seller, any Sub-Servicer or any of their
respective affiliates, (the Trustee may require any prospective transferee
of any Class A Certificate to certify that it is not such an affiliate).
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee or
the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Certificate, and (ii) there is delivered to the Trustee and
the Certificate Insurer such security or indemnity (provided that an
unsecured letter of indemnity in a form reasonably satisfactory to the
Trustee from a Holder which is an insurance company having long-term
unsecured debt which is rated at least investment grade (or having a
comparable claim-paying ability rating) and having a minimum net worth of
$100,000,000 shall satisfy such requirement) as may be required by them to
save each of them harmless, then, in the absence of actual knowledge by a
Responsible Officer of the Trustee 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,
V-5
<PAGE>
destroyed, lost or stolen Certificate, a new Certificate of the same Class and
of like denomination and Percentage Interest. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses
of the Trustee) connected therewith. Any replacement Certificate issued
pursuant to this Section shall constitute complete and indefeasible evidence
of ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
SECTION 5.04. Persons Deemed Certificateholders.
The Seller, the Depositor, the Servicer, the Trustee, the
Certificate Insurer and any agent of any of them may treat the Person in
whose name any Certificate is registered in the Certificate Register as the
Certificateholder for the purpose of receiving distributions pursuant to
Section 4.04 and for all other purposes whatsoever, and neither the Seller,
the Depositor, the Servicer, the Trustee, the Certificate Insurer nor any
agent of any of them shall be affected by notice to the contrary.
SECTION 5.05. Book-Entry Certificates.
Each Class of Class A Certificates, upon original issuance, shall
be issued in the form of one or more typewritten Certificates representing
the Book-Entry Certificates, to be delivered to the Depository by or on
behalf of the Depositor. Such Certificates shall initially be registered on
the Certificate Register in the name of the Depository or its nominee, and
no Certificate Owner will receive a definitive certificate representing such
Certificate Owner's interest in such Certificates, except as provided in
Section 5.07. Unless and until definitive, fully registered Certificates
("Definitive Certificates") have been issued to the Certificate Owners of
-----------------------
such Certificates pursuant to Section 5.07.:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Depositor, the Servicer, the Certificate Insurer and the
Trustee may deal with the Depository and the Depository Participants for all
purposes (including the making of distributions) as the authorized
representative of the respective Certificate Owners of such Certificates;
(c) registration of the Book-Entry Certificates may not be
transferred by the Trustee except to another Depository;
V-6
<PAGE>
(d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depository and the
Depository Participants and shall be limited to those established by law and
agreements between the Owners of such Certificates and the Depository and/or
the Depository Participants. Pursuant to the Depository Agreement, unless
and until Definitive Certificates are issued with respect to any Class of
Class A Certificates pursuant to Section 5.07, the Depository will make book-
entry transfers among the Depository Participants and receive and transmit
distributions of principal and interest on the related Certificates to such
Depository Participants;
(e) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants;
(f) the Trustee may rely and shall be fully protected in relying
upon information furnished by the Depository with respect to its Depository
Participants; and
(g) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of,
Certificateholders evidencing a specified percentage of the Voting Rights
such direction or consent may be given by Certificate Owners (acting through
the Depository and the Depository Participants) owning Book-Entry
Certificates evidencing the requisite percentage of Class Certificate
Principal Balance of such Class.
SECTION 5.06. Notices to Depository.
Whenever any notice or other communication is required to be given
to Certificateholders of any Class with respect to which Book-Entry
Certificates have been issued, unless and until Definitive Certificates shall
have been issued to the related Certificate Owners, the Trustee shall give
all such notices and communications to the Depository.
SECTION 5.07. Definitive Certificates.
If after Book-Entry Certificates have been issued with respect to
the Class A Certificates, (a) the Depositor advises the Trustee that the
Depository is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement with respect to such
Certificates and the Trustee or the Depositor is unable to locate a qualified
successor, (b) the Depositor, at its sole option, advises the Trustee that it
elects to terminate the book-entry system with respect to such Certificates
through the Depository or (c)
V-7
<PAGE>
after the occurrence and continuation of an Event of Default, Certificate
Owners of any Class of Certificates evidencing at least 51% of the Voting
Rights of such Class advise the Trustee and the Depository in writing through
the Depository Participants that the continuation of a book-entry system with
respect to such Certificates through the Depository (or its successor) is no
longer in the best interests of the Certificate Owners with respect to such
Certificates, then the Trustee shall notify all Certificate Owners of such
Certificates, through the Depository, of the occurrence of any such event and
of the availability of Definitive Certificates to Certificate Owners requesting
the same. The Depositor shall provide the Trustee with an adequate inventory
of certificates to facilitate the issuance and transfer of Definitive
Certificates. Upon surrender to the Trustee of any such Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall authenticate and deliver such Definitive
Certificates. Neither the Depositor nor the Trustee shall be liable for any
delay in delivery of such instructions and each may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of such
Definitive Certificates, all references herein to obligations imposed upon or
to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of such
Definitive Certificates as Certificateholders hereunder.
V-8
<PAGE>
ARTICLE VI
THE SELLER AND THE SERVICER
SECTION 6.01. Liability of the Seller, the Depositor and the
Servicer.
The Seller, the Depositor and the Servicer each shall be severally
liable in accordance herewith only to the extent of the obligations specifi-
cally imposed by this Agreement and undertaken hereunder by the Seller, the
Depositor and the Servicer, respectively, herein.
SECTION 6.02. Merger or Consolidation of the Seller or the
Servicer.
Subject to the following paragraph, the Seller will keep in full
effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. The Servicer will keep in full
effect its existence, rights and franchises as a corporation organized under
the laws of the State of New York (or under the laws of such other jurisdic-
tion as may in the future issue a charter for the Servicer). The Seller and
the Servicer each will (and the Servicer will require each Sub-Servicer in
the related Sub-Servicing Agreement to) obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary 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 Seller or the 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 the Seller or the Servicer shall be a party, or any Person
succeeding to the business of the Seller or the Servicer, shall be the
successor of the Seller or the Servicer, as the case may be, hereunder,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person
-------- -------
to the Servicer shall satisfy the requirements of Sections 6.06 and 7.02
hereof with respect to the qualifications of a successor Servicer.
SECTION 6.03. Limitation on Liability of the Seller, the Servicer
and Others.
Neither the Seller, the Depositor or the Servicer nor any of the
directors, officers, employees or agents of the Seller, the Depositor or the
Servicer, or members or affiliates of the Depositor shall be under any
liability to
<PAGE>
the Trust or the Certificateholders 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 Seller, the Depositor, the Servicer or any such person against
the remedies provided herein for the breach of any warranties, represen-
tations or covenants made herein, or against any specific liability imposed
on the Seller, the Depositor or the Servicer herein, or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith
or negligence in the performance of duties of the Servicer, the Depositor or
the Seller, as the case may be, or by reason of reckless disregard of obli-
gations and duties of the Servicer, the Depositor or the Seller, as the case
may be, hereunder. The Seller, the Depositor, the Servicer and any director,
officer, employee or agent of the Seller, the Depositor or the Servicer, or
any member or affiliate of the Depositor may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted
----- -----
by any Person respecting any matters arising hereunder.
The Servicer, the Seller and the Depositor and any director,
officer, employee or agent of the Servicer, the Seller or the Depositor shall
be indemnified by the Trust and held harmless against any loss, liability or
expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Except as otherwise provided herein,
neither of the Seller, the Depositor nor the Servicer shall be under any
obligation to appear in, prosecute or defend any legal action that is not
related to its respective duties under this Agreement; provided, however,
-------- -------
that, except as otherwise provided herein, any of the Seller, the Depositor,
or the Servicer may, with the prior consent of the Trustee, the Certificate
Insurer, in its discretion undertake any such action 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 and
the Certificate Insurer hereunder. In such event, the legal expenses and
costs of such action, with the prior written consent of the Certificate
Insurer, and any liability resulting therefrom shall be, expenses, costs and
liabilities of the Trust, and the Seller, the Depositor and the Servicer
shall be entitled to be reimbursed therefor out of the Certificate Account.
VI-2
<PAGE>
SECTION 6.04. Limitation on Resignation of the Servicer; No
Assignment or Delegation of Duties by Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) by the mutual consent of the Certificate
Insurer (except that if a Certificate Insurer Default has occurred and is
continuing, the decision of the Trustee shall control) and the Trustee or (b)
upon determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the
preceding sentence permitting the resignation of the Servicer shall be
evidenced by an Independent Opinion of Counsel to such effect delivered (at
the expense of the Servicer) to the Trustee and the Certificate Insurer. No
resignation of the Servicer shall become effective until the Trustee or a
successor servicer, appointed pursuant to the provisions of 3.26(b) and
satisfying the requirements of Sections 6.06 and 7.02 hereof with respect to
the qualifications of a successor Servicer, shall have assumed the Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.
Except as expressly provided herein, the Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or (except as permitted by Section 3.02) delegate to or subcontract
with, or authorize or appoint any other Person to perform any of the duties,
covenants or obligations to be performed by the Servicer hereunder, without
the prior written consent of each of the Certificate Insurer except that if
a Certificate Insurer Default has occurred and is continuing, the decision
of the Trustee shall control, and notice to the Trustee, and absent such
written consent any agreement, instrument or act purporting to effect any
such assignment, transfer, delegation or appointment shall be void.
SECTION 6.05. Rights of the Seller, the Depositor, the
Certificateholders and Others in Respect of the
Servicer.
The Servicer shall (and shall require any Sub-Servicer in the
related Sub-Servicing Agreement to) afford, the Seller, the Depositor, the
Trustee and any Class A Certificateholder who has a greater than 10%
Percentage Interest in the related Class and any representative or agent of
the foregoing and the Certificate Insurer, upon reasonable notice, during
normal business hours, access to all records maintained by the Servicer in
respect of its rights and obligations hereunder and access to officers of the
Servicer and each Sub-Servicer responsible for such obligations. Upon
request and at such requesting party's expense, the Servicer shall furnish
to the Seller, the Depositor, the Certificate
VI-3
<PAGE>
Insurer, any Certificateholder and the Trustee the Servicer's most recent
publicly available financial statements and each Sub-Servicer's most recent
financial statements (annual or quarterly statements, as the case may be) and
such other information relating to their capacity to perform their obliga-
tions under this Agreement as the Servicer or such Sub-Servicer possesses.
To the extent such information is not otherwise available to the
public, the Seller, the Depositor, the Certificateholders, the Servicer (with
respect to information of any Sub-Servicer) and the Trustee and the
Certificate Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Servicer's or the Sub-Servicer's
(only with respect to information of such Sub-Servicer) written consent,
except as required pursuant to this Agreement or to the extent that it is
necessary to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies for reasons consistent with the
performance of their respective duties or (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority, or as may be required in any report submitted to any
regulatory body, having jurisdiction over the Seller, the Depositor, the
Servicer, the Trustee, any Certificateholder or the Trust Estate, as the case
may be, and in any case, the Seller, the Depositor, the Servicer (with
respect to information of any Sub-Servicer) or the Trustee, as the case may
be, shall use its best efforts to assure the confidentiality of any such
disseminated non-public information.
SECTION 6.06. Eligibility Requirements for Servicer.
The Servicer hereunder shall at all times be a corporation or a
state-chartered or national bank acceptable to the Certificate Insurer except
that if a Certificate Insurer Default has occurred and is continuing, such
entity shall be acceptable to the Trustee. The Servicer shall be organized
and doing business under the laws of any state or the United States of
America having equity of at least ($50,000,000) (other than the original
Servicer) (or such lower level as may be acceptable to the Certificate
Insurer, or, if a Certificate Insurer Default has occurred and is continuing,
to the Trustee). In case at any time the Servicer shall cease to be eligible
in accordance with the provisions of this Section, the Servicer shall resign
immediately in the manner and with the effect specified in Section 7.02(a).
VI-4
<PAGE>
ARTICLE VII
DEFAULT
SECTION 7.01. Servicer Defaults; Certain Matters Affecting the
Servicer.
(a) "Servicer Default", wherever used herein, means any one of the
following events:
(i) any failure by the Servicer to deposit in the Collection
Account and the Certificate Account any amount (other than a Delinquency
Advance required to be made from its own funds) that it is required to
deposit under the terms of this Agreement, which continues unremedied for
a period of two Business Days after the date upon which such payment was
required to be remitted or paid; or
(ii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements
on the part of the Servicer contained in the Certificates or in this
Agreement which continues unremedied for a period of 30 days after the
first date on which (x) a Servicing Officer has knowledge of such failure
or (y) written notice of such failure, requiring the same to be remedied,
shall have been given to a Servicing Officer by the Seller, the
Certificate Insurer, the Majority Certificateholders, the Depositor, or
the Trustee; or
(iii) a decree or order for relief of a court or agency or super-
visory authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy, insolvency
or similar law or the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceeding, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 45 days; or
(iv) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all of
its property; or
(v) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
<PAGE>
for the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure of the Servicer, in its capacity as Seller, to
repurchase, or substitute a Qualified Substitute Mortgage Loan for, any
Mortgage Loan as required by Section 2.06 hereof; or
(vii) any failure of the Servicer to pay any Delinquency Advance or
any amount in respect of Prepayment Interest Shortfalls on any Servicer
Remittance Date required to be made from its own funds pursuant to Section
3.23 or 4.06, respectively, that continues unremedied for a period of one
Business Day; or
(viii) an insufficiency in Available Funds occurs on a Distribution
Date, resulting in the need for an Insured Payment, unless the Certificate
Insurer determines that such insufficiency in Available Funds resulted
from causes beyond the reasonable control of the Servicer; or
(ix) either (a) the Servicer fails to make any payment due with
respect to recourse debt or other obligations which such debt or
obligations has (or have) an aggregate principal balance of $750,000 or
more; or (b) the occurrence of any event or the existence of any
condition, the effect of which is to cause (or permit one or more persons
to cause) $750,000 or more of recourse debt or other obligations of the
Servicer to become due before its (or their) stated maturity or before its
(or their) regularly scheduled dates of payment, in each case, so long as
such failure, event or condition shall be continuing and shall not have
been waived by the person or persons entitled to performance; or
(x) the rendering against the Servicer of a final judgment, decree
or order for the payment of money in excess of $750,000 which is
uninsured, and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 60 consecutive days without a
stay of execution; or
(xi) the stockholders' equity of the Servicer calculated in
accordance with generally accepted accounting principles is less than
$3,000,000; or
(xii) a failure of the Servicer to meet the Servicer
Termination Test; or
(xiii) there is a change of "control" of the Servicer (where
"control" has the meaning ascribed to it in the Securities Exchange Act of
1934, as amended from time to time), unless the Certificate Insurer has
determined in a manner which is not arbitrary or capricious that such
VII-2
<PAGE>
change in control does not have a material adverse effect on the
interests of the Certificate Insurer.
If a Servicer Default shall occur, then, and in each and every such
case, so long as such Servicer Default shall not have been remedied, (x) the
Certificate Insurer or (y) the Trustee at the direction of the Majority
Certificateholders, with the consent of the Certificate Insurer, may, by
notice in writing to the Servicer, the Trustee, the Depositor, the Seller,
each Certificateholder and the Certificate Insurer, terminate all of the
rights and obligations of the Servicer in its capacity as Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans
and the proceeds thereof.
On and after the receipt by the Servicer of any such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Certificates (other than as a Holder of any Certificate)
or the Mortgage Loans or the Policy or otherwise, shall pass to and be vested
in the Trustee or other successor Servicer appointed pursuant to Section 3.26
hereof and, without limitation, the Trustee or such other successor Servicer
is hereby authorized and empowered, as attorney-in-fact or otherwise, to
execute and deliver, on behalf of and at the expense of the Servicer, any and
all documents and other instruments and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment
of the Mortgage Loans and related documents, or otherwise.
The Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the successor Servicer
with all documents and records requested by it to enable it to assume the
Servicer functions under this Agreement, and to cooperate with the successor
Servicer in effecting the termination of the Servicer's responsibilities and
rights under this Agreement, including, without limitation, the transfer
within one Business Day to the successor Servicer or its designee for
administration of all cash amounts which shall at the time be or should have
been credited by the Servicer to any Account, or which shall thereafter be
received with respect to the Mortgage Loans or any REO Property (provided,
--------
however, that the Servicer shall continue to be entitled to receive all
- -------
amounts accrued or owing to it under this Agreement on or prior to the date
of such termination, whether in respect of Delinquency Advances or otherwise
and shall continue to be entitled to the benefit of Section 6.03 hereof,
notwithstanding such termination).
For purposes of this Section 7.01, the Trustee shall not be deemed
to have knowledge of a Servicer Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice of any event
which is in fact
VII-3
<PAGE>
such a Servicer Default is received at the notice address of the Trustee
provided herein and such notice references the Certificates, the Seller, the
Depositor, the Trust or this Agreement.
For purposes of this Section 7.01, any consent or determination by
the Certificate Insurer shall be replaced by consent or determination of the
Majority Certificateholders if a Certificate Insurer Default has occurred and
is continuing.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Servicer on behalf of Trustee, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Servicer on behalf of
Trustee shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.
SECTION 7.02. Trustee to Act; Appointment of Successor.
On and after the day the Servicer receives a notice of termination
pursuant to Section 7.01 or on and after the day the Servicer becomes
ineligible to act as Servicer due to an inability to meet the eligibility
requirements of Section 6.07, and unless a successor Servicer other than the
Trustee has been appointed pursuant to Section 3.26 hereof, the Trustee shall
be the successor in all respects to the Servicer in its capacity as Servicer
under this Agreement (until replaced by the Certificate Insurer) and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto and arising
thereafter placed on the Servicer (except for any representations or
warranties of the Servicer and any obligation to repurchase a Mortgage Loan
for any reason hereunder) by the terms and provisions hereof, including,
without limitation, the Servicer's obligations to make Delinquency Advances
pursuant to Section 4.06 (but only to the extent that it determines that such
Delinquency Advance would not be a Nonrecoverable Delinquency Advance) and
payments of Prepayment Interest Shortfalls pursuant to Section 3.23
(including, if the Servicer was terminated in connection with an Event of
Default described in Section 7.01(a)(vii), the Delinquency Advance(s) and/or
Prepayment Interest Shortfalls not made by the Servicer which resulted in
such termination); provided, however, that if the Trustee is prohibited by
-------- -------
law or regulation (as evidenced by an Independent Opinion of Counsel) from
obligating itself to make advances regarding delinquent Mortgage Loans, then
the Trustee shall not be obligated to make Delinquency Advances or payments
in respect of Prepayment Interest Shortfalls; and provided, further, that any
-------- -------
failure to perform such duties or responsibilities caused by the
VII-4
<PAGE>
Servicer's failure to provide the documents and records required by Section
7.01 shall not be considered a default by the Trustee as successor to the
Servicer hereunder.
Notwithstanding the above, if the Trustee shall be unable to so act
as successor Servicer or if the Trustee is prohibited by law from making
advances regarding delinquent Mortgage Loans or making payments in respect
of Prepayment Interest Shortfalls, and in such event that the procedures
described in Section 3.26 have not commenced within a reasonable period of
time, then the Trustee shall petition a court of competent jurisdiction to
appoint, as the successor to the Servicer under this Agreement in the
assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer under this Agreement, any established mortgage loan servicing
institution qualified to service mortgage loans such as the Mortgage Loans
which meets the eligibility requirements of Section 6.07 hereof.
In connection with such appointment made by such court, the Trustee
may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
--------
however, that no such compensation shall be in excess of that permitted the
- -------
Servicer as such hereunder. The Seller, the Certificate Insurer, the
Trustee, and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. Upon a
successor Servicer's acceptance of its appointment by such court, the Trustee
shall notify in writing the Seller, each Certificateholder, the Depositor,
the Certificate Insurer and each Rating Agency of such appointment.
No appointment of a successor to the Servicer under this Agreement
shall be effective until the assumption by the successor to the Servicer of
all the responsibilities, duties and liabilities hereunder, except as
otherwise provided herein.
Any successor to the Servicer, other than a successor appointed by
a court of competent jurisdiction upon the petition of the Trustee, shall be
entitled to receive, as compensation therefor, the Servicing Fee, calculated
at a servicing fee rate to be agreed upon at the time between such successor
and the Seller (it being acknowledged that the Trustee as Successor Servicer
shall be entitled to the Servicing Fee Rate provided for herein), but not in
excess of the Servicing Fee Rate, and all funds relating to the Mortgage
Loans which the Servicer would have been entitled to if the Servicer had
continued to act hereunder, subject to the obligation to pay any Make-Whole
Amounts pursuant to Section 3.17.
VII-5
<PAGE>
The successor Servicer (other than the Trustee) shall be solely
liable for any costs and expenses associated with the transfer of servicing
to such successor Servicer.
SECTION 7.03. Notification to Mortgagors and Certificateholders.
(a) Upon any such termination pursuant to Section 7.02 above or
appointment of a successor to the Servicer, the Trustee shall, at the expense
of the Servicer, give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to each
Mortgagor at their respective addresses appearing in the Mortgage Loan
Schedule.
(b) Within three Business Days after the occurrence of any event
which constitutes or which, with notice or lapse of time or both, would
constitute a Servicer Default, the Trustee shall transmit by mail, at the
expense of the Servicer, to all Holders of Certificates and the Certificate
Insurer, notice of any Servicer Default actually known to a Responsible
Officer of the Trustee.
SECTION 7.04. Additional Remedies of Trustee Upon Servicer
Defaults.
Upon any Servicer Default, the Trustee shall have the right to the
extent consistent with the rights reserved to the Certificate Insurer
hereunder, in its own name and as Trustee, to take all actions now or
hereafter existing at law, in equity or by statute to enforce its rights and
remedies and to protect the interests, and enforce the rights and remedies,
of the Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filings of proofs of
claim and debt in connection therewith). No remedy provided for by this
Agreement shall be exclusive of any other remedy, and each and every remedy
shall be cumulative and in addition to any other remedy and no delay or
omission to exercise any right or remedy shall impair any such right or
remedy or shall be deemed to be a waiver of any Servicer Default.
SECTION 7.05. Waiver of Servicer Defaults.
The Certificate Insurer, and subject to the consent of the Trustee,
which consent may not be unreasonably withheld, may waive any Servicer
Default and its consequences, except that if a default in the making of any
required deposit to the Collection Account or the Certificate Account that
would result in a failure of the Trustee to make any required distribution
on the Certificates may be waived only by all of the Certificateholders.
Upon any waiver of a past Servicer Default, such Servicer Default shall cease
to exist, and any Servicer Default arising therefrom shall be deemed to have
VII-6
<PAGE>
been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other Servicer Default or impair any right
consequent thereto except to the extent expressly so waived. Notice of any
such waiver shall be given by the Trustee to each Rating Agency and to all
Certificateholders.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Default and
after the curing of all Servicer Defaults which may have occurred, undertakes
to perform such duties and only such duties as are specifically set forth in
this Agreement. During a Servicer Default, the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
Any permissive right of the Trustee enumerated in this Agreement shall not
be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee which are specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they are in the form specified in this Agreement.
The Trustee may, in accordance with its duties hereunder, do all
things necessary and proper as may be required in connection with any
secondary mortgage licensing laws and similar requirements, including, but
not limited, to consenting to jurisdiction, and the appointment of agents for
service of process, in jurisdictions in which the Mortgaged Properties are
located.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
-------- -------
(i) Prior to the occurrence of a Servicer Default, and after the
curing of all such Servicer Defaults which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions contained
therein (including, but not limited to, Servicer Information), upon any
certificates or opinions furnished to the Trustee that are in the form
specified in this Agreement;
<PAGE>
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of the Certificate Insurer or the Majority
Certificateholders issued to the Trustee pursuant to Section 8.13 hereof.
The Trustee shall, upon receipt of the request substantially in the form
of Exhibit O attached hereto, prepare, issue and forward to the Servicer
checks for refunds and expenses indicated on such request.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be protected
in acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document (including, but not limited to, Servicer
Information) reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to make any
investigation of matters arising hereunder to institute, conduct or defend
any litigation hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of
this Agreement, unless such Certificateholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby (provided that an
unsecured letter of indemnity in a form reasonably satisfactory to the
Trustee from a Holder which is an insurance company having long-term
unsecured debt which is rated at least investment grade (or having a
comparable claim-paying ability rating) and having a minimum net worth of
$100,000,000 shall satisfy
VIII-2
<PAGE>
such requirement); nothing contained herein shall, however, relieve the
Trustee of the obligation, upon the occurrence of a Servicer Default of
which the Trustee has actual knowledge (which has not been cured or
waived), to exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
(v) Prior to the occurrence of a Servicer Default hereunder and
after the curing of all Servicer Defaults which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Certificate
Insurer or by the Majority Certificateholders; provided, however, that if
-------- -------
the payment of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Trustee,
not reasonably assured to the Trustee by the security afforded to it by
the terms of this Agreement, the Trustee may require reasonable indemnity
(provided that an unsecured letter of indemnity in a form reasonably
satisfactory to the Trustee from a Holder which is an insurance company
having long-term unsecured debt which is rated at least investment grade
(or having a comparable claim-paying ability rating) and having a minimum
net worth of $100,000,000 shall satisfy such requirement) against such
expense or liability as a condition to taking any such action. The
reasonable expense of every such examination shall be paid by the Servicer
or, if paid by the Trustee, shall be repaid by the Servicer upon demand;
(vi) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys; and
(vii) The Trustee shall not be personally liable for any loss
resulting from the investment of funds at the direction of the Servicer or
the Seller held in any Account; provided, however, that the Trustee
-------- -------
shall be personally liable on any investment on which it is the obligor.
VIII-3
<PAGE>
(b) Following the Closing Date, and except as otherwise provided
in this Agreement, the Trustee shall not knowingly accept any contribution
of assets to the Trust unless it shall have been provided with an Opinion of
Counsel at the expense of the party delivering such assets acceptable to it
and the Certificate Insurer to the effect that the inclusion of such assets
in the REMIC Trust will not cause the REMIC Trust to fail to qualify as a
REMIC at any time that any Certificates are outstanding or subject the Trust
to any tax under the REMIC Provisions or other applicable provisions of
federal, state and local law or ordinances.
(c) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial
or other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this
Agreement.
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
Loans.
The recitals contained herein and in the Certificates (other than
the signature on the Certificates) shall be taken as the statements of the
Seller, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations or warranties as to the validity or suffi-
ciency of this Agreement or of the Certificates (other than the signature of
the Trustee on the Certificates) or of any Mortgage Loan or related document.
The Trustee shall not be accountable for the use or application by the
Seller, the Depositor, the Servicer of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds
paid to the Seller, the Depositor or the Servicer in respect of the Mortgage
Loans or for the use or application of any funds deposited in or withdrawn
from the Collection Account by the Servicer.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee.
SECTION 8.05. Expenses of Trustee.
The Trustee's Fee shall be paid as described in Section 4.04. In
addition, the Seller covenants and agrees to pay or reimburse the Trustee,
upon request, all reasonable expenses, disbursements and advances incurred
or made by the Trustee, and any director, officer, employee or agent acting
for and on behalf of the Trustee, in accordance with any of
VIII-4
<PAGE>
the provisions of this Agreement (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ, whether or not such expenses are incurred in connection with any
Opinion of Counsel acquired or permitted to be obtained by the Trustee) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified by the Seller and held harmless against any
loss, liability or expense incurred in connection with or relating to this
Agreement or the Certificates, or the performance of any of the Trustee's
duties hereunder, other than any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder; provided that (i) with respect to any such loss, liability
--------
or expense, the Trustee shall have given to the Seller, the Depositor, the
Servicer, the Certificate Insurer and the Certificateholders written notice
thereof promptly after the Trustee shall have knowledge thereof and (ii)
while maintaining control over its own defense, the Trustee shall cooperate
and consult fully with the Certificate Insurer in preparing such defense.
Such indemnity shall survive the termination or discharge of this Agreement
and the resignation or removal of the Trustee.
SECTION 8.06. Trustee Eligibility Requirements.
The Trustee hereunder shall at all times be a corporation or a
state-chartered or national bank acceptable to the Certificate Insurer, which
is not an affiliate of the Seller or the Servicer, organized and doing
business under the laws of any state (or the District of Columbia) or the
United States of America, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $100,000,000
and subject to supervision or examination by federal or state authority. Any
Trustee shall at all times have ratings assigned to its long-term, unsecured
debt obligations of at least "A" by S&P and "A2" by Moody's. If such
corporation or association publishes reports of conditions 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
conditions so published. In case at any time any Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section
8.07. The corporation or national banking association serving as Trustee may
have normal banking and trust relationships with the Seller and the Servicer
and the respective affiliates.
VIII-5
<PAGE>
SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Seller, the
Depositor, the Certificate Insurer, the Servicer and to all Certificate-
holders. Upon receiving such notice of any such resignation, the Servicer
shall select a successor Trustee and shall present such party to the
Certificate Insurer and the Majority Certificateholders and upon their joint
approval such party shall promptly be appointed successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the resign-
ing Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders, the Certificate Insurer and the
Seller by the Servicer. If no successor trustee shall have been so 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.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 and shall fail to resign after written
request therefor, or if at any time the Trustee shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Servicer
shall solicit and present to the Certificate Insurer and the Majority
Certificateholders and upon their joint written approval, in duplicate, which
instrument shall be delivered to the Trustee so removed and to the successor
trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Seller by the Servicer.
The Majority Certificateholders may, with the written consent of
the Certificate Insurer (which shall only be required if no Certificate
Insurer Default has occurred and is continuing), at any time remove the
Trustee and appoint a successor by written instrument or instruments, in
triplicate, signed by such Holders or their attorneys-in-fact duly author-
ized, one complete set of which instruments shall be delivered to the Seller,
one complete set to the Trustee so removed and one complete set to the
successor so appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer, the Servicer and the Seller by
the Trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until
VIII-6
<PAGE>
acceptance of appointment by the successor trustee as provided in Section
8.08.
Notwithstanding anything to the contrary contained herein, so long
as no Certificate Insurer Default exists and is continuing, the Trustee may
not be removed by the Certificateholders without the prior written consent
of the Certificate Insurer, which consent shall not be unreasonably withheld.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Certificateholders, the Certificate
Insurer, the Servicer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Mortgage Files
and related documents and statements held by it hereunder (other than any
Mortgage Files at the time held by a custodian, which shall become the agent
of any successor trustee hereunder), and the Seller, the Servicer and the
predecessor trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers,
duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06.
Upon acceptance of appointment by a successor trustee as provided
in this Section, the predecessor trustee shall mail notice of the succession
of such trustee hereunder to each Holder of Certificates at their respective
addresses as shown in the Certificate Register and to each Rating Agency.
If the predecessor trustee fails to mail such notice within ten (10) days
after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the resigning
trustee.
Notwithstanding anything to the contrary contained herein, so long
as no Certificate Insurer Default exists, the appointment of any successor
trustee pursuant to any provision of this Agreement will be subject to the
prior written consent of the Certificate Insurer.
VIII-7
<PAGE>
The Trustee shall not be liable for the acts or omissions to act
of any successor Trustee appointed hereunder.
SECTION 8.09. Merger or Consolidation of 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 the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation or association shall be eligible under
the provisions of Section 8.06, without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Estate or property securing the same may at the time be
located, the Trustee with the consent of the Certificate Insurer shall have
the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all
or any part of the Trust Estate, and to vest in such Person or Persons, in
such capacity, such title to the Trust Estate, or any part thereof, and,
subject to the other provisions of this Section 8.10, such powers, duties,
obligations, rights and trusts as the Seller and the Trustee may consider
necessary or desirable. If the Trustee shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Certificate Insurer shall have the power to make such appointment. Subject
to the Certificate Insurer's prior approval, no co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall
be required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations
VIII-8
<PAGE>
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed by such separate trustee
or co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VIII. Each separate trustee and co-
trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject
to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Trustee Records.
The Trustee shall afford the Seller, the Servicer, the Certificate
Insurer and each Certificateholder upon reasonable notice during normal
business hours, access to all records maintained by the Trustee in respect
of its duties hereunder and access to officers of the Trustee responsible for
performing such duties, such inspection to take place at 311 West Monroe
Street, 12th Floor, Chicago, Illinois 60606 or such other place as designated
by the Trustee. Upon request, the Trustee shall furnish the Servicer, the
Certificate Insurer and any requesting Certificateholder with its most recent
financial statements. The Trustee shall cooperate fully with the Seller, the
Servicer, the Certificate Insurer and such Certificateholder and shall make
available to the Seller, the Servicer, the Certificate Insurer and such
Certificateholder for review and copying such books, documents or records as
may be requested with respect to the Trustee's duties hereunder. The Seller,
the Servicer, the Certificate Insurer and the Certificateholders shall not
have any responsibility or liability for any action or failure to act
VIII-9
<PAGE>
by the Trustee and are not obligated to supervise the performance of the
Trustee under this Agreement or otherwise.
SECTION 8.12. Appointment of Office or Agency.
The Trustee designates its office at 77 Water Street, New York, New
York 10005 as its agency in the City of New York where the Certificates may
be surrendered for registration of transfer or exchange, and presented for
final distribution. The Trustee designates its offices at 311 West Monroe
Street, 12th Floor, Chicago, Illinois 60606, as the office at which notices
and demands to or upon the Trustee in respect of the Certificates may be
served and will notify the Certificate Insurer and the Certificateholders of
any change in the location of such office or agency.
SECTION 8.13. Exercise of Trustee Powers by Certificate Insurer
and Certificateholders.
Subject to the provisions of this Article VIII, the Certificate
Insurer, or the Majority Certificateholders with the consent of the
Certificate Insurer, which consent may not be unreasonably withheld (provided
--------
that such consent of the Certificate Insurer shall not be required if a
Certificate Insurer Default has occurred and is continuing), may direct the
time, method and place of conducting any proceeding relating to the Trust or
the Certificates or for any remedy available to the Trustee in its capacity
as Trustee (and not in its individual capacity) with respect to the
Certificates or exercising any trust or power conferred on the Trustee with
respect to the Certificates of the Trust (except that if a Certificate
Insurer Default has occurred and is continuing then the direction of the
Majority Certificateholders shall control and the Certificate Insurer shall
have no right to act) provided that:
-------------
(i) such direction shall not be in conflict with any
rule of law or with this Agreement; and
(ii) the Trustee shall have been provided with indemnity
satisfactory to it (provided that an unsecured letter of indemnity in
a form reasonably satisfactory to the Trustee from a Holder which is
an insurance company having long-term unsecured debt which is rated
at least investment grade (or having a comparable claim-paying
ability rating) and having a minimum net worth of $100,000,000
shall satisfy such requirement).
VIII-10
<PAGE>
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Certain Rights of the Certificate Insurer.
By accepting its Certificate, each Holder of a Class A Certificate
agrees that unless a Certificate Insurer Default exists, the Certificate
Insurer shall have the following rights, without any consent of the Holders
of Class A Certificates:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so for any reason, except that in the case
of Section 3.15(b) hereof;
(b) the right to require the Seller to repurchase or substitute
for, or to require the Servicer to purchase, Mortgage Loans pursuant to
Section 2.06;
(c) the right to give notices of breach or to terminate the rights
and obligations of the Servicer pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Servicer Default pursuant to Sections 7.01 and 7.02; and
(e) the right to direct the Trustee to investigate certain matters
pursuant to Section 8.02(a)(v).
In addition, each Holder of a Class A Certificate agrees that,
unless a Certificate Insurer Default exists, the right to remove the Trustee
pursuant to Section 8.07 hereof may be exercised by the Majority
Certificateholders only with the prior written consent of the Certificate
Insurer, which consent shall not be unreasonably withheld.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
(a) Unless a Certificate Insurer Default exists, the Trustee shall
not:
(i) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 or consent to the resignation of
the Servicer pursuant to Section 6.04;
(ii) terminate any Sub-Servicing Agreements pursuant to Section
3.03;
<PAGE>
(iii) assume any Sub-Servicing Agreements pursuant to Section
3.06; or
(iv) undertake any litigation pursuant to either Section 7.05
or 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent
shall not be unreasonably withheld.
(b) Notwithstanding anything herein to the contrary, after the
occurrence of a Servicer Default and until such time as all Servicer Defaults
have been cured, no provision of this Agreement shall require the Trustee to
take any action or omit to take any action at the request of the Certificate
Insurer or any Certificateholder to the extent the Trustee believes in good
faith such action or omission would cause the Trustee to violate any law or
regulation applicable to it or to breach their respective obligations owed
by it to the Certificateholders and to the Certificate Insurer, pursuant to
this Agreement or otherwise.
SECTION 9.03. Trust Estate and Accounts Held for Benefit of the
Certificate Insurer and the Certificateholders.
The Trustee shall hold the Trust Estate and the Mortgage Files, and
shall maintain the Accounts, for the benefit of the Certificateholders and
the Certificate Insurer and all references in this Agreement (including,
without limitation, in Sections 2.02, 2.04, 3.10 and 4.04) and in the
Certificates to the benefit of Holders of the Certificates shall be deemed
to include the Certificate Insurer. The Trustee shall cooperate in all
reasonable respects with any reasonable request by the Certificate Insurer
or the Class A Certificateholders (when other than the Seller, the Servicer
or any affiliate thereof), for action to preserve or enforce the respective
rights and interests of the Certificate Insurer or the Class A
Certificateholders (when other than the Seller, the Servicer or any affiliate
thereof) under this Agreement and the Certificates.
The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties for the benefit of
the Certificateholders and for the benefit of the Certificate Insurer, and
all references in this Agreement (including, without limitation, in Sections
3.01(b) and 3.10) to the benefit of or actions on behalf of the
Certificateholders shall be deemed to include the Certificate Insurer.
Unless a Certificate Insurer Default exists, the Servicer shall not terminate
any Sub-Servicing Agreements without cause or undertake any litigation
pursuant to Section 3.12(c), without the prior written consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, neither the
Servicer nor the Seller shall undertake
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<PAGE>
any litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior written consent of the
Certificate Insurer.
SECTION 9.04. Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Class A Certificates which is made
with moneys received pursuant to the terms of the Policy shall not be
considered payment of the Class A Certificates from the Trust Estate and
shall not result in the payment of or the provision for the payment of the
principal of or interest on the Class A Certificates within the meaning of
Section 4.04. The Seller, the Depositor, the Servicer and the Trustee
acknowledge, and each Holder by its acceptance of a Class A Certificate
agrees, that without the need for any further action on the part of the
Certificate Insurer, the Seller, the Servicer or the Trustee, to the extent
the Certificate Insurer makes payments, directly or indirectly, on account
of principal of or interest on the Class A Certificates to the Holders of
such Certificates, the Certificate Insurer will be fully subrogated to the
rights of such Holders to receive such principal and/or interest from the
Trust Estate.
The Trustee, the Depositor and the Servicer shall reasonably
cooperate in all respects with any reasonable request by the Certificate
Insurer or the Class A Certificateholders (when other than the Seller, the
Servicer or any affiliate thereof) for action to preserve or enforce the
respective rights or interests of the Certificate Insurer or the Class A
Certificateholders under this Agreement without limiting the rights or
affecting the interests of the Holders as otherwise set forth herein.
SECTION 9.05. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to the
Certificateholders and, if not otherwise required to be sent to the
Certificate Insurer, shall also be sent to the Certificate Insurer.
SECTION 9.06. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
IX-3
<PAGE>
ARTICLE X
TERMINATION
SECTION 10.01. Termination.
(a) Subject to Section 10.02, this Agreement shall terminate upon
notice to the Trustee of either: (i) the later of the distribution to
Certificateholders of the final payment or collection with respect to the
last Mortgage Loan (or advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due hereunder and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer,
the Seller, the Certificate Insurer, each and all Certificateholders in
writing; provided, however, that in no event shall the Trust established by
-------- -------
this Agreement terminate later than twenty-one years after the death of the
last surviving lineal descendant of John D. Rockefeller, Sr., the late
President of Standard Oil Corporation, alive as of the date hereof.
(b) Subject to Section 10.02, the Majority Class R
Certificateholders may, at their option, terminate this Agreement on any
Distribution Date following the date on which the aggregate Loan Balance of
the Mortgage Loans is less than 10% of the original Class A Certificate
Principal Balance by purchasing, on the Servicer Remittance Date preceding
such Distribution Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (x) the greater of (i) 100% of the
Loan Balance of each outstanding Mortgage Loan and each REO Property as of
the last day of the preceding Due Period, and (ii) the fair market value
(disregarding accrued interest) of the Mortgage Loans and REO Properties,
determined as the average of three written bids (copies of which shall be
delivered to the Trustee, the Certificate Insurer and the Servicer) made by
nationally recognized dealers, (y) 30 days' interest thereon at a rate equal
to the Mortgage Rate, (z) the aggregate amount of (i) all unreimbursed
Delinquency Advances, (ii) all unreimbursed Servicing Advances relating, in
the case of unreimbursed Servicing Advances, only to the Mortgage Loans and
REO Properties then held as part of the Trust Estate, (iii) any accrued and
unpaid Servicing Fees and (iv) the Reimbursement Amount (the "Termination
Price").
(c) Subject to Section 10.02, the Servicer (and if Cityscape is
removed as Servicer, the Certificate Insurer) may, at its option, terminate
this Agreement on any Distribution Date following the date on which the
aggregate Loan Balance of the Mortgage Loans is less than 5% of the original
Class A Certificate Principal Balance by purchasing, on the Servicer
Remittance Date preceding such Distribution
<PAGE>
Date, all of the outstanding Mortgage Loans and REO Properties at a price
equal to the Termination Price.
(d) In connection with any such purchase pursuant to either
paragraph (b) or (c) above, the Servicer shall deposit in the Certificate
Account all amounts then on deposit in the Collection Account (less amounts
permitted to be withdrawn by the Servicer pursuant to Section 3.11), which
deposit shall be deemed to have occurred immediately preceding such purchase.
Any such purchase shall be accomplished by the deposit of the
Termination Price into the Certificate Account on the applicable Servicer
Remittance Date, which amount shall be applied to the distributions to be
made on the Distribution Date immediately following such Servicer Remittance
Date. Upon such deposit of the Termination Price, the Trustee shall pay the
Servicer the amount described in clause (z) of the definition of "Termination
Price" from the amounts on deposit in the Certificate Amount.
(e) In connection with any such purchase pursuant to either
paragraph (b) or (c) above, the party or parties effecting such purchase
shall (i) at their or its own expense, provide to the Trustee an Opinion of
Counsel experienced in federal income tax matters in form and substance
satisfactory to the Trustee to the effect that such purchase constitutes a
"Qualified Liquidation", as such term is defined in the REMIC Provisions of
the REMIC Trust and (ii) shall give the Trustee, the Certificate Insurer and
the Servicer (if the purchaser is not the Servicer) at least 60 days prior
written notice of their or its intent to exercise such option. The Class R
Certificateholders and the Servicer shall at the time discuss future
servicing arrangements for the Mortgage Loans.
(f) Notice of any termination, specifying the Distribution Date
upon which the Trust will terminate shall, after the Trustee's receipt any
such notice, be given promptly by the Trustee by letter to the
Certificateholders by first class mail or overnight delivery during the month
of such final distribution two Business Days after the Determination Date in
such month, specifying (i) the Distribution Date upon which final payment of
the Certificates will be made and (ii) the amount of any such final payment.
(g) In the event that not all of the Class R Certificateholders
pay the Termination Price, the non-purchasing Class R Certificateholder shall
not be entitled to, and the Trustee shall not distribute to such non-
purchasing Class R Certificateholder, any of the remaining Mortgage Loans,
REO Properties or Mortgage files, or any amount in excess of the amount such
Class R Certificateholder would have
X-2
<PAGE>
been entitled to receive on such Distribution Date had such termination not
occurred.
(h) Each Holder is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has
made the final distribution thereon shall be deemed canceled and shall no
longer be outstanding for any purpose of this Agreement, whether or not such
Certificate is ever returned to the Trustee.
(i) In the event that any amount due to any Class A
Certificateholder remains unclaimed, the Trustee shall, at its expense, use
its best efforts to contact each such Class A Certificateholder by mail or
telephone and if such efforts fail shall cause to be published once, in the
eastern edition of The Wall Street Journal, notice that such money remains
unclaimed. Such funds shall remain uninvested and shall not accrue any
interest. If, within two years after such publication, such amount remains
unclaimed, the party or parties effecting the purchase pursuant to either
clause (b) or (c) above shall be entitled to all unclaimed funds and other
assets which remain subject hereto and the Trustee upon transfer of such
funds shall be discharged of any responsibility for such funds, and the
Certificateholders shall look to such party for payment.
(j) Following any purchase by the party or parties effecting the
purchase pursuant to either clause (b) or (c) above, the Trustee shall
promptly release to such party or parties the Mortgage Files for the remain-
ing Mortgage Loans, and the Trustee shall execute all assignments, endorse-
ments and other instruments necessary to effectuate such transfer as are
furnished by such party or parties.
(k) The Trustee shall return the Policy to the Certificate Insurer
no later than five Business Days following the termination of this Agreement.
SECTION 10.02. Additional Termination Requirements.
(a) In the event the purchase of the Mortgage Loans provided in
Section 10.01 occurs, the Trust shall be terminated in accordance with the
following additional requirements, unless the party or parties effecting such
purchase obtains at its or their own expense and delivers or deliver to the
Trustee and the Certificate Insurer, an Opinion of Counsel, addressed to the
Seller, the Servicer, the Certificate Insurer and the Trustee to the effect
that the failure of the REMIC Trust to comply with the requirements of this
Section 10.02 will not (x) result in the imposition of taxes on "prohibited
transactions" of the REMIC Trust as defined in Section 860F of the Code or
(y) cause the REMIC
X-3
<PAGE>
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(i) Within 90 days prior to the time of the making of the final
payment on the Certificates, the Trustee, on behalf the REMIC Trust shall
adopt a plan of complete liquidation of the REMIC Trust, meeting the
requirements of a qualified liquidation under Section 860F of the Code and
any regulations thereunder and shall specify the first day of such period
in a statement attached to the REMIC Trust's final Tax Returns pursuant to
Treasury Regulations Section 1.860F1;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the time of making of the final payment on
the Certificates, the Servicer, with the cooperation of the Trustee,
shall conduct a sale of the assets of the Trust Estate (other than the
Policy) to the purchasing party or parties for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the purchasing party or parties all cash on
hand in any Account not required to be paid to the Servicer, the Class A
Certificateholders, or any other Person, and the Trust shall terminate at
that time.
(b) By their acceptance of Class R Certificates, the Holders
thereof hereby agree to authorize the Trustee on behalf the REMIC Trust to
adopt a plan of complete liquidation of the REMIC Trust, which authorization
shall be binding upon all successor Class R Certificateholders.
X-4
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
This Agreement may be amended from time to time by the Seller, the
Depositor, the Servicer and the Trustee with the consent of the Certificate
Insurer, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions herein which may be defective or inconsistent with any other
provisions herein or (iii) to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that any such
action listed in clause (i) through (iii) above shall not, as evidenced by
an Independent Opinion of Counsel delivered to the Servicer, the Certificate
Insurer and the Trustee, adversely affect in any respect the interests of any
Certificateholder.
In addition, this Agreement may be amended from time to time by the
Seller, the Depositor, the Servicer and the Trustee with the consent of the
Certificate Insurer and with the consent of the Majority Certificateholders
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
-------- -------
such amendment or waiver shall (x) reduce in any manner the amount of, or
delay the timing of, payments required to be distributed on any Certificate,
including any change in the definition of Specified Overcollateralized
Amount, without the consent of the Holder of such Certificate, (y) adversely
affect in any material respect the interests of the Holders of any Class of
Certificates in a manner other than as described in (x), without the consent
of the Holders of Certificates of such Class evidencing at least 51% of the
Voting Percentage of such Class, or (z) reduce the percentage of Voting
Rights required by (y) without the consent of the Holders of all Certificates
of such Class then outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Independent Opinion of Counsel to the effect that such
amendment will not result in the imposition of a tax on the REMIC Trust
pursuant to the REMIC Provisions or cause the REMIC Trust to fail to qualify
as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish, at the expense of the Person that requested the amendment if
such Person is the Seller or Servicer, but in no event an expense of the
Trustee, otherwise
<PAGE>
at the expense of the Trust, a copy of such amendment and the Opinion of
Counsel referred to in the immediately preceding paragraph to the Servicer,
the Certificate Insurer, each Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders
under this Section 11.01 to approve the particular form of any proposed
amendment; instead it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
SECTION 11.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any
or all of the properties subject to the Mortgages are situated, and in any
other appropriate public recording office or elsewhere, such recordation to
be effected by the Servicer and at its expense, at the expense of the Trust,
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and such counterparts shall constitute but
one and the same instrument.
SECTION 11.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or
to take any action or proceeding in any court for a partition or winding up
of the Trust, nor otherwise affect the rights, obligations and liabilities
of the parties hereto or any of them.
Except as expressly provided for herein, no Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the
XI-2
<PAGE>
Trust, or the obligations of the parties hereto, nor shall anything herein
set forth, or contained in the terms of the Certificates, be construed so as
to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to
any third person by reason of any action taken by the parties to this
Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity (provided that an unsecured letter of
indemnity in a form reasonably satisfactory to the Trustee from a Holder
which is an insurance company having long-term unsecured debt which is rated
at least investment grade (or having a comparable claim-paying ability
rating) and having a minimum net worth of $100,000,000 shall satisfy such
requirement) as it may require against the costs, expenses and liabilities
to be incurred therein or thereby, and the Trustee for 15 days after its
receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder
with every other Certificateholder and the Trustee, that no one or more
Holders of Certificates shall have any right in any manner whatever by virtue
of any provision of this Agreement to affect, disturb or prejudice the rights
of the Holders of any other of such Certificates, or to obtain or seek to
obtain priority over or preference to any other such Holder, which priority
or preference is not otherwise provided for herein, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 11.04. Governing Law; Jurisdiction.
This Agreement shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws. With respect to
any claim arising out of this Agreement each party irrevocably submits to the
exclusive jurisdiction of the courts of the state of New York
XI-3
<PAGE>
and the United States District Court located in the borough of Manhattan,
city of New York, and each party irrevocable waives any objection which it
may have at any time to the laying of venue of any suit, action or proceeding
arising out of or relating hereto brought in any such courts, irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in any inconvenient forum and further irrevocably
waives the right to object, with respect to such claim, suit, action or
proceeding brought in any such court, that such court does not have
jurisdiction over such party, provided that service of process has been made
by any lawful means.
SECTION 11.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given (except as otherwise provided in
Section 11.12 hereof) if personally delivered at or mailed by first class
mail, postage prepaid, or by express delivery service, to (a) in the case of
the Seller and the Servicer, 565 Taxter Road, Elmsford, New York 10523-2300
(telecopy number (914) 592-7101), or such other address or telecopy number
as may hereafter be furnished to the Depositor, the Certificate Insurer and
the Trustee in writing by the Seller, (b) in the case of the Trustee, Harris
Trust and Savings Bank, 311 West Monroe Street, 12th Floor, Chicago, Illinois
60606, Attention: Indenture Trust Administration (telecopy number (312) 461-
3525), or such other address or telecopy number as may hereafter be furnished
to the Depositor, the Certificate Insurer, the Seller and the Servicer in
writing by the Trustee, (c) in the case of the Depositor, Financial Assets
Securities Corp., 600 Steamboat Road, Greenwich, Connecticut 06830,
Attention: General Counsel, (203) 625-6065 (telecopy number (203) 629-4571),
or such other address or telecopy number as may be furnished to the Seller,
the Servicer, the Trustee and the Certificate Insurer in writing by the
Depositor, and (e) in the case of the Certificate Insurer, Financial Security
Assurance, Inc., Attention: Surveillance Department, 350 Park Avenue, New
York, New York, telephone number (212) 826-0100 (telecopy number (212) 888-
5278), or such other address or telecopy number as may hereafter be furnished
to the Trustee, the Seller, the Depositor and the Servicer in writing by the
Certificate Insurer. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Notice of any
Servicer Default shall be given by telecopy and by certified mail. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the
manner set forth above.
XI-4
<PAGE>
SECTION 11.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement or of the Certificates or the rights of
the Holders thereof.
SECTION 11.07. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
SECTION 11.08. Notice to S&P and Moody's.
(a) The Trustee and the Servicer shall each be obligated to use
their best reasonable efforts promptly to provide notice to S&P and Moody's
with respect to each of the following of which a Responsible Officer of the
Trustee or Servicer, as the case may be, has actual knowledge:
(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Servicer Default that has not been cured
or waived;
(iii) The resignation or termination of the Servicer or the Trustee;
(iv) The final payment to Holders of the Certificates of any Class;
(v) Any change in the location of any Account; and
(vi) Any event that would result in the inability of the Trustee
to make advances regarding delinquent Mortgage Loans.
(b) In addition, (i) the Trustee shall promptly furnish to each
Rating Agency copies of the following:
(A) Each annual report to Certificateholders described in Section
4.05; and
(B) Each Statement to Certificateholders described in Section
4.05; and
XI-5
<PAGE>
(ii) the Servicer shall promptly furnish to each Rating Agency copies of the
following:
(C) Each annual statement as to compliance described in Section
3.19;
(D) Each annual independent public accountants' servicing report
described in Section 3.20;
(E) Each Collection Account Statement described in Section 3.18;
and
(F) Each notice delivered pursuant to Section 7.01(a) which
relates to the fact that the Servicer has not made a Delinquency Advance.
Any such notice pursuant to this Section 11.08 shall be in writing
and shall be deemed to have been duly given if personally delivered or mailed
by first class mail, postage prepaid, or by express delivery service to
Moody's Investors Service, Inc., Pass-Through Monitoring Department, 99
Church Street, New York, New York 10007, Attention: Structured Finance
Group; to Standard & Poor's Corporation, Ratings Group, 25 Broadway, 15th
Floor, New York, New York 10004-1064, Attention: Mortgage Surveillance Group.
SECTION 11.09. Further Assurances.
Notwithstanding any other provision of this Agreement, neither the
Certificate Insurer nor the Class A Certificateholders nor the Trustee shall
have any obligation to consent to any amendment or modification of this
Agreement unless it has been provided reasonable security or indemnity
against its out-of-pocket expenses (including reasonable attorneys' fees) to
be incurred in connection therewith. To the extent permitted by law, each
of the Seller, the Trustee, and the Servicer agrees that it will, from time
to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such further instruments as the Certificate
Insurer may reasonably request to effectuate the intention of or facilitate
the performance of this Agreement.
SECTION 11.10. Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or
implied, shall give to any Person, other than the Certificateholders, 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.
XI-6
<PAGE>
SECTION 11.11. Acts of Certificateholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or
taken by the Certificateholders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such
Certificateholders in person or by agent duly appointed in writing; and such
action shall become effective when such instrument or instruments are
delivered to the Trustee, the Seller, the Servicer and the Certificate
Insurer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the
Certificateholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Agreement and conclusive in favor
of the Trustee and the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Whenever such execution is by a signer acting in a
capacity other than his or her individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Certificateholder shall bind every
future Holder of such Certificate and the holder of every Certificate issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Trust in reliance thereon, whether or not notation of such
action is made upon such Certificates.
SECTION 11.12. Appointment of Tax Matters Person.
The Holders of the Class R Certificates hereby appoint the Trustee
to act, as their agent, as the Tax Matters Person for the REMIC Trust for all
purposes of the Code. The 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 Holders of the Class R Certificates may hereafter appoint a different
entity as their agent, or may appoint a Class R Certificateholder to be the
Tax Matters Person for the REMIC Trust.
XI-7
<PAGE>
IN WITNESS WHEREOF, the Seller, the Depositor, the Servicer and the
Trustee have caused their names to be signed hereto by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
FINANCIAL ASSET SECURITIES CORP.
as Depositor
By:
---------------------------
Name:
Title:
CITYSCAPE CORP.,
as Seller and Servicer
By:
---------------------------
Name:
Title: Authorized Signatory
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
---------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of June 1996 before me, a notary public in and for
said State, personally appeared _______________________________ known to me
to be an Authorized Signatory of Financial Asset Securities Corp., a Delaware
corporation that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the 27th day of June 1996 before me, a notary public in and
for said State, personally appeared Robert Grosser known to me to be
President of Cityscape Corp., a corporation that executed the within
instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
___________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of June 1996 before me, a notary public in and
for said State, personally appeared E. Kay Liederman, known to me to be a
Vice President of Harris Trust and Savings Bank, an Illinois Banking
Corporation that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------------
Notary Public
<PAGE>
EXHIBIT 2
(BROWN & WOOD LETTERHEAD)
June 27, 1996
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Financial Asset Securities Corp.
Cityscape Home Equity Loan Trust, Series 1996-2
Home Equity Loan Pass-Through Certificates
-----------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel for you and Financial Asset
Securities Corp. (the "Company") in connection with your purchase,
pursuant to an Underwriting Agreement, dated June 25, 1996, between the
Company and you, of Financial Asset Securities Corp., Cityscape Home
Equity Loan Trust, Series 1996-2, Home Equity Loan Pass-Through
Certificates, Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates (the "Offered Certificates"). The Offered Certificates are
being issued together with the Class R Certificates pursuant to a Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement") dated as
of June 21, 1996, among the Company, as depositor, Cityscape Corp., as
seller and as servicer, and Harris Trust and Savings Bank, as trustee.
The Offered Certificates and the Class R Certificates are herein
collectively referred to as the "Certificates".
The Certificates represent the entire beneficial interest in a trust
fund (the "Trust Fund") created pursuant to the Pooling and Servicing
Agreement. The Offered Certificates will evidence senior beneficial
ownership interests in the Trust Fund, with the remaining beneficial
ownership interest in the Trust Fund being evidenced by the Class R
Certificates. The assets of the Trust Fund consist primarily of a pool of
conventional, fixed-rate mortgage
XI-1
<PAGE>
loans secured by first and second liens on one- to four-family residential
properties and mixed-use properties.
Unless otherwise indicated, all terms used herein shall have the
meanings assigned to such terms in the Pooling and Servicing Agreement.
In arriving at the opinions expressed below, we have examined such
documents and records as we deemed appropriate, including the following:
1. Signed copy of the Registration Statement on Form S-3 (File No.
33-99018) filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "1933
Act"), on November 6, 1995, as amended, and declared effective by the
Commission on March 20, 1996 (such registration statement, as amended,
being referred to herein as the "Registration Statement").
2. The Prospectus relating to the Offered Certificates, dated March
20, 1996 (the "Basic Prospectus"), as supplemented by the Prospectus
Supplement, dated June 25, 1996 (the "Prospectus Supplement"), each as
filed with the Commission pursuant to Rule 424(b) under the 1933 Act (the
Basic Prospectus, as supplemented by the Prospectus Supplement, the
"Prospectus").
3. Signed copy of the Pooling and Servicing Agreement.
In addition, we have made such investigations of such matters of law
as we deemed appropriate as a basis for the opinions expressed below.
Further, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the due
authorization, execution and delivery of the Pooling and Servicing
Agreement by the respective parties thereto (other than the Company).
Based upon the foregoing, we are of the opinion that the Trust Fund
will qualify as a "real estate mortgage investment conduit" ("REMIC")
within the meaning of Section 860D of the Internal Revenue Code of 1986,
as amended (the "Code"), the Offered Certificates will be treated as
"regular interests" in the REMIC for purposes of Code Section 860G(a)(1),
and the Class R Certificates will be treated as the "residual interest" in
the REMIC for purposes of Code Section 860G(a)(2), assuming: (i) an
election is made to treat the assets of the Trust Fund as a REMIC, (ii)
compliance with the Pooling and Servicing Agreement and (iii) compliance
with changes in the law, including any
<PAGE>
amendments to the Code or applicable regulations of the United States
Treasury thereunder.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the federal laws of the United States
of America.
We hereby consent to the filing of this letter as an exhibit to the
Current Report on Form 8-K and to the references to this firm under the
heading "Certain Material Federal Income Tax Consequences" in the
Prospectus Supplement which is a part of the Registration Statement,
without admitting that we are "experts" within the meaning of the
Securities Act of 1933, as amended, or the Rules and Regulations of the
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ BROWN & WOOD
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