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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) December 31, 1996
FINANCIAL ASSET SECURITIES CORP., (as depositor under the
Pooling and Servicing Agreement, dated as of December 9, 1996,
which forms Cityscape Home Equity Loan Trust 1996-4, which will
issue the Cityscape Home Equity Loan Trust 1996-4, Home Equity
Loan Pass-Through Certificates, Series 1996-4).
FINANCIAL ASSET SECURITIES CORP.
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(Exact name of registrant as specified in its charter)
Delaware 333-10273 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 December 31, 1996 Financial Asset Securities Corp. (the "Company")
entered into a Pooling and Servicing Agreement dated as of December 9,
1996 (the "Pooling and Servicing Agreement"), by and among, the Company,
as depositor, Cityscape Corp., as servicer and seller, and First Bank
National Association, 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 LLP, dated December 31, 1996,
attached hereto as Exhibit 2, into the Registrant's registration statement
(File No. 333-10273).
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibit:
1. Pooling and Servicing Agreement
2. Opinion of Brown & Wood LLP
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/ Craig Eckes
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Craig Eckes
Dated: December 31, 1996
Exhibit Index
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Exhibit Page
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1. Pooling and Servicing Agreement
2. Opinion of Brown & Wood LLP
EXHIBIT 1
EXECUTION COPY
FINANCIAL ASSET SECURITIES CORP.,
Depositor
CITYSCAPE CORP.,
Seller and Servicer
and
FIRST BANK NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of December 9, 1996
_________________________________
CITYSCAPE HOME EQUITY LOAN TRUST, SERIES 1996-4
HOME EQUITY PASS-THROUGH CERTIFICATES
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . 1
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . 1
Accepted Servicing Procedures . . . . . . . . . . . . . . . 1
Account . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Accrual Period . . . . . . . . . . . . . . . . . . . . . . 1
Addition Notice . . . . . . . . . . . . . . . . . . . . . . 1
Additional Servicing Compensation . . . . . . . . . . . . . 1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assignment . . . . . . . . . . . . . . . . . . . . . . . . 2
Available Funds Shortfall . . . . . . . . . . . . . . . . . 2
Balloon Mortgage Loan . . . . . . . . . . . . . . . . . . . 2
Balloon Payment . . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . 2
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Book-Entry Certificates . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Account . . . . . . . . . . . . . . . 2
Capitalized Interest Requirement . . . . . . . . . . . . . 2
Certificate . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate Account . . . . . . . . . . . . . . . . . . . . 3
Certificate Insurer . . . . . . . . . . . . . . . . . . . . 3
Certificate Insurer Default . . . . . . . . . . . . . . . . 3
Certificate Register . . . . . . . . . . . . . . . . . . . 3
Certificateholder" or "Holder . . . . . . . . . . . . . . . 3
Certificate Owner . . . . . . . . . . . . . . . . . . . . . 3
Civil Relief Act . . . . . . . . . . . . . . . . . . . . . 4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A Certificates . . . . . . . . . . . . . . . . . . . 4
Class A Certificateholder . . . . . . . . . . . . . . . . . 4
Class A-1 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-2 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-3 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-4 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-5 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-6 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-7 Certificate . . . . . . . . . . . . . . . . . . . 4
Class A-8 Certificate . . . . . . . . . . . . . . . . . . . 5
Class A-9 Certificate . . . . . . . . . . . . . . . . . . . 5
Class A-9 Priority Distribution Amount . . . . . . . . . . 5
Class A-9 Priority Percentage . . . . . . . . . . . . . . . 5
Class A-9 Pro Rata Distribution Amount . . . . . . . . . . 5
Class A-IO Certificate . . . . . . . . . . . . . . . . . . 5
Class A-IO Pass-Through Rate . . . . . . . . . . . . . . . 5
Class A-IO Notional Principal Amount . . . . . . . . . . . 5
Class A-10 Certificate . . . . . . . . . . . . . . . . . . 6
Class Certificate Principal Balance . . . . . . . . . . . . 6
Class R Certificate . . . . . . . . . . . . . . . . . . . . 6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Collection Account . . . . . . . . . . . . . . . . . . . . 6
Corporate Trust Office . . . . . . . . . . . . . . . . . . 6
Cumulative Loss Percentage . . . . . . . . . . . . . . . . 6
Cumulative Loss Test . . . . . . . . . . . . . . . . . . . 6
Cumulative Net Losses . . . . . . . . . . . . . . . . . . . 7
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . 7
Cut-Off Date Loan Balance . . . . . . . . . . . . . . . . . 7
Definitive Certificates . . . . . . . . . . . . . . . . . . 7
Deleted Mortgage Loan . . . . . . . . . . . . . . . . . . . 7
Delinquency Advance . . . . . . . . . . . . . . . . . . . . 7
Delinquency Report . . . . . . . . . . . . . . . . . . . . 7
Delinquent . . . . . . . . . . . . . . . . . . . . . . . . 7
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . 7
Depository . . . . . . . . . . . . . . . . . . . . . . . . 7
Depository Agreement . . . . . . . . . . . . . . . . . . . 8
Depository Participant . . . . . . . . . . . . . . . . . . 8
Determination Date . . . . . . . . . . . . . . . . . . . . 8
Directly Operate . . . . . . . . . . . . . . . . . . . . . 8
Disqualified Organization . . . . . . . . . . . . . . . . . 8
Distribution Account . . . . . . . . . . . . . . . . . . . 8
Distribution Date . . . . . . . . . . . . . . . . . . . . . 9
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . 9
Due Period . . . . . . . . . . . . . . . . . . . . . . . . 9
Eligible Account . . . . . . . . . . . . . . . . . . . . . 9
Estate in Real Property . . . . . . . . . . . . . . . . . . 9
Excess Overcollateralized Amount . . . . . . . . . . . . . 9
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Final Recovery Determination . . . . . . . . . . . . . . . 10
First Lien . . . . . . . . . . . . . . . . . . . . . . . . 10
First Mortgage Loan . . . . . . . . . . . . . . . . . . . . 10
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Group I . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Group I Carry-Forward Amount . . . . . . . . . . . . . . . 10
Group I Certificate Principal Balance . . . . . . . . . . . 10
Group I Certificates . . . . . . . . . . . . . . . . . . . 10
Group I Closing Date Deposit . . . . . . . . . . . . . . . 10
Group I Current Interest . . . . . . . . . . . . . . . . . 11
Group I Distribution Amount . . . . . . . . . . . . . . . . 11
Group I Interest Remittance Amount . . . . . . . . . . . . 11
Group I Mortgage Loans . . . . . . . . . . . . . . . . . . 11
Group I Overcollateralization Deficit . . . . . . . . . . . 11
Group I Overcollateralization Increase Amount . . . . . . . 11
Group I Overcollateralization Reduction Amount . . . . . . 11
Group I Overcollateralized Amount . . . . . . . . . . . . . 12
Group I Principal Distribution Amount . . . . . . . . . . . 12
Group I Specified Overcollateralization Amount . . . . . . 13
Group I Specified Overcollateralization Deficiency Amount . 13
Group II . . . . . . . . . . . . . . . . . . . . . . . . . 13
Group II Carry-Forward Amount . . . . . . . . . . . . . . . 13
Group II Certificate Principal Balance . . . . . . . . . . 14
Group II Certificates . . . . . . . . . . . . . . . . . . . 14
Group II Closing Date Deposit . . . . . . . . . . . . . . . 14
Group II Current Interest . . . . . . . . . . . . . . . . . 14
Group II Distribution Amount . . . . . . . . . . . . . . . 14
Group II Interest Remittance Amount . . . . . . . . . . . . 14
Group II Mortgage Loans . . . . . . . . . . . . . . . . . . 14
Group II Overcollateralization Deficit . . . . . . . . . . 14
Group II Overcollateralization Increase Amount . . . . . . 14
Group II Overcollateralization Reduction Amount . . . . . . 15
Group II Overcollateralized Amount . . . . . . . . . . . . 15
Group II Principal Distribution Amount . . . . . . . . . . 15
Group II Specified Overcollateralization Amount . . . . . . 16
Group II Specified Overcollateralization Deficiency Amount 16
Independent . . . . . . . . . . . . . . . . . . . . . . . . 16
Independent Contractor . . . . . . . . . . . . . . . . . . 16
Initial Certificate Principal Balance . . . . . . . . . . . 17
Initial Group I Specified Overcollateralized Amount . . . . 17
Initial Group II Specified Overcollateralized Amount . . . 17
Initial Mortgage Loans . . . . . . . . . . . . . . . . . . 17
Insurance Agreement . . . . . . . . . . . . . . . . . . . . 17
Insurance Premium . . . . . . . . . . . . . . . . . . . . . 17
Insured Distribution Amount . . . . . . . . . . . . . . . . 17
Insured Payment . . . . . . . . . . . . . . . . . . . . . . 17
Late Collection . . . . . . . . . . . . . . . . . . . . . . 17
Late Payment Rate . . . . . . . . . . . . . . . . . . . . . 17
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . 18
Liquidation Report . . . . . . . . . . . . . . . . . . . . 18
Loan Balance . . . . . . . . . . . . . . . . . . . . . . . 18
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . 18
Majority Certificateholders . . . . . . . . . . . . . . . . 18
Majority Class R Certificateholders . . . . . . . . . . . . 18
Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . 18
Maximum Group I Collateral Amount . . . . . . . . . . . . . 18
Maximum Group II Collateral Amount . . . . . . . . . . . . 18
Monthly Payment . . . . . . . . . . . . . . . . . . . . . . 18
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . 19
Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . 19
Mortgage Loan Schedule . . . . . . . . . . . . . . . . . . 19
Mortgage Note . . . . . . . . . . . . . . . . . . . . . . . 20
Mortgage Portfolio Performance Test . . . . . . . . . . . . 20
Mortgage Rate . . . . . . . . . . . . . . . . . . . . . . . 20
Mortgaged Property . . . . . . . . . . . . . . . . . . . . 20
Mortgagor . . . . . . . . . . . . . . . . . . . . . . . . . 21
Net Mortgage Rate . . . . . . . . . . . . . . . . . . . . . 21
Net Recovery Proceeds . . . . . . . . . . . . . . . . . . . 21
New Lease . . . . . . . . . . . . . . . . . . . . . . . . . 21
Nonrecoverable Delinquency Advance . . . . . . . . . . . . 21
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 21
O/C Loss Test . . . . . . . . . . . . . . . . . . . . . . . 21
Officers' Certificate . . . . . . . . . . . . . . . . . . . 21
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 21
Original Group I Certificate Principal Balance . . . . . . 22
Original Group I Certificates . . . . . . . . . . . . . . . 22
Original Group II Certificate Principal Balance . . . . . . 22
Original Group II Certificates . . . . . . . . . . . . . . 22
Original Class Certificate Principal Balance . . . . . . . 22
Original Pre-Funding Amount . . . . . . . . . . . . . . . . 22
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . 23
Percentage Interest . . . . . . . . . . . . . . . . . . . . 23
Permitted Investments . . . . . . . . . . . . . . . . . . . 23
Person . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Placement Agent . . . . . . . . . . . . . . . . . . . . . . 24
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Policy Payments Account . . . . . . . . . . . . . . . . . . 24
Pool Delinquency Rate . . . . . . . . . . . . . . . . . . . 24
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . 24
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . 24
Pre-Funding Earnings . . . . . . . . . . . . . . . . . . . 24
Pre-Funding Period . . . . . . . . . . . . . . . . . . . . 24
Preference Amount . . . . . . . . . . . . . . . . . . . . . 25
Premium Rate . . . . . . . . . . . . . . . . . . . . . . . 25
Premium Supplement . . . . . . . . . . . . . . . . . . . . 25
Prepayment Assumption . . . . . . . . . . . . . . . . . . . 25
Prepayment Interest Shortfall . . . . . . . . . . . . . . . 25
Principal Prepayment . . . . . . . . . . . . . . . . . . . 25
Principal Remittance Amount . . . . . . . . . . . . . . . . 25
Private Placement Memorandum . . . . . . . . . . . . . . . 25
Prospectus Supplement . . . . . . . . . . . . . . . . . . . 25
Property Insurance Proceeds . . . . . . . . . . . . . . . . 25
Purchase Price . . . . . . . . . . . . . . . . . . . . . . 25
Qualified Substitute Mortgage Loan . . . . . . . . . . . . 26
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . 26
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . 26
Record Date . . . . . . . . . . . . . . . . . . . . . . . . 26
Reimbursement Amount . . . . . . . . . . . . . . . . . . . 26
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
REMIC Provisions . . . . . . . . . . . . . . . . . . . . . 27
REMIC Trust . . . . . . . . . . . . . . . . . . . . . . . . 27
Remittance Report . . . . . . . . . . . . . . . . . . . . . 27
Rents from Real Property . . . . . . . . . . . . . . . . . 27
REO Disposition . . . . . . . . . . . . . . . . . . . . . . 27
REO Property . . . . . . . . . . . . . . . . . . . . . . . 27
Request for Release . . . . . . . . . . . . . . . . . . . . 27
Residential Dwelling . . . . . . . . . . . . . . . . . . . 27
Responsible Officer . . . . . . . . . . . . . . . . . . . . 27
Rolling Six Month Delinquency Rate . . . . . . . . . . . . 28
Rolling Twelve Month Loss Rate . . . . . . . . . . . . . . 28
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Second Loan-to-Value Ratio . . . . . . . . . . . . . . . . 28
Second Mortgage Loan . . . . . . . . . . . . . . . . . . . 28
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . 28
Servicer Default . . . . . . . . . . . . . . . . . . . . . 28
Servicer Information . . . . . . . . . . . . . . . . . . . 28
Servicer Loss Test . . . . . . . . . . . . . . . . . . . . 28
Servicer Remittance Date . . . . . . . . . . . . . . . . . 29
Servicer Remittance Report . . . . . . . . . . . . . . . . 29
Servicer Termination Test . . . . . . . . . . . . . . . . . 29
Servicing Account . . . . . . . . . . . . . . . . . . . . . 29
Servicing Advances . . . . . . . . . . . . . . . . . . . . 29
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . 29
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . 30
Servicing Officer . . . . . . . . . . . . . . . . . . . . . 30
Small Mixed-Use/Multi Family Property . . . . . . . . . . . 30
Startup Date . . . . . . . . . . . . . . . . . . . . . . . 30
Stepdown Date . . . . . . . . . . . . . . . . . . . . . . . 30
Stepdown Requirement . . . . . . . . . . . . . . . . . . . 30
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . 30
Sub-Servicing Account . . . . . . . . . . . . . . . . . . . 30
Sub-Servicing Agreement . . . . . . . . . . . . . . . . . . 30
Subsequent Cut-Off Date Deposit . . . . . . . . . . . . . . 30
Subsequent Mortgage Loans . . . . . . . . . . . . . . . . . 30
Subsequent Transfer Date . . . . . . . . . . . . . . . . . 31
Subsequent Transfer Agreement . . . . . . . . . . . . . . . 31
Substitution Shortfall Amount . . . . . . . . . . . . . . . 31
Tax Matters Person . . . . . . . . . . . . . . . . . . . . 31
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . 31
Termination Price . . . . . . . . . . . . . . . . . . . . . 31
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . 31
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trustee's Fee . . . . . . . . . . . . . . . . . . . . . . . 31
Trustee's Fee Rate . . . . . . . . . . . . . . . . . . . . 32
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . 32
United States Person or U.S. Person . . . . . . . . . . . . 32
Uninsured Cause . . . . . . . . . . . . . . . . . . . . . . 32
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Voting Percentage . . . . . . . . . . . . . . . . . . . . . 32
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . 32
Weighted Average Adjusted Pass-Through Rate . . . . . . . . 32
Written Order to Authenticate . . . . . . . . . . . . . . . 33
SECTION 1.02 Accounting . . . . . . . . . . . . . . . . . . . 33
ARTICLE II
ESTABLISHMENT OF THE TRUST;
PURCHASE AND SALE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Establishment of the Trust . . . . . . . . . . . 1
SECTION 2.02. Purchase and Sale of Mortgage Loans . . . . . . . 1
SECTION 2.03. Grant of Security Interest . . . . . . . . . . . 1
SECTION 2.04. Document Delivery Requirements . . . . . . . . . 2
SECTION 2.05. Acceptance by Trustee . . . . . . . . . . . . . . 5
SECTION 2.06. Repurchase or Substitution of Mortgage Loans by
the Seller or the Servicer . . . . . . . . . . . 6
SECTION 2.07. Representations and Warranties with respect to
the Mortgage Loans . . . . . . . . . . . . . . . 9
SECTION 2.08. Representations and Warranties of the Seller . . 18
SECTION 2.09. Representations, Warranties and Covenants of the
Servicer . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.10. Representations and Warranties of the Depositor . 23
SECTION 2.11. Execution of Certificates . . . . . . . . . . . . 25
SECTION 2.12. Miscellaneous REMIC Provisions . . . . . . . . . 25
SECTION 2.13. Subsequent Transfers . . . . . . . . . . . . . . 26
SECTION 2.14. Mandatory Prepayment . . . . . . . . . . . . . . 29
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST
SECTION 3.01. Administration of the Trust; Servicing of the
Mortgage Loans . . . . . . . . . . . . . . . . . 1
SECTION 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers . . . . . . . . . . . . . . . . . . 4
SECTION 3.03. Termination of Sub-Servicing Agreement . . . . . 5
SECTION 3.04. Liability of the Servicer . . . . . . . . . . . . 5
SECTION 3.05. No Contractual Relationship Between Sub-Servicers
and Trustee or Certificateholders . . . . . . . . 5
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee . . . . . . . . . . . . . . 6
SECTION 3.07. Collection of Certain Mortgage Loan Payments . . 6
SECTION 3.08. Sub-Servicing Accounts . . . . . . . . . . . . . 7
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts . . . . . . . . . . . . 7
SECTION 3.10. Collection Account . . . . . . . . . . . . . . . 8
SECTION 3.11. Withdrawals from the Collection Account . . . . . 9
SECTION 3.12. Investment of Funds in the Accounts . . . . . . . 10
SECTION 3.13. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage . . . . . . . . . 12
SECTION 3.14. Enforcement of Due-On-Sale Clauses; Assumption
Agreements. . . . . . . . . . . . . . . . . . . . 13
SECTION 3.15. Realization Upon Defaulted Mortgage Loans . . . . 14
SECTION 3.16. Trustee to Cooperate; Release of Mortgage Files . 15
SECTION 3.17. Servicing Compensation . . . . . . . . . . . . . 16
SECTION 3.18. Reports to the Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . 17
SECTION 3.19. Statement as to Compliance and Financial
Statements . . . . . . . . . . . . . . . . . . . 17
SECTION 3.20. Independent Public Accountants' Servicing Report 18
SECTION 3.21. Access to Certain Documentation . . . . . . . . . 19
SECTION 3.22. Title, Management and Disposition of REO Property 19
SECTION 3.23. Prepayment Interest Shortfalls . . . . . . . . . 21
SECTION 3.24. Superior Liens . . . . . . . . . . . . . . . . . 21
SECTION 3.25. Indemnification . . . . . . . . . . . . . . . . . 21
SECTION 3.26. Certain Procedures Relating to Successor Sub-
Servicers and Successor Servicers . . . . . . . . 22
SECTION 3.27. Reports to the Securities and Exchange Commission 23
ARTICLE IV
FLOW OF FUNDS
SECTION 4.01. Establishment of Accounts . . . . . . . . . . . . 1
SECTION 4.02. The Certificate Insurance Policy . . . . . . . . 1
SECTION 4.03. Deposits To, and Transfers Among, the Accounts . 3
SECTION 4.04. Flow of Funds and Distributions . . . . . . . . . 3
SECTION 4.05. Statements to Certificateholders. . . . . . . . . 7
SECTION 4.06. Remittance Reports; Delinquency Advances by the
Servicer and Insurance Claims . . . . . . . . . . 10
SECTION 4.07. Compliance with Withholding Requirements . . . . 11
SECTION 4.08. Pre-Funding Account and Capitalized Interest
Account . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates . . . . . . . . . . . . . . . . 1
SECTION 5.02. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . 1
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates 4
SECTION 5.04. Persons Deemed Certificateholders . . . . . . . . 4
SECTION 5.05. Book-Entry Certificates . . . . . . . . . . . . . 4
SECTION 5.06. Notices to Depository . . . . . . . . . . . . . . 5
SECTION 5.07. Definitive Certificates . . . . . . . . . . . . . 6
ARTICLE VI
THE SELLER AND THE SERVICER
SECTION 6.01. Liability of the Seller, the Depositor and the
Servicer . . . . . . . . . . . . . . . . . . . . 1
SECTION 6.02. Merger or Consolidation of the Seller or the
Servicer . . . . . . . . . . . . . . . . . . . . 1
SECTION 6.03. Limitation on Liability of the Seller, the
Servicer and Others . . . . . . . . . . . . . . . 1
SECTION 6.04. Limitation on Resignation of the Servicer; No
Assignment or Delegation of Duties by Servicer . 2
SECTION 6.05. Rights of the Seller, the Depositor, the
Certificateholders and Others in Respect of the
Servicer . . . . . . . . . . . . . . . . . . . . 3
SECTION 6.06. Eligibility Requirements for Servicer . . . . . . 3
ARTICLE VII
DEFAULT
SECTION 7.01. Servicer Defaults; Certain Matters Affecting the
Servicer . . . . . . . . . . . . . . . . . . . . 1
SECTION 7.02. Trustee to Act; Appointment of Successor . . . . 3
SECTION 7.03. Notification to Mortgagors and Certificateholders 5
SECTION 7.04. Additional Remedies of Trustee Upon Servicer
Defaults . . . . . . . . . . . . . . . . . . . . 5
SECTION 7.05. Waiver of Servicer Defaults . . . . . . . . . . . 5
SECTION 7.06 Survivability of Servicer Liabilities . . . . . . 5
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee . . . . . . . . . . . . . . . . 1
SECTION 8.02. Certain Matters Affecting the Trustee . . . . . . 2
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 8.04. Trustee May Own Certificates . . . . . . . . . . 3
SECTION 8.05. Expenses of Trustee . . . . . . . . . . . . . . . 4
SECTION 8.06. Trustee Eligibility Requirements . . . . . . . . 4
SECTION 8.07. Resignation and Removal of the Trustee . . . . . 4
SECTION 8.08. Successor Trustee . . . . . . . . . . . . . . . . 5
SECTION 8.09. Merger or Consolidation of Trustee . . . . . . . 6
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee . . 6
SECTION 8.11. Trustee Records . . . . . . . . . . . . . . . . . 7
SECTION 8.12. Appointment of Office or Agency . . . . . . . . . 7
SECTION 8.13. Exercise of Trustee Powers by Certificate Insurer
and Certificateholders . . . . . . . . . . . . . 8
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Certain Rights of the Certificate Insurer . . . . 1
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer . . . . . . . . . . . . . . . 1
SECTION 9.03. Trust Estate and Accounts Held for Benefit of the
Certificate Insurer . . . . . . . . . . . . . . . 2
SECTION 9.04. Effect of Payments by the Certificate Insurer;
Subrogation . . . . . . . . . . . . . . . . . . . 2
SECTION 9.05. Notices to the Certificate Insurer . . . . . . . 3
SECTION 9.06. Third-Party Beneficiary . . . . . . . . . . . . . 3
ARTICLE X
TERMINATION
SECTION 10.01. Termination . . . . . . . . . . . . . . . . . . . 1
SECTION 10.02. Additional Termination Requirements . . . . . . . 3
ARTICLE XI
MISCELLANEOUS PROVISIONS . . . . . . . . . 1
SECTION 11.01. Amendment . . . . . . . . . . . . . . . . . . . . 1
SECTION 11.02. Recordation of Agreement; Counterparts . . . . . 2
SECTION 11.03. Limitation on Rights of Certificateholders . . . 2
SECTION 11.04. Governing Law; Jurisdiction . . . . . . . . . . . 3
SECTION 11.05. Notices . . . . . . . . . . . . . . . . . . . . . 3
SECTION 11.06. Severability of Provisions . . . . . . . . . . . 4
SECTION 11.07. Article and Section References . . . . . . . . . 4
SECTION 11.08. Notice to S&P and Moody's . . . . . . . . . . . . 4
SECTION 11.09. Further Assurances . . . . . . . . . . . . . . . 5
SECTION 11.10. Benefits of Agreement . . . . . . . . . . . . . . 5
SECTION 11.11. Acts of Certificateholders . . . . . . . . . . . 5
SECTION 11.12. Appointment of Tax Matters Person . . . . . . . . 6
EXHIBITS:
--------
Exhibit A Form of Class A Certificate
Exhibit B Form of Class A-IO Certificates
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 Initial Certification
Exhibit F-2 Form of Trustee's Final Certification
Exhibit F-3 Form of Trustee's Quarterly Certification
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
Exhibit P Form of Subsequent Transfer Agreement
Exhibit Q Form of Class A-10 Certificate
Schedule 1 List of Permissible Subsequent Mortgage Loans
This Pooling and Servicing Agreement, dated as of December 9,
1996, among FINANCIAL ASSET SECURITIES CORP., as Depositor, CITYSCAPE
CORP., as Seller and Servicer, and FIRST BANK NATIONAL ASSOCIATION, 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:
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, the Policy Payments Account, Pre-Funding Account and
Capitalized Interest Account.
"Accrual Period": With respect to the first Distribution Date
and the Class A Certificates, the 22-day period commencing on the Cut-Off
Date and ending on December 30, 1996 (inclusive of December 30, 1996).
With respect to any subsequent Distribution Date and the Class A
Certificates, the period commencing on the first day of the calendar month
preceding the month in which such Distribution Date occurs and ending on
the last day of such preceding calendar month.
"Addition Notice": For any date during the Pre-Funding Period,
a notice (which may be verbal or written) given to the Rating Agencies,
the Certificate Insurer and the Trustee pursuant to Section 2.13(b).
"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.
"Available Funds Shortfall": With respect to each Group, 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 (other than the Class
A-IO 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
Distribution Date in January 1997 and Group I, (A) the product of (a) the
Pre-Funding Amount on the Closing Date and (b) 22/360 and (c) the Weighted
Average Adjusted Pass-Through Rate minus (B) 30 days interest at the
related Net Mortgage Rate on each Subsequent Mortgage Loan transferred to
the Trust during the related Due Period which has a Due Date between the
applicable Cut-Off Date and the end of such Due Period.
With respect to the Distribution Date in February 1997 and Group
I, (A) the product of (a) the Pre-Funding Amount on the first day of the
related Due Period and (b) 1/12th and (c) the Weighted Average Adjusted
Pass-Through Rate minus (B) 30 days interest at the related Net Mortgage
Rate on each Subsequent Mortgage Loan transferred to the Trust during the
related Due Period which has a Due Date between the applicable Cut-Off
Date and the end of such Due Period.
"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, First Bank National Association, as
Trustee, in trust for the registered Certificateholders of Cityscape Home
Equity Loan Trust, Series 1996-4" 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 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, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class
A-10 and Class A-IO Certificates.
"Class A Certificateholder": Any Holder of a Class A
Certificate.
"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 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-6 Certificate": Any one of the Class A-6 Certificates
as designated on the face thereof substantially in the form annexed hereto
as Exhibit A-6, 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-7 Certificate": Any one of the Class A-7 Certificates
as designated on the face thereof substantially in the form annexed hereto
as Exhibit A-7, 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-8 Certificate": Any one of the Class A-8 Certificates
as designated on the face thereof substantially in the form annexed hereto
as Exhibit A-8, 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-9 Certificate": Any one of the Class A-9 Certificates
as designated on the face thereof substantially in the form annexed hereto
as Exhibit A-9, 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-9 Priority Distribution Amount": With respect to any
Distribution Date, the lesser of (A) the product of (x) the applicable
Class A-9 Priority Percentage for such Distribution Date and (y) the Class
A-9 Pro Rata Distribution Amount for such Distribution Date and (B) the
Group I Principal Distribution Amount for such Distribution Date.
"Class A-9 Priority Percentage": With respect to each
Distribution Date, the applicable percentage specified below:
Distribution Date Priority Percentage
----------------- -------------------
January 1997 - December 1999 0%
January 2000 - December 2001 45%
January 2002 - December 2002 80%
January 2003 - December 2003 100%
January 2004 and thereafter 300%
"Class A-9 Pro Rata Distribution Amount": With respect to any
Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Certificate Principal Balance of the Class A-9
Certificates immediately prior to such Distribution Date and the
denominator of which is the Group I Certificate Principal Balance
immediately prior to such Distribution Date and (y) the Group I Principal
Distribution Amount for such Distribution Date.
"Class A-IO Certificate": Any one of the Class A-IO
Certificates as designated on the face thereof, substantially in the form
annexed hereto as Exhibit B, executed by the Trustee and authenticated and
delivered by the Trustee, representing the right to distributions as set
forth herein. The Class A-IO Certificates represent a class of "regular
interests" in the REMIC Trust.
"Class A-IO Pass-Through Rate": As described under the
definition of "Pass-Through Rate."
"Class A-IO Notional Principal Amount": With respect to any
Distribution Date, an amount equal to the aggregate Loan Balance of the
Mortgage Loans on the first day of the related Due Period.
"Class A-10 Certificate": Any one of the Class A-10
Certificates as designated on the face thereof substantially in the form
annexed hereto as Exhibit Q, executed by the Trustee and authenticated 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 Certificate Principal Balance": With respect to any
Class of Certificates (other than the Class A-IO and 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 related 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, 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": December 31, 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, First Bank National Association, as Trustee, in trust
for the registered Certificateholders of Cityscape Home Equity Loan Trust,
Series 1996-4", 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 180
East Fifth Street, St. Paul, Minnesota 55101, Attention: Structured
Finance/Cityscape 1996-4, 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.
"Cumulative Loss Percentage": As of any date of determination
and as to either Group, the aggregate of all Realized Losses since the
Startup Date on the Mortgage Loans in such Group as a percentage of the
related Maximum Collateral Amount.
"Cumulative Loss Test": With respect to Group I, the Cumulative
Loss Test for each period indicated below is satisfied if the Cumulative
Loss Percentage for Group I for such period does not exceed the applicable
percentage specified below:
Group I
Period Percentage
------ ----------
December 31, 1996 - November 30, 1998 1.00%
December 1, 1998 - November 30, 1999 1.50%
December 1, 1999 - November 30, 2000 1.75%
December 1, 2000 and thereafter 2.00%
With respect to Group II, the Cumulative Loss Test for each
period indicated below is satisfied if the Cumulative Loss Percentage for
Group II for such period does not exceed the applicable percentage
specified below:
Group II
Period Percentage
------ ----------
December 31, 1996 - November 30, 1998 1.00%
December 1, 1998 - November 30, 1999 2.25%
December 1, 1999 - November 30, 2000 3.50%
December 1, 2000 - November 30, 2001 5.25%
December 1, 2001 and thereafter 7.00%
"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": With respect to the Initial Mortgage Loans, the
close of business on December 9, 1996. With respect to any Subsequent
Mortgage Loan, the date designated as such in the Subsequent Transfer
Agreement.
"Cut-Off Date Loan Balance": As to any Mortgage Loan, the
outstanding principal balance thereof at the close of business on the
related 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).
"Delinquent": A Mortgage Loan is "Delinquent" if any Monthly
Payment due thereon is not made by the close of business on the day such
Monthly Payment is scheduled to be due. A Mortgage Loan is "30 days
Delinquent" if such Monthly Payment 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, 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.
"Depositor": Financial Asset 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 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, First Bank National Association, as
Trustee, in trust for the registered Certificateholders of Cityscape Home
Equity Loan Trust, Series 1996-4" and which must be an Eligible
Account.
"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 January 27, 1997.
"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 January 1997, the period commencing at the start of business on
December 10, 1996 and ending on December 31, 1996 (inclusive). 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 a Group and any Distribution Date, the excess, if any,
of (x) the Overcollateralized Amount for such Group that would apply on
such Distribution Date after taking into account the payment of the
related Distribution Amount on such Distribution Date (except for any
distributions of related Group Overcollateralized Reduction Amounts on
such Distribution Date) over (y) the related Group Specified
Overcollateralized Amount for such Distribution Date; provided, however,
that the Excess Overcollateralized Amount for a Group, for the period
beginning with the Distribution Date as to which clause (y)(i)(A) of the
definition of "Group I Specified Overcollateralization Amount" or "Group
II Specified Overcollateralization Amount," as applicable, applies, 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 Closing Date (provided, however, that "n" shall never be
greater than 30) and "E.O.A." is equal to the amount of the
Excess Overcollateralized Amount for the related Group that
would otherwise be obtained 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.
"Group": Either of Group I or Group II, as the context
requires.
"Group I": With respect to the Mortgage Loans, the Group I
Mortgage Loans, and with respect to the Certificates, the Group I
Certificates. When the words "Group I" immediately precede another
defined term herein, the application of such term will be limited to the
Group I Mortgage Loans and/or the Group I Certificates.
"Group I Available Funds": With respect to any Distribution
Date, the sum of all amounts on deposit in the Certificate Account with
respect to Group I on such Distribution Date after giving effect to the
distributions set forth in Section 4.04(a)(i) and (ii).
"Group I Carry-Forward Amount": With respect to any
Distribution Date, the amount, if any, by which (x) the Group I Insured
Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual aggregate distributions made to the
Holders of the Group I Certificates on such immediately preceding
Distribution Date.
"Group I Certificate Principal Balance": As of any date of
determination, the Original Group I Certificate Principal Balance less any
amounts actually distributed with respect to the Group I Principal
Distribution Amount pursuant to Section 4.04(b) hereof on all preceding
Distribution Dates.
"Group I Certificates": Any of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 or
Class A-IO Certificates.
"Group I Closing Date Deposit": With respect to the
Distribution Date in January 1997 and the Group I Certificates,
$251,929.36.
"Group I Current Interest": With respect to any Distribution
Date and any Class of Group I Certificates the sum of (i) the amount of
interest accrued on the related Class Certificate Principal Balance or
Class A-IO Notional Principal Amount, as applicable, immediately prior to
such Distribution Date during the related Accrual Period at the related
Pass-Through Rate, and (ii) the Group I Carry-Forward Amount as it relates
to interest.
"Group I Distribution Amount": As of any Distribution Date, the
sum of (i) the Group I Current Interest and (ii) the Group I Principal
Distribution Amount for such Distribution Date.
"Group I Interest Remittance Amount": With respect to the
Servicer Remittance Date in January 1997, $1,251,114.43 (which amount
includes the Group I Closing Date Deposit relating to the related
Distribution Date). With respect to each Servicer Remittance Date
thereafter, an amount with respect to interest equal to the product of (x)
the aggregate Loan Balances of the Group I 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 (together
with the Loan Balance of any Subsequent Mortgage Loan transferred to the
Trust during such preceding calendar month which has a Monthly Payment due
between the day following the related Cut-off Date and the last day of
such month) and (y) one-twelfth of the weighted average Net Mortgage Rate
of such Group I Mortgage Loans, minus the amount, if any, by which (1) the
aggregate of the Prepayment Interest Shortfalls resulting from Principal
Prepayments on Group I Mortgage Loans 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 the Group I Mortgage Loans
for such Due Period.
"Group I Mortgage Loans": 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 for Group I Mortgage Loans, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged
Property.
"Group I Overcollateralization Deficit": With respect to any
Distribution Date and Group I, the amount, if any, by which (x) the Group
I Certificate Principal Balance, after taking into account the payment of
the Group I Distribution Amount on such Distribution Date (except for the
amount of any Group I Insured Payment to be paid on such Distribution Date
to reduce the Group I Overcollateralization Deficit), exceeds (y) the
aggregate Loan Balance of the Group I Mortgage Loans as of the close of
business on the last day of the immediately preceding Due Period.
"Group I Overcollateralization Increase Amount": With respect
to any Distribution Date and Group I, the Group I Specified
Overcollateralization Deficiency Amount as of such Distribution Date.
"Group I Overcollateralization Reduction Amount": With respect
to any Distribution Date and Group I, an amount equal to the lesser of (x)
the Excess Overcollateralized Amount for such Group for such Distribution
Date and (y) the Principal Remittance Amount for such Group transferred
from the Collection Account to the Certificate Account on the Servicer
Remittance Date immediately preceding such Distribution Date.
"Group I Overcollateralized Amount": As of any Distribution
Date and Group I, the excess, if any, of (x) the aggregate Loan Balance of
all the Group I Mortgage Loans as of the close of business on the last day
of the immediately preceding Due Period over (y) the Group I Certificate
Principal Balance as of such Distribution Date (after taking into account
the payment of the Group I Distribution Amount on such Distribution Date).
"Group I Principal Distribution Amount": With respect to the
Group I Certificates and any Distribution Date, the lesser of:
(I) the Group I Available Funds plus any Insured Payment relating to
the Group I Certificates minus the sum of the Group I Current
Interest for such Distribution Date and the Reimbursement Amount
relating to Group I due and owing on such Distribution Date; and
(II) the excess, if any, of
(i) the sum, without duplication, of (A) the Group I
Carry-Forward Amount as it relates to principal,
(B) all principal (including any Principal
Prepayment) actually collected by the Servicer on the Group
I Mortgage Loans during the related Due Period,
(C) the Loan Balance of each Group I 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,
(D) any Substitution Shortfall Amounts delivered by
the Seller during the related Due Period in connection with
a substitution of a Group I Mortgage Loan, to the extent
such Substitution Shortfall Amounts relate to principal and
are actually received by the Trustee on or prior to the
related Servicer Remittance Date,
(E) the Net Recovery Proceeds actually collected by
the Servicer during the related Due Period with respect to
each Group I 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 on
or prior to the related Servicer Remittance Date,
(F) the amount of any Group I Overcollateralization
Deficit for such Distribution Date,
(G) the portion of the proceeds received by the
Trustee from any termination of the Trust (to the extent
such proceeds related to principal in respect of Group I),
(H) the amount of any Group I Overcollateralization
Increase Amount to the extent of Group I Available Funds
for such Distribution Date (such Group I Available Funds to
be calculated after taking into account any payments
required to be made pursuant to Section 4.04(b)(I)(iii),
4.04(b)(III), and 4.04(b)(V)) for such Distribution Dates,
and
(I) any moneys released from the Pre-Funding Account
as a prepayment of the Group I Certificates on the
Distribution Date immediately following the end of the Pre-
Funding Period,
over
----
(ii) the amount of any Group I Overcollateralization
Reduction Amount for such Distribution Date.
"Group I Specified Overcollateralization Amount": With respect
to a Distribution Date and Group I: prior to the Stepdown Date, the amount
which is equal to the Initial Group I Specified Overcollateralized Amount;
and after the Stepdown Date (a) if the related Stepdown Requirement is
satisfied, the lesser of (x) the amount equal to 8.40% of the then
outstanding aggregate Loan Balances of the Group I Mortgage Loans and (y)
the Initial Group I Specified Overcollateralization Amount or (b) if the
related Stepdown Requirement is not satisfied, the amount which is equal
to the Initial Group I Specified Overcollateralization Amount; provided,
however, that such amount will not be less than the product of (a) 0.50%
and (b) the Maximum Group I Collateral Amount; provided further, that if
on any Distribution Date, the Mortgage Portfolio Performance Test with
respect to Group I is not satisfied, then the Group I Specified
Overcollateralization Amount will be unlimited during the period that such
Mortgage Portfolio Performance Test is not satisfied.
"Group I Specified Overcollateralization Deficiency Amount":
With respect to any Distribution Date and Group I, the excess, if any, of
(i) the Group I Specified Overcollateralized Amount applicable to such
Distribution Date over (ii) the Group I Overcollateralized Amount for such
Distribution Date prior to taking into account the payment of any Group I
Overcollateralization Increase Amounts on such Distribution Date.
"Group II": With respect to the Mortgage Loans, the Group II
Mortgage Loans, and with respect to the Certificates, the Class A-10
Certificates. When the words "Group II" immediately precede another
defined term herein, the application of such term will be limited to the
Group II Mortgage Loans and/or the Group II Certificates.
"Group II Available Funds": With respect to any Distribution
Date, the sum of all amounts on deposit in the Certificate Account with
respect to Group II on such Distribution Date available after giving
effect to the distributions set forth in Section 4.04(a)(i) and (ii).
"Group II Carry-Forward Amount": With respect to any
Distribution Date, the amount, if any, by which (x) the Group II Insured
Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual aggregate distributions made to the
Holders of the Class A-10 Certificates on such immediately preceding
Distribution Date.
"Group II Certificate Principal Balance": As of any date of
determination, the Original Group II Certificate Principal Balance less
any amounts actually distributed with respect to the Group II Principal
Distribution Amount pursuant to Section 4.04(b) hereof on all preceding
Distribution Dates.
"Group II Certificates": Any of the Class A-10 Certificates.
"Group II Closing Date Deposit": With respect to the
Distribution Date in January 1997 and the Group II Certificates,
$33,416.92.
"Group II Current Interest": With respect to any Distribution
Date and the Class A-10 Certificates, the sum of (i) the amount of
interest accrued on the Class A-10 Certificate Principal Balance
immediately prior to such Distribution Date during the related Accrual
Period at the related Pass-Through Rate and (ii) the Group II Carry-
Forward Amount as it relates to interest.
"Group II Distribution Amount": As of any Distribution Date,
the sum of (i) the Class A-10 Current Interest and (ii) the Group II
Principal Distribution Amount for such Distribution Date.
"Group II Interest Remittance Amount": With respect to the
Servicer Remittance Date in January 1997, $179,803.28 (which amount
includes the Group II Closing Date Deposit relating to the related
Distribution Date). With respect to each Servicer Remittance Date
thereafter, an amount with respect to interest equal to the product of (x)
the aggregate Loan Balances of the Group II 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 and (y) one-
twelfth of the weighted average Net Mortgage Rate of such Group II
Mortgage Loans, minus the amount, if any, by which (1) the aggregate of
the Prepayment Interest Shortfalls resulting from Principal Prepayments on
Group II Mortgage Loans during the Due Period 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 the Group II Mortgage Loans for such Due
Period.
"Group II Mortgage Loans": 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 for Group II Mortgage Loans, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged
Property.
"Group II Overcollateralization Deficit": With respect to any
Distribution Date and Group II, the amount, if any, by which (x) the Group
II Certificate Principal Balance, after taking into account the payment of
the Group II Distribution Amount on such Distribution Date (except for the
amount of any Insured Payment to be paid on such Distribution Date to
reduce the Group II Overcollateralization Deficit), exceeds (y) the
aggregate Loan Balance of the Group II Mortgage Loans as of the close of
business on the last day of the immediately preceding Due Period.
"Group II Overcollateralization Increase Amount": With respect
to any Distribution Date and Group II, the Specified Overcollateralization
Deficiency Amount for such Group as of such Distribution Date.
"Group II Overcollateralization Reduction Amount": With respect
to any Distribution Date and Group II, an amount equal to the lesser of
(x) the Excess Overcollateralized Amount for such Group for such
Distribution Date and (y) the Principal Remittance Amount for such Group
transferred from the Collection Account to the Certificate Account on the
Servicer Remittance Date immediately preceding such Distribution Date.
"Group II Overcollateralized Amount": As of any Distribution
Date and with respect to Group II, the excess, if any, of (x) the
aggregate Loan Balance of all the Group II Mortgage Loans as of the close
of business on the last day of the immediately preceding Due Period over
(y) the Group II Certificate Principal Balance as of such Distribution
Date (after taking into account the payment of the Group II Distribution
Amount on such Distribution Date).
"Group II Principal Distribution Amount": With respect to the
Class A-10 Certificates and any Distribution Date, the lesser of:
(I) the Group II Available Funds plus any Insured Payment
relating to the Class A-10 Certificates minus the sum of
the Group II Current Interest for such Distribution Date
and the Reimbursement Amount relating to Group II due and
owing on such Distribution Date; and
(II) the excess, if any, of
(i) the sum, without duplication, of (A) the Group II
Carry-Forward Amount as it relates to principal,
(B) all principal (including any Principal
Prepayment) actually collected by the Servicer on the
Group II Mortgage Loans during the related due period,
(C) the Loan Balance of each Group II 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,
(D) any Substitution Shortfall Amounts delivered
by the Seller during the related Due Period in
connection with a substitution of a Group II Mortgage
Loan, to the extent such Substitution Shortfall
Amounts relate to principal and are actually received
by the Trustee on or prior to the related Servicer
Remittance Date,
(E) the Net Recovery Proceeds actually collected
by the Servicer during the related Due Period with
respect to each Group II 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 on or prior to the
related Servicer Remittance Date,
(F) the amount of any Group II
Overcollateralization Deficit for such Distribution
Amount,
(G) the portion of the proceeds received by the
Trustee from any termination of the Trust (to the
extent such proceeds related to principal in respect
of Group II), and
(H) the amount of any Group II
Overcollateralization Increase Amount for such
Distribution Date, to the extent of Group II Available
Funds for such Distribution Date (such Group II
Available Funds to be calculated net of any
Reimbursement Amount payable pursuant to Section
4.04(b)(IV)),
over
----
(ii) the amount of any Group II Overcollateralization
Reduction Amount for such Distribution Date.
"Group II Specified Overcollateralization Amount": With respect
to a Distribution Date and Group II: prior to the Stepdown Date, the
amount equal to the Initial Group II Specified Overcollateralization
Amount; and after the Stepdown Date, if the related Stepdown Requirement
is satisfied, the lesser of (x) the amount equal to 20.0% of the then
outstanding aggregate Loan Balances of the Group II Mortgage Loans or (y)
the Initial Group II Specified Overcollateralization Amount or, if the
related Stepdown Requirement is not satisfied, the amount equal to 10% of
the Maximum Group II Collateral Amount; provided, however, that such
amount will not be less than the product of 0.50% and the Maximum Group II
Collateral Amount; provided, further, that if on any Distribution Date the
Mortgage Portfolio Performance Test is not satisfied, then the Group II
Specified Overcollateralization Amount will be unlimited during the period
that such Mortgage Portfolio Performance Test with respect to Group II is
not satisfied.
"Group II Specified Overcollateralization Deficiency Amount":
With respect to any Distribution Date and Group II, the excess, if any, of
(i) the Group II Specified Overcollateralized Amount applicable to such
Distribution Date over (ii) the Group II Overcollateralized Amount for
such Distribution Date prior to taking into account the payment of any
Group II Overcollateralization Increase Amounts on such Distribution Date.
"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, the Placement Agent 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, the Placement Agent or the Underwriter as an
officer, employee, promoter, 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
Group I Certificate or Group II Certificate, the Initial Certificate
Principal Balance set forth on the face thereof.
"Initial Group I Specified Overcollateralized Amount": The
amount equal to the product of (a) 4.20% and (b) the Maximum Group I
Collateral Amount.
"Initial Group II Specified Overcollateralized Amount": Shall
be an amount equal to the product of (x) 10% and (y) the Maximum Group II
Collateral Amount.
"Initial Mortgage Loans": The Mortgage Loans delivered by the
Depositor on the Startup Date.
"Insurance Agreement": The Insurance and Indemnity Agreement
dated as of December 9, 1996 among the Certificate Insurer, the Depositor
and the Seller.
"Insurance Premium": With respect to any Distribution Date and
Group I, the product of (x) the Group I Certificate Principal Balance,
after taking into account all distributions to be made on such
Distribution Date, and (y) one-twelfth of the related Premium Rate. With
respect to any Distribution Date and Group II, the product of (x) the
Group II Certificate Principal Balance, after taking into account all
distributions to be made on such Distribution Date and (y) one-twelfth of
the related Premium Rate.
"Insured Distribution Amount": With respect to any Distribution
Date and Group I, the sum of (i) the Group I Current Interest and (ii) the
Group I Overcollateralization Deficit, if any, for such Distribution Date.
With respect to any Distribution Date and Group II, the sum of (i) the
Group II Current Interest and (ii) the Group II Overcollateralization
Deficit, if any, for such Distribution Date.
"Insured Payment": As of any Distribution Date and either
Group, (i) any Available Funds Shortfall for such Group remaining plus
(ii) any Preference Amount not otherwise paid to the related
Certificateholders.
"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": As defined in the Insurance Agreement.
"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 a 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 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 Group I Collateral Amount": The aggregate Loan
Balances of all Group I Mortgage Loans including all Subsequent Mortgage
Loans as of the applicable Cut-Off Date.
"Maximum Group II Collateral Amount": The aggregate Loan
Balances of all Group II Mortgage Loans as of the applicable Cut-Off 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 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 as-
signed to the Trust pursuant to Section 2.02 and Section 2.13 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. The term "Mortgage Loan"
includes both Initial Mortgage Loans and Subsequent Mortgage Loans.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust on such date, attached hereto as Exhibit D (as
such list may be amended from time to time), 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;
(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;
(xx) Cityscape loan grade;
(xxi) 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"); and
----
(xxii) the related Group.
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 Mort-
gage Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test for a Group is satisfied for any date of determination
thereof if (i) the Rolling Six Month Delinquency Rate is less than 13.5%
with respect to Group I and 12.0% with respect to Group II, (ii) the O/C
Loss Test for such Group is satisfied, and (iii) the Rolling Twelve Month
Loss Rate for such Group for the twelve month period immediately
preceding the date of determination thereof is not greater than or
equal to 1.25% with respect to Group I and 2.00% with respect to Group II.
"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": With respect to each Group, the O/C Loss Test
for any period set out below is satisfied if the Cumulative Loss
Percentage for such Group for such period does not exceed the percentage
set out for such period below:
Group I Group II
Period Percentage Percentage
------ ---------- ----------
December 31, 1996 - November 30, 1998 0.75% 1.25%
December 1, 1998 - November 30, 1999 1.25% 2.75%
December 1, 1999 - November 30, 2000 1.75% 4.25%
December 1, 2000 - November 30, 2001 2.00% 6.00%
December 1, 2001 and thereafter 2.50% 8.00%
"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 Group I Certificate Principal Balance":
$210,000,000.
"Original Group I Certificates": The Class A Certificates
(other than the Class A-10 Certificates) issued on the Closing Date.
"Original Group II Certificate Principal Balance": $25,462,546.
"Original Group II Certificates": The Class A-10 Certificates
issued on the Closing Date.
"Original Class Certificate Principal Balance": With respect to
any Class of Certificates (other than the Class A-IO and Class R
Certificates), the corresponding amounts set forth opposite such Class in
the table below:
Original Class
Class Certificate Principal Balance
----- -----------------------------
Class A-1 $38,000,000
Class A-2 $31,500,000
Class A-3 $38,750,000
Class A-4 $27,250,000
Class A-5 $12,500,000
Class A-6 $15,500,000
Class A-7 $12,250,000
Class A-8 $14,250,000
Class A-9 $20,000,000
Class A-10 $25,462,546
"Original Pre-Funding Amount": $33,250,254.61.
"OTS": The Office of Thrift Supervision or any successor.
"Pass-Through Rate": Class A-1: 6.70% per annum
Class A-2: 6.49% per annum
Class A-3: 6.50% per annum
Class A-4: 6.63% per annum
Class A-5: 6.81% per annum
Class A-6: 6.93% per annum
Class A-7: 7.20% per annum
Class A-8: 7.42% per annum
Class A-9: 6.97% per annum
Class A-IO: 0.50% per annum
Class A-10: 7.40% per annum
"Percentage Interest": With respect to any Class A Certificate,
(other than a Class A-IO 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 the related Class.
With respect to a Class A-IO or 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 Group I Certificates are issuable only in minimum
Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $1,000. The Group II Certificates are issuable only
in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $100,000. The Class A-IO are issuable
only in minimum Percentage Interests equal to (5%) of all of the
interests represented by the Certificates of such Class. The Class R
Certificates are issuable only in minimum Percentage Interests equal to
10% of all of the interests represented by the Certifi- cates 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+" 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" 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+" 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 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.
"Placement Agent": Greenwich Capital Markets, Inc., as
placement agent with respect to the Group II Certificates.
"Policy": The Financial Guaranty Insurance Policy No. 50551-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).
"Pool Delinquency Rate": With respect to any Due Period and a
Group, the fraction, expressed as a percentage, equal to (x) the aggregate
Loan Balances of all Mortgage Loans in such Group that are 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 in such Group as of the close of business
on the last day of such Due Period.
"Pre-Funding Account": The account created and maintained by
the Trustee pursuant to Section 4.01 hereof.
"Pre-Funding Amount": With respect to any date, the amount on
deposit in the Pre-Funding Account (net of any reinvestment earnings
thereon).
"Pre-Funding Earnings": With respect to the February 1997
Distribution Date, the actual investment earnings earned on amounts on
deposit in the Pre-Funding Account during the period from December 31,
1996 through and including January 31, 1997 (which amount shall be
available on February 2, 1997) (in all cases as calculated by the Trustee
pursuant to Section 2.13(c) hereof).
"Pre-Funding Period": The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings)
is less than $100,000, (ii) the date on which any Servicer Default occurs
and (iii) January 31, 1997.
"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 U.S. Bankruptcy Code in accordance
with a final nonappealable order of a court having competent jurisdiction.
"Premium Rate": With respect to any Distribution Date and Group
I, a per annum rate equal to 0.15% plus any Premium Supplement due with
respect to such Group to the extent provided in the Insurance Agreement.
With respect to any Distribution Date and Group II, a per annum rate equal
to 0.35% plus any Premium Supplement due with respect to such Group to the
extent provided in the Insurance Agreement.
"Premium Supplement": As defined in the Insurance Agreement.
"Prepayment Assumption": As defined in the Prospectus
Supplement or the Private Placement Memorandum, as applicable.
"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 remitted by the Mortgagor in
connection with such Principal Prepayment less the Servicing Fee for
such Mortgage Loan in such month.
"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.
"Private Placement Memorandum": That certain Private Placement
Memorandum dated December 30, 1996 relating to the private sale of the
Group II Certificates.
"Prospectus Supplement": That certain prospectus supplement
dated December 23, 1996 relating to the public offering of the Group I
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 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 or Loans 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
substantially 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) 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 and (xi) have a Second Loan-to-Value Ratio
equal to or greater than the Second Loan-to-Value Ratio of the
Deleted Mortgage Loan (if applicable). 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)-(iv) 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. The Certificate
Insurer may waive any of the foregoing tests provided that any such
substitution shall not adversely affect the Trust's status as a REMIC.
"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.
"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 and either
Group, the sum of (x) (i) the aggregate of all Insured Payments with
respect to such Group previously received by the Trustee and not
previously repaid to the Certificate Insurer 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 with respect to such
Group 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 with respect to such Group. 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 pools of assets consisting of the Trust
Estate except for the Distribution Account, the Pre-Funding 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.
"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 development, none of which is a co-operative unit or a mobile home,
but which may be a pre-fabricated or manufactured unit affixed to a
permanent foundation or (v) a Small Mixed-Use/Multi-Family 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 Control-
ler 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": For any Determination
Date and either Group, the average of the Pool Delinquency Rates for such
Group for each of the six (or one, two, three, four or five in the case of
the first five Determination Dates, as applicable) immediately preceding
Due Periods.
"Rolling Twelve Month Loss Rate": Beginning with the twelfth
Determination Date and as of each Determination Date thereafter, the
fraction with respect to either Group, expressed as a percentage, equal to
(x) the dollar amount of all Realized Losses with respect to such Group
for the preceding twelve months over (y) the aggregate Loan Balances of
the Mortgage Loans in such Group as of the opening of business on the
first day of the preceding twelfth month.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., 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 Loan-to-Value Ratio": With respect to any Mortgage Loan
and date of determination, the fraction, expressed as a percentage, the
numerator of which is the unpaid principal balance of the second
lien on the related Mortgaged Property and the denominator of which is
the Value of such Mortgaged Property.
"Second Mortgage Loan": Any Mortgage Loan that is secured by a
second lien on or second priority security interest in the related
Mortgaged Property.
"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., a corporation organized under the
laws of New York, 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 as to either Group if the Cumulative Loss
Percentage for such period and Group does not exceed the applicable
percentage specified below:
Group I Group II
Period Percentage Percentage
------ ---------- ----------
December 31, 1996 - November 30, 1997 1.00% 1.50%
December 1, 1997 - November 30, 1998 1.50% 3.25%
December 1, 1998 - November 30, 1999 2.25% 5.00%
December 1, 1999 - November 30, 2000 3.00% 7.00%
December 1, 2000 and thereafter 3.75% 9.00%
"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 Test": The Servicer Termination Test with
respect to Group I is satisfied for any date of determination thereof if
(x) as of the immediately preceding Determination Date, the related
Rolling Six Month Delinquency Rate is less than 15.75%, (y) the related
Servicer Loss Test is satisfied and (z) as of the immediately preceding
Determination Date, the related Rolling Twelve Month Loss Rate is not
greater than 1.75%. The Servicer Termination Test for Group II is
satisfied for any date of determination thereof if (x) as of the
immediately preceding Determination Date, the related Rolling Six Month
Delinquency Rate is less than 14.50%, (y) the Servicer Loss Test is
satisfied and (z) as of the immediately preceding Determination Date,
the related Rolling Twelve Month Loss Rate is not greater than 2.75%.
"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. The portion of the
Servicing Fee allocable to the Mortgage Loans in each Group shall be
separately payable from the funds specified in Section 3.17 hereof to the
extent related to such Group.
"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/Multi Family Property": A Mortgaged Property
with improvements generally consisting of more than four residential
dwelling units and which may include one or more non-residential units.
"Startup Date": December 31, 1996.
"Stepdown Date": The Determination Date occurring in December
1998.
"Stepdown Requirement": The Stepdown Requirement with respect
to Group I is satisfied for any date of determination thereof if as of
such date of determination (x) the related Rolling Six Month Delinquency
Rate as of the immediately preceding Determination Date is less than
11.25%, (y) the related Cumulative Loss Test is satisfied and (z) the
related Rolling Twelve Month Loss Rate is not greater than or equal to
0.75%. The Stepdown Requirement with respect to Group II is satisfied for
any date of determination thereof if as of such date of determination (x)
the related Rolling Six Month Delinquency Rate as of the immediately
preceding Determination Date is less than 10.00%, (y) the related
Cumulative Loss Test is satisfied and (z) the related Rolling Twelve Month
Loss Rate is not greater than or equal to 1.50%.
"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.
"Subsequent Cut-Off Date Deposit": With respect to any
Subsequent Transfer Date and any Subsequent Mortgage Loan transferred to
the Trust during any month which does not have a Monthly Payment due until
the second Due Period following such month, an amount equal to the product
of (a) the Loan Balance of such Subsequent Mortgage Loan on the related
Cut-Off Date and (b) one-twelfth of the Net Mortgage Rate on such
Subsequent Mortgage Loan.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the
Trust for inclusion in Group I pursuant to Section 2.13 of this Agreement
and the Subsequent Transfer Agreement, which shall be listed on the
mortgage loan schedule attached to the Subsequent Transfer Agreement.
"Subsequent Transfer Date": The date specified in each
Subsequent Transfer Agreement, provided that in no event shall there be
more than five such Subsequent Transfer Dates.
"Subsequent Transfer Agreement": Each Subsequent Transfer
Agreement executed by the Trustee (solely in its capacity as Trustee and
not in its individual capacity) and the Seller substantially in the form
of Exhibit P hereto, by which Subsequent Mortgage Loans are sold and
assigned to the Trust.
"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.
"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.
"Trust": Cityscape Home Equity Loan Trust, Series 1996-4, the
trust created hereunder.
"Trust Estate": The corpus of the trust created 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": First Bank National Association, a national banking
association, or any successor trustee appointed as herein provided.
"Trustee's Fee": With respect to any Distribution Date and
Group, the sum of (a) the product of (x) one-twelfth of the Trustee's Fee
Rate and (y) the aggregate Loan Balances of all Mortgage Loans in such
Group as of the opening of business on the first day of the related Due
Period and (b) the product of (x) one-twelfth of 0.00375% and (y) the
aggregate Loan Balances of all Mortgage Loans in such Group 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 and
Group I, the greater of (x) 0.01125% and (y) the fraction, expressed as a
percentage, the numerator of which is $5,000 and the denominator of which
is the aggregate Loan Balance of all Group I Mortgage Loans as of opening
of business on the first day of the related Due Period. With respect to
any Distribution Date and Group II, the greater of (x) 0.03875% and (y)
the fraction, expressed as a percentage, the numerator of which is $5,000
and the denominator of which is the aggregate Loan Balance of all Group II
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 Group I 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 United States or any political
subdivision thereof, or an estate 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, or a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States trustees have
authority to control all substantial decisions of the trust. The term
"United States" shall have the meaning set forth in Section 7701 of the
Code 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 Certificate and the
denominator of which is the 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 any Class A Certificates are
outstanding, 99% of the Voting Rights shall be allocated among Holders of
Class A Certificates (other than the Class A-IO Certificates) and the
Class A-IO Certificates shall be allocated 1% of the Voting Rights, each
in proportion to their respective Voting Percentage, provided, however,
that any 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 none of the Class A Certificates
are outstanding, 100% of the Voting Rights shall be allocated among
Holders of the Class R Certificates in accordance with their respective
Voting Percentage.
"Weighted Average Adjusted Pass-Through Rate": As to any
Distribution Date, the sum of (i) the weighted average of the Pass-Through
Rates of each Class of Group I Certificates (other than the Class A-IO
Certificates), weighted on the basis of their respective Class Certificate
Principal Balances on such Distribution Date and (ii) the Premium Rate.
"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.
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 1996-4" and does hereby appoint First Bank National
Association 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 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 First Bank National Association,
as Trustee under the Pooling and Servicing Agreement, dated as of
December 9, 1996, Cityscape Home Equity Loan Trust, Series 1996-4,
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: "First Bank National Association, as
Trustee under the Pooling and Servicing Agreement, dated as of
December 9, 1996, Cityscape Home Equity Loan Trust, Series 1996-4";
(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, modifica-
tion, 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 or the Subsequent Transfer Date, as the case may be,
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 any Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Act as
having special flood hazards, a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal
Insurance Administration, if obtainable with respect to such
Mortgaged Property, is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together , in the
case of a Second Mortgage Loan, with the outstanding principal
balance of the First Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood
Disaster Protection Act of 1973;
(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 or the Subsequent Transfer Date, as the case may be, 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 available as of the
Closing Date or the Subsequent Transfer Date, as the case may be, the
Seller shall deliver, prior to the Closing Date or the Subsequent Transfer
Date, as the case may be, 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 as the Certificate Insurer may approve 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 as the
Certificate Insurer may approve 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 and each Subsequent Transfer
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 or Subsequent Transfer Date, as the case may
be, such original Assignment shall be submitted for recording within
five Business Days after receipt of such information but in no event
later than 90 days (or such longer period, up to an additional 90
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 or
Subsequent Transfer 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 no later than the earlier of (i) five Business Days after receipt
thereof and (ii) within 360 days (or such longer period as the
Certificate Insurer may approve in writing with respect to specific
Mortgage Loans upon the request of the Seller) of the Closing Date
or Subsequent Transfer Date. 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 (and in any
event no longer than 30 days following the Closing Date or Subsequent
Transfer Date, as the case may be), 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 as the Certificate Insurer may approve 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 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; (c) 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 (d) any other original documents
constituting a part of a Mortgage File received with respect to any Mort-
gage 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 approves in writing
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 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.
In connection with the delivery of documentation provided by
this Section 2.04, the Seller hereby appoints the Trustee its attorney
with full power and authority to act in its stead for the purpose of
executing and certifying assignments and endorsing and certifying
promissory notes which make a part of each Mortgage File to cure any
deficiencies in such documentation.
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), (iii) and (iv) 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, the Capitalized Interest Account and the Pre-Funding
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, the Trustee shall
provide to the Servicer, the Seller, the Depositor, the Certificate
Insurer and the Seller shall provide to the Trustee, no less frequently
than quarterly, updated certifications, a form of which is attached hereto
as Exhibit F-3, 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 (and any of the
conditions in Section 2.13 with respect to the Subsequent Mortgage Loans)
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, and 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 (and any of the
conditions in Section 2.13 with respect to the Subsequent Mortgage Loans)
as of the Closing Date or the Subsequent Transfer Date; provided, however,
-------- -------
that only one such investigation shall be required for any Mortgage Loan.
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) or any of the conditions set forth in Section 2.13 hereof with
respect to Subsequent Mortgage Loans, 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 substi-
tute 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 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) or any of the conditions set forth in Section
2.13 hereof with respect to Subsequent Mortgage Loans, 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 (not including any payments withheld from loan proceeds) 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 shall be neces-
sary 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 Substitution Shortfall Amount (as described below), if
any, in connection with such substitution. The Trustee shall acknowledge
receipt 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 re-
ceived 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 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
Initial Mortgage Loan, to the Depositor, to the Trustee, to the
Certificateholders and to the Certificate Insurer that as of the Closing
Date and, with respect to each Subsequent Mortgage Loan, as of the related
Subsequent Transfer 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):
(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 with the terms of the
Mortgage Note or the Mortgage and there exists no event which, with the
passage of time or notice or both, would constitute a default thereunder,
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, 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 more than 6.41% of the Initial
Mortgage Loans in Group I and no more than 4.55% of the Initial Mortgage
Loans in Group II, each measured by Cut-Off Date Loan Balances, were 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/Multi-Family 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/Multi-Family 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 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 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) The Initial 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. No Mortgage Loan has been
modified except as such modification may be reflected in the related
Mortgage File;
(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 65.82% of the Initial Mortgage Loans in Group I
and approximately 64.90% of the Initial Mortgage Loans in Group II,
each measured by Cut-Off Date Loan Balances, are Balloon Mortgage
Loans each of which generally has an original term of not less than
fifteen (15) years and which provides for level monthly payments
generally 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 91.54% of the Initial Mortgage Loans in
Group I and approximately 28.56% of the Initial Mortgage Loans in Group
II, each measured by Cut-Off Date Loan Balances, 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 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/Multi Family 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
or manufactured unit affixed to a permanent foundation. As of the
Cut-Off Date with respect to the aggregate Loan Balance of all Initial
Mortgage Loans in Group I, (i) no more than 15.81% are secured by real
property improved by two- to four- family dwellings, (ii) no more than
1.63% are secured by real property improved by individual condominium
or townhouse units, (iii) at least 82.56% are secured by real
property with a detached or attached single- family residence erected
thereon, (iv) not more than 9.0% are subject to a ground lease and the
remainder of the Mortgaged Properties are fee simple estates, (v) not
more than ___% are secured by a property with a pre- fabricated or
manufactured unit affixed to a permanent foundation; (vi) not more
than 0.5% are subject to a leasehold mortgage; and (vii) none of
the Group I Mortgage Loans are Small Mixed-Use/Multi-Family Properties.
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/Multi-Family Property is a first lien on such
Mortgaged Property; (ix) no more than 16.22% measured by aggregate
Loan Balance of the Initial Mortgage Loans in Group I will be originated
under a non-income verification program; the weighted average
Loan-to-Value Ratio of the Initial Mortgage Loans is 74.59% and 61.62%
for Group I and Group II, respectively;
(dd) The Loan-to-Value Ratio as of the date of origination of each
Initial Mortgage Loan was not more than 96.10% and 72.00% for each of
Group I and Group II, respectively;
(ee) As of the Cut-Off Date with respect to the aggregate Loan
Balance of all Mortgage Loans in Group II, (i) all of the Mortgage Loans
are secured by Small Mixed-Use/Multi-Family Properties, (ii) no more than
2.32% are subject to a ground lease and the remainder of the Mortgaged
Properties are fee simple estates, and (iii) not more than 0.5% are
subject to a leasehold mortgage;
(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 deli-
vered 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 and
Assignments 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 0.58% and 3.89% for each of Group I and Group II,
respectively, of the aggregate Loan Balance of all the Initial 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 12.08%, and 12.06% for each of Group
I and Group II, respectively, and no Mortgage Rate for any Initial
Mortgage Loan was greater than 18.30% and 15.30% for each of Group I and
Group II, respectively, or less than 7.25% and 10.99% for each of Group I
and Group II, respectively;
(nn) With respect to each Second Mortgage Loan and Group I:
(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 and the Private Placement Memorandum (subject to the variances
specified therein);
(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 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 4.66% and 0% for each of Group I and Group II,
respectively, of the aggregate Loan Balance of all the Initial Mortgage
Loans measured by Cut-Off Date Loan Balances 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/Multi-Family 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 jurisdictions, laws, rules
or regulations and (b) shall include asbestos;
(aaa) The information set forth on the Mortgage Loan Schedule
relating to any subsequent transfer is complete, true and correct in all
material respects as of the related Cut-Off Date; and
(bbb) With respect to each Mortgaged Property subject to a land
trust (a "Land Trust Mortgage") (i) a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named as such in the land trust agreement and
such trustee is named in the Land Trust Mortgage as Mortgagor; (ii) all
fees and expenses of the land trustee which have previously become due and
owing have been paid and no fees or expenses are or will become payable by
the Certificateholders or the Trust to the land trustee under the land
trust agreement; (iii) the beneficiary is solely obligated to pay any
fees and expenses of the land trustee and the priority of the lien of
the Land Trust Mortgage is not and will not be primed by the land
trustee; (iv) the beneficiary is obligated to make payments under the
Note and will have personal liability for deficiency judgments; (v)
the Land Trust Mortgages and assignments of beneficial interest
relating to such land trusts were made in compliance with their
respective land trust agreements, were validly entered into by their
respective land trustee or beneficiary and did not, do not currently, and
will not in the future, violate any provision of their respective
land trust agreement, nor any agreement between or amongst the
beneficiaries of any one land trust; (vi) the assignment of the
beneficial interest relating to such Land Trust Mortgage was accepted
by, and noted in the records of the respective land trust trustee,
subsequent assignments of such beneficial interest in whole or in part
have not been made, and such subsequent assignments of such beneficial
interest or any part thereof are not permitted pursuant to a written
agreement between the respective beneficiary and the Mortgagee, until
the expiration of the Note in each respective land trust; (vii) the Land
Trust Mortgages are either the first or second liens on the Mortgaged
Properties; no liens are in place against the beneficial interests, or
any part thereof, of any Land Trust Mortgage or collateral assignment of
beneficial interest, which liens are superior (except for First Liens
with respect to Second Mortgage Loans) to the interest held by the
Seller, and the beneficial interest, or any part thereof, of any Land
Trust Mortgage; (viii) the terms and conditions of the land trust
agreement do not prevent the free and absolute marketability of
the Mortgaged Property; and (ix) each Land Trust Mortgage contains, and
will contain, a "due-on-sale" provision permitting the Mortgagee
under the Mortgage Note and Land Trust Mortgage to foreclose or otherwise
exercise remedies thereunder upon a transfer of the beneficial interest
in the related Mortgaged Property, and the Servicer will not waive
the application of any such due-on-sale provision without the prior
written consent of the Certificate Insurer.
(ccc) No Group II Mortgage Loan is a Second Mortgage Loan.
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, the 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 Certifi-
cateholders 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 2.06(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 (and reaffirming as of each Subsequent Transfer
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 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, exe-
cution 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;
(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, or, with respect to each Subsequent
Mortgage Loan, as of the related Subsequent Transfer 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 2.07(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 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 and the Private Placement Memorandum 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;
(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;
(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 and the Private Placement
Memorandum 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;
(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
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 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;
(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;
(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, 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 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; and
(m) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Depositor pursuant to this Agreement
are not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
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 Loan which materially and adversely
affects the value of any Mortgage Loan or the interests of the Certifi-
cateholders 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) the receipt
of (i) $33,250,254.61 for deposit to the Pre-Funding Account, $251,929.36
in respect of the Group I Closing Date Deposit, $33,416.92 in respect of
the Group II Closing Date Deposit and $274,493.26 for deposit to the
Capitalized Interest Account and (ii) 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 and
Class R 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, Pre-Funding Account and Capitalized
Interest Account shall not be part of the segregated pool of assets 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 Distribution Dates for the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-
8, Class A-9 and Class A-IO Certificates are March 25, 2010, September 25,
2011, September 25, 2011, September 25, 2011, November 25, 2011, March 25,
2014, November 25, 2018, February 25, 2028, September 25, 2011, and
February 25, 2028, respectively. The assumed final Distribution Date for
the Class A-10 Certificates is September 25, 2027.
SECTION 2.13. Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in
Article II and paragraph (b) below and pursuant to the terms of the
related Subsequent Transfer Agreement, in consideration of the Trustee's
delivery on each Subsequent Transfer Date to or upon the order of the
Seller of all or a portion of the balance of funds in the Pre-Funding
Account, the Seller shall on such Subsequent Transfer Date sell, transfer,
assign, set over and otherwise convey without recourse, all of its
respective right, title and interest in and to each related Subsequent
Mortgage Loan listed on the Mortgage Loan Schedule delivered by the Seller
on such Subsequent Transfer Date for inclusion in Group I, including (i)
the related Loan Balance, all interest payments due after the related
Subsequent Cut-Off Date and all collections in respect of principal
received after the related Subsequent Cut-Off Date; (ii) any real property
that secured such Subsequent Mortgage Loan and that has been acquired by
foreclosure or deed in lieu of foreclosure; (iii) their respective
interest in any insurance policies in respect of such Subsequent Mortgage
Loan; and (iv) all proceeds of the foregoing to the Trustee. The transfer
by the Seller to the Trustee of the Subsequent Mortgage Loans set forth on
the Subsequent Mortgage Loan Schedule shall be absolute and shall be
intended by all parties hereto to be treated as a sale by the Seller to
the Trust. If the assignment and transfer of the Subsequent Mortgage
Loans and the other property specified in this Section 2.13 from the
Seller to the Trust pursuant to this Agreement is held or deemed not to be
a sale or is held or deemed to be a pledge of security for a loan, the
Seller intends that the rights and obligations of the parties shall be
established pursuant to the terms of this Agreement and that, in such
event, (i) the Seller shall be deemed to have granted and does hereby
grant to the Trustee as of each Subsequent Transfer Date a perfected,
first priority security interest in the entire right, title and interest
of the Seller in and to the related Subsequent Mortgage Loans and all
other property conveyed to the Trustee pursuant to this Section 2.13
and all proceeds thereof, and (ii) this Agreement shall constitute a
security agreement under applicable law. The amount released from the
Pre-Funding Account shall be one-hundred percent (100%) of the
aggregate Cut-Off Date Loan Balances of the Subsequent Mortgage Loans
so transferred.
(b) The Trustee shall contribute from the Pre-Funding Account funds
in an amount equal to one-hundred percent (100%) of the aggregate Cut-Off
Date Loan Balances of the Subsequent Mortgage Loans so transferred to the
REMIC and use such cash to purchase the Subsequent Mortgage Loans on
behalf of the Trustee, along with the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of
each of the following conditions on or prior to the related Subsequent
Transfer Dates:
(i) the Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with an Addition Notice, which
notice shall be given not less than two Business Days prior to the
related Subsequent Transfer Date and shall designate the Subsequent
Mortgage Loans to be sold to the Trust and the aggregate Cut-Off Date
Loan Balance of such Mortgage Loans;
(ii) the Seller shall have deposited in the Collection Account
all principal collected after the related Cut-Off Date and interest
payments due after the related Cut-Off Date but collected on or
before such Cut-Off Date in respect of each Subsequent Mortgage Loan,
and the related Subsequent Cut-Off Date Deposit;
(iii) the Seller shall have delivered an Officer's
Certificate to the Trustee confirming that as of each Subsequent
Transfer Date, the Seller was not insolvent, nor will it be made
insolvent by such transfer, nor is it aware of any pending
insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Seller shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b) and in the related Subsequent
Transfer Agreement;
(vi) the Seller shall have delivered an Officer's Certificate to
the Trustee confirming that the representations and warranties of the
Seller pursuant to Section 2.07 (other than clauses (m), (w), (y),
(cc), (dd), (ee), (ll), (mm) and (uu) to the extent representations
and warranties relate to statistical information as to the
characteristics of the Initial Mortgage Loans in the aggregate) and
pursuant to Section 2.08) are true and correct with respect to the
Seller and the Subsequent Mortgage Loans, as applicable, as of the
Subsequent Transfer Date;
(vii) the Seller shall have provided the Rating Agencies,
the Trustee and the Certificate Insurer with an Opinion of Counsel
relating to the sale of the Subsequent Mortgage Loans to the Trustee;
(viii) the Trust shall not purchase a Subsequent Mortgage
Loan unless the Seller obtains the prior written consent of the
Certificate Insurer, which consent may not be unreasonably withheld;
provided, however, that such consent shall be deemed to have been
________ _______
reasonably withheld if, among other things, the following conditions
are not satisfied, any of which may be waived
in any respect by the Certificate Insurer by a written waiver, a copy
of which waiver shall be delivered to the Rating Agencies: (i) such
Subsequent Mortgage Loan may not be 30 or more days contractually
delinquent as of the Cut-Off Date; (ii) the lien securing such
Subsequent Mortgage Loan must be a first or a second lien; (iii) such
Subsequent Mortgage Loan may have an outstanding Loan Balance of not
more than $350,000 as of the related Cut-Off Date and all Mortgage
Loans, following the Trust's acquisition of such Subsequent Mortgage
Loan the Trust will have an average Loan Balance not greater than
$70,000; (iv) such Subsequent Mortgage Loan shall be secured by a
mortgage on property which, at the time of the origination of such
Subsequent Mortgage Loan, had an appraised value of not more than
$1,000,000; (v) the first payment on such Subsequent Mortgage Loan is
due no later than the Due Period immediately succeeding the Due
Period in which it is transferred, unless the Seller deposits into
the Certificate Account an amount equal to 30 days' interest on any
such Subsequent Mortgage Loan at the Mortgage Rate less the
applicable Servicing Fee, in which event the first payment on such
Subsequent Mortgage Loans is due no later than the last day of the
second Due Period following the Due Period in which the purchase
occurs; (vi) such Subsequent Mortgage Loan must be either a fully
amortizing loan with level payments over a remaining term of no less
than 15 years and no more than 30 years or a loan with a 15 year
balloon maturity and a 20-30 year amortization schedule; (vii) such
Subsequent Mortgage Loan shall have a fixed Mortgage Rate of at least
7.25%; (viii) such Subsequent Mortgage Loan shall have an original
Loan-to-Value Ratio of no more than 90%; (ix) such Subsequent
Mortgage Loan shall not be secured by a Small Mixed-Use/Multi-Family
Property and (x) following the purchase of such Subsequent Mortgage
Loans by the Trust, the Group I Mortgage Loans held by the Trust
(including the Subsequent Mortgage Loans) (the following percentages
measured by aggregate Loan Balance of the related Mortgage Loan or
Loans over the aggregate Loan Balance of all Group I Mortgage Loans):
(a) will have a weighted average Mortgage Rate of at least 12.0%; (b)
will have a weighted average Loan-to-Value Ratio of not more than
75.0%; (c) will have not more than 67% secured by Balloon Mortgage
Loans; (d) will have not more than 0.65% of the Mortgage Loans
concentrated in any single zip code; (e) will have not more than 11%
of the Mortgage Loans secured by second liens; (f) will have not more
than 13.0% of the Mortgage Loans non-owner-occupied; (g) will have no
less than 80% secured by Mortgaged Properties which are single family
residential properties; (h) no less than 16% will be purchase money
loans; (i) no more than 25.0% of the Mortgage Loans will be
originated under a non-income verification program; (j) no less than
35.0% will be graded "B" according to the Seller's underwriting
guidelines and no more than 11.0% and 9.0%, respectively, of the
Mortgage Loans will be graded "C" and "D" according to the Seller's
underwriting guidelines; (k) will have not more than 11.0% of the
Mortgage Loans secured by Mortgage Properties that are subject to
ground leases; and (xi) the Rating Agencies' "shadow rating" with
respect to the Class A Certificates shall not be affected by the
transfer of such Subsequent Mortgage Loans; and
(ix) (Reserved).
(x) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Seller shall satisfy the document
delivery requirements set forth in Section 2.04. In connection with
its consent to the purchase of one or more Subsequent Mortgage Loans,
the Certificate Insurer shall have the right to reduce the Specified
Overcollateralization Amount.
(xi) Each proposed Subsequent Mortgage Loan must be listed on
Schedule 1 hereto as the same may be amended from time to time with
the approval of the Depositor and the Certificate Insurer.
(c) In connection with each Subsequent Transfer Date and on the
related Distribution Date the Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-
Funding Account Earnings for such Distribution Date in accordance with the
provisions of this Agreement and (ii) any other necessary matters in
connection with the administration of the Pre-Funding Account and of the
Capitalized Interest Account. In the event that any amounts are released
as a result of calculation error by the Trustee from the Pre-Funding
Account or from the Capitalized Interest Account, the Trustee shall not be
liable therefor, and the Seller shall immediately repay such amounts to
the Trustee.
SECTION 2.14. Mandatory Prepayment.
In the event that, on January 31, 1997, not all of the Pre-Funding
Amount has been used to acquire Subsequent Mortgage Loans, then the
Trustee shall pay the Classes of Certificates then entitled to receive
distributions of principal the remaining Pre-Funding Amount as a partial
prepayment on the Distribution Date in February 1997, as set forth in
Section 4.08.
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); (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 activi-
ties 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 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, 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 Certifi-
cateholders. 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 calcu-
lating 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 Mortgage Loan or such default is, in
the judgment of the Servicer, imminent and (y) the Certificate
Insurer consents to such modification in writing.
(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
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Servicer from the responsibilities or liabilities arising under this
Agreement.
The Servicer's rights and obligations hereunder relate to each
Group of Mortgage Loans. If the Servicer is terminated solely with
respect to one Group of Mortgage Loans pursuant to Section 7.01 hereof,
such Servicer's rights and obligations with respect to the remaining Group
shall continue in full force and effect and a Successor Servicer shall be
appointed pursuant to Section 7.02 hereof with respect to the Group as to
which the rights and obligations of such Servicer have been terminated.
Any such Successor Servicer with respect to one Group only shall have the
same rights and obligations with respect to such Group that the initial
Servicer had with respect to such Group, and all terms and provisions
herein relating to the Servicer shall be deemed to relate to each Servicer
solely with respect to the applicable Group, including the related
Mortgage Loans and Certificateholders.
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
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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 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 reim-
bursement 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 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 Certificate-
holders 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 indemnification 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.
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
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result in the imposition of a tax on a "prohibited transaction" of
the Trust or affect the qualification of the 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-Ser-
vicing Account no later than the first Business Day after receipt all
proceeds of Mortgage Loans received by the Sub-Servicer, less its servic-
ing 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.
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, assess-
ments, 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, assess-
ments 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 Placement Agent, 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 1996-4 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 following 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 in each Group;
(ii) all payments on account of interest on each Mortgage Loan
in each Group;
(iii) any Delinquency Advances with respect to Mortgage Loans in
each Group, 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 in respect of the Mortgage Loans in each Group;
(v) all Net Recovery Proceeds in respect of the Mortgage Loans
in each Group;
(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 in
respect of the Mortgage Loans in each Group;
(viii) all Substitution Shortfall Amounts paid by the Seller or
the Servicer in respect of the Mortgage Loans in each Group; 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.
The Servicer shall maintain a record of all deposits to the
Collection Account on a Group-by-Group basis.
Notwithstanding any other provision herein, 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.
(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, the Placement Agent 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
Placement Agent, 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.
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 (after having received Delinquency Advances
for such period), on the Servicer Remittance Date:
(A) with respect to each Group, the Interest Remittance
Amount; and
(B) with respect to each Group, an amount with respect to
principal (with respect to each Group, the "Principal Remittance
Amount") equal to (I) the sum, without duplication, of the
amounts described in Sections 3.10(a)(i) for such Group,
3.10(a)(v) for such Group 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) for such
Group (insofar as such amounts relate to principal),
3.10(a)(vii) for such Group (insofar as such amounts relate to
principal), 3.10(a)(viii) for such Group (insofar as such
amounts relate to principal) and 3.10(a)(ix) for such Group, 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 for such Group (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 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, the Pre-Funding 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, or, in the case of the Pre- Funding
Account and the Capitalized Interest Account, the date on which the
Seller so designates, 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, the Pre-Funding Account or
the Capitalized Interest Account, does not provide investment 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
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indemnified and reimbursed for any costs, expenses, losses, or
liabilities as provided in Section 8.05.
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 property 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
Certificateholders, 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 additional 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 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 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 sub-
stitution 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 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 con-
vert 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 reim-
bursement 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 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 (including clean up
costs and liability claims) 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 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 immediately 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 deposited) 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
foreclosureof anyMortgageLoan, theTrustee shall,upon requestofthe 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 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 depos-
ited, 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 pleadings 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 in the Group with respect to which such Servicer is then
acting as Servicer hereunder, 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 with respect to either Group or both Groups, as
applicable, although any portion thereof may be paid to a Sub-Servicer as
provided in the related Sub-Servicing Agreement.
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
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Servicer Remittance Date, the 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 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 (beginning with 1997) 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 super-
vision 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 or Placement Agent 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, 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
(beginning with 1997) 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 services 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 agree-
ments 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 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;
(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 Certificate-
holders 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 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 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,
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that if the 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 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,
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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 anyliability 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 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.
SECTION 3.27. Reports to the Securities and Exchange
Commission.
The Trustee shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be
filed under the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange
Commission thereunder. Upon the request of the Trustee, each of the
Seller, the Servicer and the Depositor shall cooperate with the Trustee in
the preparation of any such report and shall provide to the Trustee in a
timely manner all such information or documentation as the Trustee may
reasonably request in connection with the performance of its duties and
obligations under this Section.
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, the Pre-Funding 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 Group I Available Funds and the Group II Available
Funds for such Distribution Date.
To the extent any shortfall (an "Available Funds Shortfall") exists
with respect to the Insured Distribution Amount relating to any Group
after giving effect to the distributions specified in Section 4.04(b)
hereof (calculating such distributions without giving effect to any
Insured Payment), 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 for such Group pursuant to the Policy for an amount equal
to the Available Funds Shortfall for such Group. Upon receipt of Insured
Payments for a Group on behalf of the related 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 related
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 (such account, 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 the related Class or Classes of Certificates
of the Insured Payment for which a claim was made and such amount may 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 Group
I Distribution Amount or Group II Distribution Amount with other funds
available to make such payment. However, the amount of any payment of
principal of or interest on the Group I and Group II 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 Group I
and Group II 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 related Insured 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 Insured Distribution Amount due on the related
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 related 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 Group I or Group II Certificate, any related Insured Payment
from the Certificate Insurer and disburse the same to each such Holder 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 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 Certificateholders, the
Certificate Insurer will be entitled to receive the Reimbursement Amount
pursuant to Section 4.04(b)(III), (IV) and (V).
(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 Group I and Group II Certificate-
holders 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 Group I Interest Remittance Amount and the Group II Interest
Remittance Amount, the Principal Remittance Amount with respect to each
Group, any Make-Whole Amount for either Group 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 and any amounts transferred on such Distribution Date from either
the Pre-Funding Account or the Capitalized Interest Account pursuant to
Section 4.08 hereof. Records with respect to all amounts deposited to the
Accounts shall be maintained on a Group-by-Group basis.
(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 with respect to each Group, the Trustee shall pay to the
Certificate Insurer the Insurance Premium with respect each such
Group, provided that no Certificate Insurer Default has occurred and
is continuing;
(ii) second, from amounts then on deposit in the Certificate
Account with respect to each Group, the Trustee shall pay itself (x)
the Trustee's Fee then due with respect to each such Group and (y)
any payments required to be paid from the Trust with respect to each
such Group pursuant to Section 8.05 up to $50,000 in cumulative
payments in respect of this clause (y) for the preceding 12 month
period plus any expenses incurred at the direction of the Certificate
Insurer (provided such expenses are not for the Trustee acting in its
capacity as successor Servicer or during a Servicer Default) ; and
(iii) third, the Trustee shall transfer all remaining amounts
then on deposit in the Certificate Account to the Distribution
Account.
(b) After making the transfers to the Distribution Account
pursuant to Section 4.04(a)(iii) above and, if an Insured Payment required
to be made with respect to such Distribution Date, from the Policy
Payments Account pursuant to Section 4.02(b) above, the Trustee shall
distribute such amounts as follows:
(I) from amounts in respect of Group I Available Funds:
(i) first, to the Holders of each Class of the Group I
Certificates, their pro rata share (based on the amount of interest
each such Class is entitled to receive) of the Group I Current
Interest for such Distribution Date;
(ii) second, to the Holders of the Group I Certificates (other
than the Class A-IO Certificates), an amount equal to the Group I
Principal Distribution Amount in the following order of priority:
(1) to the Class A-9 Certificates, an amount equal to
the Class A-9 Priority Distribution Amount; and
(2) the remainder as follows: first, to the Class A-1
-----
Certificates, until the Certificate Principal Balance of the Class A-1
Certificates is reduced to zero;
second, to the Class A-2 Certificates, until the
------
Certificate Principal Balance of the Class A-2 Certificates is reduced to
zero;
third, to the Class A-3 Certificates, until the
-----
Certificate Principal Balance of the Class A-3 Certificates is reduced to
zero;
fourth, to the Class A-4 Certificates, until the Class
------
Principal Balance of the Class A-4 Certificates is reduced to zero;
fifth, to the Class A-5 Certificates, until the Class
-----
Principal Balance of the Class A-5 Certificates is reduced to zero;
sixth, to the Class A-6 Certificates, until the Class
-----
Principal Balance of the Class A-6 Certificates is reduced to zero;
seventh, to the Class A-7 Certificates, until the
-------
Class Principal Balance of the Class A-7 Certificates is reduced to zero;
eighth, to the Class A-8 Certificates, until the
------
Class Principal Balance of the Class A-8 Certificates is reduced to zero;
ninth, to the Class A-9 Certificates, until the Class
-----
Principal Balance of the Class A-9 Certificates is reduced to zero; and
(iii) third, to the Holders of the Class A-10 Certificates, the
amount necessary to pay the Group II Current Interest and any Group
II Overcollateralization Deficit after giving effect to distributions
from Group II Available Funds pursuant to subclauses (II)(i) and (ii)
below;
(II) from amounts in respect of Group II Available Funds:
(i) first, to the Holders of the Group II Certificates, the
Group II Current Interest for such Distribution Date; and
(ii) second, to the Holders of the Group II Certificates, an
amount equal to the Group II Principal Distribution Amount until the
Certificate Principal Balance thereof is reduced to zero;
(III) from amounts in respect of Group I Available Funds
remaining after the distributions in clause (I) above, to the
Certificate Insurer, the Group I Reimbursement Amount;
(IV) from amounts in respect of Group II Available Funds
remaining after the distributions in clause in (II) above, to the
Certificate Insurer, the Group II Reimbursement Amount;
(V) from amounts in respect of Group I Available Funds remaining
after the distributions in clauses in (I) and (III) above, to the
Certificate Insurer, any remaining Group II Reimbursement Amount;
(VI) to the holders of the Group I or the Group II Certificates
or to such other person to whom such amount is required to be paid
pursuant to the Policy, the Preference Amount, if any, due and owing
such holders or such person;
(VII) On any Distribution Date, Group I Available Funds
remaining after making the distributions required to be made pursuant
to the foregoing priorities shall be distributed to the extent
necessary to pay any Group II Overcollateralization Increase Amount
remaining after the distributions pursuant to subclause (II)(ii)
above;
(VIII) to the Trustee, any payments required to be paid from
the Trust pursuant to Section 8.05 and not previously paid pursuant
to Section 4.04(a)(ii) above;
(IX) 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
(X) pro rata to the Holders of the Class R Certificates, the
amount remaining, if any, in the Distribution Account after making
the distributions in (I) through (IX) above.
(c) Notwithstanding Section 4.04(b)(I)(ii) above, (x) in the
event a Group I Overcollateralization Deficit exists on any Distribution
Date and the aggregate amount distributable as principal (including any
Insured Payments) of the Class A Certificates is not sufficient to reduce
such Group I 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 (other than the Class A-IO 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 Group I or Group II 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
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 ata bank or other entity having appropriate
facilities therefor, if such Certificateholder 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 Group I or Group II
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 distribu-
tions 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 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 Group I and
Group II Certificateholder any payment disbursed to it by the Certificate
Insurer in respect of any previous distribution to a Group I or Group II
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 for each Group or other recoveries of principal included
therein and separately identifying any Overcollateralization Increase
Amounts for each Group;
(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 Group I or Group II Certificates on
such Distribution Date;
(e) the principal amount of each Group I and Group II
Certificate (based on a Certificate in the original principal amount
of $1,000) which will be outstanding and the related Class
Certificate Principal Balance, in each case after giving effect to
any payment of principal on such Distribution Date;
(f) the amount of any Overcollateralization Reduction Amount
for each Group;
(g) the amount of any Overcollateralization Deficit for each
Group;
(h) the amount of any Specified Overcollateralization
Deficiency Amount for each Group;
(i) the amount, if any, of any Realized Losses for each Group
for the related Due Period;
(j) the Overcollateralized Amount for each Group, if any,
remaining after giving effect to all distributions on such
Distribution Date;
(k) the Carry-Forward Amount for each Group, 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 for each Group;
(m) the weighted average Mortgage Rate of the Mortgage Loans
for each Group 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 for each Group;
(o) the number of Mortgage Loans outstanding for each Group;
(p) the cumulative number and Loan Balances of liquidated
Mortgage Loans for each Group;
(q) the amount of cumulative Realized Losses and its percentage
of the Maximum Collateral Amount for each Group and in total dollar
amount;
(r) Reserved;
(s) Reserved;
(t) the current outstanding aggregate Loan Balances of the
Mortgage Loans for each Group as of the last day of the related Due
Period;
(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);
(x) the Reimbursement Amount, if any;
(y) the statement or report on all earnings on and withdrawals
from the Capitalized Interest Account and the Pre-Funding Account;
and
(z) the Class A-9 Priority Distribution Amount for such
Distribution Date.
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) with respect to each Group, 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 and bankruptcy 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 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 loan number 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; and
(G) the principal balance of each Mortgage Loan that was
modified or extended pursuant to Section 2.10 or 3.01 hereof.
The information provided in (A) - (G) above shall be provided to
the Certificate Insurer on a Group-by-Group basis. 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 substan-
tially 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 such calendar year or applicable portion thereof during
which such Person was a Certificateholder.
The Trustee upon written request shall forward to any
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
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information requested under clause (iii) shall be at the expense of the
requesting Certificateholder; provided, further, that the Trustee shall
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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 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 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 Group I Interest Remittance Amount and Group II Interest
Remittance Amount, as applicable, on such Servicer Remittance Date, in
immediately available funds, the amount necessary to make the sum of (i)
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, (ii) with respect to each of the
January 1997 Distribution Date, the Closing Date Deposit relating to such
Distribution Date and Group, and (iii) with respect to any Subsequent
Transfer Date any Subsequent Cut-Off Date Deposit relating to the related
Distribution Date, if applicable, equal to the related Group 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.
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 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. Pre-Funding Account and Capitalized Interest
Account.
(a) The Trustee has heretofore established or caused to be
established and shall hereafter maintain or cause to be maintained a
separate account denominated a Pre-Funding Account, which is and shall
continue to be an Eligible Account in the name of the Trustee and shall be
designated "First Bank National Association, as Trustee of the Cityscape
Home Equity Loan Trust 1996-4 Pre-Funding Account". The Pre-Funding
Account shall be treated as an "outside reserve fund" under applicable
Treasury regulations and shall not be part of the REMIC. Any investment
earnings on the Pre-Funding Account shall be treated as owned by the
Seller and will be taxable to the Seller.
The Trustee has heretofore established or caused to be estab-
lished and shall hereafter maintain or cause to be maintained a separate
account denominated a Capitalized Interest Account, which is and shall
continue to be an Eligible Account in the name of the Trustee and shall be
designated "First Bank National Association, as Trustee of the Cityscape
Home Equity Loan Trust Series 1996-4 Capitalized Interest Account". The
Capitalized Interest Account shall be treated as an "outside reserve fund"
under applicable Treasury regulations and shall not be part of the REMIC.
Any investment earnings on the Capitalized Interest Account shall be
treated as owned by Cityscape and will be taxable to Cityscape.
The amount on deposit in the Pre-Funding Account and the
Capitalized Interest Account shall be invested in Eligible Investments in
accordance with the provisions of Section 3.12.
(b) On the Closing Date, the Seller shall cause to be deposited
in the Pre-Funding Account and in the Capitalized Interest Account the
amounts of $33,250,254.61 and $239,120.15, respectively.
(c) On each Subsequent Transfer Date, upon satisfaction of the
conditions set forth in Section 2.13, the Trustee shall withdraw from the
Pre-Funding Account an amount equal to 100% of the aggregate of the Cut-
Off Date Loan Balances of the Subsequent Mortgage Loans sold to the Trust
for inclusion in Group I on such Subsequent Transfer Date and pay such
amount to or upon the order of the Seller upon satisfaction of the
conditions set forth in Section 2.13 hereof with respect to such transfer.
(d) (i) If the Pre-Funding Amount shall not have been reduced
to zero on or prior to January 31, 1997, the Trustee shall withdraw from
the Pre-Funding Account the amount on deposit therein as of January 31,
1997 (after giving effect to all withdrawals from the Pre-Funding Account
on such date) and promptly deposit such amount in the Certificate Account.
(ii) If the Pre-Funding Amount shall have been reduced to
$100,000 or less as of the first Determination Date, the Trustee shall
withdraw from the Pre-Funding Account the amount remaining on deposit in
the Pre-Funding Account as of such Determination Date (after giving effect
to all withdrawals from the Pre-Funding Account on such date) and promptly
deposit such amount in the Certificate Account to be applied on the next
succeeding Distribution Date.
The amount deposited to the Certificate Account pursuant to
either paragraph (i) or (ii) of this Subsection shall be net of any Pre-
Funding Earnings.
(e) On each Distribution Date during the Funding Period, the
Trustee shall transfer from the Pre-Funding Account to the Capitalized
Interest Account the Pre-Funding Earnings, if any, applicable to such
Distribution Date.
(f) On the Business Day prior to the Distribution Date in each
of January 1997 and February 1997, the Trustee shall transfer from the
Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Distribution Date.
(g) All amounts, if any, remaining in the Capitalized Interest
Account on the Distribution Date following the end of the Pre-Funding
Period shall be transferred to the Seller on such date.
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, C and Q. The Class A Certificates (other than
the Class A-IO Certificates) will be Book-Entry Certificates and Class R
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 officers of the Trustee shall bind the Trustee, notwithstanding
that such individuals or any of them have ceased to hold such offices
prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall
be entitled to any benefit under this Agreement or be valid for any
purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form 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.
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
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 A-10 and 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 A-10 or 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 A-10 (if a Definitive Certificate) or Class
R Certificateholder desiring to effect such
disposition and such Class A-10 or 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 A-10 (if a Definitive Certificate) or 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 A-10 or Class R Certificates under the 1933 Act or
any other securities law or to take any action not
otherwise required under this Agreement to permit the
transfer of Class A-10 or Class R Certificates without such
registration or qualification. Any such Class A-10 or
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 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.
(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 Certifi-
cates 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 instru-
ment of transfer in the form reasonably satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writ-
ing.
(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 Certi-
ficates.
(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
(other than the Class A-IO Certificates) 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 Certif-
icates.
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, 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 (other than the Class A-IO
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;
(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 (other than the Class A-IO 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) 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. Further, upon the request of a Holder of a Class A-10
Certificate, a Definitive Certificate may be issued with respect thereto
upon presentation of appropriate documentation to the Trustee as required
by this Article V. 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.
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 obliga-
tions specifically 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 jurisdiction 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 corpora-
tion 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 consolida-
tion 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
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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 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
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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, representations 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 obligations 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,
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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.
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
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 obligations 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 $25,000,000 (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).
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 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
$20,000,000; or
(xii) a failure of the Servicer to meet the Servicer
Termination Test for either Group; 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 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 respect to the related Group, with the
consent of the Certificate Insurer, may, by notice in writing to the
Servicer, the Trustee, the Depositor, the Seller, each related
Certificateholder and the Certificate Insurer, terminate all of the rights
and obligations of the Servicer in its capacity as Servicer with respect
to either Group or both Groups, as applicable under this Agreement, to the
extent permitted by law, and in and to the related 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 of one or both Groups, as applicable,
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 related 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 with respect to the related Group
or Groups, 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 related Mortgage Loans or any related REO Property
(provided, however, that the Servicer shall continue to be entitled
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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 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 of the related Group or Groups 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) with respect to the related Group or Groups 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
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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
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perform such duties or responsibilities caused by the 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
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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
with respect to the related Group or Groups, 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.
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 related
Certificateholders at their respective addresses appearing in the Certifi-
cate Register and to each related 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 of the
related Group 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 of the related Group. 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 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 of the related Group.
SECTION 7.06 Survivability of Servicer Liabilities.
Notwithstanding anything herein to the contrary, upon
termination of the Servicer hereunder, any liabilities of the Servicer
which accrued prior to such termination shall survive such termination.
ARTICLE VIII
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 deter-
mine 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:
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(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;
(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
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
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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
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the Trustee shall be personally liable on any investment on which it
is the obligor.
(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 out-
standing 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 sufficiency 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
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 Certifi-
cates, 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.
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 resigning 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 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 obliga-
tions 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.
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 trust-
ees, 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 (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 180 East Fifth Street, St. Paul, Minnesota 55101 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 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 180 East Fifth Street, St.
Paul, Minnesota 55101 as its agency where the Certificates may be
surrendered for registration of transfer or exchange, and presented for
final distribution. The Trustee designates its offices at 180 East Fifth
Street, St. Paul, Minnesota 55101, 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).
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 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;
(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 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 Group I or Group II
Certificates which is made with moneys received pursuant to the terms of
the Policy shall not be considered payment of the Group I or Group II
Certificates, respectively, 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 Group I or Group II Certificates, respectively, 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 Group I or
Group II 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 Group I or Group
II 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 Group I or Group II 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 Group I or Group II 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.
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 the earlier of (i) 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 and (ii) December 2028.
(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 sum of (a) the aggregate of
the Cut-Off Date Loan Balances of all Initial Mortgage Loans, (b) the
Original Pre-Funding Amount and (c) the Maximum Group II Collateral Amount
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 sum of the aggregate of the Cut-Off Date Loan Balances of all Initial
Mortgage Loans in Group I, (b) the Original Pre-Funding Amount and (c) the
Maximum Group II Collateral Amount 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 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 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
remaining Mortgage Loans, and the Trustee shall execute all assignments,
endorsements 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 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.
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 distri-
buted on any Certificate without the consent of the Holder of such
Certificate, (y) adversely affect in any material respect the interests of
the Holders of any Class of Certificates in a manner other than as
described in (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 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 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 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, First Bank National Association, 180 East Fifth
Street, 2nd Floor, St. Paul, Minnesota 55101, Attention: Structured
Finance/Cityscape 1996-4 (telecopy number (612) 244-0089), 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 Asset 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 10022, 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.
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
(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; and to Standard & Poor's Ratings
Services, 26 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.
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.
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
FIRST BANK NATIONAL ASSOCIATION
as Trustee
By:
---------------------------
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 31st day of December, 1996 before me, a notary public in
and for said State, personally appeared Craig Eckes known to me to be a
Vice President 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
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the 31st day of December, 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
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 31st day of December, 1996 before me, a notary public in
and for said State, personally appeared ________________, known to me to
be a Vice President of First Bank National Association, a national banking
association that executed the within instrument, and also known to me to
be the person who executed it on behalf of said association, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------------
Notary Public
EXHIBIT 2
(BROWN & WOOD LLP LETTERHEAD)
December 31, 1996
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Financial Asset Securities Corp.
Cityscape Home Equity Loan Trust, Series 1996-4
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 December 20, 1996, between
the Company and you, of Financial Asset Securities Corp., Cityscape Home
Equity Loan Trust, Series 1996-4, Home Equity Loan Pass-Through
Certificates, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6, Class A-7, Class A-8, Class A-9 and Class A-IO Certificates (the
"Offered Certificates"). The Offered Certificates are being issued
together with the Class A-10 and Class R Certificates pursuant to a
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement")
dated as of December 9, 1996, among the Company, as depositor, Cityscape
Corp., as seller and as servicer, and First Bank National Association, as
trustee. The Offered Certificates, the Class A-10 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 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.
333-10273) filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "1933 Act"), on August 15, 1996, as declared effective by the
Commission on August 20, 1996 (such registration statement, as amended,
being referred to herein as the "Registration Statement").
2. The Prospectus relating to the Offered Certificates, dated
December 11, 1996 (the "Basic Prospectus"), as supplemented by the
Prospectus Supplement, dated December 23, 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 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 LLP
